Hyderabad: In January 2019, the World Economic Forum (WEF) Insight Report said the achievement of positive outlook for the country’s consumption future depends on three critical challenges:
- Skill development and employment
- Socioeconomic inclusion of rural India
- A healthy and sustainable future
We analyse here the progress and the steps needed for tackling these three critical challenges since the publication of the report was one year back.
Before going to these challenges, it is important to look at the growth of the economy in the last one year. The quarterly GDP growth rate declined from 8.0% in the 1st quarter of 2018-19 to 5.0% in Q1 and 4.5% in Q2 of 2019-20.
The report of the WEF mentioned that India’s GDP growth rate for 2019 is projected to be almost 7.5% as it continues to be a major engine of global economic growth. In contrast to their projection, we expect less than 5% GDP growth in the year 2019-20.
Apart from global factors, some of the domestic factors including goods and service tax (GST) related issues, nearly 10 lakh crores of NPAs of banks, crisis in non-banking financial companies (NBFCs), stagnant agriculture and rural incomes were responsible for the slowdown in the last one year.
Some economists are saying Indian economy is in intensive care unit (ICU). One need not panic about the economy as it is only a slowdown and not a recession. The revival may happen only after a year or so.
Turning to the first challenge of skill development and employment, there have been significant findings on employment with the release of 2017-18 NSSO report. The country’s unemployment stood at a 45 year high of 6.1% in 2017-18. At the same time, work participation rates declined particularly for females. It declined from 42% in 2004-05 to 22% in 2017-18 for women. Still 85 to 90% of workers are in informal sector. Therefore, the government has to focus on expanding formal sector and simultaneously raise the productivity of informal sector.
It is known that with demographic dividend, there will be large numbers joining labour force. This comes at a time when the rest of the world is ageing. Demographic dividend will be achieved only if people are provided employment, education and skills. However, the dividend varies from state to state – it is higher for North as compared to South where ageing started. Skill deficiency of workers is well known.
Niti Ayog says that only 2.3% of Indian workers have formal skill training compared to 70% to 80% in other countries. In other words, there is only slow progress in skill development in India.
India’s skill development landscape has witnessed some changes. Institutional framework has been laid at a national level, private industries have been brought in for greater participation, Skill Development Missions are being created at state government level and 17 central ministries have taken on initiatives to skill.
While much is being done, there is a need for effective implementation of various schemes and programs at the grass root level with equal participation from all stakeholders concerned.
China’s experience in skill development can offer some lessons for India. The enactment of the 1996 Vocational Education Law of China has been the landmark step for the Chinese technical and vocational education and training (TVET) system.
There are many features distinct to the Chinese economy that provided them with manoeuvrability and flexibility to implement skill development initiatives at the local level. The law has the provisions for integrating education and training with the industrial process with the participation of local enterprises. In addition, it provides for adult training as well as vocational education and training in rural areas.
Many other countries have such an act to ensure legal backing to vocational education and training in their countries (for example, Australia, United Kingdom and Germany). A similar act should focus on all tenets of the skill development system in India, laying out the specific responsibilities of the centre and the state on the one hand, and skill providing institutes and industry on the other.
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Another issue on skill development is that countries like South Korea have increased skills along with high-quality general education. Therefore, the Indian population has to be provided with quality general education in order to sustain skill development.
Second challenge is socio-economic inclusion of rural India. Last one year witnessed slowdown in rural incomes and wages. There is a need to bridge the gap between rural/semi-urban and urban areas particularly for infrastructure, digitization including internet and financial inclusion. Announcement of Rs.100 lakh crores over five years for infrastructure by the government is an important measure.
However, details have to be worked out. The government should focus more on rural and semi-urban areas when they start spending Rs.100 lakh crores. In the last few years, the government has done well in providing cooking gas availability in terms of LPG connections (Ujjwala Yojana), providing electricity (Saubhagya Yojana), programmes like Swatch Bharat Abhiyan, These programmes helped the vulnerable sections particularly women. The budget 2019 indicates provision of every single family with electricity and a clean cooking facility by 2022. We have to see the progress in the next two years.
Information technology is another source of socioeconomic inclusion in rural areas. Digital India launched by the government tries to ensure that the services are made available to citizens electronically and by increasing internet connectivity or by making the country digitally empowered.
This initiative includes plans to connect rural areas with high speed internet networks. There has been significant progress in mobile connectivity but internet penetration is still a problem in many rural areas.
Regarding financial inclusion, The Pradhan Mantri Jan Dhan Yojana has contributed significantly to the cause of financial inclusion in the country. The total number of accounts opened under PMJDY increased to 37.1 crores with 1.02 lakh crore of deposits in September, 2019. Of these accounts, 59% are operational in rural and semi-urban areas.
The usage of these accounts, however, has stagnated in the last two years as evident from the deceleration in average balance. A national strategy for financial inclusion (NSFI) for India 2019-2024 was prepared under the aegis of the Financial Inclusion Advisory Committee. Hopefully, it will enhance the financial inclusion in rural areas further.
The third challenge is healthy and sustainable future. This is becoming much more important in the context of UN SDGs. The problem is much more severe in urban areas with alarming rates of congestion and pollution along with unhealthy population. Estimates show that non-communicable diseases are rising and they account for 63% of all deaths in India.
The government is focusing on Pradhan Mantri Jan Arogya Yojana (PMJAY) which provides health insurance cover of Rs. 5 lakh to 10 crore families. Some estimates show that we need Rs.one lakh crores for this purpose. However, as compared to the required funding, the allocations to PMJAY seem to be trivial. It is true that health insurance is an important component of healthcare coverage. But, universal health coverage should be the goal.
A massive increase in public health expenditure and a radical revamp of primary health infrastructure are needed for moving towards universal health coverage, which should provide accessible, affordable and quality health coverage to all.
There is a need to focus on impending crises in air and water pollution, waste management and urban congestion. India has a long history of environmentalism with the passage and codification of various Acts even before the pre-reforms period, started in 1974. Recently, government has been taking measures to reduce pollution levels and face climate change challenges.
Namami Ganga mission is one example of government’s initiatives. Also, the existing environmental regulations in the country are among the most stringent laws exist elsewhere. However, their implementation and enforcement has been inadequate. This has resulted in continued deterioration of environment including air and water pollution.
Delhi’s air pollution goes to emergency levels every year due to crop residue burning in Punjab and Haryana. But, we have to suggest alternatives to the farmers. Industrial, vehicle and construction pollution is more responsible for Delhi’s deteriorating air pollution. One can learn less from Beijing and Shanghai cities in China on reducing air pollution and waste management.
Among various reasons for limited success of environmental policies are, institutional failure and general apathy. “Not in my backyard’ attitude of masses is equally responsible for pollution problems. On the one hand, the regulating authorities should keep in mind that ‘prevention is better than cure’ by playing a pro-active role and, on the other hand, the masses should cooperate each other and get involved in tackling environmental issues.
To conclude, in the last one year, economic growth including consumption growth has declined. The progress on the three challenges mentioned in the World Economic Report is mixed. There is deterioration in employment situation and increase in unemployment while there are improvements in rural areas like LPG provision, increase in electricity, financial inclusion and reduction in open defecation. Health sector is getting attention but non-communicable diseases are rising and needs universal health coverage.
Environment and pollution levels seem to be rising but at the same time awareness is rising. India is a large country and the problems also vary from one state to another. Therefore, apart from central level, state level policies and actions are required to tackle these three critical challenges.
A medium term plan is required to achieve goals on these challenges for enhancing consumption, growth and well-being. Challenge of agricultural development has to be added to the above three challenges as agricultural incomes are important for consumption.
(Article by S. Mahendra Dev, Vice Chancellor, IGIDR)
