Indian data have always been somewhat flawed, but they have also been within the realm of the believable. The new series for GDP may also be flawed, but it is not fudged for short-term ends. Yet, silence from the government on questions about the statistics helps create that impression. It is not that the new GDP series is totally off; simple examination of the nominal GDP growth figures would suggest an economy slowing down consistently. Nominal annualised growth of six per cent in the second quarter of 2015-16 was the lowest since 2011, when the new series started. In fact, nominal growth in the last four quarters is almost half of what it was before this government took office. Moreover, the latest figures show a nominal growth rate lower than the real growth rate, due to a negative GDP deflator; this has not occurred for a long time. In other words, the business perception is also reflected in government data.
It is only when the GDP figures are corrected for inflation that real GDP growth appears to be healthy and stable. This is not a data problem - simply that business perceptions are formed on the basis of their revenue and earnings reported in nominal rupee values, whereas it is inflation-adjusted figures that are favoured by policymakers. Perhaps more disturbing is the consistent fall in imports for several months, a sure sign of slowing internal demand growth in normal times - and apparently inconsistent with an economy growing at seven per cent or more. The government needs to hammer out a threefold message. First, that there may be other things that may be wrong with the new GDP series, but these will be identified and corrected. Second, that India is moving closer and closer to global best practices on national accounting. And third, that the new GDP series does reflect what is happening in the Indian economy. In the absence of such messaging, questions will arise - when government data do not seem in sync with experience, doubt is natural. Silence will only lead to distrust and appear as if the government is either unsure of, or sugar-coating, its own figures.
Unfortunately, the committee supposed to examine the growth figures is many months behind in making its report public. Sporadic attempts to defend the numbers and trumpeting India as "the fastest-growing large economy is no replacement for transparency, for honesty in accepting weaknesses, for taking responsibility over their correction, and for being proactive and coordinating a single set of messages. Huge investments are impacted by growth figures, not to mention the fiscal and monetary policies. Silence and inaction are only making things appear worse.