Don't let Modi fool you with the GDP figures
The Modi government must understand one simple truth: Never cover up the truth with lies.
After inflicting massive damage to the economy through demonetisation and the faulty implementation of GST, the government is now trotting out new statistics to save its face.
BJP ministers are gloating over the rise in GDP growth rate to 6.3 per cent for the second quarter of 2017, especially in the run-up to Assembly elections in Gujarat and Himachal Pradesh.
Today’s GDP numbers reiterate the #IndiaUnstoppable story under PM @narendramodi. The strong rebound in growth is a reflection of solid economic management by the Modi Government.
— Amit Shah (@AmitShah) November 30, 2017
GDP back on its growth trajectory. Son of Gujarat achieves what Cambridgians, Oxfordians & Harvardians failed to achieve. Massive blow to all the fabricators of false narrative of economic slowdown. #IndiaUnstoppable pic.twitter.com/2vJQMk71y7
— Dharmendra Pradhan (@dpradhanbjp) November 30, 2017
Although the new figures compared to the dismal 5.7 per cent in first quarter - a three-year low and much lower than the 7.9 per cent GDP growth in the same quarter last fiscal - is a bit reassuring, it's not difficult to see the actual picture. If we compare the growth of 6.3 per cent with July-September quarter of last year, it's clearly very unimpressive. Yes, 6.3 per cent is higher than the 5.7 per cent GDP growth in the April-June quarter, but lower than the 7.5 per cent growth in the second quarter of last fiscal.
But the government agencies and a largely pliant media are happily spreading the myth that bad times are over.
“Perhaps the impact of two very structural reforms, demonetisation and the GST, is now behind us and hopefully in the coming quarters we can look for an upward trajectory,” Arun Jaitley said recently.
Of course, one cannot stop the BJP campaign machinery from creating feel-good myths. But let's take a lot at the reality.
The Wholesale Price Index inflation rate in June 2017, shows that inflation was 0.9 per cent compared to (-)0.09 % in June 2016.
Similarly, the Index of Industrial Production (IIP) which recorded growth of 8 per cent in May 2016, fell sharply to 1.7 per cent in May 2017.
Most shockingly, the trade deficit which was $8.1 billion in June 2016, increased to a whopping $12.95 billion in June 2017. How did this happen? Imports that were $30.7 billion in June 2016, rose by as much as 19 per cent to $36.5 billion in June 2017. Exports on the other hand, increased by 4.4 per cent to $23.5 billion in June 2017 compared to $22.6 billion in June 2016. Oil imports increased by 12 per cent at $8.1 billion in June 2017 over the previous year.
What do these figures show? Despite Prime Minister Narendra Modi’s flagship programme for "Make in India", the balance of trade figures have only worsened. Of course, the PM was banking on support from: 1) domestic entrepreneurs; and 2) foreign investment. That didn't work out, also because there is no widespread boom in developed economies, leading to priorities being on local production and exports without transfer of technology to countries of the Global South, for example India.
This makes India’s task of substantial increases of exports and attracting foreign capital much more difficult.
In the meanwhile, poverty has not declined according to international estimates. Economists Jean Dreze and Amartya Sen in their book, An Uncertain Glory, estimated poverty in 2013 in India to be 68.7 per cent using the purchasing power parity method (which estimated the real value of currencies based on their comparative purchasing power).
Recently, Thomas Piketty, noted for his work on the tendency of capital to be concentrated and centralised, in his examination of Indian trends found that the rich had become richer, while widespread poverty that many economists have measured remains very high.
How much does this affect the Indian economy? Actually, quite a lot.
Not only are the poor and small peasants affected heavily by rising prices - often leading to near starvation levels - but overproduction and drought have also hit them disproportionately hard.
For instance, record onion prices in 2014-15 had made it the most-preferred crop among farmers in the country. But since February 2016, onion prices kept hovering between Rs 3 per kg and Rs 7 per kg, at least till June this year. Another example: droughts. GM seeds last only for a year. In case rains fail, a whole year's crop fails. But if incentives are given to increase productivity, not only will incomes increase, but so will the purchasing power of the poor and small farmers.
GDP data shows the crisis in the farm sector. Instead of Jumlas about doubling farmers’ income by 2022, this govt should tell us what steps it plans to take to ease farmers’, their families’ pain and give them their rightful due. https://t.co/OFMpsq79Nq
— Sitaram Yechury (@SitaramYechury) December 1, 2017
Tomato - 80 /- KGPotato- 30 /- KGONION - 60 /- KG Really #IndiaUnstoppable in terms of inflation.But we are still looking for these legendry faces to protest when the prices are high with more than 300% in just 3 years pic.twitter.com/r4m42hndN5
— Aaryaa ???????? (@dho_dala) November 30, 2017
The rise in oil imports by 12 per cent by June 2017, had a cascading effect as fuel is required for pumping machines, trucks, trains, tractors, diesel generator sets, cars, two-wheelers, turbines et al. This is probably why the NDA government which promised a Rs 2 cut in fuel prices backed out, claiming that this could not be on the GST Council agenda. The traders reaction indicates that GST has worried them despite sharp rollback in some categories.
While it is true that a number of countries have GST-like tax, very few have six different levels of taxes.
In retrospect, had the NDA government restricted itself to a maximum of three rates and minimised the paper work, the backlash from traders would have been significantly less.
But this government refuses to admit its mistakes. Instead, it continues to create more myths. And as long as it enjoys the support of a powerful section of the media, the common people will never get to see the real picture behind the facade.