1. No jobs, no credit growth, no private investments in economy, says P Chidambaram

No jobs, no credit growth, no private investments in economy, says P Chidambaram

Between the gathering storm on the India-Pakistan border and the massive disruption to the economy, Saturday, November 26, passed almost unnoticed. The day marked the exact mid-point of the tenure of the government led by Prime Minister Narendra Modi.

By: | Published: November 27, 2016 6:12 AM
Jobless growth has severely dented the claim that the Indian economy is the fastest growing large economy in the world Jobless growth has severely dented the claim that the Indian economy is the fastest growing large economy in the world

Between the gathering storm on the India-Pakistan border and the massive disruption to the economy, Saturday, November 26, passed almost unnoticed. The day marked the exact mid-point of the tenure of the government led by Prime Minister Narendra Modi. It is a natural and opportune moment to take stock of the government, its promises, the delivery and the state of the economy.

I made a list of the economic concerns of the average citizen, then I struck out each concern that was not as important as the remaining concerns. Ultimately, I was left with three and there was no way the list could be pruned further. In my view, the most pressing concerns that are uppermost in everyone’s mind are: jobs, credit growth and investment. The past is the view in the rear mirror — noticed but unalterable. The present is represented by the demand for jobs and for credit. The future lies in investments made today and in the following days.

Jobless growth

‘Jobs’ is a good starting point. Almost everyone is either employed or self-employed. The employed earn a wage or salary, the self-employed earn an income. The data on jobs created in the last 30 months is stark, revealing and worrying. I cannot do better than quote the words of a former finance minister: “Fresh job creation continues to suffer and will lose its connect with economic growth… What is important for us politicians to remember however is that the aam aadmi is not concerned with theories. He wants results, and if we fail to provide the people with job opportunities in adequate numbers, they will be disappointed.”

The former finance minister is Mr Yashwant Sinha. His son, Mr Jayant Sinha, was minister of state for Finance for a little over two years in the present government and is now MoS, Civil Aviation.

Jobless growth has severely dented the claim that the Indian economy is the fastest growing large economy in the world. By one estimate, 15 million persons enter the job market every year. Among Mr Narendra Modi’s election promises, the one that attracted millions of young men and women to vote for his party was the promise that he would create 20 million jobs a year. There is empirical evidence that, in the last two years, India has witnessed a period of jobless growth:

– Employment generation in eight labour-intensive sectors was 4,90,000 in 2014 and 1,35,000 in 2015 compared to 12,50,000 in 2009 (when the Labour Bureau’s survey began);

– Contract jobs declined by 21,000 during January-September 2015 compared to an increase of 1,20,000 during January-September 2014;

n A study by Care Ratings showed that jobs growth was near zero in 2014-15 — only about 0.3 per cent;

– Employment generation in manufacturing companies was negative at -5.2 per cent in 2014-15 compared to 3.2 per cent in 2013-14.

Job creation is not easy. According to estimates, 15 million jobs were created during 2005-2012, but it still left millions unemployed. The situation has become worse. On jobs, the government has comprehensively failed.

economy

Low credit growth

Next, credit growth. Self-employment or job-creation is closely linked to availability of credit. MSMEs (especially micro and small) create the largest number of jobs. The table gives the rate of credit growth in the last three years of the UPA government and the first two years of the NDA government. Apart from other consequences, the immediate impact of low credit growth is lack of new jobs and, in some sectors, loss of jobs. As on November 11, 2016, year-on-year credit growth was just 8.25 per cent. Low credit growth is directly reflected in the index of industrial production (IIP) and in exports. Both IIP and exports are languishing. The government has utterly failed to find an answer to the question why overall rate of credit growth is the lowest rate in 20 years.

Dismal investments

Lastly, investment. The best measure of investment is growth in Gross FIxed Capital Formation (GFCF). In 2014-15 and 2015-16, it was 4.85 per cent and 3.89 per cent, respectively, which is low and which is directly reflected in the IIP. The last GDP estimates put out by the CSO show that in Q1 of 2016-17, GFCF shrunk by 3.1 per cent over Q1 of the previous year. According to the Centre for Monitoring of Indian Economy, new private sector project announcements dropped by 21 per cent in July-September 2016 compared to the corresponding quarter in 2015. The growth rate of credit to large industry was 5.33 per cent and 4.24 per cent in the last two years, the lowest in many years (see table). The Finance Minister has repeatedly urged the private sector to invest, but there are no takers either for his exhortation or for bank credit!

So, mid-term, there is no job creation; abysmally low credit growth; and dismal private sector investment. Having failed in the three main subjects, the government claims that it has passed the exam with distinction! Now, you can understand why the Prime Minister chose to dramatically alter the narrative with so-called demonetisation.

Website: pchidambaram.in

@Pchidambaram_IN

  1. R
    roby mani
    Nov 27, 2016 at 11:50 am
    Well analysed article, This is the type of discourse expected from the political cl, especiallly form the PM and FM and not the meaningless jargon and noise emanating from them at present. They are now realizing that a Himalayan ber has been committed and are trying to wriggle out of it. People may be fooled sometimes, but cannot be fooled at all time.
    Reply
    1. N
      Nis
      Nov 27, 2016 at 12:14 pm
      Chidambaram, you are a politician. Your opposition is the current ruling party, so of course you will find flaws in all of its policies. You may write articles that try to project you as having an unbiased and educated opinion, but at the end of the day everything you say is just to favour Congress' cause.
      Reply
      1. R
        Rajat
        Nov 27, 2016 at 4:36 pm
        Mr. P.C - First and foremost every one of the three claims you are making has an alternative economic view which you have failed to consider in your writing (which I wont go into on this forum). Secondly, being a former FM who largely ran lacklustre Union Budgets, it is really rich when you criticize the present government. As an opposition no on expected you to agree. Lastly, the jobless growth and falling private investments are all a by product of your own rule - the Congress that ruled for approximately 45 years or more had all the chances but you did nothing. Why criticize the government now?
        Reply
        1. M
          Manoj Kumar
          Nov 27, 2016 at 12:53 pm
          Every work has its effect, either in short term or long term Mr Chidambaram. You may be right, your statistical figures are undisputed. But what about monetary confinement? Foe everything you mentioned cash flow is essential, Where is cash? All the money has been confined with scamsters. All the figures are the result of what have been sown by your govt to term it as gross recession. Before you put your pen, think twice!!! Before you say anything, think twice!!! Before you act, think twice!!! In this digital world, citizens are not carried away by JUMLAS of any party, be it BJP or Cong. Citizen of India are now highly judgmental to accept the right and reject the wrong. Thanks for your invaluable opinion which is more required by you all for introspection and change. Remember, it is said in s, never ever utter name of your compeor, you do not stand to criticize them but by default you promote them. The more you criticize, the more you promote. Probably your act is directing citizens to your compeor, compel the to compare, may be advertently or inadvertently.
          Reply
          1. V
            V.V.Chandrasekaran
            Nov 27, 2016 at 8:16 am
            PC is right with regard to all the three subjects.But the government has a ready made answer.That is Corruption during UPA regime.God save the poor citizens,jobless youth & direction less economy.
            Reply
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