By Pooja Misra
“Tripartite compact” a term given in the Economic Survey has resonated pretty strongly with many of us. The survey states that for the country to be a Viksit Bharat by 2047, a tripartite compact is needed between the Centre, State and Private industry be it in terms of land and labour reforms and/or between the Government, Private Sector and Academia for skill development and job creation.
The Indian economy has remained robust, demonstrated resilience in the face of geopolitical challenges and achieved a GDP growth of 8.2% in the previous financial year, but for India to be a Viksit Bharat by 2047 and move towards equitable growth and away from a K-shaped growth there are certain key challenges that the country needs to address. While we have suitably grown from a low-income economy to a low-middle-income nation with our GDP per capita being in the range of $2730.77 approx. as against that of China being $13,136.48 and US and UK being 85,372.69 and $51,074.79 respectively, to be a Viksit Bharat by 2047 we need to focus on addressing these challenges and not get caught in ‘the middle-income trap’.
What does the Employment Data show:
To begin with, the one challenge that has been on the forefront for quite some time now is unemployment. The Periodic Labour Force Survey (PLFS) – Quarterly Bulletin for January – March 2024 showed that the unemployment rate in urban areas in India stood at 6.7% as against a global unemployment rate of 5.1% (World Bank, 2023). As per RBI KLEMS data, all-India unemployment rate (UR) had declined to a 20-month low of 7% (May 2024), however, the Economic survey itself acknowledges that, to cater to the rising workforce the Indian economy needs to generate an average of nearly 78.5 lakh jobs annually until 2030 in the non-farm sector.
The numbers for Labour Force Participation rate (LFPR) and Female Labour Force Participation (FLFPR) in urban areas in India show that it has increased to 50.2% and 25.6% respectively in January – March 2024, yet when we compare the LFPR to World Bank data it shows that at a global level the LFPR was at 66.3% in 2022 and FLFPR stood at 49% in 2023, thus highlighting the fact that the country still has some way to go. Yes, the Government has done well in designing of the three Employment Linked Incentive (ELI) schemes which should give the much-needed boost to increased LFPR, employment and private investment. Interestingly, this would also lead to the formalisation of labour and to a certain extent address the issue of private investment not taking off and work favorably for the economy.
Increased Private Capex – need of the hour
As stated in the Economic Survey it is high time that private investment cycle takes off and does the heavy lifting. An increase in private capital expenditure, will lead to companies expanding operations, investing in new technologies and creation of jobs. With the Government focusing on and calling for ‘all hands on deck’, laying stress on a ‘tripartite compact’, an investment-led growth should create jobs, enhance productivity, build long-term economic capacity and lay the foundation for sustainable long-term growth for the nation. With capacity utilization numbers of India Inc. being in the region of 74%-80%, the logical next step is increased private capital expenditure.
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While sectors such as steel, cement, construction, real estate have been showing increased private capex, however we know that it is not broad based and as given in the Economic Survey private gross fixed capital formation in machinery & equipment and intellectual property is yet to take off. The ELI for manufacturing could give the much-needed push. The silver lining on the wall being that in addition to incentivising for private investment to increase in the Union Budget 2024-25, there is continuity being maintained in the govt. capex with an allocation of 11.11 lakh crore. Increased government capex results in boosting growth, gives rise to employment opportunities for the skilled, semi-skilled and unskilled persons and has a multiplier impact on the core sectors of the economy.
Time and cost overruns for Government Projects need to be monitored:
However, in reference to the government capital expenditure what is much needed is that there should be close monitoring of projects in relation to time and cost overrun. Just to quote latest data, the Indian government’s cost overruns in central government projects reached a 12-month high of 20.09% in April 2024, with 1,838 projects with a value of Rs 150 crore and above costing Rs 33.2 lakh crore, while the time overrun has dipped from 36.04 months in March to 35.4 months in April with 48% of projects delayed for over two years.
MSMEs: A Key Integral Constituent of the Economy
The plus point in the budget being that the Government has done well by providing the boost to the MSME sector through credit guarantee scheme etc. The highlight being e-commerce export hubs to be set-up to enable MSMEs and traditional artisans to market their produce in international markets which should logically give a boost to the One District, One Product scheme and help in balanced regional development.
Another positive from the budget is that with a reduction in the fiscal deficit target to 4.9% of GDP for this FY (moving fast on the glide path), the crowding out effect due to government borrowings will be lowered and leave ample space in the financial flow and availability of funds for the private sector and will also give added advantage to the small and medium sector.
Land and Labour reforms needed for Viksit Bharat 2047:
Also to add, while the Government has been moving in the right direction with its China + 1 policy, PLI schemes etc, however, for the same to fructify, with ease of doing business as its central focus, next-generation structural and economic reforms are much needed not only to be devised, but also implemented and executed especially in the context of land and labour policies. Reforms in the land acquisition policy is a key area that the government needs to address and address fast. Agreeably, digitisation of land records, creating digitised cadastral maps are key steps which can ensure effective implementation of land acquisition policy but we need to move faster on the land acquisition reform so that it becomes an enabler and does not remain a deterrent for industry. Similar is the case with the labor reforms. Here is where the tripartite compact between the Centre, States and private sector needs to move into action.
Effective implementation of Training and Skill Development Programmes:
Training and skill development programs aligning with industry needs have been the call of the day for quite some time now. While, 1,000 Industrial Training Institutes to be upgraded in hub and spoke arrangements with outcome orientation, 20 lakh youth to be skilled over a 5-year period and course content & design aligned as per skill needs of industry are all steps in the right direction and has good intent behind it but, what needs to be seen and closely monitored is its execution on the ground. Skills that make individuals more employable and adaptable to changing job requirements and consequently bring down structural unemployment need to be identified and worked upon by the academia hand in hand with the industry. Equal onus for re-designing of course curriculum lies with the academia and industry. Yes, the announcement that one crore youth would receive internship opportunities in the top 500 companies will prove to be a significant investment in skill development programs and provide a solid foundation for a workforce prepared for the future, but if we want to be a Viksit Bharat by 2047, this is an area in which the Government, academicians and industry need to come together and work.
Quality Employment will build a Viksit Bharat
To be a Viksit Bharat by 2047, not only job creation but, quality employment is what we would need and the same can be an outcome of research and development, increased domestic manufacturing wherein skilled labour is employed, expansion of exports especially in areas catering to labour-intensive manufacturing and signing of more free trade agreements. Rather, it might be a good idea that that when FTAs are signed the details of the same should be percolated down to the MSMEs especially the ones engaged in exports as that would help them strategise their production plan accordingly and reap higher returns.
Urban Development a key focal point
Not to miss, with 68% of the world population projected to live in urban areas by 2050 (United Nations, 2018) and with India, China and Nigeria expected to be accounting for as high as 35% of the projected growth of the global population between 2018 and 2050, investing in building of sustainable urban infrastructure is a head that cannot be ignored and the Government has done well by stating that ‘Cities are the growth hubs’ and ‘Creative redevelopment of cities’ and ‘Transit Oriented Development plans for 14 large cities with a population above 30 lakh is much needed’. Strategically designed sustainable infrastructure facilitates long term sustainable urban expansion, while minimising resource depletion and mitigating environmental damage.
All growth engines needed to fire
Last but most importantly, it has been a much-discussed fact time and again, that the nation needs to fire on all its growth engines especially Private Final Consumption expenditure. While increased employment should give the much-needed boost to private consumption this will bear fruits only in the medium term. Increasing money in the hands of people to spend especially the middle and lower income strata of society could be a solution worth exploring. Yes, while some comfort has been provided to individuals who opt for the new tax scheme, however, a more innovative approach, such as bringing petrol and diesel under the GST ambit, may give a significant boost to the economy in the short term too.
(Pooja Misra is the Area Chair, Economics & International Business, BIMTECH. Views expressed are the author’s own and not necessarily those of financialexpress.com.)