Does govt see a crisis as big as 2008-09 today? The Devil is in the data

The first two major economic documents of the new government -- the Economic Survey and the Union Budget -- did not contain any significant new measures on jobs.

The Economic Survey made suggestions on restricting size-based benefits to infant micro, small and medium enterprises and denying these to those MSMEs that do not grow even after years of such benefits. The suggestion is sensible but, it does not directly address the problem of jobs. Will infant MSMEs generate sufficient jobs to more than offset the loss of jobs caused by the possible shutting down of the dwarf MSMEs post benefits?

The Economic Survey is right in effectively saying that it does not make sense to perpetually subsidize small firms that fail to grow -- the dwarfs. But, this is not a solution to the jobs problem we face. Possibly, this is not even proposed as a solution to the jobs problem. But, then there are no solutions from the government on the jobs front. There weren't any direct suggestions in the BJP's election manifesto. There were none in the Budget presentations on February 1 and there are none in the most recent Economic Survey and the Budget presented on July 5.

The finance minister's speech talks about preparing the youth of the country to meet demand for skilled workers in a world that is likely to face labour shortages. But, it does not talk about jobs, directly.

The government has released the Periodic Labour Force Survey results for 2017-18 and also for urban India in the first three quarters of 2018-19. Yet, there is no discussion about these in any of the economic documents since their release.

This stoic silence is intriguing.

The monetary stance has turned accommodative. Implicitly, the greater preference for growth compared to inflation control is a positive for employment generation. Monetary policy is not known to take unemployment rates explicitly into consideration. Perhaps, it's time it did so.

What do the fiscal numbers tell us? An acceleration in the rate of increase in government spending would be a positive for employment generation. The finance minister's speech did not betray any strategic position in the matter. Besides, the speech was almost bereft of any quantitative data. It did not state what the government would spend or what would the fiscal deficit be. This was a first.

Beyond the speech are the detailed budget papers where the data can be found. But, calculating the growth in central government spending has become more confounding than it usually is. This is because the budget papers do not recognize the fiscal statistics for 2018-19 released by Comptroller and Auditor General of India. The CAG released these estimates in May 2019, more than three months after the Interim Budget had presented data for 2018-19 on February 1, 2019. Yet, the budget presented in July do not recognize these. It continues to use the data it presented on February 1 although it did have more up-to-date numbers from the CAG which were even used in the Economic Survey.

This is important because the difference between the numbers presented in the budget and those provided by the CAG is very big. The budget estimate of total central government expenditure in 2018-19 was Rs.24.42 trillion. The revised estimates presented by the then finance minister, Piyush Goyal was higher, at Rs.24.57 trillion. But, on May 31, 2019, the CAG released the fiscal estimates for the year ended earlier in March 2019. This placed the central government expenditure much lower at Rs.23.11 trillion. The difference between the estimates given by the government in February and those released by its official agency in May is a significant Rs.1.5 trillion. However, finance minister, Nirmala Sitharaman does not recognize this fall in central government spending in 2018-19 compared to its revised estimates. The budget papers presented by her stick to the earlier revised estimate of Rs.24.57 trillion.

This matters because we need to interpret the Rs.27.86 trillion that the government says it will spend in 2019-20. Should we compare these to the Rs.24.57 trillion that the finance minister says were spent in 2018-19 or should we compare these to the Rs.23.11 trillion that the CAG says were spent in the same year.

The former implies a growth of 13.4 per cent. But, the latter implies a growth of 20.6 per cent. The former would be close to business as usual. But, the latter implies a big increase in government spending of a scale not seen since 2008-09. This was when the government responded to a global financial crisis with a 24 per cent increase in central government spending. Does the government see such a big crisis today? Unlikely. But, the devil in the data must be exorcised.



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