source- The Print.

The discourse surrounding the accuracy of India’s Gross Domestic Product (GDP) data has been marked by a schism between economists and statisticians. A faction of economists posits that the current administration, under Prime Minister Narendra Modi, is inflating growth figures. Conversely, statisticians contend that these economists are misinterpreting the statistical methodologies employed.

This contention spans a multitude of issues, including the measurement of consumption levels, the methodology of expenditure calculation, the spending habits of households, and the potential artificial inflation of GDP data. Economists Arvind Subramanian, Ashoka Mody, and Arun Kumar have expressed criticism of the prevailing GDP estimation methodologies. In contrast, statisticians Pronab Sen and T.C.A Anant have defended these methodologies, arguing that the economists are misdirecting their focus.

The economists’ critique is threefold. Firstly, they highlight the discrepancy between robust GDP growth and tepid consumption levels. Secondly, they point out the difference between two methods of estimating GDP — the production method and the expenditure method. Lastly, they question the manner in which the Indian system accounts for the effect of inflation on GDP growth, specifically critiquing the use of a “deflator” to adjust nominal GDP figures.

Subramanian and his co-author Josh Felman argue that the Household Consumption Expenditure Surveys (HCES) reveal weaknesses in the consumption numbers in the GDP data. They suggest that the consumption number measured in National Accounts Statistics (NAS) is less robust than the level of consumption arrived at in the National Sample Survey (NSS).

However, statisticians counter that the NSS data is inferior to the NAS data and argue that comparing the two is a flawed exercise. They point out that NSS consumption is problematic because it fails to adequately measure key expenditure components such as health and education spending by households. They argue that these two components are forming increasingly large shares of household expenditure, while the share of food is falling.

Pronab Sen argues that comparing consumption and production is fraught due to varying data quality. He also points out that we are largely concerned with real GDP numbers, not nominal ones, which means the GDP deflator used becomes an important factor. Subramanian and Felman argue that the GDP deflator being used has failed the “smell test”. They suggest that the deflator isn’t capturing the true picture of inflation in the country, and that the wrong deflator is being used for the wrong sectors.

Anant and Sen point out some conceptual flaws with Subramanian and Felman’s arguments. They argue that most of the non-traded services sectors are not measured by the CPI either, so using that index would run up against the same problem. Ashoka Mody accuses the Modi government of “beautifying” its GDP numbers by using the production method of calculating GDP instead of the expenditure method. He suggests that the expenditure method would have resulted in growth being much slower than portrayed.

Sen points out that India follows the production approach because our expenditure data is very patchy. He explains that the level of discrepancy seen is not significant and can be explained by the fact that the data flows are erratic. A Princeton University professor accuses the Indian government of conducting a “branding and beautification” exercise on its GDP numbers to make them look better in the run-up to the G20 summit. However, Ministry of Finance officials argue that there has been no change in the methodology, and that the latest data was calculated the same way as always.

Mody argues that while income from production increased at an annual 7.8% rate in April-June, expenditure rose by only 1.4%. He suggests that the NSO treats income as the right one and assumes that expenditure must be identical to income earned, which he sees as a violation of international best practice. In response, government officials argue that the discrepancy talked about by Mody for the April-June 2023 quarter would be balanced out in subsequent quarters. They also argue that the discrepancy is not a new thing, nor has the income side approach always been higher than the expenditure side.

The government officials argue that Mody’s allegation that GDP growth in the first quarter of 2023-24 was exaggerated would have been more believable had the government always chosen the higher of the two methods when it reported its growth numbers. On Wednesday, growth figures for the eight core sectors of the Indian economy were released for the month of April 2023. The data showed a mixed bag, with the overall growth of the eight sectors coming in at a six-month low of 3.5%. However, the fertilisers, steel, and cement sectors all saw double-digit growth in April.

The Controller General of Accounts released data on the government’s revenue and expenditure for 2022-23. The data showed that the government had succeeded in meeting its target for its fiscal deficit to be 6.4% of GDP in 2022-23. The Ministry of Statistics and Programme Implementation released the GDP data for the fourth quarter of 2022-23 and also for the full year. The numbers were largely positive, with the 7.2% growth in 2022-23 higher than the 7% the government itself had predicted. This was made possible by a cross-sectoral strong performance in the fourth quarter.

The agriculture sector grew at a robust 4% in 2022-23, with growth in each quarter surpassing the level seen in the previous quarter. The manufacturing sector ended the full year with a seemingly poor 1.3% growth, but that concealed some good news. The sector grew 4.5% in the fourth quarter of the year, emerging from two consecutive quarters of contraction. Despite anecdotal evidence that hotels, flights, trains, and restaurants are running full with long waiting lists, the data showed that household consumption was still low. This could be because as the economy regains momentum, the first to begin spending are the rich. Those at the bottom of the pyramid are yet to open their purse strings.

The monthly survey of the private manufacturing sector conducted by S&P Global, the results of which are published as the Manufacturing Purchasing Managers’ Index (PMI), provides a good estimate of what the near future will look like in terms of economic activity. The PMI data for the manufacturing sector in May was the highest it had been since October 2020. The government released the GST revenue for May, which came in at Rs 1.57 lakh crore, the fourth-highest it has ever been. This data showed that not only were the sales of goods and services increasing, but that tax compliance is also improving.

The Reserve Bank of India (RBI) posits that for India to achieve its developmental goals over the next three decades, an annual growth rate of 8-10% is required over the next decade. This growth is essential to capitalize on the demographic dividend that began in 2018 and is projected to last until 2055.

Economists and statisticians are engaged in a debate over the accuracy of India’s GDP data. Economists argue that the government is inflating growth numbers, while statisticians contend that economists are misunderstanding the statistical methodologies used.

The economists’ critique revolves around three elements: the discrepancy between robust GDP growth and tepid consumption levels, the difference between two methods of estimating GDP, and the use of a “deflator” to adjust nominal GDP figures for inflation.

The RBI bulletin suggests that conditions in India are aligning for an extension of the trend upshift that elevated the average real GDP growth above 8% during 2021-24. The deepening of capital, led by sustained public investment and supported by productivity improvements, is currently driving the country’s growth trajectory.

Despite the robust GDP growth, the data showed that household consumption was still low. This could be because as the economy regains momentum, the first to begin spending are the rich. Those at the bottom of the pyramid are yet to open their purse strings.

The monthly survey of the private manufacturing sector conducted by S&P Global, the results of which are published as the Manufacturing Purchasing Managers’ Index (PMI), provides a good estimate of what the near future will look like in terms of economic activity. The PMI data for the manufacturing sector in May was the highest it had been since October 2020.

The government released the GST revenue for May, which came in at Rs 1.57 lakh crore, the fourth-highest it has ever been. This data showed that not only were the sales of goods and services increasing, but that tax compliance is also improving.

I keep reading news stories of another benefit that comes with a one world government interconnected economies having to be renegotiated, often to worse than before.

Has there been any benefit? Was this purely a nationalist move that’s backfired?

It seems that everywhere we go, far-right parties seem to go hand in hand with:

1. Cutting public funding

2. NIMBYism (rampant in much of the Western world)

3. Protectionism/Nativism (Brexiteers, anti-NAFTA dolts, etc.)

4. Anti-Free Trade (Brexiteers, Eurosceptics, etc.)

The first one boggles me the most #3-4 make some kind of sense (not that I agree with it), b/c it plays into their (often) nationalistic rhetoric. So, they'd want to favor domestic companies, and protect domestic labor pools.

However, who in their right mind things that defunding public healthcare systems, underfunding welfare or pension systems, etc. will somehow result in a higher quality of life for the domestic population? It is absolutely antithetical. We see it with the Tories in the UK who's bogus tHrEe hUnDReD fIftY mIlLiON pOUndS pEr YeAr fOR tHe NHS!! was just a straight up lie, and their funding increases haven't kept pace with demand. Neither have (consequently), the salary increases of public service workers, or even the relative staffing levels to ease their workloads. This isn't limited to the NHS but other emergency services, to the rail department, etc.

Conservatives in Canada also seem to follow the "starve the beast" model when gutting public services, and other conservative or far-right parties across the world do the same.

Has there ever been a far-right party that's actually made sensible economic policies?

I know some moderate Democrats have praised it for normalizing relationships with Israel and other middle Eastern countries but I've heard some more progressive people saying it partly lead to Oct 7th due to leaving Palestine out of negotiations