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Wednesday, 10 April 2013 00:00
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Jobs, trade, even IIP numbers look iffy

 

Anyone who has read the Economic Survey, or heard various government functionaries over the years, knows that India is experiencing jobless growth, or near-jobless growth at least. As compared to an economic growth of 7.9% per year over the last decade, the Economic Survey tells us, total employment in the country in both public as well as private sector jobs grew by just 1.6% per year. At $32.5 billion for Q3, India’s current account deficit (CAD) is equally problematic, and at 6.7% of GDP, it is the highest India has ever seen in its history. Both facts call for some serious policy action.

But what if the data was wrong? TV Mohandas Pai and Rajesh K Moorti, in FE yesterday, showed major lacunae in the manner in which the employment data has been calculated. The duo took the records from the Employees’ Provident Fund Organisation (EPFO) since that keeps data for all companies that have more than a certain number of employees. Since the government keeps its own provident fund, the EPFO data pertains only to the private sector. After discounting this since there is an element of double-counting, it turns out India’s employment growth in the decade was lower than GDP growth, but at 7.4% per year, there is no way India had jobless growth. In other words, many of India’s policies – such as the lack of an exit policy—have been predicated on incorrect data. In the case of the CAD, a lot depends on what you take as oil imports in Q3—$44 billion as the DGFT data puts it or $39 billion as the petroleum ministry says it is. And just some months ago, the government quietly lowered its estimates of exports for FY11—copper exports were cut by half and passenger cars by around a fifth while raising miscellaneous exports over three times to make good the difference. Why the government did this is an interesting story. A research report from Kotak found that while engineering exports had risen from $38 billion in FY10 to $68 billion in FY11, exports of the country’s top engineering firms had risen just 11% in rupee terms in the same period. Indeed, the data showed exports of automobiles dramatically in excess of those exported by the top automobile manufacturers; it even showed exports of aeroplanes, railways and ships. Of the increase in exports, just a fourth went to the top 10 export markets. In the case of the IIP, similarly, capital goods data had become so volatile, researchers started stripping this out while reporting IIP—in July 2011, removing insulated cables and wires from the index saw capital goods rising just 0.3% instead of the 63% reported. There are several other such instances of senseless data—at times the WPI and CPI appear to be reflective of two dramatically different economic realities—that a lot of economic policy making, including by RBI, is nothing but shooting in the dark. That’s an issue where progress continues to remain poor.

 
 

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