“Distributed Growth model” is the need of the hour. Growth alone will not suffice.
India’s budget preparation is in the final leg and it will be unveiled soon. Last two budgets have put the focus correctly; by giving thrust to rural development, agriculture and infrastructure, but the bureaucratic red-tape has been an impediment. We have a long way to go and we need to evolve a new model – the ‘Distributed growth model’. All these decades, we have chased the ever-elusive “double digit” growth, but we are not going to achieve that with the current approach.
“Too many economists spoil the budget”. We had a world-class economist running the country for a decade, we had the best economists running the RBI and the erstwhile Planning Commission, and we still could not achieve double digit growth, and floundered. So, it’s time to have a fresh look at our economic approach. A mere change in the interest rates have not done anything, and will not. Economy is not about tax collections, interest rates or money supply alone, it is much more. ‘Text book economists’ do not understand the country’s complexities, and neither they do good to the economy, or to economics. Also, the general perception is, that only 3 % pay taxes. Yes, 3 percent may be paying direct taxes but every citizen of India pays taxes indirectly when s/he purchases a product from the market. With GST implemented, all the more! So, to use this reason of low tax payer’s base is wrongfully placed.
It is time we considered a model that leads to growth which percolates downwards and spreads wide, that what I call as, ‘Distributed Growth model”. How do we make it happen?
Let’s look at the following data;
- More money in the hands of the poor : There are about 250 million households in India and of these, about 25 % are BPL. So, we need to continue and enhance their earnings with “Mission 62.5 million households”.
- Agriculture : The number of cultivators and agricultural labourers added together make up around 263 million or 22% of the population (@1.2 Bn population based on 2011 census). Investment in ‘Irrigation’, in agri-allied sectors, and in setting up forward linkages with markets in towns, and for exports is the need. Special ‘Agri-infra & Irrigation mission’ project is needed to fire the most important engine of our growth – Agriculture.
- MSME : As per the annual report of the MSME Ministry (2015-16), MSME sector employs about 80 million people in about 36.1 million units. Out of these, units in rural areas are 20 million and number of women enterprises are 2.6 million. MSME needs to expand more to semi-urban and rural areas and engage youth and women entrepreneurs, and also boost MSMEs expansion in food processing, agriculture based and allied segments, high-end tooling, IOT and niche manufacturing. MSME is where massive employment and income gets generated. It will not only ensure success of ‘Make in India’, but most importantly, as the MSME employees themselves are the customers of “Make in India’, it will create ‘customers’ for such products. With such customers available, ‘Make in India’ will be a grand success. MSME is the second engine of the economy that needs to be fired up
- Six states (Bihar, Uttar Pradesh, Rajasthan, Madhya Pradesh, Jharkhand and Chhattisgarh) have 42 percent of population and 56 % of the total population growth. Luckily, all these are under BJP. We need to invest more in uplifting the economy of these states. Lower growth in these states can drag down the overall growth of the country.
- Retailers number 13 million and we need to carefully tread FDI in online and retail segments. 100 % Investment in Retail for daily use products might be myopic, and the policy makers need to be careful if BJP wants to run this country for another 25 years! Also, we need to create innovative models to explore, to seek investments in retail and grow the standalone stores at the same time
- Tourism: India has about 10 million tourist arrivals and this can become 5 times. Imagine the number of hotels & convention centres, cabs, guides etc. that will come up and the best part, without any Government investment, as the private sector will invest seeing the business potential. Government must focus on tourism as a job creator and a foreign exchange earner. India has so much to offer to global and domestic tourists! Focus on ASEAN and expand beyond .
Health & Education
Recent study had revealed that 50 million go below poverty line due to healthcare costs. Also, it is a known fact that most of the ‘educated’ are not ‘skilled enough’ to do the jobs that the country needs as its economy evolves. Hence, education and health needs investment. If the workforce is not healthy and competent, how can the economy be strong? In fact, anecdotally (since I am not an economist by training), I would take the liberty of stating that GDP growth would be equal to the GDP spends on education, and health! Our healthcare system and education system is in shambles and it needs massive investment. For achieving ‘distributed growth model’, investment in health and education are a precondition.
Strongest thing about India’s economy is ‘1.34 billion consumers’, who run the consumption story (growth engine) for the country, and we add about 18 million new consumers every year. With more opportunities for consumers from Agriculture, MSME and Tourism; and assuring them with quality health and education; we will fire the economy to grow 10 percent a year, and that too, sustainably.
I see foreign trained economist keep warning India about the Fiscal discipline. If the investments are going in areas outlined above and not in opex, we must not worry. Even if the fiscal deficit reaches 5 percent, investments in these sectors will payback, and our economy will be amongst the 3rd largest in a decade. USA is a case in point. It is too big an economy and though its fiscal arithmetic is baffling, does it worry about its ratings or deficit!!?
In oil rich Gulf countries, GDP and GDP per capita appears fantastic as statistics, but since the oil fields are in the hands of a few royal families, the wealth gets concentrated in a few hands. Recently, the annual Oxfam survey has found that the wealthiest 1 % Indians garnered 73 % of the wealth created in 2017. This is due to the ‘Concentrated Growth model’. So growth alone with not suffice , and we need ‘distributed growth’. In the “Distributed Growth” model lies the answer. India should move to this model before the gap between ‘have’s’ and ‘have nots’ increases more!
What the policy makers must aim is on enhancing the income and money in the hands of consumers by creating more avenues to work, earn and spend. This will happen if we invest in agriculture and value addition in allied agro based industries, MSME, tourism, infra, health & education.
Lastly, let us not forget, electorate will evaluate Modi government’s performance on health, education, employment, electricity and inflation. These hold the key to a massive win in 2019.
Good economics is long term politics!
Rajendra Pratap Gupta is a leading public policy expert. Views are personal
On October 11, 2012, i wrote the blog ‘From Emerging to a Submerging Economy’ https://commonmansblog.com/2012/10/11/india-from-emerging-to-a-submerging-economy/
I read the story in the Economic Times today, titled ‘Feast of Burden’ ( Page 10, ET dated August 3-9, 2014). It is almost two years since i wrote my blog and this story on corporate debt. Things are still the same , rather have gone worse . For example ,
The cumulative debt of;
- Tata Group is about Rs. 2.00 lac Crore
- Reliance ADA Group is about Rs. 83,000 Crore
- Jaypee Group is about Rs.66,000 Crore
- Bharti Group is about Rs.60,541 Crore
- GMR Group is about Rs.37,788 Crore
- Lanco Group is about 34, 876 Crore
- HCC is about Rs. 11,150 Crore
I am not mentioning the rest of the groups like ESSAR etc…. Small and mid-size companies would further make the situation scary .
It is time that the Government asked all these companies to come out with a clear statement of how they are going to service these debts, to ensure that these companies do not end up creating a ‘cloud burst’ for the Indian middle class and disturb the economic prospects of this developing country
Rajendra Pratap Gupta
Indian milkman uses oxytocin injection twice a day to extract milk from his cattle.
Greedy dairymen inject cattle with veterinary Oxytocin to produce more milk. It is used to force the cow to give milk even after severe beatings and stress. However, it destroys the cow’s reproductive system and she goes dry in just 3 years. She is then abandoned.
A substantial part of the oxytocin injected into the cow seeps into the milk. It is very harmful for humans who unwittingly are made to consume an artificially created hormone. Humans face all the harmful effects of this drug. Children are most susceptible to its effects (it is known to have caused imbalanced hearing and weak eyesight). Common symptoms are exhaustion and loss of energy. Expecting mothers should avoid milk that may have been adulterated with oxytocin because:
– Oxytocin increases the risk of post-partum hemorrhage
– Individual women may be hypersensitive to oxytocin and it can inhibit breastfeeding.
– Oxytocin seriously affects the growth of hormones, especially in females, because of which minor girls attain early puberty.
Oxytocin is also found in phenomenal proportions in beef and other meat. Over 75% of all beef are known to have high and dangerous level of oxytocin content.
The Government of India has acknowledged the negative effects of oxytocin and has declared it as a scheduled substance.
But why I am trying to teach you veterinary science? You must know that FDI in retail, or selling the stakes in Public sector units ( PSU’s ), the one time sale of spectrum, reducing CRR & Chidambaram’s budget are nothing but a dose of ‘Oxytocin’ to our ‘Gau maa’ – Mother India. We will, for sure, temporarily increase the GDP & show some growth in GDP, but the long-term impact would be painful to our economy. Hope good sense will prevail and we will find ‘sustainable models for rural income and consumption’ & focus on sustainable rural economic model to avoid an overdose of Oxytocin for our economy, which will kill it forever…
Rajendra Pratap Gupta