Jul 23, 2024 10:04 PM IST
The job-rich growth strategy should innovate itself to be inclusive but historic, geographic and social circumstances will remain pervasive for some time to come.
Finance Minister Nirmala Sitharaman’s seventh budget articulates a bold, even radical vision for sustaining India’s fast growth in an uncertain world. At its heart are measures to make the best use of India’s demographic dividend, which is what lies at the core of India’s vision of its Amrit Kaal, the centenary of its Independence. The most visible dimensions of this strategy are the multiple initiatives in the budget to stimulate employment in the formal sector. This is rightly seen as the most reliable way to boost labour productivity.
Equally significant, though less prominent, is a fundamental repositioning of the role to be played by the private sector in all its dimensions: farmers, MSMEs, Self Help Groups (SHGs), the large scale corporate sector, and foreign multi-nationals. They represent the demand side of the labour market and have an equally important role to play. Given the sheer scale and diversity of India’s potential labour force, new institutions to match demand and supply are also being devised.
India has maintained a long-term average growth rate of 6% for three decades since the 1991 reforms. With slowing population growth, per capita growth has been even stronger. This impressive rate of sustained growth over the last few decades speaks of the maturity of institutions and decision-making structures, which express themselves in rising productivity — what economists call supply-side growth. India’s Gross National Income (GNI) per capita for 2023 as reported by the World Bank is $2,540, which places it firmly in the lower middle-income category. A country that is just above the World Bank’s high-income threshold of $14,005 is Chile with a reported Gross National Income per capita of $15,820. The challenge for India is to prepare itself for the transition to middle-income status ($4,516 by World Bank metrics) and to keep growing fast as a middle-income country, as China and Korea have before it.
This is an ambitious goal and there is no sure way to plan for a 25-year horizon: There are too many uncertainties. Yet private investors, both domestic and foreign, do need long-term guidance. Also, in a democracy, a given Parliament cannot bind its successors. What can reasonably be done is to announce broad directions of policy, enshrine these in legislation and aim for a few early wins in an effort to establish momentum.
Commendably, employment incentives and skilling are at the core of the budget. Three schemes for employment generation are part of the package that, for the first time, includes a wage subsidy for new entrants. To further push the agenda of women-led development and to improve the female labour force participation, several notable initiatives including setting up of working women hostels, establishing creches, organising women-specific skilling programmes and promoting market access for women led SHGs/ enterprises are laid out in the budget.
Preparing the labour force to be more productive is no point without a receptive private sector. The budget reimagines the private sector in a comprehensive manner, recognising the equal importance, not only of large scale corporate but also start-ups, farmers and MSMEs. To this end, the budget incorporates relevant measures to bolster the health of agricultural sector and MSMEs. The strategies to attain ‘Atmanirbharta’ for oil seeds and pulses and creation of large scale clusters for vegetable production close to major consumption centres, all by acknowledging the role of Farmer Producer Organisations (FPOs), cooperatives and start ups, is reflective of this.
The commitment to review the direct tax code could also make an enormous difference to ease of doing business. Underlying these policies are two deeper shifts. First, the lead on investment will shift from the public to private sector with the government playing a facilitating role. An important example in the budget is the commitment to allow the private sector into the nuclear power sector, as well as the development of a taxonomy for green investment. Also relevant is the commitment for a vision for the financial sector which can mobilise long term resources for India’s investment requirements.
As the third largest economy in the world, India will inevitably get deeply engaged with the world economy. What India enjoys is scale. This budget seeks to harness underutilised domestic resources and capabilities to establish a virtuous cycle of rising productivity, increased savings and lower cost of capital. This strategy will become clearer in the course of the year as various policy papers are finalised, but the direction of change is obvious and welcome.
The job-rich growth strategy should innovate itself to be inclusive but historic, geographic and social circumstances will remain pervasive for some time to come. Successful programmes such as the Aspirational Districts Program and the most recent Aspirational Blocks Program will continue to play an important role. It would be ideal if the lessons from these new skilling initiatives could in time be brought into these schemes as well.
Suman Bery is vice-chairman, NITI Aayog.The views expressed are personal
Story Saved
