A startling discovery about the Indian GDP growth rate between 2011-12 and 2016-17 states that India did not grow at 7% per year, as the citizens were officially informed. Instead, the average annual growth crawled at a ridiculously small 4.5% on an average, during those five years and now, well, it’s at -10.2% for 2020-21.
The situation that India’s economy dragged itself into has taken me 18 years back to April 12, 2002, when a record-breaking franchise had just set its foot into every single bookstore in the world with Harry Potter and the Philosopher’s Stone.
Being an ardent believer in witchcraft and wizardry, the sequence in which the magic bricks of the story piled up one after another with a perplexing turn of events spared me very little time to get mesmerised by reality. Needless to say, there have been innumerable sleepless nights on which I’ve found myself staring at the sky and contemplating Joanne Rowling’s world beyond the clouds.
However, the crystal of doubt started polishing itself with every birthday of mine that passed, and I got to witness a clearer picture within. The surprising fact isn’t in what I witnessed, but in what I interpreted it to be and how relatable it seemed to my developing nation.
So, let’s sit back and try to keep today’s economy in our heads as we proceed with the story.
The world described in the Harry Potter series is one where the economy is stagnant, the government is an effective police state, and the education system is in an urgent need of major reform.
Despite all the magic, fundamental economics still apply in the wizardry world. A flip through one of the seven wonders of the Potter series will clearly project how far it is from a utopian dream. Money and price systems still exist and society is not overflowing with riches; witches and wizards are bestowed with the same financial difficulties as their muggle counterparts. While magic can transfigure and alter objects in numerous ways, there still prevail certain natural laws that clearly mean that one can’t just conjure money or food out of thin air.
There appears to be virtually zero encouragement for further innovation. Almost all businesses and firms in the magical world are extremely well established: Olivander’s, for instance. The wand shop first opened in 382 BCE. Business churn only seems to occur in the middle of a panic, such as that caused by the return of Lord Voldemort and his subsequent terror campaign in the mid-1990s. A world as hierarchical and prejudiced as the one Harry resides in — where most rich wizards such as the Malfoys look down on those less fortunate than themselves — clearly does not encourage innovation, growth and social mobility.
But hold on, it’s not only the financial system where there’s a lack of competition. Every industry in the wizarding economy is highly concentrated. One reason for this boils down, undoubtedly, from excessive regulation and bureaucracy. Such regulations drive up the costs of production and raise a barrier against challengers.
Foreign producers and international trade are eager to provide competition, but heavy government regulation appears to stop this: in The Goblet of Fire, we learn that ministry regulations prevent the import of flying carpets, which would compete with broomsticks as a mode of personal transportation. The official reason for the ban is that flying carpets are classified as Muggle objects, yet, the fact that they can fly clearly makes this ban absurd and is obviously an example of a government trying to protect domestic producers at the expense of consumers.
It is well established that increasing human capital and expanding the frontiers of knowledge are among the key ingredients for economic growth. A good education system is crucial for enabling this. Unfortunately, in the magical world, schooling is generally very poor. There is virtually no teaching of theory, and creativity is not encouraged, which is why Hermione is a model student, even though the Weasley brothers Fred and George arguably contribute far more to the wizarding society through their innovation and entrepreneurship.
But by far, the biggest issue in the world that Harry Potter inhabits is the role and influence of the Ministry of Magic. The Ministry has immense and arbitrary powers, which it uses to control and regulate most activities in the magical world. Worryingly, the concepts of checks and balances or separation of powers don’t seem to exist: the Ministry functions as the executive, legislature, as well as the judiciary.
A free press would have helped expose the pervasive incompetence and corruption of the Ministry of Magic. Unfortunately, the Daily Prophet, which is the primary source of news for the magical world, effectively acts as the propaganda arm of the Ministry of Magic: the paper and the ministry are closely connected, and news stories are often altered to have a more pro-ministry slant.
Now, let’s keep this picture in the background while we review the growth numbers of today’s India.
To begin with, there are two important points necessary in justifying the discrepancy in the GDP growth numbers. One, former Chief Economic Adviser Dr Arvind Subramanian uses 17 key factors in his published paper, including two-wheeler, tractor and truck sales, electricity consumption, manufacturing numbers, rail freight and so on, as proxies to measure overall growth.
His findings state that before 2011, most of these stated factors — manufacturing production and exports to be specific — moved in tandem with overall growth. Thereafter, for no explained reason, manufacturing growth raced ahead, dragging the GDP growth upward; exactly like magic.
There lies no doubt in the fact that manufacturing was indeed the main culprit, but other sectors followed this trend too. Secondly, the data showed that India’s growth was measured against an average of 7.1%, in which all the other nations were approximately growing. Thereafter, compared to all those nations, India was rising ahead. This sounds very similar to the story of locating a needle on the surface of Mars- without a telescope; again, magic.
His paper undoubtedly serves zero political motive. It covers data during both UPA and NDA periods. Hence, the errors that have crept into our macroeconomic numbers are systemic, and not driven by any political directive.
Now, what are the odds of this happening? Low.
Let’s assume, for simplicity’s sake, that the years after 2010, when the global economic crisis was hitting our shores, the government might have needed to do this to keep the global credit ratings high, lower borrowing costs, keep inward investment flowing and so on. Even then, the probability of this occurring in our chaotic bureaucracy is considerably low.
Hence, imagine what could have happened had the government projected the actual data. What could have been saved if the media houses portrayed news exactly as it were and not as it should be? How far would the low-hanging social indicator of education have improved if history wouldn’t have been meddled with? What would have been the delta of higher development achieved had we spent the very similar amount of time improving health instead of renaming cities?
Let me provide you with an answer to one of these questions: if the policymakers had been informed of the actual number of 4.5% instead of 7%, then they would have stopped rejoicing about effective economic management and instead, invested a few more hours in reform. This is insanely obvious.
For instance, if a patient with cancer is diagnosed as suffering from common cold, the chances of survival fall dramatically. In fact, at least part of the policy paralysis of the Narendra Modi regime between 2014 and 2019 could have been attributed to the self-satisfaction fed in, not by the data of the Indian Economy, but by what can best be described as the one from a Harry Potter economy.
Wide-scale institutional and economic reform is long overdue and must begin so that our motherland can drag herself out from under the mammoth that is financial crisis.