Employment Centric Growth with Self Reliance
Professor Ashwani Mahajan
The policies of globalization of the last 30 years have yielded mixed results. While the GDP growth during this period was much higher than the planned growth of the preceding 40 years, employment opportunities were not proportionately created. That is why the GDP growth of this period was called ‘jobless growth’. While on the one hand not enough employment opportunities were being created, some economists argued that the pace of poverty reduction in the country has accelerated during this period. Although according to government data, the pace of poverty reduction is said to be faster than before, especially in the last two decades; it is not visible in terms of the indicators of conditions of the poor. For example, the pace of reduction in malnutrition of children and women is very slow. Similarly, other parameters of health and health facilities also do not indicate a significant improvement.
Bhagwati versus Sen
Nevertheless, there is a section of economists who believe that growth is remedy for all economic ills, who argue that if growth happens, benefits of increased GDP will percolate downward, by way of employment, incomes and greater availability of goods and services. This process is called, ‘Trickle Down’. Protagonists of GDP growth argument, while explaining their point, tell that if size of GDP is small, even if we distribute it equally, everybody will get a small piece; however if size of GDP grows, there will be a chance of getting a larger piece out of the same. Same thing is being told by Jagdish Bhagwati, “redistribution is possible with growth, but growth is not possible with redistribution”.
However, a good number of economists do not agree with prontogonists of growth. They say that ‘Trickle Down Theory’ is not a practical one. Growth without redistribution does not bring improvement in quality of life of masses. Amartya Sen elaborates the same view, when he says that though growth is important to improve life of people, but it must be accompanied by improvement in social indicators, such as literacy and health.
These economists believe in the ‘rights approach’. They argue that humans, who are deprived of the benefits of growth must be compensated for the same, as a matter of ‘right’. Therefore, they talk of ‘right to employment’, ‘right to food’, ‘right to health services’, ‘ right to education’ etc. But these economists also believe that growth is an important precondition for improving lives of the people.
Therefore, Bhagwati and his co-author Panagariya write that if growth is important than why Prof. Sen does not advocate policies for encouraging growth. In fact this hot controversy between two great economists, both of Indian origin, is nothing but a replica of age old debate of redistribution versus growth.
If we see the practical part of implementing the ‘rights approach’, it costs heavily to the government. Though, it may be generally believed that with growth government revenue will increase more than proportionately and therefore, increased expenditure required for implementing welfare expenditure, providing for facilities required to implement the ‘rights approach’ can be financed, on practical grounds this doesn’t seem to be an easy task. For instance, though government has been implementing the legislations made in the past towards these goals, it is finding difficult to cope up with rising demands for spending on MNREGA, right to education, right to food and right to health services. Competitive populism also tends to inflate expenditure on these items.
Therefore, while this is a foregone conclusion that merely GDP growth, by whatever means is no guarantee for improving the lives and livelihood of the peoples in the country, even the redistribution approach though looks attractive, may not be a plausible solution for achieving the objective of social welfare.
Prof. Sen’s model of redistribution relates with socialism, whereas Prof. Bhagwati’s first love is capitalism. Same ‘old wines’ are being served in new bottles, in the name of Sen and Bhagwati Models, despite their miserable failure in India. These models cannot do any good for masses in the long run. To raise employment, we cannot continuously depend on Government budget. Today we are following the policy of temporary employment creation in the name of MGNREGA. This type of policy may provide short term income support to unemployed, but this cannot be long term solution for eradicating unemployment in the rural areas. Similarly, food security through PDS or mid-day-meal, are all short term measures and continuously depend on public budget.
In the last 30 years, the blind race for globalization has caused a major damage to employment generation. During this period, unemployment has increased in almost every country of the world except China. While the unemployment rate in America is 6.2 percent, in England it is 5.1 percent, in Germany and France it is 5.9 and 9 percent respectively. Worst sufferer of this phenomenon has been the youth. Along with this, the quality of employment has also deteriorated as the youth (not fit for high tech jobs) is forced to work in very low paid jobs. According to a report of OECD, in India, there were 30 percent of the youth (between age of 15 and 29 years) who were neither in education, nor in employment or in training (NEET), which means they were unemployed. In many countries of Europe, youth unemployment has reached more than 50 percent. That is to say, both developed countries and developing countries, have been struggling with lack of employment opportunities in the last 3 decades.
Every year, about 20 million people are added to the population of India. Today, a large proportion of the population is young due to the pattern of population growth in the last 30–40 years. Today, two-third of the country’s population is below 35 years of age. And more than 36 percent of it is in the age group of 15 to 35 years. From this point of view, the India is most youthful country in the world; and that is why India is now called ‘Youngistan’. Such a situation is also defined as ‘demographic dividend’, because large size of youth population makes it possible for the country to grow rapidly by using capacities of the youth. This has always been a concern of the policy-makers about how to take advantage of this benefit.
It’s well known India missed first three industrial revolutions and lagged behind the developed countries of today and most of our efforts have always been to follow them and catch up growth. The challenge facing India today is not only to compensate for its unsatisfactory performance in the second and third industrial revolutions, but also to actively participate in the fourth industrial revolution. It is true that robotics, artificial intelligence, drones etc will hurt employment generation, but this is equally true that new technology also reduces costs. For example, companies that use Artificial Intelligence, robots, drones, etc., are able to reduce costs. As the cost decreases, the industry becomes more competitive in the global markets. But the loss of indiscriminate employment in the name of new technology also cannot be justified. In such a situation, policy makers will have to show sensitively and seriousness in terms of choice of technology.
The issue of appropriate technology is of utmost importance. In today’s era, this choice is influenced by the market. Since costs are reduced due to robotics and artificial intelligence, its use is justified from private profit perspective. However, it should not be forgotten that loss of employment also has its own social cost. When people are out of employment, their capacities and skills are not utilized. To compensate for their income, the government has to spend in some form or the other. That is, on the one hand, the cost of company’s decreases, but its real cost falls on the rest of society through the government.
But Technology Development Should Not Stop
Be it artificial intelligence, robotics, block chains or drones, they are also becoming symbols of development in modern times. New innovations are taking place in this area. Their demand is also increasing around the world. Due to the superior skills of our youth in software development, science and technology, today a large number of our youth are also making new discoveries in these fields and they also have big stakes in this revolution. India’s startups are moving ahead in the field of drone production. Robots have also been developed rapidly in many areas. In any case, it will not be beneficial for the country to stop this development. Today, there is a need to start a debate in the country on how to use these new technologies, so that on the one hand the country may emerge a leader in this field in the world; on the other hand, by choosing appropriate technology, we create sufficient job opportunities for our youth skilled and unskilled.
Job Creation with Self Reliance
Prime Minister in his Independence Day speech, had said that self-reliance is not a word, it’s a resolve. To fulfil the national resolve, efforts will have to be made at all levels. PM said that country can no longer remain an exporter of raw materials and importer of finished goods. To make the country capable to produce for the world, we need to make all out efforts. Apart from curbing unequal competition from imports, by way of raising tariffs, anti-dumping and countervailing duties, non-tariff measures including standards; we need to make efforts to create an eco-system to develop domestic industry. We understand that in the post-independence period our economic and industrial development has been badly affected by excessive regulations, bureaucratic hurdles, red-tape, inspector raj, socialist mindset and strangulation of our entrepreneurs. In the post new economic policy period, though the rhetoric was of lifting regulations, red tape, giving encouragement to private enterprise, government policy remained concentrated to only import liberalization, allowing MNCs in the name of FDI and amending domestic laws to only facilitate foreigners. Obsession for free trade and import liberalization (especially from China) resulted in destroying our industries, rather than making our industry efficient. FDI also didn’t help in transfer of new technology. Rather in the name of technology outflow of foreign exchange increased manifold by way of royalty and technical fees.
Country has witnessed that how our small industry and even individuals came forward and made face masks and PPE kits when they were in short supply, and China was trying to profiteer from our helplessness. Similarly, many labs came forward to address the problem of shortage of testing facilities and today we not only have sufficient facility of testing COVID19, cost of testing has also come down drastically. When country and the world was witnessing a shortage of ventilators, one Company Skanray Technologies, Mysuru, which was producing 5000 ventilators in a month, took the hill task of helping companies to fulfill the requirements of the country, by generously sharing the design of their ventilators, with other manufacturers and made it possible to manufacture 60,000 ventilators in the country in a short span of two months; and now country is exporting ventilators in huge quantity and is fulfilling the world’s demand. Hard work of our farmers instils confidence in the countrymen that we don’t face shortage of food items anymore. During Corona period, we see many examples of how, many employers continued with payment to their workers despite lock down. We need to understand that; lot of damage has been caused by the blind obsession towards globalisation, in the yesteryears, impacting domestic production and employment and has led to excessive dependence on other countries, especially China.
Time has now come to give encouragement to domestic efforts to increase production indigenously. These efforts are becoming visible. For increasing production of active pharmaceutical ingredients (APIs), a production linked incentives (PLI) package of more than rupees 12 thousand crores has been rolled out. For electronics and mobile phones PLI package of more than rupees 42 thousand crores has been given. In all a PLI package of nearly 2 lakh crores has been announced covering 13 sectors. Nation has witnessed, how our industry both big and small, responded to the Corona challenge by producing PPE kits, N95 masks, ventilators and many other equipment. We supplied HCQ tablets to the world. Pharma industry is not only producing sufficient vaccines, enough to not only vaccinate the whole population, but also help the rest of the world. We are producing Covid medicines for domestic needs and also for exports.
Under these circumstances, government’s budgetary push is important but not sufficient. We need to change the mindset of the bureaucracy, regulatory bodies, government’s machinery, judiciary and media. We need to get rid of rules and regulations designed to foster socialist system. We need to allow our young entrepreneurs (start-ups) to freely work to flourish their new ideas to bring in new technology and generate wealth. Modi government’s push to start ups, needs to be taken to the next level. Dream of ‘Make in India’ has to be realized by encouraging Indian youth entrepreneurs. We know that India missed the bus of first, second and third industrial revolutions. It’s a time for fourth industrial revolution, which is digital revolution. Given huge size of Indian economy and huge market opportunities, global giants are trying to exploit the potentials in their favour. Many people think that we are undergoing a threat of digital colonisation also. We need to seize this opportunity and make our country Atmanirbhar digitally as well. COVID-19 though came as a pandemic, a threat and a challenge; our country has resolved to convert the same into an opportunity. We need to work towards the same and take our country out of foreign economic dominance, unemployment, poverty, deprivation and stigma of underdevelopment.
Let’s usher in a new era of self-reliant villages, with job creation at village level in dairy, poultry, horticulture, floriculture, bamboo farming, cottage industry, food processing, high value crops and more and more value addition at village level; a new eco system, where our villagers are not constrained to migrate to cities. In manufacturing, let’s not be dependent on China or any other country. Making world class goods for domestic and international markets, as Prime Minister says with ‘zero defect and zero (environmental) effect’. After getting disillusioned from China, whole world is looking towards India as an alternative. Let’s turn this crisis into an opportunity.
Under these circumstances we need a Government policy, which facilitates employment to poor on permanent basis; and which is productive too. For this we need to change the production system. Policies need to be devised which create more employment opportunities, along with increase in production. We need to end indifference towards agriculture and make efforts to increase production and income of the farmers. Fair distribution of income is possible only if labour gets fair wages, farmer gets remunerative price for his produce and everybody is able to fulfill his/her basic needs. For this we do not need communism or socialism; what we need is integrated policy, where production, employment, investment and distribution are not separated, rather they are integrated and synchronised with one another.