By Sumarbin Umdor
In the midst of depressing stories dominating the headlines of newspapers of our state, the report of Meghalaya being the fastest growing state has failed to cheer the spirits of citizens of this small state. The Shillong Times headline screaming ‘Meghalaya Tops Growth Chart in India’ sounded like something straight out of a ‘Ripley’s Believe it or Not’ cartoon. Meghalaya’s economic growth rate of 9.7 percent achieved in 2013-14 which has been mentioned in the above article qualifies us as among the fastest growing economies in the world. But sadly this does not reflect the reality of the state’s economy, leading many to question the veracity of the growth figures with a prominent state politician outright damning it as a pack of lies. So what is the story behind the data?
GDP or gross domestic product is a measure in monetary terms of the volume of final goods and services produce in an economy during a specific period. It is important to clarify here that GDP is a measure of level of economic activity but not necessary a reflection of well-being of citizens of a country. In the words of noted economist Joseph Stiglitz “there are many dimensions to success, and GDP does not measure most of the relevant dimensions. It measures one dimension, but only one”. Besides income other indicators of economic and social wellbeing are jops and earnings, housing, health status, education and skill, environmental quality, personal security and much more. However, GDP is considered to be the broadest and most commonly used indicator of economic output and wellbeing.
While GDP represents output at country level, State Domestic Product (SDP) represents output at state level. Estimates of SDP are prepared by State Directorate of Economics and Statistics (DES) under the guidance of Central Statistical Organisation (CSO) and presented by economic activity, such as agriculture, forestry, fisheries, mining, manufacturing, electricity, construction and services. The estimation of GDP involves collection of data from each economic activity and using production or income approaches at a disaggregated level and then aggregating them for the whole state.
Reliability of the GDP estimates depend on the availability of the accurate data and also on the rigorousness in application of estimation methodologies. It is widely acknowledged that GDP estimates of developing countries are notoriously unreliable due to lack of reliable data. Indian GDP figures have often been viewed suspiciously in many quarters with a certain commentator describing them as one third statistical illusion. The present Chinese premier Li Keqiang has described that China’s GDP figures are man-made and therefore unreliable.
Coming back to the estimation of SDP in India, the income originating approach adopted in estimating state income corresponds to the production of goods and services produced within the geographical boundary of the State and not the income that accrues to the residents of the State. In plain language this means that while SDP figures of Meghalaya has been increasing in the last few years driven by the phenomenal growth in manufacturing sector, the figures does not indicate how much of this income is available to the residents of the state as this would be a better indicator of the welfare of the residents. For this one needs to compile data on inter-state flows as well as flows to and from abroad, which at present is not being collected.
The 9.7 percent economic growth achieved by the state in 2013-14 is history and does not reflect the present situation where the state is reeling under the coal mining bandh imposed by the National Green Tribunal in April of 2014. The bandh has crippled the important mining sector which contributes as much as 10 percent of the state’s income with coal being a major component of this sector. The effect of the bandh is not limited only to the mining sector and associated activities but is also being felt by all sectors of the economy. We have architects, lawyers, restaurateurs, shopkeepers, real estate brokers, tailors and almost all sectors complaining of the biting effect of the mining bandh on their livelihood.
The overall effect of the bandh on Meghalaya’s economy will be known once the final revised estimates of the SDP for 2014-15 and 2015-16 are released in coming months. However, we can safely predict that overall economic growth in these two years is set to take a downward tumble by few percentage points and that the economic decline will spread across the economy and not confined to mining and quarrying sector. The budget estimates of 2015-16 gives us a good picture of the dire impact of coal mining bandh on economic growth. For the first time in recent years collections of own revenues from sources like state excise, sales tax and royalty from Non-ferrous Mining & Metallurgical for 2015-16 are projected to be significantly lower than the actual collection during 2013-14 before imposition of mining bandh. For example the state government has projected revenue from Non-ferrous Mining & Metallurgical at rupees 112 crore which is about 25 percent of the actual collection in 2013-14.
There are two issues that we need to consider as we assess the economic growth of the State. One, as the present economic growth is fueled by mining and extractive industry, sustainability of the growth is an important issue as this affect the well-being of future generations. As we continue to plunder our mineral resources and strip our forest bare we need to seriously consider how we continue to achieve high economic growth once these resources are exhausted. We need to identify and invest in sectors that would accelerate and sustain growth in the future. The other equally important issue is that of reducing inequality in the economy by ensuring that economic growth is broad based and inclusive, i.e., ensuring that there is opportunity for everyone to participate in the growth process along with increased sharing of the fruits of growth.
(The writer teaches economics in NEHU)