Hindu Nationalist RSS Leadership Criticizes Jobless Growth in India

[Riaz Haq]

Akhil Bharatiya Pratinidhi Sabha (ABPS), the top decision-making body of India's RSS (Rashtriya Swayamsevak Sangh), says that “the young generation is suffering from unemployment and the pandemic has made things even grim... We cannot turn a blind eye to unemployment. It is a crisis and it needs to be addressed.” The RSS was apparently reacting to the falling labor participation rate in India relative to Pakistan and the global averages. The RSS leadership wants the government of Prime Minister Narendra Modi to focus on helping small and medium sized enterprises (SMEs) to create jobs.  RSS likes Modi government's ‘Make in India’ initiative “but it needs to be sharpened even more and get more investment.” The resolution is titled, ‘The need to promote work opportunities to make Bharat self-reliant’. The solution offered by ABPS resolution: Take agro-based local initiatives to promote rural areas and create jobs, according to Ram Madhav, a member of the RSS executive committee. 

Falling Employment in India. Source: CMIE

India's labor participation rate (LPR) fell to 39.5% in March 2022, as reported by the Center for Monitoring Indian Economy (CMIE). It dropped below the 39.9% participation rate recorded in February. It is also lower than during the second wave of Covid-19 in April-June 2021. The lowest the labor participation rate had fallen to in the second wave was in June 2021 when it fell to 39.6%. The average LPR during April-June 2021 was 40%. March 2022, with no Covid-19 wave and with much lesser restrictions on mobility, has reported a worse LPR of 39.5%.

Labor Participation Rates in India and Pakistan. Source: ILO/World ...

Youth  unemployment for ages15-24 in India is 24.9%, the highest in South Asia region. It is 14.8% in Bangladesh 14.8% and 9.2% in Pakistan, according to the International Labor Organization and the World Bank.  

Youth Unemployment in Bangladesh, India and Pakistan. Source: ILO, WB

In spite of the headline GDP growth figures highlighted by the Indian and world media, the fact is that it has been jobless growth. The labor participation rate (LPR) in India has been falling for more than a decade. The LPR in India has been below Pakistan's for several years, according to the International Labor Organization (ILO). 

Indian Employment Trends By Sector. Source: CMIE Via Business Standard

Construction and manufacturing sectors in India have been shedding jobs while the number of people working in agriculture has been rising, according to CMIE. 

Pakistan Employment By Sectors. Source: PBS via Bilal Gilani

It is important to note that Pakistan’s economy has created 5.5 million jobs during the past three years – 1.84 million jobs a year, significantly higher than yearly average of new jobs created during the 2008-18 decade, according to the findings of Labor Force Survey (LFS) as reported by the Express Tribune paper. The biggest jump in share of employment (1.5%) was in the construction sector, spurred by Naya Pakistan construction incentives offered by the PTI government. 

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[Riaz Haq]

Latest CMIE data: Indian labor force participation has dropped from 46% in 2017 to 40%. This "discouraged worker effect" shows people are giving up looking for work. India is growing. Job creation must be core policy to ensure all growth is not at the top.


https://www.business-standard.com/article/economy-policy/india-s-jo...

India’s job creation problem is morphing into a greater threat: a growing number of people are no longer even looking for work.
Frustrated at not being able to find the right kind of job, millions of Indians, particularly women, are exiting the labor force entirely, according to new data from the Centre for Monitoring Indian Economy Pvt, a private research firm in Mumbai.

With India betting on young workers to drive growth in one of the world’s fastest-expanding economies, the latest numbers are an ominous harbinger. Between 2017 and 2022, the overall labor participation rate dropped from 46% to 40%. Among women, the data is even starker. About 21 million disappeared from the workforce, leaving only 9% of the eligible population employed or looking for positions.

Now, more than half of the 900 million Indians of legal working age -- roughly the population of the U.S. and Russia combined -- don’t want a job, according to the CMIE.

“The large share of discouraged workers suggests that India is unlikely to reap the dividend that its young population has to offer,” said Kunal Kundu, an economist with Societe Generale GSC Pvt in Bengaluru. “India will likely remain in a middle-income trap, with the K-shaped growth path further fueling inequality.”

India’s challenges around job creation are well-documented. With about two-thirds of the population between the ages of 15 and 64, competition for anything beyond menial labor is fierce. Stable positions in the government routinely draw millions of applications and entrance to top engineering schools is practically a crapshoot.

Though Prime Minister Narendra Modi has prioritized jobs, pressing India to strive for “amrit kaal,” or a golden era of growth, his administration has made limited progress in solving impossible demographic math. To keep pace with a youth bulge, India needs to create at least 90 million new non-farm jobs by 2030, according to a 2020 report by McKinsey Global Institute. That would require an annual GDP growth of 8% to 8.5%.

“I’m dependent on others for every penny,” said Shivani Thakur, 25, who recently left a hotel job because the hours were so irregular.


Failing to put young people to work could push India off the road to developed-country status.

Though the nation has made great strides in liberalizing its economy, drawing in the likes of Apple Inc. and Amazon.com Inc, India’s dependency ratio will start rising soon. Economists worry that the country may miss the window to reap a demographic dividend. In other words, Indians may become older, but not richer.

A decline in labor predates the pandemic. In 2016, after the government banned most currency notes in an attempt to stamp out black money, the economy sputtered. The roll-out of a nationwide sales tax around the same time posed another challenge. India has struggled to adapt to the transition from an informal to formal economy.

Explanations for the drop in workforce participation vary. Unemployed Indians are often students or homemakers. Many of them survive on rental income, the pensions of elderly household members or government transfers. In a world of rapid technological change, others are simply falling behind in having marketable skill-sets.

For women, the reasons sometimes relate to safety or time-consuming responsibilities at home. Though they represent 49% of India’s population, women contribute only 18% of its economic output, about half the global average.

[Riaz Haq]

CMIE: #India's #unemployment rate jumped to 7.83% in April from 7.60% in March. #Urban #jobless rate soared to 9.22% from 8.28% in March. #Modi #BJP #economy #Hindutva #Islamophobia https://www.business-standard.com/article/economy-policy/india-s-un...

The unemployment rate in the country grew to 7.83 per cent in April from 7.60 per cent in March, according to the Centre for Monitoring Indian Economy (CMIE) data.

The unemployment rate in urban areas was higher at 9.22 per cent compared to 8.28 per cent in March, the data released on Monday showed.




In the rural area, the unemployment rate was at 7.18 per cent in April compared to 7.29 per cent in the previous month.

Unemployment rate was the highest in Haryana at 34.5 per cent followed by Rajasthan at 28.8 per cent, Bihar 21.1 per cent and Jammu and Kashmir 15.6 per cent, the data showed.


CMIE managing director Mahesh Vyas told PTI that it is important to note that the labour force participation rate and the employment rate also increased in April.

"This is a good development," Vyas said.

The employment rate rose from 36.46 per cent to 37.05 per cent in April, he added.

[Riaz Haq]

Sidharth Bhatia (India)
@bombaywallah
A banker friend, a strong supporter of the present regime, said last night, we (India) will be worse than Sri Lanka in five years. Not one economic indicator is doing well or is likely to improve, he said. "I'm not an alarmist, I'm just scared."

https://twitter.com/bombaywallah/status/1522820409971949568?s=20&am...

[Riaz Haq]

Problems Facing Indian Economy
25 February 2022 by Tejvan Pettinger

https://www.economicshelp.org/india-2/problems-indian-economy/

Since 1991, the Indian economy has pursued free market liberalisation, greater openness in trade and increase investment in infrastructure. This helped the Indian economy to achieve a rapid rate of economic growth and economic development. However, the economy still faces various problems and challenges, such as corruption, lack of infrastructure, poverty in rural areas and poor tax collection rates.

1. Unemployment

Despite rapid economic growth, unemployment is still an issue in both rural and urban areas. The fast rate of economic growth has left unskilled workers behind, and they have struggled to find work in growing industries. In 2017, the official unemployment rate was just below 5%. However, a report by the OECD found over 30% of people aged 15-29 in India are not in employment, education or training (NEETs). Livemint reported on March 6, 2017. WIth, little if any government welfare support for the unemployed, it leads to dire poverty.

2. Poor educational standards

Although India has benefited from a high % of English speakers, (important for call centre industry) there is still high levels of illiteracy amongst the population. It is worse in rural areas and amongst women. Over 50% of Indian women are illiterate. This limits economic development and a more skilled workforce.

3. Poor Infrastructure

Many Indians lack basic amenities lack access to running water. Indian public services are creaking under the strain of bureaucracy and inefficiency. Over 40% of Indian fruit rots before it reaches the market; this is one example of the supply constraints and inefficiency’s facing the Indian economy.

4. Balance of Payments deterioration.

Although India has built up large amounts of foreign currency reserves, the high rates of economic growth have been at the cost of a persistent current account deficit. In late 2012, the current account reached a peak of 6% of GDP. Since then there has been an improvement in the current account. But, the Indian economy has seen imports growth faster than exports. This means India needs to attract capital flows to finance the deficit. Also, the large deficit caused the depreciation in the Rupee between 2012 and 2014. Whilst the deficit remains, there is always the fear of a further devaluation in the Rupee. There is a need to rebalance the economy and improve the competitiveness of exports.

5. High levels of private debt

Buoyed by a property boom the amount of lending in India has grown by 30% in the past year. However, there are concerns about the risk of such loans. If they are dependent on rising property prices it could be problematic. Furthermore, if inflation increases further it may force the RBI to increase interest rates. If interest rates rise substantially it will leave those indebted facing rising interest payments and potentially reducing consumer spending in the future

6. Inequality has risen rather than decreased.

It is hoped that economic growth would help drag the Indian poor above the poverty line. However, so far economic growth has been highly uneven benefiting the skilled and wealthy disproportionately. Many of India’s rural poor are yet to receive any tangible benefit from India’s economic growth. More than 78 million homes do not have electricity. 33% (268million) of the population live on less than $1 per day. Furthermore with the spread of television in Indian villages the poor are increasingly aware of the disparity between rich and poor. (3)

7. Large Budget Deficit

India has one of the largest budget deficits in the developing world. Excluding subsidies, it amounts to nearly 8% of GDP. Although it is fallen a little in the past year. It still allows little scope for increasing investment in public services like health and education.

[Riaz Haq]

#Indian Rupee dropped 51 paise to an all-time low of 77.41, surpassing the previous low of 76.98 in March. #INR has been staggering since the beginning of the year. Foreign funds have pulled out $17.7 billion from Indian stock market this year already. https://www.businesstoday.in/latest/economy/story/rupee-hits-all-ti...

https://twitter.com/haqsmusings/status/1523714595122147329?s=20&...

Rupee hit an all-time low against the US Dollar on Monday, bringing further bad news for the economy that is already reeling under high inflation. The Rupee dropped 51 paise to an all-time low of 77.41, surpassing the previous low of 76.98 in March.


The Rupee has been staggering since the beginning of the year. Foreign funds have pulled out $17.7 billion from Indian equities this year already.

Sharat Chandra, Vice President of Research and Development, Earth ID, said that taming inflation will be an uphill task in such a scenario. However, Heena Naik- Research Analyst - Currency, Angel One Ltd was more optimistic about the depreciating Rupee.

“This negative trend in Rupee is temporary as markets are expected to be braced by IPO-related inflows which shall provide support to the Indian Rupee,” said Naik.

Chandra, however said, "The depreciating Yuan has led to the fall of many Asian and emerging market currencies, but the Indian rupee hitting new lows is worrisome for the economy because India, one of the biggest importers of crude oil, is more vulnerable to rising crude oil prices. This would also increase the trade deficit resulting in an expected current account deficit of 3 per cent and impacting the balance of payments. RBI's data suggests that India's current account deficit (CAD) increased to US$ 23.0 billion (2.7 per cent of GDP) in Q3:2021-22 from US$ 9.9 billion. In this context, taming inflation is going to be an uphill task for RBI. High-interest rates may force Indian businesses to cut down on capital expenditure."

How it will impact your life

The depreciating Rupee is likely to have a direct impact on your spendings.

Imports: Importers need to buy Dollars to pay for imported items. With the dip in Rupee, importing items will get more expensive. Oil imports will get costlier, which can directly impact consumers.

Additionally, other imported items as well as components are also likely to get costlier, which will increase the prices for consumers. This means that cars and appliances are likely to get expensive.

Escalating prices might accelerate inflation, which is already high currently.

Loans: There is likely to be an indirect impact on loans. As Rupee depreciates, import prices go up, making items and commodities more expensive. This pushes inflation. Now, with rising inflation, RBI resorts to altering the repo rate – which has already been hiked by 40 bps to 4.40 per cent. High repo rates means banks increase their lending rates, making EMIs costlier. Banks have already increased their loan rates.

[Riaz Haq]

Can #Indian #economy survive a global downturn? #India's currency #INR is at an all-time low, #unemployment is high. #Food, #energy prices are rising. #COVID19 , #UkraineWar and the #Shanghai lockdown could derail the world economic recovery. #inflation https://www.thehindubusinessline.com/opinion/can-the-indian-economy...

Everyone was hoping this would be the year of recovery when the global economy climbed off its Covid-19 sickbed and took the first tentative steps towards normalcy. As we recovered from Omicron, there were faint hopes we might have put the illness behind us. That brief spurt of optimism now seems premature.

The grim truth is the world couldn’t be in a worse shape. For a start, Covid-19 hasn’t gone away. Then, there’s the Russia-Ukraine war, now stretching into its 77th day with no end in sight. If all that isn’t enough, Shanghai, China’s biggest industrial city, is still undergoing a prolonged lockdown and supply disruptions could throw the global economy out of gear.

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Inflation has become a global phenomenon, and the Reserve Bank of India and other central banks are all hiking interest rates with more tightening to come. Throw in the falling rupee and that will push up the prices of all imports starting with oil, coal, steel and cement and other commodities. Inevitably, prices of everyday necessities to luxury goods will rise. The Indonesians have already banned edible oil exports which we need in large quantities and prices of pulses are also rising, driven in part by the Russia-Ukraine war. And as consumers abandon discretionary spending, this lowers tax revenues and leaves the government in a tighter-than-ever squeeze with less to spend on key projects.

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Mercedes Benz’s India CEO has gone on record to say he doesn’t have enough vehicles to meet strong demand. On a different level, companies like Maruti and Hero are saying there’s insufficient demand for their lower-end vehicles, suggesting buyers in those categories are stalling on purchases due to financial worries. Throw in sliding stock markets for the more well-heeled and it’s clear discretionary spending will suffer.

Outsourcing to China where manufacturing was cheaper seemed like a great idea until now when the perils of putting all your production eggs in one basket are becoming clear. Over the last 30 years, China has become the world’s factory and there’s nothing left in the West. Take shipbuilding for instance. The world’s 10 top shipyards are in South Korea and China.

Now, with China in lockdown, it’s disrupting global supply lines and creating shortages globally. It’s unclear when Shanghai will get Xi’s all-clear to open up. We’ve seen from our own experience a two-to-three week lockdown doesn’t stamp out Covid-19 totally and Omicron is especially fast-spreading.

Can India escape the effects of a global slowdown? We emerged relatively unscathed in 1999 and also 2008. But now we’re more interlocked with the world and it’s tough to see us escaping the multiple blows that are striking different corners of the globe.

[Riaz Haq]

The Indian economy is being rewired. The opportunity is immense And so are the stakes

https://www.economist.com/leaders/2022/05/13/the-indian-economy-is-...

Who deserves the credit? Chance has played a big role: India did not create the Sino-American split or the cloud, but benefits from both. So has the steady accumulation of piecemeal reform over many governments. The digital-identity scheme and new national tax system were dreamed up a decade or more ago.

Mr Modi’s government has also got a lot right. It has backed the tech stack and direct welfare, and persevered with the painful task of shrinking the informal economy. It has found pragmatic fixes. Central-government purchases of solar power have kick-started renewables. Financial reforms have made it easier to float young firms and bankrupt bad ones. Mr Modi’s electoral prowess provides economic continuity. Even the opposition expects him to be in power well after the election in 2024.

The danger is that over the next decade this dominance hardens into autocracy. One risk is the bjp’s abhorrent hostility towards Muslims, which it uses to rally its political base. Companies tend to shrug this off, judging that Mr Modi can keep tensions under control and that capital flight will be limited. Yet violence and deteriorating human rights could lead to stigma that impairs India’s access to Western markets. The bjp’s desire for religious and linguistic conformity in a huge, diverse country could be destabilising. Were the party to impose Hindi as the national language, secessionist pressures would grow in some wealthy states that pay much of the taxes.

The quality of decision-making could also deteriorate. Prickly and vindictive, the government has co-opted the bureaucracy to bully the press and the courts. A botched decision to abolish bank notes in 2016 showed Mr Modi’s impulsive side. A strongman lacking checks and balances can eventually endanger not just demo cracy, but also the economy: think of President Recep Tayyip Erdogan in Turkey, whose bizarre views on inflation have caused a currency crisis. And, given the bjp’s ambivalence towards foreign capital, the campaign for national renewal risks regressing into protectionism. The party loves blank cheques from Silicon Valley but is wary of foreign firms competing in India. Today’s targeted subsidies could degenerate into autarky and cronyism—the tendencies that have long held India back.

Seizing the moment
For India to grow at 7% or 8% for years to come would be momentous. It would lift huge numbers of people out of poverty. It would generate a vast new market and manufacturing base for global business, and it would change the global balance of power by creating a bigger counterweight to China in Asia. Fate, inheritance and pragmatic decisions have created a new opportunity in the next decade. It is India’s and Mr Modi’s to squander. ■

[Riaz Haq]

Rajeev Matta
@RajeevMatta
India’s total debt in March 2014 was 53 lac crores. In March 2023 it will be 153 lac crores. He has added 100 lac crore in 8 years.
India’s debt to GDP ratio was 73.95% in Dec 20.
(1/n)

https://twitter.com/RajeevMatta/status/1525346057122885632?s=20&...

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Rajeev Matta
@RajeevMatta
Foreign reserves are under 600 billion dollars. The trade deficit in March 22 alone was 18.51 billion when we exported the most (an increase of 19.76%); the import too that month increased by 24.21% (they don’t highlight that).
(2/n)

------------
Rajeev Matta
@RajeevMatta
Besides paying for the trade deficit, the foreign reserves need to provide for 256 billion dollars of debt repayment by Sept 22. Imagine, with imports getting costlier where we will be then.
(3/n)

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Rajeev Matta
@RajeevMatta
Indian banks, specially the govt ones are making merry. In FY 21, they wrote off loans worth Rs 2.02 lac crore and since 2014, a whopping 10.7 lac crores. 75% of this is by public sector banks. We all know who all borrowed and scooted or not paying back.
(4/n)

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Rajeev Matta
@RajeevMatta
Finally, the GDP. We were going well at 8.26% in March '16 after which he punctured the tyres of the running car. Remember demonetization? We came down to 6.80 in 17; 6.53 in 18; 4.04 in 19 & -7.96 in 20. Who says pandemic and world economy are responsible for our halt?
(n/n)

[Riaz Haq]

The world has been hit with a double whammy - on one hand there is a recessionary trend with demand falling, at the same time prices are going up. Central banks around the world took inflation too lightly, says Swaminathan Aiyar. Stagflation signs are around. While we (India) may not collapse like Sri Lanka or Pakistan but we are certainly in trouble, he believes.

https://economictimes.indiatimes.com/news/economy/policy/india-wont...

We are at highest rate of inflation in years. The wholesale price index for April had just come in at 15.05%. The consumer price index 7.8%. These are extraordinarily high rates and there is nothing special about India. In America where the target inflation is 2% their latest inflation rate 8.5%, it came down a little to 8.3%. So there is global inflation.

Prices of commodities, services, manufacturing - have been soaring in the last 12 months. The inflation began in 2021 and the Ukraine war has accelerated it. The world is caught in a huge inflationary trap right now . The physical shortage of a large number of commodities has been building up over time, and over and above that came the shock of war and the sanctions imposed on Russia, which is an important supplier of number of items. The Black Sea, which is one of the greatest supply routes out of Russia and Ukraine, has been blocked by the war.

On top of everything else China has committed a kind of hara-kiri by having a complete lockdown in an attempt to stomp out COVID - so there is a separate supply shock because there is no production going on in China. These different strands have all come together for a gigantic shock.

We are in a situation where on the one hand there is a recessionary trend, recession is coming because demand is falling, at the same time prices are going up. Some people call this stagflation.

In the case of India we have been hit both ways. We were expecting this to be a very good year for growth. The World Bank, IMF had said India would be the fastest growing major country, and perhaps that will still be the case but earlier they were hoping for 9% growth or things like that, now people say maybe 7%, 7.5%, maybe 6%. So, we are in a tough position right now with inflation is rising fast because inflation is rising everywhere else in the world and because of that we cannot escape it alone and the downtrend, the recessionary trend is also coming the world over and we cannot escape that. We are perhaps better positioned to withstand the problem that some other countries. We will not collapse like Sri Lanka or Pakistan but we are certainly in trouble

[Riaz Haq]

We (India) may not collapse like Sri Lanka or Pakistan but we are certainly in trouble, he (Swaminatham Aiyar) believes.

https://economictimes.indiatimes.com/news/economy/policy/india-wont...

Do you think the situation is under control. Can central banks control inflation just by raising the rates?
Raising interest rates is not going to solve the supply problem. Raising interest rates is a way of-- if there is an overheated economy with too much demand then you can say I want to slow down that demand by raising interest rates and making it difficult for people to buy but that is not the case today. India does not have an overheated economy where there is too much demand, in fact there is not enough. Take a look at the India Inc earnings - the auto sector is not in good shape, demand is low and so production is also being affected.

There is a shortage in areas like metals but even there the prices have come down very sharply. So right now, the problem of inflation cannot easily be solved by tightening the interest rates. It can be tightened in some cases, the government is trying to do it in the case of wheat by putting an export ban. If you look at the world price of wheat it costs about Rs 40 a kilo and if we freely allow the export of wheat and all our surplus buffer stocks we can have a huge export boom but then if the Indian price equates with the world price at Rs 40 a kilo there will be mayhem and there will be riots on the streets so the government has tried to do supply management by saying we will stop all exports of wheat.

This I think was a bad move, I mean it should have been more gradual and they should be allowing some exports but right now that is one thing that they can do. They have put a ban to improve the supply of wheat and this can help to reduce inflation on that front. Beyond that you will have to live with the global trends, you cannot wish away the global trends and just as Indonesia has put this restriction on edible oil, we are a very large importer of edible oil we are going to suffer.

The government up to a point can reduce import or excise duties on commodities like edible oil, crude oil, petrol, diesel - but all this would be limited amount of relief. It is not the case that prices will come down but you can you can limit the extent to which the prices rises beyond that you will have to wait for this war to play out and for this business cycle to play out, those are items beyond your control.

What do you think is the best course of action for the RBI now?
Central banks around the world, including the RBI, were too relaxed about inflation. They kept thinking this is some temporary delaying it will go away. Then they thought that some increase has taken place last year it will go away then they thought no, then when the war came then again people thought that this may be just temporary, there will be a quick solution to the war.

There is no quick solution to the war and it has now become very clear that inflation has gone out of control compared with what you expected it to be.

In America the target is 2% and it went to 3-4% they said you know okay it could come down again instead it has gone to 5%, 6%, 7%, 8%, 8.5% so panic has broken out there and they are tightening and tightening. The RBI cannot afford to be left out and therefore the RBI has been reluctant to raise interest rates but when everybody else is doing it they say we will have to do so because if we do not do so there can be an attack on the rupee.

You cannot have a situation where everybody else just raising the interest rates and India is not, if you do that huge amount of money can flow out of India so because of that the RBI reluctantly is increasing its rates and will continue to raise its rates there is no option and apart from protect any our foreign exchange reserves it will also help tame inflation up to a point.