For India to be truly independent, systemic changes are necessary.
The last three years have been rocky. India-China cooperation lost steam by 2019. The Asian giants drifted apart sensing mutually misaligned objectives and few complementarities. Border tensions and skirmishes and tit-for-tat trade retaliatory (collaterally inflation stoking) tariff measures became mechanisms for India’s realignment with the ‘Western Alliance’. The following years 2020 and 2021 were clouded by the COVID-19 pandemic. The government did well to step up welfare spending despite a ballooning fiscal deficit (9.2 percent of GDP during FY 2021) which continues at high levels of 6.4 percent this fiscal. Nor has the current fiscal year (2022) been propitious. India is highly susceptible to imported inflation—mostly due to fuel (coal, oil, and gas) and edible oil. Not being a net exporter of fuels, it is at the receiving end of the Ukraine crisis-led commodities boom.
Border tensions and skirmishes and tit-for-tat trade retaliatory (collaterally inflation stoking) tariff measures became mechanisms for India’s realignment with the ‘Western Alliance’.
Some of this is structural and expected. The post-1945 expansion in good jobs was due to accompanying efficiency enhancements in processes, innovation in products and services aided by digitalisation, and the international rules-based boom in global flows of finance, tourism, trade, and workers since the 1980s. This ‘win-win’ arrangement is now broken. Global growth and trade are slowing. The worst affected are low and lower-middle-income economies like India, which have not accumulated the human and capital reserves for sustained growth, relative to the needs of the population. Protection and trade barriers constrain growth but are politically attractive as token ‘active’ economic policies. Brexit is a good example of tokenism driving practicality into isolation.
Credit must be given to the growth-sensitive and localised pandemic management arrangements, continued high growth in agriculture, massive welfare payments to insulate the poor from the downturn, stabilised demand, and the accommodative monetary policy which ensured credit availability at lower interest rates.
Second, India has 20 universities of excellence authorised to set their own syllabi and adopt pedagogical practices which prepare students for good jobs. Why cannot our government-funded schools, technology training institutes, and universities do the same by seeking collaborations and certification from branded institutions in advanced economies? Unshackling pedagogical innovation, enhancing management autonomy, and promoting international partnerships can improve educational outcomes at a lower cost for the government. Another noteworthy point is that women are seemingly invisible in our workplaces. Only one-fifth (age cohorts 25 to 59) seek work versus 90 percent of men. Our total fertility rate of 2.2 in 2021 is declining toward the global TFR of 2.1 children per woman in the childbearing cohorts. It could and should decline faster if more women are to seek work. A determined overhaul of the reservation policy for women in public service is long overdue. Fiscal incentives (tax rebates) for the private sector to embed gender sensitivity, would have an even larger impact since private employment far exceeds public employment. The all-male 20-member Maharashtra cabinet sworn in on 9 August is an embarrassment, illustrating how far, even a progressive state, has to go in gender equity. We also need to maintain our demographic dividend. Must we age even before we can graduate to upper-middle-income status? Though India does better (28 per 1,000 live births) than the 2021 global average of 37 in under five mortalities, compare with seven in Sri Lanka, 16 in Vietnam, and 22 in Bangladesh, we are falling behind. A coordinated expansion in nutrition (like fortified rice announced last year) and targeted public health facilities can preserve the baby cohorts providing workers over the next two decades, despite a desirable fall in fertility rates. This prolongs our demographic dividend.
Protection and trade barriers constrain growth but are politically attractive as token ‘active’ economic policies. Brexit is a good example of tokenism driving practicality into isolation.
Lok Shakti—the ability to motivate citizens—is intrinsic to local body experience. As per a dipstick survey of the existing Lok Sabha, less than one-third of the members have such experience. Why not revalue local body governance experience by infusing it formally into our disconnected state legislatures and Parliament through a constitutional amendment, prescribing a minimum service of three years as an elected local body representative, as a prior qualification for seeking election as an MLA or MP? Consider the potential for additional local revenue from empowered local bodies and elected mayors. Revenue from property tax in India was estimated at 0.16 to 0.24 percent of GDP (ICRIER 2011). As per IMF data, the rate is just 0.01 percent of GDP (2015) in India. Vietnam collects 0.04 percent (2015) and Indonesia 0.35 percent (2018). China increased collection from 0.15 percent (2005) to 1.4 percent (2019). Local bodies can generate more than the INR 1.21 trillion allocated for systems revamp by the XV finance commission over five years, simply by taking property tax collections to Indonesian levels of 0.35 percent of GDP. Bengaluru tripled property tax revenues (1996-2001). Homeowners paid just one-third of the increase. Two-thirds came from better land and building records management, assessment, and collections. Investment, growth, and government finances can improve only when all vertical and horizontal segments of government are empowered to execute their mandates and executive independence is accompanied by accountability. India is moving. But so is time. The key is to trick time into seemingly stopping, whilst India races ahead—think of it as a national Botox.
A coordinated expansion in nutrition (like fortified rice announced last year) and targeted public health facilities can preserve the baby cohorts providing workers over the next two decades, despite a desirable fall in fertility rates.
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Sanjeev S. Ahluwalia has core skills in institutional analysis, energy and economic regulation and public financial management backed by eight years of project management experience ...Read More +