Hi,
Here is a critical reading of an article published in today's print of
The Indian Express. The article is related to warning signs that are indicated in economics of India these days. I have mostly studied Reading Comprehension this week. With a fresh approach to read long passages, I was interested to read such an article based on economics and related to relevant events. If you are interested in learning to read better, then this article is for you. Also, if you feel scared to read long passages related to economics, as many people generally do, this is a way that you may adopt to reveal the points stated in the article.
My first step was to read the article without bothering to get stuck in understanding difficult words or phrases, and convoluted sentences. I noticed there were some terms that were pre-defined in economics. However, they did not became a hurdle to grasp the arguments of the author. In the last few paras, the author points us to shift attention from monetary to fiscal policy. I understood the point of the author, but did not sufficiently understood the difference. So, I thought to go back and understand the passage throughly.
You may read the passage by yourself before proceeding further. Take a moment, relax, and read the article. Follow the link here:
https://indianexpress.com/article/opinion/columns/india-gdp-economy-covid-19-worker-wages-sajjid-chinoy-7092154/First things first. The title or headline of the passage is
CANARY IN THE COALMINE by
Sajjid Z Chinoy, who is Chief India Economist at J.P. Morgan. I could not understand the headline at first. Only by relating what I have read to the headline, I thought canary, a yellow bird, is used a symbol for workers, or workforce dressed in yellow jackets. But I did not wanted to assume this and found that
this is actually an idiom, meaning that someone/something that is an early warning of danger.At this point I started reading the passage again and noted my points below. My focus was noticing the author's argument and tone, a strategy that is recommended in some text books on Reading Comprehension in GMAT. This also includes conditional statements or causality that may have been stated by the author. Spotting a conditional statement in a dense text is an essential skill required in both critical reasoning and reading comprehension. Next thing to focus while reading is difficult words or phrases that may be defined in passage or implied by context. The following are points that I gathered from the article. I have written these sequentially.
General principle:
Value addition must ultimately accrue to the different factors of production.Idiom:
accrue to - a quantifiable value to be credited to an account or to a person's account
Definitions: 1.
Value addition - Value-added is the difference between the price of product or service and the cost of producing it. The price is determined by what customers are willing to pay based on their perceived value.
2.
Factors of production - In economics, factors of production, resources, or inputs are what is used in the production process to produce output—that is, finished goods and services.
My interpretation - A part of the profits that producers are making must be transferred to those factors that contributed in their production.
Conditional statement: If listed company profits are growing 25 per cent, and yet GDP contracted 7.5 per cent, it reveals (by construction) significant pressure on profits of unlisted SMEs, wages and employment.
In a sample of five East Asian economies, employment income has contracted — in nominal terms — in 2020.Definition:
nominal terms - In economics, nominal value is measured in terms of money, whereas real value is measured against goods or services.
Author's argument:
So even as economies heal from COVID-19, the distribution of incomes across capital and labour risks becoming very skewed in favour of capital. Tone: no tone. The claim is objectively stated based on evidences presented in previous paragraph.
Conditional chain:
If every firm boosts profits by cutting employee compensation, then the (strategy) simply cannibalises future aggregate demand and profitability for all firms, then reduces chances of re-hiring employees. This condition will again lead us to
reinforce the risks of settling into a sub-optimal equilibrium, which is another term pre-defined in economics.
Definition:
a sub-optimal equilibrium - This term is related to Pareto-optimality, which is
a concept of efficiency. A state of affairs is Pareto-optimal (or Pareto-efficient) if and only if there is no alternative state that would make some people better off without making anyone worse off. More precisely, a state of affairs x is said to be Pareto-inefficient (or suboptimal) if and only if there is some state of affairs y such that no one strictly prefers x to y and at least one person strictly prefers y to x. The concept of Pareto-optimality thus assumes that anyone would prefer an option that is cheaper, more efficient, or more reliable or that otherwise comparatively improves one’s condition.
Conditional chain:
If job-market pressures induce households into perceiving this shock as a quasi-permanent hit on incomes, households will be incentivised to save, not spend in the future. While economic momentum is expected to slow as pent-up demand wears off, the level of output will progressively reach pre-COVID levels as the economy normalises.Author's argument:
This begs the question.Tone: strong - very concerning
Text question:
The question is what will drive growth after that? Probably, the following part of the passage will answer to this question.
Conditional statement:
If labour market pressures dent private consumption, and an incomplete global recovery in 2021 dents export prospects, there will be no imperative for entrepreneurs to invest, especially with manufacturing utilisation levels below 70 per cent heading into COVID-19 outbreak.Author's argument:
So fiscal policy cannot afford to become a drag next year. Tone: no tone - but a claim that has been stated argumentatively or objectively.Definition:
fiscal policy - Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. It is the sister strategy to,
yet unlike it, monetary policy through which a central bank influences a nation's money supply.
Definition:
leitmotif - on the basis of the context, a repeated move
At this point, we face another text question. Looking back, can we answer the last question? Yes, the answer is government spending through fiscal policy.
Text question:
But how do you accommodate this spending? Scope of this question lies in the concerns that may be raised by government. Unlike the answer to the last text question, which required an elaborate answer, the answer to this question comes immediately.
By doubling-down on public sector asset sales.Conditional statement:
If higher infrastructure spending is financed by higher asset sales, the headline fiscal deficit (which matters for bond markets and interest rates) can be slowly reduced, even as the underlying fiscal impulse (which matters for growth and jobs) remains positive.Author's argument:
This (higher infrastructure spending is financed by higher asset sales) is the only way to undertake fiscal consolidation without incurring a fiscal drag. Tone: No tone. Claim is objectively stated.
Author's argument:
In 2021, the baton must therefore pass from monetary to fiscal, especially since the latter is a more surgical instrument to target SMEs and the labour market. Tone: No tone. Claim is objectively stated.
Similar items: monetary to fiscal policy. Monetary policy is supported independently by the central bank of the nation while fiscal policy is supported by government spending, a policy move that is highly political.
Conditional statement:
If growth contracts 7.5 per cent this year and rebounds 12 per cent next year, activity in early 2022 will still be about 7 per cent below the level forecasted pre-COVID, reflective of some economic scarring.Tone: scarring - strong caution
Author's argument:
Much, therefore, remains to be done. The excitement around the vaccine shouldn’t obscure this fundamental premise.Tone: No tone. Claim is objectively stated.
Purpose: to warn us about the challenges that the Indian economy may face in the next financial year and suggest a method to avoid such a situation.
Organisation: Describes how the concerning issue exists despite a substantial recovery of worsened economy, how the issue leads to future challenges, and how to fix the issue.
In my opinion, it not necessary to note all these points while reading a GMAT passage. You only need to notice these points clearly. For better practice and keeping a track of the passage, occasionally, you may note the points made by author. I am not an expert in GMAT reading comprehension, but I found this method really helpful in precisely grasping long passage under time pressure. You may need to try this method in some of the passages before you can gain confidence in using this method.
Lastly, I want to share this. I am still preparing for the GMAT. It has been almost 2 years since I started. I did not lose hope yet. If you are in similar situation, don't give up.
Count on little improvements to stay motivated. You will succeed sooner than you may expect. Please feel free to comment on this method and share your thoughts. Have a great weekend ahead!