Use statistics to shape stimulus
This newspaper reported last week that the government is considering several proposals to give a boost to economic activity. The steps being considered include temporarily slashing taxes on automobiles, packages for various other industries, and injection of liquidity to complete some stalled projects. To be sure, these moves are still on paper. Still, based on the measures, it is clear that the likely government response seems to be treating the current downturn in the economy as a cyclical rather than a structural one.
There are two factors worth considering. The first is the controversy regarding India’s gross domestic product (GDP) numbers. Many independent economists, including a former Chief Economic Adviser to the present government, have said that India’s GDP statistics could actually be overestimating growth. If this is true, then the economic slowdown could be worse than what the government thinks it is. Two, policies such as demonetisation and Goods and Services Tax (GST) have given a big blow to the informal sector in the Indian economy. This might not have reflected immediately in the official GDP numbers, but is probably showing through a slowdown in demand. It is difficult to dwell on the impact of these two factors as there has not been any attempt by the government to gauge their effect on the economy. There is one source which can give an insight into the impact of these policies on aggregate demand. The National Sample Survey Office (NSSO) has completed its Consumption Expenditure Survey (CES) for 2017-18. This survey can give detailed data about consumption expenditure levels of various kinds of households in the economy. The employment statistics for the Periodic Labour Force Survey (PLFS) conducted in 2017-18 have already been released. Any policy response to the present economic slowdown should take into account the information provided by PLFS and CES. The ministry of statistics and programme implementation should expedite the release of the already delayed CES data. This will give a valuable source of information to both the government and independent economists to understand the current economic situation.
There is a political context to this as well. The PLFS data, which showed unemployment to be at a four-decade high, was withheld until the 2019 election results were out. The reason could have been to prevent political embarrassment for the government. There’s no reason to delay the CES data, though. Even if the CES findings show a bad picture, holding them back would only delay a coordinated response to the present slowdown.