Calcutta Notebook


Prime Minister Narendra Modi said recently that "development" is the only solution to the problems facing the country. The report card of economic reforms initiated by Manmohan Singh and being implemented faithfully by the NDA Government is more like of the student who passed the exams in the second division. There have been some great achievements. No doubt Indian economy has become globally competitive, thanks to the flexible exchange rate and competition faced by domestic industries from cheap imports. Big corporations have contributed more revenues to the tax kitty. This has enabled the government to implement welfare programmes like farmer's loan waiver and MNREGA and provided some relief to the common man. Poverty has been much reduced. True, services sector has done wonders. But the quality of life of the common man has scarcely improved.

The biggest problem is of jobs. The growth rate of GDP has been about seven percent since the reforms were initiated. It has led to a growth in employment in the organised sectors of hardly two percent. Large numbers of youth are entering the work force and making a living by plying rickshaws and the like. Reforms have helped create a vibrant middle class in the services sector, however. Young engineers are buying properties that took a lifetime of savings of their parents to buy. This middle class is employing maids. Some benefits of reforms are thus percolating. But not much. The real income of the maids has actually declined. She was getting Rs 600 per month in 1995. Today she is earning Rs 1300. Her income has increased two times while the cost of living has increased about four times. The reason is that large numbers of workers are migrating from the villages to the cities in the search of jobs. The demand for maids has increased less than the supply. Thus wages have been declining. Larger numbers of maids have got jobs but at lower wages. The "trickle" in the "trickle down" of economic growth is becoming thinner and thinner by the day even though the number of trickles has increased.

This situation is simply not sustainable. There is a huge upsurge in police killing in the United States and terror in Europe. Britain has decided to exit the European Union. In reality aggressions are taking place because the common man is feeling cheated. The situation is more desperate in India.

"Make in India" will not help in reversing these fortunes. Manufacturing is increasingly being undertaken in capital intensive sectors. The share of capital intensive products in India's exports was 41% in 1991-92. It has increased to 65% in 2010. The generation of employment in the organised manufacturing sector was insignificant in this period. "Skill India" will help, but only if it percolates down. It will help if youth are able to access the global e-markets and make customised computer games and like e-products sitting in their homes. Then Indian youth may be able sell their home made e-products across the world. The present approach of ‘‘Skill India’’, on the other hand, is focused on manufacturing. This skilling will not help. Large numbers of skilled people are already begging for jobs. The end result of ‘‘Skill India’’ will be that the less-skilled will be replaced by more-skilled. The more-skilled will produce more and that will lead to less number of jobs to produce the same quantity of goods.

The solution to this problem is twofold. In the long run one must develop the services sectors. Skills of people must be improved to supply e-products to the global markets. What is urgently needed is to establish "Indian Institute of Services Exports" along the lines of IITs and IIMs. Tourism is a major source of revenue in a large number of countries. The tourist who comes to India should feel secure. The daily events of conflicts between cow protectors and Muslims, dalits and upper caste people, and so on create a sense of fear among the visitors. This fear percolates to services provided through the internet. There is a need to set social equations on even keel for the services exports to move ahead.

These measures, however, will take considerable time to yield results. There is a need to implement some short term measures. Certain sectors should be reserved for labour intensive production only. For example, all textile weaving mills can be directed only to manufacture for export. That will lead to the creation of large number of jobs in handlooms and decentralised power looms. But such a measure will step on the toes of the big companies and is anathema to politicians and bureaucrats alike.

The quality of life of the common man takes a hit from the poor quality of governance. The hafta is being collected by the street corner vegetable seller as previously. Obtaining a driver's license continues to involve wriggling through the maze of many windows. In an interview after assuming charge as the Prime Minister in 2004, Manmohan Singh had said that his top priority was to secure an improvement in governance. That is where he did the least. The current NDA Government has improved governance at the top. Honest officials are being promoted. But this is like recruiting a good driver to drive the broken car. It will go only so far. Need is to repair the car so that even a not-so-good driver will be able to reach the destination. Systemic changes are required. A system of proactive spies to locate and trap the corrupt officials must be set up as was advised by Kautilya in Arthasastra. Public hearings must be held before promoting senior officials. External evaluation of performance of the officials must be done and the worst performing ten percent should be shown the door every year. The reforms have brought opportunities for businessmen and prosperity for the elite middle classes. The common man has been left behind and the government is absolutely clueless about a way forward.

Vol. 49, No.21, Nov 27 - Dec 3, 2016