Fudging GDP growth

GDP growth target is fixed by the Planning Commission (PC). This makes it an interested party in showing best results. Pakistan Bureau of Statistics (PBS) collects data on various sectors and economic activities, and presents whatever is the total value added during the year as GDP growth. It has no interest in the outcome. The focus is on using a consistent and generally acceptable methodology in a transparent and accountable manner. There is a clear-cut conflict of institutional interest. This is why I warned against placing the PBS under the PC (February 15, 2019).

However, in a country where judges of superior judiciary tend to ignore conflict of interest in bench formation, institutional conflict of interest hardly matters. The PBS is now an attached department of PC. National Accounts Committee (NAC), the forum for the approval of the estimates made by the PBS, is now headed by the Planning Secretary. This state of the affairs is worse than the beginnings in 1950, when both planning and statistics were the attached departments of the then Ministry of Economic Affairs.

What happened in the last week of May was nothing new. But the way and the speed with which it happened left no doubt about the driver. Everyone in Pakistan and those interested abroad knew ahead of time that growth in Pakistan was likely to be negligible, if not negative. Large scale manufacturing, important crops and the related wholesale and retail trade are the only sectors where data is available before the end of the year for provisional or first estimates. The rest is based on projections or extrapolation of past survey results and other indirect methods. In FY23, the three main sources of direct information are deep in the red.

Obviously, the PBS came out with an overall growth of minus 0.5%, still an underestimate in my view. Alarm bells rang first in the P Block, then the Q Block and the battalion of advisers and special assistants in the PM secretariat. Political capital, already dwindling, had to be saved from further erosion. Adding insult to injury was the revised number of FY22, IK’s last year. Its provisional number, forced at a convenient 5.97%, came out to be 6.5%. IK, who quoted the official Economic Survey in his public meetings by rounding up to 6%, would have shouted even more about his economic achievement. Hence the GDP growth of this year was declared to be 0.29% and that of the last year at 6.1%.
The shift of PBS to PC happened during the IK regime in the name of institutional reform. Soon after, a special meeting of the NAC was called well before the normal May event to use the new base of 2015-16 to present the more palatable growth numbers. Fudging took place in the past as well during the military regimes of General Zia and General Musharraf, when the PBS was under the Ministry of Finance.

Direct control by PC, however, makes it even more vulnerable. In the Constitution, the subject of statistics falls under Federal List, Part II and hence in the domain of the Council of Common Interest (CCI). The CCI continues to lack a proper secretariat. Until that happens, the PBS can be placed under the Cabinet Division that has many other such bodies under its wings. With no direct interest in its inputs and outputs, the temporary new home will improve trust in data, besides catalysing its independence and integrity. The ultimate goal should be to keep it as far away from the political domain as possible.