Former Reserve Bank of India Governor Raghuram Rajan on Tuesday wondered whether the Indian economy was indeed growing at 7% and said he is “in the camp that has no idea what the statistics are at this point”. In an interview with CNBC-TV18, Rajan called for an impartial body to clean up the way statistics are calculated, to remove confusion over economic growth data.
“I think what we need is a revamp to figure out what is true growth rate is,” Rajan said in the interview. “I know one minister [in the Narendra Modi government] has said [that] how can we be growing at 7% and not have jobs. Well, one possibility is that we are not growing at 7%.”
Rajan was possibly referring to Union Finance Minister Arun Jaitley, who has been a strong defender of the growth data. There have been several questions about the government not making public a report on jobs data, which claimed that unemployment reached a 45-year high in 2017-’18. Jaitley had claimed in February that high economic growth, which he said India had seen, was not possible if there was no job creation.
Referring to the doubts being raised over economic data, Rajan said: “I just think that we need now to essentially clean-up, find out what in fact is the source of confusion with the new GDP numbers, with the revisions, etc. I would say setting up an impartial body to look at it is an important step to restoring confidence.”
Rajan added that a “stronger broad-based growth” was needed for creating meaningful jobs. “We need stronger broad-based growth, which primarily for most people means good jobs,” he said. “What we need to do is focus on how do we create good jobs for the vast number of people who are leaving schools, who are leaving agriculture, who are leaving universities, in such a way that they can expand India’s growth.”
‘Time to look back at demonetisation’
In another interview to NDTV, Rajan said the government should introspect on some of its decisions, like demonetisation. “It might be useful to go back over that decision and see how it was taken and what its long-term consequences were,” Rajan said. “Did it meet some of the objectives it had – certainly some we know it didn’t, but maybe there are others that it did. What is the learning from this – every modern economy which takes such momentous decisions has to do some self-examination based on actual data and ask if this worked, and did not work...and how to improve the process of decision-making.”
Rajan said “enough time has now passed by for us to look back at demonetisation and ask what the learning has been from it”. “Self-examination is something that every government must do for better governance and efficiency,” he said.
Controversies over GDP data
Several problems have come to light ever since India, under the Narendra Modi government, changed the base year for calculating GDP growth to 2011-’12. In November, the Centre revised down the Gross Domestic Product growth rates for the 2006-2012 period, saying it had recalibrated the data to reflect a more accurate picture of the economy. One set of data, given by the National Statistical Commission in August 2018, had shown that India’s economy grew by over 10% for at least one year under the previous Congress-led government. However, it was soon removed from the government website, and another set of data, which showed lower numbers for the previous regime, was released three months later.
A group of economists and social scientists earlier this month had urged the Indian government to restore the integrity of statistical organisations as their national and global reputation was “at stake”.