Light to Moderate Growth

Are we really growing at 7.6%? The pessimists invite us tolook at what has been happening to exports and publicinvestment. Consider the spate of criticism to which the Central Statistics Office’s estimates of the gross domestic product (GDP) have been subjected (not least in the columns of EPW). Given the discrepancy between the new series and the old series, which (if either) is to be believed? And what, the nay-sayers ask, of the past record of growth forecasts? For the fiscal year (FY) 2013, the initial estimate was 5.1% while the actual outcome was 5.6%; for FY14, the corresponding figures were 6.9% and 6.6% respectively. The cynics assure us that it is not just the magnitudes of the forecasts but their directions which are suspect. And then there was the very public disagreement between the chief economic adviser (CEA) and the governor of the Reserve Bank of India (RBI). It would appear that the CEA has lost his bet with the governor on an accelerated growth rate rather badly: the former was backing 8.1% to 8.5%, while the governor put his money on a more modest (and in the event, realistic) 7.4%. If we do not watch out, bookmakers are going to get into the act in a big way, and then what will the match-fixing harvest be? We may soon have to be drawing again on the services of Justices Mudgal and Lodha.

What all this suggests is that it is not a good idea to make growth rate predictions that involve actual real numbers. For it is on the basis of these numbers that the government and the RBI have to make decisions on public spending, revenue mobilisation, the size of the deficit, and the rate of interest. The economist Pranab Bardhan has recently expressed the apprehension that the tax concessions made to the corporate sector are in excess of the provisions for welfare spending in the budget. One must not rush from this to the conclusion that we are dealing with a government that cares more for the business community than for the labouring poor. Oh no, it is not a case of crony capitalism, simply a case of arithmetic gone awry because of defective growth forecasting. If the projected value of GDP is erroneous, how can the government be expected to get its numbers on revenue and expenditure and deficit right? So if the state is to be aided in its genuine concern for progressive taxation and generous social sector spending, if academic economists and the chiefs of data generating agencies are to be prevented from engaging in tetchy exchanges, if the CEA and the RBI governor are to avoid betting in public, then the time has come to let ambiguity in and keep the bookies out. That is to say, no more precise numerical forecasts. There is a strong case, instead, for prognosticating in very general terms, for allowing for multiple interpretations, for predicting one thing and its opposite, and for refraining from hasty commitment to specific numbers. We already have a helpful model available from the Indian Meteorological Department. Everybody all around, henceforth, would benefit greatly if the Economic Survey were to couch its growth forecasts along the following lines: