 Hello and welcome to NewsClick. Today we have here with us Rohit Azad. He's a faculty from JNU, Economic Subject. We're going to discuss about the recent GDP figures that have come out. Hello Rohit, welcome to NewsClick. Rohit, the past one week everybody has been talking about the GDP figures. India seems to have shown a very impressive GDP growth considering the global scenario. I think it's about 6.8%. So what do you think of it? Is it that impressive? Is our economy doing that well that we have such a high growth? I think there has been an issue about methodology. I mean there is a discussion about, yes, India seems to be the fastest growing economy in the world if we go by these GDP figures. At the same time, there have been quite a few doubts which have been raised by economists, by statisticians, past statisticians. And those doubts are important to be considered before we come to a conclusion that this 6.8 actually 6.8. If I can give an analogy in terms of what this change has been, let's say if you were to look at an apple orchard and you had about 10,000 trees in that and since you can't count apples for all those 10,000 trees you do a sample of that 10,000 trees and let's say you do 1,000 and the number of apples you have in that 1,000 you multiply it by 10 which gives you the apple production of that orchard. What has changed in this between the methodology which was there, the 2004, 5, 2, 2011, 12 is that they have changed the number of trees, let's say, so instead of doing 1,000 they have increased it and secondly they are valuing apple not just in terms of its volume but also in terms of its quality and that's the change that now on the face of it it seems like it's perfectly fine. I mean if you're taking the quality of apples into account that's far better than just looking at the value in some abstract sense but that only makes sense if both your sample is done well and actually you're measuring the apple's quality better. Now that's where the doubts have come up if I can elaborate on that. People have said multiple things on that. The most important being that the data which has now been used so there is a change in database, earlier it used to be the RBI database for the corporate sector and the reason why one is picking the corporate sector because that's the one which has seen the jump between these two series. Now you're using the Ministry of Corporate Affairs database. The doubts which have come up on that is that even though the data set is bigger there are serious issues of reporting of data in that to give you one concrete example of that. NSSO picked up certain firms from that sample to study the services sector and they found that one third of that data set was essentially companies which didn't exist or were not out of coverage and all of that. Now how reliable would that be if you have a sample of which one third is companies such as these. So that's one immediate problem that arises and hence it's not only about increasing the sample size itself. It is the quality of the sample also that matters and that's an important consideration I would keep in mind. So you think that this 6.8 GDP that government is showing to us could be much lower? Perhaps perhaps because as I said one was sample and then what they technically called the blowing up term so you have a sample and then you obviously multiplied by something to get at the overall figure because you don't have the total population figures in that sense. Now whether that blowing up factor is the current correct one or not apart from the fact that the basic sample itself is problematic but what about the blowing up factor is that exaggerated? If it is then obviously it's possible that for both these reasons the GDP figures could be a bit inflated perhaps. Yeah because if you actually look at the GDP figures which is 6.8 and the recent unemployment figures which they say that it's been the highest since 45 years so there doesn't seem to be a reconciliation like if the GDP is high how come there is such a high unemployment at one level? Absolutely and that's one then if you look at other you know I mean fair enough that there is a change in methodology so that could bring about a change in terms of numbers but then it should also there are certain things which have not changed for example bank credit data it stays the same the amount of loans they have given to the corporate sector household sector is still based on the same methodology that hasn't changed now if there has been a higher growth that should also seen a jump what you find is the exact opposite the corporate sector loans have in terms of the rise has actually fallen the rate of growth then one could turn around and say that okay probably it's not credit financed it could be let's say retained earnings of the corporation and their own profits they are reinvesting but then that should show up in terms of the investment data that investment GDP ratio has gone up that also doesn't show then one could turn around and say fair enough it's not domestic factors but international factors which have driven this growth that also doesn't show that export GDP ratio is not rising nor is the case that domestic consumption as a proportion of GDP is any higher than what it was earlier so there are genuine doubts now one could say that you could have probably taken a final position if you were in a position to do this assessment yourself and that's where another component that there is lack of transparency I mean one cannot check DMCA database because it's not available unlike what used to be the case with the RBI database earlier let's say because we don't have choice because we don't own the government statistical machinery if we decided to take the government's GDP data on face value so if you look at 2018-19 data so the quarterly even its own data, government's own data shows the quarterly the GDP growth has gone down I think it's about 8% in the first quarter and by the fourth quarter it has fallen to 5.8% so do you think there is somehow there is like a deceleration that's happening in the economy? I think that within series the comparison would not be so unfair because basically it's like I mean if I can go back to the Apple example that you've looked at the quality of the Apple and if that methodology of finding out the quality remains the same which is the new series then comparing the two would not be a problem should not be a problem although there can be problems arising there itself because if the way you're measuring within the series itself changes over a period of time then there is a problem but let's say that that's not happening you fixed it, you know how you're measuring the quality of the Apple and that stays constant all through this phase when you're in which case the rates of growth would not be problematic I mean it might be the case that it is inflated but if you compare across two periods within that it should be fairly, I mean technically speaking should not be a problem so in that sense obviously there could have been a deceleration in the growth rate and it matches up with index of industrial production credit figures and all of that so perhaps yeah there has been a decline but I think the conflict or the controversy arose not merely in terms of looking at it within the series it arose in a different context when they started claiming that the NDA or the Modi government has done much better than the UPA government although all the indices of the UPA one were completely the opposite even if we take the you know their back series into account credit GDP as I said and the other figures if you look at they were far better compared to what you had during the last government so then there was a discrepancy there and the controversy was so much more because the same government came up with two different back series one which was under N. Bhanumurthy from NIPFP him being the in charge of that committee which brought out figures which gave UPA even higher rates of growth within a day that data disappeared I mean it was not on the MOSPI website anymore and then came the actual figures which we now have where the UPA figures have gone down dramatically and it shows up where Niti Aayog is sitting and looking at overseeing the data which is not what Niti Aayog's job was it should be statistics should be independent of any political intervention from the government otherwise it creates doubts as they have and renowned economists have questioned these figures So finally Rohit if we look at government's own data which is showing that within 2018-19 there has been a deceleration over the quarters and also if we put it together with the fact that there is high unemployment again by government's own data so what should be done now what should any government do right now about unemployment if I can just make a small point that the NSSO data which has now been released is still not for this year I mean it's not counting 2018 the last figures so that may not be a good comparison to make but at least they are acknowledging that during their 5 years the last 5 years the unemployment rates were far higher at least that much they are acknowledging although it happened all post-election the same data could have been released pre-election as well but coming back to this point in terms of what can be done I think there has to be a fundamental change in which how you look at policy unfortunately the fixation of this government and it to some extent was also true about the UPA this fixation with fiscal deficit is something which has to go why do I say that because that's one source if let's say private corporate investment is falling as a proportion consumption is not picking up because the incomes unemployment is an issue then incomes are not getting generated then how do you push the economy there has to be some lever through which you inject some fresh demand in the economy and fiscal policy is one such thing now if you are fixated on keeping the fiscal deficit at a particular level then you don't have that lever anymore because that is then dependent on the current output itself if you say that only 3% of your current output is what you can spend extra spend then if the output is low then the expenditure would also be low so unless they break out of that mindset which is this fixation on fiscal deficit through the FRBM I think it would be difficult to make a recovery on top of that you have the monetary policy or let's say the RBI which is fixated on inflation targeting the exact opposite that they should be worried about at the moment which will increase the interest rate so from both the side of government not intervening directly and then the corporate sector or the household which could have increased their let's say loans or demand for different goods if the interest rates go up then that also becomes difficult for them so I think it's what the government is doing at the moment is the exact opposite of what it should be doing but then if you have only one kind of you know if your vision itself is skewed then this is what you end up with so earlier you have said that there is a problem in comparison between the previous series and the present series so what is the exact problem? so the exact problem as first was that when they came up with this new methodology they did not calculate the back series which is not normally how you bring new series you always do as soon as you introduce a new methodology you always create a back series of that while you produce that data this was not done it was only done for two years and if you look at those two years it's quite drastic if I can just quote you a figure between the two series if you look at particularly manufacturing which is where the huge jump takes place the rate of growth in 2012-13 for the old series was 1.1% the same rate of growth becomes 5 percentage points higher 6.1% with the new series similarly 2013-14 it was in the negative minus 0.7% again it goes up by almost 5% to 5.3% now this seems ridiculous I mean it seems difficult even if not ridiculous seems difficult to digest then came the question ok fair enough two years may be problematic so you at least now produce the back series which is what they did in terms of calculating the back series the biggest problem with the back series was apart from the fact that there were two different estimates which came up they have calculated the back series based on this data set which only goes back to 2009-10 how have they calculated the years prior to that have used the other database the RBI database for that now how do you make that comparison then it is as good as the earlier series if it is so then how come the figures are different for that series and what exactly has happened there it looks like a black box and nobody knows about it because the government is not willing to share it publicly, openly so that it can be held accountable to the researchers or public at large so I think that is the core of the doubt even in terms of the comparison between the two series so from the figures you've quoted you said there for 2014-13-14 from negative to it went up by 5% so if we actually deduct 5% now it could be just 1.8% of growth no so this is 5% of manufacturing alone so if you look at in terms of weightage obviously it will be far lower and that is for that particular year so if this thing continues perhaps yes and manufacturing let's say is 30% or whatever that is then 30% of that 5% so at least yeah but true thank you Rohit we hope to see you again thank you Shudna thanks for having me here thank you for watching NewsClick