JOIN USBudget 2020: An opportune time to change focus from growth to jobs
As is the case during a period of lower demand for many goods, higher inflation, joblessness, and drops in consumption spends, it is logical for debates to veer around the ways and means to kick-start growth, investments, and development. However, if one looks at India’s economic history over the past four decades (1980-2020), it is clear that the need of the hour is to focus more on wealth distribution, creation of jobs of the future, and policies that address the aspirations of the poor and lower classes.
Growth is important, but not crucial. Budget 2020 may be an opportune time to change the focus. Instead of decisions to just help India Inc and dole subsidies to the poor, it would be desirable for government actions to create an environment that enables the poor to earn more to consume more, and put more money in their pockets to spend on education and health.
Who benefited from growth?
The growth-led trickle-down effect during the economic reforms era (1984-2020), especially after 1991, happened in driblets, which hasn’t satisfied the bottom 50 per cent of society.
Look at the statistics to feel the sting of a huge growth in wealth disparity and rage among the poor. In 1983, according to the World Inequality Report (2018), “The share of national income accruing to top earners (in India) was the lowest since tax records started in 1922”. It adds that in that year the “top 10% earned 30% of national income, the bottom 50% earned approximately 24% of national income, and the middle 40% just over 46%”.
By 2014, the situation changed dramatically. The top 10 per cent owned around 56 per cent of the national income, the bottom 50 per cent a mere 16 per cent, and the middle 40 per cent only 32 per cent. The wealth of the elite almost doubled, and that of the poor reduced by a third. More importantly, the top 0.1 per cent "captured more growth than all of those in the bottom 50% combined." Authors Lucas Chancel and Thomas Piketty, who explored the variations between 1922 and 2014, dubbed it the transformation from "British Raj to Billionaire Raj".
Since 2014, these trends became worse. Higher growth rates helped the rich. Officially, hundreds of millions were no longer poor; they were no longer categorised as below poverty line (BPL). However, their lives changed in a minimal manner. They had a little more food, a little more money. The latter was decimated by inflation rates, which reduced the buying power of the rupee. The former meant they could have real daal, and not just daal water.
In July 2019, Finance Minister Nirmala Sitharaman made a start to tax the rich to shore up government revenues. However, given the hue-and-cry from India Inc and foreign investors, these were rolled back. May be hiking taxes is not the solution. But there are ways to ensure wealth distribution to some extent. The mandatory spend on corporate CSR is a beginning. There can be other ways to cajole the rich to invest in the prosperity of the poor.
Job creation with an eye on the future
Reforms introduced new and higher aspirations among the lower and middle classes. As India got wired with the global village, people realised what was available, and what they could genuinely desire and demand. One of the key areas was in the jobs arena. The village youth was no longer satisfied to work on the farms; she wanted jobs in big towns and cities. The poor weren’t happy with a few hundreds in their pockets that enabled them to become above poverty line (APL), but thousands.
Higher growth was unable to provide such opportunities to most of the younger people. Jobless growth during the 1980s, 1990s, and the first decade of this century, was sadly followed by a period of slower growth with lesser number of jobs. Unemployment levels reached the highest in the past four decades. Today, the need is not just to create jobs, but jobs of the future. The reason: Most skills will become redundant, or require additional skills, in the near future.
By 2030, according to a McKinsey report, up to a third of current jobs are likely to vanish. India, where automation and use of artificial intelligence (AI) are lower, may be among the hardest hit. Hence, Budget 2020 needs to think in terms of how to impart skills so that people are ready for tomorrow’s jobs. This can, to a large extent, address the twin problems of wealth disparity and the desire among the bottom 50 per cent for work that will transform the lives and comforts of their families.
In addition, the poor are no longer happy with mere doles and subsidies. While such free lunches enable political parties to garner votes, and win elections, these have short-term impact. The real problem is to help the poor to access essential services like health, education, electricity, and LPG cylinders. Policies to achieve these results were introduced over the past decade and more. However, they failed because of poor implementation.
A CAG report on the Centre’s decision to provide free gas stoves and LPG cylinders to poor households talked about its impracticality. Most beneficiaries purchased two or three cylinders a year. They couldn’t afford the cylinders, but used them to announce that they had 'arrived'. In many cases, the beneficiaries purchased dozens of cylinders a month. This implied rampant corruption, and a thriving black market in the re-sale of cylinders.
Hence, the time has come to ensure access. The poor will pay for these services, but only if they are assured of quality and continuity. An electrified village, where there is power for one-two hours, isn’t a happy one. Neither is a family that has to travel miles to reach a school or hospital. This can be the basis for Budget 2020.
(Alam Srinivas is an independent investigative journalist and author of several books)
Disclaimer: The views expressed above are the author’s own. They do not necessarily reflect the views of DH.