 You are watching News Made Easy, I am Anand Yo Chakravarty and today I am going to talk about India's obsession with infrastructure. As if spending on infrastructure, building infrastructure is going to solve all our economic problems and that is why there is a, as you know, a big infrastructure push in budget 2022 and if I take out the double counting, the spending on BSNL, I can say conservatively about 1.2 lakh crore additional is going to be spent on building infrastructure and what does that mean? Bridges, roads, airports, sprucing up power plants, these are all spending that is going to be done and of course on other things as well and what does that mean? That means that that spending is going to be, that money is going to go to buy raw materials and equipment. So, what is that? There are coal, there is cement, there is steel, there are equipment like cranes, road rollers, big, you know, equipment carriers and things like that which are used for in construction projects. So, all of these will actually be bought and there will be a demand for them and of course, there will be employment and one of the most visible forms of employment is that construction sites, you see people working, engineers, there are trucks and bulldozers and you know, cranes working on those sites and it is a very active, visibly active space when it comes to work and employment. So, it looks like a lot of employment is being generated and when there are jobs, then there is consumption. Look at this happy family, they have got jobs and there may be salary hikes as well. There is a white collar family, so maybe it is an engineer or a manager who has got a salary hike and they look very happy because they are buying more things and that is being argued that because of infrastructure spending, not only is infrastructure being built, it is creating jobs, it is creating demand in the economy and solving the huge demand problem that we have. But ultimately, we have to see that whatever spending that is taking place, how much of that money is going to go in wages because ultimately that income is what is going to be spent on consumption goods and consumer durables, that is what consumers spend. So, if I take NHAI, National Highway Authority of India's Breakup, where it is then raw materials of the total cost of building and a highway, raw materials account for 65%, equipment accounts for 21% and wages directly account for about 14%. Now, the extra spending this year is about 66,000 crore, raw materials out of that as I said, 65% will be about 43,000 crore, equipment will be about approximately 13,900 crore and if you look at wages directly, it's about 9,200 crore, that could be 10,000, I'm just taking rough numbers here but let's stick to that number which NHAI puts out as its weight. But of course, this is direct employment. As I said, since demand will increase for equipment and raw materials, let's take a raw material like let's say cement, right? So, cement, in cement companies, I've taken the big companies, on an average, the labor cost of total cost is 18%. So, which means that if a cement company gets 100 rupees from a highway project, then 18 rupees out of that 100 rupees will go to workers, right? So, indirectly, that wage is being created because money is being spent on raw materials, similarly equipment. So, again, I've taken the big equipment manufacturers, something like L&T, only 8% of the total cost is on wages. So, if they are getting 100 rupees for selling equipment, then 8 rupees out of that will go to workers. So, let's add all of that up and here you can see direct wage cost, as I said, is directly 14% in companies which produce raw materials. I'm taking the cement average of 18% of cost is wages and in equipment companies, wages account for 8%. So, let's add that up. So, direct wage cost is about 9,240, that could be more. Don't go by the accuracy of these numbers. These are just calculations based on average percentages that I'm taking. They could be roughly or, but broadly, they'll be correct. Raw material, the wage component of the raw materials of NHAI's additional expenditure is about 7,700 and the equipment component, wage component of equipment is about 1,100 crores. So, all these numbers that you're seeing are crores. When I add them up, the total wage impact is 18,000 crore out of what? Out of the 66,000 crore. So, 66,000 crore is the total additional spending by NHAI this year. Total wage impact is 18,000 crore. So, we can say that 27% of what NHAI spends is the total direct and indirect wage impact of what it spends, right? And that's the figure that we'll take for all, as a proxy for all infrastructure spending, bear it out right now. But remember that the highest wage ratio is actually in something like Mandrega, where the wage ratio is 60%. So, for every 100 rupees spent, 60 rupees has to be paid out in wages, which is why Mandrega creates so much employment and puts so much money in the hands directly of people. Mandrega has been cut this year, the allocation by 25,000 crore. And remember, if it has been cut by 25,000, again, remember these numbers that you're seeing, I don't have space. That's why I've put it as 25,000, but it's actually 25,000 crore. And the wage cut is 15,000 crore. 60% of 25,000 means that if the allocation is reduced, in terms of wages, 15,000 crore is going to go away. And remember here, I'm just taking direct wages. I can do the same thing and say, if in Mandrega, equipment and raw materials have been supplied, and I can say, okay, about 15% of that is also going to be wages, but I'm not doing that. I'm taking a conservative estimate here. So, let's look at it. The extras infrastructure spent, as I said, approximately 1.2 lakh crore. Extra wages at 27% of 1.2 lakh crore is roughly 33,000 crore. But remember, Mandrega reduction is going to take out 15,000 crores of wages from the system. So, the net wage impact is 33 minus 15, which is just 18,000 crore. That's the net wage impact of the total infrastructure spending that the government is doing. 18,000 crore is not bad. You can say it's not too bad, but let's look at the number of jobs. Last year, the government spent approximately 1 lakh crore and it created about 15 crore Mandrega jobs. And this year, I can say approximately at that same rate, if it has been cut by 25,000 crore, then the number of jobs that are going away about 3.8 crore jobs are going away, all right? So, these 3.8 crore odd people are going to be looking for new work, which is being created by these infrastructure spending, right? Along with that, there are in India about 5.5-6 crore construction workers who will also be used for these projects. So, effectively, you can say about 6 odd crore total, right? People moving from Mandrega, some more demand which was not met last year. So, total number of people looking for jobs and might get work is, let's say, 6 crore. These are not new jobs, but these are jobs which already exist. They're just going to get additional wages by getting extra work. Remember, they don't get work throughout the year. So, extra per head, total is 18,000 crore, 6 crore workers getting that 18,000 crore. Extra per head, per worker, works out to just 3,000 rupees, just 3,000 rupees for the entire year. Now, what does that mean? Workers, on an average, workers per household are about 1.3 people, right? And so, the extra wages will work out to 3,000 into 1.3, which is 3,900 rupees. For the family, for the household. Members, on an average, per household, is about 5.5 amongst poor people who do this kind of work. So, extra wages per head in the year is going to be about 710 rupees per person in that family. What does that mean? Per person annually, in the entire year, 710 rupees per month, less than 60 rupees. That is just 2 rupees per day additional to approximately, I'll say approximately about 20 or 20-25 odd crore people. That's the spending, that is where it's going. That is where the money is going to end up. Now, you can understand that what that means. That broadly means to us that this money is going to be used for just a little bit of extra expenditure on food, on absolute necessities. This is not going to generate any new demand at all. This is going to go towards basic necessities. It's not bad, it should happen, but there are other ways to deal with it. Other ways to not only create jobs, but also to increase consumption. Very clearly, infrastructure spending does not help. Infrastructure spending actually only boasts profits because big companies get these contracts, these are guaranteed returns, guaranteed revenues. They add their profit margin and the tender and their profits get guaranteed. So that's what happens. Ultimately, this is going to fatten the purses of the rich. That's the show today. Keep watching NewsClick. Do subscribe to us, like this video and share it as well.