Across the Aisle: No thanks to the government, writes P Chidambaram

Police detain unemployed youth staging a protest in Hyderabad (PTI Picture)

On August 31, 2021, the Central Statistics Workplace’s (CSO) estimates on Nationwide Revenue had been introduced. The GDP quantity was certainly spectacular — 20.1 per cent. There was an expectation that ‘we the folks’ shall be seduced by the numbers and the spin of the federal government.

Reward to the media and the folks (save a couple of bhakts), they refused to be befuddled by the numbers and shortly realised the reality. The reality was that the expansion charge of GDP (20.1 per cent) within the first quarter of 2021-22 was a statistical phantasm as a result of the ‘base’ was an unprecedented low of (-)24.4 per cent in Q1 of 2020-21. It was what Dr Gita Gopinath, Chief Economist of the IMF had, months in the past, described as “mathematical development”.

What Folks can Obtain

However, we should welcome the expansion of 20.1 per cent as a result of it reveals what a rustic and its folks can obtain however an insensitive and uncaring authorities. When there was a second wave of Covid-19 within the early weeks of the quarter (April-June 2021), the state governments managed the disaster with out shutting down the financial system. The contribution of Mr Modi’s authorities was its colossal failure to handle the availability and allocation of oxygen: the acute scarcity for a number of weeks brought on a lot of deaths (which quantity is believed to be for each loss of life recorded no less than 10 that went unrecorded).

The expansion charge of 20.1 per cent was led by the folks’s ‘non-public remaining consumption expenditure’. The folks spent their cash on consuming items and providers. It was Rs 17,83,611 crore in Q1 and marked a pointy improve over the Rs 14,94,524 crore spent in Q1 of final yr when the nation was hit by the primary wave of the virus.

True Benchmark

There’s one other remaining consumption expenditure. It’s the authorities’s. Think about what would have been the outcome if authorities expenditure had saved tempo with ‘non-public remaining consumption expenditure’. The previous declined from Rs 4,42,618 crore in Q1 of final yr to Rs 4,21,471 crore this yr. The federal government’s contribution to the Q1 outcome was, subsequently, damaging. Nor did the federal government take efficient steps to spice up exports, which is likely one of the 4 engines of development. ‘Internet Exports’ too declined from Rs 34,071 crore in Q1 of final yr to (-) Rs 62,084 crore this yr. The expansion charge of 20.1 per cent, albeit mathematical, was due to the folks and no due to the federal government.

The federal government failed to point out the boldness to spend and, if it was in need of cash, the boldness to borrow and spend. It must also have made money transfers to twenty or 25 per cent of the households on the backside of the pyramid; with that cash, ‘non-public remaining consumption expenditure’ would have gotten a giant increase. Collectively, enhanced authorities expenditure and elevated non-public consumption would have vaulted the expansion charge to over 25 per cent and thus made up for the slide of (-)24.4 per cent final yr.

The numbers for Q1 of 2021-22 additionally reveal some critical weaknesses within the financial system. The true benchmark just isn’t 2020-21 (the pandemic yr) however 2019-20 (the pre-pandemic yr). The annual output that yr was undoubtedly modest however however upwards. Are we there but? The reply is not any. Have a look at key numbers:

Key sectors of the financial system haven’t but attained the extent of output of 2019-20. What’s worse is the output in these sectors is beneath the extent of output of the earlier yr, 2018-19. The one star performer is ‘agriculture’.

The numbers underline one other conclusion that has been highlighted by observers, surveys and the CMIE’s studies however which the federal government has stoutly disputed: job losses. Hundreds of thousands of jobs had been misplaced in 2019-20 due to the continual slide within the financial system (poor administration). Extra jobs had been misplaced in 2020-21 (pandemic). These misplaced jobs haven’t come again in 2021-22. Bear in mind additionally, the majority of the employment is within the casual sector and within the MSMEs, and the CSO estimates don’t seize, for the current, the efficiency of the casual sector or the MSMEs.

Clueless and Timid

The V-shaped restoration is a tiresome spin by the Chief Financial Adviser. When the quarterly development charge declines from 5.1 per cent to (-)24.4 per cent, that shall be depicted by the left incline of the letter ‘V’ and any small optimistic development shall be depicted by the correct incline of the ‘V’. If the small optimistic development persists quarter after quarter, the correct incline will rise, however very slowly. That may be a no-brainer. The actual query is when will we attain the pre-pandemic degree of GDP that was recorded in 2019-20?

The federal government can do lots to speed up the restoration however, as I’ve typically mentioned, it’s clueless and timid. I used to be pleasantly stunned to seek out {that a} fawning newspaper carried an editorial on September 1 beneath the title ‘Spend, Authorities, Borrow and Spend’. I endorse that recommendation. That’s the path to a fast financial restoration.