Stimulating Economic Momentum

Admittedly, today Indian economy is dispelling the doubts of future low growth, whooping fiscal deficit, momentous spiraling inflation, and abysmal poverty. The present economic indicators hint that the ensuing GDP growth would be pegging at not less than 8 percent, while the fiscal deficit would hover around 5.2 percent. Similarly, retail inflation is expected to stay well under limits and may not slip beyond 4.2 percent.

The multi-dimensional poverty level is sure to shrink at a record low level (4.96). Understandably, this all is presumed with buoyant growth of GST revenue coupled with other direct and indirect tax collections ( Rs 48.2 lakh crores) along with the infusion of relevant economic policies.

Nevertheless, the existing economic challenges including staggering growth of unemployment and underemployment, low consumption expenditure and swift decline of income-saving ratios, slow infrastructure development, the absolute gulf between rich and poor, concentration of economic opportunities in metropolitan cities only, etc have raised genuine concerns to introspect whether the present economic discourses initiated by the policy think tanks have merit to take India to touch the zenith of Viksit Bharat @ 2047 agenda.

Understandably, it is somewhat unrealistic to underscore the potential of the policy discourses announced by the Hon’ble Finance Minister in the budget 2024-25 that unleashed a sustainable and inclusive progressive momentum holding in its ambit ten broad distinctive changes and policy corrections to push India closer to the loft agenda of Viksit-Bharat 2024.

The agricultural sector being the most critical and focal source of economic change and progress in India was given added support to make it a powerful domain for amelioration of rural-specific poverty and income inequality. Accordingly, for this purpose, the present government added new priorities for agriculture development through the introduction of new 109 high-yielding varieties of crops in specific fields to augment income and employment besides earmarking 102 lakh crores for agriculture development.

Hopefully, this agri-centric policy approach may yield some prospective improvement in the agriculture sector. However, these initiatives largely would fail to place the agriculture sector on the pedestal of reasonable growth that it experienced earlier. The sector is still haunted by low growth of 3.3 percent as of 2024,  while its contribution to GDP is somewhat insignificant at 2.1 percent.

The existing firefighting policy dictum welded with the sector does not resolve its long-standing concerns including productivity inefficiency, low yield bottlenecks, inadequate and marginal farm landholdings, overwhelming use of conventional farming, low farm pricing, and inadequacy of minimum support prices. Along with these fallacies, the agriculture sector spurts environmental issues like climate change, biodiversity loss etc.

These aspects demand a multipronged strategic approach coupled with widespread awareness among farmers and investment in agri-specific knowledge generation and research. Rightly to address these issues, the government’s decision to provide financial support under the Accelerated Irrigation Benefit Programme for Rs 11500 crore besides augmenting agricultural-related research may prove useful for the sector.

The approach though long term and plausible. Yet it is premature to comment on how far the dividends can be attained from such policy measures. There is a need for a comprehensive policy initiative and reforms  to address the issues of the agriculture sector to make it effective for sustainable development.

Similarly, youth and women empowerment, reduction of unemployment, and underemployment are the second top priorities of the present dispensation in New Delhi. Truly,  youth empowerment through the skilling of around 4.10 crore youth under five major proposed schemes for the next five years involving  Employee Provident Fund Organization (EPEO)  shall have a predominant role in offsetting the effects of staggering unemployment.

However, an argument boils down do the  proposed skill and employment-centric schemes have ability to make employable around of 9.2 percent unemployable and under-employable people India (as per CMIE report June 2024) .  Understandably, the proposed job creation strategy in the manufacturing sector shall witness undue job proliferation and fictitious job growth which may not fit well with the demand and supply requirements of the market. This policy discourse surely shall have unmanageable financial and execution flaws.

Consequently, in the long run, the schemes would prove less effective and ultimately may not alter the existing scenario of unemployment. Nevertheless,  the upgrading of 1000 industrial training institutes shall have a favourable impact on the Skill India initiative and youth empowerment, provided the skill training is well in line with the existing and emerging needs.

Supporting the argument,  the skill India Initiative Report 2023 documented that skill improvements among youth and women have a favourable impact on their employment prospects and leaped up to 50.3 percent from 46.2 percent. The positive trend bodes well for the country’s economic growth, as leveraging the nation's demographic dividends could lead to doubling the GDP by 2030 from the current level.

Although, the budget unfurled problems-specific initiatives to augment human resources development and welfare in the country, however, the key argument persists that inequalities of income, and regional disparities are profound in India and no longer can be eliminated unless an effective and equitable wealth redistribution mechanism is not worked that makes everybody better off.

The government needs to execute a big-push approach for wealth redistribution. This initiative is fundamental for taking India closer to Viksit Bharat @2047 status. Sizable poverty, inequalities of income and wealth, and low overall quality of life of people are the upfront challenges that India faces  all across the regions and states.

According to the official data of the World Inequality Report 2022, India is among the most unequal countries in the world, with the top 10 percent and top 1 percent of the population holding 57 percent and 22 percent of the total national income respectively.

The share of the bottom 50 percent has gone down to 13 percent. Consistent with the fact,  it is pertinent to mention that distinct states, regions, and community-specific programmes and policies need to be designed and executed. It is advisable that the government should create a  “Poverty Reduction Corpus Fund” out of interest, dividend earnings by investors from bank deposits. Post office deposits/ stock markets/life insurance policies/ claims etc., and such corpus be distributed through an organized and effective process among the poor and needy to marshal them out from abysmal poverty.

Rightly, the move will relieve the financial burden on the government to support the poor. Moreover, the budget specified to address the housing needs of around one crore urban middle-class and poor families and lay sewage treatment, water supply and solid waste management projects and services for 100 cities through bankable projects. Surely, these measures vindicate the assertiveness and upright decisions of the government to realize the Viksit Bharat @2047 target, yet they seem somewhat asymmetrical and inconclusive in leveraging the plausible and immediate needs of people.

For the manufacturing sector, the government accorded continuing priority to “Make in India initiatives” to foster self-reliance and global competitiveness in the sector. The strategic adjustments in customs duties and reduction of import duties on certain mineral items like lithium, and copper would augment the domestic process and production of these minerals sector and may have both an adverse and favourable impact on imports and exports.

Along with this, the development of investment-ready industrial parks and expansion of the National Industrial Corridor Development  Programmes are indications of the government’s resilience and commitment to the Making in India initiative and development of manufacturing sector. Moreover, for the MSME sector relaxing credit-granting mechanisms and assessments for purchasing machinery and equipment and creating “E-commerce Export Hubs” shall have a favourable impact on the industry. However, the argument still stands that these firefighting policies would not change the existing plight and challenges faced by MSME which includes technology bottlenecks, marketing flaws, rising inflation, etc.

Understandably, the developed manufacturing system is subservient to all-around infrastructure development for which the government is committed to spend  Rs 11.11 Lakh crore. Truly, capital spending has both instant and long-run utility-orient expenditure leading to capital formation, employment, income,  and consumption generation. The continuing emphasis on infrastructure development is crucial to achieving the 2047 vision for a $ 40 trillion economy. However, for its successful outcome, it requires the involvement of multiple stakeholders - a public-private partnership that is somewhat not laudable in India.

Private investment in India has been on continuous decline over the last couple of years. There is a strong need to step up private investment beyond 27 percent of GDP  in infrastructure development.  The staggering decline in private investment is a profound cause of concern and is fully attributed to unmatching corporate policies and sluggish demand.  The story is almost alike in the case of Foreign Direct Investment (FDI) which also declined to $ 10.58 billion from  $27.98 billion in FY 2024 compared to last year.

This will come only when the government creates a supportive business environment and facilitates the flow of credit for private investment. However, the Hon’ble FM proposes to relax the rules and regulations for FDI and overseas investment and promote opportunities for using the Indian Rupee as a currency for overseas investment. Yet, the policy is still underway and expectedly its dividends may not be realized in immediately.

Given the approach of economic policies initiated by the government, stimulus to progress and improvement in the Indian economy and its people is visible on the ground and yet does not lend to seal a sold claim that India would attain the goal Viksit Bharat @ 2047. However,  serious and committed efforts to this effect are underway.

By: Dr. Mehraj ud Din Shah, Associate Professor, Department of Commerce, Central University of Kashmir- Green Campus, Ganderbal