Kautilya (aka Chanakya and Vishnugupta) excitedly picked up the 2014 reprint of his 5000 BC bestseller, Arthshastra (The Science of Governance). Today, he would present a copy to Emperor Chandragupta and wow him with the fabulous news that his political adversary, the UPA, had been totally vanquished. UPA’s last remaining claim to fame – ie, that they had delivered much higher GDP growth during their reign – had been demolished by him, the incomparable Kautilya.
He swung his red-beacon white car onto the road named after him, Kautilya Marg, in Lutyens Delhi, and pointed its nose towards Lok Kalyan Marg, the Emperor’s abode. He felt light-headed and optimistic.
But he was surprised to find the Emperor pacing up and down, looking a trifle irritated and angry.
Chandragupta: I read the news. Brief me on how you pulled off the GDP heist?
Kautilya (a bit uncertainly): Sir, I relied on the courses I taught at Takshishila University on Artificial Intelligence. I layered over a whole new set of assumptions on the past data to come up with an artificial… err, newly crafted data.
Chandragupta (snappily): Tell me the key points quickly.
Kautilya (beads of sweat breaking out on his forehead): Sir, I changed the telecoms’ input from the number of new subscribers to minutes of voice and data consumed. I switched from the volume, to the value, of motorcycles manufactured in each factory. I lowered the weights attached to the informal and financial businesses, shrinking the tertiary sector in our GDP. I did a few more clever twists, and we hit bull’s eye! They are now more than a hundred basis points behind us. And I’ve killed their boast of double-digit growth in 2010/11; unfortunately, that’s also damaged our beloved India. But I guess we have to accept that it’s nearly impossible for Bharatvarsha (India) to breach the 8 percent growth ceiling. He he he he (he giggled nervously)…
Chandragupta: Quiet! Tell me, did you stop to consider the impact of these new assumptions on our bigger game-plan? After all, beating the UPA was only a tiny cog in our grand scheme.
Kautilya (now looking terrified and confused): Sir, err, bigger game-plan? I am sorry, I am not quite getting it…
Chandragupta (visibly agitated): The bigger game-plan, my friend! We had to rework this GDP series all the way back to 5,561 BC – ie, more than 7,500 years back – to prove that the growth we managed during the Mahabharata and under Hindu rulers was higher, much higher, than what was logged under the Mughals. While it’s good that we have gone back until 2005 to kayo the UPA, our much bigger objective is to go back nearly 80 centuries to demolish, once and for all, the claims of Babar ki aulad [the Mughal dynasty founded by Babar’s progeny]. Prove to me that your new assumptions will clinch that for us, Kautilya, or else… (Chandragupta trailed off menacingly)
Kautilya (taking a deep breath to control his rising panic): Aaah, don’t worry Sir, I’ve got that covered. Allow me to take you through it, one point at a time.
Telecoms: Since it’s our considered view that high speed internet was deployed in the Mahabharata – but these technology-challenged infidels replaced it with pigeon mail under Mohammad Jalaludin Akbar – we shall win hands down here.
Motorcyles: The Pandava chariots in Mahabharata were equipped with laser and nuclear weapons. On the other hand, the Mughals used to ride clumsy, slow elephants. This one is in the bag too!
Financial sector: The barter system was prevalent during the Mahabharata. Since there is no change in the money supply under that dispensation – I mean, there’s no money at all – it’s inflation proof. As against this, the infidels used currency. So, the “inflation deflator” that I will use for the Mahabharata age will be nil. No problem, we shall beat the Mughals here too.
Informal sector: Now, let’s figure this one out. Hindu artisans were replaced by Muslims in the Mughal era. But since Muslims take five breaks every day for namaz (prayers), it would stand to reason that their productivity was lower than the Hindu artisans of the Mahabharata period. So gotcha, we win!
Kautilya (continuing): Net net sir, leave it with me. I will not change a single assumption; and with the same model that we’ve used to demolish UPA’s record, I shall prove to the world that the GDP growth under the Hindu rulers was much higher than under the Mughals...
Chandragupta (now beaming): Well done, Kautilya, my Chanakya, my wonderful hatchet! You are priceless.
New Economic Variables Emerge as an Economy Progresses
I’ve created the above satire to ram home the seriousness of the issue, not trivialise it. As new technology, global commercial rules, social mobility and income growth alter national economies, the relative importance of different variables changes. For example, in an agrarian society with a per capita annual income under $100, people would eat coarse cereal and grain.
But as countries and citizens become richer, say at annual income levels above $1,500 per capita, they begin to consume much more fruit, milk and animal protein (meat). Necessarily then, you have to give a higher weight to these items to calculate food inflation.
Similarly, in 2005, a new telecoms subscriber had to buy a handset (Rs 10,000), and pay a relatively higher amount for voice and data (say, Rs 2,000 per month). So s/he represented a far more significant measure of economic output, than minutes of data consumption (which was negligible when there were no iPhones, YouTube videos or Facebook).
But today, in 2018, in the Reliance Jio era, handsets and voice calls have become free, while gigabytes of data have become available for a song. Therefore, the unit of economic measurement should now switch to minutes or hours of data consumed.
So, a new telecoms subscriber was the correct measure in 2005. Just as the volume of data consumed is the right metric now. But it would be wrong to super-impose a volume measure in 2005 to restate the value of India’s “telecoms GDP” for that year. That’s a clearly biased selection which shall under-estimate the telecoms output in 2005 compared to 2018. And since the Modi government has used this device – and a million similar tweaks – to “recalibrate” the GDP under UPA downwards, what they’ve done is highly questionable, even plain wrong.
This dire conclusion is strengthened by several other data points – corporate profits, investments, tax revenue, credit expansion, exports – which show the Manmohan government posting a much stronger performance than the Modi regime. It’s disingenuous to try and turn all of that hard evidence on its head!
Best to Back Off, Prime Minister!
In any case, the GDP of any country is a very fuzzy and imprecise measure of the economic well-being of its citizens; so, precious little will be gained by trying to game that data. GDP is always fixated on “more”, not “better”.
If more patients die in hospital, the GDP improves; but if everybody is healthy and never visits the doctor, GDP falls. If a car burns excess fuel and pollutes, GDP increases; but if its engine is efficient, GDP shrinks. If the education system is terrible and every student needs to take private tuitions, GDP increases. It’s perverse!
Prime Minister Modi’s fetish to rewrite history is well documented. But he would be wasting his fast-depleting political capital in playing that trick on past economic data. At best, he will get a few talking points which won’t matter to agitating farmers and unemployed youth. At worst, he would be wrecking yet another respected institution of India’s political democracy.