The view from the corner office at the top of Raisina Hill can be seductive. Especially if the images and pictures are sieved by the Chief Economic Adviser. For example, job losses may disappear and appear as fresh enrolments in the EPF! Hungry faces may vanish and be replaced by persons collecting their bounty of 5 kg of grain a month for two months! The picture of a toiling tenant farmer may fade and the picture of an absentee landlord depositing his kisan samman cheque may fill the screen! That is the magic wrought by power, authority and disdain of criticism.
The average Indian cannot aspire to climb the Hill. He or she is more or less confined to the village or to the ward of a town or city. Because both feet are firmly planted on the ground, the average Indian’s view is like the worm’s view. The view may be stark, dirty and ugly, but it will be closer to the truth.
Commissioning a Survey
I requested a friend, Mr Jawahar, (who assembled a team of investigators) to do a telephone survey of 1000 persons belonging to the lower middle class. (Even those who live in houses in gated communities like to describe their station in life as ‘middle class’, but we know they are not). We defined the lower middle class as persons with an income of Rs 5000-30,000 a month. There were 1004 respondents who answered 9 questions and gave their email ids and mobile telephone numbers. Some respondents may have slightly understated their income, but even if the income fell marginally on the other side of Rs 30,000, it would not distort the data.
The questions related to the period of 12 months that followed the first lockdown on March 25, 2020. The findings of the survey are revealing:
1. There were 1004 respondents
2. 880 reported that their income had decreased, 117 reported ‘no change’ and 7 reported their income had increased.
3. 758 reported that their expenditure had increased, 115 reported ‘no change’ and 91 reported their expenditure had decreased.
4. 725 reported a reduction in their savings, but only 329 reported a reduction in their assets. The remaining reported no change in their savings or assets.
5. As may be expected, 702 reported they had borrowed money. The sources were bank, micro finance institution, self help group, chit fund, family, relative and friend. Some reported they had borrowed from more than one source. Most had borrowed money on interest (653). On the ability to repay within the time and with interest, if any, 176 were confident, 164 were not confident and 256 were doubtful.
Evidence Around Us
These findings are in accord with what we see, hear and observe every day. The pandemic and the state of the economy have severely affected the household balance sheet. Losing income, facing higher expenses, driven to borrow, dipping into savings and not very confident of one’s ability to repay, the average householder is a frazzled person. Unless there is a double income in the household (even if both incomes have taken a hit), it is safe to conclude that the average householder is shaken and feels that the household (family) has become poorer.
Let’s take the lowest of the four numbers in the answers to the four main questions on income, expenditure, savings and borrowing. It is 702. That represents 70 per cent of the population that was surveyed. It is not a reassuring picture of a country that, until recently, boasted that its economy was the fastest growing large economy of the world. It is certainly a mighty fall from the established heights that (1) India witnessed an average growth rate of 7.6 per cent during 2004-2014 and (2) 27 crore persons were lifted out of poverty during that period. All that is history.
The findings are also in accord with the NSO’s estimates of annual national income for 2020-21. The GDP in 2020-21 had contracted by (-) 7.3 per cent over the previous year. Further, four indicators were worse than what they were two years ago: private consumption, gross fixed capital formation, exports and imports. The RBI flagged the ‘demand shock’ in the economy and Dr Abhijit Banerjee, the Nobel laureate, advised more spending and, if necessary, printing money.
The NSO and the local survey — the bird and the worm — saw the same picture on the ground. That is a happy congruence which leaves the Finance Minister and the Chief Economic Adviser locked in an echo chamber.
Doable, but will it be
The bitter facts are that the GDP at constant prices and the per capita annual income have tumbled since 2017-18:
The nation as a whole and the average Indian have backslid to the position they were in 2017-18. The economy has been battered and scarred, firstly by disastrous policies (demonetisation, muddled GST), secondly by Covid-19 and thirdly by economic mismanagement.
The climb-back to 2017-18 will be slow, but it can be done, if the government will listen to and act upon the well-argued and well-meaning advice of the IMF, RBI, renowned economists and the Opposition parties.