India's new economic report is just a feel-good document

It is a widely acknowledged fact that interim budgets in an election year are likely to be crafted with the impending political maelstrom in mind. The budget speech typically becomes an occasion for great fanfare, with much energy being spent exaggerating the government's achievements while making generous promises of future gifts and new opportunities. This year, India's Finance Ministry adopted a new practice by releasing a document titled “The Indian Economy: A Review”, inviting comparisons with the annual economic survey that usually precedes the Union Budget by a day or two when no parliamentary elections are due. In keeping with the hyperbolic atmosphere of an interim budget, the review released on Monday proved to be a paean to the current government's economic management while downplaying some of the economy's most chronic problems. The review could therefore be seen as another pre-election tool, loaded with embellishments that appeal to the ruling party's middle-class support base, harmony with the electoral trumpet of the interim budget and perhaps also provide ideas for the party's manifesto.

It is a widely acknowledged fact that interim budgets in an election year are likely to be crafted with the impending political maelstrom in mind. The budget speech typically becomes an occasion for great fanfare, with much energy being spent exaggerating the government's achievements while making generous promises of future gifts and new opportunities. This year, India's Finance Ministry adopted a new practice by releasing a document titled “The Indian Economy: A Review”, inviting comparisons with the annual economic survey that usually precedes the Union Budget by a day or two when no parliamentary elections are due. In keeping with the hyperbolic atmosphere of an interim budget, the review released on Monday proved to be a paean to the current government's economic management while downplaying some of the economy's most chronic problems. The review could therefore be seen as another pre-election tool, loaded with embellishments that appeal to the ruling party's middle-class support base and provide harmony with the electoral trumpet of the interim budget and perhaps ideas for the party's manifesto as well.

Otherwise, such a review is a welcome idea. In these tense times of geopolitical conflict and economic uncertainty, a calm and sober look at the economy would have gone a long way to allay fears. Unfortunately, the document deviates from the straightforward and narrow. It's not that it trades in untruths. The problem is different: it seems to avoid some crucial questions. Let's take some illustrative examples. The first is the jubilation that the economy is hitting its stride in growth amid global turmoil, while the rest of the world's major economies are struggling to regain their footing. Amidst this boasting, two crucial facts are overlooked. First, estimated nominal GDP growth for 2023-24 has been lower than forecast, which will have its own implications. Furthermore, the review does not meaningfully address the growing criticism of GDP overestimation or the persistent problems in estimating the GDP deflator, which have led to discrepancies in output estimation between expenditure and production methods.

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Otherwise, such a review is a welcome idea. In these tense times of geopolitical conflict and economic uncertainty, a calm and sober look at the economy would have gone a long way to allay fears. Unfortunately, the document deviates from the straightforward and narrow. It's not that it trades in untruths. The problem is different: it seems to avoid some crucial questions. Let's take some illustrative examples. The first is the jubilation that the economy is hitting its stride in growth amid global turmoil, while the rest of the world's major economies are struggling to regain their footing. Amidst this boasting, two crucial facts are overlooked. First, estimated nominal GDP growth for 2023-24 has been lower than forecast, which will have its own implications. Furthermore, the review does not meaningfully address the growing criticism of GDP overestimation or the persistent problems in estimating the GDP deflator, which have led to discrepancies in output estimation between expenditure and production methods.

What is particularly worrying is that the review ignores the elephant in the room: current unemployment. It uses the government's recently released Periodic Labor Force Survey data to celebrate growing job opportunities and falling unemployment. However, this ignores data from other independent sources, such as the unemployment estimate of over 9% for November 2023 according to the Center for Monitoring Indian Economy forecast. In fact, Bibek Debroy, Chairman of the Prime Minister's Economic Advisory Council, admitted in an interview with Mint that the slow job creation in the economy was a concern. The review also has other strange things: it cites a 2023 paper to use Angus Maddison's conclusion that India contributed 22.6% of world GDP in 1700, rather than the British economist's work to quote directly. Although the paper was used to extract a data point, it does not mention his concerns about growing unemployment and poor economic performance. Ideally, a realistic examination of the economy – in the true democratic spirit of full disclosure – would have helped citizens make independent assessments. The government may have pushed the envelope by breaking convention, but unfortunately it is a missed opportunity.