Stagnation = fear: Apprehension of economic reform is rooted in past economic failures. Growth is essential

Clipped from: https://timesofindia.indiatimes.com/blogs/toi-editorials/stagnation-fear-apprehension-of-economic-reform-is-rooted-in-past-economic-failures-growth-is-essential/TOI Edit

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As the government and farmers’ representatives prepare for another round of negotiations this week, there’s one thing that can be said with certainty. The apprehension about the consequences of change through reform is rooted in the feeling among farmers that alternatives are bound to be worse. Yet, anecdotal evidence from across India shows that farmers are clearly dissatisfied with the current situation. The apprehension should be seen as a symptom of a larger failing in India’s economic trajectory, something that makes many resistant to change and simultaneously dissatisfied with the present.

A revealing statistic on the possible roots of this angst is the performance of India’s manufacturing sector. It contributed 17% of India’s annual output last year. Around a decade ago, its contribution was roughly the same. For millions of young with limited skills, looking to move out of the struggling farm sector, opportunities have been limited. In the absence of opportunity, there is fear of change even if most agree status quo is untenable. India’s disappointing economic performance over the last decade has made the political challenge of economic reforms tougher. In response to this challenge, governments are prone to revert to populist measures that sow the seeds of further trouble.

Karnataka and Andhra Pradesh recently formed standalone development bodies for earmarked communities. This kind of slicing and dicing and subsequent budget allocations according to communities is a worrisome trend. It is not limited to states. The Centre has appointed an OBC Commission that is working on ways to subcategorise them. All these measures are a manifestation of the failure to create adequate economic opportunities for India’s youth. Palliatives of the kind governments are engaged in will eventually spawn a new set of problems.

The most important lesson of the last seven decades is that economic vibrancy is the tide that lifts all boats. Other measures are nothing more than zero sum games, where one group’s gain comes from another one’s loss. A recent global economic forecast says that India will become the world’s third largest economy by 2030, after relatively slipping since 2019. China, on the other hand, is expected to become the world’s largest economy by 2028, five years ahead of what was earlier forecast. This variation in performance is a measure of what India has lost by failing to get its economic policy right. Economic growth is the antidote to many of our challenges. We need to prioritise it.

This piece appeared as an editorial opinion in the print edition of The Times of India.

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