After the Prime Minister’s speech at the ICSI gathering on October 4, 2017, several experts have mushroomed with their opinions in the media, attempting to fault the PM’s response to economic doomsayers. These articles have tended to take one or both of two views: one, that the government is still in “denial” of the slowdown; and two, that the PM “cherry-picked” facts and data to counter the negative narrative on the economy. Where these experts tend to converge is in attributing everything good or strong about the economy to oil prices and all that is not, to the Modi government (precisely, demonetisation and GST).
As an example of such articles, we may look at Vivek Kaul’s piece “How Modi Cherry-Picked Data To Build A Positive Narrative On The Economy”, published in Huffington Post on October 5, 2017. Kaul’s article is typical in claiming both that the PM cherry-picked data as well as that oil is behind everything good and policies like demonetisation and GST are behind everything else.
Food Inflation & Farmers
For instance, food inflation, as the PM had pointed out, has come down from 12.1% in 2013-14 to 4.2% in 2016-17 and -0.3% in April-August 2017-18. Kaul says that food inflation “is in negative territory because farmers haven’t got the right prices for their produce.”
Now, let us look at the facts. While there is certainly no discernible “oil” factor involved here, what farmers earn has more to do with MSPs than the consumer price. And what has happened with MSPs? For all crops with MSP, the fact is that MSPs have been hiked over the last few years and continue to be hiked, even as for Kharif 2017-18.
If we look at certain crops as examples, we see that MSP on paddy per quintal has increased from Rs 1,000 (Common) and Rs 1,030 (Grade A) in 2010-11 to Rs 1,470 and 1,510 respectively in 2016-17 (as on June 1, 2016). For the 2017-18 season, MSPs on Common & Grade A paddy are Rs 1,550 and Rs 1,590 per quintal respectively, i.e., a hike of Rs 80 per quintal for the current Kharif.
To take the important example of pulses, tur and moong, among others, have seen their MSPs per quintal rise from Rs 3,850 and Rs 4,400 in 2012-13 respectively to Rs 5,450 and Rs 5,575 respectively for Kharif 2017-18.
Where is the Data?
Throughout the article, the writer keeps blaming demonetisation and GST, such as when he claims demonetisation has been responsible for destroying supply chains in India, including agri-supply chains, or that it has “led to a huge job destruction”. There is, however, no evidence or data reproduced to support this refrain that occurs in several places within the article. Similarly, GST is blamed for playing havoc but it is never shown how.
Forex Reserves: Inheritance & Comparison
Kaul talks about forex reserves and says that the data was picked from 2011-12 onwards to show how forex reserves rose by $60 billion under Modi as PM to be where it is today, above $400 bn. By contrast, forex reserves were flat when Manmohan Singh was PM. However, Kaul argues, if the data is taken from 2003-04, i.e. Singh’s first term as PM, we will see that forex reserves “accumulated at a much faster rate during Manmohan Singh’s tenure as prime minister.”
Now, the comparison with 2003-04 may be termed untenable for several reasons. First of all, the conditions for the global and Indian economies were very different at that point in time. We are, after all, talking about the pre-Crisis global economy, long before the financial crisis and its aftermath dating from the collapse of Lehman Brothers in September 2008. Second, it could also be argued that Manmohan Singh’s government had little to do with the booming economy and bulging forex reserves in 2003-04 and the next few years, since that was what his government had inherited from the Vajpayee government which left office in May 2004. Third, what the Modi government inherited from its predecessor was not the state of the Indian economy in 2004 but that in Manmohan Singh’s second term – i.e. the largescale economic mess that Kaul himself has had to admit in his article.
Why Leave Out Infra?
In the end, Kaul’s article itself is a case study in cherry-picking issues. The PM talked about many things in his speech and highlighted what has been achieved in infrastructure and socio-economic inclusion. Why hasn’t the writer thought of taking these up? Is it because oil cannot be forcibly placed behind these or because the last administration did not leave even statistics worthy of comparison?
For instance, what does oil have to do with rural electrification? If villages did not have electricity, was it because of fuel prices? Or is the Modi government’s success in rural electrification the result of falling global crude prices? Till date, 14,574 of 18,452 unelectrified villages have been electrified, that is, 78% of unelectrified villages have been electrified. Besides, India’s power transmission capacity addition has risen from 1,75,282 MVA in 2011-14 to 2,10,219 MVA in 2014-17, as the PM pointed out. Power transmission lines have seen circuit kilometre addition of 76,515 CKM in 2014-17 from 54,289 CKM in 2011-14.
Highways, Railways, Rural Roads, Etc
Again, just as an example of the data presented by the PM in speech, we have construction in railways, highways, rural roads, cargo capacity in ports, etc. In railways, new lines were laid for 813 km and 953 km respectively in the years 2015-16 and 2016-17. In the last two years of the Manmohan Singh administration, these figures were 352 km (2012-13) and 360 km (2013-14). Again, 6,061 km and 8,231 km of highways have been constructed in 2015-16 and 2016-17 as compared to 5,732 km and 4,260 km in 2012-13 and 2013-14 respectively. Under PMGSY, 47,447 km of rural roads have been constructed in 2016-17 as opposed to 24,161 km in 2012-13, the last full year in office of the previous administration. The average road length completed today in 2016-17 is 130 km as against 66 km in 2012-13. This list, too, could go on. But does the writer believe the economic impact of such infra is zilch when he rues “the bad state of the Indian economy”?
Socio-economic Inclusion: MUDRA
Moreover, on small enterprises and jobs, where does what the PM said about the MUDRA scheme come in? As of September 22, 2017, MUDRA has seen 9.13 crore borrowers and the total sanctioned amount stands at Rs 3.98 lakh crore. Given this administration’s emphasis on creating job creators and not job seekers, shouldn’t MUDRA’s socio-economic impact be taken into consideration?
Core Sector Growth
In conclusion, it may be pointed out that there are other facts of the economy that critics like Kaul are ignoring, deliberately or otherwise. The uptick in commercial vehicle sales, while derided by critics of an ideological bent, is not an irrelevant economic indicator. Besides, and more importantly, where is the registering of the fact that the core sector (Eight Core Industries which account for 40%-plus of the IIP) has shown credible growth in August 2017, the highest in five months — 4.9 % higher compared to the index of August, 2016? Where is the mention of manufacturing and services PMI, which too, have risen?