One of the big issues facing the Indian economy is that of data credibility. This is the second time around that we have seen the NSSO data being questioned. Do you think that government is actually suppressing the economic data?
No, I do not think we can take that view. If you do not agree with the data and there are different data, that is possible and it is possible that somebody in the governmental system etc. have been influencing data collection, but so far as the national statistics institution is concerned, they are quite autonomous. If you look at history, despite many changes in the government, by and large their data has been satisfactory in terms of what they have been able to count. The main issue is the sample that you take and try and get into data. Now whether the government has influence on that particular part or not, one cannot say.
Since you are saying if the government has influenced the data or not one really cannot say, isn’t there a case for a statistical audit of the Indian data, need for an independent agency or economists to look at the quality of the Indian data?
That does not have to depend on the election. That part can be done if an autonomous body is set up to see whether there was any fault in the data calculations over the last five-six years and then we can decide whether any methodology has to be changed because ultimately you cannot count 1.3 billion people. You can only count a section of the people who are representative of the total data in terms of consumption, in terms of services, employment and so on and so forth.
Would you say there is a case for relook at the data by an independent valuator?
Yes, but not by saying that this particular data is wrong and that particular data is wrong, unless there is evidence. I do not know whether it is possible to establish an evidence.
But the fact is that 108 economists had raised a lot of questions about the Indian data/Whether it was a jobs report of the latest data which says the MCA-21 data is dodgy, how should one really look at it? Perhaps a body like NSSO need legal backing?
You can have a legal backing and make it autonomous and so on. After the election, a little body can be set up which will look into it and which would audit how the data has been calculated. What you might say deficit or lack of data is a different matter because that would be estimated but we can try and improve. If there is so much debate, than the best thing is after the election, set up a committee or set up an investigating audit committee to see what more needs to be done in terms of either increasing the sample size or increasing the different areas which are more reflective of the total population in terms of activity, in terms of services, manufacturing and all that.
A lot of people are concerned about the consumption slowdown. It is manifest not only in the auto sector but also in the FMCG sector. Is that really pointing to a larger slowdown in the economy?
Not in the long term. You have to view this as short term because we are having elections. There is uncertainty and people are waiting to see the outcome of elections and what kind of government is formed. Investors are waiting.
Food prices have risen but agriculture is not in a very good state. In services sector also, people who are doing work would wait and see what kind of election results are there. At the moment, I would not put too much weight on this.
But the task of new government which comes into power is precisely to make sure that our growth picks up and our unemployment reduces. Our agricultural areas will see the kind of funds required for fertilisers and other things . In terms of fundamentals, there is no other country than India and perhaps China, which have all the strings. We have technology. We have capital in terms of total investment. We have savings. We have labour and we have land. All the factors of production are in our favour and there is no reason why we cannot reach 8% rate of growth which we did during 2004 to 2010.
What are the fiscal tools that are available with us? The revenue stream is pretty weak. The government is borrowing a lot more in FY20. What are the fiscal tools that are available for the government to push growth if you are saying that is going to be one big task in front of the new government?
Things are inter-related. If consumption is decreasing, then also total amount of GST earnings may increase, but it would be less than what it could be if consumption was increasing. Similar is the case with employment.
If you look at fiscal deficit, earlier fiscal deficit was higher. It came down to 3.4% last year. This year, it is supposed to be higher. Part of this may be due to all the things that you have said about the slowdown in economy. So, tax receipts are higher. But there may be difference between expenditure and revenues partly because of the election expenditure or partly because of investments that you are doing all over the country. Implementation may be slow but the investment rate is probably increasing. But it is not producing outputs as of now.
Do you believe the new government could perhaps look at a fiscal stimulus? That will come at the risk of a ballooning fiscal deficit?
My view on the fiscal deficit part is very different from what the normal view is. The reason you want lower fiscal deficit are two in number. One is essentially inflation. If you have a large deficit, then the so called money multiplier would be large and you would have money supply, which would increase at a much faster rate than output. So, you will have much higher inflation. If you do not have say an inflation problem, then you can have a fiscal deficit which is higher.
Second, what do you do with that fiscal deficit? If you are doing that fiscal deficit part in order to do things in times of election, to provide more money to people which are free or loan waivers or other things, then you would have a lot of disjuncture between what the actual poor get and what you are spending as has been the case with many of our schemes.
We are providing support for ration cards or for the shops for food. Data show that 50% is diverted.