Last Sunday, the Congress party held a “Halla Bol” rally against unemployment and inflation. It is believed that every one is hurt by unemployment and inflation. It is believed that every one is determined to reduce unemployment and inflation.
I am sorry that I have to puncture these widely held (wrong) beliefs. There are sections of the population and — hold your breath — parts of the government that are happy with raging unemployment and soaring inflation and will do everything that is possible, clandestinely, to keep the flags of unemployment and inflation flying high.
Let’s begin with ‘Who loves unemployment?’
Business & government
Business loves unemployment. Because there are so many people chasing a small number of jobs, the bargaining power of the job-providers is high. Consequently, wages are depressed. Wage increases are paltry. For example, agricultural wages increased by less than 3% in 2021-22 despite the inflation rate being higher. The average monthly income of an agricultural family in India was Rs 10,213 in 2019 (source: ES 2021-22), hardly sufficient for 4-5 members for food, shelter, clothing, education, healthcare and leisure. Since the bargaining power of the employed — or even the self-employed — is weak, the average income of a family rises only marginally. In a period of low growth or recession, the situation becomes worse for the average family.
Government recruitment bodies and public sector enterprises love unemployment. When there are thousands of applicants including graduates and post-graduates for a few hundred lower-grade vacancies, the appointing authorities acquire enormous power and discretion. Brokers flourish, money changes hands, scams occur.
Because job-seekers exceed jobs, there is growing casualisation and informalisation of jobs in the private, public and governments sectors. Labour welfare laws are thrown aside. The trade union movement is weakened considerably.
Crime syndicates love unemployment. There is a large catchment area for recruiting runners for drug trafficking, smuggling, illicit liquor trade, illegal betting and gambling, human trafficking and similar illegal activities.
Let’s turn to ‘Who loves inflation?’
Tax collectors & sellers
Revenue Departments and Tax collectors love inflation. Month after month, the tax collectors report a ‘new high’ in tax collection, for instance GST collection. They never report the inflation-adjusted number. In August 2022, the GST collection was ?1,43,612 crore (as against ?1,12,020 crore in August 2021), but adjusted for the average inflation in the last 12 months, the real value of the GST receipts was only ?1,33,559 crore. In the case of ad valorem taxes, even while keeping the tax rates constant, the tax collector can reap a bonanza.
Budget makers love inflation. The numbers in the Budget documents are in current prices. Allocations are in current prices. So, the Budget maker can claim that she has allotted more money in the present year than was allotted in the previous year. Few citizens will make the adjustment for inflation. For example, adjusted for inflation, the allocations in the 2022-23 Budget for Defence, Fertilisers, Food, Agriculture, Energy, Health, Rural Development and Urban Development were lower than the revised estimates for 2021-22.
Government debt managers love inflation. Since debt is borrowed and repaid in current prices, the inflation rate depresses the value of the debt. The borrower actually re-pays less than what he had borrowed.
Apropos the above, note that the Finance Minister said that inflation was not her red-lettered priority concern!
Sellers love inflation. MRP is increased significantly, notwithstanding that input costs may have increased only moderately. This is especially so in the case of essential goods. For example, milk prices were recently increased sharply across India both by government-run dairies and private dairies.
Exporters love inflation. For every dollar of the value of export, the exporter will earn more rupees. Of course, in the case of import-intensive exports, the windfall will be lower.
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Lenders love inflation. It is an opportunity to raise the interest rates, even if the cost of money had not risen commensurately.
Business, especially large corporations, duopolies and oligopolies, love inflation. They acquire more pricing power, especially in the case of price-insensitive goods and services. For example, if you must fly from Delhi to Chennai tomorrow, you have no choice but to shell out up to Rs 50,000 depending on the class of travel. The facility of ‘dynamic pricing’ has enriched airlines, Uber and Ola, and the State-owned railways. If you doubt the assertion, please look at the ‘profit & profit’ statements of private companies for 2021-22 and the quarterly statements for the current year.
Contractors love inflation. Old estimates will be revised. Price over-runs will be easily justified. Price bids of new contracts will be increased.
All political parties
Editorial Writers love unemployment and inflation. If an editorial writer is too lazy to think of a new horse or donkey to flog, he can take an old editorial on unemployment or inflation and re-arrange the paragraphs. No one will notice the sleight of hand because no one reads editorials.
And finally, Ruling Parties and Opposition Parties love unemployment and inflation. In the hands of the Opposition, they are useful sticks to beat the Rulers. The slogan will be “Modi hai, to mehangai hai” and “Modi hai, to berozgar hai”! The Ruling Party will turn around and say “my unemployment and inflation are better than yours!”
A day may come when everybody will love unemployment and inflation.