Friday, April 10, 2015

Growth has to pare with human development

Business Advisor, Vol.X, Part 1, 10th April 2015 carried this article of mine.

February 2015, towards the close was crowded with the vision-led railway budget, the release of Economic Survey and the Union Budget. The next twenty days in Parliament did not have so much to discuss on the approach to the budget as on amendments to the land bill, the rape incident of West Bengal and some unholy acts in Haryana. The most significant budget discussion related to the allocations to AP and Telangana states and the devolutions under the 14th Finance commission. The strategic intent and the road map for growth laid out in the FM Budget speech, would seem to have got full endorsement.

Growth by itself even if in double digit, would be inconsequential if it escapes the human development. The 300mn poor are not so much worried about how the dollar is moving against the rupee or how the rupee is globally pared although its consequences will have definitive impact on them. In an event crowded out during the last few days of February 15 was the release of a book: ‘India’s Growth Resurgence.’

In spite of the change in the base year from 2005 to 2012, the CSO credibility of the growth figure is still in question in the context of lowest/negative manufacturing growth and not too impressive growth of services sector. The statistical jumble did not in any case put the human development in a better frame than what was on hold till 2014 with 134th rank out of 183 nations surveyed by the UN.

The near two and half decades of reform process were literally in waves with turfs and peaks between 1991. Never ever in the past has the Indian economy been so keenly watched by global community with hope, expectation and anticipation. The sheer size of the economy and the potential it holds has global investors, multi-national corporations, and players in different sectors, queuing to take part in the country’s economic progress and the growth agenda, what with, Make-in-India, Swatch Bharat and Jan Dhan, the new instrument of inclusive growth.

The galvanizing speeches of Modi, the all-embracing international communities, an inclusive foreign policy, ease of doing business reform agenda etc., have all made the rating agencies upping their rankings and the World Bank and IMF hoping for 7.5% growth in 2015-16.

There is nothing like a de-coupled economy as some advocate. Impact on one major economy, could have a cascading impact on various other economies, stock markets and banking, directly and indirectly. The collapse of the Lehman Brothers last decade, and the time taken for the world’s largest economy-The US, to shrug it off, provides great learning. Therefore, the risk associated with growth cannot be wished away as we embrace globalization and assimilate external interest in India. The deep question one has to respond strategically, is whether we adopt a consumption led growth or austerity led growth to contain the inflation – even amidst the option of choosing CPI as the indicator to rein in,
Even educated persons are bewildered and often confused over what the government should do to address these risks. Notwithstanding the enormous challenges that the global economy posed to India during the last two decades on several fronts, a detailed analysis of the sectoral risks unfolds the corrections required on the domestic front, particularly, in governance.

The human development indicators expose the ground realties. The seemly strong growth does not translate into major changes in terms of some of the indicators such as poverty, literacy, public health and sanitation among others. Jobless growth is no solution to the sagging growth. Large corporates and PPP-led investments in infrastructure may bring in stability and sustainability to the investment climate. It is, however, the ability of the entrepreneurs to scale up their skills matching with the needs of the future, particularly in the MSME sector that holds the key to job-oriented growth.

The contribution of MSMEs to the economy, though well recognized, needed much more attention. The deep-pocketed global investor, with capability to play a long-term waiting game, could bring about a major impact on these unsung heroes (MSMEs) of the country’ economy, which could either get stronger or perish unable to take on competition. The authors rightly suggest integration of Jan Dhan linked with Aadhar and mobile banking as key micro enterprise initiative. The Government already seems to have recognized this with the announcement of Mudra Bank. Here, quite a few changes in attitudes of the angel funds, banks, and NBFCs form the core of future agenda. Government’s ability to provide nourishment to the sector through equity fund, hassle free credit and effective delivery instruments of the policy with specific timelines at the state level holds the key.
Among the real sectors, agriculture sector’s growth plays a key role, with weather Gods playing truant, in not merely ensuring food security but also sustainability for the growth of manufacturing and services sectors. Well-understood credit and extension, technology-led marketing and scientific storage as means to ensuring efficient value-chain management are considered essential.

While the country takes pride in a few Indians and Indian firms taking the first few global rankings of reputed institutions, it would also like to take pride in reducing poverty to the barest minimum faster than ever and improve on the various human development indicators. It would not like to see that the impact of growth builds islands of prosperity in a sea of poverty. Good governance, therefore, matters most for sustainable and inclusive growth. The agenda is well set.