'Pakorawallah' and Modi's mind game for elections 2019

   

On Nov 21, 2013 while addressing election rally in Agra, BJP's Prime Ministerial candidate Narendra Modi promised to provide one crore jobs to the youth of the country, if voted to power at the Centre. He became PM in 2014 and at the end of his 4 of 5 year tenure, Modi stares at elusive jobs against the backdrop of debacle of his disruptive reforms like demonetisation, GST etc and growing realization that the government will not be able to create formal jobs for over 6-7 million joining the country’s workforce annually. In 2016-17, actual jobs created were just 4.1 lakh as against the BJP’s electoral promise of creating one crore jobs annually. Unable to destroy non-tax paying informal sector and expanding tax paying formal sector, Modi is now embracing informal sector for his 2019 electoral campaign. 'Pakorawallah' is an indication of his newest mind game.

• Creating jobs is India’s biggest worry and it will only get worse. 
• India is expected to have 100 crore people aged between 15 and 64 years of age by 2027, which means the world’s largest and youngest workforce. As the economy progresses, millions of people employed in low productivity farm sector will have to be moved to higher-productivity non-farm jobs. Barring China, this scale of migration has no precedent in history.
• India’s self-employed is and will remain humungous. Self-employment is common in India. Sometimes, it is out of choice but more often it is out of compulsion. 
• They represent 47% of India’s 470 million workforce. They include street vendors, rickshaw pullers, carpenters, plumbers, chaiwallahs, grocers, taxi drivers, doctors, accountants, pakorawallahs etc. Most of the self-employed are below the economic radar. 
• The scope of tax evasion makes informal sector even more attractive. 
• They are homeless, office-less and unbanked. They are vulnerable and footloose and live on the fringes. They rarely figure in government policies or statistics, or even statements. 
• Self-employed is not a homogeneous group. Income instability is their biggest problem. One serious illness can set them back by several years.
• With economic growth regular and casual workers have risen while the number of self-employed has dipped. ILO says 77% of Indian workers will be engaged in vulnerable employment by 2019.
• Last month, self employed pakoda sellers made headlines when Modi said, “Youth selling pakora outside… and earning Rs.200 a day also means creation of jobs.” 
• The Economic Survey 2018 defines formal employment as, one, where the employers are providing some kind of social security (like EPF and health or life insurance) to their employees, and, two, where firms are part of the tax net. According to the first definition based on social security, 31% of India’s non-agricultural workforce, 75 million out of an estimated at 240 million, have formal employment. According to the employers-in-the-tax-net second definition, 54% (or 127 million) of the non-agricultural workforce is in the formal sector. What is it Modi is trying to convey by redefining 'employment' with his own way?
• Mudra loans are disbursed for non-agricultural activities, including dairy, poultry and beekeeping. 90% of the loans to over 10 crore beneficiaries in last three years were under the ‘Shishu’ category averaging Rs 43,000. Labour ministry might be working out a formula under which 40-50% of the 104 million beneficiaries of the Pradhan Mantri Mudra Yojana could be bracketed as employed.
• If India has to progress, mainstreaming its 470 million self-employed will be an important stepping stone. Modi knows that confronting unemployment head-on rather than sidestepping it may be a smarter strategy.
• India’s IT industry is in a crisis, with technological changes forcing them to pivot or perish. Almost 65% of its 4 million IT workers are not retrainable and runs the risk of losing jobs.
• The degree of disruption technology will cause, with the automation wave is certain to cull jobs. 
• If we want growth with jobs, the push has to be on small industries, and not on the middle or the top. But the biggest beneficiary of initiatives like 'ease of doing business' will be the MSMEs who also bear the biggest brunt of the inefficiencies in the system.
• India's employment elasticity – number of jobs created per percentage of GDP growth — has been among the lowest. It is now declining – from 0.3% between 1991 to 2007 has halved today. This is mainly because India’s growth, dominated by the services sector and not labour-intensive manufacturing, has a bias for skilled workers. 
• The majority of India’s workforce is engaged in informal, unorganised, low-income, low-productivity jobs. This is not self-employment. This is self-exploitation. They need to be moved up from 'subsistence-based livelihood' to 'good self-employment'. Policy makers should focus on increasing formal wage employment and good self-employment. 

The Modi government, in its last year, is short on time. And India’s job seekers short on patience. In politics, perception management is as important as the change on the ground. Modi government likely to lean 'more on perception management' with narratives, publicities and media management rather than any change on the ground to face general elections in 2019. 

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Political language makes lies sound truthful and murder respectable but Modi must remember that he can't fool all the people all the times despite his oratory skills and media management. Voters have their own way of understanding what is good for them and whom they should vote. Narratives and money power works some times only. Rajasthan bye poll results has already sent spine chilling message to Modi which is reflected by Amit Shah's lackluster postmortem analysis. Surfacing scandals is another cause for worry for Modi. Above all rising graph Rahul Gandhi gives him sleepless nights.

Why do we need economic growth?

Most things don’t grow forever. If a person grew at the same rate for his whole life, he’d become gigantic. Yet most economists are united around the idea that the economy needs to grow, always. And at a high rate, for the good of the country and its people.

• Economic growth is the increase in the goods and services produced by an economy, typically a nation, over a long period of time. It is measured as percentage increase in real gross domestic product (GDP) which is gross domestic product (GDP) adjusted for inflation. The economic growth every year is essential to a country’s stability and prosperity. But some economists argue that it makes more sense to focus on measures of well-being than growth.
• Maximizing growth doesn’t necessarily help people, but also that rapid growth can itself come at a cost, such as when the pursuit of growth is used to push through policies that are expected increase the GDP but may have negative consequences for millions.The pursuit of growth can be quite dangerous. The welfare of a nation can scarcely be inferred from a measurement of national income.
• For a developing economy where the basic need isn’t met and growth is necessary for more food. Economic growth in a developing economy can go a long way to improving living standards. When people are living in poverty, they experience a deprivation of basic human needs, such as food, shelter, education, basic health care. Economic growth can enable many of these basic needs to be met and this economic growth can radically increase living standards among those countries.
• It's an election winner. Politicians see growth as very important. Elections are won or lost on the state of the economy. Look what happens if growth disappears and recession looms. People get very concerned about falling incomes and rising unemployment. 
• If poverty is to be relieved and the rich are not to be made poorer, then growth is necessary. Making the poor richer is not easy and there are many political obstacles in the way. But at least growth makes it easier.
• When real incomes are already quite high, economic growth can have a marginal impact on living standards. There is a strong diminishing marginal utility to extra income. 
• Economic growth is driven by technological improvements, which reduce the costs of production and enable more to be produced. This technological progress in many ways feels an inevitability. How could you stop this technological progress? Technological improvements have particularly improved the productivity of agriculture and manufacturing. This means we can support ourselves with a smaller % of the workforce on agriculture and manufacturing. Many of new jobs are in service sector.
• In theory, economic growth should enable people to work less, enjoy more leisure time and would enable to retire earlier, if they are able and willing.
• Increased GDP offers the potential for higher living standards but certainly doesn’t guarantee it because of uneven distribution and how it is used. GDP measures activity in the economy, but there’s no way to know whether that activity is actually good for society. The BP oil-rig explosion, which killed 11, and the subsequent spill, which leaked 3 million barrels of oil into the Gulf, actually lifted GDP because of the amount of money spent cleaning it up.
• Economists often say that without growth it will be impossible to address income inequality. But even with growth, there’s no guarantee that inequality will decrease. The economy’s current trajectory is of increasing inequality. Economic growth leads to the depletion of resources - a problem that's likely to get worse as world population and world consumption grows.
• One of the biggest sources of rising expenditure in western economies is health care. There are simply more things that can be treated. Also, there is the irony of having to treat diseases of affluence (such as obesity, heart attacks, cancer etc).
• Economic growth will not solve the fundamental problems of human psychology / behaviour. It can increase sense of inequality. Growth will not reduce the incentives to cheat and steal. It does not make people more charitable and good-natured.
• Environmental problems facing humanity, economic growth could exacerbate these issues and reduce living standards.
• Some of the most content people in the history of the world got by on a lot less. Some saints have argued they were much happier when they forsook their wealth.
• Rather than worrying about increasing real GDP, we could spend time promoting greater social harmony.
• The point is that life is a struggle for most people in developed economies, and technology and increased efficiency has not done much to fix that over the last 40 years. No doubt there are a few that have enjoyed increased leisure time, but at the expense of the masses.

Do we need economic growth? Not really. But, if managed well, it doesn’t have to do any harm and gives the potential to make improvements in our material well-being. Needless to say, economic growth is far from the panacea to make society better. It is a neutral component of human well-being. There’s nothing wrong with targeting economic growth as long as you are aware of its imitations. Governments and society need to be judged on so much more than simply whether their economies are growing.

We have to find a way to make the aspects of capitalism that serve 

wealthier people serve poorer people as well.

If money is your hope for independence you will never have it. 

The only real security that a man can have in this world is a reserve of 

knowledge, experience, and ability ... Henry Ford

Money has no utility to me beyond a certain point ... Bill Gates

For India with large number of unemployed youth, economic growth is the only way to create enough jobs and security. The present phenomenon of jobless growth is unsustainable. The current trends of economic growth are also associated with increased pollution, over exploitation of non-replenishable natural resources, destruction of ecology etc is a destructive growth. Additional wealth created is grabbed by top 10% wealthiest people. The disparity between rich and poor is widening. This kind of growth is absurd. In an ideally developed world all people should be equal, even though perfection is unachievable. We need to grow to accommodate ever rising population.

Demonetisation brings manufacturing to a halt

Auto Spare Parts Sector Takes Beating

Dec 19 2016 : The Times of India (Hyderabad)

About 30,000 units manufacturing auto mobile spare parts and about the same number of agro based industrial units have shut shop post-demonetisation with orders drying up. About 1.5 lakh MSME units (all segments) lined up along Jeedimetla, Balanagar, Shahpur, Maheswaram, Adibatla, Quthbullapur, Dulapally , Kukatpally and Cherlapally are on verge of shutting down operations after facing huge losses over the past one month. Also small players in retail textile, food processing and plastic industry are also bearing the brunt of demonetisation.

Despite the announcement that banks can give upto Rs.50,000 to commercial establishments, banks are not giving that amount. “The worst hit among the lot are the micro units with turnover of `10 lakh to `50 lakh. Also MSMEs across segments are hit badly. In most of these units, the workers are hired on a daily basis.“ added Gowra Srinivas, senior vice president, Federation of Telangana and Andhra Pradesh Chambers of Commerce and Industry .

Since the `micro' industry completely runs on cash, be it placing of orders, transportation, payment to workers or purchase of raw materials, units have seen between 50 to 70% loss of production over the month.“I am unable to pay to my labourers as none of them have bank accounts. They are refusing to come to work, forcing me to suspend operations,“ said Shaik Hussain, accessory manufacturing unit owner from Balanagar.

“With production at the manufacturing units dipping, the supply has gone down. Moreover, even the transportation network which operates only on cash is hit. In the whole process, I am unable to supply to my clients. I have not only lost a number of orders but even reputation in the process.“

My View:

The overall impact could be well over 1,000,000 people. Modi & Co wants brings these people into formal economy and tax them. What a ridiculous idea! 

While they don't pay income tax only they pay all indirect taxes levied on consumption. Even if Modi & Co decides to tax them, it will be meager which produces much work and little gain.

Modi as leader of the nation should realize the realities of the nation before heeding to the funny advises of economic pundits living in ivory towers about avenues to maximize tax revenues.