Blatant Lies about Jobs and Economic Growth

Whether it is about the jobs crisis or about the rate of growth of the economy, leading government spokesmen are mouthing blatant lies. What they say is diametrically opposed to the real life experience of people.

Lies about Jobs

More than 5 months ago, on 20th July to be precise, while responding to a no-confidence motion in Parliament, Prime Minister Modi claimed that over one crore (10 million) additional jobs were created in the country during the past one year. He said this estimate is based on a survey by an independent institute.

Graph

It was not a scientific statistical estimate by any standard. It was a rough calculation based on numerous optimistic assumptions (see Box on Modiji’s Arithmetic).

Modiji’s Arithmetic to Arrive at One Crore Jobs

Step 1: About 45 lakh subscribers enrolled in the Employees Provident Fund (EPF) scheme during September 2017 to May 2018. Another 5.7 lakh enrolled in the National Pension Scheme during the same period. Thus, over 50 lakh new subscribers enrolled in these two schemes during 9 months. Extrapolating to a full year we get about 70 lakhs.

Step 2: Given that about 7,000 chartered accountants joined the system, it was assumed that 5,000 of them would have started new enterprises, each of which would have provided employment to 20 persons, thereby creating 1 lakh accounting jobs. Of the 80,000 doctors who graduate every year, it was assumed that 60 per cent start their own practice, each providing employment to 5 persons. This led to an additional 2.4 lakh jobs. A similar 60 per cent of the 80,000 graduating lawyers were assumed to be providing jobs to 2-3 persons each, adding another 1.2 lakh jobs. These add up 4.6 lakhs jobs in these professions.

Step 3: New commercial vehicles were estimated to have added 11.4 lakh jobs. About 5 lakh driver jobs were estimated to have been created by the 25 lakh new passenger cars that hit the road. Auto-rickshaws provided jobs to another 3.4 lakh. These add up about 20 lakh jobs in road transport.

Step 4: All of the above add up to 94.6 lakhs, close enough to 100 lakh, or one crore jobs.

Apart from being based on all kinds of questionable assumptions, Modiji’s arithmetic suffers from double counting. The same person or job is being counted more than once. For example, some of those newly hired by chartered accountants or legal firms would have also enrolled in EPF. Moreover, a person who is hired on a short-term contract often gets hired again under a new contract when the first one has expired; as a result, multiple “new jobs” may actually be providing employment to one and the same person.

A second major flaw is that there is no estimate of jobs being destroyed. After all, additional employment or Net job creation = New jobs created - Old jobs destroyed. There are no annual official estimates available, either on all new jobs created or on the number of old jobs destroyed.

The year 2017 witnessed the destruction of many lakhs of jobs in informal and unregistered small-scale businesses, as a result of the Note Ban and imposition of GST. According to the Centre for Monitoring the Indian Economy (CMIE), the Note Ban led to a fall in the labour participation rate, from 48% to about 43%. In other words, about 5% of the working age population lost all hope of finding gainful employment and dropped out of the labour force altogether.

Every year, more than one crore youth enter the labour force. There are too few additional jobs being generated. Most new job openings available are in trade and other services, mostly on temporary contracts and some under fixed-term contracts. During the few months of the festival season, numerous retail trading companies hire lakhs of sales persons on temporary contract. Regular jobs are extremely scarce.

In October 2018, it was reported that 237 lakh people applied for 1.2 lakh jobs in the Indian Railways. This reveals the desperate search for secure regular jobs in the country, and the acute shortage of such jobs.

The truth of the matter is that the capital-centred orientation of the economy prevents the possibility of any solution to the jobs crisis. Having no real solution to offer, government spokesmen are resorting to blatant lies. In the absence of official annual data, they are resorting to faulty arithmetic to concoct absurdly tall claims.

Lies about Economic Growth

The most recent big lie about the Indian economy is that it has grown faster since 2014 than during the previous ten years. This claim is based on a new GDP series released by the Central Statistical Organisation (CSO).

Total production is the sum of domestic consumption, domestic investment and exports less imports. How can it be believed that the economy is growing faster than before, when consumption, investment and exports have all slowed down or suffered an absolute decline?

For instance, production of cotton cloth and man-made fibre fabrics have fallen during the past several years (see chart). It shows that people in our country are having less and less money to spend on new clothes. It is the combined result of growing unemployment and squeeze in disposable incomes due to high inflation, high indirect taxation and growing debt service payments in the form of EMIs.

Even many bourgeois economists and editorial comments in leading English dailies have pointed out that the government’s claim about faster economic growth, based on the new GDP series, is not in tune with the known trends in all major economic indicators.

Government spokesmen, including members of the Niti Ayog, are defending their claims by arguing that even though industrial production has slowed down or declined, this is allegedly more than made up by accelerated growth in services.

Estimates of value added in “services” have always suffered from exaggeration and over-estimation. A large part of it consists of “value added by public administration and defence”, which is a concoction. Public administration and defence are not activities that create any added value. They do not increase the wealth of India. Another large part of the so-called services sector GDP is ascribed to trade and financial intermediation, which are also not activities that create added value.

For many years now, more and more people have realised that whatever politicians say cannot be believed. Now the level of credibility has fallen to a new depth. It looks like even the National Accounts Statistics cannot be trusted.

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Dec 16-31 2018    Political-Economy    Economy     2018   

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