The author Santosh Mehrotra
Growth has slowed, despite the claims that India is the fastest-growing large economy. Joblessness is high, real wages stagnant, while prices soar as inequality mounts.
There are at least five, if not six, economic priorities that await a new government. First, restoring GDP growth to 8% per year, on a sustained basis, while creating jobs in the non-farm sector. Three groups are desperate for jobs.
There were already too many in agriculture in 2019, 42% of the workforce was producing 15% of India’s GDP. The national lockdown and the economic contraction have added 60 million new workers to agriculture (men and women alike) – the opposite of what a developing country at India’s stage of development needs.
The second group consists of the unemployed stock of youth. In addition, there are NEETs (Not in Education, Employment or Training), whose numbers exceed 100 million, who have regrettably fallen out of the labour force, as discouraged workers. Third, work must be found for educated young, with about six million joining the labour force, each year. Thus, the new government has no choice but to focus on generating nothing short of 10-12 million new non-farm jobs each year. The current government has not even recognized that such a problem exists.
The second priority will be to rediscover issues with India’s public health system, going beyond the current government’s emphasis on Ayushman Bharat, or expanding an insurance-based model of health. Many past governments have neglected public health. However, despite a National Health Policy (NHP) 2017, public expenditure on health by the general government has remained at 1.1% to 1.3% per annum for the last decade. In the next five years, this must rise to 2.5% of GDP as the NHP commits. Without that, there is little prospect of India achieving the SDGs on health.
Part of this priority must be to halve child malnutrition; that means stunting of under-fives should fall from its obscene level of 35%; wasting of under-fives should also fall to half from its 19% level. These require continuing the good work on safe sanitation begun by the current government, to take it to 100% villages being actually Open Defecation Free, rather than merely the government claiming they are.
Similarly, the third priority is raising public expenditure on education, which is half of what is aimed at by the New Education Policy 2020 – with a greater focus on the learning of children, so no child (who was left behind during the Covid-19 pandemic) is left behind. It also means that instead of higher education expanding at a breakneck speed (which has only created unemployable), youth completing secondary education should be diverted into vocational education and training. To expand facilities governments will need to facilitate the greater engagement of employers and industry (including through a Right to Apprenticeship, as promised in the Congress manifesto). That will ensure that youth are actually enabled to transition into the labour market from the education system.
A fourth priority is controlling the inflation that is hurting the vast majority of the poor and fixed-income groups. This government has put high taxes on petrol and diesel, which are unwarranted. Lowering those alone will reduce fuel prices, which feed into multiple other costs. Reducing price levels, not just the rate of inflation will create demand, just as a new focus on MSME-level job creation would raise incomes as wages rise as new jobs return. A virtuous cycle could thus be set in motion.
However, achieving all these would be difficult without mobilizing additional revenues through surcharges on the super-rich, who have only grown richer in the last 10 years, and through rationalizing GST to eliminate too many rates. Tax to GDP ratio must rise to meet the needs of health, education, and infrastructure that is mounting. All of these would be good steps to reduce the rising inequality in wealth and incomes.
Finally, improving governance would mean an end to cronyism in the allocation of natural resources, or scarce spectrum. Improving governance is not possible unless the Census is carried out in 2025.
(The writer taught economics at Jawaharlal Nehru University, Delhi)