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Home / Opinion / Views /  Shiny GDP data masks anxieties of a silent population

Richard Thaler, who won the Nobel Prize for Economics in 2017, once famously said: “In the 1940s, economics started getting highly mathematical. It was basically because economists weren’t smart enough to write down models of real behaviour that they started writing down models of highly rational behaviour—and they kind of forgot about humans." Now that India’s gross domestic product (GDP) figures for the second quarter of 2021-22 ending 30 September are out, economists, analysts and pundits appear to have gone into paroxysms of number-crunching. Every decimal point is being fought over, as if the future of Indian civilization revolves around the axis of 10 basis points up or down.

At C-Voter, our team brainstormed about how to gauge the real feelings and opinions of ordinary Indians over their family finances and financial future. This happened soon after Bibek Debroy, chairman of the Prime Minister’s Economic Advisory Council, expressed complete confidence in an interview to Mint that GDP growth in the current fiscal year would be around 10%, hinting that it may even touch 11%. Did ordinary Indians, from delivery agents and private school teachers to marketing managers, shopkeepers, doctors and accountants, among others, share this optimism? A special poll with clearly defined questions was conducted across India that involved more than 3,400 respondents.

A confidence crunch
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A confidence crunch

As the chart and explanations alongside show, there seems to exist a wide gulf between the expectations of economists and policymakers, on one hand, and ordinary households on the other. Both may be right in their own ways. But survey findings indicate that the ‘average Indian’ is nervous and uncertain about his or her family’s financial future. This Indian does not seem willing to spend, forget about splurging, is still fearful of a job loss, and is not very confident of a rise in family income next year. This should be a sobering lesson for policymakers. Shorn of jargon and gobbledygook, simple economics suggests that people will not spend if they are uncertain or pessimistic about the future. Ergo, if the wheels of commerce don’t spin faster via increased spending overall, how can high GDP growth rates be sustained?

The first question asked was: Compared to last year, how optimistic are you about your family’s economic condition this year? The answer would shock pundits who are gung ho about the Indian economy. More than 67% of the survey’s respondents said they expect it to remain either the same or deteriorate this year. In fact, more than 67% of National Democratic Alliance (NDA) voters felt the same. Only 32.6% were optimistic of better times. Experts may point towards massive infrastructure development plans, pump-priming efforts and much more, with hard numbers to back them up. But human feelings and sentiments don’t always depend on cold numbers, as Richard Thaler would probably have said.

The second question was: Compared to last year, how much did you spend during the festive season this year? Less than 20% of our respondents said they spent much more than last year, 32.1% said they spent the same amount, while as many as 48.2% said they spent less this year. If you’re surprised, two sets of data should wake you up. A November press release by the Society of Indian Automobile Manufacturers states that passenger vehicle sales in October 2021 (at the peak of our festive season) were almost 18.9% down, compared to October last year; okay, chip shortages did play a role in this, but the data point is noteworthy. Further, various agencies and research outfits tracking mobile phone sales said that smartphone shipments declined by about 5% in the July-September quarter of 2021-22 from the figure achieved in the same period last year.

The third question asked was: Compared to last year, what do you think about the threat of job losses this year? About 28.5% respondents felt the threat has decreased significantly, while 33.1% felt the threat had worsened. This is not solely sentiment. Centre for Monitoring Indian Economy (CMIE) data for this year suggests that unemployment has hovered between 11.84% in May 2021, when the second wave of covid infections was ravaging the country, and 6.86% in September 2021. Besides, if you see relatives, neighbours, friends and general acquaintances losing jobs, you will get nervous.

The fourth question posed was to salary holders: How optimistic are you about getting a decent salary hike next year? Now, 2022 is in the future and ordinary Indians would be driven by their gut feeling on this, rather than statistical models. Just about 20% said they were sure of a decent salary hike next year, while 41.3% felt they had no chance of a pay hike.

The fifth question was addressed to business persons: As a business person, what are your expectations about your income in the next year? Compared to most other folks, business people do pay more respect to numbers. And yet, only 19.5% expected a significant rise in income next year, while 38.4% expected their incomes to go down. One example will show why. Arvind Khurana, president of All India Mobile Retailers Association, which represents some 150,000 shops, claims there has been a 50% drop in sales this Diwali.

What do these numbers suggest? First, that Vir Das, a so-called stand-up comedian, is right about the existence of two Indias. Second, sentiment among consumers, households and small businesses need to improve sharply, and quickly too. How can that happen? It all boils down to human psychology. But to quote Richard Thaler again: “The sad truth is that many behavioural economists know very little about psychology."

Yashwant Deshmukh & Sutanu Guru are, respectively, founder & editor-in chief, and executive director of C-Voter Foundation.

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