The famous data scientist W Edwards Deming once said, “Without data, you’re just another person with an opinion.” Almost 18 months after it took office, data tells us that the Bharatiya Janata Party-led government at the Centre has not done much to mitigate many of India’s current economic concerns. After the Bihar debacle, the last thing that the BJP wanted to hear was that industrial production has slacked to a four-month low of 3.6 percent while retail inflation inched up to 5 percent. Suffice to say, the economy is not out of the woods yet. According to data released Friday by the Central Statistics Office (CSO), industrial production grew at 3.6 percent in September, the slowest pace in four months and down from 6.3% in August, mainly because of subdued performance of the manufacturing sector. Retail inflation rose to a four-month high of 5 percent in October compared with 4.41 per cent in September this year and 4.62 percent in October 2014. It is apparent, from the two key macro indicators that the economy continues to face steep challenges. The rise in retail inflation was in no small part due to costlier pulses and other food items. In October, prices in the pulses and the products category shot up by a stunning 42.2 percent. Although the Centre, in alliance with various State governments, have taken stern measures to battle this rise in prices, food prices in India will continue to succumb to supply-side bottlenecks.
To revive our dawdling manufacturing sector, which was a major cause behind the drop in IIP, Prime Minister Modi has gone out of his way to invite foreign investment into the country. “The discourse on economic policy has been mainly focused on fiscal measures, monetary interventions, welfare programs and other such highly visible instruments of government action. Therefore, when an economy does poorly a disproportionate amount of the debate centers fiscal policy instruments. Economic lethargy is more often than not a consequence of the overall administrative eco-system that determines how easily a business can be started and closed, the efficiency with which contracts are enforced, the rules of administration pertaining to a variety of activities— such as getting permits for electricity and doing the paperwork for exports and imports. Recognizing that these have more bearing on an economy’s progress and blunt the more visible policy instruments, the World Bank has been focusing on countries improving their EODB (ease of doing business) standards. Thus, the standing on this also has a major impact on attracting investment to a country. India, given its cumbersome bureaucratic processes and its rent collecting proclivities, has been striving to clamber upwards on this index,” according to a social media post by Mohan Guruswamy, who heads the Centre for Policy Alternatives, an independent and privately funded think-tank in the national capital.
Before India can seek investments, it needs massive work to improve the business environment. Therefore, it is germane to ask whether the ease of doing business in India has really improved. The ease of doing business during the last year of the UPA government went up from 142 to 134. In the first NDA year, it went up to 130. The data is available on the World Bank website. To claim that the NDA government took it up from 142 to 130 is a brazen lie. The only improvement in the last year was the ease of electricity connection. India’s rank went up on that count because of a huge fall in demand leaving power distributors badly in need of industrial consumers paying the highest tariff. However, what should worry the government, especially Prime Minister Modi, since he had promised a spurt in job growth, is the ability of the Indian economy to absorb the millions who join the workforce every year. A massive demographic dividend, which the Prime Minister is not averse to showing off in his visits abroad, not only implies increased labour supply but also a challenge in finding capacity in the economy to absorb and productively employ extra workers. To make a larger number of people employable would necessitate large investment in human capital. Investment in educational and vocational training needs to be strengthened if India has to successfully reap the benefits of the demographic dividend. In 2011-12, according to the Centre, in nearly 18 percent of households in rural and 6 percent in urban areas, there was not a single member in the age-group 15 years and above who could read and write a simple message with understanding. Similarly, the recent report by the National Sample Survey Organisation states that during the survey period of July 2011 to June 2012, nearly 25 percent of males and 29 percent of females in the age range 5 to 29 years did not consider education necessary to eke out a living. These are worrying figures. Suffice to say, the Centre has indeed recently launched the National Policy on Skill Development and Entrepreneurship. With a whopping INR 5,040 crores being allocated for skill development across various ministries in the 2015 budget, the government has recognized the gap and is willing to fund programmes to bridge it. But beyond that, nothing really is clear.