Sub-6% growth will be a catastrophe

Now, the Indian economy is characterised by slow growth, low investment and no jobs. The growth of GDP slowed sharply from 7 per cent in October-December quarter to 6.1 per cent in January-March of the last financial year and 5.7 per cent in the first quarter (April-June) of the current fiscal. It seems demonetisation, global slowdown and GST impacted growth negatively.

There are growing symptoms of more widespread distress as indicated in slowing private investment, consumption demand and farmers agitations. Some reports suggest that the investment rate in India is at the lowest in 10 years. Low investment has hampered the growth of infrastructure, transport, health and transport sectors, which are biggest job providers.

Following demonetisation, loss of employment was a major concern. Big slogans like “Participation of All and Development of All” or “Sabka Saath, Sabka Vikas” are dreams unfulfilled with a huge number of under-employed. This article comes with some policy prescriptions to reengineer inclusive growth.

Better implementation
The current and the previous governments introduced many new programmes and laws like MGNREGA Act, Make in India, Digital India, Jan Dhan Yojana, MUDRA (Micro Units Development & Refinance Agency Ltd), and GST etc., but their implementation is lagging. Proper social auditing should build in to these schemes for effective implementation.

Laws for inclusive growth
Age-old laws which hinder the progress need to be repealed and replaced with new laws. As a part of the increasing rural incomes, government aims at doubling farmers’ income by 2022 with multi-pronged strategy. It requires about 10.4 per cent annual growth in real income compared to only 3.5 per cent per annum during 2002-03 to 2012-13. As per the agricultural census 2011, 47% of landholdings had less than half a hectare in size.

These holdings are too small to support a family of five. Some of them are willing to lease out land and engage in full-time non-agricultural employment and some are willing to lease in land to make their cultivated land bigger and economically viable. But unfriendly tenancy laws make it almost impossible to lease-in and lease-out in existing legal framework.

As a result, more and more of the productive farm land is left fallow year after year. The introduction of Model Agricultural Land Leasing Act that balances and protects the rights of the tenants and landowners would be a potential solution.

Industry-friendly policies
NITI Aayog three-year action plan mentioned that India’s major problem is underemployment. A job that one worker can perform is often performed by two or more workers. It means a majority of workers are poor and working in low productive informal sector, earn lower-wages and working only 2-3 days a week as casual labourer. To generate high income jobs to young India, there is a need to focus on manufacturing.

But, small scale manufacturing sector is low productive and suffering from under-employment. Small manufacturing units with less than 20 workers which employed 72 per cent of India’s manufacturing workforce contributed only 12 per cent of manufacturing output. Making the small firms productive and profitable is the biggest challenge for policy makers. Make-in-India and Skill-India should focus on creating high-income jobs.

Promoting investments
Recent taskforce report on doubling farmers’ income mentioned that there is a need for investment of Rs 6.3 lakh crore in irrigation projects and infrastructure to double farmers’ incomes, of which 80 per cent should be public investment. Similar investments are needed to promote industry and small-scale sector in backward districts.

Creating markets
Lack of demand for small-scale units and also for agricultural produce is visible in terms of decreased prices. Crash in prices of potatoes, onions, oilseeds and pulses is an example of lack of demand and consequent problems. There is a need to create demand through expanding public spending on social programmes and through income support schemes or employment schemes like MGNREGA.

Enabling environment
Creating an enabling environment and governance structure for growth and employment is crucial. These include infrastructure, digital connectivity, Public Private Partnerships (PPPs), energy, science and technology and creation of an effective innovation ecosystem especially in backward and rural India. Investments in education, skill development and health contribute to the creation of a productive workforce. Social harmony and productive workforce is essential to promote economic growth as well as to benefit from it.

Universal Basic Income
Lastly, providing minimum basic income for each and every household to sustain minimum standard of living is an important duty of any developing country as with globalization risks to livelihoods are increased.

Overall, better implementation of government acts and scheme, innovative programmes like universal basic income, promoting investments, creating markets, increased labour productivity and creating enabling environment for private sector for job creation will boost inclusive growth.(Writer is Director, National Institute of Agricultural Extension Management (MANAGE), Hyderabad)

By A Amarender Reddy