What the 131 CAs got wrong in their response to 108 economists

The quality of Indian economic data has been doubtful at best over the last few years. Last week, on March 14, 108 economists and social scientists came together and issued a press release on this, saying: “This is the time for all professional economists, statisticians, independent researchers in policy—regardless of their political and ideological leanings—to come together to raise their voice against the tendency to suppress uncomfortable data, and impress upon the government authorities, current and future, and at all levels, to restore access and integrity to public statistics, and re-establish institutional independence and integrity to the statistical organisations.”

In response, 131 chartered accountants (CAs) came together on March 18 and said: “Disputing Government data is routine for experts around the world. However, it is unusual for a particular set to come together to discredit all data and long-standing institutions of eminence.” They even called the appeal of the economists and social scientists “devious”.

Let’s look at this issue pointwise.

1. A bunch of people are saying: what do CAs know about economics and economic data? I find this argument to be rather silly. People do have some knowledge across subjects and we should always have an open mind on points which are cogently and lucidly made. Look at what is being said and not who is saying it. If you still think it is rubbish, then go ahead and debunk it.

2. The last I checked, India was still a democracy and given this, people have the right to peacefully react to things. So, 131 CAs can respond to 108 economists, as can 151 MBAs or a million Chowkidars. Everyone has the right. As I said earlier, the argument is more important than the person making it.

3. Now let’s analyse what the CAs have said in counter to what the economists have said regarding India’s economic data. My guess is the 131 CAs have been very heavily influenced by the 1975 film Deewaar. Their entire argument smells of the famous dialogue from the movie: “जाओ पहले उस आदमी का sign लेकर आओ जिसने मेरे बाप को चोर कहा था ”. What they have come up with is whataboutery, not logic and facts.

4. The CAs’ letter says: “The allegations appear choreographed, and resemble the previous ‘Award Wapsi’ drama, which too was enacted just before a crucial state election. A political tendency is being developed to disown institutions. Even facts reported by the Armed Forces are being questioned against national interest.”

This is nothing but whataboutery. The economists and social scientists in their letter stick to economic data. They don’t talk about armed forces or giving back awards anywhere. In the same spirit, the CAs should have also stuck to the main argument which, in this case, is data—and the fact that the government is suppressing it from coming out.

5. The CAs’ letter says: “Between 1960 to 2014, India had been left behind by all its peers from Japan, China, Taiwan, Korea, Brazil, Thailand, Indonesia, Malaysia, Singapore, Russia, South Africa and Sri Lanka in economic growth. None of these economists or social scientists ever made an appeal in those 54 long years that India is on a slow track and is being left behind.”

Why 54 years? The economic reforms were initiated in 1991 and after that, India has grown much faster than it did before 1991. Why the random cut-off? Do they mean to say that nothing happened between 1991 and 2014? Or that India started to grow only after Narendra Modi was elected prime minister? This seems rather silly.

6. How many CAs on the list protested against the slow growth of the economy in those 54 years? Shouldn’t what CAs want to apply to economists apply to themselves first?

Of course, as far as economists go, there were economists who criticised the government’s policies in India’s first 44 years of Independence between 1947 and 1991, when India followed a highly socialist model of economic development (not to say that the Modi government is not socialist), and did not get anywhere in the process. Jagdish Bhagwati, for one, was pretty vocal about it. Bhagwati is now a big Modi fan. Then there was BR Shenoy, who had a totally different vision for the Indian economy against the public sector-led economic development which Jawaharlal Nehru had envisioned.

In the last few decades, Jean Drèze, who is a part of the list of economists and social scientists, has been very vocal about the government’s underinvestment in education and health. Which is why it is important to read a little bit of history before commenting on these things.

7. As far as the 108 economists are concerned, they were probably not born in the years India started experimenting with a socialist model of development. And if they had, many of them were probably running around in their half pants or small frocks for that matter. Not a time when you have a view on the economy as a whole. This applies to the CAs on the list as well. And given that, why make such a stupid point?

8. The letter goes on to say: “Is it their intention to scare foreign Investors by creating doubts on the credibility of data?” The foreign investors are already scared. They are not nincompoops. This is what Ruchir Sharma of Morgan Stanley said in a recent interview to Indian Express: “Over the last few years, India’s data credibility has turned poor.”

9. As far as CAs are concerned, many of them are investment/fund/asset/private equity managers and are dependent on the stock market for their income. When the market goes up, they make money. When the market goes down, they still make money, though not as much. They don’t lose money when the stock market falls, like normal investors do. Hence, it is in their interest to keep saying that the stock market is going to go up, even when earnings aren’t really looking up. Which is precisely what seems to be the intention of this letter as well. In fact, on a separate note, one could write a book on the number of stock market forecasts that CAs have got wrong.

10. Since the CAs have indulged in a lot of whataboutery, let me do some of it as well. What about IL&FS? What about Satyam? What about so many other firms which fudge their accounts on a regular basis, which are then certified by CAs? Or what about all the black money in India? How have CAs helped people park it all over the place? What is their role in it? How do CAs help convert black money into tax-free agricultural income? I guess they should have a thing or two to say about that as well.

11. The letter goes on to say: “Some Indian banks indulged in massive evergreening of loans between 2008 to 2014.” And the economists kept quiet about it. But what were CAs doing about it? Why did they certify the books of account of these banks? Why didn’t they point out these anomalies? The economists and the world at large only later came to know of the shenanigans of the companies and public sector banks. But CAs had access to real-time data on banks. What did they do about it? Why was Nirav Modi’s fraud on Punjab National Bank not discovered by the CA firm auditing the bank?

12. The letter points out: “In their letter, while there has been no detailed proof for the allegations, a reference has been made about revision in GDP series post change in the base year to 2011/12.” The letter then says that these revisions were made earlier as well.

The point being made is that GDP methodology keeps changing, so what is the big deal this time around? The big deal is that the GDP growth numbers these days don’t pass the basic smell test. In 2016-17, the demonetisation year, the economy grew by 8.2 per cent. The numbers don’t match with the high-frequency economic indicators coming out every month or every quarter. There is a basic mismatch. (You can read more about it here.) Earlier, the Central Statistics Office brought out the GDP data. Now the NITI Aayog, which has no expertise in this area, fiddles with it. Clearly there is a problem.

I also wonder what the CAs have to say regarding the government holding back and not publishing the data which is inconvenient to it.

13. The letter says: “All this has helped India become the sixth largest economy in the world.” Well, India did briefly become the sixth largest economy in July 2018. But France pipped it again in December 2018. India is currently the seventh largest economy in the world. The 131 CAs should have put one CA to do some basic fact-checking before they put out stuff. Relying only on WhatsApp is a problem. (You can read more about it here.)

14. The CAs call the half-baked and badly implemented Goods and Services Tax a transformational reform. Demonetisation, which destroyed large parts of the informal economy, is also called a transformation reform. This tells us very clearly where exactly they are coming from.

15. Throughout the letter, the 131 CAs question the “true intentions” of the economists and the social scientists and ponder “whether this concern emanates from the upcoming elections”, One can turn this around and question whether the response of the 131 CAs also stems from this.  

To conclude, the next time CAs put out a letter, they should at least get an economist to vet it and not make such silly mistakes. Whataboutery is also an art. Not everyone can do it cogently and avoid getting caught in the process.