The recently released NITI Aayog action plan targeted 8% growth rate for Gross Domestic Product (GDP) for 2017-18 to 2019-20, hoping to reduce poverty through trickledown effect. It reiterated that all 125 crore population should benefit from the action plan as envisaged by Prime Minister “Participation of All and Development of All” or “Sabka Saath, Sabka Vikas.”
The action plan indicated that in the coming years, there will be reallocation of resources from non-developmental revenue expenditure to capital expenditure with focus on growth with much emphasis on private sector job creation in manufacturing sector. It also emphasises social sectors as well as infrastructure as priority areas for huge investments. The following are some the key ideas for inclusive rapid growth for the coming three years.
Better implementation of developmental schemes
Effectiveness of laws and government schemes are important not only to achieve targeted growth rate of 8% per annum, but also for inclusiveness. The current government is giving more emphasis on private investment by providing enabling environment through initiatives like Make in India, Digital India, Jan Dhan Yojana, MUDRA (Micro Units Development & Refinance Agency Ltd), Model Agricultural Land Leasing Act and GST etc. Although, all these schemes are with good intension, the key for rapid development is effective implementation.
Better laws for pro-poor growth
One of the important aims of the government is to increase incomes of the poor in both rural and urban India. 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% annual growth in real income compared to only 3.5% per annum during 2002-03 to 2012-13. As per 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 may 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, most of the productive farm land left fallow year after year. The introduction of model land-leasing law that balances and protects the rights of the tenant and landowners would be a potential solution. Age-old laws which hinder the progress need to be repealed and replaced with new laws.
Eliminate under-employment through industrial friendly policies
As mentioned in the NITI report, India’s major problem is underemployment. A job that one worker can perform is often performed by two or more workers. It means 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 industry and services. NITI Aayog report mentioned that, in addition to low productive agricultural sector, small scale manufacturing and service sectors are suffering from under-employment. Small firms with less than 20 workers which employed 72% of India’s manufacturing workforce contributed only 12% of manufacturing output. The 650 largest enterprises accounted for 38% of services output but only employed 2% of services workers. Put another way, the remaining services firms employed 98% of the workforce but produced only 62% of the output.
Make-in-India and Skill-India should focus on creating high-income jobs. On the other hand, India’s service sector is already competitive globally. Hence there was a need to promote both manufacturing and services sector including apparel, electronics, gems and jewelry, financial services, tourism and cultural industries.
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% should be public investment. Similar investments are needed to promote industry and small scale sector in backward districts. Given the fiscal constraints, it is difficult to mobilize this huge budget, unless through innovative financial instruments like viability gap funding through public-private partnerships with proper incentives.
With all these efforts, if production increases, finding market is a difficult task for agricultural as well as many rural industries. Domestic consumption demand is subdued except a few sectors like real estate. And competition in international markets is increasing from countries like China, Bangladesh, and South East Asia etc. Crash in prices of potatoes, onions, oilseeds and pulses is an example of lack of demand and consequent problems. There was a need to create demand by expanding incomes and consumption levels of the poor, through income support schemes or employment schemes like MGNREGA.
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. The report mentioned that the government should get out of production sector and focus on creating competitive environment and proper governance and regulation for wider participation in growth by all sections of the society. Social harmony and productive workforce is essential to promote economic growth as well as to benefit from it. Education, skill development and health contribute to the creation of a productive workforce.
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 in the development process with the liberalisation there were chances that many left out of due to competition. However, this assistance should not intervene in market mechanisms and incentives for more efforts. It may take direct money transfer to the beneficiaries to reduce corruption and increase transparency. It will also help in creating demand for the agricultural and other small scale industrial products.
Overall, better implementation of government acts and scheme, innovative programmes like universal basic income, promoting investments, creating markets, increasing labour productivity and creating enabling environment for private sector for job creation will boost inclusive growth.
(The author is the Director of National Institute of Agricultural Extension Management (MANAGE), Hyderabad. He can be contacted at firstname.lastname@example.org.)
A. Amarender Reddy