Nation of Beancounters

How much does a Bandh cost, really?

Posted in Uncategorized by Navin Kumar on July 9, 2010

Bibek Debroy writes a fantastic op-ed in today’s Express about how to calculate the cost of a bandh. While the various chambers of commerce in India put the cost anywhere between 3000-13000 crores, Debroy argues that it’s much less:250-500 crs.

For those too lazy to read the entire article, I’m going to try to explain why the numbers vary so much.

The simplest way to calculate how much a “lost day” costs is this: take GDP of India (the amount of production done in a year) and divide it by 365. This gives us 17-18000 crores. Of course the numbers presented by the chambers vary, for various reasons: one might use real while another uses nominal GDP etc.

There are 3 reasons why this is flawed:

Firstly, Bandhs are primarily an urban phenomenon and don’t affect production in rural areas.

Secondly, the losses made on the day of the Bandh are not permanent: if you want to buy a washing machine but find the store shut down, do you abandon your quest? Of course not. You’ll come back the next day. A decline in sales on the day of the bandh can be compensated by higher sales the next day.

Thirdly, many people are paid by the month, not the day (income and production are equal in national accounts). The only people that lose income on this day, then, are people who are earn according to the number of days they work: poor labourers, auto rickshawalas etc as well as some self-employed individuals like shopkeepers, paanwaris etc. And even the latter category are not too badly affected: the bandh lifts at 6pm.

This also means, of course, that the poor are the worst affected by the bandh.

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