PROFESSOR ARUN KUMAR, a noted economist who is also Malcolm Adiseshiah Chair Professor at Institute of Social Sciences and former head of Centre for Economic Studies and Planning, JNU, is an authority on black economy and has authored The Black Economy in India and Indian Economy since Independence. His area of specialisation includes Public Finance, Growth Economics, Macroeconomics and Development Economics.
He studied at Delhi University, Jawaharlal Nehru University (JNU) and Princeton University, USA, and taught economics at JNU for three decades till 2015.
In an interview with MOHAMMAD NAUSHAD KHAN, he said if we take data from both organised and unorganised sectors then the figure would be -29 per cent and not -7.3 per cent. The figure of 1.6 per cent growth in Q4 is also doubtful because in January 2021 capacity utilisation of organised sector was down by 10 per cent compared to 2020, as per the RBI.
What’s your take on the negative GDP growth in 2020-21?
Mostly the figures announced are quarterly and we also have advance estimate of the year 2020-21. The data generally available are from the organised sectors and they are the basis of the predictions made. But for agriculture, data from the unorganised sectors is not available and it is assumed that it is growing at the same rate as the organised sector which is incorrect because the former has declined much more sharply than the latter during lockdown. Based on this flawed methodology, the government has given the rate of growth of GDP as -7.3 per cent and the rate of growth in Q4 as 1.6 per cent.
In the case of agriculture too, in Q1, it was said that the production target was achieved. We all know the production of fruit and vegetables was down in Q1 because it rotted in the fields. Milk production was low and poultry and flowers were also badly affected. These segments constitute 50 per cent of agriculture production. So, in Q1 when growth in agriculture was taken to be 3 per cent, there was a 10 per cent decline.
What is your argument on the negative GDP growth? Do you believe the figures given are authentic and accurate?
If we take data from both organised and unorganised sectors then the figure would be -29 per cent and not -7.3 per cent. The figure of 1.6 per cent growth in Q4 is also doubtful because in January 2021 capacity utilisation of organised sector was down by 10 per cent compared to 2020, as per the RBI. Capacity utilisation was 63 per cent but a year earlier it was around 70 per cent.
In the government press note, for each of the quarters of 2021, it is admitted that data from many sectors were not available and therefore they have taken alternate figures and therefore the growth figures could be revised later on.
Do you think these figures are reliable?
In Q1 most data was not available. Hence the Q1 and Q2 data are not comparable with last year’s data or this year’s data. So, the question arises how reliable are the figures given by the government. As a result our data on growth is very doubtful. They are showing a better picture than the situation on the ground. This is especially true for the unorganised sectors.
What do you think could be the possible reason behind negative GDP growth? Is it because of the pandemic?
The negative growth no doubt was because of the pandemic because there was lockdown and production of goods and services was badly affected. But the impact of the pandemic could have been minimised if the policy of the government was in accordance to the situation.
The government should have transferred money to those who had lost incomes to increase their purchasing power which would have increased demand and that would have resulted in more production. The government should have pumped enough money into the Rural Employment Guarantee Scheme and into micro units to revive them. If they had adopted such policies then the decline would have been much less. The government’s package last year was based on supply side policies and not on boosting demand. When demand is low, the former cannot work since investment would not kick in.
What is your apprehension ahead of third wave if it becomes a reality?
The consumer sentiment was already down in January 2021, as per the RBI data and it has fallen further. Capacity utilisation was also down and it has also declined further. As you said, there is a possibility of a third wave and it is being said that its impact would be more on children. So, many people are frightened and therefore they will not increase their consumption any time soon. If their consumption remains low then demand will also remain low and investment will not revive. So, consumption and investment would remain low ahead of a possible third wave.