In 2016, shift focus to 'missing class'

Budget cuts in social sectors like health and education will have a long term effect on the growth prospects.

The year 2016 is full of phenomenal opportunities for India and the resili-ence of the Indian story will be at its full test by mid-year. It co-uld well become a turning point.

India is now integrated into the global economic system and if the fundamentals of the economy (domestic sustainable consumption story) are strong, it will make the country flexible to the global shocks. Some of the key considerations are mentioned here.

The India opportunity: Let us look at the population dynamics. From time to time, various committees have estimated the poor middle class. Various studies and reports have estimated different numbers for the middle class, ranging from 23.6 million (the Credit Suisse’s Global Wealth Report 2015) to 264 million (World Bank, Reference period 2005).

The current ‘India story’ is much about this 200-300 million middle class population. The HNI population (High Net worth Individuals) was estimated to be 1.98 lakh in 2014.

The Missing Class: Though the variation and veracity of numbers can be debated, these numbers leave us with a big question – if the rich and middle class add up to less than 300 million, and between 216.5 to 416 million are estimated to be poor out of the total of 1,220 million population, how to account for the rest 500-600 million? Are these a ‘Missing Class’? If we can transform the lives of the-se 500-600 million positively, no one can stop India from growing at double digit. But this needs a new paradigm of development.

Back to the farmland: India’s growth prospect largely depends on agriculture and its allied sectors. Agriculture depends on the small and marginal farmers of the total number of the forming class. Given that our rural population is about 825 million, the rural consumption story and the story of India depend upon this population.

Without creating sustainable earnings aimed at sustainable consumption for this population, the real story of India will remain untold and is the big-
gest question which calls for an answer. 

Rural development and agriculture sector are intrinsically linked, and now the global policies will also impact this sector big time. India cannot ignore the tiller of the soil who feeds a billion-plus population. On the one side, we need to address the ‘missing class’, and on the other, we also need to have a plan for contingencies. The year 2016 will gradually unfold surprises on multiple fronts.

Globally, the overall economy is not in good shape. The USA has started tightening the rules for foreign workers, and our Indian IT story revolves around it. China has dollar strong reserves but the signs of strain are visible. This overall gives an indication that we must watch out the US, China, Germany and Japan.

If the crude prices fall further, the fiscal deficit will be easy to handle, but then there is a real threat of investment withdrawal by sovereign wealth funds, and if the oil prices rise steeply, we have the crisis of fiscal deficit. In the likelihood of Fed raising the interest rates again, money may flow out of the country.

Given the regularity with which the natural calamities are striking due to climate change, we now need to factor the losses and investments required thereafter on a more regular basis. Also, now, major towns depend on reservoirs for water needs and India is already a water stressed nation. Rain water harvesting and water recycling needs large scale adoption for preventing India from becoming a water scarce country.

Global intolerance
International conflicts and the growing global intolerance is an extremely disturbing trend, and we have to transform this ‘Conflict of Civilisations’ into a ‘Dialogue among Civilisations’. Power sector needs structural reforms in a holistic manner. There is a likelihood of youth unrest as a result of unemployment and we have to address this seriously.

Budget cuts in social sectors like health and education will have long term effect on the growth prospects and we need to invest in agriculture, health and education to reap the deferred dividends of such critical investments. The NPAs have worsened in the past one year and the large corporates are living on stretched valuations and strained balance sheets.

The financial sector faces a daunting challenge and a formidable risk and is in need of structural reforms. Urban infrastructure is already overburdened. Labour needs of micro, small and medium enterprises and agriculture have been deprived. The answer lies in better education, health and job opportunities in rural areas and addressing the profitability and productivity of agriculture.

Also, the entrepreneurs have started moving out of country and are setting their offices in Singapore, US and other off shores, and this needs to be addressed on priority. The security horizons are narrowing, and this is showing signs of the impending challenge. Cyber security is a new dimension.

It is not just about doing right things, but also doing things rightly that will take India forward. The country has tremendous potential and we need to move swiftly. Seeing the logjam in parliament, it is time that a consensus must be arrived for a national agenda. The electorate cannot be taken for granted.

(The writer, a BJP leader, is a former Union minister)