Corona Diaries 21: Silly Points On Economics & Numbers

Social media, the theatre of all things absurd and frivolous, has been unusually active over the last few days. Ever since the number 20 lakh crore hit the headlines and the nation’s collective consciousness, it has been a great source of entertainment for the new media junkies. They are getting a rush of adrenaline by creating questions around the number and challenging fellow travellers across platforms to find answers.

Here’s a sampling of what’s going around: ‘How many zeroes after two in 20 lakh crore?’; ‘How do you put the number in thousands and lakhs?”; “How does it convert into trillions?” and so on. Don’t be surprised if someone puts you to an eye-test, asking you to find out missing zeroes in the number or zeroes replaced by the letter ‘O’. Since the new media’s capacity for silliness is infinite, everything is in the territory of the expected.

Numbers, particularly big numbers, have a way of bamboozling us. Not long ago, a television panelist came to grief for failing to tell the number of zeroes in a trillion. This was emabarrassing because the debate was about the country transforming into a trillion-dollar economy and he had dominated the show with his profound views. One cannot blame him much though. Our brains are familiar with the numbers we deal with on a regular basis. Beyond thousand, lakh, million or maybe a crore, our sense of count goes haywire. This is the space for specialists. The questions on the social media are, in a way, an acknowledgement of our weakness.

Now, away from the flippancy of social media, what does Rs 20 lakh crore–worth of the package to revive the corona-hit Indian economy–mean to the ordinary person? Well, since it is so big, it must be life-changing. With so much money nothing can go wrong. To hard-nosed economists it might mean something different though. They are not a tribe to be overawed by the magnitude of digits. Since they are best equipped to find the devil in the detail, let’s understand how they dissect the number and interpret other important aspects of the current crisis.

Here’s a word of caution: Economists rarely agree. Like the joke goes, for every economist, there exists an equal and opposite economist. So the similar set of facts can have conflicting interpretations.

WHAT YOU SEE IS NOT WHAT YOU GET

It is a brave package indeed, on a par with the best in the world. For a government stretched for resources, Rs 20 lakh crore–in the vicinity of ten percent of the national GDP–is a great deal. Experts, however, say what you see may not be what you get. The number is comforting, eyeball-grabbing headline material but the text that follows is more complicated. They suspect that a bit of mathematical juggelry could have bloated the number.

Several liquidity infusion measures by the RBI in the last several weeks, which account for more than Rs 9 lakh crore are part of the package. That brings down the size of the package to slightly more than five percent of the GDP. This, say the experts, would still be fine if the spending announcements made in the national budget are not merged with the big revival package. While the mood is optimistic in general, a section of economists believe, it would take all freshness out of the package. In the end, what matters is whether the money reaches the targeted sections and gets the wheels of the economy moving. Our record in this area has been patchy.

MSMES: PUTTING THE CART BEFORE THE HORSE?

The best way to stir the animal spirit in the entire economy is to kickstart activity at the bottom of the pyramid. There appears to be a broad agreement on this. That explains the government’s emphasis on the MSME sector. After all, it contributes about 30 percent to the GDP, accounts for nearly 50 percent of the country’s exports and employs 11 crore people. Of the 6.34 units, a shade above half are located in rural areas, taking the burden off unremunerative agriculture. Demonetisation of 2016 had dealt a staggering blow to the cash-dependent sector. Just as it was getting on its feet, the long lockdown kicked in. Given that most of them are micro enterprises and operate on low margins, only a handful are financially capable of sustaining beyond a month of inactivity.

A whopping Rs three lakh crore is being infused to prime up this sector. The process of revival would ride on collateral-free loans fully guaranteed by the centre among a slew of other incentives.It was long overdue, says a large section of economists. Shouldn’t the government, says another, clear their dues to help them get over the working capital pain? According to newspaper reports, government ministries and departments both at the state and central levels, and public sector undertakings owe them a whopping Rs 5 lakh crore. The recent announcement is a case of too little too late, they maintain. It might lead to huge bad loans.

Well, didn’t we say economists hardly agree on the same thing?

THE JOBLOSS CONUNDRUM

Too many young people without jobs and on the streets is a recipe for disaster. It can exact a heavy political price. Few would disgree, least so those in power. According to media reports quoting data from Centre for Monitoring Indian Economy, as many as 27 million youth in the age group 20-30 lost their jobs in the month of April alone. The number stood at 60 million for the age group 20-39. It can only get worse in the months to follow. The jobloss story in India transcends the rural-urban divide. In the worst case scenario, it can drive poverty to the levels of post-independence days. And the powers that be are acutely aware of the magnitude of the matter.

And, how have they responded? Some states have reverted to job schemes they discredited whole-heartedly not so long ago, some are busy making economic space for migrants returning to states and some have thrown labour laws to the winds. The last one is particularly worrisome since it might usher in large-scale labour unrest and prove counterproductive.

Also Read: Zomato Announces Lay-Offs, Says Number Of Restaurants Will Shrink By 25-40%

Economists, as usual, are divided. Our labour laws, they claim, are archaic and inimical to the interest of businesses and industries, and finally, growth. The country cannot afford the luxury of such laws in the time of crisis. The opposite view is, labour laws are a product of decades of hard struggle, not something created out of a vacuum. The laws keep labour-industry tension at the mimimum, thus ensure optimal productivity.

Now, where do the conflicting positions take us, the lay people? To more confusion. The writer George Bernard Shaw is supposed to have said ‘If all the economists were laid end to end, they would never reach a conclusion’. We are lesser souls. To be fair to economists, their subject does not necessarily follow the law of causation. In economics there are just too many moving parts; change in one may not lead to equal change elsewhere.

Let’s go back to social media and make fun of numbers.

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