The Pillars Of An Equitable Post-COVID India

Context: In the post-pandemic world, addressing inequality is key to sustaining growth and well-being.

Seven challenges in employment

• Creating productive jobs for seven to eight million per year.
• Correcting mismatch between demand and supply of labour (only 2.3% of India’s workforce has formal skill training as compared to 96% in South Korea, 80% in Japan, and 52% in the United States)
• Structural change challenge (Manufacturing should be the engine of growth. Here, labour-intensive exports are important and manufacturing and services are complementary).
• Focusing on micro, small & medium enterprises and informal sectors including rights of migrants.
• Getting ready for automation and technology
• Social security and decent working conditions for all.
• Raising real wages of rural and urban workers and guaranteeing minimum wages.

Analyzing the rising inequalities in India:

• Impact of the pandemic: India’s middle class shrunk by a third due to the pandemic, while the number of poor people earning less than Rs.150 per day more than doubled. - Pew Research Report.
• In the pre-COVID scenario: Following factors led to the rising inequalities even before the pandemic.
  • Slow economic growth: Compounding the existing problems of unemployment and inequality.
  • Presence of large informal sector (which is vulnerable to economic shocks).
• Prospects of K-shaped economic growth: While the big companies gained huge profits during the pandemic, the informal sector lost employment and wages.
  • The levels of GDP show that it will grow only around 1.1% in FY22 as compared to FY20 levels.
  • According to the Centre For Monitoring Indian Economy, the employment rate is still 2.5 percentage points lower now as compared to the level before the lockdown last year.
• Gendered impact: Women lost more jobs, and many are out of the workforce.
• Inequalities in health care: Where the public expenditure is just 1.5% of the GDP à increased out-of-pocket expenditure.
• Increasing inequalities in education:
  • In education, there are islands of excellence that can compete internationally even as a vast majority of children have poor learning outcomes.
  • Experience of a digital gap in education during the pandemic.

Way forward

• Focus on employment and wages:
  • Improve investment levels: Which declined from 39% in 2011-12 to 31.7% in 2018-19;
  • Focus in employment-intensive sectors: E.g. Infrastructure; Budget 2021-22 focus on capital infra-investment a right step.
• Create equality of opportunity by improving human development:
  • Health sector: Public expenditure should be 2-3% of GDP and move towards universal healthcare.
  • Education: Revamp model that produces islands of excellence and fixing the digital gap.
• Provide quasi-universal basic income and other safety nets: Cash transfers to all women above the age of 20 years; expanding the number of days provided under MGNREGA and a national employment guarantee scheme for urban areas.
• Increasing farmer’s income: Strengthen farmer producer organizations and states have to play a pro-active role in agri-reforms.
• Enhance tax and non-tax revenues: E.g. tax/GDP ratio to be raised, with a wider tax base and richer sections to pay more taxes.
• Federal governance reforms: Reduce inequalities between Centre and States in finances, strengthen state budgets to improve capital expenditures on physical infrastructure, spending on health, education and social safety nets.
• Address non-economic factors: Through the deepening of democracy and decentralization. (Unequal distribution of development is rooted in the inequalities of political, social and economic power).