Tag: Government Schemes

All-encompassing plan

India needs to eliminate the mismatch between its growth and employment by formulating data-backed comprehensive policy best-suited to its economic situation and demographic dividend

Recovering from the Covid shock the Indian economy is showing great resilience and we are now witnessing a V-Shaped recovery. The GDP growth for the fourth quarter is likely to be positive and for the entire year 2020-21, it should be in the region of -7 per cent. The following year promises a growth rate of anywhere ranging from 10-12 per cent at current prices but even then the economy would just be back to the pre-covid level by March’22. The biggest issue that has been thrown up has been that of unemployment. Large scale unemployment was a result of the covid crisis. Even before that, unemployment was becoming an important issue that needed a policy framework to tackle. India is reaping the demographic dividend with the median age being 28.4 years and also about 8-10 million new entrants are entering the labour force every year. The magnitude of the problem is clear. The CMIE (Centre for Monitoring Indian Economy) comes out with data for unemployment and their data shows that the unemployment rate went as high as 23.5 per cent during the first two months of lockdown. The position is much better today with the February data shows that the overall unemployment rate in India is 6.9 per cent (7.74 per cent in urban and 6.55 per cent in rural). One of the main objectives of the twelfth five-year plan (2012-17) was the generation of decent and productive employment in the non-agriculture sector. The employment policy in India has so far laid emphasis on self-employment whereas a much more comprehensive analysis of the problem and a policy prescription is required.

It is high time India follows the footsteps of several other countries which have a comprehensive national employment policy. The policy emphasis in various countries is different according to their economic situation. East and South-East Asian countries like Singapore, Indonesia or Philippines have policies geared towards global integration as a core element of growth and employment. African countries have focused on employment friendly anti-poverty strategies while some of the Arab countries have moved from active labour market policies which were limited to young college graduates to more comprehensive policies addressing other employment challenges faced by the region. Many countries in Eastern and Central Europe have also formulated comprehensive national employment policies which include steps like improving employment services, promoting skills training and other ways to develop human capital. Latin American countries like Brazil and Argentina have also focused on the informal economy. India has to understand the needs of its own population and the economy and evolve a national economic policy that will answer the challenges the countries faces.

If we analyze the employment scenario in India it throws up certain interesting highlights. The first is that even as GDP growth rates have risen the relationship between growth and employment generation has become weaker over time. In the 1970s and 1980s when GDP growth was around 3-4 per cent, employment growth was around 2 per cent per annum. However, after the 1991 reforms and particularly in the 2000s the GDP growth has accelerated to 7 per cent but employment growth has slowed down to 1 per cent per annum. Thus it is clear that growth by itself will not lead to higher employment generation but specific policy interventions would be required. The philosophy behind the current budget of the Union Government is that growth has to be focused on and all other things will follow. However, looking at the trend over the last 40 years, this may not be true and there is an urgent need for a National Employment Policy. Another point to note is that most of the manufacturing sector is becoming increasingly capital intensive meaning that more manufacturing may not necessarily lead to more employment. Further, it is disturbing to note that though labour productivity in organized manufacturing has increased by six times over the past three decades the wages have increased by only 1.5 times. The result is that the labour share of income in organized manufacturing has fallen down to about 10 per cent. It may also be further pointed out that the labour participation rate of women has declined in recent years and is currently at a low level of 27 per cent.

We have in India policies both at the central and state level which relate to industries, agriculture, skill development, tourism and education and each of them is connected to the issue of unemployment. Industrial policies talked about generating more investment and there are incentives for this. However, it is important to link the incentives in an industrial policy more to the generation of employment than merely the figure of money invested. Similarly, policies relating to an increase in productivity of agriculture aim to free labour from the agriculture sector to move to the non-agriculture sector. Major policy intervention in rural areas has been the MGNREGA policy (Mahatma Gandhi National Rural Employment Guarantee Assurance) which seeks to employ all job seekers. This scheme was a great asset in the time of Covid. Policies related to skill development and tourism create demand for such persons. Above all the education policy is important for determining the type of human capital that is produced. The education policy should come out with young boys and girls who are employable and suitably equipped with domain knowledge as well as soft skills.

Even though all the above-mentioned policies correlate with the generation of employment, there is no doubt that we need a national economic policy that would have a vision in consonance with the overall growth objectives of the nation and be responsive to all the challenges and opportunities. We must be clear that a national employment policy is much more than merely a job creation programme because it has to take into account the whole range of social and economic issues and consider every aspect of the economy. It has to bring together all these schemes, policies, programmes and institutions which influence the demand and supply of labour and the functioning of the labour markets. Decent work has to be provided in which international labour standards, social protection and workers fundamental rights are given as much weightage as is given to job creation. The national employment policy will have to tackle the very important issue of huge informal sector employment, jobless growth, the threat of automation and the changing nature of new jobs along with the gender parity issue.

We must evolve a national employment policy that will bring about a synergy between various sectors of the economy and focus on education and skill development. It should also endeavour to enhance the labour participation rate of women. The crucial problem of disguised unemployment in our agriculture sector needs urgent attention to make productive use of each person as also the issue of underemployment which is persistent in the Indian economy and is highlighted by the fact that even PhD students apply for a class four level job in government.

The most important thing for any sustained policy intervention for employment requires data about the number and category of people looking for jobs and matching them with the demand for jobs in various sectors of the economy. The policy will have to lay adequate emphasis on developing an effective labour market information system that will identify skill shortages, training needs and available employment opportunities. We need to evolve employment portals rather than have the existing moribund employment exchanges at the national and state level.

If India has to become truly Atma Nirbhar and if we have to make the 21st century an Indian one then it is imperative that we focus on the crucial problem of unemployment and evolve a national employment strategy that attends to all aspects of supply and demand of labour across all sectors.

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Hard knocks

Though India nears the proverbial ‘light at the end of the tunnel’, the pandemic has, nevertheless, imparted several lessons on the need to overhaul public health infrastructure

The biggest learning of COVID-19 for India has been the imperative of focusing on public health. Policymakers, experts, doctors and intellectuals need to sit down and urgently apply their mind on responding to this challenge. There is no doubt that public health infrastructure in India needs a lot of improvement and the worse is that there are huge regional variations with the southern states being in a far better position as compared to states like UP and Bihar. This is borne out by the differences in the figures of infant mortality, maternal mortality and total fertility rate where the southern states can compare with the best in the world while the backward ones are in the same quadrant as Sub-Saharan Africa. The nation is indebted to the sagacity of its political leadership, acumen of the administrative machinery, the brilliance of the scientists and the dedication and courage of the doctors and paramedic staff along with the remarkable patience and fortitude shown by the common citizen, which has helped it handle the seemingly insurmountable challenge of Corona reasonably well. Looking at the huge population that we have, our figures for the total number of people infected, recovery rate and crude fatality rate compare favourably with the best in the world. Of course, a young population and a naturally high level of immunity have helped matters but you cannot take away the credit from all those involved in fighting the Corona menace.

At the moment, it appears as if the threat of Corona is slowly declining and with two vaccines having been approved, it is possible that sometime towards the middle of 2021 we should have come out of this crisis. Mercifully, the economy is also rebounding faster than anticipated largely due to the innovative spirit and courage of entrepreneurs and farmers. We can heave a sigh of relief but there is no room for complacency to set in. One does not know when another pandemic might invade our lives and we have to be ready to respond to it keeping in mind the learnings of the battle against Corona. The Corona crisis has also led to a situation where because of the focus of our limited resources on the pandemic the other health care problems suffered including immunization of children and battle against diseases like TB. It is now clearly written on the wall that India has to accord the highest priority to public health in the years to come so that we can handle any emergent situation and bring about a vast improvement in the quality of life of its people. The first intervention can start with the current Union budget likely to come within a month which should focus on the health care sectors and come out with innovative schemes and above all significantly raise the percentage of expenditure on public health in general and as a percentage of GDP. In the year 2020-21, the budget allocation for health as a percentage of total expenditure was 5.4 per cent (65,001 crore) which was only 1.6 per cent of GDP. This figure has been more or less constant for the last five years since 2016-17 though the overall amount has gone up from 37,061 crore in 2016-17 to 65001 cr in 2020-21. India has been targeting an expenditure of 2.5 per cent of GDP on public health by 2025 but this was a vision when things were moving normally. The Corona pandemic has been a huge shock necessitating a total re-think and reconsideration of priorities. Even the 15th Finance Commission has highlighted this issue and called for an increased allocation on public health. We should now aim to reach this figure of 2.5 per cent at least two years in advance of our original target and this intent has to be brought out in the budget priorities for 2021-22. It is significant to point out that the figures for public health expenditure are 17 per cent of GDP in the USA, 11.7 per cent in Germany, 11.2 per cent in France & 11.1 per cent in Japan and I read somewhere that even Bhutan and Ethiopia spend more as a percentage of GDP than India. The per capita public health expenditure for India in 2020-21 is only Rs 1,944.

The areas for concern are quite clear. We have to significantly increase the number of beds per 1000 people from the current figure of 0.6 and fully equip and modernize as well as operationalise our 1.5 lac primary health centers (PHC) and 29,144 health and wellness centers. For this purpose, significant investment is required to upgrade the infrastructure of the PHCs. Above all, we need many more doctors as our current ratio is 1 doctor for 1,457 people against the WHO norm of 1:1000. This means that many more medical colleges will have to be opened and in particular, the scheme of converting district hospitals into medical colleges has to be given a major fillip. We need to add many more seats to existing medical colleges by upgrading their infrastructures. A peculiar feature of India is that the private sector share in health care is far more than the public sector amounting to 78 per cent in urban areas and 71 per cent in rural areas. There is a definite need for increasing the share of public health spending and there is also a huge need for regulating the private sector to enable it to cater to the needs of the weaker sections of the society. Innovation and regulatory reform hold the key.

The out of pocket expenditure for citizens in India is 62.4 per cent against the governments spend of 30 per cent. Compare this with the UK where the corresponding figures are 9.7 per cent and 83.1 per cent; for the US the figures are 11 per cent and 48.1 per cent, for Brazil 25.5 per cent, 46 per cent and for China 32 per cent and 55.8 per cent. Almost 52 per cent of this out of this pocket expenditure goes for medicines, 10 per cent for diagnostic labs and 22 per cent on private hospitals. This is quite an anomaly for a developing nation where almost 15 per cent of people are still living in absolute poverty. The situation has to be remedied on an emergent basis. Otherwise, low-income people would be pushed further into poverty by spending more on health. A strange phenomenon I have noticed is that even people with low levels of income do not avail of the free facilities being provided by government hospitals as they have no faith in them and spend huge amounts in consulting private doctors or even quacks.

Increasing public expenditure is only one part of the solution. My experience of more than three decades of governance has clearly shown that the absorption capacity of these funds is an area where huge improvement is required. Significantly, it is the less developed states where the capacity to spend the funds is constrained by issues relating to governance and poor management leading to poor quality of public health delivery and huge leakages of funds. One can just analyse the working of the National Health Mission to prove this point where a lot of funds were year marked for the states but the quality of spending and even the amount of money spent varied from state to state. There is, in my opinion, a great need to bring about governance reforms in the health sectors which would require a lot of training and orientation in issues related to public health as well as the qualities of leadership, planning, coordination and execution amongst the officers involved in the process. Robust institutional mechanisms for service delivery have to evolve and be nurtured; and technology has to be used in a big way to prevent corruption as well as to increase the range of quality health care facilities. Unless we look after our human capital by making them healthy we cannot expect them to participate equitably in the process of democratic governance as well as economic growth. A healthy nation is a happy nation and that is the goal that we must aspire for.

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Communicating farm reforms

While the new farm bills will bring much-needed reforms, continuing miscommunication with the farmers has seen the Government’s intentions being lost in translation

Almost for the last twenty days, the agitation of the farmers has been catching the national headlines and a situation of stalemate has been created. It is hoped that very soon a solution which is acceptable to both parties is arrived at. The real issue to my mind is that of a lot of apprehensions in the minds of the farmers due to miscommunication and these concerns need to be addressed and the interest of the development of the agriculture sector and the farmers. Agriculture sector structural reforms are ultimately for the benefit of the farmers and, therefore, it is important that they understand and support them and realise the gains that shall flow to them as a consequence of these reforms.

India undertook major economic reforms in the year 1991 which opened up the industrial and the international trade sector leading to a positive impact on the GDP of the country and overall economic development. However, it is true that these reforms bypassed the agriculture sector leading to a situation where over several years we have been witnessing farmer distress. Not since the Green Revolution in the 60s have any major reforms been undertaken to energise the agriculture sector and the benefits of the Green Revolution have long since reached a plateau. I recall during my civil service days we always focused on making inputs like high yielding variety seeds, fertiliser, pesticides and other micronutrients along with water for irrigation and adequate power supply available to the farmers. This led to considerable gains in productivity and overall production leading to India becoming food self-sufficient from an importer of food grains. It has now been realised that raising productivity is not sufficient and the most important thing is giving the farmer a higher income. With this objective in mind, the Government of India constituted a committee known as the Dalwai Committee which has given detailed recommendations and the honourable Prime Minister gave the target of doubling farmer’s income by 2022. This is indeed a laudable goal but it is not possible to achieve this without significant market reforms which would ensure that the farmer gets the right price for his produce.

The current structural reforms seek to address the structural issues in agricultural marketing and can definitely be viewed as a major initiative in opening up the agriculture markets and bringing about value addition to agriculture produce. However, the farmers evidently are not convinced of the intentions of these laws as perhaps adequate time was not given to have a full and comprehensive debate on these issues to make them acceptable. Any major structural reform disturbs the existing equilibrium and shakes people out of their comfort zones which always causes disturbances. We know that any path-breaking change measure goes through various stages before it is accepted. The first reaction is to oppose it, then early adopters respond positively to it and finally on seeing the results the others follow. Change can never be brought about overnight and needs patience and continuous communications to make it acceptable. This, in my opinion, is at the root of the farmer agitation. These measures structural reforms were announced at a press conference about relief packages for the impact of the Coronavirus on the economy and thereafter, ordinances were issued and subsequently acts passed in Parliament without debate leading to different people understanding the reforms in different ways and feeling uncomfortable with the change. We all know that policies always need detailed deliberations with the stakeholders and should not be rushed through. There is an adage which says that when you cross a river you should feel the pebbles below your feet meaning that policy cannot ignore the real issues which have to be taken into account at the time of formulation. However, there is no point in talking about the past. Today there is an opportunity to discuss all issues threadbare with the farmers in a spirit of accommodation and with a flexible approach which would certainly lead to an amicable and acceptable solution.

A written assurance can be given that the MSP mechanism will not be interfered with and that APMC mandis would be strengthened rather than abolished or allowed to decay. To protect the small and marginal farmer a regulatory mechanism is required to enable the farmers and the corporates to be on an equal footing. Farmer producer companies which are genuinely operational should be set up through a major campaign with funding from the Government to ensure that the small farmer is not exploited by the market. Warehouse and cold chain infrastructure have to be developed on a massive scale taking advantage of the one lakh crore Government of India scheme for this purpose and warehouse receipts should be made negotiable instruments so that the farmer does not have to indulge in distress selling and take advantage of the upswing in the markets. Another alternative is to implement the Amul model used for milk in the case of all the vegetables and fruits. Once the farmer is able to parley on equal terms with the corporates this could lead to a massive spread of food processing industries in the rural areas generating non-farm employment for the youth and transforming farmers into agri-business entrepreneurs thereby considerably increasing their income. Taken to their logical conclusion these reforms if properly implemented can lead to a big increase in agriculture exports.

The reforms are in the right direction but have been announced in too much of a hurry. It is important to address all the genuine concerns of the farmers and take the reform process forward.

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