What the economy needs now

India is one of the fastest growing large economies in the world, having grown at an average of almost 7 per cent for the last twenty-five years. There have been many notable reforms over this period – most recently, the cooperative fiscal federalism that brought the goods and services tax (GST) into being; the enactment of the Indian Bankruptcy Code; and the dramatic dis-inflation of recent years, partly as a result of a move to an inflation targeting regime. While all of this is commendable, we should not be satisfied with this. India is still one of the poorest countries in the G-20, and poor countries ought to grow faster because catch-up growth is easier. Also, the benefits of growth in India have been distributed extremely unequally, with top incomes rising much faster than the rest. We have seen new environmental challenges in the form of sharp increases in both local pollution levels and carbon dioxide emissions that, if unchecked, threaten to stall or reverse progress. India is also not creating enough jobs: even though data on employment in India are both low quality and controversial, the recent news that 28 million applied for 90,000 low-level railway jobs suggests we are not satisfying the demand for jobs (Singh 2018). Unfortunately, we are not well-positioned to follow the export-led growth path that allowed many Asian countries to climb out of poverty. Despite abundant cheap labour, we are not part of many global supply chains. Even as global firms seek to diversify away from China so as to reduce political risk, India is rarely seen as an obvious alternative. Given India’s continental size, it need not follow the export-led path. It will, however, have to ensure that growth generates jobs and incomes across the skill spectrum, in the process: 1. Creating semi-skilled jobs for those currently underemployed or unemployed and those who are seeking to leave low-productivity agriculture – even while enhancing the productivity of agriculture itself and the earnings of the agriculture-dependent population. 2. Increasing labour participation of women. India has one of the lowest female participation rates in the labour force, down from 35 per cent in 1990 to 27 per cent in 2017. It is one of the few countries where this ratio has fallen. This limits the talent pool that the economy can draw upon, even as it constrains the life choices of women, many of whom, the evidence suggests, would like to be working. 3. Spreading jobs and economic development from the coastal states to the interior, as well as to Kashmir and the North-Eastern states. https://www.juggernaut.in/books/what-economy-needs-now