Indian economic recession

In the budget, the FM Nirmala Sitharaman claimed that India’s economy would hit $5 trillion by 2025. In the weeks that followed, GDP growth rater fell to a six-year low of 5%; the RBI made a surplus transfer of Rs 1.76 lakh crore to the union government; and the government announced the merger of ten public-sector banks into four combinations. These announcements came against the backdrop of the precarious state of the Indian economy. The country is witnessing an economic slowdown that has spread from the auto sector to all other segments, the unemployment rate is at a 45-year high and the tax collections from the previous fiscal year presented an estimated shortfall of Rs 1.67 lakh crore from the revenue expected by the BJP government. The going seems difficult for both Sitharaman and the Indian economy.

• The RBI has lowered India's growth forecast for FY20 to 6.1% from 6.9% it projected earlier. The World Bank has cut India's GDP growth forecast from 7.5% to 6% this year.
• India is a consumption-driven economy. When consumers buy goods and services, the wheels of the economy turn. That has not been happening for several quarters and for various reasons.
• Fewer jobs (at 6.1% in 2017-18, unemployment was the highest in 45 years), a freeze in salary hikes and bonuses, layoffs and uncertainty in businesses are making people cut down on spending.
• Incomes and wages in rural India, where 67% of India's population lives, have been hit because of low food prices. Agriculture GDP grew just 2% in the first quarter of the current fiscal, compared to 5.1% in the same quarter of the previous fiscal.
• Consequently growth in private consumption expenditure is down to an 18-quarter low of 3.1% in June 2019. Savings declined to an all-time low because of static or falling incomes.
• Construction, which is a big employment generator, is decelerating because of the slump in real estate. Exports fell 6.57% in Sept 2019 compared to a year ago. Discoms are groaning under a combined debt of over Rs 2.4 lakh crore. Corporate sector revenue growth fell to an 11-quarter low and investments plunged to a 15-year low.
• The banking and financial services sector is in a mess. There is liquidity, but no loans are being given. Banks are tottering under a mountain of NPA's of close to 10% of their total assets. They are fearful of giving fresh loans in case they add to their woes. Non-banking financial companies, which are a major source of consumer loans, are in a mess of their own and unable to extend credit. And the string of collapsing financial institutions has further sapped consumer confidence in the system.
• The government's rescue acts like slashing corporate tax rates and unprecedented interest rate cuts by the RBI seem to be yielding no results in the short term.
• These are exceptional times and they call for exceptional measures. Indian government could take cue from the US Federal Reserve spent nearly 800 billion dollars to pre-empt an imminent economic meltdown in 2008.

The Indian economy is in a vicious downward spiral and the Modi government needs to stop worrying about the fiscal deficit & inflation etc and start pouring money into the economy to stimulate growth. They need to put money in people's pockets in every way they can. This appears to be the only way to get the jammed wheels of the economy moving again.

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Indian economy's headwinds

India's GDP growth has peaked in the first quarter and going ahead some moderation is expected as weaker rupee and rising oil prices remain two major headwinds for the Indian economy, Credit Suisse said. 

• The 8.2% GDP growth for the April-June 2018 quarter of this year, though "encouraging", was largely owing to base effects. 
• The Indian economy grew at 8.2% on good show by manufacturing and farm sectors, according to official data. 
• Monsoon deficit is now at 6% and the acreage under kharif sowing is flat year-on-year.
• Weaker rupee and rising oil prices remain two major drag factors for the economy. These two headwinds could turn out to be a double whammy for India, exerting an upward pressure on inflation and downward pressure on growth, the report said.
• The core inflation is inching up and all these factors could prompt the RBI raise interest rates. Higher interest rates will have a negative impact on growth expectations.
• On the positive side, Credit Suisse expects economic growth to gradually get support from strengthening bank balance sheets as more companies exit bankruptcy, and as GST implementation progresses further which should provide a much more conducive environment for the investment growth to pick up.

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As on Sept 17, 2018, Sensex drooped by 4% and USD INR also shed 4% during this month. INR lost almost 13% against USD, during 2018 and earned dubious distinction of the worst performing Asian currency against USD this year. Some reports point out that Indian economy is better than only Turkey, Argentina and Venezula, which is worry some. Weakening rupee, rising oil prices, widening current account deficit, inflation & interest rates ready to take off, our economic pundits are clueless of what to do and are simply staring. Any thoughtless intervention will only widen CAD pushing inflation up. Not intervening while economy is on slippery slope is also wrong. Steadily FE reserves are getting depleted. No reserves are adequate enough, when economy is facing headwinds.

Demonetisation - Much about nothing - RBI report

The Hindu Businessline | August 30, 2018

The RBI, its annual report released on Wed Aug 28, 2018, has revealed that only  ₹16,050 crore out of the  ₹15,44,000 lakh crore (1.04%) of the scrapped higher denomination notes have not returned back into the banking system and therefore remain missing or unaccounted for. This data has raised questions about the overall gains and the impact on the economy, especially the informal sector, because of the disruption 'Demonetization' has caused. 

• The Modi government had framed the dramatic announcement as a move to clamp down on corruption and black money, cut off terrorist financing and tackle fake notes. But with almost all the demonetised notes coming back, everyone wonders whether the stated purpose of demonetisation has been served.
• Modi's hidden objectives of demonetisation were (i) its perceived windfall in terms of an enhanced dividend for the government from the RBI as government expected at least 30% (~₹5,00,000 crores) of cash, black money stacked will not get back into banking system and (ii) disarming opposition parties with all their stacked cash becoming worthless and thus paving his way to win UP elections effortlessly.  
• The initial narrative by the government was that a large amount of demonetised currency will not find its way back into the system. This purported benefit did not materialise in any significant way. It cannot be said that significant losses have been inflicted upon those holding black money.  
• The claim that it would lead to an increase in tax collection, nothing can be anything with confidence.
• During the reporting financial year, 522,783 pieces of counterfeit notes were detected in the banking system, which was 31.4% lower than in the previous year.
• The cash-based terror and criminal activities may have been disrupted for some time, as did cash-based legitimate activity, it is not clear that there has been any significant disruption.
• The liquidity surge in the banking system that came about in the aftermath of demonetisation complicated the RBI's conduct of monetary policy.
• RBI had to introduce many instruments to absorb demonetisation induced liquidity from banks.
• The increase in CRR dented bank's earnings.
• The mopping up of liquidity eroded the RBI’s earnings. 
• RBI's expenditure on printing of currency doubled from the previous year. 
• RBI's income for the year decreased by 23.56% and its expenditure increased by 107.8% resulting in a sharp decline in the RBI’s surplus.
• Demonetisation served as a negative shock to the economy. GDP growth in the Jan-Mar 2017 quarter slowed to 6.1%, and to 5.7% in the next quarter (April-June 2017). 
• A number of small-scale businesses were adversely affected. The unorganised sector especially bore the brunt of the sudden shock. Economic activity shrinkage is over ₹300,000 crores & loss of jobs at over 2 million, this is the worst any PM could do to any nation. 
• The value of banknotes in circulation increased by 37.7% over the year to ₹18,03,700 crore as at end-March 2018. The volume of banknotes, however, increased by 2.1%.
• While there no benefits at all (all pain & no gain), the clear lesson is that tax reforms and effective monitoring of suspicious transactions are a better alternative for addressing the stated objectives. 

What India has done to its money is sickening and immoral - Steve Forbes ... In November 2016, India's government perpetrated an unprecedented act that is not only damaging its economy and threatening destitution to countless millions of its already poor citizens but also breathtaking in its immorality. Without any warning India abruptly scrapped 85% of its currency. It claims the move will fight corruption and tax evasion by allegedly flushing out illegal cash, crippling criminal enterprises and terrorists and force-marching India into a digitized credit system. Human nature hasn't changed since we began roaming this planet. People will always find ways to engage in wrongdoing. Terrorists aren't about to quit their evil acts because of a currency change. There's no misunderstanding what this is truly about: attacking your privacy and inflicting more government control over your life. What India has done is commit a massive theft of people's property without even the pretense of due process--a shocking move for a democratically elected government. (One expects such things in places like Venezuela.) Not surprisingly, the government is downplaying the fact that this move will give India a onetime windfall of perhaps tens of billions of dollars. By stealing property, further impoverishing the least fortunate among its population and undermining social trust, thereby poisoning politics and hurting future investment, India has immorally and unnecessarily harmed its people, while setting a dreadful example for the rest of the world. 

Economy worsened since 2016 ... RBI survey

Pre-poll surveys might still be leaning towards Modi, but the recent highly rated RBI's Consumer Confidence Survey tells another tale. The survey was conducted in Bengaluru, Chennai, Hyderabad, Kolkata, Mumbai and New Delhi, has showed that 48% of the citizens believe that the Indian economy has deteriorated in 2018 from the previous round. On general economic situation, income, spending, employment and price level about 48% felt the general economic situation in May 2018 was worse than a year ago and 32% perceived an improvement.

• Households in general were pessimistic about the employment situation, with 44% of them feeling that it has actually worsened. An aggregate of 51% have said that do not expect any change or expect employment prospects to deteriorate in the coming year.
• Over 88% felt that the general price level has increased and over 83% said they expected it will keep increasing in the coming year too.
• The proportion of households expecting their spending will increase in the next one year remained almost unchanged at over 83%.
• Modi government is facing a flak on the price situation as continuously increasing petrol and diesel prices have led to a spike in the rates of almost all essential commodities and transportation.
• GDP grew at 7.7% in the Q4 FY18, the fastest pace in seven quarters, aided primarily by sustained government spending. While private investments are struggling to recover, slowing of private consumption (54.6% against 59.3% in the previous quarter) the main growth engine, is also a cause for concern. 
• Even though the government has been patting its back on bringing down inflation, 79% of respondents felt that it has actually gone up. Many respondents felt that the prices have increased and will continue to increase going ahead. About 83.8% expects food prices to rise in the next three months as against just 77.2% a year back. 
• Retail inflation, measured by the year-on-year change in the CPI, rose from 4.9 % in May to 5% in June, driven by an uptick in inflation in fuel and in items other than food and fuel. RBI Governor Urjit Patel says RBI needs to maintain inflation at the legislated target of 4%.
• One of the major pointers towards a slowdown is the fact that people's incomes have remained stagnant. 48.9% households said that their incomes have remained same, it has gone up for 27% and gone down for 23%.
• And even though incomes have declined, spending has shot up. People are spending more on essential items. For 85% spending on essential items has gone up,  while for 52% it has gone up on non-essential items.

Earlier in June 2018, Piyush Goyal, finance minister in-charge, dismissed the RBI's consumer confidence survey findings. "I think the facts speak for themselves, with 7.7% growth. Some people with blinkers on seem to have come out with a report that does not gel with reality then I have no answer to them, but there will always be some naysayers in this world,” he said. 

Modi's fake data wont work anymore. He must stop spreading false data and 

take action or should say BJP do not have good finance knowledge and 

hire experts where ever they are available ... A citizen

The BJP will not enjoy the tail winds it enjoyed in 2014 in the next elections. However, a lack of hope that the economic situation will improve significantly in the next one year. Economic mismanagement is an important opposition charge. Still the electorate has not placed its bet on an anti-Modi campaign, like it did in an anti UPA campaign in 2012. A status quo in these trends suggests it may still be advantage BJP in 2019 at a time when the opposition is banding together. It is good that institutions are coming out of Modi's evil influence in spreading fake data. Needless to say that present situation is as bad as it was in 2013-14, the last year of UPA's 10 year regime. Majority people not expecting any improvement in economy indicates their loss of confidence Modi's capabilities and could spell doom, in 2019 elections, for Modi & BJP. 

Modi squander's away low oil price advantage

• Every $10 price variation in crude oil price, simply means for India as GDP 1% and loss/gain of 1 million jobs lost/added, without doing anything.
• While UPA II under Manmohan Singh suffered above $100 per barrel oil price, Modi was gifted by God with $50 per barrel oil price regime. The difference simply means 5% GDP growth and 5 million jobs added without doing anything by central government. 
• Modi retained 85% of lower oil rices to government by increasing excise duty while passing on benefit to consumer - limited to just 15%. This amounts to nearly Rs.7-8  lakh crores additional money with central government and no one knows where it has gone?
• Modi and FM Jaitley also changed series for GDP growth calculations which has added another 2% totaling to 7% advantage.
• Average GDP growth rate during the period of UPA Government (2004 to 2014) has been 7.7% despite two global slowdowns in this period.
• It was 6.9% GDP growth rate, when Modi became PM in 2014. Year-on-year GDP growth was increasing when Manmohan Singh assumed office in 2004, but was falling after Modi took to the helm. Modi inherited a sluggish economy stricken by policy paralysis and corruption. 
• FM Arun Jaitley, inherited a situation where there was little room left to increase public expenditure. Growth has slowed down but consumption hasn’t gone down, while demand is still there in the market the same was fulfilled by imports.
• The Demonetisation and the GST rollout have caused major disruption, effecting GDP numbers.

The impact on GDP growth rate with variations in economic activity is never simple. Despite high oil prices, corruption, policy paralysis etc - UPA's economic performance was exuberant where as aided with low oil prices, Modi's reckless fiscal reforms boomeranged and almost destroyed economy. However Modi & Jaitley squandering away the huge savings due to low oil price regime, not solving any of the ailing sectors, their inaction leading to huge pile up of NPAs and banks pushed to brink of collapse etc are unpardonable. Neither Modi nor Jaitley has any depth of knowledge of economics nor have any good people to assist them and most of the time seemed helpless. Definitely we don't need helpless leaders!

Manmohan Singh is the biggest success in PM's office!

Statistics can often be stranger than fiction.

• How shall we define ‘political success’? By the fact of ‘re-election to the office’.
• The ‘biggest’ political success can be defined as re-election to office by the ‘largest increase in mandate’.

If a politician gets re-elected with the largest increase in his mandate, that should, incontrovertibly, allow him to claim the mantle of 'being the most successful'.

Who can claim to be India’s most successful prime minister?

1. Jawaharlal Nehru - Although he got re-elected more than once, he did not appreciably increase his (already awesome) mandate over his respective previous tenures.
2. Indira Gandhi - She got re-elected after she cut short her tenure in 1971, but added only 36% (from 259 in 1967 to 352 seats) to her previous mandate.
3. Atal Bihari Vajpayee - He got re-elected in 1999, but the BJP’s numbers in parliament hardly budged.
4. Manmohan Singh - He got re-elected in 2009 by increasing his previous mandate of 2004 by a gravity-defying 45% (from 141 to 206 seats).

Manmohan Singh, widely described as India’s weakest prime minister, but who, on cold quantitative statistics, can justifiably claim to be the biggest success in that office! 

The spectacular Lok Sabha polls of 2009

• Congress swept urban areas. (7 out of 7 in Delhi and 5 out the 5 it contested in Mumbai)
• With 21 seats, Congress was the second-largest party in Uttar Pradesh after SP(23) and ahead of BSP(20) and more than double of BJP’s tally of 10. 
• Both the contending alliances, UPA and BJP, had declared prime ministerial candidates – Manmohan Singh and LK Advani .
• The communists collapsed from 59 seats to 24.
• Obvious analyses for the Congress’ amazing re-election in 2009 was (i) the three continuous years of 9% -plus GDP growth, (ii) farm loan waiver just before the voting and (iii) people simply loved Manmohan Singh’s act of political defiance over the Indo-U.S. Nuclear Deal. They saw in him a status quo defying politician who could herald change on a massive scale.
• Very few understood, or cared, about the nuclear nuance. What they latched on to was Singh’s ability to stand up to blackmail in the pursuit of modernity and change.
• In July 2008 left coalition partners saw red over the Indo-U.S. Nuclear Agreement, and withdrew support in parliament, pushing the government into a minority. He sought a vote of confidence in parliament for his minority government. Some deft political management saw the Congress get new allies on board supported the government. When the vote was counted Singh had won 275-256. His beaming face and exultant V wave became Singh’s political signature for the 2009 polls; across the country, he was feted as ‘Singh is King’.
• Congress misread its mandate and harked back to the stasis of garibi hatao (poverty) politics, handing a neat walk-over to Narendra Modi in 2014, who instinctively understood the political message of 2009 better than the victors themselves.

We will vote you in, provided you can deliver real and discontinuous change to us. We were promised this in 2009, and again in 2014. But we were let down by both Manmohan Singh and Narendra Modi. So for 2019, please go to your drawing boards and figure it out!

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Economic survey 2018

• GDP is likely to touch 6.75% by the close of this FY. Far behind 8% of 2015-16. Remember GDP growth has nothing to do with well being of common man.
• Tax base goes up but tax collections are lower.
• Three year low oil price bonanza is over. The benefit was squandered away foolishly by Modi & Jaitley. Any further increase of oil price will not only slow does GDP growth but impacts inflation.
• A $20 per barrel increase in oil prices will result in GDP growth slowdown by 1%, and a rise in inflation of 1%.
• If high international oil prices persist or elevated stock prices correct sharply, provoking a ‘sudden stall’ in capital flows is likely.
• In the medium term, the three areas that would require a policy focus including employment, education, and agriculture.
• Further economic reforms like completing banks recapitalization, completing privatization of Air India.
• The Sensex has risen 46%, during past 2 years, while economic growth and corporate profits have decelerated. This trend has largely been driven by expectations of a revival in growth and a sudden change in the savings pattern of households after demonetisation. A sharp correction cannot be ruled out in case future growth of the economy and corporate earnings do not remain in line with current expectations and stock markets could trigger "stall" in capital flows and force hikes in interest rates.
• Due to climate change, annual agricultural incomes could reduce by 15-18% in irrigated areas and 20-25% in unirrigated areas. Higher investment needs to be made towards expanding irrigation with the implementation of efficient drip and sprinkler technologies. A plan to provide direct income support to farmers can be put in motion to replace inefficient agricultural subsidies. 
• Although India's unemployment rate is around 3.5%, the unemployment rate in the 15-24 age group stands at 10.5%, as per ILO estimates. India has an abysmally low capacity to provide jobs to first-time workers. The only solution for India is to strengthen its manufacturing sector. 
• Providing incentives to labour-intensive export sectors  will not only provide jobs but also implies higher current account surplus for the economy which can provide a cushion against swings in the global oil prices. Therefore, it would go a long way in reducing India's historical macro-economic vulnerability. 
• Congress leader  Randeep Surjewala said that it has turned out to be much ado without direction, cohesion and vision. Modinomics had decoupled India's robust economy by myopic vision and the double whammy of demonetisation and ill-conceived GST. With one year to go for next general elections, Prime Minister Modi has plunged India's Economy towards despondency, dejection and dire straits.
• Senior Congress leader P.Chidambaram said though the survey says growth rate for 2017-18 will be 6.75%, implying a second half growth rate of 7.5%, it offers little evidence in support of this claim. Causing 'agrarian distress' is the designed objective of the Modi government as the agriculture-GDP growth under the Modi government has plunged to just 1.9%, half of what was achieved in the first four years of the UPA. It is obvious that the government hopes that the private sector will come to the rescue of the economy. There is not much gas left in the government.
• In a jibe at the government, Mr Rahul Gandhi tweeted, "The Economic Survey 2018 says, 'Acche Din' are here, except for these minor hiccups: Industrial Growth is (down). Agricultural Growth is (down). GDP Growth is (down) and Job Growth is (down). Don't worry Be Happy!" He also tagged a video of the song "Don't worry be happy" with the tweet.

Modi is in a fiscal bind. Revenue collection remains under pressure following the chaotic roll-out of a GST, and with an eye on next year's election, his spending priorities may turn to the distressed rural sector, putting pressure on the budget deficit. Even though government committed 3.2% budget deficit for this year analysts expect this at 3.5% this year and and 3.2% next year.

Economic upturn is defined as higher GDP growth over three consecutive quarters. Not every uptick which Modi's team bombard incessantly in media and social media. All these economic data doesn't mean anything really. Go to a village and talk to them or meet some frustrated unemployed youngsters in every street corner in the evenings and you will realize state of economy. Nearly 10% of voters for 2019 elections are first time voters in age band of 18-25 educated and/or skilled joined workforce but unemployed who have no knowledge of history or politics or bothered about GDP growth or corruption. Most of them are engaged in subsistence activities and are thoroughly frustrated. They would teach lesson to Modi and BJP in 2019 general elections.

The man who could not do any thing with Rs.4-5 lakh crores of oil bonanza money in 3 years except resorting to wild gambling what can he do now with no money, non performing economy and almost all sectors in distress. Corruption is not the only high priority item in our country. The priority items are healthcare, education, unemployment, agrarian distress, and many more after which corruption control and bullet train comes. Unfortunately for our flamboyant PM style, spectacle and display alone matters and nothing else. Modi has made a hash of anything and everything. The worst PM ever in history of India. The only way to show performance is to create wrong data and that is what exactly he and his gang are doing.

Indians are worse off under Modi

Prime Minister Modi should spend less time abroad telling foreigners how well India is doing and more time at home asking people how they feel about his administration.

• Only 3% of Indians consider themselves thriving in 2017 compared to 14% in 2014.
• India’s largely rural population initially led the decline in life evaluations, with thriving dropping from 14% to 7% between 2014 and 2015, and edging even lower to 4% and 3% in the years after that.
• Declines among urban Indians have been much more gradual, although they are down in the past year, dropping from 11% to 4%.
• Modi’s policies have yet to touch the masses. Living wage for family in India remains almost flat in the Rs.17,300-17,400 per month range over his tenure. 
• Wages paid to low-skilled labor decreased to Rs.10,300 per month in 2017 from Rs.13,300 per month in 2014.
• There is the persistence of corruption, the rise of nonperforming loans in state-owned banks, high taxation, poor public health, and chronic income inequality — something that Modi inherited from previous administrations. All these explains the misalignment between the high hopes of the Indian people for their economy and what they are personally experiencing.
• The people had high expectations, and those expectations have not been satisfied. GDP growth is still above 5%, but it has slowed down sharply from past rates of 8 and 9%.
• The above 5% GDP growth is not creating jobs. There’s this phenomenon of ‘jobless growth.’ India is demographically quite a young nation. And the young people are entering the labor force at too fast a rate compared to job creation. These young people are getting frustrated.

When people see their lives headed in the wrong direction, they want change. That should be of great concern to Modi.

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Artificial Intelligence, Automation & Jobs

• Cars that drive themselves, machines that read X-rays, and algorithms that respond to customer service inquiries are all manifestations of automation. These technologies increase productivity and improve our lives, their use will substitute for some work activities humans currently perform has sparked much public concern.
• Technology destroys jobs, but not work. Automation adoption could be a powerful productivity booster.
• More than 60% of occupations have at least 30% of constituent work activities that could be automated. Less than 5% of occupations can be fully automated. It will also create new occupations that do not exist today, much as technologies of the past have done.

• About 15% of work activities could get automated by 2030. Advanced economies would get more effected by automation reflecting higher wage rates and thus economic incentives to automate.
• Even with automation, the demand for work and workers could increase as economies grow fueled by productivity growth. Rising incomes and consumption in developing countries, increasing health care for aging societies, investment in infrastructure and energy etc will create demand for work that could offset the displacement of workers. Additional investments in infrastructure and construction could be needed to reduce the risk of job shortages in advanced economies.
• By 2030, 75 million to 375 million workers (3 to 14% of the global workforce) will need to switch occupational categories. Displaced workers are unlikely to get jobs if idle for more than an year. If their transition to new jobs is slow, unemployment could rise and dampen wage growth.
• All workers will need to adapt increasingly capable machines which require higher educational attainment, spending more time on activities that require social and emotional skills, creativity, high-level cognitive capabilities and other skills relatively hard to automate.
• Automation will enable growth of high wage jobs in advanced economies while middle-wage jobs might decline. Automation will spur growth of middle wage jobs in emerging economies mostly in construction and service sectors which further boost the emerging middle class.
• The benefits of automation will be vast but addressing worker transitions is imperative by business and political leaders. Economies that are not expanding do not generate job growth. Mid career job training and worker redeployment will become essential. The priority is strengthening transition and income support for workers caught in the crosscurrents of automation.
• This job gained could more than offset the jobs lost to automation only if businesses and governments seize opportunities to boost job creation and for labor markets to function well.
• Technical feasibility of automation is important, other factors such as cost of developing and deploying automation solutions for specific uses in the workplace, the labor market dynamics, the benefits of automation beyond labor substitution, and regulatory and social acceptance will influence the pace and extent of automation adoption.
• In the US, the agricultural share of total employment declined from 60% in 1850 to less than 5% percent by 1970, while manufacturing fell from 26% of total US employment in 1960 to below 10% today. China’s one third workforce moved out of agriculture between 1990 and 2015. Yet overall employment grew. Such shifts can have painful consequences for some workers during the transition period that could be eased only after policy reforms.
• Robust aggregate demand and economic growth are essential for job creation. New technologies have raised productivity growth, enabling firms to lower prices for consumers or pay higher wages. This stimulates demand across the economy, boosting job creation.
• Rising productivity is usually accompanied by employment growth thus creating demand for goods and services across the economy. 
• Productivity growth enabled by technology has reduced the average hours worked per week. Across advanced economies, the length of the average work-week has fallen by nearly 50% since the early 1900's.
• Although the historical record is largely reassuring, some people worry that automation today will be more disruptive than in the past. If technological advances are adopted rapidly, the rate of worker displacement could be faster. If many sectors adopt automation simultaneously, the percentage of the workforce affected by it could be higher.
• Automation will have a lesser effect on jobs that involve managing people, applying expertise, and those involving social interactions, where machines are unable to match human performance for now.
• Jobs in unpredictable environments such as gardeners, plumbers, or providers of child and elder care will also see less automation by 2030, because they are difficult to automate technically and also command lower wages, which makes automation a less attractive business proposition.
• Automation displacing labor is clearly visible but it is difficult to envision all the new jobs that will be created as most new jobs are created indirectly and spread across different sectors and geographies.
• Global consumption grows as incomes rise and consumers spend more and their spending patterns also shift, creating more jobs in the countries where the income is generated, but also in economies that export to those countries. 
• People aged above 65 years could grow by 300 million, by 2030, and their spending will increase on health care and other personal services. This will create significant demand for doctors, nurses, health technicians, home health aides, personal care aides and nursing assistants but reduces demand for pediatricians and primary school teachers. 
• Jobs related to developing and deploying new technologies may also grow. Overall spending on technology could increase by more than 50% between 2015 and 2030. The number of people employed in these occupations is small but they are high-wage occupations.
• Rising incomes also create demand for more and higher quality buildings. Both factors could create new demand, mainly in the construction sector. These jobs include architects, engineers, carpenters and other skilled tradespeople, as well as construction workers, machinery operators and other jobs with lower skill requirements.
• Advanced economies may also see employment declines in occupations that are most susceptible to automation. These include office clerks, office assistants, finance and accounting, customer interaction jobs, cashiers, food service workers, and a wide range of jobs carried out in predictable settings, such as assembly line workers, dishwashers, food preparation workers, drivers, and agricultural and other equipment operators. Helping individuals transition from the declining occupations to growing ones will be a large scale challenge.
• The changes in occupational growth or decline imply that a very large number of people may need to shift occupational categories and learn new skills in the years ahead. The challenge in advanced economies will be to retrain mid career workers. There are few precedents in which societies have successfully retrained such large numbers of people. Frictions in the labor markets including cultural norms regarding gender stereotypes in work and geographic mismatches between workers and jobs could also impede the transition.
• Between 400 million and 800 million individuals could be displaced by automation and need to find new jobs by 2030 around the world. However people will need to find their way into these jobs. Of them, 75 to 375 million may need to switch occupational categories and learn new skills. 
• China faces the largest number of workers needing to switch occupations if automation is adopted rapidly. For advanced economies the share is much higher - up to one-third of the 2030 workforce in the US and Germany, and nearly half in Japan.
• History suggests that over time, labor markets adjust to changes in demand for workers from technological disruptions, although at times with depressed real wages.
• With sufficient economic growth, innovation, and investment, there can be enough new job creation to offset the impact of automation, although in some advanced economies additional investments will be needed to reduce the risk of job shortages.
• Future jobs lost and jobs gained vary by country, with the largest disruptions expected in advanced economies.
• Higher wages make the business case for automation adoption stronger. Some economists worry about “premature deindustrialization” in developing countries due to automation.
• Economic growth is essential for job creation. Economies that are stagnant or growing slowly create few new jobs. Countries with stronger economic and productivity growth and innovation will be expected to experience more new labor demand.
• Countries with a rapidly-growing workforce, such as India, may enjoy a “demographic dividend” that boosts GDP growth, if young people are employed. Countries with a declining workforce need automation to offset their shrinking labor supply, while countries with growing work forces have greater job creation challenges.
• India, a fast-growing developing country with modest potential for automation over the next 15 years due low wage rates. Most occupational categories are projected to grow reflecting its potential for strong economic expansion. However, India’s labor force is expected to grow by 138 million people by 2030, or about 30%. Employing these new entrants in formal sector jobs will require job creation on a much larger scale than in the past. Automation will make this challenge more difficult; some fear “jobless growth.” However analysis suggests that India can create enough new jobs to offset automation and employ new entrants, if it undertakes the investments.
• China and Mexico have higher wages than India, and so are likely to see more automation. Mexico’s projected rate of future economic expansion is more modest. Like the United States and Japan, Mexico could benefit from the job creation in new occupations and activities to make full use of its workforce.

With inputs from:

Transitions in a time of Automation

In coming years 'Automation' in many predictable activities is inevitable in India, its immediate impact on our 4 million IT work force is tremendous. 65% of existing IT employees are not re-trainable and will end up losing their jobs sooner or later. To over come impact of automation it is necessary to retrain our workforce but also create new jobs. But our track record in new job creation is dismally low. Today our economy is facing 'jobless growth' which is neither sustainable nor desirable. Due to Automation, job losses would be local where as new job creation would be any where in the world. New investments, infrastructure spending and construction requires higher budgets otherwise widespread unemployment is imminent. Unless agriculture is made remunerative and vibrant, migration of rural labour to urban localities in search of livelihoods will continue unabated and is destructive for our economic progress. Vibrant economies will easily adjust and derive benefits of 'Automation' but struggling economies like India will see painful disruption and deindustrialisation.

S&P's rationale for India's status quo

OVERVIEW

Despite two quarters of weaker-than-expected growth, India's economy is forecast to grow robustly in 2018-2020 and foreign exchange reserves will continue to rise.

Nevertheless, sizable fiscal deficits, a high net general government debt burden, and low per capita income detract from the sovereign's credit profile. We are affirming our 'BBB-' long-term and 'A-3' short-term sovereign credit ratings on India. 

The stable outlook reflects our view that, over the next two years, growth will remain strong, India will maintain its sound external accounts position, and fiscal deficits will remain broadly in line with our forecasts. 


RATING ACTION

On Nov. 24, 2017, S&P Global Ratings affirmed its unsolicited long- and short-term foreign and local currency sovereign credit ratings on the Republic of India at 'BBB-/A-3'. The outlook is stable.


OUTLOOK

The stable outlook reflects our view that, over the next two years, growth will remain strong, India will maintain its sound external accounts position, and fiscal deficits will remain broadly in line with our forecasts. Upward pressure on the ratings could build if the government's reforms markedly improve its net general government fiscal out-turns and so reduce the level of net general government debt. Upward pressure could also build if India's external accounts strengthen significantly.

Downward pressure on the ratings could emerge if GDP growth disappoints, causing us to reassess our view of trend growth; if net general government deficits rose significantly; or if the political will to maintain India's reform agenda significantly lost momentum.


RATIONALE

The ratings on India reflect the country's strong GDP growth, sound external profile, and improving monetary credibility. India's strong democratic institutions and its free press promote policy stability and compromise, and also underpin the ratings. These strengths are balanced against vulnerabilities stemming from the country's low per capita income and relatively high general government debt stock, net of liquid assets.

Institutional And Economic Profile: The ruling party continues to consolidate its power at the state level and, despite obstacles to the implementation of reform, strong growth is likely to continue Narendra Modi's coalition, led by the Bharatiya Janata Party (BJP), has further consolidated power in state-level elections in 2017 and we expect it to make further gains.

One-off factors, such as demonetization and the imposition of a goods and services tax, have led to some quarterly cooling in India's high growth figures.

Nevertheless, the medium-term outlook for growth remains favorable, based on private consumption, an ambitious public infrastructure investment program, and a bank restructuring plan that should help revive investment.

The ruling BJP-led National Democratic Alliance (NDA) coalition dominates the electoral scene, and has a clear majority in the Lok Sabha (the Lower House of parliament, which is directly elected by the people). However, it lacks a majority in the Rajya Sabha (the Upper House, which is largely elected by state assemblies under India's federal system). In the Upper House, the opposition has been able to stall some reform efforts. The NDA has been doing well in 2017's state-level elections and is forecast to make further gains at this level, which could eventually lead to a majority in the Upper House.

The coalition has also managed to pass a number of reforms to address long-standing impediments to the country's growth. These include comprehensive tax reforms through the introduction, on July 1, 2017, of a goods and services tax (GST) to replace the complex and distortive system of domestic indirect taxes. Other measures include a Bankruptcy Code and nonperforming loan resolution framework; a plan to recapitalize state-owned banks; a plan to strengthen the business climate by simplifying regulations and improving contract enforcement and trade; and reforms to the energy sector.

However, confidence and GDP growth in 2017 appear to have been hit by the sudden demonetization exercise in late 2016 (by which high-value cash notes of Indian rupee [INR] 500 and above, which constituted about 85% of the country's cash stock, were replaced with new notes, in an effort to curb tax evasion).

The July 1, 2017 introduction of the GST, which combines the central, state, and local-level indirect taxes into one, has also led to some one-off teething problems that have dampened growth.

Nevertheless, in the medium term, we anticipate that growth will be supported by the planned recapitalization of state-owned banks, which is likely to spur on new lending within the economy. Public-sector-led infrastructure investment, notably in the road sector, will also stimulate economic activity, while private consumption will remain robust. The removal of barriers to domestic trade tied to the imposition of GST should also support GDP growth.

Ratings are constrained by India's low wealth levels, measured by GDP per capita, which we estimate at close to US$2,000 in 2017, the lowest of all investment-grade sovereigns that we rate (see "Sovereign Risk Indicators," Oct. 13, 2017, also available at www.spratings.com/sri). That said, India's GDP growth rate is among the fastest of all investment-grade sovereigns, and we expect real GDP to average 7.6% over 2017-2020 (6.5% in per capita terms).

Flexibility And External Performance Profile: Ongoing expenditure pressure at both the central government and state level will ensure fiscal consolidation remains slow, but India's external position is a strength given the planned ramp-up in public-sector-led infrastructure investment and the persistent deficits, especially at the state level, fiscal consolidation will remain difficult.

The rupee's liquidity in international foreign exchange markets will continue to buttress our external assessment.

Recapitalization of state-owned banks is likely to pave the way for some improvement in credit expansion from 2018. India's external position remains a credit strength. According to the "Triennial Central Bank Survey," published on April 2016 by the Bank for International Settlements (BIS), the rupee was traded in 1.1% of all foreign exchange transactions globally. We therefore consider the rupee to be an actively traded currency, which increases India's ability to finance external imbalances. The recent increased issuance of offshore rupee-denominated bonds (masala bonds) is a testament to this flexibility.

We forecast that India's external debt, net of liquid public and financial sector external assets, will average a modest 8.4% of current account receipts over 2017-2020. The level of economy wide external indebtedness is likely to remain contained throughout the forecast period, underpinned by an improved current account deficit, which we forecast will average 1.8% over 2017-2020, down from the 2.3% level recorded on average between 2011-2016. Recent narrowing has been driven by robust
exports and lower global oil prices. The Reserve Bank of India's foreign exchange reserves stood at above US$400 billion in October 2017, amounting to over six months of import cover, a sizable buffer.

Against the backdrop of the planned ramp-up in public-sector-led infrastructure investments, as well as persistent deficits at the state level, the large general government debt load and India's overall weak public finances continue to constrain the ratings. India has a long history of high net general government fiscal deficits (net of liquid assets, deficits averaged over 8% of GDP over the past 20 years and 7% in the past five years).  The planned large infrastructure investment program is likely to limit expenditure flexibility, even though the government is likely to be able to tap private sector funds for the construction of many of these infrastructure projects.

In addition to expenditure demands, the country's fiscal challenges also reflect revenue underperformance compared with most peers at the rating level. India's general government revenue, at an estimated 22% of 2017 GDP, is low compared with peer sovereigns. Administrative efforts to expand the tax base--including demonetization (which has increased the number of tax registrants) and the introduction of the GST in July--corroborate our belief that government revenues will accelerate into the forecast period.

Although we expect central government to broadly succeed in controlling deficits at the federal level, we foresee that problems at the state level will add 3% on average to the consolidated general government deficits over the forecast horizon. 

India's high fiscal deficits in past years have led to the accumulation of sizable general government borrowings (about 67% of GDP in 2017, net of liquid assets) and relatively high debt servicing costs (close to one-fifth of general government revenue). We project that net general government debt will decline by a modest amount over our forecast horizon. India's government borrowings are mostly denominated in rupees, which largely mitigates exchange rate risks. The small portion of external government debt is predominantly sourced from official lenders over long tenors and at concessional rates. 

India has a two-tier banking sector. Its private sector and foreign banks amount to about 30% of the banking system, with the public sector amounting to 70%. The private sector banks have better profitability and higher internal capital generation, and are better capitalized with lower-stressed assets than government-owned banks. 

Given their weaker profitability, we estimate that public-sector banks will need a capital infusion of about US$30 billion to need capital to make large haircuts on loans to viable stressed projects and meet the rising requirement of Basel III capital norms. 

In October 2017, the government committed to a capital infusion plan of roughly that size, partially financed by the government itself and the rest raised via other sources. We include planned recapitalization costs to our assumptions of the sovereign's general government debt issuance. Our Bank Industry Credit Risk Assessment for India is '5' (with '1' being the strongest assessment and '10' the weakest). Nevertheless, combining our view of India's government-related entities and its financial system, we view the country's contingent fiscal risks as limited. 

The Reserve Bank of India (RBI) has made substantial progress in lowering consumer price index (CPI) inflation following the introduction in February 2015 of its medium-term inflation target band (with 4% CPI inflation plus or minus 2% as the principal nominal anchor for monetary policy), aided by broadly lower oil prices and other factors. Other steps taken to strengthen policy formulation include the introduction of the monetary policy committee framework, improved communication, and efforts to strengthen monetary policy transmission (for example, through new guidelines requiring banks to determine their lending rates using marginal cost of funds). These have also helped improve monetary effectiveness. We expect the RBI to continue to achieve its inflation targets. We believe these RBI measures will support its ability to sustain economic growth while attenuating economic or financial shocks. 

Earlier when the rating was given usually the government took a view that 

they are under-rating our performance. Now we are saying they may be 

over-rating our performance. In either case the consensus seems to be 

they are not rating properly. So leave it there ... YV Reddy

S&P was kind enough to use soft words and yet made their point of the reality clearly. In the past we had the advantage of low oil prices continuously for 3+ years but the advantage was squandered away by lethargy and reckless spending. Going forward our wrecked economy has to face increased oil price regime. Modi's reforms so far have been disruptive in nature with poor design, badly implemented without any mitigation space and had decimated informal sector. These have resulted in closure of 250,000 SMEs and livelihood loss for over 2.5 million workforce. All his vanity schemes launched with spectacularity have bounced. The result is economy shattered and all sectors are in deep distress except MNCs and service sector. The real position is reflected by 90% usage of fiscal space within first three months and reduced revenues and expenditure uncontrolled. Modi with quack advised schemes effortlessly wrecked economy but rebuilding the same is painfully slow and will take its own sweet time and in the meantime poorer classes are subjected to enormous pain for no fault of theirs. What is store for India, time will reveal in next one and half years i.e. prior to 2019 general elections. I foresee stable or worsened situation.

This is a kind of economic collapse

JNU professor Himanshu says the economic slowdown is not the result of a one-off event like demonetisation, nor a technical problem but the slump began almost two years ago. This is a kind of economic collapse. The first step to tackle it is to acknowledge it.

• The economy is in a trough. GDP growth dipped to 5.7%. The Index of Industrial Production for July came in at 1.2%. Consumer Price Index showed that the inflation rate had risen to a  high of 3.4%.
• While Finance Minister Arun Jaitley acknowledged that the GDP numbers for the April-July quarter were of concern, BJP president Amit Shah told that the slowdown in the economy was due to “technical reasons”.
• These numbers might be an early warning of possible stagflation with low demand, high unemployment, decline in GDP and persistently high prices.
• There are many reasons for the collapse of domestic demand and the economic crisis India is facing and the government has limited room to manoeuvre and bring the economy back on track.
• RBI has confirmed, what all of us knew, demonetisation caused much pain without any gain. But demonetisation was not the trigger for the economic collapse one is witnessing today.
• It is a kind of economic collapse. The data is clear on this. Since 2015-16, growth rates have been going down. These numbers represent a very serious set of problems with the economy that have been neglected for a long period of time, which is why they have come to bite us today.
• Some of these problems started in 2013-2014. Wages had started turning negative in real terms since 2013. The problem of non-performing assets had appeared by then. The global recession was visible. These factors were well-known. The one big trigger was in August 2014, when primary commodity prices collapsed following a fall in oil prices. This hit farmer incomes hard.
• The droughts of 2014 and 2015 were difficult to deal with and agriculture GDP contracted and these factors severely dented agricultural incomes. With wages going down, rural demand collapsed by 2015.
• Jobs were not being created and wages were turning negative in real terms – growing slower than the rate of inflation.
• The government neglected the severe depression in rural demand for a long time that eventually spilled over to other sectors. Exports had been falling and the government ignored the trouble spots. Private investment has slowed down and credit growth is at its lowest.
• Construction has been the bulwark of employment in the non-agricultural sector in the past 10 years. But the government was in denial till chief economic advisor accepted the possibility of demand deflation in the economy. But this admission should have come earlier.
• In a normal monsoon year in 2016 after two consecutive droughts, when the situation was improving, demonetisation broke the back of the informal economy. It acted almost like a drought does on the economy. Demonetisation delayed hopes for the revival of the economy, and demand deflation was extended.
• Surely, GST has impacted the informal sector in terms of taxes and cost of compliance, which basically means hiring consultants. If it hits the unorganised sector, then manufacturing will be in deeper trouble in the coming quarters.
• The current scenario is uncertain about the next two to three quarters with no signs of private economic activity reviving. Worse, agriculture will make a very low contribution to growth with food grain production remaining flat. The livestock sector has been hit by political beef controversy that could contract the livestock sector as well. Excluding cotton, all major kharif crops have shown a decline in acreage.
• This year even though monsoon was good but its distribution is unlikely to contribute much to GDP in the next quarter.
• There are no visible signs of green shoots right now in the economy. The SBI has already pared down the growth rate for the entire year to 6.5%. There is almost a consensus emerging that the mess in the economy is far more serious than what people had assumed earlier.
• Farm loan waivers by nine states have sucked up the resources of state governments – there is a decline in capital formation in the states. That is telling us that state government expenditure towards investment is going down. The spending capacity of states has been squeezed quite dramatically and total fiscal deficit of states has increased. This impact the government’s ability to ramp up expenditure in the coming months to revive demand. By the end of June, the Central government had already reached 92.4% of its fiscal space. So, there is not much manoeuvring room left for either the states or the Centre.
• Government might have to breach the fiscal deficit target to revive demand. The government is hoping to collect more from non-tax revenue sources. It had a lot of hope for one source initially – dividend from the RBI which has been dashed. Two other sources the government is banking on are telecom auctions and disinvestment of PSUs. Both depend a lot on market conditions. Even though it has floated the idea of selling off Air India, it may not materialise soon. Given the market situation and the heavy squeeze on the telecom sector caused by the launch of Reliance Jio these decisions could get delayed.
• This is similar to what happened during the time of the AB Vajpayee government (1998-2004). At that time, too, the government failed to recognise that there were problems. The “India Shining” slogan came out of not recognising the economic situation. Inflation was low, wage rate growth was low, agriculture had almost collapsed. Foodgrain production on per capita basis had turned negative. This is true with this government also. Foodgrain production was 265 million tonnes in 2013-2014 and it has been projected up to 276 million tonnes for this year. So in four years, it has gone up by just 10 million tonnes, the lowest in the last 15-20 years. This is lower than the rate of growth of the population. In terms of per capita, that means foodgrain growth is negative. Incomes are negative in real terms. Agricultural investment is negative. This is similar to the NDA government period 1998-2004.
• But 2008 was different because the problems that hit our shores spiralled out of a global crisis. We had one of the best runs of growth between 2004 and 2008. The government distributed a lot, it earned a lot. The agriculture sector was clocking around 4% growth. Incomes were rising. Global commodity prices were rising, so terms of trade shifted in favour of the agricultural sector and farmers benefitted. Construction and manufacturing were growing at their fastest rates. That gave us the cushion to go in for a fiscal stimulus and revive demand.We were not so directly exposed to the financial crisis in developed economies and domestic demand was the prime driver. Right now, the engine of the economy – domestic demand – has collapsed.
• 2018 will be the last Budget the government will be presenting. In 2019, it would be a vote-on-account. The first thing is to acknowledge the gravity of the problem. The government has played blind for long to what has been happening in the economy. The finance minister has come on record to say that these are of concern. That is the first time the government has acknowledged such concerns. But if they actually have a very good idea of the magnitude of the problem is unclear. Right now the engine of the Indian economy, domestic demand, has collapsed.
• The share of private final consumption expenditure as a share of gross domestic product, it was roughly 62% during the third quarter of 2016-2017 – this is the festive season, so private consumption is usually high. Then, mid-way through this quarter, demonetisation happened and sucked out buying power. Compared to the third quarter of 2016-2017 with severe disruption in its second half, the share of private final consumption expenditure in gross domestic product has come down now. in the last quarter, it was down to 57%. That should be a worrying sign.
• There have been too many disruptions in the economy at the same time. What is needed is somebody who can work hands on with the economy.
• The entire economic policy-making group including the RBI in it. The policy-making is never one individual, it is a collective effort. Unfortunately the government’s ability to tap into a pool of economists and experts is very limited. Niti Aayog is in transition now, RBI is already under fire, the chief economic advisor may change now. There needs to be a point where experts, economists and policy-makers come together.
• Differences are bound to be there. No two economists are going to have the same opinion. This government has far less differences than the previous one and that is its problem. Somehow the government must seize the moment and act fast. If this continues for long, it will take a disproportionately greater effort to recover to what is now considered a normal 7% growth rate.

The Wire: Wide Angle: Episode 10: Demonetisation Anniversary

Joblessness: Modi's Achilles' heel of 2019 elections

• In 2013 election campaigning, Modi PM candidate of the BJP, at a rally in Agra thundered "If the BJP comes to power, it will provide one crore jobs every year" which is now haunting him.
• In May 2017, a Labour Bureau quarterly report noted that a mere 230,000 jobs were created in eight key sectors from Apr-Dec 2016, a far cry from Modi's 2013 promise. This, when over a million aspirants enter the Indian job market every month. 
• The GDP growth slipped to 5.7% in the Apr-Jun quarter, the lowest in three years, with manufacturing growing at a five-year low of 1.2%, from 10.7% a year ago.
• CMIE estimates that about 1.5 million jobs were lost during January-April 2017, the first quarter after the Nov 2016 demonetisation exercise. Worse, India is set to see a further 30-40% reduction of jobs in manufacturing compared with last year.
• With a general election in less than two years, the dearth of jobs could prove the Achilles' heel of the Modi government, rein in the high prices of essential goods and rectify anomalies in the GST. 
• RBI, in its monetary policy statement on Oct 4, reiterated the need for recapitalising banks.
• Currently 30,000 new youngsters are joining the job market every day, yet the government is creating only 500 jobs a day - Rahul Gandhi said, even as he admitted that the UPA government too faced the same challenge.
• India could have been sailing smoothly at 10% plus growth, but for the spate of disruptions, including demonetisation, GST, RERA and the new bankruptcy norms. Individually they may carry a broad range of benefits, together they have inflicted collateral damage much more than was anticipated.
• The real estate sector, which creates 1.5 million jobs, has been the worst hit. Home sales fell 26% in the Delhi-NCR in the first half of 2017 as demand nosedived post-demonetisation. Unsold inventory in the Delhi-NCR stood at 180,000 units and it will take developers four-and-a-half years to sell it.
• As many as 67 textile units are reported to have shut down across the country, rendering 17,600 people jobless.
• In Nov 2016 Larsen & Toubro sacked 14,000 employees, 11.2% of its workforce, as business slowed down and digitisation left many employees redundant. IT companies, including Tech Mahindra, Wipro and Cognizant, laid off tens of thousands of staff as global business grew tougher. HDFC Bank laid off 11,000 workers over three quarters citing digitisation. Yes Bank eliminated more than 10% of its workforce citing increased redundancy, poor performance and the impact of digitisation. Hiring intentions in corporates are 20 percentage points lower year-over-year. In the informal sector lakhs of workers go jobless as construction projects dry up given the unprecedented investment slowdown.
• Manufacturing was stuttering despite the government's high-decibel 'Make in India' campaign. Acquiring land for setting up manufacturing units continued to be tough. Private investment growth has been falling since 2012. The country still ranked a low 130th in the World Bank's ease of doing business rankings.
• India's job challenge is staggering, to put it mildly. The country needs to create 16 million jobs a year for the next 15 years to take advantage of its demographic dividend.
• In key areas like textiles, India has ceded its leadership to countries such as Bangladesh and Vietnam.
• Adding to the manufacturing woes is the implementation of new digital technologies like the internet of things, cloud computing and artificial intelligence in the manufacturing process, making traditional jobs obsolete. These technologies with a squeeze in services, are affecting IT jobs too.
• Sectors like construction, real estate, power, energy, infrastructure are destroying jobs. There has been a 30% decline in job creation since 2007-08 in these sectors.
• Short-term job creation looks near-impossible since we have been focusing on the wrong kind of manufacturing for 60 years, and are now paying the price.
• Bank credit has fallen by 50 per cent. New projects are not coming up as private investment is drying up. Focus on construction will also boost the steel and cement industry. Construction and infrastructure can boost economic activity and jobs substantially, but they have been marred by time and cost overruns. As critical as supporting giant projects is extending help to small entrepreneurs. 
• Recapitalisation of banks can also help them lend to businesses, given that bad loans to the extent of Rs 7.7 lakh crore have weakened their capacity to lend.
• IT is losing its sheen as a significant job provider, with markets such as the US becoming more protectionist. Technological advances are also rendering the work force obsolete at a faster clip. 
• This could be the right time to boost consumption through lowering interest rates or giving government subsidies to certain businesses.
• Reviving the informal sector remains the biggest challenge. It's impossible to gauge the extent of joblessness given paucity of data. There is simmering discontent waiting to explode that we must prevent. We must act now.
• The government has also increased budgetary allocations for anti-poverty programmes and rural employment generation schemes. The highest ever allocation under the MGNREGA was made during 2017-18. About 51.2 million households were provided employment during 2016-17.
• The larger debate continues to be over what India should focus on: manufacturing or services. Growth in the recent period has been driven by services, which in itself was owing to substantial inflows of foreign finance. India needs rapid manufacturing growth fueled by both export growth and expansion of the domestic market. 
• Today's joblessness is similar to that of late 1960's which prompted PM Indira Gandhi to amend Apprenticeship Act in 1973 to include training of graduate and diploma engineers as "Graduate" & "Technician" Apprentices and to mitigate their problem.
• Jobs will remain a thorn in this government's side which appears unsolvable and will have telling effect in 2019 elections. 

Good or bad aside, during UPA regime GDP growth benefited all, despite corruption and scams except 2008 global recession and 2013 economic dip. Modi riding the wave of anti incumbency and joblessness became PM in 2014 and instantly forgot his promises and commitments. He focused on foreign jaunts and blaming predecessor and did nothing for next two years. The advantage of low oil prices since 2013 was squandered away. Without even discussing with economic experts, he ventured on quack advised demonetisation and mangled GST roll out without adequate preparation and keeping away keys sectors out of GST and economy plunged into distress and millions jobs lost. Banks recapitalisation was given a miss and today banks do just retail banking only. In 2017 almost all economic parameters are worse than in 2013 and nothing much is likely to happen in next two years prior to 2019 elections. Modi & BJP are certain to pay price for their arrogance and incompetency. 

GDP Growth rate precarious

• Economic growth is caused by (1) an increase in aggregate demand and (2) an increase in aggregate supply.
• While the increase in demand is linked to consumption and requires enormous liquidity. Where as supply increase to match increased demand requires investment and easy working capital.
• With stagnant incomes in all classes resulted in demand decrease.
• With stagnant private investment and fragile PSU Banks - working capital for industries is limited and supply side is also restricted. This also restricts exports.
• With no jobs created during past three years economic activity remained stagnant.
• Jobless growth & consumer spending growth are unsustainable beyond a point.
• Infrastructure building remained stagnant.
• Demonetization impacted informal sector sector and agriculture beyond imagination and about 5 million casual jobs evaporated.
• GST roll out resulted in inventory reduction everywhere. Mangled GST badly implemented resulted in confusion and unscrupulous traders are collected higher GST and paying nothing to Government. At least 30% dealers haven't registered with GST but are actively collecting GST and pocketing the same. Cash transactions and GST evasion is on very large scale.
• China recorded average GDP growth of 10.5% during 2003-12 but remained stable at 7.4% thereafter. This despite government's investment of trillions of dollars to enhance growth, which is unsustainable.

Modi & Jaitley should understand that country's economics are complex and there is no single pill to boost GDP growth. Having destroyed racing economy with demonetization and further impacting with mangled GST roll out without adequate preparation impacting economy greatly and GDP growth is limping at 5.7% which otherwise would have been close to 10%. Now Modi & Jaitley are facing dilemma with cash starved treasury and banks, boosting GDP growth is no easy task. With prevailing indicators revival is unlikely prior to 2019 elections.

Unemployment in India

Unemployment, irregular jobs and low salaries continue to hurt India while it continues to embrace labour reforms. Around 77% families have no regular wage earner and more than 67% have income less than Rs 10,000 a month. Unemployment is higher in urban areas, among women, among educated and in agriculture sector. A society where a large proportion of the labour force is unemployed suffers from poverty and vulnerability. An increase in unemployment reduces aggregate spending power, slows down the economy and it increases the vulnerability of households to deal with economic shocks. Govt's employment through various schemes like MGNREGA, at an expense of about Rs.48,000 crores, failed to remove unemployment problem due to corruption and bureaucratic apathy in implementation. 

• Unemployment Rate in India averaged 7.32% between 1983 and 2013, with a high of 9.40% in 2009 and low of 4.90% in 2013. Unemployment in India is projected to increase to 17.8 million in 2017.
• On Nov 22, 2013, as BJP's prime ministerial candidate Narendra Modi at an election rally in Agra had promised creation of 1 crore jobs every year if his party won the election. 
  The BJP manifesto stated that “The country has been dragged through 10 years of jobless growth by the Congress-led UPA government. Under the broader economic revival, BJP will accord high priority to job creation and opportunities for entrepreneurship.”
  After three years of government formation, job creation remains the worst failure of the government as the job creation remained lowest in eight years.
• In 2015 only 1.35 lakh jobs were added, compared to 9.3 lakh jobs that were added in 2011-12 during UPA regime.
• About 15 lakh jobs were lost in the first four months of 2017 as the number of employed people came down from 406.5 million to 405 million. Each year 12 million people enter the workforce and 65% of India's population are under the age of 35. 
• Labour participation rate is a ratio of all adults willing to work, whether employed or unemployed, to the total population. This ratio was 48% in Jan 2016. It fell to below 45% in Nov 2016. Now it reached 43% in July 2017. Most Indians choose not to work. Low labour participation rate hinders economic growth.
• There were only seven countries in the world that had a labour participation rate of 43% or less. These are Iraq, Puerto Rico, Moldova, Syria, Timor-Leste, Samoa and Jordan. Labour participation rate in China is 71%. The world average is 63%. Other major countries are Indonesia with a labour participation rate of 67%, Pakistan (54%), Nigeria (56%), Bangladesh (62%) and Philippines (65%).
• In India, the unemployment rate measures the number of people actively looking for a job as a percentage of the labour force. In 2016, the country’s unemployment rate was 7.97%, with rural unemployment at 7.15% and urban unemployment at 9.62%.
• Shift in the pattern of employment from permanent jobs to casual and contract employment has adversely affected the wages, employment stability and social security of the workers.
• Why do so many Indians choose not to work? Indians are neither lazy nor rent-seekers by nature. The problem is in the lack of good jobs; in opportunities to work in a place where meritocracy rules and one can work hard with dignity and honesty for growth and prosperity. If such jobs are available in good numbers Indians will definitely choose to work.
• A jobless growth is neither sustainable nor desirable. It is a dangerous trend that creates social tension and disharmony. It spreads further inequality, which may lead to societal collateral damage.  
• It is the young who are losing jobs and it is the young again, who have stopped looking for jobs although they are unemployed. Young people are not ready to take jobs which are considered to be socially degrading or lowly. Such youngsters could easily stray into unlawful activities. 
• Causes of unemployment in India: (1) Growth of population (2)Underdevelopment of the economy (3) Slow growth in the agricultural sector (4) Defective system of education (5) Absence of manpower planning (6) Degeneration of village industries (7) Inappropriate technology (8) Slow growth of industrial sector (9) Immobility of labour and (10) Jobless growth.
• While unemployment is an important problem India faces, more serious problem is severe underemployment with workforce struck in low-productivity & low-wage jobs. Skilled people gets jobs easily and hence skill development among the youth is imperative.
• Achieving higher economic growth, in the range of 8% to 10%, is necessary to solve the problem of jobless growth.

Very few governments think about youth unemployment 

when they are drawing up their national plans ... Kofi Annan

Long-term unemployment makes a worker less employable.

Quite often the unemployed youth commit crimes to earn their living. Due to lack of opportunities in India, intelligent youth migrate to foreign countries. Their intellectual abilities are used by foreign countries which causes loss to India. Unemployment impacted organisational practices. It has resulted in unfair and corrupt practices in organisations such as low wages, harassment, fake muster rolls etc. The attitude of some private sectors towards employees is unfair on account of availability of surplus labour. Modi after becoming PM had enjoyed touring the world and delivering charismatic speeches and playing rogue politics in India. Midway the term he unleashed senseless demonetization which didn't achieve any of its intended objectives but left nation and its poor suffer unintended consequences. Thereafter, mangled and hurriedly rolled out GST is impacting economy and GDP growth like never before. Demonetization and GST are responsible for GDP growth slipping from 8.1% to 5.7% instead of growing to over 10%. 1% GDP growth loss roughly means loss of 1 million jobs. While recovery is certain after few years, in the meantime poor, peasants and lower classes are paying bitter price for no fault of theirs and for Modi's wild & blind adventures.