Business Economics & Services Team (BEST)
How Reliable Is Official Statistics in India?
Many people are openly questioning the veracity of official statistics in India. The old idiom - lies, blatant lies and statistics - seems to have come back. Look at the official statistics that has been put in the public domain yesterday. It says that GDP growth for July-September 2014 has slowed down to 5.3 % as against 5.7% in April -June quarter. But many newspapers refused to take cognizance that the growth rate in July-September is marginally better than 5.2% clocked in the same quarter in the previous year.
The perceived slide down in the growth rate is triggered by the lackluster performance of the manufacturing sector, which contributes roughly 15 % of the GDP. Despite, these pitfalls., the stock market has witnessed a steady rally mainly due to higher growth expectations on account of the likely cut in interest rates and the prospects of further reforms.
Now let us analyze the economic parameters in the public domain. For the last one moth or so, a lot of stories have been churned out in various newspapers indirectly cajoling the RBI Governor to cut the interest rate and that too a steep cut. The stories are twisted and colored to serve that ultimate purpose. Let us look at some of these stories. Important among them are the slide down in the rate of growth of whole sale and consumer indices, which have been played up out of proportion in most of the newspapers. Why it was done? The reason why RBI kept the interest rate unchanged was the enhanced inflationary expectation. One need not dispute the fact that both the parameters -wholesale and consumer indices-have fallen marginally. The rate of growth of inflation has only fallen from a higher base. That does not mean that in absolute terms the inflation has come down. Prices have not fallen for essential items of common man. Prices of almost all food articles are at least 25 to 35 % higher than what they were in the previous year and almost 50% higher than what they were two years back. It is also true for poultry, fruits and other items and in some cases they are higher than the average increase in the prices of food articles.
The government can hide behind the statistics that they roll out. But the common man is facing the brunt. Some of the sections of the public are partly insulated from the onslaught of this increase. They may be businessmen, traders, salaried people and to a lesser extent the government pensioners, whose compensation is partly linked to the inflation indices. What about vast majority of people who are not covered by the safety net? They are suffering and their wrath no government can overlook only at their own peril.
Now, the other factor that is refusing to come into the public domain is the net saving that the government and the oil companies have reaped on account of the steep cut in the oil prices. From close to US $100 per barrel, it is expected to hit below US$70 billion. The oil prices are decided by a combination of factors like oil futures, which is a function of demand and supply, both expected and current and the geopolitics factors like uneasiness among countries, transport bottlenecks etc. The public should know the profile of prices at which oil contracts are concluded and other modalities like whether is there any middlemen and who negotiated the prices and a host of connected issues. That is what transparency means and any effort to hide these facts will perpetrate the opaqueness in the system.
Equally significant is why rupee is still above Rs 60 vis a vis dollar. Rupee could have shored up against the dollar on account of the decline in the foreign exchange outflow triggered by lower oil prices. People who are in the know of things maintain that even if the oil prices slide below US$50 per barrel, India's import bill will not come down since there is a huge pent up demand for import particularly for gold. Instead of tightening the screw for gold imports, the government in fact has eased the import regime, which can offset the gains on account of the lower oil prices.
How Reliable Is Official Statistics in India?
Many people are openly questioning the veracity of official statistics in India. The old idiom - lies, blatant lies and statistics - seems to have come back. Look at the official statistics that has been put in the public domain yesterday. It says that GDP growth for July-September 2014 has slowed down to 5.3 % as against 5.7% in April -June quarter. But many newspapers refused to take cognizance that the growth rate in July-September is marginally better than 5.2% clocked in the same quarter in the previous year.
The perceived slide down in the growth rate is triggered by the lackluster performance of the manufacturing sector, which contributes roughly 15 % of the GDP. Despite, these pitfalls., the stock market has witnessed a steady rally mainly due to higher growth expectations on account of the likely cut in interest rates and the prospects of further reforms.
Now let us analyze the economic parameters in the public domain. For the last one moth or so, a lot of stories have been churned out in various newspapers indirectly cajoling the RBI Governor to cut the interest rate and that too a steep cut. The stories are twisted and colored to serve that ultimate purpose. Let us look at some of these stories. Important among them are the slide down in the rate of growth of whole sale and consumer indices, which have been played up out of proportion in most of the newspapers. Why it was done? The reason why RBI kept the interest rate unchanged was the enhanced inflationary expectation. One need not dispute the fact that both the parameters -wholesale and consumer indices-have fallen marginally. The rate of growth of inflation has only fallen from a higher base. That does not mean that in absolute terms the inflation has come down. Prices have not fallen for essential items of common man. Prices of almost all food articles are at least 25 to 35 % higher than what they were in the previous year and almost 50% higher than what they were two years back. It is also true for poultry, fruits and other items and in some cases they are higher than the average increase in the prices of food articles.
The government can hide behind the statistics that they roll out. But the common man is facing the brunt. Some of the sections of the public are partly insulated from the onslaught of this increase. They may be businessmen, traders, salaried people and to a lesser extent the government pensioners, whose compensation is partly linked to the inflation indices. What about vast majority of people who are not covered by the safety net? They are suffering and their wrath no government can overlook only at their own peril.
Now, the other factor that is refusing to come into the public domain is the net saving that the government and the oil companies have reaped on account of the steep cut in the oil prices. From close to US $100 per barrel, it is expected to hit below US$70 billion. The oil prices are decided by a combination of factors like oil futures, which is a function of demand and supply, both expected and current and the geopolitics factors like uneasiness among countries, transport bottlenecks etc. The public should know the profile of prices at which oil contracts are concluded and other modalities like whether is there any middlemen and who negotiated the prices and a host of connected issues. That is what transparency means and any effort to hide these facts will perpetrate the opaqueness in the system.
Equally significant is why rupee is still above Rs 60 vis a vis dollar. Rupee could have shored up against the dollar on account of the decline in the foreign exchange outflow triggered by lower oil prices. People who are in the know of things maintain that even if the oil prices slide below US$50 per barrel, India's import bill will not come down since there is a huge pent up demand for import particularly for gold. Instead of tightening the screw for gold imports, the government in fact has eased the import regime, which can offset the gains on account of the lower oil prices.
