Haq's Musings

Riaz Haq writes this data-driven blog to provide information, express his opinions and make comments on many topics. Subjects include personal activities, education, South Asia, South Asian community, regional and international affairs and US politics to financial markets. For investors interested in South Asia, Riaz has another blog called South Asia Investor at http://www.southasiainvestor.com and a YouTube video channel https://www.youtube.com/channel/UCkrIDyFbC9N9evXYb9cA_gQ

Showing posts with label Crisis. Show all posts

Wednesday, December 15, 2021

India in Crisis: Unemployment and Hunger Persist After Waves of COVID

India lost 6.8 million salaried jobs and 3.5 million entrepreneurs in November alone. Many among the unemployed can no longer afford to buy food, causing a significant spike in hunger. The country's economy is finding it hard to recover from COVID waves and lockdowns, according to data from multiple sources. At the same time, the Indian government has reported an 8.4% jump in economic growth in the July-to-September period compared with a contraction of 7.4% for the same period a year earlier. This raises the following questions: Has India had jobless growth? Or its GDP figures are fudged? If the Indian economy fails to deliver for the common man, will Prime Minister Narendra Modi step up his anti-Pakistan and anti-Muslim rhetoric to maintain his popularity among Hindus?

Labor Participation Rate in India. Source: CMIE

Unemployment Crisis:

India lost 6.8 million salaried jobs and its labor participation rate (LPR) slipped from 40.41% to 40.15% in November, 2021, according to the Center for Monitoring Indian Economy (CMIE). In addition to the loss of salaried jobs, the number of entrepreneurs in India declined by 3.5 million. India's labor participation rate of 40.15% is lower than Pakistan's 48%. Here's an except of the latest CMIE report:

"India’s LPR is much lower than global levels. According to the World Bank, the modelled ILO estimate for the world in 2020 was 58.6 per cent (https://data.worldbank.org/indicator/SL.TLF.CACT.ZS). The same model places India’s LPR at 46 per cent. India is a large country and its low LPR drags down the world LPR as well. Implicitly, most other countries have a much higher LPR than the world average. According to the World Bank’s modelled ILO estimates, there are only 17 countries worse than India on LPR. Most of these are middle-eastern countries. These are countries such as Jordan, Yemen, Algeria, Iraq, Iran, Egypt, Syria, Senegal and Lebanon. Some of these countries are oil-rich and others are unfortunately mired in civil strife. India neither has the privileges of oil-rich countries nor the civil disturbances that could keep the LPR low. Yet, it suffers an LPR that is as low as seen in these countries".

Labor Participation Rates in India and Pakistan. Source: World Bank/ILO

Labor Participation Rates for Selected Nations. Source: World Bank/ILO

Youth unemployment for ages15-24 in India is 24.9%, the highest in South Asia region. It is 14.8% in Bangladesh 14.8% and 9.2% in Pakistan, according to the International Labor Organization and the World Bank.

Youth Unemployment in Bangladesh, India and Pakistan. Source: ILO, WB

In spite of the headline GDP growth figures highlighted by the Indian and world media, the fact is that it has been jobless growth. The labor participation rate (LPR) in India has been falling for more than a decade. The LPR in India has been below Pakistan's for several years, according to the International Labor Organization (ILO).

Indian GDP Sectoral Contribution Trend. Source: Ashoka Mody

Even before the COVID19 pandemic, India's labor participation rate was around 43%, lower than its neighbors'. Now it has slipped further to about 40%. Meanwhile, the Indian government has reported an 8.4% jump in economic growth in the July-to-September period compared with a contraction of 7.4% for the same period a year earlier. This raises the following questions: Has India had jobless growth? Or its GDP figures are fudged? If the Indian economy fails to deliver for the common man, will Prime Minister Narendra Modi step up his anti-Pakistan and anti-Muslim rhetoric to maintain his popularity among Hindus?

Indian Employment Trends By Sector. Source: CMIE Via Business Standard

Hunger Crisis:

India ranks 94th among 107 nations ranked by World Hunger Index in 2020. Other South Asians have fared better: Pakistan (88), Nepal (73), Bangladesh (75), Sri Lanka (64) and Myanmar (78) – and only Afghanistan has fared worse at 99th place. The COVID19 pandemic has worsened India's hunger and malnutrition. Tens of thousands of Indian children were forced to go to sleep on an empty stomach as the daily wage workers lost their livelihood and Prime Minister Narendra Modi imposed one of the strictest lockdowns in the South Asian nation. Pakistan's Prime Minister Imran Khan opted for "smart lockdown" that reduced the impact on daily wage earners. China, the place where COVID19 virus first emerged, is among 17 countries with the lowest level of hunger.

World Hunger Rankings 2020. Source: World Hunger Index Report

India Among Worst Hit:

India has a 17.3% child wasting rate, the worst in the South Asia region. Child stunting is also extremely high across South Asia. “Data from 1991 through 2014 for Bangladesh, India, Nepal, and Pakistan showed that stunting is concentrated among children from households facing multiple forms of deprivation, including poor dietary diversity, low levels of maternal education, and household poverty,” the World Hunger Report said. China, the place where COVID19 virus first emerged, is among 17 countries with the lowest level of hunger.

Hunger and malnutrition are worsening in parts of sub-Saharan Africa and South Asia because of the coronavirus pandemic, especially in low-income communities or those already stricken by continued conflict.

India has performed particularly poorly because of one of the world's strictest lockdowns imposed by Prime Minister Modi to contain the spread of the virus.

Hanke Annual Misery Index:

Pakistanis are less miserable than Indians in the economic sphere, according to the Hanke Annual Misery Index (HAMI) published in early 2021 by Professor Steve Hanke. With India ranked 49th worst and Pakistan ranked 39th worst, both countries find themselves among the most miserable third of the 156 nations ranked. Hanke teaches Applied Economics at Johns Hopkins University in Baltimore, Maryland. Hanke explains it as follows: "In the economic sphere, misery tends to flow from high inflation, steep borrowing costs, and unemployment. The surefire way to mitigate that misery is through economic growth. All else being equal, happiness tends to blossom when growth is strong, inflation and interest rates are low, and jobs are plentiful". Several key global indices, including misery index, happiness index, hunger index, food affordability index, labor force participation rate, ILO’s minimum wage data, all show that people in Pakistan are better off than their counterparts in India.

Hanke's Annual Misery Index 2021. Source: National Review

Pakistan's Real GDP:

Vehicles and home appliance ownership data analyzed by Dr. Jawaid Abdul Ghani of Karachi School of Business Leadership suggests that the officially reported GDP significantly understates Pakistan's actual GDP. Indeed, many economists believe that Pakistan’s economy is at least double the size that is officially reported in the government's Economic Surveys. The GDP has not been rebased in more than a decade. It was last rebased in 2005-6 while India’s was rebased in 2011 and Bangladesh’s in 2013. Just rebasing the Pakistani economy will result in at least 50% increase in official GDP. A research paper by economists Ali Kemal and Ahmad Waqar Qasim of PIDE (Pakistan Institute of Development Economics) estimated in 2012 that the Pakistani economy’s size then was around $400 billion. All they did was look at the consumption data to reach their conclusion. They used the data reported in regular PSLM (Pakistan Social and Living Standard Measurements) surveys on actual living standards. They found that a huge chunk of the country's economy is undocumented.

Pakistan's service sector which contributes more than 50% of the country's GDP is mostly cash-based and least documented. There is a lot of currency in circulation. According to the State Bank of Pakistan (SBP), the currency in circulation has increased to Rs. 7.4 trillion by the end of the financial year 2020-21, up from Rs 6.7 trillion in the last financial year, a double-digit growth of 10.4% year-on-year. Currency in circulation (CIC), as percent of M2 money supply and currency-to-deposit ratio, has been increasing over the last few years. The CIC/M2 ratio is now close to 30%. The average CIC/M2 ratio in FY18-21 was measured at 28%, up from 22% in FY10-15. This 1.2 trillion rupee increase could have generated undocumented GDP of Rs 3.1 trillion at the historic velocity of 2.6, according to a report in The Business Recorder. In comparison to Bangladesh (CIC/M2 at 13%), Pakistan’s cash economy is double the size. Even a casual observer can see that the living standards in Pakistan are higher than those in Bangladesh and India.

Wednesday, May 6, 2020

Survey Finds Overwhelming Majority in Pakistan Satisfied With Imran Khan's Handling of Coronavirus Crisis

An overwhelming 81% majority of Pakistanis are satisfied with Federal Government performance in responding to coronavirus pandemic, way up from 61% who expressed satisfaction in March, according to a recent Gallup Pakistan survey. These numbers reflect Pakistan's much flatter disease curve compared with most other nations, including highly developed ones, that have seen a rapid rise in Covid-19 cases and deaths. The federal government has also launched an $8 billion stimulus program to deal with the economic impact of COVID19 on small businesses and the poor daily wage earners. Meanwhile, the nation's central bank has significantly cut interest rates from double digits down to single digit.

Bilal Gilani of Gallup Pakistan tweeted his reaction to the poll result in the following words: "These are very unusual numbers ! But not without parallels from around the world. Crisis brings good in govt and ppls expectations set changes!"

The unprecedented crisis has indeed brought out the best in Prime Minister Imran Khan's government. After some initial criticism about the slow response to the pandemic back in March, the government in Islamabad has acted quickly to deal with it. Here are some of the key actions by Prime Minister Imran Khan in March and April:

1. Nation-wide lockdown ordered to slow the spread of the disease in Pakistan. The lockdown was started by the Sindh government where the cases began to spike after the return of hundreds of Pakistani Shia pilgrims from Iran, a known COVID hotspot. The lockdown has resulted in flattening the curve of the disease and reduced load on the developing nation's weak healthcare system.

Gallup Pakistan Coronavirus Survey

2. Prime Minister Imran Khan launched an $8 billion economic stimulus package, including funds for low-income families to be disbursed through $75 grants.

Comparison of COVID19 Cases in Select Countries. Source: Our World in Data

3. All international flights into and out of the country were stopped and all passengers who arrived before the ban went into effect were checked and those with symptoms quarantined. This action stranded thousands of foreigners in Pakistan and several thousand Pakistanis overseas. Some flights have since been allowed to help those stranded.

4. All passenger train service was halted in Pakistan. Pakistan Railways operates 142 trains daily on its 1,885-km-long tracks to ferry some 700 million passengers every year. Coronavirus fears had already reduced ridership.

COVID19 Deaths in Select Countries. Source: Our World in Data

5. The launch of Ehsaas Emergency Cash program at the end of March to hand out Rs. 12,000 each to 12 million families (an estimated 67 million people) whose livelihood has been severely impacted by the COVID-19 epidemic or its aftermath. This came after Prime Minister Imran Khan told reporters that “we don’t want to try and save people from corona but they end up dying due to hunger and poverty".

6. Prime Minister Imran Khan granted exemption from lockdown to a few select activities, the area of forestry among them. These exemptions are subject to safe practices described in Stabdard Operating Procedures (SOPs) described by the government. Many workers idled by the coronavirus lockdown have been hired to plant millions trees as part of the Prime Minister's "10 Billion Tree Tsunami" program to deal with climate change. This is being described as "Green Stimulus".

7. Ramping up of tests and availability of personal protection equipment (PPE), including masks and protective suits for the healthcare workers. Critics in Pakistan argue that more needs to be done to dramatically increase testing and reduce PPE shortages. This criticism is no different from that seen in other countries, including highly developed nations the United States and the United Kingdom.

Clearly, the results show that Pakistan's actions have slowed down the spread of disease caused by coronavirus in the country. The effect can be seen in Pakistan's much flatter curve compared with most other nations, including highly developed ones, that have seen a rapid rise in Covid-19 cases and deaths. The federal government has launched an $8 billion stimulus program to deal with the economic impact of COVID19 on small businesses and the poor daily wage earners. Meanwhile, the nation's central bank has significantly cut interest rates from double digits down to single digit. It is these results that have produced overwhelming approval of Prime Minister Imran Khan's handling of the coronavirus crisis. Let's hope the government in Pakistan will handle the aftermath of the crisis even better.

Here's a World Economic Forum video of Pakistan's tree-planting campaign during the pandemic:

https://youtu.be/1iwT30Vd88E