Patrick Amerasinghe, Chairman of the Federation of Chambers and Industry is well known for his frank and unbiased opinions on economic and trade issues as a private sector entrepreneur. He calls a spade a spade fearlessly. At a recent seminar, he has questioned the validity or perhaps even the credibility of the economic growth rate numbers, and impliedly of the estimated Gross Domestic Product /Gross National Product. The reply given by the Governor of the Central Bank has not disclosed certain "Unacceptable Features in the Central Bank statistics." There are two questions the average citizen of this country expects the Central Bank Governor to answer.
The first is by how much the Gross Domestic Product/ Gross National Product has risen at constant prices, or in other words in Real Terms?
The second question is the rate of inflation assumed, as measured by the well known DGP/GNP deflator measure?
Answers to these questions are of paramount concern to all of us particularly to investors, the trade and even to our political masters. A lower rate of inflation and a higher rate of economic growth would mean good performance and acceptable economic management by those in power. If things are the other way round, the Government is likely to be attacked for inefficiency and mismanagement. Thus whatever figures given by the Central Bank are likely to provoke debates in various fora. In this context it is possible that statistics are produced to please the political masters.
It is perhaps, for this reason that Mr. Amerasinghe has raised the validity of the inflation rate and growth rate mentioned in the Central Bank report for the year 1995. One has to congratulate the Governor for the excellent presentation of this year's report and the connected statistics. For the first time, a job well done! The Report gives the real economic growth rates of 5.6 percent for 1994 and 5.5 percent for 1995. The ordinary citizen refuses to accept the realistic nature of the so called inflation "Deflator" and the growth scenario. Let us just take the growth estimates of the GDP in relation to the agricultural sector.
It is reported that the growth rate of 3 percent was estimated for 1994 and 1995. It looks unacceptable for several reasons.
Tea production has grown by 4.4 percent in 1994 and 1.6 percent in 1995; rubber by 1 percent in 1994 and 0.9 percent in 1995; coconut by 20.6 percent in 1994 (It is over a lower base in 1993) and 5.1 percent in 1995; paddy is constant at 4.7 percent in both years. Other agriculture, forestry and fishing sectors have grown at the rate of 0.1 percent in 1994 and 2.8 percent in 1995.
The most important question that has to be raised is the share of the so-called "other agricultural products." It is easy to arrive at estimated production of crops like sugar, dairy products, minor export crops and well known subsidiary food crops. One can then arrive at the share of this rather mysterious and unidentified group at around 11.7 percent of the GDP in 1994 and 11.4 percent in 1995. At current market prices, the value of production will be a wobbling figure of Rs. 67,760 million in 1994 and Rs. 75,457 million in 1995. This "mysterious sector would account for more than the total production of paddy; will exceed even if the entire agricultural sector consisting of tea, rubber, coconut, paddy, fisheries and dairy are reckoned. One begins to wonder whether this mysterious sector of production is in the moon, unless the Central Bank comes out and identify this category.
According to Paul Madsen of the IMF, growth in purchasing power of the GDP (or its counterpart, the real income) is sometimes estimated by deflating the domestic expenditure component of the GDP (at market price) by the relevant domestic price indices and the trade balance by the Import price index. This is in accordance with the guidelines of the UN for the preparation of the System of National Accounts (SNA). Have the Central Bank staff adopted this method in computing the GDP, and the Real sector growth and in the process arrived as a residual number for the value of other crop category in the GDP. Even if so, the weight of this category seems totally untenable.
The extent cultivated (in hectares) for chillies has alarmingly dropped from 34,000 hectares in 1991 to 28,000 hectares in 1995; green gram from 42,000 hectares in 1991 to 24,000 hectares in 1995 and cow-pea (Lankan parippu) from 27,000 hectares in 1991 to 15.000 hectares in 1995.
These are considered essential income generating crops of the rural farmer. The sharp decline in the extent cultivated has undoubtedly increased rural poverty and unemployment/ under employment. These are the end results of consumer oriented and silly tariff policies where agricultural imports are allowed on duty waiver. For example, import duty of 35 percent on red lentils has been waived from March 1994. This had ruined the cultivators of cow-pea. Why waive the entire duty of 35% and lose over Rs. 2,400 million in revenue and ruin our farmers?
The Central Bank report itself mentions that the production of other field crops in 1995 was poor, compared to 1994 . To quote "Big onion production which recorded an all-time high in 1994 declined drastically by 45 percent in 1995, due to the marketing problem faced by farmers. The production of red onions, chillies and green gram recorded a decrease of 18 percent, 10 percent and 8 percent respectively (in 1995) compared to 1994."
If this is the reality, how can the share of other agricultural products grow at 2.8 percent in 1995 over 1994? It is evident that someone is "massaging" these figures to mislead the country and to please the political masters.
We know that statistics were cooked up during the 1965-70 period and poor Dudley Senanayake was wondering what went wrong only after the election results reduced the UNP to 15 seats. In the 1970-1977 period under the supervision of Professor H.A. de S. Gunasekera the then Secretary to the Ministry of Planning and Economic Affairs, no one believed those statistics regarding cost of living as reflected in Colombo the Consumer Price Index inflation rate and even economic growth rates etc. His students in various positions in the public sector used to affectionately call these statistics as "Hadaya Figures." He sacrificed his intellectual integrity. The grand lady was fed with inaccurate information and she was completely in the dark about the situation "outside Temple Trees". In the end, she had to bite the dust in 1977 reduced to only 8 seats. Are the sycophants back with a vengeance? Will the Resident Representatives of the IMF/ World Bank tell us whether the Central Bank statistics are acceptable.
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