Thursday, February 07, 2019

The government is there to please the people. That's what they do.

It was unwise of the government to try to suppress the unemployment data from the National Sample Survey Office (NSSO) which showed "the unemployment rate at a 45-year peak of 6.1% in 2017-18", wrote R Jagannathan. Actually, high unemployment is a good thing because, "The rise in open unemployment may be indicative of a degree of returning optimism in the job market." "If people think the economy is sinking, many of the unemployed may temporarily drop out of the job market," while unemployment peaked at 9.23% in May-August 2016 "when a good monsoon had improved the jobs climate". This theory is belied by the Labor Force Participation Rate (LFPR) which has dropped from 55.9% in 2011-12 to 49.8% in 2017-18. "LFPR is the section of working population in the age group of 16-64 in the economy currently employed or seeking employment." Why would fewer people be looking for work if the economy is growing? "Indian statistics often resemble a hall of mirrors that the bewildered have to walk through," wrote N Rajadhyaksha, even though Prasanta Chandra Mahalanobis "had built a statistical system that was once the envy of the world". With general election in a couple of months the government wants to hide the fact that "almost 11 million Indians lost their jobs in 2018". "Over the years, electoral politics has forced Bharatiya Janata Party (BJP) to start looking a bit like the Congress, the main opposition party," wrote R Singhal. BJP is the party of Prime Minister Modi. "And yet, there were some major embellishments which have become this government's hallmark." The government transferred its capital expenditure to public sector companies (PSUs) by forcing them to employ more people and, in a sleight of hand, showed revenue of Rs 800 billion by forcing one public sector company to buy another. By grossly overestimating revenue the Budget forecast fiscal deficit at 3.4%. "If India had fiscal council, it would have probably stated the fiscal deficit for this year at 4 per cent of the GDP," wrote L Venkatesh. The government is able to claim that fiscal deficit is under control by grossly overestimating nominal growth of GDP, on which it collects taxes, wrote Prof A Lahiri. "Indeed, the combined public sector deficit including central, states and PSUs is above 8 per cent." "Governments finance their fiscal spending and deficit usually through market borrowings," wrote Prof VA Nageswaran, and by borrowing from small savings schemes. But this government has found a third source, which is "internal and external budgetary resources of public enterprises". "Without sound data, no policy response will be adequate to meet the burgeoning employment crisis," wrote Jagannathan. But, sound data will show that this government is responsible for the fiscal mess, as A Mukherjee wrote. Politicians know that the majority of people don't understand statistics. But they love handouts. So, they please the people.

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