Shahrukh Khan’s interrogation, guns and butter

So Shahrukh Khan is in news again, for yet another detention at another US airport. So digging up an old post that was first published in 2012, when he made big news for being detained. It talks of the economics of Shahruk Khan's detention.

Hope you like reading it!

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There has been much debate about whether the detention of Indian superstar, Shahrukh Khan,  at the airport at New York for the second time was called for or not. There are of course arguments on both sides – in terms of its political implications, social messages and so forth, for which, there are really no clear answers.

But in economic terms, there is a clear loss. According to my calculations, the potential income lost to Shahrukh Khan (and hence to India’s Gross Domestic Product) could have lifted as many as 300 or more people out of poverty for one year! The poverty numbers themselves have come under severe scrutiny in the recent past, so the actual number of people might be lesser, but these estimates are still a reflection of the potentially dramatic impact it could make.

But how were these numbers obtained? As per publically available reports, Shahrukh Khan charges Rs 20-25 crore per film, and assuming 1 or 2 films of his release per year, the average earning per year from films alone is taken to be around Rs 35 crore. His endorsement deals have been projected to fetch him around Rs 200 crore per year (the numbers were available for 2007-08, and assuming that the King, as he is lovingly called, has at least raised his rates at India’s not-small inflation rates, this is the number we get). So that makes his average income per year at Rs 235 crore. He, of course, would generate incomes from performances and his entertainment company (which produces films among other things) as well. But numbers are not as easily available on them. So, essentially, this is a conservative estimate.

If we decide to turn brutal to our superstar and assume he works 365 days in one year at the rate of 12 hours a day (he is famous for sleeping only 4-5 hours a day apparently), his average hourly income is well over Rs 5 lakhs. Since he has been subjected to interrogation for at least 6 hours over the past years, at today’s prices, India has lost Rs 30 lakhs at least in GDP on account of a last name of ‘Khan’. (Why don’t terrorists use a non-Muslim alias though, ever?)

The poverty lines suggested by the Planning Commission recently for 2009-10, which have effectively been panned reportedly by the government itself, but for lack of alternatives we go with them. Adjusting for inflation over the past two years, and weighting for the rural-urban population ratios we get an exact number of 315 people being lifted out of poverty. Admittedly, it is not a huge number in an emerging country like ours and certainly not given the size of the population, but it still provides context.

One can of course say that it is not as if Shahrukh Khan’s incomes were anyway going into poverty upliftment directly, but the fact remains that as long as he is part of this economy whether he spends his money or he puts it into investments as well as pays a tax on it, they would have probably found its way into productive uses. And the more spending there is in the economy, the more chances are that people will get jobs, and be lifted out of poverty. And this is just one instance. A number of people are routinely interrogated, and if we start extrapolating those costs, the actual figures would be much higher. Which is not to say that these moves by the US are not justifiable. The costs of the 9/11 alone are staggering, and who knows how many more such incidents have been prevented on account of tightened security.

As novice economics students, the production possibility frontier is one of the first concept one is taught. Essentially it talks about an economy at the limit of its potential and one that produces only 2 goods – guns and butter. The economy can produce either guns only, or butter only or some combination of the two. It might be time for us to assess if we are producing too many guns and too little butter, the Khan incident or not.