Opinion | Want to understand GDP data manipulation? Watch The Matrix

We are living in the Matrix. A data manipulation and suppression matrix.

The premise of the 1999 cult movie was that human beings were living in a simulated reality called the Matrix where everyday life was an illusion to keep people under control.

Cut to the present: India is the fastest growing major economy in the world, a genius demonetisation move led to a spurt in economic growth that year, and citizens have no time for pesky unemployment figures because they are busy working to catapult India to a $10 trillion economy by 2030.

Except that, this is the matrix. The Narendra Modi government has revised, re-revised and suppressed data so much that economists and other social scientists are protesting. How can policy making be efficient when the basic data on which said policies are formulated is suspect?

“Any statistics that cast an iota of doubt on the achievement of the government seem to get revised or suppressed on the basis of some questionable methodology,” said an open letter signed by 108 economists.

These include the data which shows that GDP growth “shot up by 1.1 percentage points to 8.2 percent, the highest in a decade! This seems to be at variance with the evidence marshalled by many economists.”

Other prominent examples include: Two competing GDP back series for varying lengths of time; suppression of the first economy-wide employment survey conducted since 2011-12; and now news that this employment survey could be scrapped altogether by the government.

The need for timely, accurate data has been well-articulated. As this Moneycontrol piece by Rajesh Kumar puts it: “Aside from policy implications, it is important that data doesn’t end up damaging trust in financial markets. Capital is extremely mobile in today’s world and might prefer moving out of a place where the very basis of making investment is being questioned.”

But governments have blithely ignored such dangers. Data manipulation and suppression is used by all governments, authoritarian or otherwise. The honour board includes, apart from the usual suspect China, Argentina, Turkey, Russia and the United States, when it comes to election related data manipulation, points out this paper.

In Argentina, the populist president Cristina Fernandez continuously falsified data to keep citizens’ support, even though the fake data cost the country billions of dollars, reports The Economist. In China, Premier Li Kequiang apparently prefers to use three indicators to track economic growth - railway cargo volume, electricity consumption and bank credit – rather than official GDP numbers.

However, research suggests that this data manipulation and suppression doesn’t work in the long run. According to a paper by Handi Rita Li of Duke University, who studied the political effect of economic data manipulation in China, there is evidence that the Chinese people respond to actual growth and not to official GDP data. It said that manipulated statistics do not reduce protests or contribute to social stability as real economic growth does. That should be rather obvious.

What’s the takeaway here?

Even in an authoritarian economy, manipulation does not result in lower social unrest. In a democracy, manipulating and suppressing data is akin to shooting yourself in the foot. When data is widely divergent from the actual ground reality, people will start questioning the numbers. That’s especially true when there are alternatives to official statistics. They will show their displeasure at the ballot box. After all, one can’t fool all the people all the time.