NEW YORK: Union minister Arun Jaitley Sunday rejected criticism of giving a “jobless economic growth", saying the absence of any major social or political agitation in the last five years indicates government schemes have created employment.
In an interview to PTI, Jaitley, who is here for medical treatment, justified the absence of any major mention of job creation in the interim budget presented on 1 February, saying such budgets are different from the normal budget speeches as they are more like “a report card and a road map." “Why is it that India, in the last five years, hasn’t seen a major social or political agitation? If there is no job creation, there will be discontent. Where is that visible?" he said.
Jaitley said it is not as if “suddenly in five years the productivity levels in India have gone up that all organizations are now running with half their staff. The empirical evidence is to the contrary." There is controversy over a leaked National Sample Survey Office (NSSO) report putting unemployment rate at a 45-year high in 2017-18.
Jaitley also said questions are being raised as to how GDP increased after demonetization, as reflected in the revision in economic growth numbers for 2017-18 fiscal.
“I have been asserting from day one that it (GDP) has to increase after demonetization. There was no settled global model on what happens post-demonetization, there were no studies and therefore a former Prime Minister (Manmohan Singh) made a statement that there will be a 2% drop. And everybody else accepted this as a prediction of a prophet of doom," he said.
Demonetization, he said, compelled people to deposit almost their entire cash, or 86% of India’s currency, into banks. This meant that many cash transactions that previously went unrecorded for the purposes of GDP came on record.
“In the earlier eras, when we used to speak of parallel economy, one of the concerns was that the parallel economy doesn’t reflect in the GDP. Therefore, when all were compelled to deposit 86% of India’s currency into the banks, and now had to use cheques and credit cards for the future payments, the number of digital and banking transactions increased." He noted that money deposited in banks went to mutual funds, from there they were channelled to non-bank financial companies (NBFCs), real estate sector, automobile purchase and more capital expenditure.
“Transactions now emanating from that deposited money became recordable transactions. The anonymity attached to the owner of cash was gone. Now the owner of the cash was identified," he said.
Jaitley, who was the finance minister when old 500 and 1,000-rupee notes were scrapped overnight in November 2016, said except for a quarter or a little more, the long-term impact of the move on GDP was visible due to the deposits being made in banks and more formalization of the economy.
“But since there was no global model, off-the-cuff statements were being taken as comfortable predictions. It was a bandwagon effect where everybody started speaking without thinking. And now the proof of the pudding is in the eating," he said.
Jaitley said the GDP estimates are only estimates but tax collections are real. “Tax comes only if people earn more and spend more. If post-demonetization, in the FY2016-17 and FY2017-18, your tax collections rise from 15% to 18% annually, more than the normal range, obviously this indicates an expansion of the economy," he said.
India’s net GDP increase in the last five years is estimated to have averaged 7.6%.
“That’s real GDP. The nominal GDP will be 7.6% plus inflation. This will take you closer to 12%. If you have a 12% annual nominal growth for five years, which compounded annually constitutes the fastest growth in five years in any global economy, forget economic principles, it defies even common sense of a lay citizen that a 70-75 per cent expansion in the economy doesn’t create a single job," he averred.