India. Craig Jeffrey

in January 2015, not long after Narendra Modi took up office as prime minister, following the victory of the BJP in the general election of 2014. The Wall Street Journal reported (30 January 2015), ‘India surprised economists Friday evening by ratcheting up its official economic-expansion figure for the previous fiscal year, marking it as a year of sharp recovery rather than continuing stagnation, and putting India’s growth rate much closer to China’s’. According to the former method of calculating GDP, growth in 2013–14 was 4.7 per cent; according to the new method it was 6.9 per cent (and 7.4 per cent in 2014–15 as compared with 5.5 per cent, according to the old way of calculating GDP).

      There was fierce debate amongst Indian economists about the new method, with influential voices on both sides (for discussion, see Kar and Sen 2016: box 6.1). Somewhat later, the respected journal, the Economic and Political Weekly, published an editorial under the title ‘Lies, Damned Lies, and Statistics’ (11 June 2016), noting ‘glaring anomalies in the GDP data’, and pointing out, for example, that the old series of growth numbers for manufacturing showed 1.1% growth in 2012–13, while the new method reported 6.2%. But if we follow the advice of Kar and Sen, who suggest that it is prudent to refer to both data series, we find that there is no question that the per capita growth rate has fallen by comparison with the 2002–10 period: it stood at an average of around 6.4 per cent per annum in 2002–10, 3.94 per cent over 2011–14 according to the old definition and 4.91 per cent over 2012–16 according to the new definition (Kar and Sen 2016: fig. 6.1). Then, in June 2019, embarrassingly for the new government that had taken up office only a few weeks earlier, the former Chief Economic Adviser to the Government of India (2015–18), Arvind Subramanian, published a paper with the Centre for International Development at Harvard University, that called into question all the estimates of GDP growth for the period from 2011. As we explain below, Subramanian’s work suggested that actual growth over the period from 2011 to 2017 may well have averaged only about 4.5 per cent per year (A. Subramanian 2019).

There is no doubt, then, about the slowdown after 2010–11, and there are question marks over whether or not there really has been recovery since 2014. It is not just that there is such a gap according to the different ways of calculating GDP, but also that there is no consistency between different approaches to the assessment of the performance of the economy. In particular, there are indications that manufacturing industry is not doing at all well. India is perhaps ‘deindustrializing’ according to the Harvard economist Rodrik (2015; and see Amirapu and Subramanian 2014). The proximate cause of the slowdown after 2010–11 was the relative decline in corporate investment, and this had still not recovered by the end of 2019 (Seth 2019). The underlying factors, for Joshi, as for other economists, and the media, had to do with a souring of the investment climate because of the failures of the Congress-led United Progressive Alliance (UPA) government of 2009–14 – the scandals in which it was involved, and the policy paralysis which resulted from their exposure. A further factor was the deteriorating macro-economic position, reflected in rising inflation and widening deficits (Joshi 2017: 27). Data on Gross Capital Formation (investment in plant and machinery) show, however, an average of 31.8 per cent of GDP in 2014–18, the years of the Modi government, as compared with an average of 39 per cent in 2004–13, under the UPA, and of 33 percent in the decade before this (Ghatak and Mukherjee 2019).

      Probing these arguments, Kar and Sen (2016: 85–8) suggest that the loss of investor confidence – on which there is evidence from international surveys – may be understood as the outcome of negative political feedback from the closed deals environment that had developed after 2002, and the evidence of crony capitalism. Discontent over corruption, for which the government was held responsible, not the private sector, was focused in 2011 by the campaign of the India Against Corruption movement, of which the Gandhian social worker Ana Hazare was the figurehead. The legitimacy of the state was seriously eroded. These developments further encouraged the mobilization of non-elites, for example, over land acquisition for industrial projects, and helped to bring together the official accountability institutions – the office of the Comptroller and Auditor General (CAG), the Central Bureau of Investigation (CBI) and the judiciary. The kinds of closed deals that had obtained could no longer be made, and there was a sharp fall in the growth rates of the rent-thick sectors of the economy.

      The loss of credibility of the Congress Party and the UPA on the one hand, and the extraordinary campaign performance of Narendra Modi, as the prime ministerial candidate of the BJP, on the other, brought the BJP into office in 2014, with an absolute majority in the Lok Sabha, the lower house of the Indian parliament. This was the first time that a single party had won a majority for thirty years. Hopes ran high, among India’s capitalists, that Modi would re-establish the legitimacy of the state, and restore business confidence. There were concerns, however, about his close relationships with particular businessmen, from his long period in office as chief minister of Gujarat, when some business groups had been favoured – for example, over land acquisition (Jaffrelot 2018). These concerns did not go away, for in spite of well-publicized actions against some big businessmen, under a reformed bankruptcy code introduced by the Modi government (The Economist 2018a), it was still thought that some businessmen gained from close relationships with the prime minister and the ruling party. An important case in point had to do with the way in which India’s richest man, Mukesh Ambani, built up his telecoms company Reliance Jio, thanks, it was thought, to exceptionally favourable political and regulatory decisions (Stacey and Mundy 2018).

On the face of it, the Modi government was successful initially in restoring economic growth. In 2015, amid much fanfare, it was declared that India’s rate of economic growth had at last overtaken that of China, and that the country now was the fastest growing of all the major economies. It was a great moment for those political leaders and bureaucrats for whom this had long been the target – though regarded with scepticism by those who were not persuaded by the new method for calculating India’s GDP. Controversy over the methodology for computing growth rates was further fuelled in 2018, when the Central Statistical Office announced a downgrading of the official annual growth rates for 2005–2012, when the Congress-led UPA government was in office, from 7.75 per cent per annum to 6.82 per cent, while it showed the growth achieved under the Modi government in its first four years in office as 7.35 per cent per year. It was widely thought that the downgrading of the growth rate of the earlier period was unconvincing, given the boom of 2004–08 (Mundy 2018). The credibility of Indian growth statistics was called even further into question early in 2019 with the effective collapse of the National Statistics Commission – an autonomous body, set up in 2005 to raise the standards of official data – following the resignations both of its acting chairman and of its last independent member, who complained of having been sidelined by the government (Kazmin 2019a).

      Controversy over the validity of India’s official economic data reached a new moment of drama with the publication in June 2019 of the paper by former Chief Economic Adviser Arvind Subramanian, referred to earlier. Essentially, in the research reported in the paper, Subramanian compared data on 17 standard ‘real’ indicators that are usually strongly correlated with GDP growth – indicators such as electricity consumption, two-wheeler sales and commercial vehicle sales – with the GDP data. His emphatic conclusion was that ‘A variety of evidence suggests that the methodology changes introduced for the post-2011 GDP estimates led to an over-estimation of GDP growth’ (2019: 26), and, as we noted, he reckoned that growth in 2011–17 may well have been only about 4.5 per cent per year. This matters a lot, he argued, not only for reputational reasons, but more for policy-making: ‘The Indian policy automobile has been navigated with a faulty or even broken speedometer’ (2019: 27).

Still, in 2017, three years after he had come into office, Narendra Modi was complimented by The Economist, in an editorial (24 June 2017), for having ‘pushed through reforms that had stalled for years, including an overhaul of the bankruptcy law and the adoption of a nationwide sales tax (GST) to replace a confusing array of local and national levies. Foreign investment has soared, albeit from a low base’. The paper went on, however, ‘Alas, these appearances are deceiving’ – describing Modi as at best a cautious reformer, and as having failed, in particular, to tackle the serious problems of the financial system. At that point, state-owned banks still accounted for 70 per cent of all loans, but were in great difficulty because