The Economic Survey presented by the ministry of finance, government of India, every year, a day before the presentation of the budget, has a special chapter focussing on a particular subject.
This year, the subject is employment and the chapter is grandiloquently titled, ‘Seizing the Demographic Dividend.’ The chapter begins well. To quote Raghuram Rajan, Chief Economic Adviser: “Productive jobs are vital for growth. And a good job is the best form of inclusion.” This raises great expectations, but at the end of the chapter, one is left totally disappointed. Amateurishness, both in terms of theory by and in terms of policy – content is writ large in the discourse on demographic dividend. The analysis is more in the form of an essay by a post-graduate student of economics: it cannot be elevated to form part of a semi-policy document, like the Economic Survey. It is characterised by the prolixity and discursiveness of a PhD dissertation. Look at the conclusion it derives from the analysis. “India’s challenge is to create the conditions for faster growth of productive jobs outside of agriculture, especially in organized manufacturing and in services, even while improving productivity in agriculture. The benefit of rising to the challenge is decades of strong, inclusive growth.”
The authors of this chapter should have realised that conventional development economics is a failed God today. In a recent paper, a World Bank expert has written virtually an obituary of development economics as it has evolved over the years. “Unfortunately, development economics has not always provided useful policy guidelines in the past and it may be unable to do so in the future as well” (April 2012). The World Bank’s Commission on Growth and Development asserts that there is no generic formula for growth. “Each country has specific characteristics and historical experiences that must be reflected in its growth story.” The tragedy is that some Indian policy makers, including the authors of the Economic Survey, continue to be haunted by the ghosts of conventional market theology.
Conventional wisdom stipulates that as an economy develops, the share of agriculture in national income declines and that of manufacturing and tertiary sectors rises. Simultaneously, the surplus population in agriculture is siphoned off to the latter sectors. In India, no doubt the share of agriculture in national income has declined sharply, from say, 50 per cent in the 1950s, to less than 20 per cent today. But unfortunately, the dependence on agriculture has not been reduced. Even today, nearly 60 per cent of the population continues to depend on agriculture and allied sectors for their livelihoods. That is why we have to look for ‘second best’ solutions. Looking for solutions in the experiences of Indonesia, Korea, China and USA, as the Economic Survey does, only exposes the rootlessness of the authors in the Indian economy.
Look at another policy recommendation of the Economic Survey. “Agriculture is very low-productivity, but employs over half the labour force. In contrast, financial and brokerage services are the most productive sector in the economy, but employ a tiny share of the labour force” (page 32). Should we shift the agricultural labour to the Citibanks and Morgan Stanleys? The authors seem to be unaware of the global financial crisis of 2008, which reflected in all its rawness, the workings of a predatory financial capitalism. The Financial Crisis Inquiry Commission of the US has laid bare for all to see the shameless greed and moral decadence of the Wall Street banker. How amateurish can one get?
The preoccupation of the authors of the Economic Survey with market theology is highlighted by the Economic and Political Weekly. “Of course, global finance capital feels assured when both, the RBI and the ministry of finance, have in place top bureaucrats and advisers, who are either ex-or current World Bank or International Monetary Fund senior employees.” The Economic Survey, in this chapter, makes out a case for ‘free trade’ and for the abridgement of trade union rights and a suggestion that India follow the Mauritian export processing model and so on (March 9, 2013).
There are no two opinions on the demographic dividend that India can reap. Cross-country evidence suggests that productivity is an increasing function of age, with the age group 40-49 being the most productive because of work experience. Nearly half the additions to the Indian labour force over the period 2011-30, will be in the age group 30-49. The critical question is: how to extract the demographic dividend from this young population? Here one has to look within. To hope that the surplus population that has taken ‘shelter’ in the agricultural sector will be siphoned off to the manufacturing sector is being bookish. It is here that the Economic Survey stands exposed as barren of ideas of India-specific policy making.
The ‘second best solution’ is to employ these young persons in occupations which will enhance the natural resources of the economy. This is what we are doing already, without the benefit of advice of IMF/World Bank experts. In the Mahatma Gandhi National Rural Employment Guarentee Scheme (MGNREGA), about 4.39 crore households have been provided employment, of which more than 58 per cent are women. A major activity under this programme is watershed activities, which will enlarge the water resource base. Future agricultural growth will have to be necessarily water-centric watershed development projects, both micro and macro, which hold out great promise for future agricultural growth: the potential area to be covered is huge, capital investment is modest, projects are labour-intensive and do not require much technical know-how. By its very nature, growth under watershed development is “inclusive.” Thus, this is the best method of using surplus labour in agriculture for capital formation. The option of shifting the surplus population from agriculture is not open to us and hence we have to think in terms of using surplus labour in activities related to agriculture or rural sector. Afforestation, expanding the area under bamboo plantations, activities designed to promote sustainable use of natural resources, are relevant in this context.
Finally, investment in education contributes to economic growth. The past decade has recorded substantial increases in education, particularly primary education under Sarva Shiksha Abhiyan (SSA). But we have to ensure that the quality of education is good. The Annual Status of Education Report (ASER) of 2012, based on a study conducted by the NGO Pratham Education Foundation, found that 68 per cent of students in Class V could not read or comprehend the study material of Class II. The outcome of investment in education has to be more positive.
The central point is to seek India-specific solutions, rather than regurgitate barren and outmoded theories of development.
DR.N.A. MUJUMDAR
