We need to reframe ‘development’ away from aggregate measures of growth towards a sharper, more telling focus on the advancement of the majority of our population.

 

The uncertainty surrounding the virulence and intensity of the prevailing Covid-19 pandemic has forced policymakers to become more people-centric. A major hallmark of the reorientation has rightly been towards meeting what citizens need the most, with a focus on abetting their means of livelihood. No matter the country, the lockdowns of varying lengths and severity, imposed consequent upon the breakout of the disease, have hugely impacted the working class and poor families. Devising ways and means to get such vulnerable sections back to their normal routines, deserves maximum attention. Otherwise, we risk not just disastrous outcomes on humanitarian grounds, but also risks to our current economic and societal systems—expressions of resentment against persisting inequalities and the growing deprivation will undoubtedly manifest in unexpected forms such as the countrywide racial protests recently witnessed in the United States.

Emerging nations, especially India with its large population, have to be particularly ingenious in handling the evolving situation lest it slip out of control. In the weeks following the first round of lockdown imposed in late March, a staggering 122 million people found themselves unemployed. To put thais in context—this was a quarter of the work force and included 40mn in the organised sector and at least twice as many casual workers commonly engaged without any kind of work-assurance, fair wages or a modicum of social security. The more gravely impacted were the hitherto ignored migrant labour, estimated between 40 and 80mn people. The only set of daily wagers relatively unscathed were the 230-250mn farm labourers who continued to find work in the ready rabi crop harvesting at first, and then later in land preparation for the ensuing kharif season. A mercy in disguise would not be an unfair description of this. Kudos are due here to the Central and a majority of the state governments for rising to the occasion and getting across the much needed food grains, cash transfers and even gas cylinders to several million people and preventing disastrous consequences of possible hunger and pestilence.

With the benefit now of having had some time since the immediate shock of the pandemic hit, the need of the hour is upfront confronting the position that India’s future development hinges on ensuring that our half a billion workers—increasing by 10mn annually—are prepared not just for a prolonged pandemic but get gainfully employed in the country’s future growth process. We have to first accept, as many nations across the world increasingly have, that tags such as the “fastest growing large economy” are meaningless if progress is measured only by aggregate GDP increases or averages like per capita income. The widening inequalities of incomes occurring in most countries following the widely implemented post World War II, industrialisation model, based on assumptions of “trickle down’’, like in India tend to get glossed over in such omnibus indicators. Realisation of this had led welfare economists and social scientists such as the Swedish Gunnar Myrdal and our own Amartya Sen to instead point towards poverty-measurement as a more relevant criterion of development. Over the last three decades, the policy prescriptions for attaining that goal have no doubt led to a decline in absolute numbers, and sometimes even in the proportion of population below a particular income threshold. However, the glaring and growing relative income gap of the majority vis-à-vis a minority in the higher echelons have made economists such as Thomas Picketty, an inequality researcher, and the doomsayer professor Nouriel Roubani, conclude that looking at poverty just as a static level of subsistence, oblivious to widening gaps, is an untenable situation. Rapid concentration of income and wealth in the hands of a few, and the social unrest it is capable of causing, excludes the participation of the majority in “development” and significantly contributes to low output.

These modern-day so called “developmentalists” imbued by welfarism, appropriately call for a comprehensive range of economic and social policies that focus specifically on the problems of economic inequality and poverty. They argue that higher incomes among the poor increases demand and provides a greater stimulus for production. Their policy prescriptions include not only raising income levels of the poor, but also the moves that redistribute wealth and income more evenly. In addition to questioning the residuary approach towards the impoverished in the growth process, they draw attention to the regressive policies taking the poorer countries towards greater destitution primarily owing to lack of steady employment.

While the merits of all economic philosophies can be endlessly argued, what’s clear in the case of India, is that we need to reframe “development” away from aggregate measures of growth towards a sharper, more telling focus on the advancement of the majority of our population. Despite our growth, a third of India’s population lacks access to proper health care, a fourth are still unable to follow the three Rs of literacy, and a fifth (especially concentrated in women and young children) do not, admittedly, get adequate nutrition. While many of these people may not officially be below the arbitrary poverty-line, it is evident that such indicators are unacceptable and blindly chasing GDP growth would not move the needle here.

Public policy in India must centre on employment-creation as the sustainable goal of our development. Creating jobs cannot be a matter of state responsibility alone. Similarly, creating jobs cannot be only centred around the organised segments, and creating work must be predicated on increasing people’s skills and productivity. The governments can, at best, through their public works programs, be direct employers as the last resort in times of acute natural or man-made disasters, and much along the lines of MGNREGA, this would only ensure bare minimum wage in cash or kind, just enough to keep body and soul together.

States must play an active role and take responsibility in creating an eco-system for a growing economy with clear goal of generating a significant number of new jobs every year to match the additions to the workforce. They must put the full force of regulatory, fiscal and monetary policies to work, making available factors of production like land, capital and labour through tax incentives, grants and loans in an evolving system that places greater societal recognition for those providing jobs rather than only creating personal wealth. The country’s limited fiscal space, in fact, could be improved alongside this through a differential direct taxation between those who create more jobs relative to others over and above the current industry specific norms.

Other focus areas such as skills upgrades at government cost, preferred status in the acquisition of scarce land, reducing the plethora of regulatory clearances and ensuring WTO compatible trade and financial incentives, are just some of the undertakings the governments must take on for promoting labour intensive industries. Over time, government resources must be augmented through innovative measures such as monetizing huge tracts of government land in a score of large military cantonments, as well as recovering a greater part of the incremental values of land along new highways and train routes from land owners. Perhaps, even more than the extent of financial assistance, consistency in policy framework over time would be necessary for investors, both domestic and foreign.

This is the first of a two-part article. Next week: Policy changes and actions needed for employment-creation.

Dr Ajay Dua, a developmental economist, is a former Union Commerce & Industry Secretary.