Tag: nda government

Why The Congress Party is Pro Big Government

Back in 2009, just before the general elections, I had advised people to vote for the NDA. My argument there was that irrespective of the relative merits and demerits of the parties leading the two coalitions, the BJP was a more likely candidate to lead a reformist government for it was not the incumbent. Incumbent governments tend to get cozy with unelected people who are in power (for example, leaders of PSUs, unions, civil servants, etc.) because of which they are loathe to take up policies that cut the power of such people. In other words, they are loathe to take up reformist steps that decrease the size of government.

The same argument can be extended to argue why the Congress is inherently a pro-government party. The fact of the matter is that it is the party that has been in power at the Union government for most of our history. This means that a large part of the unelected government organization has its loyalties with the party. Consequently, the party too sees itself as being loyal to this cadre, and will not pursue policies that cut down their power.

This explains why the Congress-led UPA1 government decided to reverse the earlier NDA government’s decision to repeal the Essential Commodities Act. It explains why the Congress-led UPA1 government did not pursue the reforms in the APMC act that had been set in motion by the earlier NDA government. This also explains why the Congress-led UPA2 government is trying to push through the Food Security Bill, which seeks to increase the role of the government in the agricultural supply chain.

The reforms that the UPA governments have been trying to pursue are those that do not significantly impact its unelected-government-organization constituency. Foreign investment in retail, for example, will only affect the retail industry, and the government doesn’t have much skin in the game there. The Indo-US Civil Nuclear Agreement again doesn’t trample on government feet. Conversely, nuclear energy is a field where a compelling argument can be made in favour of a government monopoly, so that agreement will only increase government participation in the energy sector (note that I’m not against the deal. I’m only trying to explain why it is acceptable reform for the Congress). The MGNREGA again brings in several thousand more people into the government folds. The only exception in the list of UPA-led reforms that might challenge big government is the Right to Information, but that act was passed in the infancy of the UPA1 government when it was much more beholden to the National Advisory Council (NAC) than it is today.

So what explains 1991? Two things. Firstly, it was a whole bunch of low hanging fruit. Though government was reduced, the resulting incremental growth increased the size of the pie so much that the proportion of the enhanced pie that the unelected-government-organization had access to was enhanced. So from a rational tradeoff perspective, it was the right thing to do. Secondly, and more importantly, the reforms were inevitable. The Indian economy was in such bad shape that there was no way out but to do those reforms. So holding up 1991 as proof of the Congress Party’s reformist credentials is wrong.

But what is the guarantee that a non-Congress government will pursue reforms that could reduce the size of the government? They fully recognize the fact that large parts of the unelected-government-organization cadre are beholden to the Congress party, and they will want to cut this constituency down to size. Hence, they will work towards reforms that will reduce the size of government. Yes, there is no guarantee that they will not open up other fronts that will increase the government’s footprint, but they are unlikely to do worse than a government involving the Congress.

Standard Error in Survey Statistics

Over the last week or more, one of the topics of discussion in the pink papers has been the employment statistics that were recently published by the NSSO. Mint, which first carried the story, has now started a whole series on it, titled “The Great Jobs Debate” where people from both sides of the fence have been using the paper to argue their case as to why the data makes or doesn’t make sense.

The story started when Mint Editor and Columnist Anil Padmanabhan (who, along with Aditya Sinha (now at DNA) and Aditi Phadnis (of Business Standard), ranks among my favourite political commentators in India) pointed out that the number of jobs created during the first UPA government (2004-09) was about 1 million, which is far less than the number of jobs created during the preceding NDA government (~ 60 million). And this has led to hue and cry from all sections. Arguments include leftists who say that jobless growth is because of too much reforms, rightists saying we aren’t creating jobs because we haven’t had enough reform, and some other people saying there’s something wrong in the data. Chief Statistician TCA Anant, in his column published in the paper, tried to use some obscurities in the sub-levels of the survey to point out why the data makes sense.

In today’s column, Niranjan Rajadhyaksha points out that the way employment is counted in India is very different from the way it is in developed countries. In the latter, employers give statistics of their payroll to the statistics collection agency periodically. However, due to the presence of the large unorganized sector, this is not possible in India so we resort to “surveys”, for which the NSSO is the primary organization.

In a survey, to estimate a quantity across a large sample, we simply take a much smaller sample, which is small enough for us to rigorously measure this quantity. Then, we try and extrapolate the results to the large sample. The key thing in survey is “standard error”, which is a measure of error that the “observed statistic” is different from the “true statistic”. What intrigues me is that there is absolutely no mention of the standard error in any of the communication about this NSSO survey (again I’m relying on the papers here, haven’t seen the primary data).

Typically, when we measure something by means of a survey, the “true value” is usually expressed in terms of the “95% confidence range”. What we say is “with 95% probability, the true value of XXXX lies between Xmin and Xmax”. An alternate way of representation is “we think the value of XXXX is centred at Xmid with a standard error of Xse”. So in order to communicate numbers computed from a survey, it is necessary to give out two numbers. So what is the NSSO doing by reporting just one number (most likely the mid)?

Samples used by NSSO are usually very small. At least, they are very small compared to the overall population, which makes the standard error to be very large. Could it be that the standard error is not reported because it’s so large that the mean doesn’t make sense? And if the standard error is so large, why should we even use this data as a basis to formulate policy?

So here’s my verdict: the “estimated mean” of the employment as of 2009 is not very different from the “estimated mean” of the employment as of 2004. However, given that the sample sizes are small, the standard error will be large. So it is very possible that the true mean of employment as of 2009 is actually much higher than the true mean of 2004 (by the same argument, it could be the other way round, which points at something more grave). So I conclude that given the data we have here (assuming standard errors aren’t available), we have insufficient data to conclude anything about the job creation during the UPA1 government, and its policy implications.