Labour pain

In a speech recently in the US, Rahul Gandhi acknowledged that the UPA lost the 2014 polls because it could not create enough jobs. He is right. Data from the National Sample Survey corroborates his take.

No wonder then that Rahul’s American trip provoked lengthy responses from commentators close to the establishment. Of course, they knew that rubbing it in would show them up as cantankerous so they complimented his performance.

One commentator said it won’t matter in eastern UP, while another said that Berkeley and the Ivy League schools (where Rahul impressed crowds) don’t matter. I beg to disagree. I went to the University of Pennsylvania, the iviest of the Ivy Leagues and also taught there, including at Wharton and Swarthmore College.

The Ivy League and professional crowd has strong connections at home and their opinions are respected in India. In fact, they remain more often than not more connected with India than other NRIs and so should definitely not be ignored.

But instead of letting it all pass, the Empire struck back. In his defence, Manmohan Singh said liberalisation was a success. Employment is only part of the story. Outgoing NITI Aayog vice-chairman Arvind Panagariya was more direct. He said the corporate sector has performed well. Investment output and employment have been rising. He took averages to make comparisons, which are not ideal statistics for analysis of short-run perturbations because they flatten out the turns you are after. Panagariya used averages to force the argument that the blip last year and this year will be reversed.

The de-acceleration of growth in 2012 was policy-induced. So were the troubles that ensued. The economy de-accelerated and voters very correctly placed the blame on the UPA and voted it out. Rahul is absolutely correct in accepting the mistake on behalf of the party and saying that it needs to be corrected.

There is no evidence whatsoever to suggest that the economy will pick up now without policy reversals. Panagariya goes to great lengths to showcase the rose garden of corporate performance. But he is too good an economist to ignore the non-corporate sector and its importance in the economy. The corporate sector accounts for less than a tenth of the economy. The non-corporate sector is more important because it creates more jobs.

Half the problem is solved if a mistake is admitted and an amendment made. One can only hope that the so-called stimulus package will materialise sooner or later.

Some day we will get to one, or maybe two rates and have a real GST, which then, after six months, will start working the way it is supposed to. And some day, the effects of demonetisation will wear off . Until then let’s not kid ourselves and design a good old stimulus.

The writer is a former Union minister

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