A CRISIS OF CONFIDENCE

Jagdish Rattanani

Is the Indian economy hot, tepid or in cold waters? The raging debate on whether 2026 Q1 GDP growth was 7.8% as the government claims or a measly 2.6% that goes down to near zero if the downward revisions of the previous year and the inflation deflator are appropriately accounted for cannot be settled on numbers alone. Technical knowledge can explain the GDP numbers just as experiential insight can question the integrity of numbers and practical knowing can dismiss them as irrelevant in a world where lived reality is nowhere near the claimed statistics. Theodore Bernstein, the acclaimed author and jour nalist of the New York Times, wrote a long time ago that no news, “be it social, political or economic, exists in the ab stract but stems from the day to day lives of people” and one task of those explaining it is to “bend it back to the level whence it sprang (because) eternally basic is how people live.” When events reported in official statements fail to resonate with the lives people lead, the latter becomes the truth, and the former gets recorded as the narrative. The contentions over the GDP number are a sign of the times. They are illustrative of a crisis of confidence that is the central crisis facing the government of Narendra Modi. It is interesting that former bureaucrats have locked horns with the government on the numbers, lending ammunition to what has now become a full-fledged political battle that has raised the stakes even more. Forceful claims and punchy counterclaims make this a political quagmire for a government that already has its back to the wall. In fact, the 7.8% growth was the first bit of good news after the Jantar Mantar protests which forced the government to bend and wrested the resignation of the education minister in July.

In the process, a Prime Minister once projected as mighty and invincible has been ridiculed and memefi ed, his Home Minister faces tough questions on the handling of the protests, and the manner in which a former bureaucrat who spoke of high-level internal tensions was detained for hours in New Delhi has only lent more weight to the talk that something is seriously wrong within. The story of India’s GDP is but one example of how the Modi government has seen dwindling trust and eroding confidence in its claims of superior performance. Consider the claim that it has cleaned up Non-Performing Assets (NPAs), and the renewed controversy over how the system really works. A recent order of the National Company Law Tribunal (NCLT) made possible a resolution in which a one-time TV magnate who now says he is as good as broke would repay Rs 6.25 crore against admitted total claims that LIC Housing Finance Limited placed before the tribunal at Rs 22,006.57 crore. That is under three paise for every hundred rupees owed. That shocker of a “settlement” is now on hold.

Separately, the CBI has registered a case against the magnate on a complaint by LIC Housing Finance Limited. The individual case, though significant, matters less than what it points to. Between FY18 and FY25, gross NPAs of public sector banks (PSBs) fell from Rs 8.96 lakh crore to Rs 2.84 lakh crore. But how was the bad stock erased from the books? It was write-offs rather than recoveries. Those same eight years saw Rs 10.76 lakh crore written off against Rs 6.72 lakh crore of recoveries and upgradations, a ratio of 1.60. For every one rupee recovered, Rs 1.60 was written off. For 2025, written-off amounts were almost double the recoveries for PSBs. The official answer to all this is that a write-off is an accounting entry and not a waiver, that the borrower remains liable. In practice, recovery remains low. This takes us back to the problem of technical correctness versus lived reality that also afflicts the GDP growth story. The signal to the system is that big borrowers can get away, further weakening standards of governance. Yet the gross NPAs are down, which, in terms of numbers alone, is an achievement and a cause for celebration by the government. A problem solved on paper lives on untouched by practice.

A lesson that stands out is that it is in the interest of the government to let the “bad” numbers emerge, for it is these that lend credibility to the good ones. They encourage good debate, better policymaking and increased credibility. It may be useful to recount a message that Jeff Bezos of Amazon (not to be otherwise admired) put out when he was told that the bad reviews on a sales site harm the business. True, they do, but in the short term. In the long term they encourage better buying, reduced returns, and give credibility to the good reviews, so that the credibility of the entire reviews section is enhanced and serves the customers and the company well. It can build credibility. The lesson is simple: no paint job can hide a bad and leaky patch for long.

The writer is a journalist and faculty member at SPJIMR.