Going beyond quarterly GDP data

The recent outburst around faltering GDP growth numbers in Q1 of this fiscal has kicked up a political and economic debate. The issue has caught the attention of international media as well, so much so that The Economist discussed it in its October 7 issue. Economic pundits have ascribed the decline in growth to a combination of impacts of demonetisation and the Goods and Services Tax (GST). A former finance minister has blamed flawed economic policies of the Government for the ‘debacle’.

Prime Minister Narendra Modi, in a recent address to the Company Secretaries, stated that this was not the first time India had witnessed a slow Q1.

The core issue in this background is how relevant is Quarter on Quarter (Q-on-Q) performance reporting for the Government? More importantly, should growth numbers, that too the overall number, be the basis for a conclusive judgement of the economic performance of the country?

The concept and regulation around Q-on-Q first visited this country in the context of listed companies requiring to report financial and business performance on a quarterly basis a few years back.

Amidst all the hue and cry at that time, Corporate India settled down to quarterly reporting so that all stakeholders get a regular and constant peep into the performance of each quarter.

Increased cost of compliance was somewhat compensated by some discipline in cleaning up internal issues four times a year rather than at the year end.

The data points for reporting as prescribed is well settled and has served its purpose notwithstanding some industries such as financial services stating that Q-on-Q distorts the performance more in the context of provisioning for bad loans and so on. Quarterly performance assessment also helps audit committees and board of directors to get to the bottom of operating and financial issues with some regimented regularity.

Today exists a world of excessive data points and, sometimes, over reporting of numbers with fragile or confused conclusions. Debates also become egoistic rather than getting into the core of the issue around numbers.

For example, if the economy grew 5.7 per cent in Q1 of 2017-18, a meaningful debate should capture base GDP on which the growth has occurred, sector-wise growth, key events that preceded the quarter in question, Q1 growth numbers for the last five years and the trend thereon.

Secondly, there must be reporting on end use of funds raised by the Government. As stakeholders, the public would want to know resources like taxes that are deployed by the States and Centre. With greater devolution of taxes to the States (42 per cent) and with the unrolling of GST, there is now seamless financial integration between Centre and States. As a mature democracy, we should move to a Q-on-Q reporting by Central and State Governments. (see table)

Any MIS is as effective as it is put to use. The success of reporting is when the user identifies the issues, generates a debate around those issues without getting into personalities and becomes a catalyst to improved overall performance. It is time that we move in that direction, rather than discussing growth percentages without getting into specifics.

It is believed that 60 per cent of India is really not concerned with this debate if it does not increase their overall well-being. Thirty eight per cent of India is concerned but does not bother to debate it. One per cent is interested, debates within itself and does nothing about it. Finally, the last 1 per cent debate and seemingly represent matters but end up losers. This has happened several times in the past. It is time to change this trend.

The advent of GST has shifted the incidence from origin to destination. Likewise, the rigour of periodical monitoring should move from source to end use i.e application of resources and deployment for the benefit of development. It should be a “24/7 x 365” affair.

‘Taxes are the price one pays for civilisation’ is a time-tested statement. A normal compliant citizen pays around 34 per cent tax at personal level, 18 per cent GST on goods and services, and also pays hefty tolls for using highways (around ₹400, for instance, to drive from Chennai to Salem . Is he not being over-burdened is the question?

The legitimate question is if I am paying all my taxes honestly why should I pay for road toll? Unless the citizens come together and form a working group to monitor end use of resources, the Governments alone cannot be held accountable.

As the late Nani Palkhivala once remarked: “The threat from India is not from across the borders but only from within”.

It is time the citizens and governments join together to put in place an effective monitoring system thereby leading to a timely course correction as required. Let us put an end to this debate at 40,000 feet above sea level which is not helping anybody’s cause or pockets.

The writer is a chartered accountant The views are personal