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India’s Population Bomb and the Surprising Truth Behind It

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Debates on many issues in India, ultimately boil down to India’s huge population.
During the course of such debates, many educated Indians feel that India’s population is responsible for a bulk of its problems and needs to be controlled.

They are unable to distinguish between India’s huge population and the need to control it. Allow me to explain.

As per the National Health Survey of 2015-2016, the fertility rate in India stood at 2.2. This basically means that on an average 1000 women have 2,200 children, during their child-bearing years. In 1981, it was at 4.5. In 2001, it was 3.1. Slowly but steadily, things have improved on this front.

People have fewer children once they see their children survive. The infant mortality rate, or the number of infants who die before reaching one year of age for every 1,000 live births during the course of a given year, has been falling. In 2016, the infant mortality rate in India stood at 34. In 1996, this had stood at 75.

As Hans Rosling, Ola Rosling and Anna Rosling Rönnlund write in Factfulness—Ten Reasons We’re Wrong About the World – And Why Things Are Better Than You Think: “Parents in extreme poverty need many children… for child labour but also to have extra children in case some children die… Once parents see children survive, once the children are no longer needed for child labour, and once the women are educated and have information about and access to contraceptives, across cultures and religions both the men and the women instead start dreaming of having fewer, well-educated children.”

In the Indian case, while we can debate the well-educated bit, surely parents are having fewer children.

As mentioned earlier, the fertility rate in India stood at 2.2 in 2016. Not surprisingly, poorer states like Uttar Pradesh, Bihar, Rajasthan and a few states in the North-East, have higher fertility rates. These states also have high infant mortality rates.

As the Roslings write: “Every generation kept in extreme poverty will produce an even larger next generation. The only proven method for curbing population growth is to eradicate extreme poverty and give people better lives, including education and contraceptives. Across the world, parents then have chosen for themselves to have fewer children. This transformation has happened across the world but it has never happened without lowering child mortality.”

As the National Health Survey points out: “Women with no schooling have an average 3.1 children, compared with 1.7 children for women with 12 or more years of schooling.”
The replacement rate or the level of fertility of women at which the population automatically replaces itself, from one generation to the other, typically tends to be at 2.1.

Further, given India’s high infant mortality rate, in comparison to the developed countries, the fertility rate is perhaps already at the replacement level.

In fact, the fertility rate in urban India is at 1.8, whereas in rural India, it is 2.4.  Interestingly, as the National Health Survey points out: “Twenty-three states and union territories, including all the states in the south region, have fertility below the replacement level of 2.1 children per woman.”

The broader point here is that India is close to stabilising its population. Of course, this is not going to happen overnight and will take a few decades to pan out. As per the National Population Policy of 2000, India’s population should stabilise at 145 crore in 2045.

Also, the good thing is that India did not adopt a compulsory one child policy like China did. Given the preference for boys, it would have led to selective abortions, like happened in China. This is not to say that selective abortions don’t happen currently, but the situation would have been even worse.

The sex ratio at birth in 2016 was 940 females to a 1000 males. With a one child policy, the sex ratio would have been lower than its current level. And this would have had other repercussions.

To conclude, while India has a huge population, we have clearly reached a stage where the population will stabilise in the next few decades.

The column originally appeared in the Bangalore Mirror on April 25, 2018

Why Indians Love Govt Jobs

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Indian Railways, the country’s largest employer, recently advertised for 90,000 vacancies. It got over 2.8 crore applications for it.

My calculations suggest that the number of applicants is around one-fifth of India’s youth workforce, which is actually looking for a job.

Nearly two lakh people applied for 1,137 constable vacancies in Mumbai Police. A newsreport suggests that this included 167 MBAs, 423 Engineers and 543 postgraduates. There were 3 individuals with an LLB and 167 individuals with a Bachelors in Business Administration, on the list.

Sometime back,129 engineers, 23 lawyers, a chartered accountant and 393 postgraduates in arts, were among the 12,453 individuals who were interviewed for the job of a peon, in the Rajasthan Assembly Secretariat. In total, 18 posts were to be filled up.

In May last year, nearly 25 lakh individuals wrote the exam for 6,000 Group D posts on offer in the West Bengal government.

There are many other such examples, which have been popping up over the last few years. The moment a government job is advertised, a huge number of people apply for it. The question is why?

India is currently going through a phase, where its working age population is growing at a faster rate than the overall population. This is thanks to the fact that people are having fewer children. Nearly a million Indians are entering the workforce every month. This amounts to nearly 1.2 crore a year, or around two and a half times the population of New Zealand.

This stage in any economy is referred to as the demographic dividend. As people enter the workforce and find jobs, earn and spend, the economy grows at a faster rate than it has in the past, and pulls many people out of poverty.

Of course, this is how things are supposed to happen, in theory.

The fact that so many people are applying for government jobs suggests that there are not enough jobs going around for India’s demographic dividend. This is countered by the idea that not everyone applying for a government job is unemployed.

It is just that we Indians love the security of a government job and hence, the huge number of applicants.

Is that true?

India’s unemployment is best represented by the term underemployment. What does this mean? It means that everyone who is looking for work all through the year, does not find it.

Data from Annual Report on the Employment and Unemployment Survey suggests that only three in five Indians looking for a job all through the year are able to find it. This basically means that 40% of India’s workforce is unable to find work all through the year. We may call this underemployment, but this is nothing but unemployment.

Further, there is a huge amount of disguised unemployment in India’s agriculture sector, which produces around 12% of the gross domestic product, but employs nearly 46% of the workforce. Disguised unemployment essentially means that there are way too many people trying to make a living out of agriculture. On the face of it, they seem employed. Nevertheless, their employment is not wholly productive, given that agricultural production would not suffer even if some of these employed people stopped working.

A bulk of the Indian workforce is employed in the informal sector. Estimates vary from anywhere between 65% to 92%. And these individuals are badly paid. This is something that the government acknowledges as well. As the Economic Survey of 2015-2016 points out: “The informal sector should… be credited with creating jobs and keeping unemployment low. Yet, by most measures, informal sector jobs are much worse than formal sector ones—wages are, on average, more than 20 times higher in the formal sector.”

The point being that informal employment pays badly. The average daily earnings of a casual worker in rural areas in 2011-2012 was Rs 138. In urban areas, it was Rs 173. A regular worker made Rs 298 in rural areas and Rs 445 in urban areas. Now compare this with a worker of a central public sector enterprise, who made Rs 2,005 per day, apart from having a secure job and several other benefits. This basically means that a casual worker working in rural areas made around 6.9 per cent per day of what the worker of a CPSE made in 2011-2012.

There is no reason to believe that this would have changed by now. This clearly explains why Indians love government jobs. It takes away the insecurity of working for the informal sector and at the same time pays much better. Who wouldn’t apply for a government job in such a case?

Let’s look at a little more recent data.

As the Report of the Seventh Pay Commission, released in November 2015, points out: “To obtain a comparative picture of the salaries paid by the government with that in the private sector enterprises, the Commission engaged the Indian Institute of Management, Ahmedabad, to conduct a study. According to the study, the total [monthly] emoluments of a General Helper, who is the lowest ranked employee in the government, is Rs. 22,579, [which is] more than two times the emoluments of a General Helper in the private sector organisations surveyed, at Rs. 8,000-9,500.”

Hence, the IIM Ahmedabad study, “on comparing job families between the government and [the] private/public sector, has brought out the fact that… at lower levels, salaries are much lower in the private sector as compared to government jobs”.

As per the Report on the Employment and Unemployment Survey, nearly two-thirds of self-employed and contract workers, make up to Rs 7,500 per month or Rs 90,000 per year. The per capita income in 2015-2016, for which the above data is valid, was at Rs 1.07 lakh. This basically means that a bulk of India’s non-salaried workforce, earns a significantly lower income than the per capita income.

As far as the salaried workforce is concerned, around 38% of them make up to Rs 7,500 per month. Hence, the salaried part of the workforce is in a much better position. This clearly shows that there is an economic incentive for even the educated lot to apply for low-level government jobs.

India’s underemployment problem can be solved with more job creation in the formal sector, which isn’t happening. As per the Centre for Monitoring Indian Economy, in 2017-2018, Indian companies scrapped projects worth $ 117 billion, which is the highest number ever. 40% of these projects were dropped in the period January to March 2018.

In such a situation, how will formal jobs ever be created?

The Economic Survey summarises it best: “The challenge of creating ‘good jobs’ in India could be seen as the challenge of creating more formal sector jobs.”

The column originally appeared on Firstpost on April 24, 2018.

18,000 Employees of Air India Cannot Hold the Nation to Ransom

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Newsreports suggest that 11 Air India unions representing more than 10,000 employees have started a social media campaign with the Save Air India slogan.

The Indian government plans to sell 76% of its stake in the airline. Under the current terms, the buyer needs to give a guarantee that the permanent employees of the airline will not be fired for at least one year.

After that the buyer is allowed to offer a voluntary retirement scheme to the employees.
This condition along with the fact that any prospective buyer has to takeover two-thirds of the Rs 48,447 crore debt (as on March 31, 2017) of the airline, has led to a situation where none of the Indian airlines are interested in buying Air India. (We don’t know about the foreign ones as yet).

Newsreports also suggest that the International Finance Corporation, the private investment arm of the World Bank, is likely to underwrite the debt amount of Air India for the successful buyer of Air India.

It is highly unlikely that any prospective buyer will buy Air India without any arrangement to handle the $7.5 billion debt of the airline (Rs 48,447 crore at $1=Rs 65).

Given how risky and difficult the airline business is, such a huge debt amount can pull down even a currently profitable airline. Also, it is worth remembering here that two out of three mergers that happen, fail.

While, the debt part of the airline can be handled, how the government handles the employees of Air India, is more important.

As on January 1, 2017, the airline had 18,049 employees. In comparison, IndiGo had 14,576 employees as on March 31,2017. IndiGo also employed 8,225 employees on a temporary/contractual/casual basis. Indigo has 40% share in India’s domestic airline business and is a profitable airline. Air India has 12% of India’s domestic market share and has a 17% share in flights in and out of India and it loses money.

How do things look at the employee cost level? The employee benefit expenses of Air India during 2016-2017, stood at Rs 2,558 crore. This worked out to around 11.5% of the total revenue earned during the course of the year.

In comparison, Indigo spent Rs 2,048 crore and this worked out to around 10.6% of the total revenue earned by the airline during the course of the year. Clearly, the employee cost is much more in case of Air India.

Having said that, the difference is not much but can nevertheless be important in a low margin business like airlines are. For any prospective buyer of Air India, one of the easiest ways to control costs, is to get rid of the non-productive part of the employee base.

And any prospective buyer having paid good money to the government would want to employ this strategy. This is a low-hanging fruit, but the current terms of sale don’t allow a prospective buyer to do that.

But such a situation is likely to arise only if the government is able to sell Air India.

Before that, the employee unions are likely to show their nuisance value by making it as difficult as possible for the government to sell Air India. The social media campaign is
just the starting point. The opposition parties are likely to join in as well.

The Congress politician Manish Tewari recently tweeted about what happens if British Airways buys Air India. He went on to ask, “won’t souls won’t souls of millions of Freedom Fighters who sacrificed everything turn in their graves?”

This is terribly bad rhetoric, given that British Airways was privatised way back in 1987, but then the Congress party has always liked the idea of the government owning public sector enterprises (This is not to say that the Bhartiya Janata Party doesn’t). The British Airways is just another private airline now and one of the most successful privatisations ever carried out in Britain. So, if British Airways buys Air India, it will be a great thing because the airline has some experience in turning around a government owned airline, and running it profitably over the years.

As far as the employees are concerned, their protests are hardly surprising given that most of them have spent their lifetimes working for a government owned company. The future is unlikely to be as cozy as it is under the current owner and they will make every effort possible to ensure that continues.

But the current owner has spent a lot of taxpayer money to keep this airline going. Between April 2010 and December 2017, the accumulated losses of the airline were at Rs 46,256 crore.

To keep the airline going, the government invested Rs 26,545 crore into the airline since April 2011. Over and above this, the airline has taken on working capital loans from banks, which as on March 31, 2017, stood at Rs 31,088 crore. This basically means that the airline keeps running because of the loans it keeps taking on. The banks are lending to the airline primarily because it is owned by the government, leading to the actual debt of the government going up. They would have long-stopped lending to a privately owned airline in a similar situation.

The larger point being that every extra rupee that the government spends on this airline, is a rupee taken away from something else. Let’s take the case of defence. In fact, Vice Chief of Army Lt Gen Sarath Chand told a Parliamentary panel sometime back that 68 per cent of the Army’s equipment is in the ‘vintage category’. “Funds allocated is insufficient and the Army is finding it difficult to even stock arms, ammunition, spares for a 10-day intensive war. All the three services are expected to be prepared for at least 10 days of intense battle,” he said. This is clearly not a good trend. There are more important
things that India needs to spend money on than Air India.

Also, if the government is serious about genuine privatisation (and not the kind where LIC buys government’s stake in public sector enterprises) of loss making as well as profitable government companies, it is important that the sale of Air India goes through.

If the 18,049 employees of Air India are allowed to hold the country to ransom then so will the employees of other loss-making government-owned companies like MTNL, BSNL and a whole host of other companies, in the days to come.

If the government doesn’t handle the employees of Air India seriously, then the entire idea of selling Air India, was yet another jumla to come out of this government.

This originally appeared on Firstpost on April 16, 2018.

Modi government refuses to acknowledge India’s jobs crisis

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Indian Railways, India’s largest public sector employer, recently received more than 28 million applications for 90,000 jobs posts, it had advertised for. As of March 31, 2017, the Indian Railways employed around 1.31 million individuals.

The ratio of the number of applicants to the number of jobs stood at a whopping 311:1.
The number of applicants was more than the population of Australia, which was a little over 24 million in 2016. It was around 6 times the population of New Zealand, which in 2016, was around 4.6 million.

Using data provided by the Central Statistics Office of the government of India, we can estimate that the number of Indians between the ages of 15 and 29, who are most likely to apply for these jobs on offer, are at 360 million (189 million males and 171 million females).

This basically means that close to 7.8% of the population in the age group that can be categorised as India’s youth has applied for the 90,000 jobs on offer at the Indian Railways. What this calculation does not take into account is the fact that everybody in the age group 15-29 is not looking for a job.

Many individuals in this age group are studying. In case of females, many are married at a young age and take care of the family. In some other cases, females have been pulled out of school or college, and are waiting at home to get married.

We need to adjust for this i.e. take the labour force participation rate of this age group of the population into account, and then recalculate the numbers.

The labour force participation rate for males in the age group 15-29 is 63.1% (as per NSSO June 2012). These are the proportion of people who are actually looking for jobs. For women it is 18.3%.

There are two explanations for the low female labour participation rate. One lies in the fact that many individuals in this age group are still studying. Further, the overall labour force participation rate for females is also very low at 18.1%, and this reflects in this age-group as well.

Taking the labour force participation rates into account, the total number of people actively looking for jobs in the 15-29 age group works out to 150 million (119 million males and 31 million females).

This means close to 18.7% (28 million expressed as a percentage of 150 million) of the population in the 15-29 age group, has applied for the 90,000 jobs on offer at Indian Railways. Or to put it a little simplistically, one in five individuals in the 15-29 age-group has applied for the jobs on offer in the Indian Railways.

This tells us the sad state of affairs for the one million youth who are joining the Indian workforce every month. Another factor at work here is that the government pays much better at lower levels than the private sector in India does, which obviously gets many people to apply.

The above figures clearly show the lack of formal jobs in India. This is a problem that the Indian government is not willing to acknowledge. Recently, Jayant Sinha, a junior minister in the Modi government, called India’s jobs crisis more of a data crisis, in a column he wrote for The Times of India, India’s largest selling English newspaper.

In his column he stated that 6.5 million new jobs were created in the retail sector between 2014 and 2017. While he didn’t state the source of this data, some digging around suggests that he borrowed this number from Human Resources and Skill Requirement in the Retail Sector, authored by KPMG, for the NITI Aayog, a government run think tank.

The 6.5 million jobs that Sinha talked about was basically a forecast, which Sinha passed off as the actual number of jobs created.

As far as the lack of data is concerned, the Labour Bureau carried out six household based Annual Employment-Unemployment Surveys (EUS) between 2010 and 2016. Of this, reports of five rounds have been released till date. (Makes us wonder why has the report on the sixth round been held back up until now).

The report of the fifth round was released in September 2016. One the major findings of the report was that only 60% of the Indians who were looking for a job all through the year, found one. This figure showed the bad state of jobs in India, very clearly. This finding was consistent with a similar finding reported in the report on the fourth round of the survey as well.

Recently, in an answer to a question raised in the Parliament, the government said, “On the recommendations of Task Force on Employment, however, this survey has been discontinued”. Basically, a survey which brought bad news has been discontinued and then the government goes around talking about lack of data.

There is enough data that suggests that India is facing a huge jobs problem. The so called demographic dividend is collapsing. The Modi government refuses to even acknowledge this problem. The first step towards solving any problem is to acknowledge it. If you don’t acknowledge a problem, how do you solve it?

The column was originally published on April 13, 2018, on AsiaTimes.

Do Numbers Always Tell the Truth?

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The writer Gregg Easterbrook once said: “Torture numbers, and they’ll confess to anything.” Allow me to explain with an example, on how numbers can be used to muddle the truth.

Nirav Fraud has defrauded the Punjab National Bank of Rs 12,645.97 crore. This is the loan amount that the diamond merchant has defaulted on. On its own the number sounds like a pretty big number, which it is.

But now let me show, how even a number as big as this, can be made to look small, by someone who is looking to muddle the truth.

The question is how big is Nirav Modi’s fraud vis a vis the accumulated bad loans of Punjab National Bank. His fraud is ultimately going to add to the bad loans of the bank.

Bad loans are loans where the borrower has stopped repaying for 90 days or more. The accumulated bad loans of Punjab National Bank stood at Rs 57,519 crore as on December 31, 2017.

Hence, Nirav Modi’s default will add around 22% more to the bad loans number of Punjab National Bank. At this level, the default still seems big. Let’s go a little further.
Now let’s take a look at the bad loans of all banks (i.e. public sector banks + private banks + foreign banks). This stands at around Rs 9,00,000 crore, as on December 31, 2017. Nirav Modi’s default amounts to just 1.4%, which is very small in the overall scheme of things. A big default number now suddenly seems very small.

Let’s look at this in one final way. The average size of a fraud in the case of Indian banking, where the borrower willfully defaulted, was around Rs 3 crore, between 2012-2013 and 2016-2017, a period of five years. In case of Punjab National Bank, the average size of a fraud amounted to Rs 9.6 crore.

When we compare Nirav Modi’s fraud with these figures, we realise how big his fraud is, in the context of borrowing frauds. And this is how Nirav Modi’s fraud needed to be looked at and which is how, thankfully, it is being looked at.

The context is the most important point when trying to make sense of a number. The good thing is that nobody tried to muddle the truth in this case, and it was clear from day one that Nirav Modi’s fraud was a big fraud, from day one. But that is not always the case.

Few years back, in the days after Nirbhaya was battling for her life, I remember reading a news item which suggested that Sweden had one of the highest incidences of rape in the world. The Indian scenario was much better, the newsreport suggested.

Of course, the newsreport totally missed out on the context and muddled the truth. As Hector Macdonald writes in Truth—How the Many Sides to Every Story Shape Our Reality: “Sweden is said to have the second highest incidence of rape in the world, with more than 60 cases reported per 100,000 inhabitants each year (the rate for India is 2 per 100,000). Yet this reflects not only Sweden’s better reporting of sexual crime but also a broader definition of rape.” In India, other than fewer rape victims coming out in the open, the system also works to protect the rapists in many cases.

Or take the case of rates of kidnapping. As Macdonald writes: “Canada and Australia have the highest rates of kidnapping in the world. Really, it’s true. Not because they are more dangerous than Mexico and Colombia but because their governments include parental disputes over child custody in kidnapping statistics.”

The broader point here is that before believing a number, it is important to look at the overall context in which it is being used. As Macdonald writes: “When someone tries to persuade you that a number is especially significant, the first thing to do is to translate it into a more revealing truth that incorporates relevant context.”

Now that of course is, easier said, than done.

The column originally appeared in Bangalore Mirror and Mumbai Mirror on April 11, 2018.