Dualism and its discontents

Business Standard     11th November 2021     Save    
QEP Pocket Notes

Context: India has been characterised by significant economic dualism and disparities over many years.

Issues associated with growing economic dualism in India
  • Slow economic growth: Especially in first half of previous decade during the last years of the United Progressive Alliance government.
  • Deterioration in employment conditions: Tripling in overall unemployment as well as in youth unemployment rate and a massive decline in female labour force participation between 2011-12 and 2017-18 recorded by the official, published employment/labour force surveys for those years.
  • Economic Policies adopted in later half of the previous decade: The twin shocks of demonetisation in late 2016 and the painful transition to goods and services tax in 2017-18.
  • Increases in rural poverty in several major states and an overall increase in the poverty ratio for first time in 4 decades as per survey of household consumption was done by the National Statistical Office (NSO) in 2017-18. 
  • Advent of Covid pandemic: Nationwide lockdown imposed in late March 2020, which led to April-June 2020 quarter GDP plummeting by 24 per cent and the full fiscal year GDP dropping by 7.3 per cent.
    • 100 million people losing their livelihoods as per data from the Centre for Monitoring the Indian Economy (CMIE).
    • Fairly swift recovery especially among the larger by the end of 2020, only to be followed by another plunge during the second Covid wave.
  • Preponderant informal sector: Accounts to around 85 per cent of national employment. The extraordinary boom in stock market and unicorn startups clouded by the large participation of this sector.
    • The ratio of total employment to working age population was about 2.5 per cent lower in the July-September quarter of 2021, compared to January 2020.
  • Low average earnings: CMIE data and various micro surveys indicate that average earnings amongst the re-employed were significantly lower than in pre-Covid times.

Way Forward

  • Economic and social policies: The central focus of remedial policies has to be the expansion of job opportunities in both the formal and informal segments of the economy.
  • Increase employment: It will raise incomes and consumption, possibly with a positive feedback loop, reduce poverty and strengthen overall economic growth. 

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QEP Pocket Notes