September 30, 2022
  • September 30, 2022

P Chidambaram writes: They love unemployment and inflation

By on September 10, 2022 0

Last Sunday, the Congress party organized a “Halla Bol” rally against unemployment and inflation. It is believed that everyone suffers from unemployment and inflation. It is believed that everyone is determined to reduce unemployment and inflation.

I’m sorry to have to pierce these widely held (false) beliefs. There are sections of the population and – hold your breath – parts of the government who are content with raging unemployment and runaway inflation and who will do everything possible, covertly, to keep the flags of unemployment high. and inflation.

Let’s start with ‘Who likes unemployment?’

Business and government

Companies love unemployment. Since there are so many people looking for a small number of jobs, the bargaining power of job providers is high. Consequently, wages are depressed. The salary increases are ridiculous. For example, agricultural wages increased by less than 3% in 2021-22 despite a higher rate of inflation. The average monthly income of a farming family in India was

Rs 10,213 in 2019 (source: ES 2021-22), barely enough for 4-5 members for food, housing, clothing, education, health and recreation. The bargaining power of wage-earners — even of the self-employed — being weak, the average income of a family increases only marginally. In times of slow growth or recession, the situation worsens for the average family.

Public recruitment agencies and public sector companies love unemployment. When there are thousands of applicants including graduates and post-graduates for a few hundred lower grade vacancies, the appointing authorities gain tremendous power and discretion. Brokers flourish, money changes hands, scams happen.
Because job seekers outnumber jobs, there is increasing casualization and informalization of jobs in the private, public, and government sectors. Labor welfare laws are rejected. The trade union movement is considerably weakened.

Crime syndicates love unemployment. There is a large catchment area for recruiting riders for drug trafficking, smuggling, illicit liquor trade, illegal betting and gambling, human trafficking, and other similar illegal activities.

Let’s move on to ‘Who likes inflation?’

Tax collectors and sellers

Tax services and tax collectors love inflation. Month after month, tax collectors report a “new peak” in tax collection, for example the collection of the GST. They never report the inflation-adjusted number. In August 2022, the GST collection was Rs 1,43,612 crore (compared to Rs 1,12,020 crore in August 2021), but adjusted to the average inflation of the last 12 months, the actual value of GST revenue does not was that of Rs 1, 33,559 crores. In the case of ad valorem taxes, even holding tax rates constant, the tax collector can reap a windfall.

Budget makers love inflation. Figures in budget documents are in current prices. Allowances are in current prices. Thus, the budget holder can claim that she has allocated more money in the current year than was allocated the previous year. Few citizens will adjust to inflation. For example, adjusted for inflation, 2022-23 budget allocations for defense, fertilizer, food, agriculture, energy, health, rural development, and urban development were lower than revised estimates. for 2021-22.

Public debt managers love inflation. Since the debt is borrowed and repaid at current prices, the rate of inflation depresses the value of the debt. The borrower actually repays less than he borrowed.

On the above, note that the Minister of Finance has declared that inflation is not his priority concern!

Sellers like inflation. MRP is increased significantly, although input costs may have only increased moderately. This is particularly the case in the case of essential goods. For example, milk prices have recently been sharply increased across India by both state and private dairies.

Exporters love inflation. For every dollar of export value, the exporter will earn more rupees. Of course, in the case of import-intensive exports, the windfall will be less.

Lenders like inflation. This is an opportunity to raise interest rates, even if the cost of money has not risen proportionately.

Companies, especially big companies, duopolies and oligopolies love inflation. They gain greater pricing power, especially in the case of price-insensitive goods and services. For example, if you have to fly from Delhi to Chennai tomorrow, you have no choice but to shell out up to Rs 50,000 depending on the travel class. The “dynamic pricing” facility has enriched the airlines, Uber and Ola, and the public railways. If you doubt the claim, please see private company profit & profit statements for 2021-22 and quarterly statements for the current year.

Entrepreneurs love inflation. Old estimates will be revised. Price overruns will be easily justified. The price offers of new contracts will be increased.

All political parties

Editorial writers love unemployment and inflation. If an editorial writer is too lazy to think of a new whipping horse or donkey, he can take an old editorial on unemployment or inflation and rearrange the paragraphs. No one will notice the sleight of hand because no one reads the editorials.

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And finally, the ruling parties and the opposition parties love unemployment and inflation. In the hands of the opposition, they are useful sticks for beating rulers. The slogan will be “Modi hai, to mehangai hai” and “Modi hai, to berozgar hai”! The ruling party will turn around and say “my unemployment and my inflation are better than yours!” »

A day may come when everyone loves unemployment and inflation.