Mumbai: India is at the risk of falling into a middle income trap with poor human capital and low-quality infrastructure, according to Massachusetts Institute of Technology economist Abhijit Banerjee. Speaking at the Exim Bank’s 34th commencement day annual lecture, Banerjee said that a reset of our policymaking is long overdue as we stare at a host of new problems. He also said that we need to make government jobs less “cushy". Edited excerpts from an interview:
What has the government done right in terms of welfare schemes?
This government has gone for a number of ideas worth exploring. It has gone too quickly without enough homework. If you look at the concept of Jan Dhan Yojana or Swachh Bharat Mission or Pradhan Mantri Fasal Bima Yojana or Ayushman Bharat, at some level these are ideas which need to be put on the table for public debate. The reason why Swachh Bharat faces challenges is because there are a number of behavioural challenges. People don’t like waterless toilets. There is no reason not to use them. There is a bunch of innovations that happened in the previous government. Other than Aadhaar, this government hasn’t taken them up. A good example is the banking correspondent model, which is the right complement to Jan Dhan Yojana, if you have an account and it is 25km away and I have ₹ 200 to deposit every month. So, the whole idea of banking correspondent is to cut through that particular constraint. And it hasn’t been implemented very well. As a a result, Jan Dhan Yojana is not going to be implemented very well as well. They announce the scheme first and see the fallout later.
Ahead of the elections, the government has proposed a 10% reservation in jobs and education to the economically backward sections in the general category. What’s your view?
If we keep adding more quotas, you dilute quota for somebody else. If 100% is covered by quotas, then that is equivalent to no one being covered. We are heading there. In election time, it’s a clever move by government. I tend to not love expansion of quotas. Not because of the usual argument that you won’t get the most talented people, but it creates a political focus on quotas. We are not going to solve the problem of unemployment through government jobs. Let’s focus on issues where the fight needs to be fought. A country that is obsessed with getting quotas is a country not putting the right emphasis on policy.
How would you rate this government’s success at job creation?
There is a mismatch between people’s expectations and what jobs are available. That mismatch creates a huge problem. People hate their jobs. In your early 30s, according to NSSO, every male is employed. It can’t be that there is no job. Every male who is above 20 and doesn’t have class 10 qualification is employed. Only unemployment is in the age group of educated 20s. They are not looking for jobs. They are taking tests. It’s the top half of education distribution. It’s people who have Class X plus. We have no other problem of unemployment. We can talk about ‘Make in India’. We are not close to being an explosion of manufacturing employment. We can talk about change in labour laws. I don’t think any of this will make any of the good jobs treble.
The government doesn’t have a magic wand. We are talking about creating 50 million jobs.
I don’t think there is a magic button that any government can press. I don’t see a way of creating many million jobs. Jobs in retail, hospital. People don’t like these jobs. They take training and quit. We should think of a world where we are not going to add a number of very good jobs irrespective of whichever government is in power. Mr Modi promised all of this. But I don’t think anybody knows how to change the employment landscape.
What are your views on farm loan waiver?
It’s not an insane response. You have taken a set of policy decisions which have hurt them explicitly. They deserve some compensation. The problem with waiver is that it is an unfair way of compensation. All the people who have no land don’t get farm loans. It creates a huge moral hazard. It’s an extremely unattractive solution to the problem. It gives relief fast. I would rather say take everybody in the affected block, give money to all the people there, like Telangana. But give money to all the people, including landless labourers. Compensating people for a problem we have created is not a bad thing.
The banking sector is going through a major crisis. What do you think should be done?
It’s terrible. We are basically shying away from taking hard decisions. We are in a bind because we have a bunch of banks which are known to be bad banks for the last 50 years. Right now, we are doing a war of attrition. We are not getting ready fast. IL&FS was known for many years while nobody did anything about it.