Re: India's GDP growth and UPA's economic record

by Idéfix Wed Jul 31, 2013 1:58 pm

As I said before in this thread, I am quite concerned about the gap between India and China in GDP growth rate. This prompted me to take a closer look at the gap in year-over-year growth rates between India and China since liberalization began in 1991. The chart below shows the gap in percentage points between the two countries' growth rates in GDP at PPP.
India's GDP growth and UPA's economic record - Page 2 Captur42

India's GDP growth and UPA's economic record - Page 2 Captur42

This means that in 1991, China's growth rate exceeded India's by 7.3 percentage points; in other words, India grew at GDP at PPP at 5.8% while China grew it at 13%. (The difference is 7.3%, not 7.2% because of a rounding anomaly). I have color-coded the chart for various governments in India since liberalization began: red is Congress/UPA, green is NDA and blue is third parties.

Overall, it looks like India has steadily narrowed the gap in GDP growth with China. Looking at the data for each year can make it hard to spot long-term trends, so I computed averages for each government. The chart below shows the simple average of the gap in y-o-y GDP at PPP growth rates with China:
India's GDP growth and UPA's economic record - Page 2 Captur44

India's GDP growth and UPA's economic record - Page 2 Captur44

As you can see, the average gap has been closing steadily. We still have a large 2-3 percentage point gap that we need to close. If you split apart the two UPA terms under Singh, the average gap under UPA-1 is 2.7% and the average gap under UPA-2 is 2.2%.

This analysis is interesting because it normalizes for global economic conditions, while surfacing specific factors that affect one or both countries. In the wake of the global financial crisis, while growth in India has slowed, it has slowed a wee bit less than in China.

The source for these charts is the IMF data cited above.

PS: I posted incorrect versions of the charts earlier; fixed them in this version. The year 2012 was not showing in the earlier charts.

by Idéfix Wed Jul 31, 2013 2:03 pm

Jebediah Mburuburu wrote:i suspect that india's gdp growth rate of just over 8% is more sustainable in the long term - say, for the next 20 years - than china's 10%.

Yes. In addition, China's draconian population control policies that helped it take longer strides in per-capita GDP so far will prevent it from sustaining the growth over the long term, as their population ages rapidly.

by confuzzled dude Wed Jul 31, 2013 2:31 pm

How reliable are China's GDP numbers? They are not a secular country like India or US thus my question.

by Idéfix Wed Jul 31, 2013 2:40 pm

confuzzled dude wrote:How reliable are China's GDP numbers? They are not a secular country like India or US thus my question.

There are allegations that China overstates its growth numbers. I don't know if those allegations are true. The US Federal Reserve has this to say about those numbers:

Some commentators have questioned whether China’s economy slowed more in 2012 than official gross domestic product figures indicate. However, the 2012 reported output and industrial production figures are consistent both with alternative Chinese indicators of the country’s economic activity, such as electricity production, and trade volume measures reported by non-Chinese sources. These alternative domestic and foreign sources provide no evidence that China’s economic growth was slower than official data indicate.

We found that reported Chinese output data are systematically related to alternative indicators of Chinese economic activity. These include alternative indicator indexes of Chinese activity composed of variables that are less susceptible to official manipulation, as well as externally reported trade volume measures. Importantly, these models suggest that Chinese growth has been in the ballpark of what official data have reported. We find no evidence that recently reported Chinese GDP figures are less reliable than usual.

http://www.frbsf.org/economic-research/publications/economic-letter/2013/march/reliability-chinese-output-figures/

by smArtha Wed Jul 31, 2013 3:25 pm

Idéfix wrote:
smArtha wrote:
Thanks for an informative and educational post. I'll be really surprised, if the inflation adjusted real GDP numbers are better since 2009. The end user 'aam aadmi' experience doesn't seem to match this. Has this got to do with the differences in WPI, CPI, PPI/Core Inflation measures? What is the source of inflation you had used to come to the real GDP numbers?
I did not do the inflation adjustment myself, I used the RBI's published figures of GDP at constant 2004 prices.

Oh RBI is probably reporting WPI or Core Inflation rates.
http://www.moneylife.in/article/wpi-or-cpi-which-inflation-number-should-an-individual-look-at/32724.html

How do these numbers look if the CPI is used? That will probably reflect the 'aam aadmi' perception.
Also, to ensure that the comparisons across 'PM reigns' is objective, it'll be good to verify if the definition and constituents of Inflation and GDP that RBI reported on had changed during these periods. For eg: did the basket that computes WPI undergo a change?
Also, for some weird reason, I'm not seeing any of the charts/pics on these posts. Not sure if this is some security thing on my side or browser issue. Sorry if some information is already on the charts and I'm seeking the same.

by Idéfix Wed Jul 31, 2013 4:34 pm

smArtha wrote:How do these numbers look if the CPI is used? That will probably reflect the 'aam aadmi' perception.

That is difficult to answer, because real GDP is calculated at wholesale prices. CPI is based on the basket of goods a theoretical individual buys regularly. India tracks CPI numbers for four different baskets: Industrial Workers (IW), Industrial Workers Non-Food (IW-NF), Urban Non-Manual Employees (i.e. service sector, UNME), and Agricultural Laborers (AL). Each of those comes with different weights for common items like food, energy, etc. So they move not always in sync. Depending on which of the CPI baskets you use, you will have to adjust things up or down. And to do it correctly, that is to make CPI representative of what the population as a whole experiences, you probably have take a weighted average of the three (or four) CPI baskets weighted by their proportion in the population. If the 'aam admi' you are interested is employed in a service sector job, then you use the UNME CPI basket. Is the 'aam admi' perception you are referring to that of the urban middle class?

You should be able to see the charts -- not sure what is wrong.

by goodcitizn Wed Jul 31, 2013 4:50 pm

Idéfix wrote:
Jebediah Mburuburu wrote:i suspect that india's gdp growth rate of just over 8% is more sustainable in the long term - say, for the next 20 years - than china's 10%.
Yes. In addition, China's draconian population control policies that helped it take longer strides in per-capita GDP so far will prevent it from sustaining the growth over the long term, as their population ages rapidly.

I like the idea of believing that India will do much better than China over the long haul. But a few things need to be considered.

1. In about 10 years, India's population will equal China's and surpass it if the current fertility rate of 2.7 births per woman contiues versus 1.6 births per woman in China.

2. India's literacy rate is inferior to China's and below that of world average.

The table below (from Wiki) shows the adult and youth literacy rates for India and some neighbouring countries in 2002. Adult literacy rate is based on the 15+ years age group, while Youth literacy rate is for the 15–24 years age group (i.e. youth is a subset of adults).

[th]Country[/th][th]Adult Literacy Rate[/th][th]Youth Literacy Rate[/th]

China	95.9% (2009)	99.4% (2009)
Sri Lanka	90.8 (2007)	98.0
Burma	89.9% (2007)	94.4% (2004)
Iran	82.4% (2007)	95% (2002)
World Average	84% (1998)	88% (2001)
India	74.04% (2011)	82% (2001)
Nepal	56.5% (2007)	62.7%
Pakistan	62.2% (2007)	73.9% (2010)
Bangladesh	53.5% (2007)	74%

3. One doesn't need statistics to show how bad the public healthcare system is in India.

4. Information technology only represents about two and a half million people representing less than 0.5% of the total working age population. In contrast, over half the working age population is in agriculture representing a sixth of output. Increased use of science and automation in this labor-intensive sector would significantly increase productivity and output thereby increasing the income level of this rural population.

5. High levels of corruption, red tape, dearth in infrastructure, environmental degradation etc have a bearing on future growth as well.

Thanks for the informative graphs. The numbers have certainly been encouraging over the last decade. Regardless of which government comes into power and who ends up being the PM, India has a serious task ahead.

by goodcitizn Wed Jul 31, 2013 5:04 pm

goodcitizn wrote:
Thanks for the informative graphs. The numbers have certainly been encouraging over the last decade. Regardless of which government comes into power and who ends up being the PM, India has a serious task ahead.

Meant to say: 4. Information technology employs about two and a half million people representing less than 0.5% of the total working age population

by Idéfix Wed Jul 31, 2013 6:59 pm

goodcitizn wrote:I like the idea of believing that India will do much better than China over the long haul. But a few things need to be considered.

1. In about 10 years, India's population will equal China's and surpass it if the current fertility rate of 2.7 births per woman contiues versus 1.6 births per woman in China.

2. India's literacy rate is inferior to China's and below that of world average.

The table below (from Wiki) shows the adult and youth literacy rates for India and some neighbouring countries in 2002. Adult literacy rate is based on the 15+ years age group, while Youth literacy rate is for the 15–24 years age group (i.e. youth is a subset of adults).

[th]Country[/th][th]Adult Literacy Rate[/th][th]Youth Literacy Rate[/th]
China 95.9% (2009) 99.4% (2009)
Sri Lanka 90.8 (2007) 98.0
Burma 89.9% (2007) 94.4% (2004)
Iran 82.4% (2007) 95% (2002)
World Average 84% (1998) 88% (2001)
India 74.04% (2011) 82% (2001)
Nepal 56.5% (2007) 62.7%
Pakistan 62.2% (2007) 73.9% (2010)
Bangladesh 53.5% (2007) 74%
3. One doesn't need statistics to show how bad the public healthcare system is in India.

4. Information technology only represents about two and a half million people representing less than 0.5% of the total working age population. In contrast, over half the working age population is in agriculture representing a sixth of output. Increased use of science and automation in this labor-intensive sector would significantly increase productivity and output thereby increasing the income level of this rural population.

5. High levels of corruption, red tape, dearth in infrastructure, environmental degradation etc have a bearing on future growth as well.

Thanks for the informative graphs. The numbers have certainly been encouraging over the last decade. Regardless of which government comes into power and who ends up being the PM, India has a serious task ahead.

I agree with you on the challenges facing India. An under-nourished, uneducated population cannot easily find its way to prosperity. Every single economic miracle in the last century -- Japan, post-war Germany, South Korea, Hong Kong, Singapore, southeast Asia, and now China -- is based on a population with solid primary and secondary-level education. India has done better at higher education for its privileged few than primary and secondary education for its masses. And once someone reaches adulthood, it costs many times as much money to teach them the three Rs than to do so when the person is young. I think these are some of the fundamental reasons India will find it hard to emulate China's long-period growth rate of 10% a year, with some years exceeding 12%. I think if India catches up to China in the next 10-15 years, it won't be because we grow any faster, but it will be because China slows down.

The fundamental reason I believe China will slow down is its population pyramid. Here is some interesting news from a news report earlier this year:

ON JANUARY 18th the National Bureau of Statistics (NBS) announced that the number of working-age Chinese shrank last year by a total of 3.45m. In the slow-moving world of demography, that is a big turning point. The mobilisation of Chinese labour over the past 35 years has shaken the world. Never before has the global economy benefited from such an addition of extra human exertion. Now the additions are over...

When the labor pool begins to shrink, the economy can't keep up its blazing hot pace of growth. Of course, the article explains how the peak may not have been reached just yet, but we are pretty close. Just when growth tapers off, you are saddled with another problem: an increasing dependency ratio (ratio of the number of people too young or too old to work to the number of working-age adults). As dependency ratio increases, more of the nation's economic output needs to be spent on taking care of the old, so less can go into investment to spur further growth. This is an estimate of the future ratios for India and China from The Economist:
India's GDP growth and UPA's economic record - Page 2 Indiapopulation1

India's GDP growth and UPA's economic record - Page 2 Indiapopulation1

As you can see, demographics are in India's favor for a few more decades, while that tide has already turned against China. Of course, all those young people are a blessing only if you can suitably educate and employ them; otherwise, you end up with social unrest and violence, not a growing economy.

by Idéfix Wed Jul 31, 2013 9:00 pm

Smartha, I did some more work on the "feels like" issue you raised. Because of the complexity I mentioned before, this is a more subjective / back-of-the-envelop analysis than all the others I have done so far. The World Bank has a database that shows India's GDP deflators (the inflation rates actually used to convert from nominal to real GDP) as well as consumer inflation (changes in CPI), that is what consumers "feel." Here is a chart that compares the two timeseries.
India's GDP growth and UPA's economic record - Page 2 Captur50

India's GDP growth and UPA's economic record - Page 2 Captur50

The red line with dots shows the annual rates that were used to convert nominal GDP into real GDP. The green line with squares was the annual inflation rate in each year based on changes in CPI. As you can see, CPI has typically been higher than the GDP deflator. In order to understand the relative impact of this difference on each PM's tenure, I computed the average of the gaps each year between CPI and GDP deflator. Those averages are shown below:
India's GDP growth and UPA's economic record - Page 2 Captur48

India's GDP growth and UPA's economic record - Page 2 Captur48

First a note on how to read this. The chart says that during PVNR's five years, CPI exceeded GDP deflator on average by 0.1% -- or in other words, the growth rate in real GDP reported is close to what it "felt like" to the "common man."

Under ABV's NDA government, the average real GDP growth reported was 6.0%; because CPI on average exceeded GDP deflator by 1.4%, you could say that growth felt like 4.6% to the common man. Under MMS's UPA government, the average real GDP growth reported was 8.2%; CPI exceeded GDP deflator on average by 0.8%, so that growth felt like 7.4% on average. I am not drawing a chart to show these numbers because they are "feels like" estimates. If I draw an analogy to weather reporting, these are not numbers that you read off the thermometer, so I am not charting them -- although from a political point of view, showing ABV at 4.6% and MMS at 7.4% looks better for UPA than showing them at 6.0% and 8.2% respectively.

Sources: The World Bank, GDP deflators and CPI inflation rates.

PS: Added y-axis to the first chart.

by Idéfix Wed Jul 31, 2013 11:28 pm

Smartha, after my last post above discussing the impact of CPI vs. GDP deflator to understand how the growth "felt like" to the common man, I had a nagging sense that my back-of-the-envelop analysis was incorrect. So I went back and tried to do a more thorough job.

What I did is this: I took the real GDP number for each year and tried to convert that into constant consumer prices.

By definition, Real GDP = Nominal GDP / GDP Deflator, so I computed an adjusted GDP number:

Adjusted GDP = Real GDP x CPI / GDP deflator

With these adjusted numbers, the gap between UPA and NDA narrows. The number for NDA is 6.9% CAGR, and that for UPA is 7.7%. The number for UPA-1 is 8.4% and UPA-2 is 7.5%.

I believe this is a more accurate estimate of what the growth "feels like" to someone buying the same basket of goods and services year in and year out. This analysis does not rely on average gaps between CPI and GDP deflator over an entire tenure, but accounts for the actual gap each year.

The conclusion remains the same: UPA achieved the highest real GDP CAGR of all governments, and UPA-2 is still higher than NDA.

One final note: the reason GDP deflators are different from CPI is that with changing prices, consumers do adjust what they buy. GDP deflators reflect that. For example, if white bread becomes cheaper over time (say due to greater manufacturing efficiency) while whole wheat flour remains at the same price, consumers will start buying more white bread. CPI will assume the old, fixed pattern of consumption, while GDP deflator accounts for the change. In this case CPI will indicate a higher rate of inflation than GDP deflator, but GDP deflator more closely mirror what the common man "feels."

by rawemotions Thu Aug 01, 2013 12:12 am

Idéfix wrote:
rawemotions wrote:I did not start this thread . you did and when pointed out that any economic comparison is NOT meaningful without considering all parameters like Inflation, impact on Debt etc. you are saying it is analysis paralysis.
I have already accounted for inflation in my analysis. I showed real GDP growth numbers, not nominal GDP.

rawemotions wrote:It is Ridiculous to selectively put out some charts picked from varuous websites without holistically comparing the overall economic situation.
I agree. Not one chart I have posted in this thread has been picked from "various websites." They have all been created by me using data that I have clearly cited the sources for. You are welcome to do similar analysis of whatever other indicators you think are relevant, and post them here.

rawemotions wrote:This government needs to be thrown out for that aspect alone.
You are welcome to your opinions of reasons for throwing out the government. The purpose of my analysis was not to lead to such a predetermined conclusion as yours. Your objective is to show analyses that indicate that UPA needs to be thrown out. Mine, as I stated at the outset, was to look at the numbers and see what they tell us. I stated first which analyses I was going to perform, before I knew where that would lead us. Then I performed those analyses and posted the results. I am sorry if you don't like the results; the numbers are what they are, and you can verify the honesty of my analyses because I have shared my sources.

Finally, I chose the specific analyses I mentioned at the beginning of this thread, because I did the same analyses for Modi's economic development record in Gujarat.

At the level of a country, these parameters are simply not good enough, because they do not look at the sustain ability of growth, which is essential for long term progress of a nation's economy. Your posts on comparison of Indian's economy as a whole is simply not comprehensive enough, because as I pointed out, it ignored Debt, Job Growth, and many other parameters I listed. It is especially essential if your objective is to compare the record under two governments. Have the grace to accept it and if possible improve it next time.

For the record you should also include the 40 years of (Mis)rule by Congress till the 1990's. Moreover. longer the government is in power, the more time they have to frame policies. When you compared NDA to UPA, UPA had 8 years whereas NDA's had just 5. This also has to be factored in somehow, if the comparison is about their abilities and the time they had to frame policies. Policies take time to work, and thus the amount of time available is an essential element of the comparison. Offcourse I do not see any easy way to factor this in.

by goodcitizn Thu Aug 01, 2013 12:56 am

Idéfix wrote:
When the labor pool begins to shrink, the economy can't keep up its blazing hot pace of growth. Of course, the article explains how the peak may not have been reached just yet, but we are pretty close. Just when growth tapers off, you are saddled with another problem: an increasing dependency ratio (ratio of the number of people too young or too old to work to the number of working-age adults). As dependency ratio increases, more of the nation's economic output needs to be spent on taking care of the old, so less can go into investment to spur further growth. This is an estimate of the future ratios for India and China from The Economist:

As you can see, demographics are in India's favor for a few more decades, while that tide has already turned against China. Of course, all those young people are a blessing only if you can suitably educate and employ them; otherwise, you end up with social unrest and violence, not a growing economy.

The future does look better for India compared to China in terms of labor pool. But India has to improve labor productivity which lags behind China considerably. Also, the population of illiterates in the present and upcoming workforce is so high in absolute numbers that employment for them has to be in unskilled labor unless substantial investment is made in training. Compared to China where working-age women account for 67%, Indian working-age women account for only 33%. While China is focusing on moving up on the value chain and increasing global market share in the services sector to sustain its growth and increase profitability, India is woefully behind in investing in manufacturing, advancement in agricultural output and infrastructure. Unfortunately the Indian political system is much slower in implementing policy changes and executing plans compared to the Chinese regime. Of course, this is not to debate the merits of democracy.

There is a dire need for India to increase its public expenditure in education and health as a % of GDP in the immediate future. As you correctly said, proactive steps will avert violence and unrest. It is sad that the government is more concerned in dividing India into pieces for votebanks than uniting India towards national growth and progress.

by Idéfix Thu Aug 01, 2013 1:12 am

rawemotions wrote:
Idéfix wrote:
rawemotions wrote:I did not start this thread . you did and when pointed out that any economic comparison is NOT meaningful without considering all parameters like Inflation, impact on Debt etc. you are saying it is analysis paralysis.
I have already accounted for inflation in my analysis. I showed real GDP growth numbers, not nominal GDP.

rawemotions wrote:It is Ridiculous to selectively put out some charts picked from varuous websites without holistically comparing the overall economic situation.
I agree. Not one chart I have posted in this thread has been picked from "various websites." They have all been created by me using data that I have clearly cited the sources for. You are welcome to do similar analysis of whatever other indicators you think are relevant, and post them here.

rawemotions wrote:This government needs to be thrown out for that aspect alone.
You are welcome to your opinions of reasons for throwing out the government. The purpose of my analysis was not to lead to such a predetermined conclusion as yours. Your objective is to show analyses that indicate that UPA needs to be thrown out. Mine, as I stated at the outset, was to look at the numbers and see what they tell us. I stated first which analyses I was going to perform, before I knew where that would lead us. Then I performed those analyses and posted the results. I am sorry if you don't like the results; the numbers are what they are, and you can verify the honesty of my analyses because I have shared my sources.

Finally, I chose the specific analyses I mentioned at the beginning of this thread, because I did the same analyses for Modi's economic development record in Gujarat.
At the level of a country, these parameters are simply not good enough, because they do not look at the sustain ability of growth, which is essential for long term progress of a nation's economy. Your posts on comparison of Indian's economy as a whole is simply not comprehensive enough, because as I pointed out, it ignored Debt, Job Growth, and many other parameters I listed. It is especially essential if your objective is to compare the record under two governments. Have the grace to accept it and if possible improve it next time.

For the record you should also include the 40 years of (Mis)rule by Congress till the 1990's. Moreover. longer the government is in power, the more time they have to frame policies. When you compared NDA to UPA, UPA had 8 years whereas NDA's had just 5. This also has to be factored in somehow, if the comparison is about their abilities and the time they had to frame policies. Policies take time to work, and thus the amount of time available is an essential element of the comparison. Offcourse I do not see any easy way to factor this in.

Let me put it this way. I honestly don't think you will be satisfied with any analysis as comprehensive enough, unless the conclusion is to your liking -- that UPA has to be thrown out. In other words, my hypothesis is that your problem is not with the analysis itself, but with the conclusion. And you are entitled to hold on to your opinion, data be damned.

I started analyzing some numbers and sharing the results here. There are two possible reactions to that. One is to engage in constructive dialog, question the assumptions, poke holes in the data or conclusions, and suggest additional analyses to enrich the discussion. This is the approach most SuCHers have taken both on this thread and the Gujarat thread. Another approach is to throw out a long litany of your complaints about the government under question, and call me economic spinmaster for Congress. If you take the latter approach, I really don't see why I need to address that 20-point list you threw at me. That is why I say to you, if you feel these 20 points you list are important, convince me and the other people here by getting the data, doing the analysis, and posting the comparison.

There are good reasons GDP and HDI get as much importance as they do. As headline metrics, they are hard to beat. You can analyze a hundred metrics in a haphazard manner without throwing any light on the question you are trying to answer. Or you can pick the most relevant ones and analyze them thoroughly.

by goodcitizn Thu Aug 01, 2013 2:00 am

Idéfix wrote:
rawemotions wrote:
Idéfix wrote:
rawemotions wrote:I did not start this thread . you did and when pointed out that any economic comparison is NOT meaningful without considering all parameters like Inflation, impact on Debt etc. you are saying it is analysis paralysis.
I have already accounted for inflation in my analysis. I showed real GDP growth numbers, not nominal GDP.

rawemotions wrote:It is Ridiculous to selectively put out some charts picked from varuous websites without holistically comparing the overall economic situation.
I agree. Not one chart I have posted in this thread has been picked from "various websites." They have all been created by me using data that I have clearly cited the sources for. You are welcome to do similar analysis of whatever other indicators you think are relevant, and post them here.

rawemotions wrote:This government needs to be thrown out for that aspect alone.
You are welcome to your opinions of reasons for throwing out the government. The purpose of my analysis was not to lead to such a predetermined conclusion as yours. Your objective is to show analyses that indicate that UPA needs to be thrown out. Mine, as I stated at the outset, was to look at the numbers and see what they tell us. I stated first which analyses I was going to perform, before I knew where that would lead us. Then I performed those analyses and posted the results. I am sorry if you don't like the results; the numbers are what they are, and you can verify the honesty of my analyses because I have shared my sources.

Finally, I chose the specific analyses I mentioned at the beginning of this thread, because I did the same analyses for Modi's economic development record in Gujarat.
At the level of a country, these parameters are simply not good enough, because they do not look at the sustain ability of growth, which is essential for long term progress of a nation's economy. Your posts on comparison of Indian's economy as a whole is simply not comprehensive enough, because as I pointed out, it ignored Debt, Job Growth, and many other parameters I listed. It is especially essential if your objective is to compare the record under two governments. Have the grace to accept it and if possible improve it next time.

For the record you should also include the 40 years of (Mis)rule by Congress till the 1990's. Moreover. longer the government is in power, the more time they have to frame policies. When you compared NDA to UPA, UPA had 8 years whereas NDA's had just 5. This also has to be factored in somehow, if the comparison is about their abilities and the time they had to frame policies. Policies take time to work, and thus the amount of time available is an essential element of the comparison. Offcourse I do not see any easy way to factor this in.
Let me put it this way. I honestly don't think you will be satisfied with any analysis as comprehensive enough, unless the conclusion is to your liking -- that UPA has to be thrown out. In other words, my hypothesis is that your problem is not with the analysis itself, but with the conclusion. And you are entitled to hold on to your opinion, data be damned.

I started analyzing some numbers and sharing the results here. There are two possible reactions to that. One is to engage in constructive dialog, question the assumptions, poke holes in the data or conclusions, and suggest additional analyses to enrich the discussion. This is the approach most SuCHers have taken both on this thread and the Gujarat thread. Another approach is to throw out a long litany of your complaints about the government under question, and call me economic spinmaster for Congress. If you take the latter approach, I really don't see why I need to address that 20-point list you threw at me. That is why I say to you, if you feel these 20 points you list are important, convince me and the other people here by getting the data, doing the analysis, and posting the comparison.

There are good reasons GDP and HDI get as much importance as they do. As headline metrics, they are hard to beat. You can analyze a hundred metrics in a haphazard manner without throwing any light on the question you are trying to answer. Or you can pick the most relevant ones and analyze them thoroughly.

Two things: First, HDI (which addresses longevity, knowledge and standard of living) is the only objective way at present with published statistics to make any valid comparisons. This is based on the outcome. Second, the quality of life is a subjective matter and Smarta's questions were more along those lines. I think Carvaka tried to quantify it as best as he could but, again, it only addresses the outcome.

Rawemotions is asking questions that relate to the causes. The problem is that there are way too many factors that contribute to the outcome. Just how much weight must one place on a particular factor be it the length of time NDA was in office compared to UPA or the global economy under different governments is open to all sorts of arguments.

by Jebediah Mburuburu Thu Aug 01, 2013 11:09 am

goodcitizn wrote:Rawemotions is asking questions that relate to the causes. The problem is that there are way too many factors that contribute to the outcome. Just how much weight must one place on a particular factor be it the length of time NDA was in office compared to UPA or the global economy under different governments is open to all sorts of arguments.

yes, many factors do contribute to the outcome, but government policies form a major contributor to the outcome, especially in developing countries. these include taxes, laws, for example, labour laws, interest rates, incentives for investment, government spending on infrastructure, education, healthcare, mid-day lunch schemes for children, employment guarantee schemes, and most importantly, the removal of barriers to trade and foreign investment.

india is a huge country with burgeoning internal demand for goods and services, and this fact protects it considerably from the ups and downs of the world economy.

thus, it is reasonable to assess the performance of indian governments and political parties on the basis of economic and human development outcomes.

by smArtha Thu Aug 01, 2013 11:26 am

Idéfix wrote:Smartha, after my last post above discussing the impact of CPI vs. GDP deflator to understand how the growth "felt like" to the common man, I had a nagging sense that my back-of-the-envelop analysis was incorrect. So I went back and tried to do a more thorough job.

What I did is this: I took the real GDP number for each year and tried to convert that into constant consumer prices.

By definition, Real GDP = Nominal GDP / GDP Deflator, so I computed an adjusted GDP number:

Adjusted GDP = Real GDP x CPI / GDP deflator

With these adjusted numbers, the gap between UPA and NDA narrows. The number for NDA is 6.9% CAGR, and that for UPA is 7.7%. The number for UPA-1 is 8.4% and UPA-2 is 7.5%.

I believe this is a more accurate estimate of what the growth "feels like" to someone buying the same basket of goods and services year in and year out. This analysis does not rely on average gaps between CPI and GDP deflator over an entire tenure, but accounts for the actual gap each year.

The conclusion remains the same: UPA achieved the highest real GDP CAGR of all governments, and UPA-2 is still higher than NDA.

Theoretically, these estimates and analysis sound convincing enough to closely reflect the 'aam aadmi' perception of growth. However, there is definitely something missing still in the 'quantification' that does not explain why the urban middle class felt better with NDA and UPA-1 than UPA-2. And also why the lower economic classes in both urban and rural areas perceive UPA-1 to be better than NDA and UPA-2. Even HDI based analysis is not explaining that. I'm a relative novice to the macro-economic theories and constructs and so lost on how the perception and experience of people is generally quantified with low or minimal deviation from the experiential reality.

by Propagandhi711 Thu Aug 01, 2013 11:34 am

smArtha wrote:
Idéfix wrote:Smartha, after my last post above discussing the impact of CPI vs. GDP deflator to understand how the growth "felt like" to the common man, I had a nagging sense that my back-of-the-envelop analysis was incorrect. So I went back and tried to do a more thorough job.

What I did is this: I took the real GDP number for each year and tried to convert that into constant consumer prices.

By definition, Real GDP = Nominal GDP / GDP Deflator, so I computed an adjusted GDP number:

Adjusted GDP = Real GDP x CPI / GDP deflator

With these adjusted numbers, the gap between UPA and NDA narrows. The number for NDA is 6.9% CAGR, and that for UPA is 7.7%. The number for UPA-1 is 8.4% and UPA-2 is 7.5%.

I believe this is a more accurate estimate of what the growth "feels like" to someone buying the same basket of goods and services year in and year out. This analysis does not rely on average gaps between CPI and GDP deflator over an entire tenure, but accounts for the actual gap each year.

The conclusion remains the same: UPA achieved the highest real GDP CAGR of all governments, and UPA-2 is still higher than NDA.

Theoretically, these estimates and analysis sound convincing enough to closely reflect the 'aam aadmi' perception of growth. However, there is definitely something missing still in the 'quantification' that does not explain why the urban middle class felt better with NDA and UPA-1 than UPA-2. And also why the lower economic classes in both urban and rural areas perceive UPA-1 to be better than NDA and UPA-2. Even HDI based analysis is not explaining that. I'm a relative novice to the macro-economic theories and constructs and so lost on how the perception and experience of people is generally quantified with low or minimal deviation from the experiential reality.

can be explained thusly:

statistical analysis: art of pissing on someone head and telling them it's raining

by Marathadi-Saamiyaar Thu Aug 01, 2013 11:42 am

Propagandhi711 wrote:
can be explained thusly:

statistical analysis: art of pissing on someone head and telling them it's raining

Exactly. First of all it is entirely wrong to even compare UPA-1, 2, 3, 0, -1, -2 and NDA. You have one with a history of 50 years and on the other side another group with a history of 5 years. and all this statistical jugglery to prove ?????

by Jebediah Mburuburu Thu Aug 01, 2013 11:50 am

Propagandhi711 wrote:
can be explained thusly:

statistical analysis: art of pissing on someone head and telling them it's raining

hahaha @thusly!

by Idéfix Thu Aug 01, 2013 11:59 am

smArtha wrote:
Idéfix wrote:Smartha, after my last post above discussing the impact of CPI vs. GDP deflator to understand how the growth "felt like" to the common man, I had a nagging sense that my back-of-the-envelop analysis was incorrect. So I went back and tried to do a more thorough job.

What I did is this: I took the real GDP number for each year and tried to convert that into constant consumer prices.

By definition, Real GDP = Nominal GDP / GDP Deflator, so I computed an adjusted GDP number:

Adjusted GDP = Real GDP x CPI / GDP deflator

With these adjusted numbers, the gap between UPA and NDA narrows. The number for NDA is 6.9% CAGR, and that for UPA is 7.7%. The number for UPA-1 is 8.4% and UPA-2 is 7.5%.

I believe this is a more accurate estimate of what the growth "feels like" to someone buying the same basket of goods and services year in and year out. This analysis does not rely on average gaps between CPI and GDP deflator over an entire tenure, but accounts for the actual gap each year.

The conclusion remains the same: UPA achieved the highest real GDP CAGR of all governments, and UPA-2 is still higher than NDA.

Theoretically, these estimates and analysis sound convincing enough to closely reflect the 'aam aadmi' perception of growth. However, there is definitely something missing still in the 'quantification' that does not explain why the urban middle class felt better with NDA and UPA-1 than UPA-2. And also why the lower economic classes in both urban and rural areas perceive UPA-1 to be better than NDA and UPA-2. Even HDI based analysis is not explaining that. I'm a relative novice to the macro-economic theories and constructs and so lost on how the perception and experience of people is generally quantified with low or minimal deviation from the experiential reality.

Smartha, one of the two specific perceptions regarding comparative performance that you mention is borne out by the data; UPA-1 was indeed better than UPA-2 and NDA.

Perceptions are rarely driven by data, and not always grounded in reality. Political perceptions, like perceptions about commercial products and services, are highly prone to manipulation by competing marketing and branding efforts. Let me give you an example. About ten years ago, a majority of Americans believed Saddam Hussien had a role to play in 9/11. The objective reality is that he did not. There was no concrete evidence presented of such a role ever. But the perception was deftly created and it stuck. A significant fraction of Repiublicans still hold that belief.

When I started doing these analyses, my perceptions were different. I thought, like much of the urban middle class, that NDA had performed better than UPA, and that Gujarat under Modi had clearly outperformed its peers the way China outperforms India. What were those perceptions based on? Casual reading of media articles regarding the economy, and the statements from both sides of the political divide framing their own and their opponents strengths and weaknesses, and conversations with people with opinions. It is only when I analyzed the numbers that I realized that the perceptions are not supported by the numbers. I think the BJP has done an excellent job of marketing its development credentials.

The middle class has other reasons besides economic growth to favor BJP to Congress: for example, the middle class craves a visibly stronger Indian state on the global stage, and projecting that kind of strength is part of the BJP platform (e.g. nuclear tests). The poor don't care about India's global image, they care about their daily bread. The middle class (which in India is just the 10-20% after the top 1-2%) tends to favor parties that are against redistribution and welfare schemes, because they have to bear the brunt of paying for them. This is no different from the top 20% income earners in America favoring Republicans due to economic self-interest (which is a very valid reason to support a party in a democracy). Given all these factors, middle class people are more susceptible to also believing the BJP's claims of superior economic development performance, because that gives them a "patriotic" reason of wanting to see India grow besides their own economic self-interest to support the BJP.

by Idéfix Thu Aug 01, 2013 12:05 pm

Propagandhi711 wrote:can be explained thusly:

statistical analysis: art of pissing on someone head and telling them it's raining

Hahaha, I understand that the conclusions upset you, so you want to piss at the analysis.

The other day, you accused me of partisan bias because I did the analysis only for one side -- Gujarat under Modi. That was one of the things that made me run the numbers for India under UPA. I ran the exact same metrics for the other side, and showed that your claim of "the other side's abject performance on every front" was very wrong. I guess the only response you can muster is to steadfastly ignore the content of the analysis, and convince yourself upfront that it must be wrong.

by Idéfix Thu Aug 01, 2013 12:06 pm

Marathadi-Saamiyaar wrote:
Propagandhi711 wrote:
can be explained thusly:

statistical analysis: art of pissing on someone head and telling them it's raining

Exactly. First of all it is entirely wrong to even compare UPA-1, 2, 3, 0, -1, -2 and NDA. You have one with a history of 50 years and on the other side another group with a history of 5 years. and all this statistical jugglery to prove ?????

I have shown comparisons both internally -- every PM since liberalization -- and externally, to India's peers. I understand that you don't like what the data clearly tell you.

by smArtha Thu Aug 01, 2013 12:08 pm

Propagandhi711 wrote:
can be explained thusly:

statistical analysis: art of pissing on someone head and telling them it's raining

LOL. I do see the point when such analysis is done on random small sample sets that somehow are supposed to reflect reality. But today we have the technological capability to take the raw data from each individual on the planet and analyze that and not be constrained by the limitations of selection models employed for sample size and distribution.

by truthbetold Thu Aug 01, 2013 12:25 pm

Idefix,
Matching Gdp numbers to govt is not a mere number exercise. Economic policies take time to show impact and survive through poor policies.
in Indian economic history seminal events were:
Early 1990s - pvn. And mms opened up Indian economy. Entrepreneurs were given a free hand and external investments were facilitated.
Between 1999 to 2002 - India negotiated with west on nuclear weapons issue but those discussion led to a sea change in the western view of India.
1990s foundations were consolidated by 2002 creating a long term base for growth.
The huge improvement from 2002 was no simple accident. By 2004, even sceptics like laloo. And karat agreed that growth is the best subsidy.
that foundation continued yield results across India irrespective of central or local govt party. World economy wax booming at that time.

by smArtha Thu Aug 01, 2013 12:32 pm

>>Perceptions are rarely driven by data, and not always grounded in reality. Political perceptions, like perceptions about commercial products and services, are highly prone to manipulation by competing marketing and branding efforts. << wrote:
I'm not referring to the psychological aspect of perception and that too on issues that are far removed from the day-to-day living issues of the common man. I'm referring to his perception regarding the existential aspects of his own/family life and survival. There cannot be much manipulated or marketed perception for anyone regarding if their family survival and living needs are being met with increased ease or more effort year over year. It is difficult to buy that media can manipulate an 'existential perception' as effectively as it can say who is 'secular' or 'communal' or even who is more 'corrupt'. Definitely all the existential realities can be quantified through exhaustive data collection and analysis and right metrics arrived at that can estimate and monitor this perception. My interest is if such metrics are even arrived at say in developed countries.

>> The middle class (which in India is just the 10-20% after the top 1-2%) tends to favor parties that are against redistribution and welfare schemes, because they have to bear the brunt of paying for them. <<
For this discussion, we can keep the top 20%, which is the rich, upward moving middle class out of the picture. Their participation and hence their perceptions do not matter much in the Indian electoral democracy.

by Idéfix Thu Aug 01, 2013 12:36 pm

truthbetold wrote:Idefix,
Matching Gdp numbers to govt is not a mere number exercise. Economic policies take time to show impact and survive through poor policies.
in Indian economic history seminal events were:
Early 1990s - pvn. And mms opened up Indian economy. Entrepreneurs were given a free hand and external investments were facilitated.
Between 1999 to 2002 - India negotiated with west on nuclear weapons issue but those discussion led to a sea change in the western view of India.
1990s foundations were consolidated by 2002 creating a long term base for growth.
The huge improvement from 2002 was no simple accident. By 2004, even sceptics like laloo. And karat agreed that growth is the best subsidy.
that foundation continued yield results across India irrespective of central or local govt party. World economy wax booming at that time.

I agree with your thesis that governments do not have full control on the GDP growth generated during their years in office. But this doesn't apply only when we see that the numbers look good for a government that we perceive to have not done well. This applies as much to Modi as it does to Singh. So any limitations we place on UPA's ability to claim superior economic performance on the basis of higher GDP (and HDI) growth in their tenure, you should place those limitations on Modi's ability to argue the same point based on higher GDP (but not HDI) growth in his tenure. In fact, if you wanted to push your argument further, you could very argue that the same processes that you talk about also created the stage in Gujarat by 2002 for the double-digit growth we saw, and that Modi was in the right place at the right time and took some much-needed corrective actions early in his tenure, and after that he reaped the benefits from it. But that's not the point I saw you making on that thread.

by truthbetold Thu Aug 01, 2013 12:39 pm

Cont from earlier post.
The growth for 2004 to few years was set in stone by 2004. The question was whether that takes a year or two or three to wither away.
Upa. Deserves credit for not screwing or adding problems after 2004.
Upa did push through many of the pending economic reforms with no opposition from bjp.
politically upa can claim credit for 2004 to every year till 2009. But serious economics tells you that credit is shared.
Upa under mms is a pro growth govt. They pushed many good policies. But after 2009 elections hubris seem to have set in. They have pushed more subsidies and less economic policies (food security vs economic reforms). Upa either lost or is losing the balance between growth policies and distribution (subsidy) policies.
an example of policy lag is 2008 economic collapse in usa licy and subsequent economic impact. The unemployment numbers are not a result of obama govt policies.

by Marathadi-Saamiyaar Thu Aug 01, 2013 12:39 pm

Idéfix wrote:
Marathadi-Saamiyaar wrote:
Propagandhi711 wrote:
can be explained thusly:

statistical analysis: art of pissing on someone head and telling them it's raining

Exactly. First of all it is entirely wrong to even compare UPA-1, 2, 3, 0, -1, -2 and NDA. You have one with a history of 50 years and on the other side another group with a history of 5 years. and all this statistical jugglery to prove ?????
I have shown comparisons both internally -- every PM since liberalization -- and externally, to India's peers. I understand that you don't like what the data clearly tell you.

It does not take (probably impossible to account for) into account the constraints, baggage, and the momentum and continuity of policies and their contribution to the performance or non-performance.

Give me congress MINUS the Gandhai family. Until then it is BJP - bcz that is the only other national party.

by Idéfix Thu Aug 01, 2013 12:46 pm

smArtha wrote:I'm referring to his perception regarding the existential aspects of his own/family life and survival. There cannot be much manipulated or marketed perception for anyone regarding if their family survival and living needs are being met with increased ease or more effort year over year. It is difficult to buy that media can manipulate an 'existential perception' as effectively as it can say who is 'secular' or 'communal' or even who is more 'corrupt'. Definitely all the existential realities can be quantified through exhaustive data collection and analysis and right metrics arrived at that can estimate and monitor this perception. My interest is if such metrics are even arrived at say in developed countries.

I think it is fair to say that those "existential aspects" are much more critical to poor people than to middle class people. Middle class people do not live paycheck to paycheck, and are not at risk of having to go without a meal if the price of rice goes up too much. Among that segment, like you said, UPA-1 is perceived better than UPA-2 and NDA, and that is borne out by the analysis of real GDP growth.

In India, the NSSO run by the Ministry of Statistics and Programme Implementation gathers a whole bunch of metrics dealing with everyday issues of family life and survival -- what you call the existential aspects. You should look at their website for an answer to your question.

by Idéfix Thu Aug 01, 2013 12:48 pm

truthbetold wrote:The growth for 2004 to few years was set in stone by 2004. The question was whether that takes a year or two or three to wither away.

I asked you this before... if you think the initial years of UPA growth was due to NDA policies, how do you explain the slowing in the first year of UPA?

India's GDP growth and UPA's economic record - Page 2 Captur32

India's GDP growth and UPA's economic record - Page 2 Captur32

by truthbetold Thu Aug 01, 2013 12:49 pm

Idefix,
Gujarat benefited hugely from mumbai growth and the ambani type connections.
if you look at the state numbers two things stand out
(A) stats that have decent base in 2002 ( ex: tn mh ap Punjab Gujarat) benefited more than other
(B) States with major cities and it industry grew much faster
. Exception is kolkatta.
There is lot more change required to continue change. My focus is on growth policies.

by Idéfix Thu Aug 01, 2013 12:51 pm

Marathadi-Saamiyaar wrote:It does not take (probably impossible to account for) into account the constraints, baggage, and the momentum and continuity of policies and their contribution to the performance or non-performance.

Give me congress MINUS the Gandhai family. Until then it is BJP - bcz that is the only other national party.

Now we come to the crux of it -- you have reasons besides economic performance to prefer the BJP. You value those other reasons more than economic performance. There is nothing wrong with that, and you are entitled to your preferences. I am talking on this thread about economic development performance and little else.

by truthbetold Thu Aug 01, 2013 1:41 pm

Idefix,
Your question about 2003-04 and 2004-05 growth rates of 8 vs 7 requires a study of details. First and foremost economies do not grow at the same rate every year. Second 1% is not a significant difference in policy terms (it is lot of money in crores but). There was a severe drought. In early 2004. Ysr actually claimed in September that rains came back to ap after getting rid of cbn.
A three year moving average would smooth out these anamolies tosomeextent.
if we want to use these numbers for political gains, we can take whatever suits us.
My hope is that most of us on this forum are largely unattached to political parties( not political philosophies) .

by Marathadi-Saamiyaar Thu Aug 01, 2013 1:47 pm

Idéfix wrote:
Marathadi-Saamiyaar wrote:It does not take (probably impossible to account for) into account the constraints, baggage, and the momentum and continuity of policies and their contribution to the performance or non-performance.

Give me congress MINUS the Gandhai family. Until then it is BJP - bcz that is the only other national party.
Now we come to the crux of it -- you have reasons besides economic performance to prefer the BJP. You value those other reasons more than economic performance. There is nothing wrong with that, and you are entitled to your preferences. I am talking on this thread about economic development performance and little else.

Yes... economy gets 30% grade; honesty and corruption 30%; internal democracy 20; neopotism and favoritism 20%.

Besides I have a soft corner for single politicians - for whatever they sacrificed what most people have (a family), and less chances of corruption, and hoisting their own prince and princes. Advani has a son - I read about him only once in the news media. I dont even know if other BJP stalwarts have family members in the party. At least the cadre dont sing daily about the sons and daughters of their leaders.

by goodcitizn Thu Aug 01, 2013 1:56 pm

Skipping the charts and analyses for a second, the question really becomes to what extent India's GDP growth translates to the day-to-day livelihood of the aam aadmi.

The poor people, who make up the majority of Indians, are very tolerant. They get by with poor sanitation, water shortage, crowded buses and trains, bad roads, pollution, corruption etc. But when their income is insufficient to keep up with rising prices of everyday commodities, the private schools keep raising their fees, the medical facilties charge more and more, the cost of even generic medicine is escalating, fuel cost for cylinders or two-wheelers keeps going up despite government controls and so on, they are frustrated and worried about the future of their families.

Today the situation in India for the poor is a lot worse than even two years ago. The present UPA government has failed in instilling hope to this huge segment of India. The level of corruption and nepotism in the government isn't making their perception any better.

by Idéfix Thu Aug 01, 2013 2:36 pm

truthbetold wrote:A three year moving average would smooth out these anamolies tosomeextent.

I was intrigued by your suggestion of a three-year moving average. I computed these averages and I summarize them below. The first column of numbers, labeled "GDP CAGR" is what I charted early in this thread. The next column ("TYMA GDP CAGR") is based on three-year moving average of GDP. In this timeseries, the value for 1995 is the average of the real GDP reported for 1994, 1995, and 1996. The last column ("FTYMA GDP CAGR") is based on a forward-looking three-year moving average; the value for 1995 is the average of the real GDP reported for 1995, 1996, and 1997.

PM	GDP CAGR	TYMA GDP CAGR	FTYMA GDP CAGR
PVNR	5.2%	5.1%	6.0%
Chaos	6.1%	6.5%	6.5%
ABV	6.0%	5.7%	6.2%
MMS	8.2%	7.8%	7.1-8.4%*

* Because we don't know the GDPs for 2012-'13 and 2013-'14 yet, we can't compute an FTYMA GDP for 2010-'11 or 2011-'12. The last year for which you can compute an FTYMA GDP is 2009-'10. If you do a CAGR for MMS through 2009-'10, you get 8.4%. For 2010-'11, you can do an average of two known years: 2010-'11 and 2011-'12, and for 2011-'12, you just take the 2011-'12 value. If you do it that way and compute CAGR through 2012, you get 7.1%.

by smArtha Thu Aug 01, 2013 2:37 pm

Idéfix wrote:I think it is fair to say that those "existential aspects" are much more critical to poor people than to middle class people. Middle class people do not live paycheck to paycheck, and are not at risk of having to go without a meal if the price of rice goes up too much. Among that segment, like you said, UPA-1 is perceived better than UPA-2 and NDA, and that is borne out by the analysis of real GDP growth.

Not true. It doesn't matter what strata of economic class you are in, you have earnings, consumption - operational and asset acquisition and savings as top level buckets (simplified for this discussion). Growth of earnings has no value if it doesn't translate to ability to consume more or acquire more or save more. Somehow none of the Inflators or Deflators seem to capture this for across the population. And this puzzles me as with the technological prowess that can process zeta bytes of information, analyze and extract useful patterns and metrics, we are still struggling to arrive at if at the least 2/3rds of the population were able to increase one or more of their significant consumption, assets or savings year over year. No sample surveys but exhaustive real data sourcing and processing is the only way to estimate this. The sample size has to be the entire universe of population and not some 'statistically similar group'. Isn't this the only yard stick for economic growth? And this is the indicator of value as far as I'm concerned w.r.t economy.

In India, the NSSO run by the Ministry of Statistics and Programme Implementation gathers a whole bunch of metrics dealing with everyday issues of family life and survival -- what you call the existential aspects. You should look at their website for an answer to your question.

Thanks for the referral. I'll check out this one in more leisure. But their objective doesn't indicate that they'll have what I'm looking for. They seem to rely on sample sizes and surveys too for their analysis.

by Idéfix Thu Aug 01, 2013 2:43 pm

smArtha wrote:And this puzzles me as with the technological prowess that can process zeta bytes of information, analyze and extract useful patterns and metrics, we are still struggling to arrive at if at the least 2/3rds of the population were able to increase one or more of their significant consumption, assets or savings year over year. No sample surveys but exhaustive real data sourcing and processing is the only way to estimate this. The sample size has to be the entire universe of population and not some 'statistically similar group'. Isn't this the only yard stick for economic growth? And this is the indicator of value as far as I'm concerned w.r.t economy.

That is exactly the real GDP metric that I have analyzed! The growth in real GDP metric shows that there is more income in the system. That additional income may be spent by individuals on more consumption or more savings. So I don't understand what you are getting at when you say we don't have the data.

by smArtha Thu Aug 01, 2013 3:12 pm

Idéfix wrote:That is exactly the real GDP metric that I have analyzed! The growth in real GDP metric shows that there is more income in the system. That additional income may be spent by individuals on more consumption or more savings. So I don't understand what you are getting at when you say we don't have the data.

Two differences as I can see based on my understanding from this discussion so far
1) Distribution Effect : GDP or real GDP growth only shows that the sum total growth of all 1.2billion population. It doesn't indicate if that growth is contributed wholly by the top 10% or really was near equally distributed across the population.
2) Modelling Defect : Real GDP by conceptual definition can indicate that provided the Inflation and Deflation models are based on 'real data' than 'sample data' and on the very 'actual' items people consumed or liquid/illiquid assets they acquired and not on some sample baskets. Also, models not based on treating 'white bread for rice/pasta' as equivalent even when they are adjustments made based on affordability.

by Idéfix Thu Aug 01, 2013 3:36 pm

smArtha wrote:1) Distribution Effect : GDP or real GDP growth only shows that the sum total growth of all 1.2billion population. It doesn't indicate if that growth is contributed wholly by the top 10% or really was near equally distributed across the population.

I understand this concern. Income inequality is the metric to look for; I will see what I can find.

smArtha wrote:2) Modelling Defect : Real GDP by conceptual definition can indicate that provided the Inflation and Deflation models are based on 'real data' than 'sample data' and on the very 'actual' items people consumed or liquid/illiquid assets they acquired and not on some sample baskets. Also, models not based on treating 'white bread for rice/pasta' as equivalent even when they are adjustments made based on affordability.

Real GDP actually does what you want done. It is based on what people are actually producing and consuming, not on a basket. CPI is based on a preset basket, and does not adjust each year with changing consumption patterns.

by smArtha Thu Aug 01, 2013 4:11 pm

Idéfix wrote:
smArtha wrote:2) Modelling Defect : Real GDP by conceptual definition can indicate that provided the Inflation and Deflation models are based on 'real data' than 'sample data' and on the very 'actual' items people consumed or liquid/illiquid assets they acquired and not on some sample baskets. Also, models not based on treating 'white bread for rice/pasta' as equivalent even when they are adjustments made based on affordability.
Real GDP actually does what you want done. It is based on what people are actually producing and consuming, not on a basket. CPI is based on a preset basket, and does not adjust each year with changing consumption patterns.

May be I'm missing some piece of the puzzle. From the discussion above R-GDP was arrived at by using
2004 constant prices as base which used RBI published WPI or other Inflation rate. All those RBI published Inflation numbers are subject to the above Model defect I'm talking about i.e. like an index they are tracking some basket (fixed or adjusted)

Even the GDP Deflator adjustment you threw in seemed to ignore consumption substitutes people make for reasons of affordability . For eg: if a family can no longer afford LPG cylinder and switches to the kerosene or firewood substitute does this mean there is no deterioration in their standard of living and by real GDP terms they are at par the previous year?

by Idéfix Thu Aug 01, 2013 5:55 pm

smArtha wrote:May be I'm missing some piece of the puzzle. From the discussion above R-GDP was arrived at by using
2004 constant prices as base which used RBI published WPI or other Inflation rate. All those RBI published Inflation numbers are subject to the above Model defect I'm talking about i.e. like an index they are tracking some basket (fixed or adjusted)

They take the nominal GDP number -- the current market value of everything produced -- and divide it by GDP deflator. GDP deflator is NOT based on a fixed sample or a basket. As Wikipedia says:

... the GDP deflator (implicit price deflator for GDP) is a measure of the level of prices of all new, domestically produced, final goods and services in an economy.

Like the Consumer Price Index (CPI), the GDP deflator is a measure of price inflation/deflation with respect to a specific base year; the GDP deflator of the base year itself is equal to 100. Unlike the CPI, the GDP deflator is not based on a fixed basket of goods and services; the "basket" for the GDP deflator is allowed to change from year to year with people's consumption and investment patterns.

smArtha wrote:Even the GDP Deflator adjustment you threw in seemed to ignore consumption substitutes people make for reasons of affordability . For eg: if a family can no longer afford LPG cylinder and switches to the kerosene or firewood substitute does this mean there is no deterioration in their standard of living and by real GDP terms they are at par the previous year?

The original chart that I made shows numbers derived using the GDP deflator which accounts for price levels of all goods and services. That is the truest possible measure of the output of the Indian economy for comparing one year to another. The adjustment I did was to use CPI (which is based on a preset basket) instead of GDP deflator. I did the adjustment to see whether the relative performance under different governments changes if we use a different measure of inflation. The conclusion was that it doesn't.

by truthbetold Thu Aug 01, 2013 6:00 pm

Idefix
Moving average by year would be helpful.
The numbers by pm indicate how Indian economy steadily improved to 8% from 5%. One can only hope it will return to 8% plus rate after recovering from world wide crisis.
The rupee crisis and current account deficit. Problems are still within manageable realm once parliament elections are over.

May be 2014 to 2020 averages go to 10%.

by Idéfix Thu Aug 01, 2013 6:07 pm

truthbetold wrote:Idefix
Moving average by year would be helpful.

Here you go:
India's GDP growth and UPA's economic record - Page 2 Captur51

truthbetold wrote:The rupee crisis and current account deficit. Problems are still within manageable realm once parliament elections are over.

Yes, I hope we can get growth back towards double digits.

by Marathadi-Saamiyaar Thu Aug 01, 2013 6:45 pm

Idéfix wrote:
Yes, I hope we can get growth back towards double digits.

This is where the academics, data, Excel sheets, stat analysis stop.

and the

experience kicks in.

No dopal digit for a while. With elections in 2014 it will be freebie time, deficit financing, borrowing heavily to help the coronation, divvying up states and setting part of the country in fires, and driving away the investors (why should they invest in India in these confused times when the US Market and soon to follow Euro and Japanese markets do better).

nada not happeneing...even if NDA (or just BJP-Akal-ADAMK) come to power, there will be a period of uncertainty and economy will take 2 to 3 yrs to settle down.

by Idéfix Thu Aug 01, 2013 6:54 pm

Marathadi-Saamiyaar wrote:
Idéfix wrote:
Yes, I hope we can get growth back towards double digits.

This is where the academics, data, Excel sheets, stat analysis stop.

and the

experience kicks in.

No dopal digit for a while. With elections in 2014 it will be freebie time, deficit financing, borrowing heavily to help the coronation, divvying up states and setting part of the country in fires, and driving away the investors (why should they invest in India in these confused times when the US Market and soon to follow Euro and Japanese markets do better).

nada not happeneing...even if NDA (or just BJP-Akal-ADAMK) come to power, there will be a period of uncertainty and economy will take 2 to 3 yrs to settle down.

I don't think India will experience real GDP growth in double digits any time soon because of structural impediments, but I will be happy to see a reversal of the slowing trend, and movement towards the 10% mark.

by smArtha Thu Aug 01, 2013 7:13 pm

I see that the disconnect is my understanding of the GDP deflator. Did a quick read scan online about how it is arrived at in India. Based on the below observation, I think we are closer to the 'aam aadmi' perception if we take that CPI measure or a proportionally weighted CPI average that reflects the consumption of 2/3rd population of India. This together with the distribution inequality we discussed earlier should get us closest to the 'aam aadmi' perception regarding economy

[b style="margin: 0px; padding: 0px; border: 0px; outline: 0px; font-size: 15px; vertical-align: baseline; background-color: transparent; background-position: initial initial; background-repeat: initial initial; "]Major Difference between GDP Deflator CPI and WPI[/b]

The main difference is that the GDP deflator reflects the prices of all goods and services produced domestically, whereas other price indices reflect the prices of all goods and services bought by average consumers, either at retail or wholesale markets. For example, suppose that the price of defence materials produced by an Indian company in India rises. Even though these materials are part of GDP, they are not part of the basket of goods and services bought by a typical consumer. On the other hand, imported consumption goods are not part of GDP but sometimes form part of the basket of goods of common consumer. Therefore, rise in imported consumer goods will affect consumer price index but not the GDP deflator. This difference has important implications particularly for oil price changes. When price of oil rises, consumer price index rises much more than does the GDP deflator. When it comes to CPI, it is more skewed towards food articles making ~57% of total weightage whereas WPI has only ~27% food weightage

by Idéfix Thu Aug 01, 2013 7:24 pm

smArtha wrote:This together with the distribution inequality we discussed earlier should get us closest to the 'aam aadmi' perception regarding economy

That's right! I am looking for data on inequality, and will post what I find.

by rawemotions Thu Aug 01, 2013 8:13 pm

Well it is good to beat upon only a few numbers ignoring various other parameters. But it does NOT make a comprehensive analysis of the economy. If you are serious about this analysis you would include Debt (CAD and Long term) , Job Growth figures, Infrastructure generation, Trade Balance.

I am surprised you do not have the grace to admit that you ignored all these topics. When you compare the economy of a country all these matter together. Even on inflation which you say have accounted, I remember reading a news report where Chidu changed the base year of inflation sometime in 2006. Do not know whether it was really done.

Until all the numbers are included, the analysis is half-baked and we cannot conclude anything from this, because the cost of achieving the growth, sustainability of growth is suspect. Here UPA comes out very badly. Coupled with the real inflation on essential items, the common man sees his savings dwindled, and buying power reduced.

So I do not see the purpose behind this excersize. You paint a great picture. Whereas GoldmanSachs seems to agree with what people are really feeling. They infact say Rs can go to Rs 65, thanks to the uncontrolled spending by UPA.
http://timesofindia.indiatimes.com/business/india-business/Goldman-Sachs-downgrades-rating-on-India-stocks-to-underweight/articleshow/21523681.cms

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