Think long term to make India wealthy4 min read . Updated: 10 May 2017, 05:22 AM IST
Investing in institutions might seem impractical in the short term, but it is needed to give our economy a competitive advantage
For the Indian economy to outstrip that of Japan and Germany, there is no need to wait till 2030 or beyond; we only need to use two critical leverage points to remove the shackles on India’s growth: namely, skilling of the workforce and security of property. These can act as significant force multipliers but this, in turn, needs a fundamental shift in Indian thinking. We need to abandon short-term practicality.
We read in the newspapers daily about efforts to attract capital investment to the country. The hope presumably is that such investments would lead to job growth and an increase in incomes. Surely that would happen. But the increase in incomes would be substantial only if we go up the value chain much more than wherever we are at present.
Capital, innovation and entrepreneurship are necessary but not sufficient conditions for making India wealthy. Today, India has no shortage of innovation and entrepreneurship. Even capital is available. The visible prosperity of many countries in the West, the state-of-the-art infrastructure, often leads us to confuse the results of wealth with the process of creating it. The process of creating wealth has far more to do with improving productivity and efficiency than merely the building of bridges, roads and airports or even setting up factories worth billions of dollars.
Any improvement in productivity depends on a long-term vision of improving output and reducing costs. Improving output, in turn, is an outcome of a highly-skilled workforce. That unfortunately is something India does not have in sufficient quantities.
An NSSO (National Sample Survey Office) report of 2013 says that only about 2% of the Indian workforce has received technical education of any kind. That is abysmal. The data also shows that any increase in skills, even in a sector like agriculture, can lead to a 30% rise in incomes. In the manufacturing sector, the increase in income is of the order of 80-95%.
The Skill Development Mission has made serious efforts to plug this skill gap. But they have not yet roped in academic institutions: It is these that could provide an institutional mechanism for skill development. To produce better results, we need to make efforts to encourage our academic institutions to tie up with local industry so that curricula are more suited to what the industry needs.
We need to look at higher-order skills to go up the value chain. India is earning a great deal in IT services but we do not possess skills for a lead in terms of product design. Academic institutions need investments in sunrise sectors like design engineering, robotics, geoinformatics, supply-chain management, cybersecurity, nanosciences, biotechnology, to name only a few.
This is something the Western world recognized long ago. In the 1940s, the polymath Vannevar Bush convinced the American state that money would have to be spent on knowledge creation and that this was a sunk cost. In India, however, being a practical kind of people, we are rather uncomfortable with the idea of “sunk costs". For us, everything needs to have an immediate practical value.
Next, security of property is fundamental to institutional infrastructure of any kind. These are things the Western world takes for granted: the knowledge that title to land is secure and can be used for taking out any kind of mortgage. There is a belief that no squatter can use the simple means of filing a court case and bribing the police to tie up the matter in courts for the next two generations.
For providing clear title to property, the government only needs to do two things: to pass an enabling legislation and to take up an exercise for mapping urban and peri-urban land and providing geospatial coordinates to each piece of property. The main reason that cases linger on in the courts for years together is that the government today does not have a master database of land which is updated regularly. No one really knows who is sitting on whose land.
The steps to be taken are quite simple: Assign each piece of property a unique number which could be dependent on the road where the property is located; map properties through a combination of satellite imagery and a ground-level survey; seed properties with the Aadhaar numbers of owners; award clear title to the owners. For a country that can boast of one of the least expensive space programmes anywhere in the world and one that is a major provider of global IT services, all this is easy to do. Is it possible that the prospect of so much transparency in land records raises all kinds of red flags in the establishment? Perhaps. Yet, the returns on any such exercise could be huge.
An international study of the value of public sector information says that the American government invests roughly €19 billion per year in putting information on spatial mapping and environmental services free of cost or at nominal cost in the public domain. The value added to users in the economy is €750 billion per year. In comparison, countries in the European Union, which recover the costs of such information from users, spend €9.5 billion per year in collecting the information and the value added is roughly €68 billion per year.
Strong institutional support structures are needed to give our economy a competitive advantage. It is these that would build a supportive ecosystem for fledgling businesses to grow. Investing in institutions might seem impractical in the short term, but surely governments need to take a long-term view.
Meeta Rajivlochan and M. Rajivlochan are, respectively, an IAS officer of the Maharashtra cadre, 1990 batch, and the director of the internal quality assurance cell, Punjab University.