As we celebrate our 76th Independence Day there are several things to be proud of on the economic front. India has now become one of the major economic powers that commands respect in all spheres. Earlier in the eighties and nineties, it was for software where we made a significant mark and India became known in Silicon Valley in the USA. Now it has become a super power in almost all spheres and a country that is part of all global discussions. Let us enumerate these achievements.
The first is that India is a centre piece of all global economic discussions and part of various important groups be it the Quad or G-20. Given the economic might, the influence on other economies is growing at a rapid pace. In fact in the group of BRICS nations India has clearly gone ahead in terms of being recognised as the global representative of the emerging economies.
Second, in terms of size of GDP India is now poised to be the third largest economy in the world and given the spare capacity that is there, has potential for accelerated growth in the coming years which cannot be said for other countries.
Third, the growing income in the country is seen as a door of opportunity for all global players. This is seen in the form of large foreign direct investment coming into the country. In fact the growing market is the biggest temptation for all companies to look for a slice in this story. This has been enabled in the last decade by the government through progressive policies that support such flow of funds.
Fourth, notwithstanding the size of the country and importance in the global value chains in major industries and services, India has still managed to decouple from the world. This manifests in the economy growing at a fast pace even while the world has slowed down in the last two years. This does credit for our economy as it ensures that the engine runs even when the world pushes the slowdown button.
Fifth, India has become one of the more attractive markets for foreign institutional investors and given the potential of India Inc has seen an influx of funds into the equity markets ever since they were opened up in the nineties.
Sixth, the delivery system in the country has been almost perfected with the use of technology. The story starts with the Aadhar card which has given a unique identification number for all citizens. This has been useful for better targeting of public services and has been a success. Given the size of the population the credit to be accorded is even higher as this has not been done in any other country.
Seventh the financial inclusion programmes have been administered by the government mainly through the Public Sector banks which done yeoman services here. The Jan Dhan Scheme has been a direct method of ensuring that banking is available for the masses. This has been topped with special lending schemes for agriculture and SMEs (MUDRA) and hence the loop has been closed. Further for making seamless transactions, the UPI has been a model which is now being borrowed by other countries as the sheer volume has been a vindication of the success of this mode.
Eight, the governments drive to provide power, water and fuel to every household has also yielded results with data showing that the deprivation rates have come down substantially (as per the NITI Aayog Multi-dimensional poverty index). Therefore it has been proved that the push factor is possible on a large scale if there is determination which has been shown by the government.
Ninth, Indian agriculture has grown to become largely self-sufficient with specific programmes being targeted at vulnerable crops. While there is still some way to go for oilseeds, the reduction in dependence on import of pulses is a major achievement.
Last, the progress made in the infrastructure sector has been remarkable. The highways story is well known with proliferation in construction over the years. This has forged strong backward linkages with critical industries in this space like cement, steel, machinery etc. The changing face of the aviation industry including airports as well as ports is evident as things were very different at the turn of the century.
In this success story, are there any missing links? The challenge going ahead is to create more jobs at an accelerated pace. Presently growth in new job creation has not kept pace with growth. While the qualified and professional youth do find jobs in this growth environment, it is not the same for the unskilled. This is a challenge because the youth need to recognise the need for skilling and reskilling so that they get meaningful jobs. Today it is more of the blue-collar workers getting jobs which are in construction or services like retail, delivery, security etc, which are not very remunerative and do not really skill the workforce.
This is where there is need for a major change in industry which has to become the engine to growth because jobs get created that are self-sustaining. In India unfortunately the services sector has taken lead before industrialisation picked up which has come in the way of job creation. While India Inc, has done its part, most of industry remains in the SME sector that is fragmented and not run in a professional manner. While there is potential for higher employment in this segment, there is need for scalability which is absent presently.
The task is cut out for the next five years where job creation should be the focus. This will not generate output but also income which will fuel the consumption chain which in turn will spur investment. India has been used to investment rates in the region of 34-35% in the past which has to be replicated again. Covid has been a shock and been a pushback, but the prerequisites are in place to bring about the necessary acceleration.
The author is Chief Economist, Bank of Baroda and author of ‘Corporate Quirks: The Darker Side of the Sun’. Views are personal