Prime Minister Narendra Modi made a rather significant disclosure in an interview to Swarajya magazine this week. Modi claimed that soon after taking charge in 2014, he decided not to commission a white paper on the state of the economy, because doing so had the “potential to cause a crisis all over”. He also claimed there were landmines strewn all over the economy and that even the Budget figures left behind by the Congress-run United Progressive Alliance government were questionable. In other words, he admitted to hiding the truth of the economy for the benefit of the people.
Who is to say he is not still doing so?
In the interview, Modi is asked why his government did not put out a white paper on the state of the economy, as many expected at the time. Here is his answer:
“In 2014, one of the key agendas of the BJP’s election campaign was highlighting the dismal management of the Indian economy, ironically under an ‘economist’ prime minister and a ‘know-it-all’ finance minister.
We all knew that the economy was in the doldrums but since we were not in government, we naturally did not have the complete details of the state of the economy. But, what we saw when we formed the government left us shocked!
The state of the economy was much worse than expected. Things were terrible. Even the Budget figures were suspicious.”
He explained the decision not to be transparent about the economy by claiming that the Bharatiya Janata Party was putting rashtraneeti, the interests of the country, over rajneeti, politics. Asked if disclosure would have made the economic situation worse, Modi said:
“The details about the decay in the Indian economy were unbelievable. It had the potential to cause a crisis all over.
In 2014, industry was leaving India. India was in the Fragile Five. Experts believed that the ‘I’ in BRICS [Brazil, Russia, India, China and South Africa] would collapse. Public sentiment was that of disappointment and pessimism.
Now, in the midst of this, imagine a White Paper coming out giving intricate details of the extent of damage. Instead of being a mollifier, it would be a multiplier of the distress.”
In other words, what the Modi government found, according to the prime minister, was an Indian economy in such a horrible condition that revealing the actual picture of what had happened could be disastrous for the country. So it decided that rather than tell the people what things really looked like, it would stay mum and try and fix the problem.
That alone seems problematic. It is an admission that, much like the accusations levelled at the United Progressive Alliance, his government decided it knew better than the Indian people and so ought to hide the details.
New GDP series
The question that then follows is whether Modi’s government itself has a stellar record when it comes to economic transparency ever since.
This is a bad time to ask that question, not least because India has been without a chief statistician for more than five months now, raising questions about the seriousness with which the government sees the collection, accuracy and reputation of its data. But this vacancy only reinforces some questions that have been around since the very beginning of Modi’s tenure.
Soon after taking over, and presumably after having seen the dire state of the economy left behind by the Congress-led regime, the Modi government decided that it would change the methodology in calculating gross domestic product – the value of all goods and services produced in the country in a year. The change, in 2015, came with much criticism, since it seemed to put the economy on a much faster track than other indicators implied. But, it also suggested that the last year of the Congress-led United Progressive Alliance regime had much better figures than under the older methodology.
There were vigorous debates about the new method of GDP calculation – some said that it was obscuring the true distress in the economy, others claimed it offered a more accurate picture. One universal demand from economists was for back series data that would use the new yardstick to show what the GDP numbers looked like in the decade before the change. Three years later, as of July 2018, the government has yet to release this data, leading to questions about whether the statistics would end up being embarrassing for it.
Demonetisation, electoral bonds
Then there was demonetisation. In one fell swoop, the government decided in November 2016 to withdraw 86% of the currency in circulation, only to re-introduce new high-denomination notes. It claimed that its actions – which caused massive economic distress – would significantly cut down “black money”.
During the process, however, the government refused to say how it came to the decision, whom it consulted, what its economic assumptions were going into the move, and whether those assumptions had been borne out by the results. Without these benchmarks, it is hard to evaluate demonetisation, although rhetorical arguments, like suggesting it would bring down cash in circulation or see a significant number of notes go unreturned, indicate that demonetisation was a massive, painful failure.
Transparency on data has hardly been the hallmark of this government. Its most significant intervention in political funding, for example, is introducing electoral bonds, an instrument that actually makes the entire process of giving money to political parties more opaque than before. Or its arguments about the lack of jobs: Modi’s response has been to say that the problem is not a lack of jobs but the lack of data on jobs. Which may be fair, but is an unexpected answer going into the final year of his government. Why was this not discovered earlier?
The prime minister’s general argument about the state of the economy left to him by his predecessors may be accurate: the United Progressive Alliance government was no paragon of virtue when it came to transparency. But his admission in the Swarajya interview suggests he was willing to hide the truth from the people. And his government’s actions since, from the GDP series to demonetisation to electoral bonds, do not inspire confidence. Who is to say that, having successfully hidden the true nature of the distress in the economy, Modi has continued to find it convenient to hide the truth?