On more than one occasion Prime Minister Manmohan Singh has highlighted the possibility of achieving double-digit growth. The dream 10% growth seems within reach. But this optimism is driven more by short-term factors (such as demand driven by high level of consumption and government expenditures). Factors that truly push an economy ahead, such as higher productivity (or increases in output per worker) and technological progress, are low on India’s radar.
Then, maybe, we should look at the challenges to get a more realistic picture of what can be done and what can’t. Some of these challenges were highlighted by Subir Gokarn, a deputy governor of the Reserve Bank of India (RBI), in a speech late last month.
Illustration: Jayachandran / Mint
One key challenge, which should be appreciated as India begins its 2011 census, is demographic. From 2010 to 2020 India will add 120 million persons in the working age population (28-59 years). In contrast, China will only add 19 million in this age bracket. From 2020 to 2030, this age bracket will increase by 100 million for India, while for China this number will fall by an astounding 62 million.
At the moment, these only look what they are: numbers. But they are a planner’s nightmare. If such large numbers cannot be given paying and stable jobs, one is staring at anomie. As Gokarn said in his lecture, “Thus, there is a potential vicious circle brewing here. The less effective the growth process is in creating jobs, both in terms of numbers and quality, the greater the political threat and, consequently, the less sustainable the growth process itself.”
Is he stretching the point? We think not. We are already in 2010 and one cannot see any sign of thinking about job creation beyond the usual refrain about the National Rural Employment Guarantee Scheme. Those jobs can hardly be called paying and they certainly are not sustainable.
This should not be a cause of despondency. Our bulging working age population is an asset that few countries can boast of in this age. The key to meeting this challenge has been known since the time of Ragnar Nurkse: shifting persons from low-productivity jobs in agriculture to industry and skill-intensive services. A boost to job creation in manufacturing calls for flexibility in hiring and firing while skill-intensive jobs require retooling our education system. Getting this right is the first step in the long journey to realizing India’s double-digit dream.
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