Recurring problem of Indian Economy - JOBS

This is not just India-centric but a global issue. And the scale of this problem is worrying India, given the number of first time voters of 180 million.

For the past two decades, it was augmented that Tourism and Entrepreneurship were solutions but was not of much help.

Due to India’s cheap labour existence, it was also touted to embark into manufacturing but was of no use, because this sector was already occupied by China.

So Tourism isn’t the way forward?
Not really, tourism has many angles to it, the cultural tourism, religious tourism, medical tourism, education tourism and many more. If taken special interest by the stakeholders, then can provide huge scope of opportunities in the Tourism sector.

Literally, ‘Jobs’ is a multifaceted problem. And it’s more concerning that we don’t have proper data to quantify the nature. The only available data seems to suggest that ‘Underemployment is an issue and quality of jobs is an issue, not employment.’ Livelihood is an issue.

Solution?

No one solution to pan India. Should be addressed at state-wise.

A large migration of workers from agriculture to services sector is evident. So need to address agriculture first.

Hurdles?

We do not capture jobs data properly.

Easy access to capital for manufacturing and textile sectors augmented them to use robots or automation has shrunk opportunities for labour. This automation technology will make rapid strides in the future and can penetrate into other sectors as well.
So what's the future? Gig economy might be the solution for this servicing and manufacturing sectors going forward. Also, getting skill-set ready people for the future jobs.

What about 'Make in India' initiative?

Fact of the matter is, if we want to see the jobs to increase, it is only possible by increasing nominal GDP and consistent growth at 7.3 to 8.0 pace for coming years.

Redistribution is a topic most sought-after. PM KISAN policy, PM NYAY policy, Universal Basic Income were touted to be the solution to address Jobs. Redistribution is necessary because of inherent imbalances like, Income redistribution and social redistribution, for disparity of course.

Redistribution is a global phenomenon. The question is, does Govt. has unlimited resources for redistribution? Subsidies which were there for a while, need to rationalize some of them and target better. India’s population is too large to keep redistribution going. The countries which have redistribution at large globally, their Tax-to-GDP @ 25%. But India’s center’s and state’s combined, Tax-to-GDP @ 17%. So, India need to raise Tax-to-GDP ratio.

So can we rationalize or rejig expenditure?
Sadly, No. Because our political system cannot roll back any subsidies. 20 years average of core Tax-to-GDP stood @7.5% and it refused to grow.

Only way is to grow nominal GDP, to redistribute.

If you look at the total expenditure that Govt. has, 75%-76% is non-discretionary (i.e. not in the hands of Govt.). So a quarter, in terms of revenue, is left for capital expenditure or any expenditure.

Is there a way?

Govt. has to raise more non-tax resources and monetize Govt. assets.

This is the only way, because the Govt. cannot levy more tax on middle class households anymore, as it is the highest in any country.

Can we tweak the fiscal deficit numbers to little high, to address this redistribution? No, we have already have a threshold.

Is redistribution an inflationary?

It depends, if you shelling out a huge amount from the Govt. exchequer, if infusing more money in the system continuously. This kind of infusion going to the poor population, the propensity to consume out of that is extremely high, possibly close to 100%. So this can be inflationary.

What about the tweak with the GDP Index?

There is also a suspicion that the former president of china tweaking with the index, and still a lot of funds pouring into china in terms of investments.

Trying to capture something which is as huge as GDP, like India, which is organized or unorganized, it becomes extremely difficult.

At some point of time, every index, given any country undergoes revisions. A few data-sets or data points needed to be added or subtracted. As Indian govt. has undergone many disruptive economic policies. So this is bound to take place. One thing is for sure, after revision, the data-sets in India have only become better and deeper. Quality of data would only have improved; larger pool of data now. Quality of data improved since 2 years, particularly with the MCA-21 database etc. We have larger pool of data. Higher frequency data is measured better now. Going forward, I think we are in very good position. The entire GST structure will provide economic activity data.

What next in the offing for reforms?

Large reforms like IBC, GST, Tax structure etc. are all done, untouched are land and labour. Don’t fore see land, labour reforms immediately. After all the big policy reforms, any corporate will tell you, execution of reforms should be a key focus.

Next set of reforms, might be on- micro structure, micro economics, implementation parts like- Tax, economic policies, retrospective policies on eCommerce. Deals like, Walmart inflow into India as FDI. Areas like Tax, eCommerce, FDI are important.

Need to address subsidy regime from Fiscal and Trade policy front.

Agriculture, needs a big liberalization drive. We liberalized, as an economy. But agriculture still has many Govt. restrictions. Govt. sets the markets and the prices, is the surest ways of failing any particular sector. After rural electrification, the next logical step would be good agricultural warehouses.