He was not in favour of the demand to cut personal income tax as it would affect a very limited section of 30-50 million people who anyway were high savers and, therefore, only a small percentage of what they saved in tax would be spent on fresh consumption.
Terming the economic situation as “very bad,” Sen said that post 2016-17 India’s economic statistics measuring GDP growth were “largely guess work”. This is because the informal sector, which is said to be 45 per cent of the economy, is measured on the basis of a projection of the performance of the formal sector. At a time when no one knew how badly the informal sector had been hit by demonetisation, this projection could be entirely wrong, he added.
While he was in favour of land and labour reforms, the present economic crisis is the wrong time for labour reform, Sen said, adding giving industrialists the right to hire and fire would lead to substantial proportions of their workforce being laid off and that would only add to the present crisis. He said such reforms should be done after the economy had recovered and not at a time when it’s in the doldrums.
He expressed concern about youth unemployment, which according to recent surveys had jumped from 9 million in 2011-12 to nearly 25 million in 2017-18. He said the problem of youth unemployment
had been exacerbated by the impact of demonetisation on the informal sector. This was because most young people first found jobs in the informal sector and then, after a few years of training, hoped to move into more formal areas of the economy. However, post demonetisation the informal sector had stopped hiring. This meant that for the last three years, young people, who would have obtained jobs in the informal sector, had been left unemployed, Sen said.