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Events & Issues
New Delhi, 11 January 2010
Growth Perspective
CHALLENGES IN NEW DECADE
By Dhurjati Mukherjee
Finance Minister Pranab
Mukherjee recently stated that the growth this year would be around 7.5 per
cent, while Prime Minister’s Economic Adviser Dr. C. Rangarajan, projected the
economy would expand by 8 per cent during the next fiscal. The growth rate
slipped from 9 per cent to 6.7 per sent during 2008-09 on account of the global
recession. However, driven by stimulus packages and signs of recovery in the
international market, the growth in the current fiscal is expected to be quite
commendable, despite the poor contribution by the agricultural sector, which
was plagued by droughts in several parts of the country.
The economy has,
however, been facing other problems such as fiscal deficits, food inflation and
unemployment. Though there are hopes of food inflation being steadily brought
under control, deficits have been bothering the system. Some experts feel that
subsidies need to be trimmed, leaks in disbursals through the massive welfare
schemes plugged and improvement ensured in transparency and accountability.
There is need to seriously ponder whether in a situation where over 35 per cent
of the population languishes in poverty and squalor, welfare schemes targeted
for this sector can be curtailed.
The other big worry is
that economic growth hasn’t spurred job creation. One reason for this is the
sharp increase in the labour force, which has grown around 2.95 per cent
between 1999-2000 and 2004-06 – and has been double the population growth. Even
though the employment growth rate had risen by 2.89 per cent during the same
period, it was not sufficient to tackle the situation arising from unemployment
and underemployment. The impact of NREGS cannot be doubted but it has not had the
desired effect to transform the situation.
It is well-known that
liberalization resulted in the induction of labour-saving equipment, thereby
causing lay-offs and ban on new recruitment. New service sector occupations
have no doubt been coming up but the scope of jobs has become limited. There
are apprehensions that compared to the large number of engineering colleges
that have come up in the last few years, the job potential is much less as a saturation-like
situation has already set in.
Indeed, the challenges
for the new decade are enormous, principally because of the widening disparity
between the rich and the poor, the urban and the rural sector and also the poor
social infrastructure of the country, specially in the realm of healthcare and
education. Both these sectors cannot be considered areas of profit but the poor
and the economically weaker sections of the society must be provided facilities
at minimum cost. Massive resources would obviously be needed if the Government
is sincere to ensure 100 per cent literacy, proper homes for all (including
those displaced) and adequate and affordable health care facilities.
How this will be done
remains a big challenge before the Government but with India’s
emergence as a super power, resources have to be marshaled in this direction.
Developmental experts believe, and quite rightly, that even if there are
deficits, funds for the welfare of the poor, the tribals and the backward
communities cannot be curtailed for it is very much necessary to bring them
into the mainstream of life and activity.
Apart from this,
development of physical infrastructure is another crucial area, specially the
construction of roads and ensuring connectivity to the interior districts of
the country. Work in this sector has been going on and one can hope that this
should be completed by the end of the present decade or even earlier.
But generation of power to the rural
areas remains possibly the biggest challenge as there are 76 million rural
households that are yet to switch on their first light bulb. Power Minister Sushil
Kumar Shinde has stressed on rural electrification and making access to power
across villages by the year 2012. Though this may take a few more years,
determination and right policies may make this task possible. About Rs 5,000
crores was released for rural electrification in the 10th Plan and
in the present Plan the amount has witnessed a quantum jump at Rs 38,000
crores.
The Planning Commission estimated India will need
to generate 700,000 MW of additional power by 2020 to meet the demands of a
growing economy. The 2006 Expert Committee on Energy estimated the country’s power
needs at 960,000 MW based on a 9 per cent GDP growth. Coal, hydel and
non-conventional (or renewable) energy were expected to meet at best 75 per
cent of the needs. While the thrust would need to be on renewable energy,
specially solar power, nuclear power would also have to be developed.
The immediate driver to
growth is investment, which has risen from 26 per cent of GSP in 1999-2000 to
almost 40 per cent today, supported by a corresponding rise in both domestic
savings and capital inflows from abroad. Most of the increase occurred during
the previous decade’s second half, thus accounting for the sharp growth
acceleration during the period. Significantly, private investment has doubled
to over 28 per cent at present while public investment remained more or less
static at around 9-10 per cent. It needs to be pointed out that though public
investment has not grown, its composition has changed from investment in a wide
range of manufacturing and services to more focused areas of infrastructure in
recent years.
What is imperative at
this juncture is to ensure that the fruits of development reach all segments of
society in a somewhat equal manner. The 11th Plan focused on ‘inclusive
growth’ which the Prime Minister has been emphasizing time and again. But
putting this into practice is indeed an uphill task which not only calls for
prioritizing what is called ‘alternative development’ but also strengthening
the panchayat system. Ensuring good end effective governance is the need of the
day and with it more transparency and accountability of Government officials
and politicians to make the system responsive to change.
The transformation of the rural
sector particularly assumes a very crucial role and it has to be brought about
by development of infrastructure facilities, incentives to the farming
community, special attention for skill development for rural artisans and
development of horticulture, floriculture and other agro-based industries. It
may be useful that the suggestions of the expert group formed on agricultural
indebtedness (under the chairmanship of Dr. Radhakrishnan, Director, Indira
Gandhi Institute of Development Research) need to be considered seriously
specially on increasing agricultural productivity, enhancing investments in
agricultural infrastructure, research and extension and putting in place an
effective system of rural mitigation, both in production and marketing.
Lab-to-land approach is yet to
become effective and thus research from agricultural universities and the
Indian Council Agricultural Research (ICAR) should reach the farm sector. It is
quite obvious that rural regeneration would no doubt improve the condition of a
major section of the population and make it an effective work force. One may
recall the observation of Dr. C. Rangarajan
way back in 1982: a mere one per cent increase in agricultural output
led to a 0.7 increase in the national income, most of it which reached the
developmental needs of rural India. ---INFA
(Copyright, India
News and Feature Alliance)
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