Is the growth rate fixed?

Dr Pervez Tahir May 20, 2010

T he National Accounts Committee has come out with a GDP growth rate of 4.1 per cent for the current year 2009-10. This is more than the Planning Commission’s target, IMF, World Bank and Asian Development Bank projections as well as the State Bank’s expectations. The growth certainly exceeds the perceptions of the general public, stung as it is by poverty, unemployment, galloping prices, loadshedding and human insecurity. It seems that growth has out done everyone’s expectations. With the government’s credibility next to nothing, the mantra is that of manipulation, fudging and creative accounting.

Is the government, accused of continuing with the Musharraf policies, also following him in painting the economy larger than life? Manipulation would mean a dishonest interference in the working of the Federal Bureau of Statistics (FBS) to someone’s advantage. Fudging is a state when one avoids giving a straight answer. Creative accounting is done to hide what has actually been done — to benefit somebody.

All these instruments of ‘Goebblesism’ were turned into an art form by the Musharraf regime. In its first full fiscal year (2000-01), the regime fixed a growth target of 4.5 per cent. During the year in a meeting on employment situation, Musharraf showed anxiety over media reports that the target may not be achieved. His designer finance minister assured him of a positive result. However, the National Accounts Committee arrived at the provisional figure of 2.6 per cent, revised down to 2.45 per cent in the following year and to a final estimate of 2.2 per cent. Later the base change brought it further down to two per cent.

Knowing full well that military dictators seek their legitimacy in high growth, the designer finance minister had learned his lesson. First, the practice of appointing an additional secretary in-charge rather than a full secretary as the head of the statistics division was started. Second, the senior most and the extremely competent officer of the Federal Bureau of Statistics due to become its director-general was parked at the National Defence College. Throughout the period, the FBS functioned without a director-general. Having ensured maximum pliability, the bureau was subjected to the lateral interference of the economic adviser. Never again was a provisional growth rate revised downwards. The growth rate always looked up and up, until it reached a peak of 9.5 per cent in 2004- 05, revised upward from the provisional figure of 8.4. The tyranny of the arrangement increased manifold when the designer finance minister was made prime minister for his statistical achievements. Neither National Accounts Committee, nor the Annual Plan Coordination Committee was allowed to announce the growth rate. The honour belonged solely to the prime minister. Till then, a thick blanket of secrecy was maintained. Prices, inflation and poverty also became part of the witchcraft.

In whose interest has the latest ‘fudging’ taken place? There is no evidence that the political level of the government made any attempt to influence the FBS. Its legitimacy does not lie in high growth. In any case, they are too busy in other ‘wars’ to meddle with the arithmetic of growth. The fact of the matter is that government economists themselves are disputing the 4.1 per cent growth rate. What is most amusing is that the witch doctor, now safely parked in an institution of you know who and writing a regular column for the very paper that had exposed his witchcraft time and again, is shouting from the rooftop against fudging and manipulation. What has happened is that the FBS has done what it must when allowed to function without interference. It has presented what it has got. It has no interest in increasing or lowering a growth rate. The presentation is shoddy but that reflects the low morale and the poor professional capacity of the organisation.

Published in the Express Tribune, May 21st, 2010.