The reports are incredibly worrying, rather fearsome. More alarming than a possible threat from any visible adversary. So, the grit of the government that the Indian voters just elected into office will be tested by how courageously and efficiently they ward off this threat, not directly visible to many ordinary people.
The unemployment rate in India has reached its highest in 45 years.
Misfortune Never Comes Alone!
As if that was not enough- “India’s economic growth fell to 5.8% in the January-March period of 2018-19 — the lowest in 20 quarters — due to a sharp slowdown in investment and manufacturing growth as well as a contraction in agricultural production. This pulled down gross domestic product (GDP) expansion to 6.8% in FY19 — the slowest in the first stint of the Narendra Modi government.”, writes Kamal Mitra Chenoy in his article. Thus, India is no more the fastest growing economy in the world. The position has gone to China.
The food price inflation, on the other hand, has shot up between December 2018 and April 2019; the annual wholesale food price inflation rose from –0.42% to 7.37%. The southwest monsoon’s delayed onset is adding to the uncertainty further.
GDP Growth in India
When India won its freedom, the rate of growth measured in terms of Gross Domestic Product was quite low, and it continued to remain so till we adopted a policy shift which is commonly known as the Economic Reforms, during Narasimha Rao’s government during which Manmohan Singh was the Finance Minister. The policy went on in the same direction through all successive governments. If we cast a glance on the GDP growth rate of the country over the past few decades, we find that it recorded lowest (-5.238%) in 1979 when Morarji Desai was the PM, and highest (10.260%) in 2010, when Man Mohan Singh was in charge.
The Modi government (I), was elected to power on the promise of high economic growth and development (Vikas) and there is no denying the fact that it was able to maintain a reasonable growth rate- the highest (8.154%) in its second year of incumbency. However, now it is declining, and the Modi government (II) is in for a challenge.
What is GDP?
Gross domestic product (GDP) is a monetary measure of the market value of all the final goods and services produced in a period, often annually in a country. It does not take into account those products and services which are produced and consumed in the country but are not exchanged in the market for a monetary value or money. Although changes in it do indicate changes in production and consumption of goods and services in the same direction, they (growing or declining) do not convey the real picture.
Consider, for example, a big banyan tree, which used to give plenty of oxygen, which was then consumed by the population in its vicinity. Since the oxygen was not sold in the market for some monetary value, the tree did not contribute towards the GDP. One day, someone chopped it down and sold its wood in the market for the money; this act, although, disastrous for the country did help in increasing the GDP.
A young man was appointed in a big city as an executive. He hired a maidservant as a domestic help at ₹ 15,000 a month. This amount increased the GDP, as it indicated the monetary value at which the girl sold her services in the job market. They fell in love, eventually, and got married. The girl works more for the family now, but of course, is not selling her services in the market for the money. The GDP fell by ₹ 15,000 a month, though the net happiness increased.
The GDP might grow positively or negatively, while the actual well-being of the country’s inhabitants might move in the opposite direction.
Undue Emphasis On Growth
Every growth does not necessarily mean a healthy development. Any increase over time in a quantity is growth, but not necessarily healthy and not always fit to be called ‘development.’ A tumour for example is growth without doubt, but it is not a healthy development; it is an ailment. Obesity is growth, for sure, but not a healthy development of the obese person. A growth, fast or slow as it might be, to be called a healthy development must be suitably distributed over all parts of the body.
Same is right about the economic growth of a nation, or even the entire humanity. The World Bank’s Commission on Growth and Development in its book “Equity and Growth” (2010) has rightly acknowledged the fact in these words: “growth is not synonymous with development. (If it were, the Commission would not have needed the last two words of its title.) To contribute significantly to social progress, growth must lift everyone’s sights and improve the living standards of a broad swath of society.”
In India, since the Economic Reforms, we have been chasing ‘growth’ blindly and simultaneously ignoring development. As a result, what we are now saddled with is high GDP expansion (though a slight decline in near past) without job creation.
A little slowdown in GDP growth would not have mattered if there had been a healthy employment level maintained in society.
Tackling Unemployment
Unemployment, on the other hand, is a real serious problem.
It can be tackled by creating opportunities to work, with the corporate, with the governments and as self-employed persons. To encourage the corporate to expand, and thus create jobs, vast sums of money were made available, a large chunk of which came in the form of massive bank credit. However, an unprecedented amount out of it leaked in the form of frauds (₹71,500 crore in 2018-19) to a few big business houses; the growth proved to be unhealthy and tumorous. This amount pertains to ‘fraud’ only and does not cover the entire Non-Performing Assets (NPA), portfolio of the banks.
The government in India is a significant employer. “The formal sector alone has generated 12 million jobs in a year in the past four years.”, our Hon’ble PM has claimed. More will be created on priority in the coming years. However, this was and will remain insufficient to stall increasing unemployment.
The main avenue, which can help us remedy the situation is through the encouragement of self-employment at a massive level in agriculture, animal Husbandry, cottage industries, and small and medium enterprises. We can achieve this, by diverting bank-created money profoundly and urgently to this sector, albeit after removing the malaise associated with it like the delayed release of loan instalments in crop loans, and corrupt practices by the functionaries, etc. Subsidy component mostly may be discouraged to reduce the possibility of involvement of petty government functionaries and bank employees in loan distribution and therefore creating a fiscal burden on the exchequer. However, with due modifications, the Priority Sector Lending should be enforced in full force by adapting suitably to make funds available for businesses at the grass root level, effortlessly.
Money Available for Consumption Spurs Demand
It is a well-established principle that if the people have more money available to make purchases in the market, they spur demand, and the heightened demand, in turn, encourages entrepreneurs to make business investments which creates jobs. Money available for purchases with the people is a function of their income. If they earn more, they are supposed to consume more and vice-versa. The consumption may temporarily enhance by the availability of consumer credit, housing finance, and credit cards. However, if an actual increase in incomes does not back this, it results into overcapitalization and indebtedness, of the people, and may boomerang into a cascading failure of the financial system as happened during the sub-prime mortgage crisis in 2007. For example, these days a sizeable chunk of our expenditure is creating jobs, not in India but China, and elsewhere.
The government cannot directly do anything in this regard. We, the people of India, can. Why don’t we stop purchasing all such imported items for which a domestic substitute is available? Can we not use earthenware diyas in Deepawali, earthenware disposable drinking glasses the ‘kulhars(earthen cups)’ and bowls, and ‘bhojpatra(leaf plates)’ plates in parties instead of their imported substitutes? Why do we not feel national pride in doing so? Why can we not purchase our vegetables from the poor vegetable vendors at the end of the street, instead of going to a supermarket?
To materialise our Hon’ble Prime Minister’s dream of Make In India, we must recognise our real enemies- unemployment, slowdown, and inflation.
We all must join hands and co-operate with the government, rising over and above political ideologies, creed, caste, and linguistic differences.