Jobs and prices are the markers of our well-being
To know how well-off we are, we would do well to go beyond the GDP data.Updated: Apr 11, 2016 14:30 IST
I won’t blame you if you’re a bit weary of hearing it but India’s economic growth, measured by that of its GDP, has outpaced all the other big nations of the world. In 2015-16, India’s GDP growth in real terms was 7.6%, a number that everyone in government, beginning with Prime Minister Narendra Modi, makes a point of mentioning to demonstrate how India is now at the top of the “global growth tables”. It’s true. From 6.6% in 2013-14, India’s GDP growth jumped to 7.2% in 2014-15 and then, in the following year, to 7.6%. The spurt may be partly because India altered the manner in which it computes GDP — a new base year (a routine re-adjustment); and a value-based — instead of the old volume-based — method for computing output (a not-so-routine tweak). Still, 7.6% growth is nothing to sneer at, particularly when other big nations are either slowing down (China); not growing (Japan); or are in decline (Russia).
Indian officials are chuffed about it and rarely miss an opportunity to bang on about being on top of the global growth league. But is GDP the best measure of how the Indian economy is doing? Could there be other markers that better indicate economic health? Such as employment generation? I’ll tell you why. You must have often heard Modi mention how 65% of India’s population is under 35 and how India will stand on the strength of its youth. But a young nation has also meant that every month over a million more Indians seek jobs. And how many jobs do we create? According to government data, which covers the organised sector, compared to the million more lining up for jobs every month, the number hired is piffling. Beginning April-June 2014, every subsequent quarter has seen a decline in employment. Example: In January-March 2015, just 64,000 found employment; and in April-June 2015, the number turned negative: 43,000 actually lost jobs.
The rather distressing April-June figure may not be the beginning of a trend (because jobs data is released with a time lag, we’ll know what has happened since then only later) but the fact is that there aren’t enough jobs. Chiefly this is because Indian manufacturers are not expanding capacity or putting up fresh projects. And, so, not hiring. Export demand for the past 15 months has been flat; and domestic demand is just not growing because income growth has slowed.
The pain of joblessness in the organised sector is being felt elsewhere too. In India’s villages (where 70% of its population lives), wages for plowing and tilling aren’t growing. Year-on-year comparison of monthly government data shows that from January 2015, when they grew 8.6% the rate has been steadily dropping; by November 2015, rural wages grew a mere 2.1%. A likely reason for such a trend could be over-supply of farm workers, which in turn could be because workers who typically migrate to urban areas to find jobs in construction, road-building and other activities aren’t finding any.
Besides jobs, there’s another marker that also paints a rather different picture of the economy than the rosy one that the GDP rate does. Prices. Officially, 2015 was a noteworthy year for low prices everywhere — globally as well as in India. Cheaper oil prices helped wholesale inflation to fall for 12 consecutive months and the average monthly retail inflation too remained below 5%. All good news, then? No. What the inflation data doesn’t capture are prices of things that have become an intrinsic part of household budgets. These have soared. Middle-class households now spend more than half their monthly budgets just to maintain their usual living standards. Here are some prices that escape the attention of policymakers: the monthly price index for snacks, sweets and restaurant meals has been rising 9-10% every year for the past three; prices of personal care products are up by a monthly 5% since January 2013; DTH charges for TV services, private school tuition fees, visits to barber shops; rents of apartments; costs of travelling; movie ticket prices… everything is more expensive. Such lifestyle products or services barely feature in the basket of goods used to measure inflation. They’re even considered by policy-makers to be ‘non-essential’. Are they? For the average, aspirant Indian middle-class household, how their prices behave affects the wallet.
So how’s India’s economy doing? Check jobs and prices; and not GDP.