Tuesday, September 08, 2020

Not easy to be a defender, is it?

"Real GDP, as measured at constant 2011-12 prices, shrank 23.9% from a year ago." "There must be something else to cheer about," wrote VA Nageswaran. "It is that the steep GDP contraction has restored credibility of India's macroeconomic statistics." People did not believe "growth rate of 8.2% in 2016-17", but now, "Detractors of the government, critical commentators and opposition politicians seem to trust the latest GDP figure because it has delivered them ammunition." The debate was not because of one figure but because the back series data was manipulated to show lower growth during the previous Congress-led government and the Central Statistics Office (CSO) appeared to be under control of Niti Aayog.  Economists use high frequency indicators, which are difficult to hide, to judge the state of the economy. Problem of claiming a fast growth rate is that it attracts attention of numerous analysts. Fitch Ratings "said on Tuesday that it expects India's GDP to contract 10.5% in FY21 (2020-21), more than twice the 5% decline it had forecast in June", while "India Ratings said separately that it expects an 11.8% contraction against shrinkage of 5.3% forecast earlier". Not just fudging of data, the government suppressed an employment report by the National Sample Survey Office (NSSO), forcing two independent members of the National Statistical Commission to resign in 2019. Last week the government rolled out 'Mission Karmayogi" to reform the Indian civil service, wrote A Padmanabhan.   'Karmayogi' means 'one who works selflessly'. This is going to be achieved by reducing the power of the Indian Administrative Service (IAS) by appointing top officials at Joint Secretary level from other services and even from the private sector. Whether these officials are to be appointed for their efficiency or as supporters of the government we do not know. The functioning of the first Monetary Policy Committee (MPC) of the Reserve Bank (RBI), which was set up in 2016 and has finished its term, was analysed by Bhattacharya, Kwatra and Devulapalli. What is remarkable is that, of the 7 members in the MPC, Ravindra H Dholakia, who is known to be an inflation dove, voted for a rate cut 38% of the time, while ex-IAS officer Shaktikanta Das voted an astonishing 70% of the time for a rate cut. Das was appointed governor of the RBI as a reward. Indian industry is being held back by "regulatory cholesterol", wrote Sabharwal and Agrawal. "A micro, small and medium enterprise (MSME) in a state can be inspected by as many as 20 inspectors", who can "visit unannounced at any time and begin a manual inspection process". Chain gangs do not become productive by changing enforcers. Remove our chains.

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