The Indian Government finally announced Q1 2020 GDP figures. Everybody has been crying hoarse about the -23.9% contraction. The catastrophic impact of the stringent COVID-19 lockdown is being touted as the reason for the dismal economic performance. All the discussions are now centred on the revival of the economy, “green shoots”, “encouraging signals” etc.
Everybody seems to have taken the Q1 2020 GDP figures handed out by the Government at the face value. Earlier, there have been accusations that the Government is fabricating/fudging/distorting the numbers to hide its inept performance. However, for the Q1 2020 GDP figures, there have been no such allegations.
I believe that the Government has falsified the Q1 2020 GDP figures. The actual contraction in the economy has to be much larger than put out by the Government for public consumption. To support my claim, I present the below two data points, which are available in the public domain. We just need to interpret them in conjunction with the Q1 2020 GDP figures.
Q1 2020 GST collections
Q1 2020 GST collections declined 59%. The disparity between the GST collections and the stated GDP performance is quite high. When the hard cash received by the Government as GST is down by 59%, how can the economy be down by only 24%? The difference is a staggering 35%. If both these numbers are believed to be true, it raises several questions with no convincing answers.
Is GST missing out on substantial tax collections (it is down by a huge 59% when the economy is down by relatively not-so-huge 24%)? Is so much of Indian economy in the informal sector that it is out of the GST net? If so much of Indian economy is informal, how is GDP able to capture it, but GST misses out altogether?
The Government claims that GST has been impacted due to the relaxations given in filing of the returns and payment of taxes. Well, July-August GST collections also had double-digit contractions. When will the deferred GST, as claimed by the Government, show up to cover up for the 35% deficit between GST and the Q1 2020 GDP?
Q 1 2020 GDP data
The Government announced COVID-19 lockdown from 24th March 2020. The Unlock started on 8th June 2020. Everybody said that India had the world’s most stringent lockdown and it devastated the economy. If this is to be true, how can the economy contraction be only -23.9%?
April 2020 had a complete country-wide lockdown (GST was down by 72%). Let’s assume the economy to be down by 60% in April 2020. To get -24% as an answer, with April at -60%, May and June, collectively, have to be at 18% growth. Now, May was also a lockdown month. How can it have growth? In that case, what astronomical growth did June have to make up for the previous 2 months?
Let’s look at sector-wise Q1 2020 GDP data.
Construction -50.3%. A sector heavily reliant on migrant workers. When they were in distress/went back, who constructed the 50% during these 3 months to report only 50% de-growth?
Trade, Hotels, Transport, Services etc -47%. When no transport was available anywhere in the country, who stayed in hotels, consumed services and traded?
Financial, Real Estate & Professional Services -5.3%. This is hardly any de-growth at all. It implies that the self-employed had no impact of the lockdown. People bought houses, companies leased office spaces. Whoa!!
Agriculture 3.4%. If agriculture has grown, why is food-based inflation galloping to newer heights? With hotels, restaurants, travel down; instead of agri-produce glut, we have shortages.
Production of crude oil -6.5%. Again, hardly a blip. With no vehicles on the road, where did so much of fuel go?
Bank Credits 5.6%. Banks are lending all over the place. Where is the de-growth/loss of confidence everyone is talking about?
Every data point, except the sale of commercial vehicles and passengers handled at airports, is suspect.
Nothing adds up
GST is severely down, but GDP is spared the worst. The lockdown was rigorous, but the sectoral break-up shows that there was hardly a sector impacted comparably. Then, what is/was inaccurate?
GST is currency, it cannot be wrong, else it implies that GST is a leaking bucket. If the lockdown was indeed thorough, the GDP numbers cannot be what they have been reported to be. For the GDP figures to be correct, the Government need to admit that the lockdown measures were never implemented in letter and spirit.
So, what exactly will Government admit to being wrong? Zilch, to be precise.
The Government will continue pulling the wool over the eyes and we, a gullible nation, shall willingly oblige. Just that, simultaneously, we will continue to lose lives and livelihoods with economic despair and COVID-19, which, as per the Government’s actions, seems to have already left the country.
This is India. Welcome.