Let’s reassure the migrants

AS India copes with the oil shock from the war in West Asia, the first trickle of migrants returning home has begun. From Punjab to Maharashtra, states with large migrant populations, the shrinkage in the availability of small, 5-kg LPG cylinders is pushing migrant labour to buy the return ticket to villages in Uttar Pradesh and Bihar.

The situation is nowhere near what it was when the Covid pandemic hit the country in March 2020 and a lockdown was declared overnight. This week, The Tribune’s reporters, Deepkamal Kaur, Neeraj Bagga and Shivani Bhakoo, found that while Baisakhi has always been a magnet for this return journey that migrant labour undertake annually — the Rabi crop has been harvested, wages have been paid and owners are flush with the joy of an impending new year — dark clouds are, once again, looming on the horizon.

May as well, nervous migrants are saying. What if, they add. Certainly, war is forcing India and the world to recalibrate its best-laid plans.

At home, the Modi government is keeping a tight leash on the falling rupee – it was 90/dollar a month ago, before the crisis began with the assassination of Ali Khamenei on February 28, and last week breached the psychological barrier of 95/dollar, before being nudged back. The price of oil is still being protected — India imports at least 80 per cent of the oil it consumes — but the price of fertiliser is already beginning to tremble. Like oil, a fifth of which passes through the Strait of Hormuz, 25-30 per cent of globally traded ammonia and urea — key ingredients in the manufacture of fertiliser — travels through this slender Strait, along with 20 per cent of the natural gas used to make it.

Iran is the fourth largest producer of urea (a commonly used nitrogen fertiliser); Qatar has closed its gas plants since the Iranian strikes — it supplies 14 per cent of the world’s urea. India is the second largest consumer of fertiliser in the world.

You get the picture. If the Iran war continues and the supply of fertiliser ingredients are disturbed — about half of global food production depends on synthetic nitrogen fertiliser — the poor will return to the crosshairs.

Meanwhile, as Europe tires of Trump — the French, the Spanish and the Germans are publicly demonstrating frustration at the US President’s bipolar comments about both pausing the war and warning that US forces could target Iran’s civilian infrastructure like bridges, power lines, etc, so as to bring the ancient Persian civilisation to its knees — the first signs in a shifting balance of power may be taking place.

The tolls at Hormuz had some days ago already begun to charge passage in yuan. On Friday afternoon, a ship carrying oil meant for India changed course and is now travelling to China.

The sense of unease which infiltrates business as usual is not unusual — there is a war going on, after all, and India is not immune — despite the frenzy that has taken over the states going in for elections this month. As a result, the federal map of India may or may not shift colour with this round or the next that takes place over the next year or so — certainly, there’s no danger to the ruling BJP. The PM is travelling across the country with his usual gusto, picking tea-leaves with Assam’s tea garden workers, the women dressed in matching white and red-bordered saris — the days before and after he has addressed rallies in Puducherry, Tamil Nadu and Kerala.

Perhaps the unease of war is exacerbated by a report last month by the Washington DC-based think tank, Peterson Institute for International Economics, led by Arvind Subramanian, a former chief economic advisor to the Modi government in its first term. The working paper offers new evidence for “India’s 20 years of GDP misestimation”. The burden of the economist’s argument is that in the “boom years,” between 2005 and 2011 — India may have underestimated its growth by 1-1.5 percentage points, while it overestimated its growth between 2012-2023, also by 1-1.5 percentage points.

Interestingly, the underestimated half-decade coincides with the Manmohan Singh years, when the former PM sought to unleash the “animal spirits” and create an aspirational India. While the latter overestimated decade of growth coincides with the Narendra Modi years, marked by demonetisation, the introduction of GST and the Covid pandemic — certainly, the last not his fault.

According to Subramanian, one reason for GDP overestimation is that India changed its data sources and methodology for measuring GDP from 2011-12. That official estimates from 2011-12 to 2016-17 put average GDP growth at about 6.5-7 per cent, but it may have actually been 4.5 per cent.

That the 2005-2011 period, when GDP was an estimated 7 per cent, it was really 8-8.5 per cent. Subramanian goes on to add that the overestimation is partly related to a methodological change, when the economy’s small formal sector was used as a proxy for its vast informal sector — some say, as large as 94 per cent. He says this new evidence has implications for the economy today, both in terms of GDP and consumption patterns.

Still, the perception of political stability is a funny thing. Long years ago, back in 1991, when Manmohan Singh as Finance Minister presented his first Budget, at a time of grave dissonance, he quoted Victor Hugo to say, “no power on earth can stop an idea whose time has come.” In 2014, despite the astounding economic growth that he had spawned, when PM Manmohan Singh’s party lost power to Modi’s BJP — it was a time defined by harshness and cacophony and hope that the Modi government would restore some stability to the nation.

Once again, that time is now. If Subramanian is to be believed — and no one has denied his working paper so far — then the government’s current growth figures are problematic. Add to this mix, then, the current instability that defines the world precipitated by the war in West Asia — and how India can be affected by it, not least by oil and fertiliser prices, if the war goes on.

Certainly, these are not storms of India’s making. The fact remains that Indians need a hand to tide over them. As a start, let’s reassure the migrants about the place they call home.