View: India has to fix structural problems because of the risk of growing old before growing rich
There is a reason for India’s policymakers to get their act together on the economy and reverse the slowdown at the earliest, apart from the electoral jolts the ruling party got in Haryana and Maharashtra, to drive home the point that nationalist slogans are not enough to win votes.
India runs the risk of growing old before it grows rich, and has a 10-year window to grow really fast, put in place the institutions required to sustain growth before the demographic dividend begins to dissipate. Economist Rathin Roy shook things up in May: he said India runs the risk of getting caught in the middleincome trap, of growth losing momentum because of its narrow social base, resulting in capping per-capita incomes at $12,000. That was before the first quarter growth turned out to be a measly 5%.
The economic news since has been uniformly dismal and few analysts now expect growth this fiscal to be even close to 6%. Credit has not been flowing to the commercial sector and investment stubbornly stays well below 30% of GDP. There are layoffs, suspended production at plants and discounts galore.
Demographic transition entails a stage in which the birth rate falls and, even though the death rate also falls, the proportion of the young and the old — who do not produce incomes and depend, directly or through go nment transfers, on the earnings of the working population — is small in relation to the share of the working population. This bulge in the working-age population will raise overall output, even with stagnant output per worker.
Since workers can afford to save more, because they have to support fewer dependents, the economy would have a larger volume of savings at its disposal to sustain larger rates of investment. This would boost growth further. A third component of this so-called demographic dividend is the addition to the workforce of women, previously inhibited from working.
To Grow Rich Later…
As the years go by, productive workers would turn old and roll out of the workforce, smaller cohorts — birth rates had fallen — would take their place to generate the earnings to feed themselves and the growing dependent population, constituted mostly by the non-working elderly.
The go nment recently told Parliament that by 2050, there would be 34 crore people over 60 years of age, about a fifth of the population. The population in the age group 20-59 is expected to peak by 2041, reaching 59%. But this does not mean that India can afford to dawdle in the present and pick up pace in a decade or so.
The nature of manufacturing and services is changing. Many traditional low-skilled jobs are disappearing. Many jobs considered skilled, such as in the auto-component industry, would disappear, thanks to technological change, such as displacement of the internal combustion engine by electric motors.
Before this change takes root, India has to equip its young to keep learning throughout their lives and arrange for perpetual retraining. This calls for a huge increase in resources and governance capacity now. The demographic dividend materialises when the economy’s institutions generate jobs for those seeking work.
In the absence of education, people would find it difficult to get skilled. In the absence of skills, young people would not get jobs. Their energies would be wasted and, worse, channelled into drugs, crime, lynch mobs and sectarian strife. Sounds familiar?
India Must Grow Fast Now
The go nment has come out with some policy measures: tax cuts for business and a financing package for real estate. Aligning India’s tax rates with those of Asian competitors is good policy in general, but will do little to boost investment or demand. And stalled real estate calls for massive buyouts leading to swift completion of the projects, rather than offer of some finance to crippled project developers.
Public sector banks have been merged, banking reform promised and followed up with an order to organise loan melas, presumably to boost demand. These will address short-term factors, not structural ones.
India needs a vibrant market for corporate debt and universal financial inclusion. Agriculture must reconfigure to align crops with the agroclimatic zones most suited for them and attain globally competitive levels of efficiency, tested by global trade. Incentives that misalign crops with suitable regions or induce excess production, as with rice, wheat and sugar, must go.
The power sector must become viable by users paying realistic user charges. This calls for political courage. Industry must make profits from doing efficient business, not diversion of funds from project costs.
This calls for reform of political funding, to make it transparent and accountable, so that politicians no longer dependent on covert funding by industry can regulate their working. India must invest in public health, public education and public housing. And spend at least 2% of GDP on defence, and spend it well, to maintain strategic autonomy. Fiscal capacity has to go up, with diligent tracking of GST audit trails.
And all these must happen now. Time lost in blame games will irredeemably undermine the future prosperity.
译文来源：三泰虎 http://www.santaihu.com/48866.html 译者：Joyceliu
We had big hopes when Modi came in power that nation will move ahead but were hot with complete different ideas and first term nothing much happened though he continued some of UPA reforms. His goal was not any economics and indsutrial or labour reforms but talk and talk. All his trips abraod made him feel like a king and hoped that world will come running with investments and yet he never looked what was happening inside the nation. His injection of HATE became rule of the nation and thus Law and Order disappeared and so did the investments. He won 2nd term with landslide and since voters did not demand any economic development and are happy with religious manipulation,Govt has provided no agenda how if any economic development will be formed
Ya..give freebies, win elections..
this Vedic astrology writer’s predictive alerts for more care and appropriate strategy in economic sector also , published as early as last year 2018 on 7 October at theindiapost.com through article -“ The year 2019 astrologically for India”. Later , such predictive alerts were also indicated in article -“ World trends in April to August 2019” - brought to public domain widely in March and on 5 April 2019. The significant part of these predictive alerts was that a period of four and half months from mid-April to August 2019 looked to be loaded with potential to bring major worrisome concerns in economic sector for a large number of global countries listed therein. The list had included India also. A review of these predictive alerts in May 2019 brought out similarly had suggested that the major worrisome concerns in economic sector as well may enlarge and reach out to mid-October 2019. The news reports of different sources covering Indian economy during April to September 2019, which appeared in last about three months confirm the accuracy and meaningfulness of these predictive alerts.
Again the author of this article is calling for market reforms but a large section of society and the political parties are hell bent on giving freebies and doles...Good economics is bad politics and that is where the root cause of the problem lies at policy level...Need a major overhaul of the system maybe using modern technology etc...
Some people still believe this go nment can fix the problems created by them. How long will they be in such belief?
I am scared. I better save than spend. Nothing beats the old wisdom. Old is Gold.
To fix such structural problems, do we have competent people in the Finmin & the RBI..??I wonder.....!!!
要解决这样的结构性问题，我们印度央行有没有能胜任的人?我想知道..... ! ! !
this is not a slowdown we have to accept it this is a RECESSION
Hari Krishna Johri
Today only this lady FM said that there is no recession.Feku is still claiming that India is the fastest growing economy.Onion & Tomato prices are increasing & hence there is no recession.28,000 Tons of Onion got spoiled in Govt''s Godown/Warehouses but it does not matter to these Netas/Ministers since economy is solid & growing very fast.
Please reform bureaucracy, administration, police and judiciary
Our policy makers are still busy to cash on votes. No interest for the economic growth of the country.
Our PM is mostly working 18 hrs per day for ambanis-adanis.Have they become poorer or richer in last 6 yrs?That is all matters to him.
The author is forgetting that India is the fastest growing indian economy in the world under modi - and that modi is the fastest growing indian super power in the world - and that 130 crore fastest growing population of indians have reposed their trust in the shah bhai modi bhai and their political acumen.
(According to me)Its too late, Milk price up by Rs1 which is a prime base of recession, BPL Families are not purchasing milk. It leading to low health. Low health means low GDP
More than 72 years of Independence India is still an underdeveloped country. South Korea, Vietnam,Thailand, China within a span of less than 40 years have become Industrial and export power houses because they had go nments who worked for the well being of their people. The corrupt regimes ruling India during the last 72 years had their individual well being at heart fooling and ruling the masses. Amazing that people still vote for the likes of Sharad Pawar, the Gandhis, the co unists, socialists who are responsible for the economic mess of India. What could not be done in 72 years cannot be done in 10 years. India is in a free fall of economic decline Clever Indians should migrate and hasten to get out of India before it is too late
Always blame others but never take responsibility for own actions..that is definition of incompetent loser
Right, weak and timid people indulge in blame game. Leaders deliver the results.
BJP''s premise of winning power was to dismantle the whole architecture of the economy and country; and design something new which appeals to the masses, which has miserably failed. In turn their whimsical teams & ideas has ruined the economy and lives of many.
we are talking about education, education has become a business and not talking about the standards
intelligent and balanced utopian thinking. we are a democracy of semi- litarates. Utopia is a taboo in our country. nothing works.
Kejriwal is the only hope. he is spending 25% budhet on education & 13% on health. support him & make PM. Then see how India grows at 8%.
MANJIT SINGH KHALSA
I loved your last two lines. No one even thinks about this but it is so true! Half of Earth is controlled by the Caucasians and yet they blame the Chinese, the Indians, the Africans, the Hispanics and other populations. Percentage wise, I bet they are probably equal in numbers. Nicely said below:Why abet a human crime of 8% Caucasians CRIMINALLY usurping 50% land mass and then applying border controls. Those who work with their own hands, legs, brain, produce goods and services that people NEED, earn legitimately, pay tax alone live a dignified life.
It should be sent to Mr. Trump.
It is already too late!
RBI must stop reducing interest rates further if India has to avoid mid income trap. The problem is lack of demand and high interest rates. By reducing interest rates RBI is reducing income in hands of FD and other persons living on savings (0.5 per cent reduction would take away at least 50000 crores of spending given 100 lakh crore deposits (excluding CA). More importantly its destroying saving culture (savings at 30 per cent which dwindle further vs 38 during 2008). And without 38 per cent India can''t grow in double digit (remaining 2 per cent can come from FDI) for 4:1 capital output ratio. India simply can''t ape waste where 5 per cent saving rate can translate into 2 per cent growth with continuous technological advances and predominance of high quality service sector (unlike India where there is massive underemployment).
agree buddy.. reducing interest rates is forcing FD Savers into risky assets unnecessarily.
Blame game is what BJP has achieved so far. They have lived on the achievements of Manmohan Singh, who was the architect.
Feku and Fekunomics is a deadly combination for a poor country like India. We are sick and tired of Feku doing the exact opposite of what he has promised. If Feku still refuses to resign, India will definitely fall into the low income trap again under his misrule.
Modi govt has dysentery of ideas and diarrhoea of thoughts.Operating two opposing economic systems eg.chicago school of economics and socialism don''t go together.Modi also appoints one of the most incompetent people at top positions and expect them to work.He has failed everytime.Any professional who is not respected in job will leave.Modi also thinks all indians will permanently accept extremely lower standards of living in name of hindu deshbhakti and pakistan.Modi also thinks all indians will work for rs 100 per day for their entire lives.Everyone
From where you got these facts