In this scenario, it is only a matter of (a short) time before Indians are manning key industry and services positions in developed countries. As the number of workers between 20-49 falls in developed countries and in China, the demand can and will be met mainly by India. It is very definitely in India's interests to work through the WTO restrictions on labour movement to developed countries.
However, Panagariya, in his lecture 'India in the Global Economy: the Next 15 Years' organised by the National Council Of Applied Economic Research on Wednesday, emphasised that India is ill-prepared to meet this demand. The area of real concern, he said, was higher education. At present, India has 113 million people in the age group 20-24. The gross enrolment ratio (GER) was 10% in 2000 and is only 13% at present, compared to China's GER of 33% at present. This lack of growth in enrolment rate must be rectified soon, Panagariya said.
Quantity and quality both are an issue in higher education. There must be ease of entry for private universities, Panagariya said. The government does not have the revenue required to start universities, he added, the push must be carried out by the private sector. To aid this, Panagariya called for the abolition of the University Grants Commission, calling it corrupt. He said that a more streamlined body was needed, built along the lines of the systems in place in Australia and what will soon be implemented in the UK. Regarding fees and whether college education should be free, Panagariya said that charging fees and driving the expansion of the educational sector in India was a better alternative than free education with limited reach.
On the economy as a whole, he underlined the impressiveness of India's growth story, but mentioned certain worrisome trends that needed to be rectified. Generally, he said, when labour abundant economies grow, the share of agriculture in GDP falls. In 1990, agriculture accounted for 30% of India's GDP, while it accounts for 14-15% now. What he says is worrying is that this fall in agriculture's share of GDP is not being met by a rise in industry's share of GDP. So far in India, industry has grown only at the rate of GDP growth. Also, while agriculture's share in GDP falls, the number of people it employs must also fall. But this isn't the case. Labour movement from agriculture to industry hasn't really happened. Employment in agriculture is still very high, he said.
One factor that contributes to this effect is that the sectors in industry that have grown rapidly (like auto, two-wheelers and telecom) are all capital intensive or skilled employee intensive. So, growth may be taking place, he said, but workers are not moving out of agriculture. Schemes like NREGA and various subsidies for power and water also ensure that workers don't move out of agriculture, Panagariya added.