Through a Crystal ball, Darkly

Context: Slow economic growth in the medium term will be bad for jobs, social harmony and defence capabilities.

Implications of slow economic growth in the medium term:

•  Job Crisis: India’s position is worse compared to its Asian peers such as China, Indonesia, Vietnam and Bangladesh. According to the National Sample Survey (NSS) data, between 2004-05 and 2017-18.

• Rate of open and youth unemployment had tripled to 6 %  and 18% respectively.
• Labour force participation rate (LFPR) had dropped from 64 % to under 50 %, while for females, it had plummeted from 43 to 23 %.

• Increased social and political stresses: in respect to tensions between religions, castes, classes, states and genders.

• Problems of law and order and crimes against women could worsen.

• Increase in a rift between Central and state governments putting strains on the federal structure.

• Reduction in the global profile of India: A tepid Indian economy could reverse our current international standing and limit our geopolitical possibilities.

• For, E.g. Civil nuclear deal between the US and India and the ensuing Nuclear Suppliers’ Group (NSG) waiver happened when the Indian economy was booming.

• Impact on defence spending: India will find it hard to invest in armed forces, modern weaponry and equipment which is essential to counter hostile actions by China and Pakistan.

Way Forward:

• More reforms: like agricultural marketing and labour laws.

• Reduce “non-essential” and “populist” expenditure: such as large allocations for subsidies for major areas and unsustainably high real wage and salary levels of public employees. 

• Reverse protectionist policies: Benefits of membership in the Regional Comprehensive Economic Partnership (RCEP) should be explored.

Conclusion:  Greater discipline in fiscal, monetary and financial policies and a programme of sustained strong economic reforms are essential for high medium-term growth.