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A change in perspective can boost the economy

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A change in perspective can boost the economy

In this 70th year of independence, India has to look for a new economic paradigm through an intense discussion, and create an integral economy that would be a precursor to integral humanism and overall job growth

India needs some quick solutions. It needs more jobs, a free and low-cost banking, a growing industry and a thriving farm sector. It is not right to say that India cannot do it. This is the world’s highest growing economy, even if we take the slide to 5.7 per cent in growth. It hides, however, some of the disturbing trends.

Many are now blaming demonetisation for the slowdown. But we find that the pace had slowed down over the years, or at best, it had been lopsided. Since the 1970s, the gross domestic product (GDP) has been growing exponentially but so has been the distress — fewer jobs and increasing rural displacement. It can be attributed to decelerating agricultural growth since the 1980s.

Our policy-makers, in their enthusiasm to entice people away from agriculture, started laying less attention to the sector, if not ignored it completely. While the rest of the economy was growing, agriculture was winding down with green revolution losing the push it required.  The then Planning Commission and high-ups in the Government had viewed that investment in the farm sector was a waste, as in their opinion, people needed to be weaned away from it and jobs in industry and other sectors had to be created.

The policy increased penury in the farm sector. Farmers themselves were reduced to marginal labourers and productivity started falling. The annual rate of farm growth at constant prices in the 1980s was 4.24 per cent. It reduced to 3.17 per cent in the 1990s and to 2.37 per cent in the first decade of the 21st century.

The Economic Survey, 2016-17, volume two, states that agriculture is characterised by instability on incomes owing to various types of risks related to production, markets and prices.

It says growth rates of agriculture have been fluctuating at 1.5 per cent in 2012-13, 5.6 per cent in 2013-14, (-) 0.2 per cent in 2014-15, 0.7 per cent in 2015-16 and 4.9 per cent in 2016-17. The major fact stated is the dependence on rainfall and the survey attributes this for fall in 2014 to 2016. This speaks volumes — the occasional growth is due to the efforts of the farmers, when they can. The society had done little to add to it.

This becomes more pronounced if we look at the 54 per cent gross domestic product growth between 2005 and 2012. The period created only three per cent or net 1.5 crore jobs, while every year, over one crore jobseekers were added to the list. The maximum distress was in the rural and farm sectors, with severe underemployment, the survey notes.

The country will add over eight crore net new job seekers by 2025. Even if the growth increases to seven to eight per cent, not more than three crore jobs would be created. Mere growth does not create jobs. It requires investment and capacity to pay, by the industry or the manufacturers, where most jobs are to be created. This lopsided stress again leaves the largest private sector, agriculture, into a perennial situation of neglect.

Agriculture, official data says, employs 54 per cent of the population, or approximately 70 crore people at 14 per cent contribution to the GDP. It means the largest number of people subsist on the minimum GDP. It has to change in an area when we rightly or wrongly are in a spree to promote private investment.

Let the nation accept that agriculture will remain the largest employer and re-orient the policies. It raises brouhaha over approximately Rs 75,000 crore farm loan-waivers in Uttar Pradesh, Maharashtra and Punjab, though does not mind about almost Rs 12 lakh crore bank non-performing assets (NPAs) to about less than 100 large corporates.

Loan waiver is bad economy but the banks do not lose, it is paid by the Government. The NPA is simple loot of the money put in by poor depositors. Both stress the economy and add to banking and administrative costs.

This exactly happened post demonetisation. The banks have excess liquidity of Rs 2,500 billion (Rs 2.5 lakh crore) as on June 2017, according to the second survey. Other estimates put it at four to five lakh crore rupees. Managing and paying interest on it is draining the banks. It is said to cost the banking system and the Reserve Bank of India about Rs 16,000 to Rs 24,000 crore a year. It does not estimate that a large part in the farm sector, kept in households or small businesses that transacted in cash, was away from the banks but legally transacted, which is stressing the formal banking.

It also affected farm and rural and informal sector. Lack of cash hit its operations hard. So if people associated with farming and informal sector do not thrive, the hope that the rest of the economy would boom is wild expectation. With almost 70 crore people having sub-standard living, the nation cannot expect to achieve the proverbial moksha.

The nation has to plan for adding eight crore jobs by 2025. No investment in any formal, Government, large corporate projects can create that many jobs. The stress of the Government is fine through a number of schemes from Start-up India to Make in India, but it has to include the farm, informal and the large-small sectors. The Government has to give up the idea that it could manage everything everywhere.

It has to be the facilitator for an economy that would be different from what the world pursues. The International Monetary Fund-World Bank model would not do it, nor a modified version of the Mamohanomics.

India needs an out of the box model. It has to reverse the economic process, instead of revolving around large industries, large projects, highways, fast trains, fast cars. It has to make a fresh start with the village of Mahatma Gandhi and Deendayal Upadhyaya to the fore. So far the planning has been urban-centric and it has neither helped the cities nor the villages nor the industries.

The survey two said Niti Aayog has set up a task force to address deficiencies in the existing data on unemployment and create a road map. It is a good admission. The solution has to be different and the Aayog must change the tack.

In this 70th year of independence, the nation has to look for a new economic paradigm. It has to begin from the informal sector, farms and villages. The focus on shifting villagers must change. The nation, through an intense discussion, must create an integral economy that would be a precursor to integral humanism and all-round job growth.

(The writer is a senior journalist)

 
 
 
 
 

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