By Karthik Shankar:
If you believe the reports that Modi’s visit to China was the second coming of Beatlemania, you will also believe these figures that have the government seal of approval – we are finally beating China in growth. Prematurely celebrating about ‘overtaking‘ China is akin to AAP assuming that winning the elections counted as a victory for the party rather than the cold hard job of actual governance.
Technically speaking, the figures are akin to a white lie; true only in a certain context. Our growth in the last quarter of 2014 was 7.4%, a smidge higher than China’s. Many analysts using their favourite reductive analysis of spirited India and inscrutable China will have you believe that they have switched places in the economy sprint race.
It’s About Method Stupid
First, it’s important to note that we changed our methodology of calculating our GDP. By changing it from factor prices to market prices, we have added in that secret X-factor, which are the numerous taxes levied on us by our overlords. However in 2014 the difference between levied and collected taxes was Rs 77,000 crore; large enough to overshadow Jayalalithaa’s disproportional assets (I think).
Interestingly when retroactively applied, the methodology shows a significant increase in the GDP growth recorded in the last year of the UPA regime. I wonder why ace economist Manmohan Singh didn’t dream up this solution.
All About That Base
There’s also the GDP base. China as of 2013 has a GDP of $ 9.24 trillion while India’s was pegged at $ 1.87 trillion. Saying that India grew faster than China is like saying you’re a bigger philanthrope than Bill Gates because percentage wise Rs 100 from your salary wins out against his billions of dollars. Then look at infrastructure. Despite our relentless belief that Mumbai’s glittery glass and chrome structures will put Shanghai’s to shame (on a non-rainy day), we allocated $11 billion for infrastructure. China on the other hand is fast tracking a whopping $950 billion worth of infrastructure projects this year. Tiger and Dragon seem like very apt synonyms considering one can swallow up the other whole.
Many experts have also wondered if the data really paints an accurate picture of the Indian economy. Our Chief Economic Advisor Arvind Subramaniam himself was mystified with the numbers. Just earlier this month, data showed that growth in eight core sectors was at its lowest in seventeen months. Forget China when we haven’t gotten over the UPA political free for all.
One Ticket For Pragmatic Central
Now this doesn’t mean it’s time to stop buying those Xiaomi phones (because let’s be honest those are great deals). We just have to take a pragmatic look at our economy by clearly demarcating actual growth versus comparative growth. Of course stopping the train to hype express is almost impossible, considering we as a country are addicted to jingoism.
China’s growth story is remarkable and awe-inspiring no doubt, but why do our politicians and the media always rush to draw the parallels? We are very dissimilar countries. Ours is a democracy with a highly socialist economy whereas China is an autocracy with a fairly liberalised economy. So the next time Arun Jaitley announces that India is set to overtake China in growth, don’t applaud, question if that economic feat can be replicated for the next 30 years.