Dipping graph of India's despair
Multiple surveys show the economy tipping over, yet places you and me in a peculiar saviour mode: if you have a job and are getting a salary, spending it will help keep the economy afloat. So, go order that pizza. Now!
When the Reserve Bank of India governor Shantikanta Das painted a cheery picture of our economy last week, you would have known from your experience that his optimism was not anchored in reality. You too had, in the initial days of the lockdown, rejoiced at the chirping of birds and the twinkling of stars in the clear night sky. But now you no longer marvel at the nature's bounty, for you are in thrall to the images your imagination weaves — you out of a job, with bills to pay. Perhaps time to cut expenses.
But then, like Das, you try to be positive and order pizzas online for the family. You are, quite incredibly, relieved to hear the order cannot be delivered tonight. And because you have become an emotional yo-yo, it might help you to know that many other Indians are also in a state of despair. Don't believe it? You should pore over the surveys by the Centre for Monitoring Indian Economy (CMIE) that measure, week after week, what is called consumer sentiment, which has five elements.
The first: Are we financially better off or worse off or the same as we were last year? In December 2017, 26 per cent of households surveyed said they were better off than the year before. This sense of wellbeing grew to 36 per cent in December 2019, only to decline to 28 per cent in March 2020, almost where we were in 2017. The nation's mood darkened with the lockdown beginning on March 25 – only 11 per cent said mid-April that they were better off than what they were last year and a stunning 45 per cent said they were worse off.
This perception dampened the second element of consumer sentiment – the inclination to purchase consumer durables such as refrigerators. Only two per cent thought April was a good time to buy them, down from 24 per cent in early March, although foregoing a pizza meal implies undue pessimism.
Your niggardliness, however, reflects the national expectations on three other counts used for gauging consumer sentiment. Only 9 per cent in April said they expected their finances to improve in 2021, suggesting that the government's relief package in March-end was not a boost. Only two per cent thought India's business conditions will improve by April 2021 and a whopping 59 per cent saw it worsening. Pessimism is indeed the season's flavour, as only three per cent had hopes of the business climate improving even by 2025 and around 45 per cent were sure of it worsening.
The sceptic in you wonders about the CMIE's sample size. On being told that the CMIE engages in rolling surveys for which it cumulatively covers 1.75 lakh households every 16 weeks, you accept pessimism does not afflict you alone. You realise your anxieties are triggered by your subliminal awareness that, despite the job you hold, the unemployment rate – defined as a percentage of the labour force who are unemployed and actively looking for work – has been rising.
According to the CMIE survey, the unemployment rate in March was 8.7 per cent, the highest since September 2016. By mid-April, it had climbed to 23.8 per cent. Not surprising, you mutter, as the lockdown has paralysed the economy. Remember demonetisation? The unemployment rate had then dipped because the unemployed exited the labour market – and were not counted as unemployed. Today's rate of 23.8 per cent, therefore, reflects the magnitude of their desperation, which will spawn intense competition for jobs and push down wages.
You try to read the employers' mind – the downturn was nibbling their earnings, which the consequences of the lockdown will further dwindle. Will they give you the pink slip or offer a salary cut instead? Unless they shut down their business, they should offer you the second option. To do so would be an example of enlightened self-interest, which says a person who takes into account the interest of others ultimately serves his or her own interest. How?
Assume all employers retain their employees, who will then have money to spend. This will push demand and catalyse economic activity. It is in your enlightened self-interest to accept the salary cut and order pizzas without thinking twice: You finance the restaurant, which is deprived of footfalls, and the delivery boy who might have no work otherwise. This makes Congress leader Rahul Gandhi's suggestion of transferring R6,000 a month to India's poorest 20 per cent sensible.
Consumption never had a greater social value than it has now. Diversify your consumption basket and sources of purchase, for then you will help more people. Those enjoying the security of a job can spend more. In 2014, there were 33 lakh central government employees, in addition to 14 lakh armed forces personnel and 52 lakh pensioners. To this figure add the state employees, all of whom have a guaranteed income. The government should nudge them to consume. Spend without being stingy and feeling guilty – but do not also let unfounded positivity turn you delusional, fit to be quarantined in an asylum.
The writer is a senior journalist
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The views expressed in this column are the individual's and don't represent those of the paper
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