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Of Social Media, Economics and Narendra Modi

Jan 21, 2019

Vivek Kaul

Late last week the government declared its debt numbers. As of end September 2018, the total debt of the government stood at Rs 82.03 lakh crore. On its own the number sounds like a pretty large one.

Soon, a newsreport stating that during the Modi era (starting in late May 2014), the government debt had shot up by 50%, was published. Of course, this went viral on the social media, given that the non-BJP parties have upped their social media game in the recent past. WhatsApp forwards, Facebook posts and tweets on this, have been going around over the last few days.

The question is, is this correct. Let's take a look pointwise.

1) As stated above, the total debt of the government as of end September 2018, stood at 82.03 lakh crore. At what level was the debt at when Narendra Modi was sworn in the prime minister. The debt numbers get declared every three months. Hence, the total debt of the government as on June 30, 2014 (the nearest date from May 26, 2014, the day Modi was sworn in as the prime minister, for which data is available), was Rs 54.90 lakh crore.

Given this, the total debt between June 2014 and September 2018, went up by 49.4%. This has been rounded off to 50% and is the figure being bandied around. Of course, as far as mathematics is concerned, the number is totally correct. But there is a little bit more to this than just basic fifth standard math. Let's try and understand this in a little more detail.

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2) As the government debt has expanded so has the size of the Indian economy. As I have said in many past pieces, this is something that needs to be taken into account. Hence, the total debt of the government needs to be divided by the gross domestic product (GDP or measure of the size of the Indian economy), to take into account the increase in the size of the economy. If the debt of the government is growing at a faster pace than the overall economy, then there is reason to worry.

What happens once we do that? As of June 2014, the debt to GDP ratio comes in at 47.4%. As of September 2018, it comes in at 46.1%. Once we take the size of the Indian economy into account, the government debt to GDP ratio has actually come down.

3) Given that the social media loves a simple narrative the news that the debt of the government has gone up by 50%, has gone viral. Of course, once we take the size of the Indian economy into account, that is really not the case. But this doesn't end here.

4) What this tells us is that the opposition parties have also upped their social media game. In the past, something like this would have gone totally unnoticed. But not this time around. The irony is that they seemed to have picked up the same tricks of the trade as the social media department of the governing party.

5) There is another point that needs to be made here. The Modi government has managed to push the debt to GDP ratio down, by using what the Comptroller and the Auditor General (CAG) of India, called off budget financing in a recent report.

The CAG points out that the government, over the years, has postponed the payment of subsidies to the Food Corporation of India and fertilizer subsidies to fertilizer companies. In 2016-2017, the carryover liabilities of food and fertiliser subsidies stood at Rs 1,20,360 crore.

Over and above this, as the CAG report, referred to earlier points out: "In terms of capital expenditure, off budget financing of railway projects through borrowings of the Indian Railway Finance Corporation, and financing of power projects through the Power Finance Corporation are outside the budgetary control. Such off-budget financing are not part of calculation of the fiscal indicators despite fiscal implications."

Then there is the case of the government getting one public sector company to buy another public sector company, and getting paid in the process, despite maintaining overall control over both companies.

Like last year ONGC bought the government's stake in HPCL. To do this, it had to borrow money. In the process, debt that should have been on the books of the government, ended up in the books of ONGC.

To conclude, when it comes to economics in the mass media these days, nothing is what it seems. Be careful!.


Vivek Kaul
Vivek Kaul
Editor, Vivek Kaul Publishing

PS: Now you can follow Vivek Kaul on Social Media and get Vivek's updates on the critical issues affecting the economy and your wallet... as they happen. Follow Vivek on Facebook, Twitter, and Google+.

Vivek Kaul is the Editor of the Diary. He is the author of the Easy Money trilogy. The books were bestsellers on Amazon. His latest book is India's Big Government - The Intrusive State and How It is Hurting Us.

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5 Responses to "Of Social Media, Economics and Narendra Modi"

Ved Parkash

Jan 22, 2019

Vivek, I am not an economist or even a finance guy, so pardon my limited understanding. I am an Engineer by Qualification but money matters do interest me and I am a regular reader of your posts/ articles. While the impression I got from your comments is that this Govt is doing a good job on economic front by maintaing growth and still bringing down the GDP to Debt ratio. I read some articles earlier which indicated that criteria for GDP calculation was altered by this Govt to pad up / face lift the figures GDP figures were , also the windfall this Govt got by additional duties on fuel prices and at the same time not passing off the benefits of low prices of crude to masses. Curious to know if compared apple to apple how will these figures look like ? Regards Ved



Jan 21, 2019

Insightful article as always Vivek. I think there was a typo in the second last sentence "In the process, debt that should have been on the books of the government, ended up in the books of the government of India." . I think what you meant was "In the process, debt that should have been on the books of the government, ended up in the books of the ONGC."


Ramakrishna Vudata

Jan 21, 2019

Dear Sir, Your story seems to touch only positives that too when compared to Debt/GDP ratio as you said 5th standard maths. But we should also considered the debt conversion to USD or vice versa at different time periods and comparison. What are the forex reserves in Billion Dollars at 2014 and Now and Ratio at both the times (Forex Reserves / Debt)(Liquidity of the nation). Further removal of diesel and other subsidies could have a positive impact on nations debt. How much % this is and after removing this % how much increase in Debt %. Like this many complex permutations and equilibrium comparable % has to be arrived. Hence, it is not simple 5th standard maths and at the same time definitely debt growth % is higher than the GDP growth %. I am sure you will agree for this.


Rajiv Gupta

Jan 21, 2019

Peddaling half truth at any point of time is cheating. CAG has done a proper job. The government saved around11 Lakh Crores because of the fall in crude prices by raising the excise duty & the benefit not being passed on to the end-users. The government has indulged freely into off market borrowings & also window dressing by keeping the payment liabilities pending & this again is a staggering figure. Therefore, all these extras in the Balance sheet should be considered to arrive at Tax to GDP ratio. Therefore Mr. Kaul, you also don't get trapped by half truth in the name of exposing the truth! Finally, the assets creating by the borrowings & income generated out of those assets will give you the complete picture for assessment but the irony is that we may not even collating that data because that will tell you that we are simply doing a very poor job for which this country will have to pay a price sooner or later.



Jan 21, 2019

" Hence, the total debt of the government as on June 30, 2018 (the nearest date from May 26, 2018, the day Modi was sworn in as the prime minister, for which data is available), was Rs 54.90 lakh crore" --- typo error. Modi was sworn in 2014 ! I think Modi government is so far the 'smartest' in the game of manipulation and common man gets hit. I have shares of ONGC which tumbled after this takeover to which even HPCL had tnitially not agreed.

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