Foreign trade has also slowed down considerably, showing lack of demand and growth.
The furore around the new statistical method of measuring GDP growth is not difficult to understand. It reduces the growth rate under the previous UPA government by an average of 1.3 per cent, just as the first unveiling of the new series nearly four years back has boosted the Narendra Modi government’s rate of growth by 1.8 per cent. Just when everybody appeared to be happy with the apparently high growth rate, this implied that the Modi government has released fresh calculations on the eve of the Lok Sabha polls to show how badly the Manmohan Singh government had performed.
There has been strong criticism of the government’s action by reputed statisticians and economists and the fear that the arbitrary and sudden shifting of parameters would damage the reputation of the government and any figures it sends to international agencies. The government is destroying another institution to gain a questionable advantage in the coming election. Despite the clever jugglery of its paid employees, the rapid or slow growth would be evident to anyone who has lived in India for the past two decades.
While the GDP number is an abstraction based on many factors, these are more easily understood since they are based closer to our experience. Take savings, both personal and corporate. These are used to build factories or homes or invest in assets like gold or shares. Savings indicate the health of the economy. Savings were robust when they climbed from 29.2 per cent of GDP in 2003, reached a peak of 38.6 per cent in 2007, and then slid back to 26.4 per cent in 2017. With low savings, the funds available to invest are low. Savings are related to investment.
The ratio of gross fixed capital formation to GDP had climbed from 26.5 per cent in 2003, reached a peak of 38.3 per cent in 2007, and then slid back to 26.4 per cent in 2017. The fall in savings, by about eight percentage points over the same period, has been driven almost equally by a fall in household and public savings. The fall in household savings is in turn related to investment. Another peculiarity of the past two years has been that while household savings have gone down, investment in mutual funds has gone up by five times. Because of this, says the latest Economic Survey: “The stock market surge in India has coincided with a deceleration in economic growth”. This could lead to a greater risk for savings.
Many other economic indices also do not sit well with the GDP figures put out by the government and tend to show that the claims are highly exaggerated, if not a complete fabrication. Examining the figures for credit growth, corporate sales and profit, foreign trade, capital expenditure and tax revenue show that there is a wide disparity between the real economy and the GDP figures put out by the Narendra Modi government.
Comparing the average figures for the real economy under the UPA years 2005-14 with the time under the NDA 2014-18, there are sharp differences in performance. Non-agricultural credit from banks grew at 21 per cent a year during the UPA years, compared to just 9.3 per cent under the NDA. This would indicate that the need for funds and investment or growth was much higher. While part of this may have degenerated into bad loans, it indicates that was far greater capital expenditure.
Industry was also doing much better. Corporate revenues grew by 18.9 per cent annually and company profits by 13.2 per cent on an average per year during 2005-14, compared to just 5.2 per cent for revenues and a decline of 1.8 per cent for profits during 2014-18. Similarly, capital expenditure was growing at 20.8 per cent per year in the earlier period, and it fell to 8.7 per cent later. Another important indicator is that corporate tax, which was growing at 21.5 per cent, fell to a growth of just 10 per cent, showing a clear slowdown in the economy.
Foreign trade has also slowed down considerably, showing lack of demand and growth. The growth rate of non-oil imports fell from 14.9 to 5.7 per cent and of non-oil exports from 14.1 to 1.4 per cent. The fall in imports shows a slowdown in capital expansion while a slowdown in exports indicates that the much touted “Make in India” has been a failure. While personal direct taxes have shown a similar slowdown in growth, indirect taxes have gone up. They are a greater burden on the poor and show this government’s priorities.
All this would indicate that industry just manages to limp around now. Industrial performance is accentuated when we look at auto sales. Car sales went up by an average of 13.8 per cent per year in the earlier period, truck sales were up 14.3 per cent annually, while in the 2014-18 period car sales growth had slumped to 1.1 per cent and for trucks to 0.9 per cent. Since the auto and truck sector is central to the health of the economy, with ancillary industries down the line, their dismal performance indicates that the economy is doing poorly all around.
These facts about the economy shows the real picture, and not the fiction put forward by the government in a desperate attempt gain an advantage in the elections. It is another way to bully national institutions and destroy them. It started with universities and the bureaucracy, moved on to the CBI, went on to the Reserve Bank of India and then the National Statistical Organisation was told to put out the dubious figures. In most of these cases, the officials have bowed reluctantly to the government’s diktat. Much now depends on how effectively the Election Commission manages to retain its independence.