We should treat the latest GDP statistics as innocent till proved guilty
Has the government fudged GDP data to show that the Narendra Modi era has registered faster GDP growth than either of the two terms of the preceding UPA government? Yes, says former Congress finance minister Chidambaram. Absolutely not, says BJP finance minister Arun Jaitley.
The public is cynical enough about politicians to find almost any accusation of skulduggery credible. But having observed statistical changes and disputes for five decades, let me say that our statistics should be assumed to be unfudged and innocent until proved guilty.
Stats of the Nation
The first reason for this is that voters have little knowledge of, or interest in, statistics, and, hence, so too do politicians (despite recent histrionics). To illustrate, let me relate my discovery, when statistics were revised in the late 2000s, that Bihar had suddenly achieved a phenomenal GDP growth of 11%. When I wrote about this, our newspaper correspondent in Patna phoned chief minister Nitish Kumar and asked, ‘Have you seen? Swaminathan Aiyar has written that Bihar has become India’s fastest growing state?’ After a long pause, Kumar responded, ‘If Swaminathan Aiyar says so, I suppose it may be true.’ Such indifference to statistics means that politicians lack the motivation to do the considerable amount of work and manipulation needed to fix statistics convincingly.
Second, statistics are gathered from a vast array of sources, each of which contributes only a tiny mite to the outcome. So, fudging requires a massive, coordinated effort that will be difficult to hide, especially in a climate where leaks abound.
Third, over past decades, our statistical professionals have, despite flaws, gained a global reputation for dull probity. Possibly this is because politicians viewed them as too unimportant to manipulate. But that does not alter the outcome.
Chidambaram may say I refer to a bygone era, and that in Amit Shah’s era, even the tiniest details are politicised and manipulated. To convince non-partisan readers, he needs to back his claim with concrete evidence.
As an economy develops, the contribution of different sectors to GDP keeps changing, and new sectors emerge. Some new data sources also emerge to improve accuracy. Hence, statisticians periodically switch to a new base year for measuring growth. When Indian statisticians shifted their base year from 2004-05 to 2011-12, their revised figures showed GDP growth to be distinctly higher in the last two years of UPA-2 than reported under the old statistical series.
Accusations of fudging rent the air. Yet, even the most penetrating inquiries failed to prove any wrongdoing, and international agencies all accepted the new data.
There remained the task of backdating the new series all the way to 2005, to give a better idea of UPA’s true performance. The National Statistical Commission (NSC) appointed the Sudipto Mundle Committee to do so. The committee report in August calculated that UPA had performed much better than suggested by earlier data, averaging 8.87% GDP growth in its first term and 7.39% in its second term. By contrast, Modi’s first four years averaged 7.35%. Modi’s claim of bringing ‘achhe din’ looked laughable. Congress cheered, while the BJP sulked.
Data, the Great Leveller
The Central Statistical Organisation (CSO) did not accept the Mundle Committee calculations. It had access to new data sources (such as corporate data on industrial production), and claimed to choose a methodology best aligned with that of the UN system. Using these, its own calculations show that GDP growth averaged only 6.8% in the last four years of UPA-1, and 6.7% in UPA-2. Suddenly, the Modi rate of 7.35% has become the fastest ever. The also-ran has become a champion.
Sudipto Mundle and N Bhanumurthy, who helped produce the earlier report, need to speak out. Assessing their report in August, economist Surjit Bhalla had drawn attention to the Mundle Committee’s incredibly high estimate of services growing at 25.4% per year in UPA-1, up from just 6.4% during 1998-2002. This inflated the committee’s estimates of overall GDP growth. Mundle needs to explain how his committee came up with such high growth figures for services. It may take time for the statistical fog to clear.
Like old soldiers, statistical controversies do not die, they only fade away. Many readers will shake their heads in confusion at the barrage of different calculations and mutter ‘lies, damned lies and statistics’. Different models and methodologies can yield diametrically opposite results, despite using the same data. As Economics Nobel laureate Ronald Coase said, “If you torture the data enough, they will confess to anything.”
Non-expert readers may prefer a simpler way of judging the controversy. Economic growth is an important — though by no means sole — factor in electoral outcomes. Some may argue that growth in UPA-2 was bad enough for the government to be thrashed in the 2014 general election, while growth in the Modi era has been fast enough to help him win 20 state elections. This is a gross oversimplification, though easily digestible by non-experts.
In terms of crude voter perception, this may lend weight to the CSO view over the Mundle view. Statistically, this is hardly conclusive.