Incorrect data undermines analysis and policy

Capitalism is facing multifaceted challenges due to the problem of policy-making based on incorrect data. Governments and international agencies like the World Bank that depend on faulty official data cannot correctly analyse and help resolve the problems facing the world and its poor.

—

AT a recent corporate sector conclave, political and corporate heavyweights stressed that the economy needs to grow at a sustained rate of 8 percent. All agreed that this requires a big increase in private investment. A top government official said, "We have been at the cusp of this big private sector capex boom for the last two and a half years. It is time we did it." In other words, a turnaround in the economy has not happened over the last few years.

It was further said that only three–four large groups have increased investments. The rest were exhorted to also boost investment.

It was an admission that the economy has not been doing as well as officially projected. It was accepted that only a few large conglomerates have increased investment. They are the ones favoured by the government. This kind of cronyism has held back the rest of the corporations.

This is not all.

Investment depends on demand. The Reserve Bank of India's data suggests that the corporate sector's capacity utilisation remains low because overall demand has stagnated or declined. The demand for luxury items has indeed risen, but that for day-to-day items has declined. The implication is that while the well-off are earning and consuming more, the vast majority are forced to reduce their consumption due to loss of incomes, consequent to job losses and a high level of inflation.