The Real Economy in Two Charts

Recently, the release of GDP growth numbers for September-December 2020 quarter sparked off much celebration: after two successive quarters of decline, the GDP (gross domestic product) crawled up in the third quarter by 0.4%. There was heady talk of a V-shaped recovery, the end of recession and so on. Nobody dared use the phrase, but it was there in the minds of many – “achhe din” (good days) were here! The twin shocks of pandemic and lockdown were finally over!

But if you ask the man or woman on the street, or a shopkeeper, or a small business owner, or even a salaried person, the euphoria vanishes. So, who is celebrating and why is the common person not so happy? And, more importantly, why?

Soaring Profits

First, have a look at the chart below which gives quarterly profits (after paying tax and adjusting for prior period/extraordinary transactions) for companies listed in the Bombay Stock Exchange (BSE). These are the top companies of the country. Data is from Centre for Monitoring Indian Economy or CMIE.

The quarter ending December 2020 recorded the highest profit ever for these companies – nearly Rs.1621 billion or Rs.1.6 lakh crore. As the red line above shows, this jaw-dropping rise has taken place precisely in the pandemic/lockdown period.

This is the foundation of euphoria. And, obviously, those celebrating are the corporate bigwigs and the media that they own, besides the government, of course. Small wonder they are talking about the V-shaped recovery – their profits after tax are definitely soaring in a V-shape. In fact, they are way off the page.

Not everybody in the corporate world has tasted this same ambrosia. As CMIE’s analysis points out, much of this increase has arisen because the incomes of financial sector have grown at a healthy pace while non-financial companies are still in doldrums.

Yet profits are up everywhere. This paradox – stagnating sales and incomes, rising profits – is there because huge cost cutting has been undertaken by these companies, mainly by reducing their workforce, no fresh hiring, and reduced fresh investments. Profit has to be maintained, indeed increased come what may.

The Dark Side

Now let us turn to the other side of the picture. The chart below, drawn from CMIE’s sample survey results over the years, shows the estimated number of all unemployed persons. It includes all those willing to work, whether they are actively seeking work or not.

The number of unemployed persons stood at a staggering 5.29 crore in quarter ended December, the same period for which profits reached record levels and GDP growth rose by 0.4%.

This vast number of unemployed is more than what it was in the corresponding pre pandemic September-December quarter of 2019. Then, the number of unemployed was 4.45 crore, now it is 5.29 crore. That’s about 84 lakh persons more than 2019, representing a jump of nearly 20%.

Unemployment recorded during the pandemic/lockdown is reflected in the previous two quarters – it had touched mind-boggling heights of 7 crore and then 7.41 crore in those two quarters. Since then, as the economy opened and the hapless citizenry struggled to start earning again the jobless numbers improved. Yet they remain at unconscionably high levels.

It is not a coincidence that high profits are going hand in hand with mass unemployment of this kind. That’s capitalism. Profits are maintained at any cost even if the working people are starving in their huts and hovels.

But it also reflects the callousness and partisanship of the government. It should have taken some meaningful measures to help the people in these dire conditions. Yet all that we hear from the government is triumphalism about the coming $5 trillion economy, the bounce back, ably guided by the Prime Minister, and the endless lionising of the so called “wealth creators” of New India, that is, the corporate houses and their illustrious heads.

This is not merely unjust or immoral. It is also foolish because unless people get jobs, unless they get better wages, unless farmers get better prices, there is not going to be sufficient demand in the economy. And all the big talk of a rocketing economy is going to come a cropper. But who is going to explain this to the Prime Minister and his Cabinet?

[Data assistance by Peeyush Sharma]