Fire for a Five-Trillion Cauldron: By Dr.Jayan K N

By GovernanceToday
In Economy
November 25, 2019
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India was about to throne as world’s fastest-growing economy for the third consecutive year while moving towards five-trillion Ram Rajya. Entered the unpleasant hunch-backed liquidity crunch coupled with sluggish consumer demand, stalling manufacturing sector, leaving the marketplace for an uncertain period of recovery. Yet, hopes prevail as the central government pumped money to the economy. Already pronounced investment proposals are also in the fray. Stages set, and what requires is nothing but efficiency in Implementation at ground level. Several boosters and investments will certainly recover, but would not be enough to reach five-trillion targets that too within just fifty months from now. Mending systemic lags is a prerequisite, whether it is of government functionaries or accompanying departments that host majority of the investments declared.   

Data from World Bank reveals that global GDP reached US$ 82.6 Trillion in the year 2018, and that of India stood around US$ 2.8 trillion, contributing about 3.4 per cent to the global GDP. The year before the Modi Government took charge, i.e., in 2013, India contributed 2.8 per cent to the worldwide GDP, subsequently increasing to 3.4 per cent in 2018. Global GDP witnessed relatively higher annual growth rate during the 1960s and 1970s averaging near 6 per cent. During this period, India’s growth averaged at 2.8 per cent and slumped to negative rates in the second half of the 1960s.

During 1965, India’s real GDP declined to US$ 0.176 trillion from US$ 0.181 trillion the previous year. This decline was mainly attributed to war with neighbouring countries, exposing India’s economic weakness, chronic food shortages and rampant price rise. The mid-1970s witnessed slowdown during which growth rate ranged between 1.2 and 1.7 per cent. Since then India performed relatively better until facing the downturn in 1991 plummeting the growth rate to 1.1 per cent. Last 15 years (since 2003), India succeeded in maintaining the average annual growth rate of above 7 per cent in real GDP, whereas the global DGP grew at an average yearly rate of 2.9 per cent. During the Modi government, the growth rate averaged at 7.5 per cent till 2018. Now it is slowing down and is not an Indian phenomenon alone. IMF chief Kristalina Georgieva in her first speech on October 9, told that 90% of the countries would witness slower growth in 2019. Ms Georgieva added, the slowdown is more pronounced in the largest emerging market economies like India and Brazil.

Post-1990 economic reforms, India averaged an annual growth rate of 6.3 per cent against the global average growth rate of 4.1 per cent, indicating India’s resilience to global development discourse. India should tackle this opportunity while marching towards a five-trillion economy. Maintaining a consistent growth rate of 8 to 9 per cent in real terms and 12 to 13 per cent in nominal terms is required to achieve the five-trillion threshold by 2024. This growth rate is not an easy task and falls far ahead of India’s organic growth trends. Foremost among the factors conducive to a consistent economic growth is keeping India’s strong ties with their neighbours. Feel of even a trifling entanglement at the border is risky. Does not matter, whether it is accidental or intentional.

Any form of complexity will keep the economy far from a transformed five-trillion dollar mission. It is not the size of rupee spent on defence which is going to be decisive. It is the efforts and focus of government mechanisms at various levels which is going to render a change. 

India’s defence expenditure remains at an annual average of 2.6 per cent of the GDP, against the world average of 2.3 per cent. Data from the Stockholm International Peace Research Institute (SIPRI) shows that India’s arms import reduced from US$ 5.4 billion in 2013 to US$ 1.5 billion in 2018. Euphoric social media fantasized a near-war situation with neighbours. Even opposition parties stamped it on a war for winning the election. The second term winning of Modi Government relied heavily on that psychological war, and the excitement continued till India’s corporate heads sniffed a slowdown. Tightening ties with neighbours will only help us achieve a broader economic mission within the targeted time. Simultaneously, improved focus on defence manufacturing under Make in India will offset the military agenda contributing concurrently to the five-trillion mission.

Agriculture in the specific and primary sector, in general, is another area, where we should focus more effectively. Any fifteen-year quarter of last six decade’s data on agricultural growth rates in India shows that 3 to 6 years in a quarter registered negative growth rate. Expect underlying uncertainties in agriculture production which have detrimental effects on achieving the five-trillion mission. Although a near-future drought or resultant famine do not pose a danger to India anymore, it is always good to strengthen our logistics and warehousing sector. India’s fragmented warehousing footprint is in no mood to help address the likely deceleration in the agriculture sector. Minimize storage and handling losses in general and specific for disaster-prone regions. Centre has already taken ample measures with an array of infrastructure projects including industrial corridors, dedicated rail freight corridors, and multi-modal logistics parks (MMLP), but warehousing sector hold-up. Disaster preparedness is another area India should reinforce. Tying up regions prone to frequent floods, landslides with logistics and warehousing sector will offset probable pull-down effect on organic as well as aggressive growth trends of GDP.

Modi Government’s thrust on infrastructure development continued during the second term as well, Union Budget apportioning INR 100 lakh crore (US$ 1.4 trillion) for coming five years. All good, except the system to absorb such ambitious investment proposals. The first, second and third levels of bureaucracy, or line departments and other government functionaries which host the proposed investment heaps, should adapt to a bigger mission. Ministry of Environment, Forest and Climate Change or Revenue Administration usually require 1-2 years and 4-5 years respectively to accord environmental clearances and providing encumbrance-free land to project proponents. MoEFCC has routine and hard-pressed jobs of preserving the environment and formulating mitigation measures adapting to the climate change agenda. Undoubtedly, these are superior to the induced damage emanating from infrastructure development initiatives; nevertheless, both go hand in hand.

Delayed handing over of land to project proponents defers anticipated project schedules. The minimum prolongation costs in such cases amount somewhere between 10 and 20 per cent of the overall value of civil work contracts. Price of land, since 2015, is 3-4 times higher than that provisioned as per preceding Land Acquisition Act (1894), already placing tremendous stress on any projects’ feasibility. Restructuring existing revenue administration responsible for securing land is essential to take forward INR 100 lakh crore investment.  Severance of agricultural land due to various mega projects forfeit farmers or landowners with more miseries taking aback agricultural production and consequential loss of farm-days. Farmers lose 10 to 20 per cent person-days just for attending procedures related to land securing.   

Obviously, with limited induction of new labour force, government functionaries are working long hours to meet intense deadlines set forth. These factors, along with systemic lags, resulted in formulating defective designs deviating from intended objectives. Delhi section of much-acclaimed Delhi-Meerut expressway can achieve the expected reduction of travel time of more than five times once fix the weak design points. Similarly, the Bandra-Warli Sea Link which recorded five times escalated construction cost and a three times lesser traffic volume than estimated. Such completion of projects, whether a design has gone haywire or just functional, will only help attain organic GDP growth or maybe slightly better. Private sector participation in the labour force as facilitating hands for host government functionaries, again have no shortage of long working hours. The social fabric is tattered and certainly takes a toll on individual productivity and increased morbidity. Another generation is growing with least parenting at every level.

Periodic Labour Force Survey (PLFS) conducted by the Ministry of Statistics and Programme Implementation points out average weekly working hours is 48 hours in rural areas and 56 hours in urban areas. OECD’s data from 35 member countries position Mexicans as having longer working hours with 43 hours per week. Countries like South Korea adopted legislation to reduce working hours to improve living standards, create more jobs and boost productivity. One should take pride in the amount of time spend with family apart from the eight or maximum 10 hours spent on an official position. Spending more time with family knits social fabric well. It has definite and high propensity to release consumption behaviour, which is pointed to be very bleak in India. While PM gets a sound sleep for 4 hours after working tireless for the nation, faulty engineers get sleepless nights again after working tirelessly for country. Fresh minds should be added to the workforce, provide mandatory leave for those industrious yet exhausted workers to build a healthy and happy nation.

Adding workforce can act as a massive movement capable of lighting the five-trillion cauldron with right restructuring and capacity enhancement measures, and can add 3 to 4 per cent positive growth to the existing organic growth of 5 to 6 per cent.

Dr. Jayan K N

(Delhi-based Development Planning Consultant)

Sources:

  1. GDP Data: https://data.worldbank.org/indicator/MS.MIL.MPRT.KD
  2. Bandra-Worli Sealink related information: Article by Anil Dharker – Netas must understand that growth can’t be at the cost of the environment. Times of India dated August 4, 2019
  3. Working hours data
  4. World Economic Forum:

https://www.weforum.org/agenda/2018/01/the-countries-where-people-work-the-longest-hours/#targetText=New%20data%20from%20the%20Organization,around%2043%20hours%20per%20week. Annual Report: Periodic Labour Force Survey (July 2017 – June 2018). Ministry of Statistics and Programme Implementation (May 2019

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