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Lies, damn lies and statistics

By Hardeep S. Puri: Political discourse, in the run up to a general election in particular, is best anchored in decency and decorum. Equally, the tendency to underestimate the knowledge of economics of one's opponent and overestimate one's own is best avoided.


Finance Minister P. Chidambaram's assertion, in an interview to the BBC, that the knowledge of economics of Narendra Modi, the prime ministerial candidate of the Bharatiya Janata Party (BJP), can be written on the reverse of a postage stamp, even if offered in a lighter vein, smacks of arrogance.

His subsequent question enquiring why Modi has not spoken about the fiscal deficit, the current account deficit or monetary policy is even more intriguing. Is an attempt being made to define the qualifications and terms of reference of a prime ministerial candidate or the finance minister's own successor? Additionally, does the ability to govern rest on academic degrees and theoretical knowledge?

A look at the present Congress party-led United Progressive Alliance (UPA) cabinet and the qualifications of its 31 cabinet ministers is instructive. Apart from the good doctor himself, Prime Minister Manmohan Singh, who has a Ph.D from Oxford, not one of his senior ministers has a formal degree in economics.

Many of them are students of literature (External Affairs Minister Salman Khurshid) and history (Communications and IT Minister Kapil Sibal) who then went on to become lawyers. The closest that any of them come to the study of economics are the luminaries who either studied commerce (Parliamentary Affairs Minister Kamal Nath), management (Chidambaram) and engineering (Rural Development Minister Jairam Ramesh).

Surely, it could not be this lack of formal training in the dismal science which explains the state of the economy today. Apart from earlier stints during the I.K. Gujral government, the present incumbent has been finance minister for six years.

During UPA-I and II, the overall growth rate has declined from a high of 9.6 percent to an estimated 4.5 percent for 2012-13.

Let us look at the individual sectors.

The prime minister, modest by nature, in his farewell press conference Jan 3, said: "I am concerned that we have not been as successful as we need to be in generating employment in the manufacturing sector."

According to a joint study by Boston Consulting Group and the Confederation of Indian Industry (CII) in November 2013, the share of manufacturing in India's gross domestic product (GDP) declined to 15.1 percent in 2013, the lowest in the decade.

Even if this figure is tentative, the fact that the share of manufacturing in the GDP is declining strongly is not in any doubt. The new land acquisition law effective from Jan 1 makes land acquisition, essential for this sector - and something that can take 3-6 years from start to finish - cost two-four times higher.

Not only will the manufacturing sector not produce the hundreds of millions of jobs hoped for by 2025, but the Congress-led UPA government has succeeded in complicating the task for its successor. Course correction will require huge amounts of capital to be invested and policy induced encouragement to the sector, conspicuously lacking in the last decade.

The situation relating to agriculture is worse. More than 60 percent of India lives in rural areas and relies largely on this sector for survival. The contribution of agriculture to the GDP has been steadily declined from 19 percent in 2004-05 to 13.94 percent in 2012-13.

Pointing fingers at one's opponents and hurling incentives is unlikely to alter the ground reality. The farmer is losing his land through manipulated processes of urbanization. The compensation that the farmer receives is way short of what the land mafia gets.

To try to explain food price inflation, from which the country as a whole is reeling in terms of more money in the hands of the producer, is strange. If this is so, how does one explain suicides by farmers. In Karnataka alone, where the latest invective was hurled, a total of 1,003 deaths were reported between 2005 and 2009. The number of deaths in 2012-13 were over 100.

And now inflation.

The figure was 3.8 percent in 2004 which increased to 12 percent in 2010 and is still around 11 percent. This level of inflation has the effect of nullifying almost all the other gains, especially since growth is around five percent.

The overall job creation in 2004-05 was 460 million. In 10 years, the number has only increased to 470 million. This also speaks for itself. A statistic on which the government has been conspicuously silent relates to Gini coefficient, which measures inequality. A Gini coefficient of zero expresses perfect equality and a coefficient of one expresses maximal inequality.

Those responsible for economic policy decisions would be well advised to look at the growing disparities. An increase in the Gini coefficient from 0.325 in 2004-05 to 0.39 in 2012-13 is alarming.

Given the overall fall of GDP growth from 9.4 percent to 4.5 percent, a decline in the share of manufacturing and agriculture in GDP and jobless growth from foreign investment in the services sector, which accounts for nearly 60 percent of the GDP today, should set the alarm bells ringing.

Along with rampant corruption and scams, this makes a toxic and highly combustible cocktail. What is required is urgent course correction and not vitriolic polemic.

Nothing is more galling than the use of government money to project half truths. Expensive half-page advertisements costing a fortune maintain that our exports increased from Rs.2.93 lakh crore (Rs.2.93 trillion/$47 billion) to Rs.16.34 lakh crore (Rs.16.34 trillion) in the last nine years. Not mentioned is that imports have gone up even faster, leaving us with a trade deficit of nearly $200 billion.

In 2004, our exports were $74 billion and imports $57.24 billion - a trade deficit of only $17 billion. In 2012-13, our exports were $306.6 billion and our imports $502.2 billion - a trade deficit of US$ 195.6 billion! The rupee meanwhile has gone from 44 to the dollar in 2004 and is inching up towards 63.

Senior economic managers of the UPA need to indulge in some introspection. Display of humility and less of hubris may actually go down well with those who have the votes.

(05-02-2014- Hardeep S. Puri, a retired diplomat, recently joined the BJP. The views expressed are personal. He can be reached at hardeepsinghpuri@yahoo.com)

--IANS (Posted on 05-02-2014)

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