Economy: Good, bad and ugly views
The good news is that India continues to be an argumentative society. The bad news is that the arguments are often less about the subject and more about the subjective. In the run-up to the 2019 elections, argumentative Indians are arguing not with but past each other. It is at best a dialogue of the deaf.
Look at the saga of the open letter issued by 108 economists and scientists on the need to insulate data and analysis from political influence — illustrated by the casting/recasting of GDP data and withholding of the NSSO study on labour and employment. The good news for argumentative India is that the view of the economists and the scientists was countered by a view by 131 chartered accountants — nothing wobbly about that, after all at the commission of railway safety is housed in the ministry of civil aviation. The bad news is that neither side moved the needle on informed debate.
The economists, implicitly if not explicitly, questioned the quality of the revision of GDP data and the bar on release of NSSO survey. The expression of caution required them to make a robust case for their take on GDP growth and employment. They did not and rested with the homily. The CAs, in their attempt to address the economists’ point, travelled the history of revisions and deployed known headline markers to reiterate trust in the government. The riposte of the CAs could have gone beyond faith to facts and proved their declaration leveraging data with them but did not.
Ideally, the government should have countered scepticism using revenue and expenditure data but it chose to use semantics rather than statistics. The assertion of the government that some of the economists were habitual signatories is just as relevant a factor as the fact that audit firms run by CAs gave a free pass to bankrupt entities — be it private firms or PSU banks busted by bad loans. Attributions about masked motives and motivations, riveted by allegations of affiliation and allegiance only underline the fault lines and leave the audience enveloped in a fog of facts and faith.
There is fog and then there is dense smog. The debate on job creation is stranded between the anecdotal and the empirical. The good news is that, at least anecdotally, the gig economy is showing signs of job creation — at least, in urban and peri urban areas. The bad news is that the plural of anecdote is not data. Successive governments have flailed at addressing this failing. Government expenditure, centre and states, is roughly around Rs 45 lakh crore. How difficult would it be to arrive at jobs created say in household electrification, road construction, doles for houses and toilets? Persisting with known unknown is neither good politics nor good economics.
On Friday, India was informed the government had collected Rs 85000 crore against the target of Rs 80,000 crore from disinvestments. The good news is the hole in the fiscal bucket will be smaller. The bad news is that disinvestment is no longer about dis-investing but getting Peter to buy PSU to pay Paul. In 2017, Niti Aayog had listed 24 entities for strategic disinvestment. On the list of strategic disinvestments are sale of shares in SUITI, sale of HPCL to ONGC, HSCC to NBCC and soon to be added sale of REC to PFC. Meanwhile PSEs lose roughly Rs 25,000 crore a year. It would seem the argumentative Indian has internalised and normalised that government will continue to be in business and manage businesses.
On Monday, the government declared that direct tax collections for the year were now at Rs 10 lakh crore as of March 16, 2019 post payment of advance taxes. The good news is that the government is confident of achieving the 2018-19 target of Rs 12 lakh crore. The bad news is, nearly two years after its introduction collections under GST crossed the Rs 1 lakh crore only thrice in 20 months and total collections between July 2017 and February 2019 were Rs 18.11 lakh crore — averaging roughly Rs 90,000 crore per month well below the target.
Beyond the optics of good and bad there is the reality of ugly. IL&FS, India’s Lehman, is in suspended animation. The IL&FS is bankrupt but cannot be declared bankrupt. Air India, it would seem, is all set to get a sibling as state-owned banks plan to rescue Jet Airways with public savings. There has been some lather about robustness of revenue collections and fiscal consolidation. Fact is, jukebox politics has resulted in fuzzy economics.
The good news is that on the budget papers, it all looks kosher. The bad news is that there is the explicit deficit and then there is the implicit deficit — housed in the books of PSEs and entities such as FCI. And then, there are the liabilities like GST compensation shifted to the next year. Together these could be around Rs 9 lakh crore. Add the need for provision for Ayushman Bharat as it expands and for other items of compensatory economics bound to grow post the manifestos.The good sure doesn’t look as good and the incoming government sure has fiscal ‘ask’ and ‘task’ cut out come June.
Author of Aadhaar: A Biometric History of India’s 12 Digit Revolution,and Accidental India