Saturday, July 16, 2011

The politics of statistics.....Read carefully before you conclude

Every single day, reams of data are thrown in our face. Various government and non-government bodies flood us with new statistics. Media tends to add its own “spin”.....first by choosing which of these stats to publish (depending on their political orientation) and then by either intentionally or unintentionally analyzing correctly or incorrectly the stats. Readers must remember that while the stats themselves are just numbers and apolitical, the interpretation and projection is an intensely political business!

The recent controversy stoked by the release of NSSO statistics about employment generation is one example. The story showcased by The Mint a couple of weeks back claimed that between 2004-5 and 2009-10, the total number of jobs created were just about 2 million. Now, if this were true, there would be serious consequences for India’s market-oriented reforms. These five years were amongst the highest growth years that India has seen averaging 8.4% per annum. If this high growth also could not generate employment, then surely, it was the wrong model for India to follow. Maybe socialism was a better model? There was also a fair bit of politics involved. The story said that there was much more job growth during the NDA’s tenure in the preceding 5 years from 1999-2000 to 2004-5.....almost 12 million jobs a year. The BJP issued a statement via Yashwant Sinha attributing the success to its infrastructure programme. Much later, Swaminathan S Anklesaria Aiyar in The Times of India explained the not-so-obvious reasons for the data. In reality, it was not what it was looking like. Job creation was happening at a fast rate, but there were no workers available. As a proof of this, he showed the virtual doubling of rural salaries between 2008-10 in many so called underdeveloped states of India like AP. He called it “workerless” growth rather than “jobless” growth. And he explained it by showing how women workers were going back to their homes since in India, a woman’s stature would rise if she was seen “at home”. Also with more female enrollment in schools and colleges, there was a shortage of women workers. This explanation positioned the same NSSO data so differently. In The Mint’s interpretation, India should have turned socialistic again. In Swaminathan’s interpretation, on the other hand, India’s market orientation was doing just fine!

Take the 2G scam. The CAG first pointed out that the scam could be as large as Rs 1.76 lac crores. Ever since, that number has stuck in our minds. In many ways, since we strongly believe that corruption in India is extremely high; we look for straws of data to peg our beliefs onto. The truth seldom matters. Since this blog is about the Real Truth, let me give you some real truths of the 2G scam. The CAG arguably failed to understand the difference between government “policy” and “processes”. It was the government’s policy to give 2G spectrum cheap. It’s as a result of this cheap spectrum policy that telecom pricing in India is so low. This has led to the exponential growth of the telecom sector. Today, at least 500 million subsribers – so many of them poor and under-priviliged – are enjoying the benefits of mobility and associated economic prosperity. As a result of the mobile phone, even “addressless” and “officeless” workers are able to take part in economic activity in the society. The CAG comment confused policy with process. Sure, there have been process errors. And corruption must have taken place in that sphere. But even so many months after the CBI has been working directly under the SC, all that they have been able to find is the Rs 200 crore link between DB Realty (alloted a 2G license by Raja) and Kalaignar TV (Raja’s party’s TV channel). There is nothing to date against Unitech. Nothing specific against Reliance yet. And nothing specific against anybody else. And it’s not as if the telcos have minted money because of cheap spectrum. Vodafone – the 2nd largest mobile operator in India – reported its first profit after being in this country for more than 15 years. Only the number 1 operator – Airtel – has a healthy PAT margin of around 19%. Another large operator – Reliance – has been in losses for much of last year and Idea – has just about 6% PAT margins. The other proof of corruption cited is about Unitech offloading equity to Telenor at a high market valuation of some Rs 6000 crores. But people don’t understand that the money that Telenor brought did not go to Unitech’s pockets – it went into the company. This is the way most joint ventures are conducted. The investing foreign company puts in money and brings in technical expertise while the Indian company brings in other “assets”. Whether each party will make profits or not will be determined after many years – sometimes decades. Most business ventures lose money. But who is interested in these stats. The number of Rs 1.76 lac crores has stuck in our minds!

It’s the same story with the CWG mess. No doubt, there has been a lot of corruption in this. But Rs 70,000 crores? Excuse me; but I don’t think India has progressed so much that such large sums can be bandied around frivolously in this manner. The real truth here is that the order of the scam is much smaller – maybe less than a hundred crores. Check out all cases filed against Kalmadi & Co and this will become clear. I am not saying this is not serious enough; all I am saying is that the stats are wrong.

The Black Money numbers are similarly flawed. People with high levels of imagination have put a ridiculous number of $1.5 trillion on the estimate of black money abroad. One would have to assume that most of this would be in Swiss banks. I could never understand how a poor country (yes yes I know that we have some of the richest people living here.....but their wealth is no where close to these numbers) like India could put so much money abroad. India should have been a $10 trillion economy many years back for so much black money to have been ferreted out. The truth – to be disputed by some I am sure – came out today. The Central Bank in Switzerland stated that the entire Swiss banking system had only $2.5 billion attributed to Indians. Now all of this cannot be black money. And a lot of it could belong to Indians living outside India.

It’s the same story that plays out again and again. Partly, it’s because of the politics that has permeated even so called independent offices like the CAG. It wouldn’t be surprising if retired officials from such bodies later join political parties of their choosing. Part of the problem also is that media agencies hardly employ journalists today with sound economic knowledge. And with so much focus nowadays on economics, the journo becomes a puppet in the hands of maneuvring politicians and statisticians! Who is going to explain the nuances of today’s financial economy to journalists who have traditionally studied up on politics?

The real truth is that the reader has no option but to read multiple sources of news. It’s fashionable to say that the news chases the reader in today’s digital world. But the reader is well advised to chase the news as well – so that he/she is not played around with by either motivated or ignorant makers of news!

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