On The Indian Economy, Let The Numbers Speak Rather Than Op-Eds And ‘Experts’

Popular science fiction writer Robert A Heinlein could have been talking about the current Indian public debate on economy when he wrote this line in If This Goes On – “You can sway a thousand men by appealing to their prejudices quicker than you can convince one man by logic”.

Just consider the various ‘concerned’ opinion-editorials and TV interviews by ‘experts’ that have flooded the marketplace in recent weeks. The common thread that runs through all of them is prejudice trumping data and facts. But before we get into why this may be happening now, let us first settle some facts on the economy, most of which were brilliantly enunciated by Prime Minister Narendra Modi himself in his speech on 4 October at an event in New Delhi.

The world over, economies are assessed by what can be termed as the eight golden indicators – inflation, current account balance, fiscal deficit, foreign direct investment (FDI) inflows, forex reserves, exchange rate, gross domestic product (GDP) growth rate and job creation. Economies that are doing well at a particular period of time generally perform well on four to five parameters of these eight. A major world economy doing well on all the eight parameters at the same time – it would be a rarity, if at all it happens.

How has India been doing on these eight golden indicators in comparison to the immediate preceding years? Here are the numbers.

Inflation

Overall consumer price index (CPI) inflation in financial year (FY) 2013-14 was 9.4 per cent; for the April-August period of FY 2017-18, it is at 2.5 per cent.

Food inflation that adversely affects every household – 12.1 per cent in FY 2013-14 and now in the negative at -0.3 per cent for April-August of FY 2017-18.

Current Account Balance (CAB):

This is the difference between exports and imports and should ideally be very low or even in the positive. CAB was -4.8 per cent of GDP in 2012-13; it has come down to -0.7 per cent in FY 2016-17.

Fiscal Deficit

The central government fiscal deficit was 5.9 per cent in FY 2011-12; it has come down to 3.5 per cent in FY 2017-18 and is targeted at around 3 per cent by the end of the current fiscal.

FDI Inflows

As per the FDI intelligence report 2017, India is the number one country in the world for attracting greenfield FDI investment, ahead of the United States and China. This happened for the first time ever in 2015 and the trend has persisted in 2016.

Forex Reserves

India’s forex reserves stood at $292 billion at the end of FY 2011-12; at the end of September 2017, the figure stands at $402 billion.

Exchange Rate

The fluctuation in exchange rate between April 2011 and March 2014 was approximately 34 per cent; between April 2014 and March 2017 – just about 4 per cent.

GDP Growth Rate

The GDP growth rate has received a lot of attention from some usual suspects as well as from some ‘experts’. Before getting into that argument, first some numbers. GDP growth rate at constant 2011-12 prices was 5.5 per cent in FY 2012-13, up to 8 per cent in FY 2015-16 and 7.1 per cent in FY 2016-17.

For the first quarter of current fiscal, the GVA has grown at 5.6 per cent, but as the Reserve Bank of India Governor predicted, it will be an upward trajectory every quarter from now on, and the last quarter of current fiscal is likely to see 7.7 per cent growth rate. If this upward trajectory persists, as is most likely the case, overall FY 2018-19 is looking at 8+ per cent overall growth again, thereby retaining its position as the fastest growing major economy in the world.

Jobs And Livelihood Earning

A fierce debate has raged on for some months now as to whether the economy has been creating adequate jobs. Part of this has also been fuelled by the outdated methodology of statistics collecting on job fronts by the Labour Bureau. But still, consider the following two numbers.

First, enrollment in provident fund. In March 2014, 3.26 crore people were depositing money monthly in their employees’ provident fund (EPF) accounts. This figure now stands at 4.8 crore. Provident fund is a feature of the formal sector, and therefore one can say that approximately 1.5 crore jobs have been created in the formal sector alone since 2014.

Second, the Mudra revolution. Since its launch in 2015, more than 9.13 crore people have been funded through these collateral-free loans. Of these, more than 2.63 crore people are first-time entrepreneurs. Who are these entrepreneurs? They are those who open and run boutique shops, beauty parlous, carpentry stores, medicine stores, gymnasiums, hosiery manufacturing units and other similar small businesses. Each of these businesses would typically employ at least one person to be able to run successfully. Even those who are not first-time entrepreneurs would have taken loans to expand on the existing business. All of this sums up to livelihood creation by Mudra Yojana in many, many crores at the neo-middle-class level.

If even this data is not convincing, consider the following employment-to-population ratio chart (the ratio of working age population that is employed) for India by the World Bank. Chart 1 below is the overall employment-to-population ratio between 2000 and 2016. The results are stark and drastic.

The trend of the employment rate, that had been falling in the late 1990s, was reversed under the Atal Behari Vajpayee government finally in the year 2000 and it began rising again. Then came the dark decade between 2004 and 2014, when the Sonia Gandhi-Manmohan Singh regime was in power. As chart 1 shows, there was a consistent decline for a decade. The destruction of the job market for a decade would obviously take time to reverse, but as the chart shows, the trend immediately started reversing in 2014, with the arrival of a new government under Prime Minister Modi. Since then, the employment rate has again started rising (data available till 2016), and when the data for 2017 comes, this trend would have been further reinforced.

Now, think again of those eight golden indicators to judge a major economy. India finds itself in this unique sweet spot of doing exceptionally well on each of those indicators, something which perhaps no other major world economy is doing. It is therefore not without reason that India has moved from the tag of ‘fragile five’ in 2013 to the tag of one of the best-performing economies in the world, and in such a short span of time.

Now, in the face of such compelling evidence, what is the everyday negative debate around the economy and why at this time? To phrase the question differently, ‘What is happening to the economy?’ The answer is actually very simple. ‘Gujarat’ is happening to the economy!

Remember the months preceding the 2012 Gujarat election and the orchestrated national attention that was focused on such a topic as malnutrition, for the first and the only time? The overnight ‘experts’ industry that had mushroomed to express concern on malnutrition figures in Gujarat vanished soon after the Gujarat election, not to be seen ever since. The concern of this industry was not the children of Gujarat but to pick any point to beat Modi with. Then in 2012, preceding the months of the election, the data that was available was a decade old, before Gujarat under Modi had started work on this, addressing the legacy malnutrition issue in Gujarat.

This data, although old, still came in handy. Elections over, the industry moved on to their regular programming of communal and divisive issues. None of them ever came back to tell the country what happened to malnutrition figures in Gujarat. The state has seen one of the steepest fall in malnutrition rates and it now stands well below the national average but something which is no longer useful to debate, hence no longer in news.

This time again, in 2017, it is the season of the Gujarat election. Look closely and you will find that each and every ‘expert’ who seems suddenly concerned about the economy is the same person who since 2012 election was spending time on creating a discord between communities, reporting a wipe-out of the Bharatiya Janata Party in Uttar Pradesh in 2014 elections, spreading fake church attacks narrative in early 2015, selling the intolerance narrative in end 2015, telling us how people were angry and rebelling against Modi during the early days of demonetisation, or creating a non-existent Akhilesh Yadav wave in Uttar Pradesh.

Look closely again; do you find any new person in the bunch of experts suddenly concerned about the ‘economy’ and who was not in one or the other of those orchestrated campaigns? I bet you will hardly find anyone new. The ‘actperts’ (actor-experts) are the same. The playbook is the same. The method is the same. Only the script has changed as per the demands of the time. It is a testimony to the people of Gujarat and the governance model that was first created there that they think the economy should be the season this time. Once the Gujarat election wraps up in December this year, the economy will once again be out of season for the ‘actperts’. But be rest assured, it would not be for the Modi government.

As the record of the last three years has shown, development is not a seasonal fad but a lifelong conviction for the government, led by a man who has risen from poverty and is determined to ensure not just its alleviation but its elimination.