Prof. M. K. Bhat
The devastating period of Indian economy, starting with lockdown, is coming fast to an end with the phase wise unlocking of the economy. The timely financial packages and other measures have gone in the right direction and green shoots have started to appear in Indian economy after a continuous decline in exports in the last six months. The various corrective measures taken to improve the small scale sector, financial sector, financial packages and other policy decisions have contained the ill impact of lockdown which by every measure was quite gigantic yet compulsory.
India’s exports registered 5.27% growth in September 2020 (year on year) with 27.4 billion. Exports have returned to 98.4% of normal in September while as imports have risen at a slow pace to 73.7 % of the normal. India’s import in September 2020 declined 19.6% to $30.31 billion, shrinking the trade deficit to $2.91 billion compared to 11.67 billion in September 2019.The international grim situation makes pessimist to take this growth as temporary but the festive season accompanied by positivity in crop production will push the demand upper side and is expected to further improve the economic health of the country. The reduction in imports and escalation of exports is a good sign for the economy.
With the phased unlocking of the economy, the economic indicators have started to show positive results. A few indicators like power consumption, cargo traffic, passenger vehicle sales, sowing of Kharif crop, e-way bills etc are showing signs of revival in the unlock period. Automobile sector has shown positive growth with Mauruti Suzuki registered a 34% jump in sales, Hyundai 24%, Honda10%, Mahindra and Mahindra 3.5%. Two wheelers have also registered a positive growth .The demand for petrol grew by 2% over last year. The real estate sector too has started to take upward turn. The growth was registered in crucial sectors like readymade garments, engineering goods, petroleum products, pharmaceuticals and carpets, however the export of jems and jewellery, marine and leather continue to decline. The foreign direct investment has remained buoyant at US$17billion boosted mainly by Google, Face book and Amazon.
The various steps like; package of 20 lakh crore, which amounts to 10% of India’s GDP, the government is likely to spend Rs 40000 crore for MGNREGA and 3 lakh crore package for SMEs etc are timely pomade for current crises born out of unusual situation . In addition the definition of MSMEs was changed to remove some of the artificial restrictions that were holding them back.
The decisions taken regarding bonus and LTC are a welcome step in right direction. The LTC voucher for employees before Diwali, the employees can buy goods and services equal to three times of their air or rail ticket in lieu of holidays .A bonus of Rs 3737 crore has been declared for central government employees. This will increase demand in the market and middle class will have money during festival. All these things are fruitful at this juncture.
The Government even propagates vocal for local but all these measures are relevant for the short period only. The increase in money flow will definitely escalate the demand for goods and services but for any long term solution, a deep introspection of the economy needs to be carried out, if India has to grow at a higher rate.
It is too early to say whether the growth will sustain or not but one thing is clear that a beginning in this direction has already started and the biggest challenge at present juncture remains unemployment. According to CMIE the pandemic has taken a toll on salaried jobs. The CMIE shows a sharp rise in unemployment rates in the range of 8.35% to 23.52 % during April to August 2020, 10 million migrant workers left for their homes for lack of jobs during Lock down. It is no doubt that some are back to work and many are returning. The white collar unemployed get noticed but disguisedly employed get little attention and they comprise a bigger chunk of our total work force.
In the long run, country needs to increase productivity in every sector to attain the higher growth rate, so as to make 5 trillion economy a reality. India at present is plagued by disguised unemployment, low productivity and low rate of return. It is not investment but the rate of return from investment that is of paramount importance. The disguised work force needs to be withdrawn from their respective fields if we want to make things productive. This disguised workforce existed earlier in agriculture sector only but now it is prevalent in almost every sector of the economy. It curtails profits , raises costs thereby makes things less competitive in the market. The prevalence of this unproductive force in agriculture and unorganized sector of the economy is horrific and evident.
Agriculture contributes 15% to the country’s economy, employs nearly 50% of total population, 55% of land depends on rain and the average holding of cultivable land in 2015-16 stood at 1.08 hectares. 86 percent of the land is in the hands of small and marginal farmers with a holding of less than 2 hectares, out of this 67% of land holdings was classified as marginal (less than one hectare) in 2011 census and.18% were having 1 to2 hectares .The small and marginal holdings taken together constituted 86% of total holdings in 2015 -16 compared to 85% in 2010 -11. This talks of very low possibility of applying science and technology in these small holdings and naturally their productivity cannot escalate beyond a particular level.
This proves the existence of a big chunk of disguised work force in this sector, with little productivity, needs to be put to some productive use. It will be prudent if alternative sources of employment for the marginal farmers are developed in the form of dairying, mushrooming, cattle breeding , fish cultivation, vegetable farming, sericulture, floriculture etc. Agro based industries need to be promoted in every district of the country. This extra work force is a big impediment in the growth of India and SME’s can be a big alternative for this problem.
Another big problem in agriculture has been that those who deserve get little and those who do not enjoy the most .The matter of the fact is that 4.9 percent of farmers hold 32% of India’s farm land. A large farmer in India has 45 times more land than a marginal farmer and there is no logic why such persons shall get concessions and why they should not be brought under the tax net? It is the medium and large farmers who get maximum benefit of the Government policies.
The other sector with enormous disguised unemployment is the unorganized sector which employs nearly 94% of the total workforce in India and produces nearly 49% of the total GDP. Only 6 % of the work force works in public sector, state owned and private sector those registered and pay GST, nearly 40 percent of the work force works in proprietorship. This sector also needs proper training to make workers productive and should be encouraged for entreprenual activities.
A vibrant SME sector can absorb the extra work force at a very low cost. Government while realizing the importance of this sector has taken certain steps but much remains yet to be done. They can be a beacon for the growth of the country and a base for big industries.
(The author is Professor (M.A.I.T)
Guru Gobind Singh Indraprastha
University, Delhi)
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