Whose data to trust? This seems to be the biggest economic debate brewing up in the country right now. So when four economists of repute - one of them being part of the government and another part of the previous government - sat together for a Fireside Chat during Business Today's Mindrush 2019, and decided to take the question by its horns, an interesting set of insights came forward.
Sanjeev Sanyal, the principal economic advisor to the government of India, rued the narrative that seems to suggest the government is deliberately manipulating data. He defended the government on the recent controversies around data saying that as long as data suits the political narrative of the Opposition, they welcomed it, but the moment it becomes unfavourable for them, they start criticizing it.
Montek Singh Ahluwalia, the former deputy chairman of the Planning Commission under the previous UPA government, said that while there have been instances of revision in data which raise questions on its credibility , he said that there was a need for a non-interference in the work of the statistics commission, a suggestion that Sanyal agreed with.
Ajay Shah, professor, National Institute of Public Finance and Policy (NIPFP), said that while the data on inflation and balance of payment are largely credible, it is the GDP, Index of Industrial Production (IIP) and annual survey of companies that have problems. Though he didn't specifically talk about the credibility of the jobs data, he reluctantly agreed that there is an issue with it.
On the question of why despite the claim of over 7 per cent GDP growth rate, the feeling on the ground was not that of a country being one of the fastest growing, Sanyal said that people are confusing real GDP growth with nominal GDP growth. He said that the government has been able to successfully keep the inflation below 4 per cent, and prices of various goods and services have fallen even though salaries may not have increased.
While all four economists were not on the same page when it came to low inflation, Shah of NIPFP was particularly concerned about deflationary trends. He said a big decline in inflation could be painful.
On the critical issue of jobs creation or the lack of it, Sanyal said that while jobs have been created in new areas, they have not been captured correctly by the current methods of measurement. Rajat Kathuria, Director and Chief Executive at the Indian Council for Research on International Economic Relations (ICRIER), agreed with Sanyal on this. He said that jobs have been created but the government doesn't seem to have a handle on the measurement part.
Amidst the growing wave of popularism among political parties, the experts participating in the Fireside Chat said they believed there was a need to keep a tab on the growing fiscal deficit. Ahluwalia said he would like to see in the manifesto of political parties in the next election that they would stick to a certain fiscal deficit target. He said that the combined fiscal deficit of the central and the state government is over 8 per cent, which is too big for the comfort of any government.
On the challenges that the new government will face, Sanyal said that the next government should begin legal and administrative reforms. Kathruria of ICRIER said that effects of first generation of reforms that started in 1991 have been exhausted and it is time to begin the next generation of reforms, the most important of which would be legal reforms.