Data please: Government figures shrouded in secrecy entail economic risks

Transparency often spells trouble for an administration.
Transparency often spells trouble for an administration.

Summary

  • India’s government recently stopped offering details of GST collections. While a pattern of weakening data transparency suggests a discomfort with troubling truths, the bright part is that the risk of policy mis-steps that may result isn’t lost on officials.

An important person in the government requested me to write about how the subsidy from Union budgets for second-class AC train seats in India has grown since 2014, given that these fares haven’t been adjusted for rising fuel costs. 

I haven’t managed to figure out if there is a subsidy on these fares, let alone how fast it may be growing. Happy to be corrected, but it seems that the outgo towards this subsidy and the figures needed for computing it are not being reported in the Union Budget.

When India’s railway and Union budgets were merged, officials had informally told reporters that presentations of separate railway budgets bred populism. Railway ministers made a big deal of announcing new stations and trains, skewing attention and resources to their home states and constituencies. 

The spotlight this pageantry put on passenger-train services made raising fares politically difficult, they said. Scrapping the separate rail budget was supposed to free fares of political compulsions. The worry now is if this ‘reform’ may instead have increased opacity and reduced scrutiny of budgetary details.

Also read: Mint Quick Edit | GST data: What’s the secrecy?

From this month, the Central government has stopped publishing the details of revenue collections from the goods and services tax (GST). Beat reporters covering the finance ministry were informally informed that tax collections rising month after month made this data politically inconvenient. 

The clampdown is entirely unnecessary. The government finds itself in a spot only because all along it highlighted the absolute collection numbers, one month after another. This helped obfuscate the broader reality, which is that India’s GST has not been the revenue-raising success it is made out to be. 

GST collections, net of refunds, are still lower than the revenues raised from all the taxes replaced by GST (6.1% of GDP in fiscal year 2023-24 versus 6.3% of GDP in 2016-17.)

Transparency often spells trouble for an administration. Questions begin to be asked, accountability goes up, narratives can’t easily be divorced from ground reality. Governments don’t like answering uncomfortable questions and display an inherent weakness for opacity. 

Where possible, inconvenient information tends to get suppressed, and the default response of all governments—at the Centre and states—to politically uncomfortable developments is to clamp up. Regulators, too, aren’t terribly uninhibited about disclosing information.

Central government officials complain that states are not transparently publishing power-subsidy figures, and that there are discrepancies between the figures they report to the finance ministry when seeking its nod for borrowing from the markets and the data they state in their publicly available records.

During the pandemic, the country’s failure to transparently publish the number of deaths due to covid made the world take note. Researchers tried to second guess covid’s impact, such as by collating numbers from obituaries published in news dailies.

In 2016, the Reserve Bank of India published details of the cancelled notes that were being returned to it in the first few days after demonetization, but quit its daily disclosures soon, as soon as it became inescapable that a large number of these notes would be returned, exposing deep flaws in the design and execution of the note-ban, which imposed needless and unjust hardships and losses on people. The data was published at the close of the central bank’s accounts, by when crucial state assembly elections had concluded.

Also read: At 6.1% of GDP, GST revenue for FY24 still not above pre-GST level after 7 years, says former CEA Arvind Subramanian

The government’s first Budget for its third term is being readied. To be presented on 23 July, this budget will be scrutinized more intensely than usual for the government’s commitment to fiscal consolidation. The Union Budget will be read for signs of any fallout of the ruling party’s setback in this year’s Lok Sabha elections on its spending approach.

The temptation would be to go populist and couch that in typical budgetary bureaucratese, an old finance ministry habit that former Chief Economic Adviser, Arvind Subramanian, described in his book, Of Counsel: The challenges of the Modi-Jaitley economy, invoking Paul Simon: “Just as there are more than fifty ways of leaving a lover, there are as many ways of meeting deficit targets. Governments hedge, fudge and make use of creative accounting."

All the same, the budget may be a good place to institute safeguards. Populist fiscal handouts, or ‘revdis,’ tucked away should be teased out. The long-run costs and benefits and fiscal implications could help decide whether a government scheme is a freebie, demerit subsidy or a sound way of supporting a fragile segment of the economy. 

A fiscal council would be capable of doing all this, but may end up unearthing inconvenient truths, complicating ‘headline management’ as well as policy choices. Which probably explains why the central government has so far refused to implement the 15th Finance Commission’s recommendation of setting up such an institution.

It’s a good sign, of course, even if a handful of individuals in the government are growing wary of the risks of opacity creeping into the Budget, and worrying that this might be leading to policy gaps and mistakes. It’s why concerns are being expressed over second AC passenger train fares. What are they going to do about this risk, though? We'll see on budget day, 23rd July.

Also read: Use of data, transparency can transform governance: Kant

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
more

topics

MINT SPECIALS