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NSO consumer spending report: How Narendra Modi’s advisors are cutting him off from reality

Sunil Jain

Even those like former prime minister Manmohan Singh who believe the "perilous state of fear, distrust and lack of confidence among citizens is a fundamental reason for our sharp economic slowdown" (https://bit.ly/2Kzzqfi) would agree that, at least right now, the economy isn't contracting or is at near-zero growth. Yet, that is what the latest household consumption survey of the NSSO indicates is happening. Business Standard carried a scoop of the latest report which says consumer spending has contracted by after four decades-in real terms, it fell 4 per cent on average in FY18. If consumer spending which is over 55% of the economy is contracting, and we know that investments which comprise a third of the economy are growing at just 9-19%, this means the economy nearly stalled in FY18 despite the 15% hike in government expenditure; government-spend comprises around a tenth of total GDP. Plug in the 4% NSSO-contraction into the GDP numbers and you find the economy contracted around one per cent while the official GDP data says it grew 7.2% in real terms! The government, on its part, has refused to make the NSSO report public, saying that its findings are flawed. And they are flawed since, as economist Surjit Bhalla has been pointing out for years, each survey of the NSS seems to capture less and less of India's consumption as measured by the GDP data.

Similarly, in the case of the jobs data where, at the beginning of the year, the government held back the NSSO's Periodic Labour Force Survey (PLFS) that showed a poor jobs-creation-once again, Business Standard scooped the report-as the government pointed out, there were problems with the Survey. A major one, for instance, was that while less than a fifth of Indians have studied beyond Class 10, over 75% of those canvassed in PLFS had studied beyond Class 10; in other words, the sample was not representative of India and it certainly did not compare with previous surveys that had an educational attainment similar to that prevalent in the country.

None of this, however, can justify suppressing reports. Why not release the reports and let researchers point to flaws in them? If the government is going to decide what report is kosher, every report that is contrary to the official view is in danger of getting dropped. Nor it is true that all reports that are released, such as those on GDP or IIP are completely flaw-free. A very large number of reputed economists/statisticians have said, after the GDP series was re-based some years ago, that they found the sudden jump in GDP growth-the 7% growth, they said, felt like the old 5%-quite unbelievable and even government economists find it difficult to justify the sharp swings in the IIP. The frequent, and sharp, revisions of GDP/WPI/IIP data also seems to suggest there is a problem with the series. Apart from the fact that, like in communist dictatorships, no one will ever know just what is happening if the government decides what data to release, this poses a real danger to the government itself. If the Modi government doesn't, for instance, know that investment levels are falling-or if people who see the official data don't keep pointing this to the government as its failure-how will it come up with policies to fix it? Or, in the case of agriculture distress, how will it know it needs to take action? The higher you go up in any organization-and this applies even more strongly to government-the less you know about what's going on; if even the data is going to be censored, how is prime minister Modi to know what's going on? Those censoring the data are only ensuring the prime minister is more cut off from reality; they can't be his well-wishers.