The highlight of the Economic Survey unveiled yesterday is that economic growth is expected to gain momentum in 2018-19 after two years of deceleration. Prepared by the finance ministry, the Survey forecast that the economy will grow at a pace of 7-7.5% next year as against 6.75% in the current year. Over the last couple of months, high frequency indicators such as vehicle sales and industrial output suggested that the shock imparted on account of demonetisation and transition to Goods and Services Tax (GST) has worn off. That is a good sign for the economy.
But the most interesting aspect of the Survey is its analysis of India’s long-term challenges. Finding answers to them will determine how quickly prosperity percolates and growth becomes inclusive. Agriculture, which employs 49% of the workforce while making up just 16% of the economy, is in trouble. In addition to the age-old challenge of low productivity, it is being buffeted by a new one: climate change. The outcome will be a loss of income in agriculture, particularly for poorer farmers without the cushion of irrigation.
Linked to this problem is the sorry state of education in India. The growing influence of technology on economic activity and thereby employment is disruptive for an unskilled workforce. The best way to cope is quality education. Unfortunately, the Survey’s research shows that India’s learning poverty headcount, a measure of children who do not meet basic yardsticks, is roughly where overall poverty was 40 years ago. Even as India’s poverty reduced when measured in terms of consumption, it remains stuck in the 1970s when seen from the standpoint of learning. India’s future economic trajectory will depend on the success with which governments tackle these challenges.
Governments at all levels are aware of challenges ahead and there have been haphazard attempts to solve them. This now requires a more coherent approach which fits into the overall reform package that brings in more scientific methods into agriculture and simultaneously fixes the malfunctioning welfare system. To illustrate, instead of free electricity if farmers can get a cash transfer, irrational exploitation of depleting groundwater resources can be avoided. These reforms are the only way for India to get past its current transition phase that has been labelled by the Survey as “crony socialism to stigmatised capitalism”.
via Transition pangs: Economic Survey says growth will improve, but education and agriculture need attention