Informist, Thursday, Oct 7, 2021
By Adrija Chatterjee
NEW DELHI - India's growth story, powered by the epoch-making economic reforms of 1991, is past its prime and the country needs new drivers to return to a sustainable growth trajectory, says economist Rathin Roy.
"The 1991 India growth story is over," Roy, managing director of the London-based Overseas Development Institute, tells Informist in an interview.
India, he says, must reorient its focus on five sectors--agriculture, affordable textiles, affordable housing, health, and education--to tap demand across the top 500 mln of the country's population. If these five sectors account for three quarters of the growth, the growth story will be sustainable and create jobs, he adds.
"But as long as we continue to look at automobile sales, Scotch whiskey sales and FMCG sales as what moves the Indian economic needle, we are going to be badly stuck in a growth story that is long finished and past its prime."
According to Roy, India is currently witnessing a profit-led recovery, which is helping only the rich.
"A profit-led recovery means that recovery you are seeing in the economy is being driven by increase in profits. It is not being driven by increase in wages or increase in returns to capital.
"I will describe this recovery as a recovery where some people make more money by producing less and everybody else makes less," says Roy, former director of the National Institute of Public Finance and Policy.
The economist doesn't mince his words in criticising the role of the Reserve Bank of India during the crisis. "Now, what has effectively happened is the government has used monetary policy to help rich people make profits by producing less."
Following are edited excerpts from the interview:
Q. From the fastest growing economy in the world, India was one of the worst performers in 2021. In hindsight, do you think India should have done more to come out of this once-in-a-lifetime crisis?
A. As a country, we should learn to stop being overconfident. Not just me, several economists had warned in 2020 that India's recovery would be slow. But the arrogance and hubris of many people in the ruling party, including some so-called experts, I think led the government to become complacent. We are paying the price for this complacency today. Unfortunately, the people who are paying this price are the poorest in the country because the recovery has been a profit-led recovery.
When the pandemic started, I had said resources were not an issue, but the more important question was what would you do with the money? Now, what has effectively happened is the government has used monetary policy to help rich people make profits by producing less. So, GDP has fallen and profits have gone up, which means you have made more money by selling less, yet no one in the government seems to care about this. It is clearly a government that is interested in profit makers, as opposed to wage-earners. The share of wages has fallen and jobs have been lost in huge measure.
Could the government have used fiscal policy to alleviate this? What would it have done? It could have guaranteed some proportion of people's incomes at pre-pandemic levels for a specified period. That guarantee could be easily enforced in the organised sector. But since 85% of India's economy is unorganised, the government simply did not have the instrumentation to provide universal income support of the sort that richer countries did.
Also, the central government fiscally seems to have decided to be in direct competition with states. Let alone give them money, it has actually stolen money from them in the form of cess and the money owed to them in the form of GST compensation. So, a government that is competing with states is hardly going to be in a position to provide fiscal support.
Q. The Indian economy was slowing even before the crisis. Do you think the crisis has further hit India's potential growth? Recently, advisers to the finance ministry said they expect India to clock double-digit growth this year. Do you see this as grandstanding or do you see India returning to 8-9% growth on a sustainable basis, as witnessed in the mid 2000s?
A. Of course, India will grow in double digits because India declined for two years running. The question to ask is will the great Indian double-digit growth this year bring us back to the level of GDP we were in before the pandemic, and the answer to that is an emphatic and resounding no.
I really wish people in the government would not assume that some people outside have the same level of intelligence as they do. If you lose your job for a year and then the next year you get a job that pays you half of what you earned before, your income has still gone up by 50%. If this is double-digit growth, it is nonsense.
Q. So when can we see India returning to 8-9% growth on a sustainable basis, as witnessed in the mid 2000s?
A. If the same people who celebrate double-digit growth after negative growth are in charge, I am afraid never.
Q. People are using various letters of the English alphabet to describe the recovery from the crisis. How do you see the recovery--V, U, or W?
A. I will not use letters of the alphabet. My education has progressed somewhat since primary school; I can do better than that. Therefore, I will use a word - profit-led. A profit-led recovery means the recovery you are seeing in the economy is being driven by an increase in profits. It is not being driven by increase in wages or increase in returns to capital. It is being driven by profits in the face of the fact that the economy itself has shrunk.
Very few people, essentially a few listed companies, are producing less and making a lot of money and are retiring debt, hence returns to capital are going down. When returns on capital go down, the income of savers suffers, especially for the old and fixed deposit holders. With wages falling, everybody, except a handful of listed companies, continue to suffer the economic impact of India's terrible pre-pandemic and post-pandemic performance. I will describe this recovery as a recovery where some people make more money by producing less and everybody else makes less.
Q. The RBI is targetting inflation within a 2-6% band instead of the 4% target. According to the glide path, it sees inflation going back to 4% on an average only in 2023-24. Do you think this will affect the credibility of the MPC?
A. That begs the question, whether that is the only thing that would affect the credibility of the MPC. The credibility of the MPC or the central bank is dependent on the logic that underlies such statements. Do you know what the logic is for the RBI to say that inflation is unlikely to go down until 2024, because I don't.
I see a lot of poetry, but I see very little logical argumentation from the RBI nowadays. And much as I am fond of poetry, I believe its place is in salons, not in the central bank. If the RBI makes an assertion and that assertion is not backed up by analytical argument, then its credibility is bound to suffer.
Q. Globally, there seems to be worry about rising inflation. Do you think the RBI has been slow in unwinding from its extraordinary accommodative stance?
A. I think it is very fatuous to talk about India as it were a developed country and then talk about accommodative stance. What you are seeing is a lot of liquidity floating about in the economy, but the economy is having a profit-led recovery, which means capital is not in demand. So, what precisely is the RBI trying to accommodate by increasing liquidity other than government debt, I do not know.
To speak pompously of accommodative stances in an economy where the instrumentation is very poor, where food and fuel inflation remain outside the purview of even the original analytical framework of the RBI, I think is fatuous.
Q. Do you expect tapering by other central banks to impact India and its financial markets?
A. Of course, it will impact India. India continues to run a balance of trade deficit and any increase in our foreign exchange reserves comes because the total amount of direct and foreign portfolio investment that comes into this country exceeds our balance of trade deficit. Inevitably, once the taper ends, the algorithms of those who do such portfolio investments will change in favour of the US and other countries, which will then have higher real rates of returns and to that extent, money will not come to India in the same measure as it did.
We should raise our game, unless the government believes there has been a dramatic improvement in institutional conditions, in law and order and skills in the states of Uttar Pradesh and Bihar, which is going to cause foreign investment to flock to India. I have seen some newspaper advertisements that seem to suggest that this is the case that Uttar Pradesh and Bihar are now sort of a new Taiwan and South Korea with rapid improvement in governance, huge improvement in skills and new dynamism. I have not been to Uttar Pradeh and Bihar for a while, so I cannot judge. If the Hindi heartland is suddenly going to become a sort of China-style paragon of efficiency and high productivity, then foreign direct investment will come to India. If Uttar Pradesh and Bihar are not becoming paragons of investment, then I am afraid we will have to keep an eye on foreign portfolio investment and calibrate our policies accordingly.
Q. You have been warning about a silent fiscal crisis. Do you think the pandemic has accentuated that crisis?
A. The pandemic hasn't further accentuated it, mercifully. The pandemic has, in fact, given the government the opportunity to address the crisis by announcing the biggest sale of assets. While the government may pretend it has an ideology underlying this, if you look at its track record, it is amply clear that the ideology claim is a subterfuge for a crisis response. It is clearly the only response, given the government's inability to undertake structural policies to reform the fisc.
The only response of the government is to do what a sick company does during a crisis. What will a sick company do when you are a loss-making company? Sell assets and hope that by selling them, you will be able to pay for the losses and wait for another day. So, the government has embarked on the largest ever privatisation and asset monetisation programme. And, if these work, then the fiscal crisis should in fact abate. The causes of the fiscal crisis – low tax buoyancy, inadequate tax base, government expenditure focussed on borrowing for revenue expenditure rather than capital expenditure - will not abate. These structural factors will not see a solution.
The problem, however, is I am not all that confident of the government of India's executive capability to undertake and complete a privatisation programme of the quantum they are describing. They have never done this in the past and lazy habits seem to persist. A government that takes over a year to even appoint a transaction adviser for the LIC IPO is not going to list it in a great hurry. I am also worried that the markets know this as well and sense a great opportunity to buy a lot of stuff for cheap, which will be a terrible fiscal tragedy. The fiscal crisis is fully recognised by the government. However, their capability to do so remains in doubt and there is a real danger that they will undersell these assets, which would be a national loss and tragedy.
Q. The Centre has been increasing its recourse to indirect taxes, especially excise duty, to increase its tax revenues. Do you think this trend is iniquitous? A large part of the excise duty collected by the Centre is not shared with states, as it is collected in the form of cess. Do you think this trend is fundamentally against the principle of fiscal federalism?
A. Nothing could be more fundamentally against the trend of fiscal federalism. But it is understandable. Poor people steal. Theft is tempting to a person with no money in his pocket. Therefore, the government of India is tempted to steal from states, which is what they are doing by resorting to cess. The question is how long can you do it?
The goodwill with states would have been lost and together with the default on the GST compensation cess, the ability of the Centre to renegotiate a fiscal compact with states, which I think is a matter of the highest importance, will also have been lost. While the Centre may persist with such behaviour, it is going to bring limited rewards going forward and also increase political and institutional tension on our federal fabric without commensurate returns.
Q. Recently, the finance minister said the government was in no mood to extend the 14% revenue guarantee for GST to states beyond June 2022. Do you think states' finances can cope without guaranteed revenue buoyancy?
A. I think guarantees are a bad idea. There is a mechanism for managing state finances for allowing states to fulfil their expenditure obligations. Every five years, we have a finance commission that is supposed to look at the fiscal needs of states. If there is a mismatch between the fiscal needs and the revenues apportioned to them, the finance commission can recommend a higher vertical devolution to states. To the extent that these states need resources for productive investment, the finance commission and the central government can set borrowing limits. So, there are plenty of ways in which state finances can be kept under control, consistent with responsible fiscal management. Unfortunately, what you are seeing at the moment is extremely poor fiscal management by the Centre, which is having a knock-on effect on states.
The Centre decides and collects both taxes on income and taxes on consumption. Because the buoyancy of income tax is falling, we are becoming more and more reliant on indirect taxes. But that also then leads to inflationary and other such pressures that limit the extent to which you can use the GST as an instrument for incremental revenue mobilisation.
Q. According to World Bank data, India's unemployment rate was as high as 23.0% in 2019, even before the pandemic emerged. How should India address the issue of unemployment considering it seems to have been ignored?
A. Unemployment is not the issue; it is a symptom of a malaise and that malaise is that there aren't enough productive economic activities for people to engage in. So, you ask what productive economic activities people can engage in and if you are able to successfully foster those activities, you create jobs.
Activities create jobs, policies don't. To create jobs, people have to be capable of fulfilling and performing, so you need to create supply-side capabilities. You need to create jobs where people live. The majority of people in this country live in northern and eastern India, but the jobs that exist are in southern and western India and, therefore, you have the phenomena of people being called migrants in their own country. This entire structure has to change if we are going to address the unemployment problem, and I have repeatedly given my ideas on this.
The 1991 India growth story is over. We need to change the output composition of demand to tap the demand of the top 500 mln, not just the top 150 mln from five sectors.
We must have more growth in agriculture in terms of not just output but also income, it needs to become a viable business. I think that was behind Prime Minister Modi's initiative for doubling the income of farmers. Unfortunately, like most of his initiatives, that has remained at the level of a slogan.
The second is an old problem – why are we importing 400-rupee shirts from Bangladesh and Vietnam when we can make it in India? It is not rocket science, we know the answers, fix it.
Affordable housing – there, the government has made some progress, but rather than monetise land in this sort of meaningless fashion to fill your fiscal hole, land can be used to create a huge expansion in affordable housing so that we have a slum-free India in the next five years.
And finally, if the pandemic has not taught us this, I don't know what will – health and education.
All these five sectors, if these constitute three-quarters of growth going forward instead of automobiles and airline travel, the so-called leading indicators of the economy, then that growth will be sustainable and create jobs.
Another quarter could perhaps come from rich people's consumption and from exports. But we have to stop dreaming and get real. This economy will grow when it is able to serve the needs of at least half its population. And at the moment, this economy is geared to serve the needs of the top 10-15% of this population, and is chasing a Peter Pan-like mirage of exports in the face of extremely low skills, low capabilities, huge amounts of government intervention and a series of failed experiments such as special economic zones, which have failed comprehensively across regions.
But if you are not going to export, it does not mean our growth story is over. It means you have to change the output composition of our demand to produce for Indians what they wish to consume. And there are five sectors in which this is true – agriculture, affordable textiles, affordable housing, health and education. But as long as we continue to look at automobile sales, Scotch whiskey sales, and FMCG sales as what moves the Indian economic needle, we are going to be badly stuck in a growth story that is long finished and past its prime. End
Edited by Avishek Dutta
Cogencis news is now Informist. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
Informist, Thursday, Oct 7, 2021
By Adrija Chatterjee
NEW DELHI - India's growth story, powered by the epoch-making economic reforms of 1991, is past its prime and the country needs new drivers to return to a sustainable growth trajectory, says economist Rathin Roy.
"The 1991 India growth story is over," Roy, managing director of the London-based Overseas Development Institute, tells Informist in an interview.
India, he says, must reorient its focus on five sectors--agriculture, affordable textiles, affordable housing, health, and education--to tap demand across the top 500 mln of the country's population. If these five sectors account for three quarters of the growth, the growth story will be sustainable and create jobs, he adds.
"But as long as we continue to look at automobile sales, Scotch whiskey sales and FMCG sales as what moves the Indian economic needle, we are going to be badly stuck in a growth story that is long finished and past its prime."
According to Roy, India is currently witnessing a profit-led recovery, which is helping only the rich.
"A profit-led recovery means that recovery you are seeing in the economy is being driven by increase in profits. It is not being driven by increase in wages or increase in returns to capital.
"I will describe this recovery as a recovery where some people make more money by producing less and everybody else makes less," says Roy, former director of the National Institute of Public Finance and Policy.
The economist doesn't mince his words in criticising the role of the Reserve Bank of India during the crisis. "Now, what has effectively happened is the government has used monetary policy to help rich people make profits by producing less."
Following are edited excerpts from the interview:
Q. From the fastest growing economy in the world, India was one of the worst performers in 2021. In hindsight, do you think India should have done more to come out of this once-in-a-lifetime crisis?
A. As a country, we should learn to stop being overconfident. Not just me, several economists had warned in 2020 that India's recovery would be slow. But the arrogance and hubris of many people in the ruling party, including some so-called experts, I think led the government to become complacent. We are paying the price for this complacency today. Unfortunately, the people who are paying this price are the poorest in the country because the recovery has been a profit-led recovery.
When the pandemic started, I had said resources were not an issue, but the more important question was what would you do with the money? Now, what has effectively happened is the government has used monetary policy to help rich people make profits by producing less. So, GDP has fallen and profits have gone up, which means you have made more money by selling less, yet no one in the government seems to care about this. It is clearly a government that is interested in profit makers, as opposed to wage-earners. The share of wages has fallen and jobs have been lost in huge measure.
Could the government have used fiscal policy to alleviate this? What would it have done? It could have guaranteed some proportion of people's incomes at pre-pandemic levels for a specified period. That guarantee could be easily enforced in the organised sector. But since 85% of India's economy is unorganised, the government simply did not have the instrumentation to provide universal income support of the sort that richer countries did.
Also, the central government fiscally seems to have decided to be in direct competition with states. Let alone give them money, it has actually stolen money from them in the form of cess and the money owed to them in the form of GST compensation. So, a government that is competing with states is hardly going to be in a position to provide fiscal support.
Q. The Indian economy was slowing even before the crisis. Do you think the crisis has further hit India's potential growth? Recently, advisers to the finance ministry said they expect India to clock double-digit growth this year. Do you see this as grandstanding or do you see India returning to 8-9% growth on a sustainable basis, as witnessed in the mid 2000s?
A. Of course, India will grow in double digits because India declined for two years running. The question to ask is will the great Indian double-digit growth this year bring us back to the level of GDP we were in before the pandemic, and the answer to that is an emphatic and resounding no.
I really wish people in the government would not assume that some people outside have the same level of intelligence as they do. If you lose your job for a year and then the next year you get a job that pays you half of what you earned before, your income has still gone up by 50%. If this is double-digit growth, it is nonsense.
Q. So when can we see India returning to 8-9% growth on a sustainable basis, as witnessed in the mid 2000s?
A. If the same people who celebrate double-digit growth after negative growth are in charge, I am afraid never.
Q. People are using various letters of the English alphabet to describe the recovery from the crisis. How do you see the recovery--V, U, or W?
A. I will not use letters of the alphabet. My education has progressed somewhat since primary school; I can do better than that. Therefore, I will use a word - profit-led. A profit-led recovery means the recovery you are seeing in the economy is being driven by an increase in profits. It is not being driven by increase in wages or increase in returns to capital. It is being driven by profits in the face of the fact that the economy itself has shrunk.
Very few people, essentially a few listed companies, are producing less and making a lot of money and are retiring debt, hence returns to capital are going down. When returns on capital go down, the income of savers suffers, especially for the old and fixed deposit holders. With wages falling, everybody, except a handful of listed companies, continue to suffer the economic impact of India's terrible pre-pandemic and post-pandemic performance. I will describe this recovery as a recovery where some people make more money by producing less and everybody else makes less.
Q. The RBI is targetting inflation within a 2-6% band instead of the 4% target. According to the glide path, it sees inflation going back to 4% on an average only in 2023-24. Do you think this will affect the credibility of the MPC?
A. That begs the question, whether that is the only thing that would affect the credibility of the MPC. The credibility of the MPC or the central bank is dependent on the logic that underlies such statements. Do you know what the logic is for the RBI to say that inflation is unlikely to go down until 2024, because I don't.
I see a lot of poetry, but I see very little logical argumentation from the RBI nowadays. And much as I am fond of poetry, I believe its place is in salons, not in the central bank. If the RBI makes an assertion and that assertion is not backed up by analytical argument, then its credibility is bound to suffer.
Q. Globally, there seems to be worry about rising inflation. Do you think the RBI has been slow in unwinding from its extraordinary accommodative stance?
A. I think it is very fatuous to talk about India as it were a developed country and then talk about accommodative stance. What you are seeing is a lot of liquidity floating about in the economy, but the economy is having a profit-led recovery, which means capital is not in demand. So, what precisely is the RBI trying to accommodate by increasing liquidity other than government debt, I do not know.
To speak pompously of accommodative stances in an economy where the instrumentation is very poor, where food and fuel inflation remain outside the purview of even the original analytical framework of the RBI, I think is fatuous.
Q. Do you expect tapering by other central banks to impact India and its financial markets?
A. Of course, it will impact India. India continues to run a balance of trade deficit and any increase in our foreign exchange reserves comes because the total amount of direct and foreign portfolio investment that comes into this country exceeds our balance of trade deficit. Inevitably, once the taper ends, the algorithms of those who do such portfolio investments will change in favour of the US and other countries, which will then have higher real rates of returns and to that extent, money will not come to India in the same measure as it did.
We should raise our game, unless the government believes there has been a dramatic improvement in institutional conditions, in law and order and skills in the states of Uttar Pradesh and Bihar, which is going to cause foreign investment to flock to India. I have seen some newspaper advertisements that seem to suggest that this is the case that Uttar Pradesh and Bihar are now sort of a new Taiwan and South Korea with rapid improvement in governance, huge improvement in skills and new dynamism. I have not been to Uttar Pradeh and Bihar for a while, so I cannot judge. If the Hindi heartland is suddenly going to become a sort of China-style paragon of efficiency and high productivity, then foreign direct investment will come to India. If Uttar Pradesh and Bihar are not becoming paragons of investment, then I am afraid we will have to keep an eye on foreign portfolio investment and calibrate our policies accordingly.
Q. You have been warning about a silent fiscal crisis. Do you think the pandemic has accentuated that crisis?
A. The pandemic hasn't further accentuated it, mercifully. The pandemic has, in fact, given the government the opportunity to address the crisis by announcing the biggest sale of assets. While the government may pretend it has an ideology underlying this, if you look at its track record, it is amply clear that the ideology claim is a subterfuge for a crisis response. It is clearly the only response, given the government's inability to undertake structural policies to reform the fisc.
The only response of the government is to do what a sick company does during a crisis. What will a sick company do when you are a loss-making company? Sell assets and hope that by selling them, you will be able to pay for the losses and wait for another day. So, the government has embarked on the largest ever privatisation and asset monetisation programme. And, if these work, then the fiscal crisis should in fact abate. The causes of the fiscal crisis – low tax buoyancy, inadequate tax base, government expenditure focussed on borrowing for revenue expenditure rather than capital expenditure - will not abate. These structural factors will not see a solution.
The problem, however, is I am not all that confident of the government of India's executive capability to undertake and complete a privatisation programme of the quantum they are describing. They have never done this in the past and lazy habits seem to persist. A government that takes over a year to even appoint a transaction adviser for the LIC IPO is not going to list it in a great hurry. I am also worried that the markets know this as well and sense a great opportunity to buy a lot of stuff for cheap, which will be a terrible fiscal tragedy. The fiscal crisis is fully recognised by the government. However, their capability to do so remains in doubt and there is a real danger that they will undersell these assets, which would be a national loss and tragedy.
Q. The Centre has been increasing its recourse to indirect taxes, especially excise duty, to increase its tax revenues. Do you think this trend is iniquitous? A large part of the excise duty collected by the Centre is not shared with states, as it is collected in the form of cess. Do you think this trend is fundamentally against the principle of fiscal federalism?
A. Nothing could be more fundamentally against the trend of fiscal federalism. But it is understandable. Poor people steal. Theft is tempting to a person with no money in his pocket. Therefore, the government of India is tempted to steal from states, which is what they are doing by resorting to cess. The question is how long can you do it?
The goodwill with states would have been lost and together with the default on the GST compensation cess, the ability of the Centre to renegotiate a fiscal compact with states, which I think is a matter of the highest importance, will also have been lost. While the Centre may persist with such behaviour, it is going to bring limited rewards going forward and also increase political and institutional tension on our federal fabric without commensurate returns.
Q. Recently, the finance minister said the government was in no mood to extend the 14% revenue guarantee for GST to states beyond June 2022. Do you think states' finances can cope without guaranteed revenue buoyancy?
A. I think guarantees are a bad idea. There is a mechanism for managing state finances for allowing states to fulfil their expenditure obligations. Every five years, we have a finance commission that is supposed to look at the fiscal needs of states. If there is a mismatch between the fiscal needs and the revenues apportioned to them, the finance commission can recommend a higher vertical devolution to states. To the extent that these states need resources for productive investment, the finance commission and the central government can set borrowing limits. So, there are plenty of ways in which state finances can be kept under control, consistent with responsible fiscal management. Unfortunately, what you are seeing at the moment is extremely poor fiscal management by the Centre, which is having a knock-on effect on states.
The Centre decides and collects both taxes on income and taxes on consumption. Because the buoyancy of income tax is falling, we are becoming more and more reliant on indirect taxes. But that also then leads to inflationary and other such pressures that limit the extent to which you can use the GST as an instrument for incremental revenue mobilisation.
Q. According to World Bank data, India's unemployment rate was as high as 23.0% in 2019, even before the pandemic emerged. How should India address the issue of unemployment considering it seems to have been ignored?
A. Unemployment is not the issue; it is a symptom of a malaise and that malaise is that there aren't enough productive economic activities for people to engage in. So, you ask what productive economic activities people can engage in and if you are able to successfully foster those activities, you create jobs.
Activities create jobs, policies don't. To create jobs, people have to be capable of fulfilling and performing, so you need to create supply-side capabilities. You need to create jobs where people live. The majority of people in this country live in northern and eastern India, but the jobs that exist are in southern and western India and, therefore, you have the phenomena of people being called migrants in their own country. This entire structure has to change if we are going to address the unemployment problem, and I have repeatedly given my ideas on this.
The 1991 India growth story is over. We need to change the output composition of demand to tap the demand of the top 500 mln, not just the top 150 mln from five sectors.
We must have more growth in agriculture in terms of not just output but also income, it needs to become a viable business. I think that was behind Prime Minister Modi's initiative for doubling the income of farmers. Unfortunately, like most of his initiatives, that has remained at the level of a slogan.
The second is an old problem – why are we importing 400-rupee shirts from Bangladesh and Vietnam when we can make it in India? It is not rocket science, we know the answers, fix it.
Affordable housing – there, the government has made some progress, but rather than monetise land in this sort of meaningless fashion to fill your fiscal hole, land can be used to create a huge expansion in affordable housing so that we have a slum-free India in the next five years.
And finally, if the pandemic has not taught us this, I don't know what will – health and education.
All these five sectors, if these constitute three-quarters of growth going forward instead of automobiles and airline travel, the so-called leading indicators of the economy, then that growth will be sustainable and create jobs.
Another quarter could perhaps come from rich people's consumption and from exports. But we have to stop dreaming and get real. This economy will grow when it is able to serve the needs of at least half its population. And at the moment, this economy is geared to serve the needs of the top 10-15% of this population, and is chasing a Peter Pan-like mirage of exports in the face of extremely low skills, low capabilities, huge amounts of government intervention and a series of failed experiments such as special economic zones, which have failed comprehensively across regions.
But if you are not going to export, it does not mean our growth story is over. It means you have to change the output composition of our demand to produce for Indians what they wish to consume. And there are five sectors in which this is true – agriculture, affordable textiles, affordable housing, health and education. But as long as we continue to look at automobile sales, Scotch whiskey sales, and FMCG sales as what moves the Indian economic needle, we are going to be badly stuck in a growth story that is long finished and past its prime. End
Edited by Avishek Dutta
Cogencis news is now Informist. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.
