Tuesday, April 30, 2013

Is Gujarat CM seeking to manipulate GSDP figures to inflate growth rate? Ex-babu warns this happened earlier, too

By Rajiv Shah
Latest information, available from authoritative sources, has suggested that Gujarat's growth rate at constant prices (arrived at reducing inflation) for 2012-13 – for which the figures have still not been officially released – is down to seven per cent. Well-informed official sources said, Gujarat chief minister Narendra Modi, disturbed by the figure, has held as many as four meetings to “dress up” and finalize the gross state domestic product (GSDP) figure for the year 2012-13. “So far he has not been satisfied with the numbers generated by the Directorate of Economics and Statistics and wants better numbers from them”, said an insider, adding, this is “notwithstanding the economic gloom in general and the poor agricultural scenario brought about by the first serious monsoon failure of his regime.”
The single digit rate of growth for the second consecutive year, says this insider, has come as an obvious shocker for a CM who has all along been claiming that Gujarat is the only state which has constantly maintained a double digit rate of growth. In fact, the “Socio-Economic Review” for 2012-13, released recently, contains the following statement: “Gujarat is probably the only state of the country which has recorded double digit growth in the economy continuously for the last 10 years. Because of the exemplary growth, the state has witnessed since 2001-02, Gujarat is rightly called the growth engine of India.”
Already, facts are coming to light which suggest that manipulating facts and figures to suit the powers-that-be is an important factor in calculating GSDP figures. This has been suggested in a recent note prepared by, by CJ Jose, an IAS bureaucrat who retired in 2008, and meant for circulation among influential sections to understand the real story of Gujarat's growth. In his note, he suggests that much of the propaganda of Gujarat's double digit growth rate has been arrived by by choosing a wrong base year. The impact of the propaganda has been so great that, among others, a senior economist of the Indian Institute of Management-Ahmedabad, Prof Ravindra Dholakia, praised this growth rate as something unique.
To quote Jose, “The growth of Gujarat’s GSDP (and its sectoral composition, into agricultural and non-agricultural, for the period between 1960-61 to 2009-10, at constant 1990-2000 prices), was made available, on request, to Dholakhia by the Directorate of economics and Statistics, Government of Gujarat, which became the basis of Chapter 1 of his book 'High Growth Trajectory and Structural Changes in Gujarat Agriculture'. Based on the numbers given to him, Dholakia concluded that during 2000-01 to 2009-10, Gujarat’s GSDP grew at 10.2 per cent, compared to 7.4 per cent in the decade immediately preceding 2000-01. Dolakia was perhaps the first academic from a well known institution to confirm Modi claims.”
Jose reproduces the GSDP numbers for some years extracted from Dholakia's book:
Year           GSDP (Rs.Crores) Year          GSDP (Rs.Crores)
1960-61     17020                   1997-98      101590
1981-82     40611                   1998-99      108871
1990-91     60113                   1999-00      109861
1994-95     82601                   2000-01      104494
1995-96     87045                   2001-02      113277
1996-97     99468                   2002-03      122500
2008-09    228459
2009-10    250450  
Based on this, Jose says, the “GSDP growth rate game for Gujarat" can be worked out very different way by making the choice of a base year:
Compound Annual Growth Rate (CAGR) of GSDP: 
1990-91-to 1994-95  8.27 per cent
1995-96 to 2009-10   7.84 per cent
1996-97 to 2009-10   7.36 per cent
1997-98 to 2009-10   7.81 per cent
1998-99 to 2009-10   7.87 per cent
2000-01 to 2009-10  10.20 per cent 
While pointing out that “all these are statistically correct” and the “last comparison is only as true as the rest”, with the “the first comparison is for the four year period of non-BJP rule and the “the second is for the duration of the uninterrupted BJP rule beginning with Keshubhai Patel in 1995-96 till end of 09-10”, Jose argues, “The two digit growth in the last comparison is simply the function of choosing 2000-01 as the base year. Due to widespread and severe drought in the state, fiscal 2000-01 had seen a huge decline in both agriculture and industry. Its effects persisted during much of the ensuing year (2001-02). Move the base year back by one, and the double digit ‘spectacular’ growth under Modi’s watch simply evaporates.”
Working out the latest CAGR of the Gujarat GSDP for the year 2011-12 compared to previous years, Jose seeks to juxtapose it side-by-side below the GSDP of Gujarat for some selected years drawn from Dolakia’s table (constant 1999-2000 prices) and from the Socio-Economic Review of 2012-13 (constant 2004-05 prices). 
Year              GSDP 1999-2000 prices      GSDP  at 2004-05 Prices 
1998-1999         Rs 108871 Cr. 
1999-2000         Rs 109641 Cr. 
2000-2001         Rs 104494 Cr 
2004-2005         Rs 153079 Cr                Rs 203373 Cr. 
2006-2007         Rs 189436 Cr                Rs 253393 Cr.  
2009-2010         Rs 250450 Cr                Rs 334127 Cr
2010-2011*       Rs 275655 Cr                Rs 367540 Cr 
2011-2012*       Rs 299163 Cr                Rs 398884 Cr
*The numbers representing GSDP at constant 1999-2000 prices for 2010-11 and 2011-12 are extrapolated by using the ratio between the values at the two different prices for the years where both were available. The value in 1999-2000 prices is roughly 75% of the value in 04-05 prices where both were available. 
Here, Jose suggests, the manipulation is more than evident. “With the base year of 1998-99, the CAGR for 2009-10 is 7.87 per cent. With the base year of 1998-99 the CAGR for 2011-12 is 8.09 per cent. But if the comparison is based on 2000-01, the CAGR goes to 10.20 per cent”, Jose points out, adding, all the three numbers will undergo downward change if the GSDP figures are “moderated” and “neutralized” in case one leaves aside the value of agricultural output, which itself, claims Jose, is “highly inflated” for two years, 2010-2011 and 2011-12.”
Jose underlines, “If there has been anything ‘spectacular’ and ‘amazing’ about Gujarat in the last 10 years, it is the fact that nature has been exceptionally kind to the state with plentiful and well-spaced rainfall during the period, supporting diversification of agriculture into high value crops and ensuring steady growth of agriculture and animal husbandry, growth which obviously underpins overall economic growth. If you are blind to these factors, you simply invent adjectives to glorify someone who wants to assume, foolishly though, supernatural proportions and otherwise reputed professors of economics end up heading full time sycophancy schools.”
Coming to inter-state comparisons, Jose states, “If we compare the GSDP growth of various states in India during the last five years the first position goes to UP, followed by Bihar in the second place, Mizoram in the third place, and Arunachal in the fourth place. There is nothing much to distinguish between the growth rate of Gujarat in the fifth place and Haryana, Maharashtra and Andhra Pradesh which follow immediately behind Gujarat.” 
GSDP growth (%) for the last five years 
States                           2007-08    2008-09    2009-10    2010-11    2011-12
UP                                       18.1         12.7        18.3               9.6               9.3
Bihar                                    3.7          12.2          7.1            13.7            16.7
Mizoram                            11.0          13.3       12.4              7.2               8.5
Arunachal Pradesh         12.1            8.7       14.8              7.9               3.7
Gujarat                              11.0            6.8       10.1            10.5               8.5 
He adds, “If the GSDP growth of various states in the last two fiscal years is compared it will be seen that Gujarat has slipped to the seventh position behind Bihar, Chhattisgarh, Madhya Pradesh, Maharashtra, Uttar Pradesh and Goa, in that order. Gujarat shares the seventh position with lowly Pondicherry.” 
GSDP growth (%) of last two years
State                   2010-11           2011-12
Bihar                         13.7                  16.7
Chhattisgarh           11.2                  10.8
MP                               7.9                  12.0
Maharashtra            11.8                    8.5
UP                                 9.6                    9.7
Goa                               8.0                  11.0
Pondicherry               8.0                  11.0
Gujarat                      10.5                    8.5 
Now comes the “shocker", according to Jose. If one leaves aside high claims of Gujarat on the agricultural field (which he believes have been calculated on the basis inflated value of the output of agriculture and allied activities), “Gujarat’s GSDP for the year 2010-11 will come down to 7.56 per cent against the 10.5 per cent shown above... If the overall growth of the various states is compared for the last two financial years, with the moderated growth rate (7.56 per cent) of Gujarat for 2010-11, Gujarat’s position would be 20th with only Assam, Orissa, Uttarakhand and West Bengal showing a performance worse than Gujarat.”
He comments, “The difference in the growth rate of Assam and the Orissa would be only marginally lower than that of Gujarat. But for a consolation it can be said that Modi did beat Mamta after all, a second time. Or may be Mamta was smarter all along knowing that Nano simply would not sell and would spell doom for a number of ancillary units set up in anticipation of servicing an automobile giant, as it is now happening in Gujarat.”

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