Don’t confuse luck with performance

........There are two indications that it was pure “dumb luck” that allowed GDP growth to register a two-year high in the very first quarter of the Modi regime. The first piece of luck was due to the often over-quoted “base effect”, i.e., the corresponding quarterly figure last year was low, and therefore the bounce-back was above normal. But how low were last year’s April-June numbers? As it turns out, the base was not only low, but very low. As readers of this column know, the ministry of finance (and RBI!) cannot decipher this simple fact because they rely on estimates of year-on-year (yoy) growth; this estimate hides considerably more than it reveals and can lead to grievous errors of interpretation. For example............

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