The Game of Numbers!

THERE is more than one way to cry foul in India, and in economic affairs, the path of least resistance is to allege that the numbers have been tampered with. Most recently, the allegation of number tampering has returned with a report by an New Delhi-based think tank alleging that the GDP growth rate for the outgoing fiscal year is actually 5.7pc, and not 8 pc as claimed by the government.

In earlier years, we have heard other allegations of number tampering too. The poverty reduction numbers claimed by the Manmohan led UPA regime, for instance, were widely alleged to have been tampered with. Later, when inflation began its downward spiral, the allegations resurfaced with people claiming that the reductions were actually engineered by manipulating the CPI basket rather than anything real.

In other places, the fiscal deficit number has attracted the same allegations, with people arguing that the manner in which the circular debt is treated in those numbers is wrong, and if included, the reported deficit would be far larger. The tax collection figure is routinely alleged to be manipulated, which has consequences for how we report the tax-to-GDP ratio.

That’s one thing the numbers have in common with votes: if you don’t like what you see, you can simply allege manipulation and walk away with your convictions intact.

So what’s the reality then? Is the economic data in India really so heavily manipulated that it not only distorts, but ends up fabricating reality for us?

The short answer is no. But the long answer is where the fun begins.

Data is like food to economists, without it they would starve. It’s the only thing they work with, unlike their counterparts in the social sciences. And however imperfect the data about the economy may be, they all still work with it. Take the example of the latest report alleging that the GDP growth rate has been misreported. If this is true, then our total GDP in rupee terms should be less than what is reported on the  Economic  Survey 2015-16 page. And once the GDP figure is changed then all other indicators that are shown as relative to GDP should also change.

So, for instance, once we revise our total GDP downwards, the fiscal and current account deficits as a percentage of GDP will change too, as will all sectoral breakdowns between manufacturing, agriculture and services amongst many things. It would be inconsistent, therefore, to argue that the GDP figure is misreported, but then to continue using the same percentages for the fiscal deficit and current account in building any argument.

At the moment the challenge to the GDP number coming from this think tank is a highly unconvincing one. Before it is allowed to gain any further traction in parliament, the methodology needs to be studied more carefully and the sources of the data that they have used need to be understood. Until then, it’s a good idea to leave that figure out of the debate and keep the focus on the clauses in the finance bill.