Editor,
There is something intriguing and a bit of a puzzle about the Indian economy at the moment. Despite India’s high Gross Domestic Product growth, bank credit and consumption have been relatively low. There are several factors at play. Some experts suggest that the GDP data might be inflated, which could explain the discrepancy between high GDP growth and low bank credit and consumption. A significant portion of investment in India has been driven by domestic money for the last three years rather than foreign inflows. This has led to a strong stock market but has not necessarily translated into increased bank credit or consumption. Indian banks have seen a high credit-deposit ratio, which means they are lending out a large portion of their deposits to the entities that they are aware of. This has led to tighter credit growth and could be a reason for low bank credit. The Indian economy might be experiencing a cyclical slowdown, with urban consumption indicators softening and companies sealing down their salary outlays. Geopolitical conflicts and economic uncertainties in advanced economies could also be affecting sentiment and consumption in India. It is a complex issue and multiple factors at play.
What if the GDP is inflated?
Some experts believe that the GDP is inflated. If India’s GDP is indeed inflated, it could have several implications. An inflated GDP might paint an overly rosy picture of the economy, masking underlying issues such as unemployment, low consumption, and weak investment. There could be policy missteps where policymakers might make decisions based on inaccurate data, potentially leading to ineffective or even harmful economic policies. Investors rely on accurate economic data to make informed decisions. If they suspect the GDP figures are inflated, it could erode their confidence and deter investment.
The discrepancy between high GDP growth and low bank credit and consumption could persist, as the real economic activity might not be as robust as the GDP figures suggest. Other countries and international organisations might question the credibility of India’s economic data, affecting its reputation on the global stage. IT is a complex issue, and if the GDP is indeed inflated, it would require a thorough investigation and corrective measures to ensure accurate economic reporting. Swaminathan Aiyar, consulting editor, ET Now, in his interview to The Economic Times today, says that “strong GDP growth is associated with a fast rise in credit. After all, growth has to be financed. Some would say it is a sign that GDP data are being inflated. One way or the other, either we are going to have GDP data revised downwards or there will be a pickup in consumption. It is going to appear later rather than sooner. But the mystery has to be solved. How is it that we have such a high rate of GDP growth and yet bank credit and consumption are slack?”.
Who will investigate and ensure accuracy of GDP?
In India, the responsibility of investigating and ensuring the accuracy of GDP data primarily falls on the National Statistical Office (NSO). They are tasked with collecting, analysing and publishing statistical data, including GDP figures. Additionally, the Reserve Bank of India (RBI) plays a crucial role in monitoring economic indicators and can raise concerns if discrepancies are found. IF there are suspicions of inflated GDP data, these organisations would likely collaborate to investigate and address any issues. The Ministry of Finance might also get involved to ensure that economic policies are based on accurate data. IT is a multifaceted approach, involving several key institutions to maintain the integrity of economic data.
Your etc;
VK Lyngdoh,
Via email
Why caste reservation is needed
Editor,
This is with reference to the letter, “Time to rethink caste-based reservations” (ST, October 26, 2024). The recent labour market data shows that merely 2 out of every 100 jobs are in the public sector. The caste-based reservation is all about 2 per cent jobs. Only one per cent of the total jobs are actually in the reserved category, as there is a 50 per cent bar in the reservation. The caste-based reservation is all about 2 per cent jobs. Only one per cent of the total jobs are actually in the reserved category as there is a 50 per cent bar in the reservation.
It is altogether a wrong notion that caste reservation among Members of Parliament, Members of Legislative Assembly and in the government jobs were created only to uplift some backward castes. If it was so, then the caste reservation became effective also in the private sector jobs which is 98 percent of the total jobs. The state quota and caste quota among both the elected and selected personnel of the government are there only to fulfil one of the basic tenets of democracy that demands an equitable representation of every state and community in the formation of the government.
We know about caste quota among MPs and MLAs, when we see reserved constituencies in which seats are reserved for Scheduled Castes and Tribes based on the size of their population. There is also a state quota in parliamentary seats.
However, there is no state quota in the IAS and in other central services. But there is a state civil service that acts like a state quota. It ensures equitable representation from the state in the public administration. Caste is as much a reality in India as that of a state. Therefore, the proposal for doing away with the caste reservation for the MPs, MLAs, and public servants is as dangerous for democracy as the idea of abolishing the state civil service and state quota for MPs and MLAs.
Selection of the Indian cricket team is based on merit, and there is no quota in it. However, there are zone based quotas for the selectors to check provincial nepotism. Yet, we see players from only a few states representing India. Many states remain unrepresented. This will also happen in the formation of the government in the absence of a state and caste quota. In such a situation, democracy and federalism cannot sustain.
There are some scholars who want to introduce reservation in government jobs without any cap so that the government can be truly democratic and representative. Some scholars also think that the reservation policy should be introduced in the private sector which is 98 per cent of the total jobs, to improve the lot of the backward castes.
Only if caste reservation across all jobs is applied will the argument that caste reservation exists not just to fulfil the demand of democracy but also to cater to the backward castes will become valid.
Now, let us focus on Gujarat Lok Sabha seats. Gujarat has a state quota for 26 Lok Sabha seats, out of which 2 are reserved for SC and 4 for ST. So, we see that there is a caste quota within the state quota. However, nobody says that an economic status bar needs to be introduced in the state and caste quota because we know that these quotas are for equitable representation and not for uplifting the status of 26 Gujarati persons or 2 SC Gujarati persons.
State and caste identities are permanent. Money cannot dilute them. A study says that untouchability is still being practiced by one out of four persons. There is enough evidence that money cannot change the status of an untouchable person and make him/her ‘touchable’.
Yours etc.,
Sujit De,
Kolkata