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Listen to the People Not the Numbers

Context:

The challenge facing the Indian economy lies in insufficient and unsustainable income growth for a significant portion of the population, rather than a lack of overall economic expansion. Economists, both supportive and critical of the government, are engaged in a debate about job creation and scrutinizing the accuracy of government data.

Relevance:

GS3- Economy

  • Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment.
  • Inclusive Growth and issues arising from it.

Mains Question:

The challenge facing the Indian economy lies in insufficient and unsustainable income growth for a significant portion of the population, rather than a lack of overall economic expansion. Comment. (15 marks, 250 words).

Fundamental Issues with Incomes in India:

Transition of Individuals from Agriculture to Manufacturing :

The insufficient transition of individuals from agriculture to manufacturing. In the 1990s, Indian policymakers sought a shortcut, moving directly from agriculture to services, particularly with the surge in exportable Information Technology services. However, this shortcut has led to a dead end.

Problem with High-end services and jobs:

  • High-end services, which experienced significant growth, offer limited opportunities to absorb the large number of young Indians seeking employment. Furthermore, these jobs demand levels of education often lacking in rural areas.
  • Consequently, individuals transitioning from agriculture require jobs that align with their current skills, providing an entry point for skill development and upward mobility.
  • Labor-intensive manufacturing, services, and construction offer the initial step, attracting millions of Indians away from agriculture in the past three decades.

Nature of Such Jobs:

However, these jobs lack adequate compensation, are often temporary or short-term, and lack social security or opportunities for skill advancement. Even within large, modern manufacturing enterprises, employers often engage contract workers to enhance flexibility and reduce costs, resulting in lower pay, insecure employment, and a lack of support for skill development.

Way Forward:

Innovation:

  • As the world stands at a crucial juncture, there is a pressing need for new economic ideas to forge a more environmentally sustainable and socially harmonious future.
  • Traditional measures of growth and employment fall short, necessitating fresh concepts of “work,” redesigned enterprise models, and reevaluated social and economic relationships among participants.
  • The global shift towards green, organic, and “local” practices to reduce carbon emissions and enhance environmental care will rejuvenate the appeal of small enterprises.

Economies of Scope:

  • Instead of emphasizing “economies of scale,” the viability of enterprises will be determined by “economies of scope.”
  • This shift will give rise to denser, local economic networks, moving away from extensive global supply chains connecting producers and consumers across distant parts of the world.

Social Angle:

  • The focus is set to shift towards establishing authentic “social” enterprises, as opposed to enterprises primarily designed for economic efficiency and surpluses, as is the case with corporate entities.
  • The importance of those engaged in caregiving and their invaluable work must be elevated beyond the current level recognized by economists.
  • In the prevailing economic growth model, caregivers, traditionally women, are often extracted from families—considered natural social enterprises—to contribute to factories, offices, and retail establishments designed for generating monetary economic value.

Female Labor Force Participation:

  • When economists gauge women’s labor force participation, they typically acknowledge only activities within formal enterprises that yield monetary returns.
  • They appear to disregard the value of “informal” work carried out beyond their homes, such as domestic caregiving in others’ households or on family farms.
  • Additionally, they fail to recognize the economic significance of caregiving within families and communities, especially when uncompensated.

Conclusion:

To initiate this paradigm shift, the policymaking process should commence with attentive consideration of voices often undervalued in the current economic paradigm: workers, smallholding farmers, small entrepreneurs, and women. Policymakers are advised not to solely rely on historical statistics for guiding future policies; instead, they should actively listen to the concerns and priorities of the people.


February 2024
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