A leap of faith

It may be the right time to think 'out of the box' to solve the current problem of economic meltdown. Small sops to the business community and foreign investors are going to tackle the recession and move the economy northward. Only massive ongoing long-term investments in megaprojects, carrying a long gestation period, can handle the problem by generating large employment and income to revitalise the market. Fresh large employment and income will automatically grow expenditure and demand. Profit-driven, small-purse private enterprises can't handle such investments; only the state can. Private investments always look for definitely forecastable returns. They act mostly as important supplementary players, benefiting from the government-pushed structural development to drive their own business agendas. During the economic recession, it will be wrong to leave the arduous task of rejuvenating demand with the private sector, operating mostly under shrinking sales and bottom-line pressure. Therefore, the primary role for employment, income and demand creation lies with the government.

Behind the reason of the ongoing crippling recession in India is the steady growth of unemployment, which according to the National Sample Survey Office's (NSSO) job survey for 2017-18 spiked to over six per cent, a 45-year high. For unknown reasons, the report was not released by the government. The annual report (July 2017-June 2018) of the Periodic Labour Force Survey (PLFS) pegged the all-India unemployment rate at 6.1 per cent. Unemployment was higher in urban areas as compared to the rural. In rural areas, the unemployment rate was 5.3 per cent, while in urban areas it was 7.8 per cent. However, rural jobs are generally low-paid and fall mostly under the 'disguised unemployment' category.

According to a State of India's Environment (SoE) study, 2019, released by the Delhi-based non-profit Centre for Science and Environment, India's rate of unemployment doubled in the past two years. The SoE study reported that the unemployment rate had gone up from four per cent to 7.6 per cent in the last two years (May 2017-April 2019). The unemployment rate in April 2019 was the highest in two years. The 2011 census report said a fifth of India's total population was in the 15- to 24-year age group. By 2020, they are predicted to make up a third of the country's population. The SoE report noted that the youth, who constitute around 40 per cent of India's labour force, has an unemployment rate of 32 per cent. The unemployment rate among the educated is even worse. The rate among people with at least a graduate degree was 13.17 per cent in September-December 2018, up from 10.39 per cent in May-August 2017.

The rising unemployment rate over the years and poor quality of employment are two of the most important contributors to the crippling recession. General individual income is not growing enough to push demand and grow the market. The World Bank recently estimated that India needs to create at least 8.1 million jobs a year to maintain its employment rate. However, the mere creation of jobs is not going to visibly change the market demand, except for wage goods. The quality of jobs and expendable income are among the important factors to grow the market.

The overwhelming growth of India's low-paid services sector in the last 10 years has failed to improve the market. University graduates employed in the services sector are earning mostly in the rage of Rs.8,000-Rs.10,000 per month. In large cities, illiterate domestic helpers, ayahs and attendants earn more. Anyway, such earnings do not raise demands for motorcars, motorbikes, scooters, concrete housing and branded consumables. Moreover, most of these jobs are of temporary or contract-based in nature. They may provide for sustenance, but not the quality of life that positively impacts the economy. Unfortunately, the government has no concrete plan for employment. It does not even have a concrete idea about how to grow the economy, which continues to be largely import-led — from aircraft, merchant ships, heavy and light engineering equipment, mobile phones, steel, coal to toys.

The government hardly understands that a recession-hit low-income economy can't be pepped up overnight by bank rate reduction. In a market situation as this, lower interest rates will not lead to an increase in investment to generate long term demand and employment. Instead, they may only help the debt-ridden, low net-worth industry to retire earlier high-cost loans for comfort.

It is still not too late for the government to start investing big in areas such as ports, roads and rail infrastructure, river linking and dredging, building merchant ships, container vessels, commercial aircraft, commercial semiconductors, heavy-duty earth moving equipment and setting-up big-draft seaports, to name a few. The private sector has no money to handle such investments carrying long gestation period. With 6,00,000-km coastline and nearly a trillion-dollar foreign trade, why is that India does not have shipyards to build commercial vessels?

If South Korea, the world's biggest commercial shipbuilder, China, Japan, the Philippines and Vietnam can, why can't India build commercial vessels that create lakhs of jobs? Why doesn't India feature among the world's top owners of shipping lines? Why can't India produce commercial aircraft, if China, Brazil and Canada can? Why are there no commercial semiconductor fabrication plants in India, the world's second-largest cellphones market? Why did the UPA and NDA governments issue licences to incompetent private firms to make semiconductors without result in the last 15 years? Two state-operated ventures — ISRO-owned Semiconductor Laboratories and SITAR, a unit of DRDO — build silicon chips for defence and space programmes only. If such large public investments cause big budget deficits, let them. They will, at least, create millions of jobs, enhance the market and make India a truly global economic power. India can put up with inflation, but not massive unemployment and demand contraction. IPA

(The views expressed are strictly personal)