Is our country's economic progress really heartening?

Satyajit Kumar Sharmah Thakur

(sksharmahthakur@gmail.com)

In almost all of my articles in last few years, in my effort to project the functioning of the economy and its achievements, I have abstained from projecting an unduly rosy picture of the economy. As such, in view of the measures taken by the government in consideration of the gravity of the problems till now, I am not optimistic about a satisfactory turnaround of the economy in near future because even though through projection of achievement figures in different parameters like GDP, exports, imports substitution, imports and balance of payments etc., the country's economy may have shown positive results, but in actuality fear is looming large as to whether people at large are being and will be benefited from all those projected positives in near future. But with the hope of government's rising to the occasion realizing the necessity of appropriate solutions, I am not altogether pessimistic either. However, if appropriate expeditious steps are not taken to rectify the erratic trends in the economy, that will surely create pessimism.

It is difficult to be satisfied so long as our imports are more compared to our exports, even though the export figures may show an ascending trend, thereby widening the gap of trade deficit.

In the last a few months, at least in some sectors of exports, the country was witnessing some positive figures. But that has become a matter of the past if we count on some of the latest figures and apprehensions that the second quarter of the FY23 may not augur well in the export sector due to very probable softening global commodity prices. One still remembers how initially the IMF predicted GDP of the Indian economy for the FY22 at 9.5%, only to reduce it in the month of January, 2022 to 9%. The World Bank was even more optimistic when it predicted that our country's economy for the financial year 2022 would witness a GDP growth of 11.2% initially, only to cut it down to 8.3% thereafter. The most disheartening is Nomura, which has lowered India's gross domestic product (GDP) growth forecast for the FY 2023 to 4.7% from its earlier forecast of 5.4% for the same period. Most astonishingly, the growth of trade deficit for the country has widened to a whopping 30 billion dollars in July, 2022 which will seriously hurt the country's current account deficit, putting the rupee under pressure. Without any pragmatic action which seems to have eluded us, further deterioration of external balances seems to be absolutely inevitable. True, that the restrictions which were put on exports of wheat, iron and steel contributed substantially towards such deterioration of the position of trade deficit. However, problems will always be there, only their natures will be different, and the country must be able to overcome the hurdles with suitable means.

Today, the value of our rupee is perilously low. If urgent steps are not taken to heal such wounds, except for changing the goalpost to arrive at a 5 trillion-dollar economy, I do not find any other viable possibility. The role of the Reserve Bank of India in spending 60 billion dollars to help the rupee has reduced the import cover from currency reserves as demanded by the happenings. By and by, hopefully Reserve Bank of India's reserves are likely to turn around, but very limited scope for swift rupee appreciation cannot be ruled out.

After getting a rude shock in the labour market due to mass exodus during the Covid-19 onslaught, the labour market is yet to be satisfactory. The move of the government to absorb the separated workers substantially in MGNREGA has landed them in severe suffering in respect of their earning. So many states are reported to have been suffering from fund scarcity in a situation when inflation is fast on the rise. The valiant effort of the government to get contribution to the exchequer through imposition of more taxes and taxes on some items whereon earlier no GST was there, is further worsening the purchasing power of the people. The promises of the government to create plenty of jobs seems to be heading towards facing serious negative deviation from achievement figures since in the month of June, 2022, there has been a rise in growth of unemployment to 7.8% from 7.1% in May, 2022. And that ascending trend of unemployment is really eyebrow-raising because the toughest challenge before the government right now is to arrest that growth, otherwise growing unemployment is all set for impairing our economy through diminishing purchasing power and widening the gap in wealth distribution. In spite of growing suffering of the people, while the economy is poised for a very rapid growth as the government is claiming, there is a likelihood that the country's economy is in a K-shaped progress in its process of recovery. That apprehension has gained more relevance with the government's great desire for increasing taxes on different articles and imposition of taxes on some articles which did not attract GST earlier. The growing financial disparity amongst different sections of people is a bane for the economy. It is the very reason why I have been advocating providing earning opportunities to the people instead of looking at gaining political dividend by making people enjoy different freebies under different schemes of the government, without any contribution to the economic growth of the country. However, under the current circumstances and in consideration of the costs involved therewith, there is justification and reasonableness of continuing government policies like free medical facilities to the poor class of people, financial aid to the deserving students for augmenting their studies, and low rate of interest on the commercial loans provided that loan is used for procuring means for livelihood, etc.

Deterioration of the economic condition of almost all of the lower middle-class people should have been able to attract the attention of the government. The price of an LPG cylinder is more than Rs 1,000, mustard oil and refined oil of good quality are not available at less than Rs 170 per litre, and there is price rise of all the essential commodities.

Very recently the Union Finance Minister expressed the government's great desire to alleviate the problem of growing unemployment and making unequal distribution of wealth as less as possible. But frankly speaking, considering the actions of the government, I find that statement totally contrasting. I am absolutely in accord with Mr Anand Mahindra, the Mahindra Group chairman, who recently highlighted the issue of jobless growth plaguing the Indian economy, and emphasized on the role of manufacturing sector to create jobs on mass scale taking advantage of the global factors. Even though according to Mr Mahindra, those global factors are moving in favour of India, bemoaning 7% to 8% growth of unemployment, he has expressed dissatisfaction that job growth has not kept pace with GDP growth.

Under-employment is another very impairing element of the Indian economy, for any solution of which there has not been any meaningful, sincere and serious steps till now. The exodus of migrant workers consequent to the Covid-19 outbreak and some of their absorption in MGNREGA without any certainty of the minimum number of days of their work, is a glaring example of under-employment.

I have consistently mentioned that growing dependence on agriculture due to tapering of employment opportunities in manufacturing and service sectors, is not a healthy sign for the economy. The Indian economy must rely mainly on increase in industrial production and productivity if progress of the economy is sought in real sense. With increase in the number of dependents on agriculture, even though outputs have increased but productivity has gone down. It is very detrimental for the economy and is made even more serious by the fact that India may surpass China in total population in the near future. Operation of all those elements has resulted in low per capita income with very natural slow capital growth without relying on government loans. Since the MSMEs are yet to see a very conducive turf for their competition, I am too sure without addressing their existing problems very effectively, on one hand no justice can be done to them and on the other hand the finance disbursing institutions will also be within the clutch of growth of NPAs.

That all of the prevailing problems in our economy are culminating into inequality of wealth distribution and poor quality of human capital, must be taken full cognizance of forsaking political dividend to pave the way for a desirable health of the economy. Instead of taking appropriate measures for solving the problems, measures like showing cold shoulder to the PSUs is simply evasion of the problem.

In the country's march towards becoming a 5 trillion dollar economy by the end of the FY 2024-25, unless those problems are duly recognized and expeditious actions for overcoming those problems are taken, even though the economy may be able to arrive at that target or may even surpass that, satisfactory distribution of the benefits of that progress of the economy will not happen in reality.

Yes, the governments both at the centre and at the states have claimed creation of jobs, but compared to the figures of how many have lost jobs in the last three years and addition of new job-seekers in the market, we do not have much reason to be very jubilant. With the already-expressed desire of the governments for no impetus for setting up fresh PSUs and keenness for handing over PSUs to the private parties, the writing on the wall is very clear. The coming days will belong to the private sector with overwhelming presence and unless the people gear up with desired degree of professionalism with competence and contribute to the satisfaction of the employers, their plight is bound to become more agonizing. Now with emergence of banking liquidity slipping into deficit - requiring the RBI to infuse more funds resorting to variable repo rate auction - together with the Indian currency still tumbling as low as Rs 81.62 to a dollar, the gravity of the situation demands action on the part of the government on a war footing.