Economic debacles and the stabilizer

Prof. D. Mukhopadhyay
The Indian economy has been victim of the catastrophic devastation of the recent pandemic and she has been endeavoring to revitalize and bring back normal economic activities on the track but no panacea is prevalent to bring about a mesmerized economic soothing immediately as the current economic crisis contributed to the mountainous volume of loss. According to the latest World Economic Outlook Report, the global growth forecast for 2022 has been reduced to 3.2% from 6.1% in 2021due to the depressive economic performance of the United States of America, China and India. On the other hand, economically advanced countries and emerging and developing economies are observed to have been witness of global inflationrates of 6.6% and 9.5% respectively. Recently, the International Monetary Fund (IMF) expressed its pessimistic view on the Indian economic growth trajectory and it slashed 8.7% forecast in April 2022 to 7.4% for the Fiscal Year 2023-2024 which is quite a serious warning from the highest global economy management agency. It is worth noting that the same international agency had cut down the projected growth rate from 9% to 8.7% in April, 2022 because of ‘unfavorable external condition’ and upward spiraling of commodity prices. India’s Gross Domestic Product (GDP) growth has been recorded at 4.1% which was 8.7% at the end of the Fiscal Year 2021-2022.
Again, the baseline forecast for growth has been revised to 3.2% from 6.1% due to economic slowdown in China, arising out of extended lockdowns, tightening global financial policy and hike in interest rates by the major central banks in order to tame inflation and consequential effects of Ukraine War. As far as employment front is concerned, the Centre for Monitoring Indian Economy (CMIE) shows that the unemployment rate of 7.1% in May, 2022, went up to 7.8% in June, 2022. During the same time, rural unemployment rose by 1.4 % points to 8% in rural India while the unemployment rate in urban India declined by 0.9 % points to 7.3%, the lowest unemployment rate in India in last 16 months.Again, the same source shows that the total employment of India came down from 403 million in May,2022 to 390 million in June, 2022 i.e., the magnitude of loss of jobs is 3.2% just in a month time. The CMIE attributed the loss of 8 million employment to rural sector and rest in urban sector salaried employment. Whatever happens so far is economics and unemployment, inefficiency, low productivity, less purchasing power, fiscaldeficit, currency depreciation, inflation, low growth etc. are the macro economic variables producing adverse economic impacts on the society at large. Economics is not an exact science like Physics or Chemistry but a Social Science whose subject matter is human wellbeing and community welfare. Alfred Marshall (1842-1924) says, ‘………………it deals with the ever changing and subtle forces of human nature. The purpose of economics is not simply to study wealth, but to study man. Habits of earning, saving and investing provide the data to do so’ Therefore, the ongoing economic debacle needs to have a reasonable conclusion of the adverse economic impacts on daily life of man. As an enabler, policy of market economy was adopted by India in early 1990s and an effort was exercised integrate Indian economy with the global economies and particularly with the advanced economies. Integration process is observed to have been slowed and incompletewhich needs to be addressed in no time although pure capitalistic economy is not flawless and to quote Hyman Minsky (1919-1996), ‘what we seem to have is a system that sustains instability even as it prevents the deep depressions of the past. Instead of a financial crisis and a deep depression separated by decades, threats of crisis and deep depression occur every few years.
The global economy witnesses that the competitive market economies create efficiency of the factors of production and ensure favourable consumption-based living standard as an outcome, stability culminates to economic boom. This is a positive spillover effect of capitalism. On the contrary, it is prone to create bubbles, bust and lead to financial crisis.The cumulative adverse effect of the economic crisis boosts up skewed long-term investment, inequality and disparity in consumption pattern, and the resultant outcomes act as hindrances in promoting an egalitarian society. The Indian economy has been victim ofthe ongoing pandemic, one of the reasons for economic sluggishness. India is in the trap of uncertainty in business cycles which essentially demotivate investors to commit long term investments and on the contrary, speculation rules market dominating long-term investments. Ukraine War is not yet concluded and at the same time, the Chinse displeasure over the recent visit of Mrs Nancy Patricia Pelosi, the US House of Representatives Speaker to Taiwan creates more uncertainty in global business cycle and India can hardly distance her from the adverse impacts of such geo-political tension in the neighbourhood. As a consequence, recovery process of depressive economy is likely to get further slowed down.
What India needs to do tentatively are to raise efficiency, productivity, earnings of the people who are particularly unskilled and semis killed, micro, small and medium sized firms besides encouraging large enterprises to invest in manufacturing sector in order to make India belong to the league of out performing -emerging economies. It is worth noting that the promotional conversion rate of unskilled and semi skilled workers to productivity attributed workforce isnot encouraging atall as more than 70% work force is engaged in agriculture and other low productivity sectors and this trend is more less constant for several decades. Conversion of low productivity sectors to high productivity sectors do not mean that the agriculture sector shall be abandoned, it simply implies that productivity of the work force has to be enhanced even in the agriculture and other low productivity sectors. Extensive use of technology can assist in increasing efficiency and productivity. India needs GDP to grow annually by 8.5 % and employment rate by 1.5% from the Fiscal Year 2023-2024 to the Fiscal Year 2029-2030. India cannot afford to sustain the productivity rate below 7% annually. Capacity enhancement of the manufacturing sector is likely to have the spillover effect on the capacity building of public health, sanitation and safety providing measures.
Further, India needs to raise her participation in terms of competitiveness in international markets particularly in the electronics and capital goods, chemicals, drugs and pharmaceuticals, jute, textiles and apparel, automobile and automobile components, tea and coffee.India is one of the global advocates for banning plastics but she is not fully convinced that the jute goods manufacturing sector is attributed with high potential to become the substitute of plastic and other packaging materials. Therefore, negative approach to this sector’s development needs review and for revival and revitalization, modernization of jute manufacturing industry is called for. Economic theory of comparative cost is the basic guide of international trade and commerce. Jute and textile industry is capable of absorbing huge unskilled and semi skilled work force.
The current status of ‘Manchester of India’ is unknown. India is observed to have been on persistently losing ground of garmentmanufacturing sector and export market which needs revisit as to why India cannot compete with other neighboring countries in the international garment and textile markets. One of the reasons for aversion of the Indian manufacturers in jute and textile manufacturing sectors is inability to handle unskilled and semi skilled workforce and politicized trade unions in this sector but the Labour Code 2020 is pro-productivity, pro-incentive and congenial work environment creating instrument for speedy dispute resolution in manufacturing sector. India is to provide for more and on-job training than ‘theoretical skills’ by the skill development institutions as this model emerged to be an extension of the degree awarding authority of the traditional universities having hardly any linkage with knowledge economy.
Interestingly many of the CEOs of Indian institutions of higher learnings have hardly even seen any workshops before assuming the highest office of such institutions. Today’s organizations need workforce having ‘command over technical, organizational and institutional knowledge’ and on-the job training is more effective and unfortunately few legislations and institutions support this hypothesis. It may be pertinent to mention that CEOs of the skill development institutions and universities are devoid of ‘skills’ and in many cases, it is observed that education and research training of those CEOs have no link with vision, mission, goals and objectives, organizational philosophy of those institutions and practice of this kind of appointments needs correction.
(The author is former Interim Vice Chancellor, SMVD University)