This is the first column in calendar 2024 and I renew my good wishes for a Happy New Year. Happiness is a sum of many parts. There are 142 crore individuals in India belonging to different sections of the people and I have wondered who is happy and who is not.
In recent days, I have read a spate of articles that vociferously endorsed the government’s claim that everybody is happy. Because, the authors claimed, India had witnessed unprecedented economic growth and the benefits have flowed to every section of the people. I do not deny that the economy has registered growth but it is certainly not unprecedented. The ‘golden period of growth’ was the three UPA years between 2005-2008 when GDP grew by 9.5, 9.6 and 9.3% a year. Under Prime Minister Modi, the economy has grown in the last nine years by an average rate of 5.7%. Adding the estimated growth of 7.3% in 2023-24, the average rate will still be 5.9%. That is not unprecedented or spectacular; it is satisfactory growth, but neither well-spread nor sufficient.
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The happy people
Also Read Soaring property prices: Luxury in parts Hasten slowly on T+0: Sebi may be ready, but the overall system will need time to digest such a big move The Indian online gam(bl)e: China’s success in regulating online gaming could serve as a crucial lesson for India Economy hangs in the balance: As Sheikh Hasina hangs on to power, state capacity to deal with crises reduces further The government’s economic policies lean toward low direct taxes, high and often oppressive indirect taxes coupled with coercive measures, capital investment in hard infrastructure like roads, railways, ports and airports (with insufficient allocation for education and healthcare) and subsidies to certain sections like women. The satisfactory growth rate has made some sections happy. I can count the satisfied sections: big and medium corporates; high net worth individuals; bankers; stock market investors, traders and brokers; purchasers of distressed assets; software professionals; big traders; professionals like judges, chartered accountants, doctors and lawyers; university and college teachers; government employees; rich agriculturists; and money lenders.
The dark side
The dark side of the picture is that many sections of the people are left behind — some are even left out — and these sections account for the vast majority of the people. The first section comprises 82 crore Indians who are given free ration of 5 kg per person per month. The free ration scheme is not a badge of honour to mark economic progress or prosperity. Free ration is a sign of widespread malnourishment and, in many places, of hunger. Why are over half the families in the country unable to afford staples like rice or wheat? The answer is because of low income and/or unemployment. Government has no policy to address these twin burning issues.
MGNREGS was intended to address the issue of low family income, and to supplement it, but the government’s antipathy to the scheme has been evident from the very beginning. Since April 2022, the government has deleted 7.6 crore workers from the list of registered workers. Of the current lists, over one-third of the registered workers (8.9 crore) and one-eighth of the active workers (1.8 crore) are ineligible due to the introduction of the Aadhaar Based Payment System. Absent support from MGNREGS, how are these individuals and families coping with life? Life is extremely difficult for them and, certainly, they are not happy.
Without job, with inflation
The other major section that is unhappy is people without jobs. The government no longer talks about creating jobs. It believes that it can delude the people by talking about the reported increase in self-employment. Self-employment, in a country where the average number of years that a child spends in school is 7-8 years, and with no skill training, means unemployment. The so-called self-employed young man or woman gets work irregularly and at a wage/income that is flat or lower net of inflation (compared to regular employment). There are no other benefits or security. Youth unemployment rate is 10.0% and among graduates under the age of 25 years the rate is 42%. Surely, they are not happy.
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Another set of unhappy people are those hit by inflation. That includes everyone except the top 10% that owns 60% of the nation’s wealth and earns 57% of the national income. The average inflation in 2022 was 6.7%. In 2023, inflation breached the upper limit of the 2-6% band in four of the 12 months. In November 2023, inflation was 5.55%. Food inflation, currently, is 7.7%. According to the RBI’s monthly bulletin of December 2023, “inflation will likely remain elevated relative to targets.” Inflation has resulted in reduction in consumption and household savings, and household liabilities have increased. The government has abdicated its responsibility to control inflation and left the task to the RBI. It is averse to reducing indirect taxes (to lessen the burden of prices on the poor) because, I suspect, it is not sure if it will be able to meet the fiscal deficit target.
The modest growth achieved in the Modi years has not been shared by large sections of the people because the policies of the government have failed to deal with inflation and unemployment. Besides, the policies that guide the government are of the rich, by the rich and for the rich. Even among the rich, the policies favour concentration of wealth and oligopolies if not monopolies. I think that the New Year may make some people happy but will leave major sections of the people unhappy.
This is the first column in calendar 2024 and I renew my good wishes for a Happy New Year. Happiness is a sum of many parts. There are 142 crore individuals in India belonging to different sections of the people and I have wondered who is happy and who is not.
In recent days, I have read a spate of articles that vociferously endorsed the government’s claim that everybody is happy. Because, the authors claimed, India had witnessed unprecedented economic growth and the benefits have flowed to every section of the people. I do not deny that the economy has registered growth but it is certainly not unprecedented. The ‘golden period of growth’ was the three UPA years between 2005-2008 when GDP grew by 9.5, 9.6 and 9.3% a year. Under Prime Minister Modi, the economy has grown in the last nine years by an average rate of 5.7%. Adding the estimated growth of 7.3% in 2023-24, the average rate will still be 5.9%. That is not unprecedented or spectacular; it is satisfactory growth, but neither well-spread nor sufficient.
The happy people
The government’s economic policies lean toward low direct taxes, high and often oppressive indirect taxes coupled with coercive measures, capital investment in hard infrastructure like roads, railways, ports and airports (with insufficient allocation for education and healthcare) and subsidies to certain sections like women. The satisfactory growth rate has made some sections happy. I can count the satisfied sections: big and medium corporates; high net worth individuals; bankers; stock market investors, traders and brokers; purchasers of distressed assets; software professionals; big traders; professionals like judges, chartered accountants, doctors and lawyers; university and college teachers; government employees; rich agriculturists; and money lenders.
The dark side
The dark side of the picture is that many sections of the people are left behind — some are even left out — and these sections account for the vast majority of the people. The first section comprises 82 crore Indians who are given free ration of 5 kg per person per month. The free ration scheme is not a badge of honour to mark economic progress or prosperity. Free ration is a sign of widespread malnourishment and, in many places, of hunger. Why are over half the families in the country unable to afford staples like rice or wheat? The answer is because of low income and/or unemployment. Government has no policy to address these twin burning issues.
MGNREGS was intended to address the issue of low family income, and to supplement it, but the government’s antipathy to the scheme has been evident from the very beginning. Since April 2022, the government has deleted 7.6 crore workers from the list of registered workers. Of the current lists, over one-third of the registered workers (8.9 crore) and one-eighth of the active workers (1.8 crore) are ineligible due to the introduction of the Aadhaar Based Payment System. Absent support from MGNREGS, how are these individuals and families coping with life? Life is extremely difficult for them and, certainly, they are not happy.
Without job, with inflation
The other major section that is unhappy is people without jobs. The government no longer talks about creating jobs. It believes that it can delude the people by talking about the reported increase in self-employment. Self-employment, in a country where the average number of years that a child spends in school is 7-8 years, and with no skill training, means unemployment. The so-called self-employed young man or woman gets work irregularly and at a wage/income that is flat or lower net of inflation (compared to regular employment). There are no other benefits or security. Youth unemployment rate is 10.0% and among graduates under the age of 25 years the rate is 42%. Surely, they are not happy.
Another set of unhappy people are those hit by inflation. That includes everyone except the top 10% that owns 60% of the nation’s wealth and earns 57% of the national income. The average inflation in 2022 was 6.7%. In 2023, inflation breached the upper limit of the 2-6% band in four of the 12 months. In November 2023, inflation was 5.55%. Food inflation, currently, is 7.7%. According to the RBI’s monthly bulletin of December 2023, “inflation will likely remain elevated relative to targets.” Inflation has resulted in reduction in consumption and household savings, and household liabilities have increased. The government has abdicated its responsibility to control inflation and left the task to the RBI. It is averse to reducing indirect taxes (to lessen the burden of prices on the poor) because, I suspect, it is not sure if it will be able to meet the fiscal deficit target.
The modest growth achieved in the Modi years has not been shared by large sections of the people because the policies of the government have failed to deal with inflation and unemployment. Besides, the policies that guide the government are of the rich, by the rich and for the rich. Even among the rich, the policies favour concentration of wealth and oligopolies if not monopolies. I think that the New Year may make some people happy but will leave major sections of the people unhappy.
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