FOCUS
$ 5 TRILLION ECONOMY : FAILED DEMOGRAPHIC DIVIDEND & INEQUITOUS PRIVATE SECTOR
Speaking to the nation, on 15th Aug 2019, from the ramparts of Red Fort, Prime Minister Narendra Modi, among many ideas and thoughts on his aspiring countrymen, called out “My dear countrymen, our nation must march forward, but the country cannot any more wait for incremental progress, we will have to take a big leap, we will have to change our thinking. To make India reach the Global Standard we need to build modern infrastructure. Notwithstanding despondent attitudes, ordinary people always dream of good system. They like good things; they have developed a taste for it. So we have decided to invest 100 lakh crore rupees for modern infrastructure in this time period. This will generate employment; will develop new system and various aspirations will be met. Be it Sagarmala Project or Bharathmala Project, modern railway station, bus station or airport, be it modern hospitals or world class education institutions. We want to develop the entire infrastructure. Now the country also requires seaports”. “The ordinary people have changed and we have to understand that…” “Earlier people used to ask ‘when will metaled road be constructed in our area? Now the people ask ‘will the road be of 4 lanes and 6 lanes?’ They are not satisfied with metaled road, any longer. I think this is a very significant change for aspiring India. They are no more happy with just electrical poles being erected, as it used to happen, they want power in these poles and if the ‘power would be for 24 hours’. Their expectations have seen a sea change” “Earlier government of the day would do piece meal development. It had gone on. But now times have changed. We have to unitedly think about what dreams we want to achieve as nation. Time demands that we live, fight and move ahead in unison to fulfill these dreams. Keeping this in mind we have set a dream target of building a 5 trillion dollar economy”.
“The target of 5 trillion dollar economy may appear difficult to some people. They may not be wrong, but if we don’t accomplish difficult tasks, how will the country move ahead?” Exhorting people he said ‘If we don’t take up difficult challenges how will we develop a mind set to move forward?” “After 70 years of independence we, under different governments, have reached only 2 trillion dollar economy. But from 2014 to 2019, in just 5 years we reached 3 trillion dollar economy, that is, our government added 1 trillion dollar economy in these last 5 years. This must be a dream of every Indian. I believe that there are many areas which can give India a new strength to become a 5 trillion dollar economy.” Exhorting business community he said. “Our companies and entrepreneurs also dream of getting access to the world market. By getting access to the world market, our investors will be able to enhance the status of India; our investors will be able to earn more, generate more employment. We are ready to encourage our investors to come forward for generating employment” Asking the people to change their attitude towards business community, he called on people, “We should not doubt our wealth creators. The need of the hour is to recognize and encourage the wealth creators of our nation. They should receive more honors. If wealth is not created, it cannot be distributed. If wealth is not distributed we cannot uplift the poor of our society. Those who are making efforts to create wealth, according to me; they are an asset to the nation and must be empowered.” He continued….
In the context of Prime Minister Narendra Modi’s vision about the 5 trillion dollar Indian economy, it is imperative to go back to-at least to a part of what he stated in his address to the nation on 15th Aug. 2019. He mentioned about the incremental progress during the past seven decades. He spoke about the impatience of the Indian public to have faster progress in the promises politicians were making, before the election and during the currency of the government that followed, post election. He conveyed his dream of attaining Global Standards in modern infrastructure to be made available to aspiring modern day India.
While it is true, decades ago, the expectations of most Indians were tempered, in recent days it has seen a sea-change. They want things faster and better. However this expectation is limited to those Indians who are on the move on a slow but steadily moving higher development mode. But it is also true that there is a huge section of Indians across the country who have not experienced much positive change in their life. While talking about, how to address the growing expectations of a section of Indians, he spoke about the $ 5 trillion economy. In a country which took some 70 years to reach $ 2 trillion economy, to make it $ 5 trillion economy in less than 5 years time is certainly a tall call. It is true, he claimed having achieved an additional $ 1 trillion during 2014-19 period, to clock $ 3 trillion, which is not very convincing. With the kind of slow down already set in, the task before the government is quite humungous, if not impossible. It is true that when you dream big, some of it, if not all of it, can be achieved. Hence dreaming big is essential. But dream should not be facile but based on some factors which can bring about the realization of vision little closer, than remain a mirage.
The realization of $ 5 trillion economy would surely involve huge investment, both from domestic players and international players, besides from the government, which is truly the driver of employment generation. While it is true that investment can bring about more employment opportunities, it is also true that in recent times, growth has been with zero employment growth with most private and international investors going for automation and artificial intelligence like robots and such tools for repetitive functions. However one of the most disturbing aspect of our growth story has been the education that failed. Successive governments have failed to address the problems that have been there inherent in the system itself.
The demographic dividend that our young population was expected of, some how did not happen. By 2020 those below the age of 25 years could be above 500 million, majority of whose comprehension level is well below universal standard. Truly speaking our thousands of crores of investment in education sector has not produced an adequate number of empowered literate class of youth.
On the 15th July 2016 the then Chief Minister of Uttar Pradesh Akhilesh Yadav made a surprise visit to a primary school in the district of Shravasti. To his greatest shock only one girl student in the class could read a chapter from her Hindi text book, rest could not read a word. The school Akhilesh visited had a concrete building; students had uniforms and books as well. An extremely upset Akhilesh squarely blamed teachers for the children’s inability to read from their text books, accusing teachers that ‘you have ruined an entire upcoming generation’ ‘kuch toh sarkar par krupa karo. Vidhyarthiyonke wajah sey thumhe vetan mil raha hai, sarkar key wajah sey nahee’ was his anguished observation to the teachers present in the school. His disappointed remark ‘have mercy on the government. You are getting your wages because of these students and not because of the government’ clearly reflects the waste of resources in primary education, which has not prepared a whole generation of youth for better performance in the employment market.
‘Why should the government pump money in primary education’ Akhilesh asked ‘if the children cannot read even a word?’ Perhaps not knowing what else to do, he suspended the basic education officer of the district.
According to Pratham, an educational NGO into the primary education, learning levels among students aged between 6-14 years across India, remain depressingly low. While 97% of children across India are enrolled in schools only 13% of children in grade two can read from their language books, informs Pratham’s ASER or Annual Status of Education Report. Similarly ‘1/3rd of class 8th students cannot read class two level text book, and more than 50% of those completed 8th can’t read simple English sentence or do simple division’, informs sources in Pratham.
Ever since ASER was conceptualized and put into practice, there has been a certain level of reliable estimates on the quality of education, especially at primary school level. While it was a huge logistical nightmare, developing a model of survey involving citizens and partner organizations in the corporate sector, it did help in arriving at an unanimity about one thing, ‘if India had to make use of its young, inexpensive work force, labeled as ‘demographic dividend’ it had to improve the quality of education beginning at the elementary level’.
Relying on habit or official pronouncements is not enough. A greater focus on what evidence tells us about effective teaching and learning will enable teachers to help every child to chieve the highest possible standard in education. Primary schools should insist on laying foundation in areas like spoken language, science, the arts, the humanities, emotional and moral values and lived experience to obtain good dividend.
It is true that the present incumbent government at the centre led by PM Modi is committed to bring about change. But it gives an impression, whether in its overdrive, it ignores nitty gritty details! While everybody wants to have a city like Singapore next door, not everybody is prepared to pay the price needed. We want our messy democracy and we also want a Singapore, that’s not possible.
Singapore is a city with disciplined citizens. We Indians are grossly indisciplined. We always fight for rights, but Singapore is more duty conscious with curbs on some of the rights. Thus nothing is free.
Sense of discipline or understanding our responsibility as citizens, should come from primary school. Here it is not the infrastructure that is being discussed. It is the quality of teachers where the appointing authority should pay adequate attention without any under-hand dealing in teacher appointment. If the quality of the teachers is ensured with adequate incentive of working conditions are provided, it can attract committed teachers. The dream of $ 5 trillion economy should seriously deal with this issue, if our ‘Demographic dividend’ should not turn as ‘Demographic disaster’. In fact it is already a bit of disaster. However, if the power that be, plans labour intensive industries in government sector, there is a good chance, that these unemployable unemployed can be absorbed in these industries. This will greatly help reduce the pressure everywhere and can truly give impetus to the economy to grow since wages in the hands of workmen will increase consumption which in turn will push demand that will spur supply chain and therefore an opportunity to create more supplies leading to increased investment. A study carried out by SDM institute of Management Development, Mysore had examined whether consumption or investment that added to economic growth in India between 1992 and 2015. Reportedly the study concluded that “26% is contributed by private consumption spending whereas investment spending caused only 4% variability in the GDP”. Similarly in developed countries, where income levels are high it is the consumption that drives the economic growth. The poor use 90 paise of every rupee of income for consumption, whereas rich spend only a small portion of their income since they have larger income. Rest of their income goes to term Deposits and asset creation like Gold. So clearly it is the masses when empowered with better income drive the consumption driven market scenario. Therefore investment by government that lead to more employment and therefore income, will lead to better growth.
Here it is important to recognise that in less than 3 weeks time after 15th Aug, in the first week of Sept, a panel was set-up by the Finance Minister for the proposed Infrastructure Project worth Rs: 100 lakhs crores. The panel is supposed to identify all feasible infra projects that can be started during 2019-20, so also for the remaining 4 years upto 2024. The panel is also supposed to find out the estimate of cost and identify funding sources. This earnestness is a welcome sign of things to come. Hope teachers for primary schools, similarly as a project, is seriously considered if the coming generation of children are to become the productive assets of our socio-economic evolution.
In his speech on 15th Aug 2019, PM Modi also mentioned about the business class as wealth creators. There is absolutely no doubt that they are wealth creators. There will always be a multiplier effect in a dynamic society, when business grows. PM Modi also mentioned that if the wealth is not created it cannot be distributed. Unless it is distributed how can the poverty be reduced”. Nobody can fault with this statement. But the truth is, those who created the assets or made more wealth, more often than not, kept it for themselves. They often gave it to corrupt government servants & politicians, their friends and family members, so that they grow and keep growing. Wealth doesnot always trickle down. A society guided only by the invisible hand of the market is not only imperfect, but also unjust.
It is the sad story of India of all these years. Those who earn more do not want to be taxed more. They want it reversed. No sooner FM announced reduction in corporate tax, share market index shot up like mad. Here how is the redistribution of wealth happened?
In its eagerness to help the business community, the government has left individual tax payers in a lurch. The treatment extended to commerce and industry was not extended to general public. Noreena Hertz, a Professor of Economics at the Institute of Global Prosperity, University of London, in her book ‘Global capitalism and Death of Democracy’ writies “All over the world, concerns are being raised about governments’ loyalties and corporation’s objectives. Concerns that the pendulum of capitalism may have swung just a bit too far that our love affair with the free market may have obscured harsh truths; that too many are loosing out. That the state cannot be trusted to look after our interests; and that we are paying too high a price for our increased economic growth. They are worried that the sound of business is drowning out the voices of the people.’ Can she be proved wrong?
According to Bharat Jnunjhunwala, a former Economics Professor at IIM, Bengalooru, “The government will have to take two steps to break the recession. One, protection will have to be given to small businesses. They use more labour and less automatic machines and the share of wages in the goods produced by them is more. This will place more income in the hands of poor. Two, the government must focus on exports of services, instead of manufactured goods. The global market for services such as software, mobile apps; online tuitions is continuously increasing. We must empower youth to supply these services to the global market. This will definitely lead to a rise in consumption and investment.”
It is true that the present government at the centre had inherited the problem of NPA (Non Performing Assets)of earlier regimes. During 2004/2011 bank loans were given left-right and centreleading to close to 30% credit growth, which resulted in huge NPA by the commerce and industry which the present government has the unfortunate legacy to set right things. So, it is not easy to invigorate the slack investment climate, with resource crunch. However government has various financial tool to augment resources, like issuance of oversees sovereign bonds in foreign currency like the one did by PVN Rao/Manmohan Singh combine, in early 1990's. Thus, surely there is tremendous scope for state intervention in bringing out empowerment of ordinary citizens by appropriate financial measures, which also include spending on education, health care, social security and housing, which can lead to both demand and supply for services and products. Besides, while rewarding, so called wealth creators, there should be regulation in place that all support by the state are equally reciprocated by the commerce and industry in helping state achieve better Human Development Indices, leading to the creation of better human capital, which is the goal of all developmental exercises. Hope, the vision of a developed India is within the cusp of the government of day!
Speaking to the nation, on 15th Aug 2019, from the ramparts of Red Fort, Prime Minister Narendra Modi, among many ideas and thoughts on his aspiring countrymen, called out “My dear countrymen, our nation must march forward, but the country cannot any more wait for incremental progress, we will have to take a big leap, we will have to change our thinking. To make India reach the Global Standard we need to build modern infrastructure. Notwithstanding despondent attitudes, ordinary people always dream of good system. They like good things; they have developed a taste for it. So we have decided to invest 100 lakh crore rupees for modern infrastructure in this time period. This will generate employment; will develop new system and various aspirations will be met. Be it Sagarmala Project or Bharathmala Project, modern railway station, bus station or airport, be it modern hospitals or world class education institutions. We want to develop the entire infrastructure. Now the country also requires seaports”. “The ordinary people have changed and we have to understand that…” “Earlier people used to ask ‘when will metaled road be constructed in our area? Now the people ask ‘will the road be of 4 lanes and 6 lanes?’ They are not satisfied with metaled road, any longer. I think this is a very significant change for aspiring India. They are no more happy with just electrical poles being erected, as it used to happen, they want power in these poles and if the ‘power would be for 24 hours’. Their expectations have seen a sea change” “Earlier government of the day would do piece meal development. It had gone on. But now times have changed. We have to unitedly think about what dreams we want to achieve as nation. Time demands that we live, fight and move ahead in unison to fulfill these dreams. Keeping this in mind we have set a dream target of building a 5 trillion dollar economy”.
“The target of 5 trillion dollar economy may appear difficult to some people. They may not be wrong, but if we don’t accomplish difficult tasks, how will the country move ahead?” Exhorting people he said ‘If we don’t take up difficult challenges how will we develop a mind set to move forward?” “After 70 years of independence we, under different governments, have reached only 2 trillion dollar economy. But from 2014 to 2019, in just 5 years we reached 3 trillion dollar economy, that is, our government added 1 trillion dollar economy in these last 5 years. This must be a dream of every Indian. I believe that there are many areas which can give India a new strength to become a 5 trillion dollar economy.” Exhorting business community he said. “Our companies and entrepreneurs also dream of getting access to the world market. By getting access to the world market, our investors will be able to enhance the status of India; our investors will be able to earn more, generate more employment. We are ready to encourage our investors to come forward for generating employment” Asking the people to change their attitude towards business community, he called on people, “We should not doubt our wealth creators. The need of the hour is to recognize and encourage the wealth creators of our nation. They should receive more honors. If wealth is not created, it cannot be distributed. If wealth is not distributed we cannot uplift the poor of our society. Those who are making efforts to create wealth, according to me; they are an asset to the nation and must be empowered.” He continued….
In the context of Prime Minister Narendra Modi’s vision about the 5 trillion dollar Indian economy, it is imperative to go back to-at least to a part of what he stated in his address to the nation on 15th Aug. 2019. He mentioned about the incremental progress during the past seven decades. He spoke about the impatience of the Indian public to have faster progress in the promises politicians were making, before the election and during the currency of the government that followed, post election. He conveyed his dream of attaining Global Standards in modern infrastructure to be made available to aspiring modern day India.
While it is true, decades ago, the expectations of most Indians were tempered, in recent days it has seen a sea-change. They want things faster and better. However this expectation is limited to those Indians who are on the move on a slow but steadily moving higher development mode. But it is also true that there is a huge section of Indians across the country who have not experienced much positive change in their life. While talking about, how to address the growing expectations of a section of Indians, he spoke about the $ 5 trillion economy. In a country which took some 70 years to reach $ 2 trillion economy, to make it $ 5 trillion economy in less than 5 years time is certainly a tall call. It is true, he claimed having achieved an additional $ 1 trillion during 2014-19 period, to clock $ 3 trillion, which is not very convincing. With the kind of slow down already set in, the task before the government is quite humungous, if not impossible. It is true that when you dream big, some of it, if not all of it, can be achieved. Hence dreaming big is essential. But dream should not be facile but based on some factors which can bring about the realization of vision little closer, than remain a mirage.
The realization of $ 5 trillion economy would surely involve huge investment, both from domestic players and international players, besides from the government, which is truly the driver of employment generation. While it is true that investment can bring about more employment opportunities, it is also true that in recent times, growth has been with zero employment growth with most private and international investors going for automation and artificial intelligence like robots and such tools for repetitive functions. However one of the most disturbing aspect of our growth story has been the education that failed. Successive governments have failed to address the problems that have been there inherent in the system itself.
The demographic dividend that our young population was expected of, some how did not happen. By 2020 those below the age of 25 years could be above 500 million, majority of whose comprehension level is well below universal standard. Truly speaking our thousands of crores of investment in education sector has not produced an adequate number of empowered literate class of youth.
On the 15th July 2016 the then Chief Minister of Uttar Pradesh Akhilesh Yadav made a surprise visit to a primary school in the district of Shravasti. To his greatest shock only one girl student in the class could read a chapter from her Hindi text book, rest could not read a word. The school Akhilesh visited had a concrete building; students had uniforms and books as well. An extremely upset Akhilesh squarely blamed teachers for the children’s inability to read from their text books, accusing teachers that ‘you have ruined an entire upcoming generation’ ‘kuch toh sarkar par krupa karo. Vidhyarthiyonke wajah sey thumhe vetan mil raha hai, sarkar key wajah sey nahee’ was his anguished observation to the teachers present in the school. His disappointed remark ‘have mercy on the government. You are getting your wages because of these students and not because of the government’ clearly reflects the waste of resources in primary education, which has not prepared a whole generation of youth for better performance in the employment market.
‘Why should the government pump money in primary education’ Akhilesh asked ‘if the children cannot read even a word?’ Perhaps not knowing what else to do, he suspended the basic education officer of the district.
According to Pratham, an educational NGO into the primary education, learning levels among students aged between 6-14 years across India, remain depressingly low. While 97% of children across India are enrolled in schools only 13% of children in grade two can read from their language books, informs Pratham’s ASER or Annual Status of Education Report. Similarly ‘1/3rd of class 8th students cannot read class two level text book, and more than 50% of those completed 8th can’t read simple English sentence or do simple division’, informs sources in Pratham.
Ever since ASER was conceptualized and put into practice, there has been a certain level of reliable estimates on the quality of education, especially at primary school level. While it was a huge logistical nightmare, developing a model of survey involving citizens and partner organizations in the corporate sector, it did help in arriving at an unanimity about one thing, ‘if India had to make use of its young, inexpensive work force, labeled as ‘demographic dividend’ it had to improve the quality of education beginning at the elementary level’.
Relying on habit or official pronouncements is not enough. A greater focus on what evidence tells us about effective teaching and learning will enable teachers to help every child to chieve the highest possible standard in education. Primary schools should insist on laying foundation in areas like spoken language, science, the arts, the humanities, emotional and moral values and lived experience to obtain good dividend.
It is true that the present incumbent government at the centre led by PM Modi is committed to bring about change. But it gives an impression, whether in its overdrive, it ignores nitty gritty details! While everybody wants to have a city like Singapore next door, not everybody is prepared to pay the price needed. We want our messy democracy and we also want a Singapore, that’s not possible.
Singapore is a city with disciplined citizens. We Indians are grossly indisciplined. We always fight for rights, but Singapore is more duty conscious with curbs on some of the rights. Thus nothing is free.
Sense of discipline or understanding our responsibility as citizens, should come from primary school. Here it is not the infrastructure that is being discussed. It is the quality of teachers where the appointing authority should pay adequate attention without any under-hand dealing in teacher appointment. If the quality of the teachers is ensured with adequate incentive of working conditions are provided, it can attract committed teachers. The dream of $ 5 trillion economy should seriously deal with this issue, if our ‘Demographic dividend’ should not turn as ‘Demographic disaster’. In fact it is already a bit of disaster. However, if the power that be, plans labour intensive industries in government sector, there is a good chance, that these unemployable unemployed can be absorbed in these industries. This will greatly help reduce the pressure everywhere and can truly give impetus to the economy to grow since wages in the hands of workmen will increase consumption which in turn will push demand that will spur supply chain and therefore an opportunity to create more supplies leading to increased investment. A study carried out by SDM institute of Management Development, Mysore had examined whether consumption or investment that added to economic growth in India between 1992 and 2015. Reportedly the study concluded that “26% is contributed by private consumption spending whereas investment spending caused only 4% variability in the GDP”. Similarly in developed countries, where income levels are high it is the consumption that drives the economic growth. The poor use 90 paise of every rupee of income for consumption, whereas rich spend only a small portion of their income since they have larger income. Rest of their income goes to term Deposits and asset creation like Gold. So clearly it is the masses when empowered with better income drive the consumption driven market scenario. Therefore investment by government that lead to more employment and therefore income, will lead to better growth.
Here it is important to recognise that in less than 3 weeks time after 15th Aug, in the first week of Sept, a panel was set-up by the Finance Minister for the proposed Infrastructure Project worth Rs: 100 lakhs crores. The panel is supposed to identify all feasible infra projects that can be started during 2019-20, so also for the remaining 4 years upto 2024. The panel is also supposed to find out the estimate of cost and identify funding sources. This earnestness is a welcome sign of things to come. Hope teachers for primary schools, similarly as a project, is seriously considered if the coming generation of children are to become the productive assets of our socio-economic evolution.
In his speech on 15th Aug 2019, PM Modi also mentioned about the business class as wealth creators. There is absolutely no doubt that they are wealth creators. There will always be a multiplier effect in a dynamic society, when business grows. PM Modi also mentioned that if the wealth is not created it cannot be distributed. Unless it is distributed how can the poverty be reduced”. Nobody can fault with this statement. But the truth is, those who created the assets or made more wealth, more often than not, kept it for themselves. They often gave it to corrupt government servants & politicians, their friends and family members, so that they grow and keep growing. Wealth doesnot always trickle down. A society guided only by the invisible hand of the market is not only imperfect, but also unjust.
It is the sad story of India of all these years. Those who earn more do not want to be taxed more. They want it reversed. No sooner FM announced reduction in corporate tax, share market index shot up like mad. Here how is the redistribution of wealth happened?
In its eagerness to help the business community, the government has left individual tax payers in a lurch. The treatment extended to commerce and industry was not extended to general public. Noreena Hertz, a Professor of Economics at the Institute of Global Prosperity, University of London, in her book ‘Global capitalism and Death of Democracy’ writies “All over the world, concerns are being raised about governments’ loyalties and corporation’s objectives. Concerns that the pendulum of capitalism may have swung just a bit too far that our love affair with the free market may have obscured harsh truths; that too many are loosing out. That the state cannot be trusted to look after our interests; and that we are paying too high a price for our increased economic growth. They are worried that the sound of business is drowning out the voices of the people.’ Can she be proved wrong?
According to Bharat Jnunjhunwala, a former Economics Professor at IIM, Bengalooru, “The government will have to take two steps to break the recession. One, protection will have to be given to small businesses. They use more labour and less automatic machines and the share of wages in the goods produced by them is more. This will place more income in the hands of poor. Two, the government must focus on exports of services, instead of manufactured goods. The global market for services such as software, mobile apps; online tuitions is continuously increasing. We must empower youth to supply these services to the global market. This will definitely lead to a rise in consumption and investment.”
It is true that the present government at the centre had inherited the problem of NPA (Non Performing Assets)of earlier regimes. During 2004/2011 bank loans were given left-right and centreleading to close to 30% credit growth, which resulted in huge NPA by the commerce and industry which the present government has the unfortunate legacy to set right things. So, it is not easy to invigorate the slack investment climate, with resource crunch. However government has various financial tool to augment resources, like issuance of oversees sovereign bonds in foreign currency like the one did by PVN Rao/Manmohan Singh combine, in early 1990's. Thus, surely there is tremendous scope for state intervention in bringing out empowerment of ordinary citizens by appropriate financial measures, which also include spending on education, health care, social security and housing, which can lead to both demand and supply for services and products. Besides, while rewarding, so called wealth creators, there should be regulation in place that all support by the state are equally reciprocated by the commerce and industry in helping state achieve better Human Development Indices, leading to the creation of better human capital, which is the goal of all developmental exercises. Hope, the vision of a developed India is within the cusp of the government of day!
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