Tuesday, October 4, 2022

Big figures, fragile upturn JOBS CAN SPUR CHURNING

Shivaji Sarkar

Indian politics and economy are queering the pitch. Politically feeble attempts are there with Telangana Chief Minister K Chandshekaar Rao making the first move for talks with Bihar CM and JD-U leader Nitish Kumar and RJD for cobbling up a difficult conglomeration or not. Economically, it is a challenge despite a first-quarter growth of 13.5 percent but less than expectation of the RBI and job growth of 7.6 percent that may not match the overall decline including that in the public sector.
Core sector has grown but a rate slower at 4.5 percent in July against 13.2 percent in June. The fiscal deficit at 20.5 percent even with Rs 30,307 crore dividends from RBI, Rs 7867 crore from public sector banks falls short of expected revenue generation. Even with the latest GST collection of Rs 1.44 lakh crore, 28 percent rise, the total revenue is unable to match the high government expenses and infra investment.
The economic affairs ministry secretary Ajai Seth says that there are challenges due to oil price now rising to $ 102 a barrel, possible slowdown in advanced economies and likely impact on exports despite the fact India is much better placed than other economies.
There were sharp barbs on the economy by K Chandrashekar Rao in Patna saying all sectors are in disarray. But it seemed Bihar Chief Minister Nitish Kumar avoided making any comment. Despite the hype, it is apparent that the opposition is yet to pick up the threads or do a study to challenge the economic indicators. Their challenge to the BJP remains cosmetic as of now. The revelry in the BJP camp at the sudden move of Nitish Kumar to leave the press meet speaks volumes.
Overall there is a swing in the economic indicators. The GDP growth to Rs 36.85 lakh crore, lower by 2.7 percentage points of RBI forecast, remains one of the best in post pandemic situation even as the country grapples with a difficult situation. It bars the opposition from taking an advantageous situation as the overall numbers are no less impressive. The GDP in the first quarter is above the pre-pandemic level. Further indications also come from the data that both private consumption and investments have surpassed pre-covid marks. The RBI in August MPC has lowered growth rates to 7.2 percent but SBI puts it at 6.8, Goldman Sachs 7 and Moody’s at 5.2. In subsequent quarters growth is predicted to moderate.
The farm sector has robust growth at 4.5 percent while services sector grew at 17.6 percent. Private consumption, a key driver, rose by 25.9 percent indicating aspirational purchases and gross fixed capital formations are on the rise.
The manufacturing sector rise has been at 4.8 percent against 49 percent a year ago indicate that still a lot remains to be corrected. The growth in July is one of the slowest.
The National Statistics Office lowering of April growth figures from projected 9.5 percent to 8.4 percent justifies the finance secretary TV Somanathan’s contention that overall annual growth rate would be between 7-7.5 percent.
Another area that has not been so bright is the contact-intensive-sectors like the trade, hotel and travel. Their output remains lower than pre-2019 levels. It has just touched 16 percent increase against 20 percent three years back. The sector is key to providing employment. Its less than desired growth may be an overall indicator of the job situation. After fall of jobs in four consecutive quarters the urban jobs show a rise of 7.6 percent, supposedly good for an emerging economy but for Indian situation more is needed.
The good prospects of the first quarter may not be easy to repeat in the subsequent quarters considering that more interest rate revisions by the RBI are on the cards to contain inflation now at 6.82 percent and chances of it stabilizing may be shaky as oil and food grain prices may continue to rise. This is likely to push up input costs across the board. Indian crude basket has become dearer by10 percent to $ 102. This indicates the recovery is still fragile after major shocks of the pandemic, lockdown, note-ban and high penalty provisions of the GST.
The challenges are not easy. The private sector, despite some increase in jobs post-covid, is not good paymaster. Actual job data are not known. There have been overall cuts in wages even in the best of the companies apart many layoffs and retrenchments. Many data are being collated. The severity needs to be gauged. The public sector that was adding to the job figures of late goes through an uncertainty with many units on the sale block. The railways known to be employing the highest numbers have decided to do away with large number of jobs and turn many others into short-term contracts.
The job creation needs a policy change but not on the cards for now. The government has chosen to compromise on salary bills because high fiscal deficit. The advisors need to tell the government that it may visibly bring down the wage bill but may cause severe difficulties for the country as more jobs are actually lost leading to a vortex of low consumption, penury and likely rise in crimes. It would stress the policing, not efficient in most states across the country. If not improved, it might add to aggravation of the law and order situation.
The flip side is, according to the Brookings report, India has 70.6 million people living in extreme poverty and those earning $ 4 a day number over 200 million. It is just not the urban poverty but the rural poverty is also showing signs of increases. The social stress is increasing. The stress on coffers is forcing to have second thoughts on free food dole to 800 million. During 2018-20, unemployment led to 16081suicides, Union minister of state for home Nityanand Rai told the Rajya Sabha.
These are signs of not easy situation for a country that is mulling to create a society that has high happiness index. The K-shaped growth can put the industry in a graver situation.
Despite impressive first quarter figures, and touted fastest growing economy, it is not booming. Changes in infra policies and priorities are must to move out of the morass for a fast growth and bettering of social conditions. Else a political churning may not be out of place.