Economy: The good, the bad and the ugly
This Diwali, when Hindu families the world over worshipped Ganesh, the god of new beginnings and remover of obstacles, and Lakshmi, the goddess of wealth and prosperity, the thought of safety from the Covid-19 pandemic and preserving their financial resources must have dominated their thoughts. In their prayers, they must also have asked the gods never to let this happen again.
The fall in the number of Covid-19 cases and bullish markets in India have surely given many devotees some hope that things are turning a corner. While it is too early to make accurate economic predictions, there is good news and bad news for the Indian middle class, which is already beset by high inflation.
Let’s start with the good news. According to the latest figures from the Centre for Monitoring Indian Economy (CMIE), there was an increase of 8.5 million jobs in September. This is the first time since the outbreak of the pandemic in March 2020 that such a large number of jobs have been created. As a result, the unemployment rate in the country has fallen by 1.5% to 6.9%, slightly behind the figure for September 2019.
The Goods and Services Tax (GST) collection figures are also promising. The current figure of ₹1.3 lakh crore will surely be overtaken in a few months. The residential property sector has also been growing by 13% in the last quarter, and there is an increase of 90% in new project launches. I will steer clear of the stock markets here. Its tremendous rise has taken people by surprise, but it has also raised many questions. One of these is whether the stock market’s fortunes represent the real picture of the state of the economy.
However, the dampener is that, according to CMIE again, 640,000 people lost their jobs in October. According to another report published a few months ago, more than 20 million people lost their jobs in April-May. This suggests that small and medium-sized enterprises are still not able to achieve their targets. These statistics show that while employment has increased in some sectors, it is also decreasing in others. When will employment opportunities across the board be created for the huge cohort of unemployed youth?
Extreme inflation has also broken the back of the middle class. On the initiative of the Union government, diesel-petrol prices have been reduced, but how effective will this be? Whether it is cooking gas, edible oil or consumables, with soaring prices, people must have kept their plates lighter this festive season.
No wonder the Global Hunger Index shows India well below Pakistan and Nepal.
Foreign survey agencies are often blamed for ignoring India’s ground realities and setting their standards in such a way that the achievements of developing countries are overlooked or less visible. This is actually something of a half-truth. Our own National Family Health Survey also seems to support the Global Hunger Index. Surveyors, after in-depth research in 17 states, found that there was a shocking increase in malnutrition cases in 11 of them. Whether it is poor Bihar or rich Gujarat, the situation everywhere is worrying. Up to 40% of children are malnourished in these states. This will have serious socioeconomic consequences for our future.
Let us not forget growing unemployment is not an India-specific problem. Let’s us take a look at the most powerful and developed country in the world — the United States (US). There, the Center on Budget and Policy Priorities (CBPP) found that 12% of people in the US do not have access to adequate food; 16% of Americans do not have money to pay their rent; one-third of Americans do not have enough money for their daily expenses. Like the marginalised communities in India, Black and Latino families are at the bottom of heap in the US.
Similarly, inequality is spreading rapidly in Germany, the richest country in Europe. There have been strong protests in Berlin recently over what people see as needless increases in residential rents. Protesters say landlords have increased rents by 30-40% while paying little attention to the maintenance of the houses. Demonstrations against inflation and unemployment have also increased in Eastern Europe and Latin America. It seems that we are living in the era of paradox. On the one hand, employees are being laid off, while, on the other, a large number of skilled workers and executives are leaving old companies. Microsoft recently found, in a worldwide survey, that up to 40% of those who are employed want to change their jobs. The year 2020-21 is already being labelled as “The Great Resignation Year”.
The message is loud and clear — a lot in the present world order needs to be changed immediately. Now heads of State the world over face new challenges. If they really want to, they can convert these into opportunities. But will they do so?