The ‘India Story’ is caught between questions and answers. Perception is challenged by the perils of slowdown. The ‘long-term’ promise of 7-plus per cent growth potential exists amidst the parade of forecasts in the past weeks lowering 2019-20 GDP to sub 7 per cent. The political leadership is articulating everything aspiring India wants to hear. But is the policy apparatus doing everything that needs to be done?
The fact is the economy is at an intersection of necessary and sufficient conditions. The opportunity for growth embedded in demography—and fortune cookies such as lower crude oil costs or the return of easier money thanks to the policy stance by the US Federal Reserve—need the leverage of sufficient conditions.
This week India set itself a 2024 GDP target of $5 trillion—a quantum leap from the current $2.8 trillion. The question of whether it is achievable depends on the answers of approach. All growth is essentially a sum of pieces story—India’s GDP is an aggregation of the output of the states. The US state of California has a GDP of $2.7 trillion and the GDP of Texas is $1.7 trillion. Among the Indian states, barely five push past the $200 billion mark—with Maharashtra topping at over $400 billion. The propulsion of growth and expansion of the economy are catalysed by local policy reforms. Are states matching political articulation with policy action?
Every major reform required for growth is now at the doors of the states. The BJP has won a historic mandate in 2019, bagging over 300 seats, and is blessed with an extraordinary opportunity to convert political power given that it is in power in over a dozen states—including the richest states of Maharashtra and Gujarat, in resource-rich states such as Jharkhand, and the most populous states of Uttar Pradesh and Bihar.
Transporting the economy into a new orbit calls for transformation of policies on human capital—health, education and skilling. Yes there is the public-funded health insurance scheme, Ayushman Bharat, but its role is limited as it deals with consequence. What about causatives and preventive health care? The death of 124 children in Bihar is a stark reminder of the need for investment in public health care systems. Data tells the story of neglect eloquently. Studies by the Niti Aayog show that in 2017-18, Kerala allocated `6,882 crore for health whereas Bihar, with three times the population, budgeted only `6,668 crore.
The poor state of public health care systems is worsened by criminal neglect of public policy on waste management, aggravating vulnerabilities of the poor and the middle class. Illustration of poor policy can be found in the national capital in Ghazipur, east of Delhi, which is home to the largest landfill, which stands 65 metres tall and occupies an area of 40 football pitches. With 2,000 tonnes pouring in every day, the landfill could touch 75 metres—taller than the Taj Mahal, which is 73 metres tall.
The broken state of education is well known—particularly the quality of education delivered in public schools. Earlier this summer, the government of Uttar Pradesh released data on 31.9 lakh students who appeared in the UP High School Board examinations. Of the 29.5 lakh students who appeared for Hindi, which is the mother tongue for most, over 5.74 lakh students failed.
Are there jobs for those who pass out? Yes and no. For over five years state governments across the country have left over 22 lakh posts in government jobs vacant—cynical as it may sound, the electoral dividends of sops clearly outweigh permanent solutions in politics. Are those who pass out skilled to be employable? The bitter truth is that there is no mapping of the skills and education of those who pass out of schools and colleges and enter the job market.
Even at the central level the data reveals enrolment whereas what matters is how many graduated in what. To appreciate, juxtapose the disruption that is ahead. A McKinsey study points out that over 12 million women and over 44 million men could lose jobs to automation. Do states have a plan?
Take the factors of productivity, land, labour, and capital. Land and labour law reforms rest on states. Agrarian distress demands not just centralised slogans but customised solutions that must be designed and implemented by state governments. A draft labour law code drawn out in 2016 is pending with states. A model law for contract farming—for individuals and collective groups—is similarly unattended at state capitals.
Yes. Capital is scarce and the crisis in financial markets has crippled the capillary action of financing consumption to drive growth and investment (Cosy Cabal http://bit.ly/27Credit). A lower interest rate regime is necessary but not sufficient. There is a systemic neurosis—banks lack capital to lend, NBFCs face liquidity and solvency issues, flows are affected by poor accountability of auditors and rating agencies. The crisis demands a reboot in management of public institutions and monies.
It is not enough for the RBI or the government to say ‘we will step in’ a la Mai Hoon Na, Bollywood style. To paraphrase two clichés, the $5 trillion aspiration requires the party in power to put its money where its mouth is, and walk the plank of electoral slogans.