Vision 2019: Indian policy-makers, in the coming year, must give special attention to creating more jobs, improving the country’s HDI performance and fixing agriculture.
By Aridam Bhattacharya
An alien observer would find it strange that we Earthfolk make such a big deal of having completed a revolution around the sun by celebrating it as New Year and making new resolutions for the next revolution. But, as this ‘human weakness’ of celebrations and making new year resolutions is too deeply ingrained in us, I went about the business as usual; but, this time, I could not but wonder—given the complex global and local challenges—what should be India’s resolutions for 2019.
Let us first briefly look at the global context—2018 has been a roller-coaster year for the world economy. While we have to be thankful that the economic and political competition between the two super-powers in the world did not blow up into a full-scale trade war, we have to recognise that this economic competition is now a powerful geo-political force that will shape the world economy for decades ahead. We are also embarking upon an era when the wide-spread adoption of digital technologies—from industry 4.0, internet of things, AI and machine learning, digital platforms and market places, new forms of social media and networks—will fundamentally transform human society. These two seemingly contradictory forces, one of economic nationalism and geopolitical competition that divides, and digital technologies that integrates, is shaping a radical new model of globalisation that has huge implications for India as we set out our wish-list for the new year.
Given this global context, here are my four set of ideas that I hope our political leaders and policy makers will consider as they make their own New Year resolutions.Let me start with jobs—the biggest challenge we face as we enter 2019. Traditional economic thinking for a country transitioning from low- to medium-income is to focus on large-scale manufacturing and merchandise exports to the developed world as big job-creators. Japan, Korea, Taiwan, China—all followed this path. But that was before Industry 4.0 and growth of economic nationalism hit global manufacturing. Today, global merchandise trade is stagnating while services trade, especially digital services trade, is growing. Intra-Asia trade, among the region’s developing countries, is growing more than two times faster than trade with the developed world. Manufacturing off-shoring by developed economies, driven by labour arbitrage, seems to have peaked and in-shoring by these countries is beginning to happen. Large manufacturing companies are not creating jobs as they replace people with machines, but, at the same time, the gig economy and SMEs are creating more jobs. Finally, the potential for ‘consumption of mass services’ creating millions of service-jobs is growing from a combination of digital technologies, competition and good regulations that drives down the cost of services by anywhere from 3x to 10x as we have seen in the telecom sector in India. So, in light of all these radical changes, topping my wish list for New Year resolutions by policy makers is that they will bring in fresh and radical thinking on strategies for job creation.
Second on my list are a set of ideas centering on agriculture where the prime minister has set the ambitious target of doubling farmers’ income. Historically, India’s strategy for improving farmer income has focused around improving access to inputs and increasing crop productivity. A recent BCG study had shown that the three more important drivers are (i) improving price realisation by making markets more efficient through use of technology, increasing transparency and dismantling constraints posed by archaic APMCs and the ban of exports, (ii) increasing non-farm incomes from animal husbandry and fisheries, and (iii) facilitating land consolidation through effective leasing and contract farming policies throughout India as small-holding farmers can structurally never achieve sustained positive surplus income. Without this consolidation (or direct income support), periodic farmer distress is unavoidable and loan waivers are inevitable. So, the second item on my wish list for New Year resolutions is that our political leaders will ‘bite the political-economy bullet’ and resolve to transform the agricultural marketing system.
Next on my list is transforming India’s lowly 130 rank on the United Nations’ Human Development Index (HDI), despite spending perhaps the highest amount in the world on delivering social services covering women and child welfare, health, education, and employment guarantee. And—since our public systems for delivering social services have broken down—come election time, rather than talking about our achievement on improving HDI, it becomes a political competition on who can give more ‘doles’ in form of new policies and/or more subsidies. Having now led BCG teams working across these social sectors in several states, I believe that it is possible to improve the delivery of these services not by throwing more money or coming out with a new more ambitious policies but by improving the large public systems that already exist in each state. Such a transformation starts by setting bold targets for outcome, and then systematically driving accountability and ownership down the chain, improving last-mile delivery infrastructure, processes and skills, leveraging technology to automate most of the administrative burden like transfers and postings, recruitment, grievances, etc, which clog up the system, and finally, actively engaging the public who are the recipients of these services. So, my third item on the New Year wish-list is that our political leadership will resolve not to make more grand policy announcements and handing out more subsidies but instead drive systematic and disciplined transformation of our existing public systems for more effective use of the huge public monies to delivery better social services.
My final thoughts are on India’s position in the emerging geo-political order. The old geo-politics of modern globalisation was shaped by the intense rivalry between the capitalist political system led by United States and communist political system led by then USSR. Economics played a minor role as there was no competitor to the economic dominance of the West. As communism collapsed and China rose as an economic power that has played by different ‘rules’, the world is seeing a fundamental change in the geo-political architecture increasingly shaped by intense economic rivalry between the two super-powers, with two sets of players on the side-lines jockeying for a relevant global position. One set is of the Old Globalisation economic leaders —the EU countries, Japan, etc—and the other is of the fast-growing large economies like India. In the old, political-rivalry driven geo-politics, India had built its global position as a leader of a politically non-aligned coalition of countries. As we enter 2019, I cannot resist thinking that the time is ripe for India to help build and lead another non-aligned coalition of countries, this time an economic one that becomes the third pole of the geo-political architecture and helps the emergence of a new multilateral system that is more equitable. This is the final item in my wish-list for New Year resolutions for India.
All in all, a tall order, sceptics will say. But, when else can we dream, if not in setting our new New Year resolutions as we start the circling of the sun once more!
(Author is senior partner, BCG and Director, BCG Henderson Institute. Views are personal)