Expect a more robust jobs measurement tool by end-2018: Arvind Panagariya

Q: One of the new jobs that you have been tasked with is to try and improve the way that we measure jobs in the country. Now, I know that there has been a lot of disagreement on whether we have created enough jobs, we have not created enough jobs. I am just going to go with what the government data is suggesting. If I look at the data that has been put out by the labour department which tracks eight sectors, India created 4.21 lakh jobs in 2014, 1.35 lakh jobs in 2015 and about 2.5 lakh jobs in 2016. Now if I look at what the Confederation of Indian Industry (CII) data is showing up, it shows that we created 3.7 million jobs every year in the last four years. It is like chalk and cheese. What do we believe?

A: We need to get our statistical systems in order. We have a good survey that takes place. The employment and unemployment survey. But unfortunately the frequency of that survey has been rather low. So the last one we have is from 2011-2012 and something similar has been done by Labour Ministry annually, but that also last is 2015-2016.

So the eight sector survey from which we are quoting actually is simply not suited to getting countrywide or nationwide estimates done. For most part until December, 2015, and I know you quoted data from 2014 for example, this survey actually was not even a random survey. So it is not a representative survey. You cannot convey sample results into population results, meaning into the nationwide employment figures.

So unfortunately, the labour bureau has tried to do this using certain multipliers which really are not appropriate, statistically speaking.

Q: But then, do you buy the CII number, which is saying that we have created 3.7 million jobs every year and this is based on the census data that gives the number of people employed and unemployed and thereby has a much wider base. So do you buy that as the other side of the argument?

A: We have to be careful. We have to be careful what CII is putting out also is not necessarily coming from a proper statistical survey.

Q: So that is not representative either?

A: It seems to me that they are simply extrapolating based on unemployment rates and the growth in the workforce and so forth. So that also is not a scientifically tight methodology.

Q: So what is going to be the new methodology that you are putting in place? I understand that you are almost to the final stages of putting your report on how we measure jobs in this country together.

A: We really need to fully revamp our statistical system. This was a task force which included our Chief of Statistics, TCA Anant and also the Labour Secretary and we had some experts on the committee. We also consulted with Professor TN Srinivasan who is probably the highest authority on this. So now we are going to recommend actually a full revamp. We need to have more frequent surveys. Household surveys, which will be at least annual, possibly some quarterly element to it.

We also need to have the establishment or enterprise surveys with again an annual frequency. And I think the possibilities of doing this in the next 2-3 years is all in place. So, like any new statistical system that you put in place, it takes a little while. So it is not going to happen right tomorrow, but by the end of 2018 or so, we will see a much more robust.

Q: We will have to wait till the end of 2018 to get a much more robust measure?

A: Yes.

Q: You have obviously been assessing on the basis of every data available to you on part of the government, where does the jobs story lie today?

A: I have been arguing that if you look at the good surveys that we do have which I mentioned, employment and unemployment survey is a household survey that is being done since 1970's on a relatively regular basis. And there, we actually see that the unemployment rates in India are not terribly high. If you take the liberal definition of employment then it is typically 2-3 percent. If you take the most conservative definition of employment then it is 5-8 percent.

Where I feel the jobs situation is, is that we have not created enough formal sector jobs, enough good jobs.

Q: And you believe that is where we are going to continue to feel the pressure? In fact that is going to be the situation that gets worse? I will just use the IT sector for instance as an example. We did create 3 million jobs to get to the first USD 100 billion in revenue for the Indian IT sector. But now for the next USD 100 billion, perhaps only 1.2-2 million jobs will be created. At least that is the estimation that the industry is working with.

A: I do not know. Actually the estimates I saw, this was by Saurabh Srivastava who was one of the very early heads of NASSCOM. He wrote an article within the last 2-3 weeks, saying that in the next eight years, he expects that IT sector will create 2.5-3 million jobs. And he also points out in the last three years, even if you restrict yourself to top-five companies, they have created about 5,00,000 jobs.

Q: That, they have. But this is a Nasscom-McKinsey report and I am going back to it. While the IT industry created 3 million jobs on a turnover of USD 100 billion, going forward, anywhere between 1.2-2 million will be needed to create the next USD 100 billion. This is of course a NASSCOM study.

A: No, that is different. That is simply because we are probably moving to the higher value. The way you have read to me the report, I have not seen it, but the way you read the report, it is simply saying that the next USD 100 billion will create 1.2-2 million.

Q: Versus the 3 million that was needed to create the first USD 100 billion. So because of automation, etc. there are several factors associated.

A: Perhaps, in the higher value added categories now, but that simply means that instead of USD 100 billion, in the next, if we did the first USD 100 billion, in the next 7-8 years, we ought to create maybe USD 300 billion or so. So the scale ought to be larger.

Q: So you are saying that a robust measurement of the jobs seen in India, possible only by the end of 2018?

A: Absolutely, yes. There are some other calculations that we can do faster. There are some numbers, we can count the formalisation of the labour force, that we can count in a much shorter time period meaning in a matter of months. And we can also do some count of employment created by the government schemes. There also can be done faster, but it is partial. All of these are partial.

Q: Let me move away from jobs now and talk to you about another issue and this is an issue that I know concerns you, the issue of farm loan waivers. This is not my intention to say that people should not be worried about the distress that is being caused in the agricultural sector or the distress that farmers are facing. But this is not necessarily the answer. It may be the palliative at this point in time, but this does not really address the much needed reforms that the agricultural sector needs. In your three year blueprint, in your five and seven year blueprint, the Niti Aayog has laid out a wide roadmap on what needs to be done. But do you believe this successive state governments have failed to register the kind of reforms that are required for the agriculture sector?

A: Unfortunately, this process of reforms and agriculture had been started under Prime Minister, Atal Bihari Vajpayee. And that government had brought out this model, Agricultural Produce Market Committee (APMC) Act. But it was never actually implemented in earnest. A lot of the states did adopt the model act, but they never actually implemented it in earnest.

And so, 10 years have passed, none of that happened in a major way. So we are starting there again now and so, this is the time we have to ensure, we certainly from Niti Aayog engage very deeply with the states and we take, even now, my next visit is going to be Rajasthan and I have requested and he has agreed. Professor Ramesh Chand to go along with us.

So we try to discuss with the states what specifically the states can do. These are state subjects, agriculture is entirely a state subject. So, we need to certainly do those reforms.

Q: So, in the short-term, what is it that you will recommended at this point in time to try and alleviate the pain that is being felt in the IT sector?

A: The fix we really need is getting the farmers better prices, more remunerative prices. And that is a reform that can be, in principle done really fast.

Q: So why haven't the BJP run states at least moved towards that reform?

A: Some movement has happened. Like the Electronic National Agriculture Market (eNAM) is an initiative very much in that direction and some increase has been through minimum support price (MSP) also. But remember to move in a big way, you also need financial and fiscal resources. And ultimately, of course, the state governments have to take the initiative.

Q: So do you believe that the projections that you have laid out as far as growth is concerned and those are of course, long-term projections. But in the short-term, the agri distress is going to further bring down, weigh down on growth.

A: Growth is not the big issue here because agriculture in terms of the gross domestic product (GDP) the share is not so large. But it is in terms of the people it impacts. There are so many people employed in agriculture and dependent on agriculture. So that is really the much bigger issue. I certainly think that at least finally the agricultural growth seems to have shown good progress in this last year, and the monsoons this year have been good also. So we should see actually coming up. So again, I return to the prices. The farmers need to get those prices.

Q: Are you worried about the path to fiscal consolidation, given the fact that we have now got four state governments announcing farm loan waivers and anyway, the fiscal situation of state government is not particularly great at this point of time, on account of several issues including the Ujwal DISCOM Assurance Yojana (UDAY) bonds.

A: For economists, fiscal consolidation is important. So when anything that stresses the finances is something that the economists worry about. On the other hand, I also understand that a lot of this has political salience and when particularly this concerns the farmers that are very small farmers, nearly half of our farmers really work on farms that are half a hectare. So these are by no means well to do farmers. So, there is the other side to it. And certainly the political leadership has to respond to some of these things sometimes.

Q: Speaking of political leadership and response on the NPA front, we now have 12 stressed accounts that have been identified by the RBI that will now move towards insolvency proceedings. How confident do you feel that we are going to be able to arrive at some sort of quick resolution?

A: For the first time, I feel quite optimistic that we are seriously and sincerely moving towards a resolution of these assets. I think we should have moved on this earlier. I have been arguing it internally for sure, but nonetheless, the fact that finally we have taken some bold moves -given the RBI the necessary powers, this time, I do feel that we will see progress.

Q: Speaking of bold moves and this is one of the recommendations that the Niti Aayog has made is strategic divestment. You have put a list together which doesn’t seem to have seen any forward movement despite the fact that we keep talking about it every few months and you are still hopeful that it will go through. Now there is talk that Air India could be the first on the strategic divestment block. Do you believe that government should give up management control altogether or do you believe that government should perhaps continue to hold certain amount of equity in Air India?

A: I think now where Air India stands, it is almost a matter of existence. The debt is already about Rs 52000 crore. We are adding about Rs 4000 crore of debt every year. So, this is simply not sustainable and in the end, the airline does need to go with management in the private hands.

I think it is time now, this is a problem actually – successive governments have sort of recognised but failed to act on it. I think the Prime Minister is bolder, he is more decisive.

Q: You are saying privatisation of Air India is what Niti Aayog has recommended, give up management control is what Niti Aayog has recommended. Niti Aayog has also recommended I understand writing off a significant portion of the debt, which would be crucial as far as the private investor is concerned?

A: At this stage our report really is confidential and it will not be appropriate for me to speak about the contents of the report.

Q: Has the government started to reach out to private sector players?

A: My sources information on that are as same as yours. You probably have better sources.

Q: Do you believe that within this year we could see resolution on Air India?

A: Yes, something should be happening this year. We are in June, so there are six months to this year. Remember that whether actually something happens or not also depends on the buyers and all but from the government side we should see action most certainly within coming six months.

Q: The last conversation we had was at least a few months ago. You said you were hopeful in Q1 of this financial year we would see strategic divestment take off. We are almost there, what is the situation?

A: This fiscal year we are still in Q1. So, let us not be pessimistic. Certainly one thing I am sure you have noticed that Finance Minister himself actually has made a very strong statement, which he had not done till last year. So, he made a pretty strong statement saying that we need to privatise and that was not only in the context of Air India but in general he had said so.

Q: You believe privatisation is going to get a leg up in the next few months?

A: After the Finance Ministers statement, I feel quite optimistic now.

Q: I understand that again this is something that Niti Aayog is working on – some sort of mechanism to try and aid the construction sector out of the current problems. Has that mechanism been arrived at?

A: Yes. Quite a few resolutions have actually happened.

Q: Not the previous measures that were already announced for the construction sector, this is more to do with the real estate sector and the pending projects that have been stuck, so some kind of gap funding for real estate developers being worked out?

A: That one I am not sure.

Q: How do you feel about the way the Indian economy is shaping up? The numbers at this point in time very clearly suggests that there was an impact on account of demonetisation even though TCA Anant would not want to correlate that exactly. Do you feel that with the advent of GST as well that perhaps at least over the next few months we could see an impact on growth?

A: On the impact itself let us be clear that when you say that there was an impact, you move the goal post quite a bit. Now you are saying was there some small impact or not. If the growth rate was 8 percent in 2015-16, 7.1 percent in 2016-17, so you can infer whatever you want to infer. However, the fact is that the messiahs of doom were all saying that the growth rate will decline by 2 percentage points or more. That certainly did not happen. So, I stand by my earlier statements on this subject.

Looking to the future I certainly think there will be some teething pains as we implement the GST but this is a very important, major game changer reform. I think in terms of longer term trajectory by which I don’t mean 3 or 4 years later but in about another year’s time I think this will really have a major impact because finally we have laid down the infrastructure for creating a single market in the country for every single product.

Q: Prime Minister Modi is headed to Washington to meet President Trump over the weekend and while we can talk about whether H1B is likely to be the big focus area etc. My sense is that perhaps it may not because the US sees this as an immigration issue and not as a trade issue. Do you think it would make sense for India to really take up the H1B issue in a big way on this visit?

A: I suppose we will raise it. There has been some movement on the US side also. I think a bit more conciliatory statements coming out of the United States also. That being said I suppose if I were to speculate and this is pure speculation because I have no inside information, what might turn out to be the subject of the two leaders talk is terrorism. I think that is where the two countries do see eye to eye and our interests are better aligned but that is pure speculation on my part.

Q: You believe that this is going to be something that India will want and perhaps also hope that there will be a strong message that comes in from the Trump administration on this, especially to do with Pakistan?

A: For our Prime Minister the fight against terrorism is a major subject. Two subjects which are outside my area really that he has pushed very hard on is one corruption, and that is an issue that he actually first broached at the Australia G20 and that has led to a lot of the movement actually within the G20 since then.

The other one on which the Prime Minister really has invested a lot is combatting terrorism. I think that is a very important international agenda item for him.

Q: What about trade because President Trump in his speech has also without naming India raised the issue of certain countries which have very high tariffs in the context of Harley Davidson and we know that he was talking about India. However the view in the US is that while we have opened up significantly on FDI, on the trade side not so. On the trade side the view is that India continues to be extremely protectionist.

A: I wouldn’t say extremely protectionist because all our tariffs as far as industrial goods are concerned are 10 percent or less.

Q: You have been asking for 7 percent?

A: I have been asking because I would like us to return to trade liberalisation. The last we liberalised tariffs was in 2007-08 and then the UPA government also stopped at it and we to some degree lost a bit of the momentum. So, this is part of the reason we have also written in our external agenda, that we ought to unify the tariff rate at around 7 percent. There are more reasons for why we made that recommendation because it also then takes out the inverted tariff structure from which we suffer currently. There is room for liberalisation but we are pretty liberal economy now. There was a licence required for every product to be imported, the average tariff used to be 165 percent, highest tariff was 350 percent. So, we are down to the highest tariff on industrial goods being 10 percent now. So, we have liberalised but we could do a bit more.

Q: Let me end by asking you in terms of what the priorities are going to be at the Niti Aayog. Post the going public with your plan, there has been a lot of talk on whether this is old wine in new bottle, whether the Niti Aayog is emperor in new clothes and so on and so forth. But as you go about now, hoping to execute what you have laid out as part of this plan, give me a sense of what you expect will be the low hanging fruit that should hopefully get done this year.

A: First, in India, we have very free entry on commenting and no exit whatsoever.

Q: That is the case everywhere, isn’t it? Comments are free,

A: And particularly, in the age of social media, everybody comments. So even those who have not read the three year action agenda do the commenting. So I would urge your viewers to actually read this document and read the prior documents that have existed. You may or may not like this document, but it is not the same as the old document. That I can assure you. These are very different documents and it is only 200 pages.

Q: Only 200 pages, yes.

A: If you compare the five year plans used to be in three volumes. But now of course, we unlike in the past, the way the plans were done, we have interacted closely with the ministries, closely with the states. So we also have a good deal of sense of where the ministries are headed, where the state governments are headed.

So to some degree, this three year action agenda reflects the priorities. Therefore, I am much more hopeful. It is really how somebody describes the difference between the Chinese approach to planning and the Indian approach to planning that the Chinese basically, the order would come from the top that these are the things that the government wants to do, lay out a plan, how we should do it.

In contrast, in India, basically the planning commission would sit down and do its plan rather than the government telling that this is where we are headed and therefore. And so the implementation therefore, with the five year plans had become weaker. We actually have done exactly the way I have described to you, the Chinese approach.

We have talked to the government what the government plans to do, we have talked to the states what they plan to do and that is the basis on which we have written. We have certainly not been passive, meaning there are certain things that we have advocated proactively. So we have tried to push the frontier a bit.

Q: This year what is it that you would like to at least take forward from the plan that you have put together?

A: Not a single thing. There are a number of things. We have proposed moving on all the fronts. We have been moving on the medical reform, this is happening. We are currently working very actively, just as we speak on the higher education reform. So we would very much like to move on there. We have been pushing very hard on the APMC Act reform and we very much hope that we will be moving on that.

So there are a number of fronts on which, at the moment has to happen. Coastal Economic Zones, about which we have talked. There is some movement on those as well. So we will see movement happening along all dimensions.

Q: And you feel confident?

A: Absolutely.