Harry Potter and India’s “Growth Rate” conundrum

The startling discovery based on various metrics of measuring the actual growth of the Indian economy between 2011-12 and 2016-17 clearly states the fact that India did not grow at 7% per year as the citizens were officially informed. Instead, the average annual growth crawled at a ridiculously small 4.5%, on an average, during those 5 years. 

The situation that India’s economy dragged itself into, has taken me 18 years back to the12th of April 2002 when the record-breaking franchise had just set its foot into every single bookstore in the world: Harry Potter and the Philosopher’s Stone. Being an ardent believer in witchcraft and wizardry, the sequence in which the ‘magic-bricks’ of the story piled up one after another with a perplexing turn of events, spared me very little time to get mesmerized through reality. Needless to say, there have been innumerable sleepless nights with me staring at the sky and contemplating Joanne Rowling’s world beyond the clouds.

However, the crystal of doubt started polishing itself with every birthday of mine that passed, and I got to witness the clearer picture within. The surprising fact isn’t in what I witnessed, but what I interpreted it to be and how relatable it seemed to my developing nation. So, let’s sit back and try to keep today’s economy in our heads as we proceed with the story henceforth.

The world described in the Harry Potter series is one where the economy is stagnant, the government is an effective police state, and the education system is in urgent need of major reform.

Despite the magic, fundamental economics still applies in the wizardry world. A flip through one of the seven wonders of the Potter series will clearly project how far it is from the so-called utopian dream. Money and price system still exist, society is not overflowing with riches and the witches and wizards are bestowed with the same financial difficulties as their muggle counterparts. While magic can transfigure and alter objects in numerous ways, there still prevail certain natural laws that clearly project how you can’t just conjure money or food out of thin air. 

There appears to be virtually zero encouragement for further innovation. Almost all businesses and firms in the magical world are extremely well established: Olivanders, the wand shop first opened in 382 BC. Business churn only seems to occur in the middle of a panic, such as that caused by the return and a resulting terror campaign of Lord Voldemort in the mid-1990s. A world as hierarchical and prejudiced as the one Harry resides in — where most rich wizards such as the Malfoys look down on those less fortunate than themselves — clearly does not encourage innovation, growth and social mobility.

But hold on, it’s not only the financial system where competition lacks. Every industry in the wizarding economy is highly concentrated. One reason for that undoubtedly boils down from the excessive regulation and bureaucracy. Such regulations drive up the costs of production and increase the barriers to entry for challenger firms.

Foreign producers and international trade are eager to provide competition, but heavy government regulation appears to stop this: In The Goblet of Fire we learn that ministry regulations prevent the importing of flying carpets, which could compete with broomsticks as a mode of personal transportation. The reason for the ban is that flying carpets are classified as a Muggle object, yet the fact they can fly clearly makes this ban absurd and is obviously an example of the government trying to protect domestic producers at the expense of consumers.

It is well established that increasing human capital and expanding the frontiers of knowledge are among the key ingredients for economic growth. A good education system is crucial for enabling this. Unfortunately, in the magical world, schooling is generally very poor. There is virtually no teaching of theory, and creativity is not encouraged, which is why Hermione is a model student, even though Fred and George arguably contribute far more to wizarding society through their innovations and entrepreneurship. 

But by far the biggest issue in the world that Harry Potter inhabits is the role and influence of the Ministry of Magic. This has immense and arbitrary powers, which it uses to control and regulate most activities in the magical world. Worryingly the concepts of checks and balances or separation of powers doesn’t seem to exist: The Ministry functions as executive, legislator, and judiciary. A free press would have helped expose the pervasive incompetence and corruption of the Ministry of Magic. Unfortunately, the Daily Prophet, which is the primary media source of news for the magical world, effectively acts as the propaganda arm of the Ministry of Magic: the paper and the Ministry are closely connected, and stories and news are often altered to have a more pro-Ministry slant.

Now, let’s keep this picture in the background while we review the growth numbers of today’s India.

To begin with, there are two important points necessary in justifying the fallacy in these numbers. One, former CEA, Dr. Arvind Subramanian uses 17 key factors in his latest paper, including two-wheeler, tractor and truck sales, electricity consumption, manufacturing numbers, rail freight and so on, as proxies to measure overall growth. His findings state that before 2011, most of these stated factors, to be specific, manufacturing production and exports, moved in tandem with overall growth. Thereafter, for no explained reason, manufacturing growth raced ahead, dragging the GDP growth upward; sounds exactly like magic. There lies zilch doubt in the fact that manufacturing was indeed the main culprit, but other sectors followed the trail too. Second, the data showed that India’s growth was measured against an average of 7.1% in which all the other nations were approximately growing. Thereafter, compared to all those nations, India was rising ahead. This sounds very similar to the story of locating a needle on the surface of Mars- without a telescope; again magic.

His paper undoubtedly serves zero political motive. It is non-adherent, in the sense that, it covers data during both UPA and NDA periods. Hence, the errors that have crept into our macroeconomic numbers are systemic, not driven by any political directive. 

Now, what could have been the circumstances or rather, chances in which this could have happened? The answer is, low. Let’s assume, for simplicity’s sake, that the years after 2010, when the global economic crisis was hitting our shores, the government might have needed to do this to keep the global credit ratings high, lower borrowing costs, keep inward investment flowing and so on. Even then, the probability of this occurring in our chaotic bureaucracy is considerably low. 

Hence imagine, what could have exactly been done had the government projected the actual data? What could have been saved if the media houses portrayed news exactly as they were and not as they should be? How far would have the low-hanging social indicator of Education improved if history wouldn’t have been meddled with? What would have been the delta of higher development achieved if we spent the very similar amount of time improving Health instead of replacing City-Names?

Let me provide you an answer to one of them, if the policymakers had been informed of the actual number of 4.5% instead of 7%, then they would have stopped rejoicing about effective economic management and instead, invested a few more hours in reform. This is insanely obvious. For instance, if a patient with cancer is diagnosed as suffering from common cold, the chances of survival will fall dramatically. In fact, at least part of the policy paralysis of the Narendra Modi regime between 2014 and 2019 can be attributed to the self-satisfaction fed in, not by the data of the Indian Economy but what can best be described as the one from the Harry Potter economy. 

It is long overdue that the process of the extensively widescale institutional and economic reform begins so that our motherland drags herself out of this over-engulfing mammoth named Crisis.