Tuesday, March 03, 2020

Are we allowed to pray for divine help?

"The Indian economy grew by 4.7% in the third quarter, which is October-December quarter," wrote Latha Venkatesh. "Not counting the government sector, the growth falls to 0.2%. The government sector, represented by public administration and defence, grew by 9.7%. Seen from the expenditure side, government final consumption expenditure grew by 12%." Finance Minister Nirmala Sitharaman expressed satisfaction at the "steadiness" of the economy, however several experts expressed reservation as the effect of the coronavirus on global trade is yet to be fully felt. Saying it maybe too early, "The World Health Organization has said the world should do more to prepare for a possible coronavirus pandemic." The good news is that agriculture grew by "3.5% in real terms and by 13.7% in nominal terms" and private final consumption grew by 5.8%. Private consumption contributes about 60 percent to our gross domestic product (GDP) so the economy will grow faster if people spend more, resulting in higher goods and services tax (GST) collection. Trouble with the figures is that the first and second quarter (Q1 and Q2) growth rates have been revised upwards. The Q1 growth was revised up from 5% to 5.6%, and the Q2 growth was revised up from 4.5% to 5.1%. "Quarterly GDP growth this fiscal now reads 5.6%, 5.1% and 4.7%, underscoring the fact that all was still not well with the Asia's third largest economy." Revision is generally done after the end of the financial year because unlisted companies announce their results annually so it is "completely unusual for the Central Statistics Office (CSO) to revise Q1 and Q2 GDP numbers while presenting Q3 numbers". Curiously, in Q1, mining was revised down by over 6% and construction by Rs 17,000 crore (Rs 170 billion). Q2 exports were revised down from Rs 7.26 trillion to Rs 7.03 trillion, while imports were reduced from Rs 8.62 trillion to Rs 7.8 trillion, almost by Rs 1 trillion. Such unusual behavior has left some economists "speculating that the CSO may have recast the Q1 and  Q2 numbers only to secure a 5% GDP growth this year". Unfortunately this government has repeatedly resorted to dishonest jugglery with statistics. Last year two independent members of the National Statistical Commission PC Mohanan and JV Meenakshi resigned when prevented from releasing employment figures because the government wanted to hide rising unemployment. Also last year, the government was accused of using fake figures to manipulate the GDP back series data to show lower growth during the previous Congress-led UPA government. The fact that the government is fudging data even after winning a resounding victory in May last year shows that the economy is in bad shape and it has no idea on what to do. And the coronavirus is just knocking on our doors. The official motto of the biggest economy the US is, "In God we trust", while secularism was written into our Constitution by Indira Gandhi. Is it too late to pray?

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