It may be trite to say that not just policymakers but even the typical man on the street is evidencing great interest in the economic growth prospects in a way never seen before. The focus on growth and broad appeal, which previously arcane matters such as GDP statistics, per capita consumption and a host of periodic economic indicators, is a natural outcome of economic reform, liberalisation and globalisation.
Without getting into a dogmatic discussion on whether the irreversible processes have been beneficial or detrimental to a majority of people in a country like ours, it would be useful to list out a few of their major consequences.
Growth process
There has been a spurt in the number of people who have a ‘stake' in India's growth process and these stakeholders require government economic policies to be more transparent as well as accessible. For the government too, this approach pays in the long run. More people with vested interest (in a positive sense) can hold policymakers to account. For instance, competition has forced many service providers such as banks to make their customers aware of their rights and obligations. This is done through citizens' charter and other forms of publicity. The government, on its part, has strengthened institutions such as the ombudsman to redress customers' grievances. There is still a long way to go. Transparent policy making must be accompanied by financial education. February is the month when there is a renewed interest in national income statistics. It is the month in which the largest numbers of economic policy announcements are made. Apart from the Union Budget, the Railway Budget and the Economic Survey are traditionally unveiled. With the financial year drawing to a close in a month's time, GDP statistics are worked afresh and projections made for the next year (2012-13). How well do year end estimations compare with those made at the beginning of the year?
Economy slowing down
There can be no doubt at all that the economy is slowing down. In 2010-11, according to CSO statistics, the economy grew 8.4 per cent. Right at the beginning of this financial year, there were warning signals from within the country and abroad. Even so, official estimates of a year ago — in the Economic Survey and the Budget — were overly optimistic, projecting a growth rate of 8.75-9.25 per cent. The Finance Ministry now thinks that the economy will expand by 7.5 per cent, which, given the vastly changed circumstances over the past 11 months, still seems unrealistic. The point is that even if that were to be achieved, it will be a good 1.25-1.75 percentage points lower than what was projected. Such a large variance does not reflect well on the data collection machinery of the govern- ment.
The RBI, always more conservative than the government, recently lowered its forecast to 7 per cent for the current year from 7.6 per cent, which is the same as that of the International Monetary Fund. The World Bank's estimate is lower at 6.8 per cent. There is a strong case to protect the integrity of the official data. In advanced countries, projections of national income and other key economic indicators though made by several agencies tend to converge within a narrow range. In India, on the other hand, there has not only been a sharp variance between official estimates of GDP of a year ago and now, but there are big differences between the government and other forecasters, both official and non-official.
On several occasions in the recent past, important users of official data have questioned its veracity. The monthly Index of Industrial Production, which tracks industrial output, has been extremely volatile after it moved to a new series. The RBI has found it to be unreliable for framing monetary policies. The monthly WPI inflation figures have likewise been criticised but the main point of criticism is that, despite some recent improvements, it does not capture the price movements that affect the consumers directly.
Frequent revisions to published official statistics diminish their utility. Small or large, the biggest damage that the frequent revisions to official statistics do is to increase the negative perceptions of them. For a government in the final stages of budget preparation and for the increasing number of stakeholders in India's economic process that is certainly not a good news.
