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).