Indian Finance Minister P. Chidambaram in an interview about India’s slowing GDP growth, to the Wall Street Journal says,
“We must aim at 9%, as I will, and we must be happy if it’s between 8% and 9%.”
This begs the question “Is he setting a goal for GDP growth for the country or is he managing expectations?”
A goal, IMO, is something that is ‘actionable’, i.e. you and your team can take actions which help you achieve that goal. Much like a goal in football, you can’t score one by just being on the field.
GDP growth, on the other hand is a product of:
– externalities – like the monsoon or India’s demographics which no government (knowingly) had a hand in creating
– long-term policies and action – one could argue that the 1991 liberalization is the biggest driver of GDP growth in India today.
– short-term policy and action – which tends to be more monetary policy – interest rates and money supply. Even here, short-term means at least a couple of quarters.
If you agree with the above, then you have to also agree that within a fiscal year, there is precious little that the Finance Minister or the government can do to influence the growth rate positively. In fact, in order to control inflation, the FM will have to throttle back growth. So the quote above, is in effect, expectation setting.
But it doesn’t come across as such. In all the discussion about growth targets everywhere (and there is a lot of it), growth rates for the year are projected as goals, not estimates. Words like “target”, “goal”, “aim for” are liberally used. Don’t be fooled by it. This is just taking credit for not screwing up something that was going to happen anyway.
You’ll find this behaviour in the corporate world as well. When cause and effect are separated by long cycles, it is quite common to penalize the manager who did the right things, but did not last to see them bear fruit. As also the manager who does nothing or worse but is around at the right time to reap the harvest that someone else sowed.