Large parts of corporate India aren't exactly feeling the economy's world-beating growth performance. But woe to those who dare to question it.
The chief executive officer of the country's largest decorative paints maker learned that lesson on a recent earnings call. To an analyst's question about the relationship between gross domestic product and paint demand, Asian Paints Ltd CEO Amit Syngle said that the usual correlation of the business with fast GDP growth is out of kilter in the current year.
And then he said something borderline controversial, suggesting that he's looking at ways to find "the real GDP".
That widely publicised remark, doing the rounds on social media in the middle of a bruising, six-week general election, was enough to get the Mumbai-based firm worried. Mr Syngle has referred to GDP often enough in the past, as a guidepost to business. But this time, the opposition Congress Party used his statement to poke a hole in the government's claim that India is the world's fifth-largest economy. "The comments were not, in any way, meant to question the sanctity of the GDP numbers as being projected," Asian Paints said in a clarification last week.
How often people decorate their homes, and how much they're willing to pay for it, is a function of income growth: Paint demand in India tends to outpace GDP expansion by a multiple of 1.5 to 1.75 times. The nominal GDP growth rate in the year that ended on March 31 is estimated at about 9%, but Mr Syngle's sales only expanded by 3% in value terms, so he has every reason to be a little perplexed about the official data. Last year, when the economy had grown by a little more than 14% in nominal terms, Asian Paints' business had jumped by 20%.
GDP everywhere is a statistical artefact. No authority can claim to have measured a country's exact output. China's data has been notoriously unreliable for a very long time. India's GDP calculations have faced serious criticism since a major overhaul in 2015. Suppressing information that might cast a harsh light on Prime Minister Narendra Modi's performance has given the contentions an added political colour.
A labour-force survey from 2017-18 was delayed until after Mr Modi's 2019 reelection. It showed unemployment at a 45-year high. An assessment of consumption from the same year was junked. The government said the cancellation was warranted by "data quality issues". Critics said the report was shelved because it showed a drop in household spending, the first in more than four decades. It was replaced by a 2022-23 study, which hews closer to the government's claim on poverty reduction. But it can't be compared with previous surveys because of methodological differences.
The Chennai-based economics commentator Pramit Bhattacharya recently put in a right-to-information application to inquire about the fate of an annual survey of unincorporated enterprises, which was first conducted before the Covid-19 outbreak. It appears that two more editions have been completed and a third is ongoing. But there's no sign of any data in the public domain. Had the informal economy been doing well or revived strongly after the pandemic, the government would have gone to town with the information.
In the absence of specific data, formal corporate businesses are taken as a proxy for the informal sector. But tiny enterprises, which provide subsistence incomes to the nonfarming labour force, are a very different animal. An average worker employed by them added US$1,500 (54,500 baht) of value to the economy -- or just about $5 a day -- before the Modi government's overnight ban on 86% of the country's cash in November 2016 broke their backs. Then came two further shocks: a goods-and-services tax rollout and the pandemic.
How are mom-and-pop operations faring now? It's crucial to know because nine out of 10 of India's workers are informally employed. A paint maker needs to gauge the incomes of the masses, not just of those who can afford costly coatings. When there's little growth in disposable incomes at the bottom of the pyramid, companies must offer hefty discounts to push more volume out the door.
It isn't just the official statistics that Indian CEOs find hard to discuss nowadays. It's a bigger problem if they talk about policies. Very few, as Rajiv Bajaj, the managing director of Bajaj Auto Ltd, did earlier this month, have the temerity to question the wisdom of charging a 28% goods and service tax on motorcycles, even though two-wheeler sales volumes haven't revived to pre-pandemic levels.
Multinationals have learned to keep quiet because when they do complain -- like when a Toyota Motor Corp executive spoke up against taxing cars as drugs and alcohol -- they only get pressure to walk back their words. Either that or social-media troll armies are unleashed. Makers of food and soap walk on eggshells when discussing weak rural demand.
In such a climate, the domain of acceptable corporate speech has predictably shrunk -- except when firms question local policies in states where opposition parties are in control. Larsen & Toubro Ltd, which decided nearly two years ago to pare its ownership interest in the disastrously planned Hyderabad metro rail project, recently deflected the blame for poor ridership on free bus tickets for women in the state of Telangana, which has only had this policy under a Congress Party government since December. The prime minister lost no time in picking up on it as a campaign theme. "You're taking away 50% of your metro passengers," Mr Modi said in an interview. "How will the metro move forward?"
The writing is on the wall. Whether they feel the growth or not, companies have to applaud the published GDP figures, praise India's regressive tax system and demonise Mr Modi's opponents as anti-growth. Those who make pricing decisions and deploy capital aren't all taken in by the rhetoric -- but by now, most executives like Mr Syngle know better than to air their concerns in public. ©2024 Bloomberg
Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services in Asia.