Submitting a $7 Trillion Claim to Trial

The first of them is 7 trillion. As in 7 trillion dollars. A recent report by DSP Investment Managers titled “NETRA: Early Warning and Signals through Charts”, complete with a dire looking look on the first page (https://bit.ly/40evqFc).

There are 10 charts about various financial events, one of which mentions “contango” and “backwardation”. Elsewhere, there is a declaration that the report “uses words or phrases such as ‘will’, ‘expect’, ‘should’, ‘believe’ and similar expressions or variations of such expressions that are ‘forward-looking statements’, and “actual results may differ materially from those suggested by the forward-looking statements”.

Whatever it means.

The five charts paint a generally rosy picture of India – such as “India has delivered returns to investors”, “Banking sector is in great shape” and “Investment boom to come”. The last figure is $7 trillion. This gives us – or at least purports to give us – the country’s spending on infrastructure since 1960, one vertical bar for each year.

It has this legend: “India has spent $14 trillion on infrastructure in the 75 years since independence. Of this, 50%, or $7 trillion, was spent in the last nine years. Another $7 trillion will be spent over the next six years.

last nine years? This is from 2014. You don’t need to point out the significance of that date, and so here’s DSP’s claim: This government in its nine years in office has spent as much on Indian infrastructure as all previous Indian governments since independence Have done

A pretty impressive claim, wouldn’t you say? Yes indeed, and at least one well-known-on-social-media fan of this government was pumped enough to put it on Twitter for his 300,000 followers to peruse: https://twitter.com /rishibagree/status/1632373081812664320.

But is this a valid claim? To put that question into some perspective, consider this thought experiment. Suppose I tell you: “I spent more on movie tickets in 2022 than in 2021 and 2020.” You might be impressed, considering I saw more movies in 2022 than in both of those years combined. Average, for tickets in each of those years: 200 in 2020, 250 more in 2021 500 in 2022. (These aren’t actual numbers, just off the top of my head, you understand.)

Well, hello: Naturally it cost me more in 2022 to boost my movie habits. But we cannot conclude that I watched more movies in 2022 than before. After all, if I watched the same number of movies every year, my above claim would still hold true. (It’s also why “This new movie is the highest grossing movie ever!” is a claim that deserves investigation.)

The point is that prices go up. There is inflation. We can make a fair comparison of expenses—tickets, infrastructure, hair oil, whatever—in different years only if we take this kind of inflation into account.

So how has inflation behaved in India during “75 years of independence”? To answer such questions, the site Worlddata.info is an indispensable resource. It offered me these lines: “The inflation rate for consumer prices in India has increased in the past between -7.6% and 28.6% over 61 years…from 1960 to 2021, the average inflation rate was 7.5% per year.”

There are three things to note. One, WorldData also lacks data prior to 1960. Two, these are consumer price inflation numbers, and food is a major contributor to this. Inflation in infrastructure spending may be different. So let’s be conservative and assume an average inflation rate of 5%. Three, on the DSP chart, it is near impossible to split spending into years prior to 1980 – the vertical bars are so small. So let’s ignore those years. In fact, ignore the years prior to 1990, when annual spending reached nearly $100 billion and the numbers become a bit easier to quantify.

Take 1990’s $100 billion and grow it by 5% year-over-year through 2022, the most recent year on the DSP chart. That’s 32 years of 5% annual inflation: we get a figure of $476.5 billion. That is, $100 billion in 1990, adjusted for inflation, is equivalent to $476.5 billion today.

Next, the chart says that about $100 billion was spent in 1991 as well. Increase it by 5% per year for 31 years till 2022. This gives $453.8 billion. Do the same for each year until 2013. Then sum all those figures. You get $13,881 billion, or call it roughly $14 trillion. Remember: According to the chart, total spending between 1990 and 2013 was about $6.1 trillion. But adjust it for inflation, and it’s worth $14 trillion today.

How does this compare to post-2014 spending? According to the chart, this is around $6.75 trillion – pretty close to DSP’s $7 trillion claim. But similarly adjusted for inflation, it’s equivalent to a little over $8 trillion today.

ie: in today’s dollars, India spent about $14 trillion on infrastructure between 1990 and 2013, compared to about $8 trillion since 2014. So much for DSP’s claim of $7 trillion in the 67 years before 2014 and $7 trillion in the eight years after 2014.

Also, remember that we haven’t even considered spending in the 43 years between independence and 1990. Adjust that money for inflation and add it to pre-2014 totals, and we’ll arrive at a much larger number than $14 trillion.

What’s more, if we use the WorldData inflation rate of 7.5%, we end up with an even worse mismatch between pre- and post-2014 spending on infrastructure.

Anyway, if seen, the claim of DSP cannot stand.

In fact, examining it is reminiscent of a classic dictum: Be very skeptical of the numbers used for chest-thumping and rosy pictures.

There’s another one I wanted to go to, but I don’t have the space. That’s 180. 180 kmph is the top speed we are told some new Indian trains are capable of. About that number, some other time. Or maybe you, suspecting you, will check it out.

Dilip D’Souza, once a computer scientist, now lives in Mumbai and writes for his dinner. His Twitter handle is @DeathEndsFun.