The slow climb to the trillion economy peak (No magic jump, but slow and steady work is needed)

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 The slow climb to the trillion economy peak (No magic jump, but slow and steady work is needed)

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• $5 trillion target : In 2019, the PM has given an ambitious target for the Indian economy to touch the $5 trillion GDP goal by 2024. However, what is missing is the debate on interlinking of economic growth with developmental goals (education, health, human capital, productive employment etc.)
• Growth not necessarily good : Generally, economic growth in India has not been good for various ideal developmental goals.

1. Concentration : Reports indicate that the 1% wealthiest Indians raised their share in wealth from 40% in 2010 to 60% recently. Richest 10% own 4X what remaining 90% own. So the same route of GDP growth will mean the richest taking away most of the $5 trillion!
2. Employment : Higher economic growth has meant lower rate of employment growth. Today, the unemployment rate is highest ever. The demographic dividend may turn into a disaster!
3. Education : India's literacy rate was 71.1% in 2015, and 70-74% children (6-14 yrs) go to school.

• What is needed : A big jump in public spending on education and health is the need. On education, we spend 4% of GDP (instead of 6% norm), and health takes 1.5%  of GDP (instead of 3%). Only such changes will make economic growth meaningful.
• Environmental concerns : Growth has normally meant ecological degradation in India. That needs to change.
• Slowdown blues : Without addressing the real reasons of today's economic slowdown, and building human capital properly, it may be impossible to touch the $5 tr figure by 2024. Major macro indicators are all distressed - GDP growth rate, savings rate, investment rate, exports, total credit.  [IMAGES]
• Demand crashing : As many industrial sectors have slowed down (auto, diamond, textiles, MSMEs), in parallel agriculture too is facing higher input costs and low output prices. Real Agri wages have declined and non-farm wages are constant (not rising). Overall impact has been the aggregate demand crashing across the spectrum.
• Solution :

1. Govt. has to raise public spending on agriculture (infra, inputs, extension, marketing, storage)
2. Proper farm produce prices must be given
3. MGNREGA funding must go up
4. Fill all vacant posts in Central and State governments (25 lakh)
5. Regularise various contractual, casual and honorary jobs
6. Invest in human capital by appointing more teachers
7. Promote labour-intensive sectors like gems and jewellery, textiles, garments, leather goods.

• Real crux of the problem : Since the public expenditure has reached its lowest level in 5 years, push that up. Improving supply side factors - repo rate cuts, FDI inflows, GST rate reduction, PSB recapitalisation - will have a limited impact only. Raise demand. Then bother about supply.
• Summary : The economic slowdown in India has roots in demand side problems, which must be treated on priority, also keeping in mind that mere economic growth won't bring all-round happiness.

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