The last few years have seen me focus more on information and how it is processed by individuals and households. Information matters because it helps shape up expectations—and expectations are important in determining economic outcomes.
Unfortunately, we know little about expectations although there has been a renewed interest in this area. But even as we continue to better understand and explain the formation of expectations, it is equally important to look at the quality of information.
Ultimately, information has to be processed by economic agents to form their expectations. Therefore, both the quality of information and the mechanism for processing such information are important determinants of expectations. This is more so when there is a big difference between expectations and actual outcomes.
Unfortunately, there has been a trend in misinformation in India over the last several months. Much of this misinformation is perhaps not intentional and often an outcome of errors in understanding official decisions or notifications.
Some of it is also due to the immense pressure to generate clicks which leads to clickbait headlines that do not inform the reader—but instead add to the overall confusion. The problem is not just limited to India but is one that is just as pervasive in many other parts of the world, irrespective of whether a country is developing or developed.
To illustrate the point about misinformation, let us just look at India and consider information or news over the last one month. There are at least 10 such instances concerning just economic news that immediately sprout in my mind. Of these, seven are concerned with the Goods and Services Tax.
It may be useful to provide a reminder that the Goods and Services Tax is levied not by the Union government but by the GST Council, which comprises state finance ministers. However, somehow, state governments that are most vocal for compensation (and presumably also for hiking rates) are also the most vocal opponents of the GST changes even when some of the changes were recommended by their state finance ministers. Somehow, we have allowed for delinking of state finance ministers from the GST and thereby have enabled them to make changes and then oppose those changes without assuming any responsibility for the overall GST taxation structure.
In the last one month alone, I have come across stories about 18% GST on house rent for tenants—which was later found to be fake. Then there was another story about GST on crematorium services—which again was found to be untrue. Then there was another fake news about GST on Garba, followed by yet another about GST on booking cancellations.
But the list does not stop here. Apart from these four, we also find news reports about GST on issuance of cheques, on final costs of the national flag, and a distorted representation of 5% GST on all essential food items. Each of these stories were not true and ignored the context of the notification. This led to several departments issuing clarifications that were not necessarily required.
It is not new that official government language is unclear and hard to understand—this has always been the case. Therefore, it is important to ask why there are such frequent misinterpretations of important economic changes. This is especially needed as misinterpretations like these play a role in impacting the economic expectations of agents.
But even more importantly, bad quality of information essentially implies reduced trust between citizens and conventional sources of information. This too can have implications as citizens look at other, “more” authentic sources of information—that may perhaps not be so authentic after all.
Beyond the GST, we also saw fake news about the size of the Indian economy, with some saying that India slipped to the 164th rank in the list of fastest growing nations in 2021 from being the “third-largest” economy in 2011. To compare growth and levels in itself is incorrect—this suggests that some of this information or “news” is with the intent of convenient cherry-picking of data to make a point that may conform to the opinion of the writer.
Another such instance is when the recent paper by the Reserve Bank of India on privatisation was misconstructed to be RBI’s view on the subject. The RBI article itself had problems and many would respond to it in the form of critiques as it looked at only “potential benefits” even as it ignored the costs in the form of fiscal support extended to these banks. The recent NCAER paper by Dr Arvind Panagariya and Dr Poonam Gupta is a good starting point for those still curious about why we must privatise public sector banks.
There was also a story about petrol and diesel prices not being reduced despite global crude oil prices decreasing. After further inquiry, even that story turned out to be factually incorrect, making it the last of the 10 economic stories that were not true in the last month alone.
It is therefore only natural that I wonder—why is there a sudden increase in misinformation? Has our ability to comprehend notifications reduced, or is it because 2024 is just around the corner? Ultimately, as Kishore Kumar said, “Yeh jo public hai, sab janti hai!”
New York-based economist