by Harish Gupta, National Editor, Lokmat Group
Deepavali, the Hindu festival of light, is not just an Indian event. It is a public holiday in as many as 11 countries, including Pakistan, as it signifies the victory, among other things, of hope over despair.
As far as India's economy is concerned, it is doubtful if the coming Deepavali has much bright tidings to offer. The indicators on the ground, like sluggish sales of fancy cars, expensive flats and such big-ticket items, are matched with an array of drooping indicators. Of the latter, I think the most significant is the sharp fall in the second quarter of 2016-17 of the Gross Fixed Capital Formation (GFCF). The GFCF measures the capital deployed in investment at a given point. From the first quarter of the current financial year to the second, it dropped from Rs 8,861.47 billion to Rs 8,639.56 billion. If investible capital shrinks, how will industry grow?
The fact that industry is caught in a mess is apparent from data churned out by the Central Statistical Office. Industrial production in India has contracted 0.7 per cent year-on-year in August 2016. It follows a 2.5 per cent squeeze in July. The declining industrial production figures show sector-wise collapse. Like a 49.4 per cent drop in electrical machinery and apparatus, and a 22.4 per cent fall in furniture and wearing apparel. Arguably, it points towards a downward spiral in standard of living. Such a conclusion is logical in view of the poor growth of bank credit, which stood at around 10-12 per cent year-on-year most of this year against 16-18 per cent in 2013-14 and in subsequent years.
Cement production is down to 22,283 thousands of tonnes in August, from over 25,000 thousand tonnes most of 2015. The number of cars registered in September, though a respectable 268,058, is still way behind the previous monthly high of 304,000 in March 2012. The index measuring infrastructure output has levelled to 3 after reaching an 8-plus high earlier this year. Although steel has rebounded in the past few months, electricity, coal, natural gas and crude continue to be a dismal story. What is certainly on the rise is the government's military spending, from US $48,403 million in 2013 to US $51,115.9 in 2015. And like most other indices, the export growth languishes and so does import.
Simultaneously, there is a general decline in global interest in the so-called "India story", as evident from more guarded reports on Indian economy in the western media. An ominous silence has descended on the IT sector, India's proud emblem of technological maturity. IT czars like TCS and Infosys, after showing anaemic results for quarter after quarter, are now engaged in a battle for survival. Their Western clients are now reluctant to outsource operations to foreign vendors as globalisation as a concept is facing rough weather politically. But the brick-and-mortar alternative to information technology is gasping. The recent news of a few hundred graduate engineers being among seven thousand applicants for 120-odd sweepers' jobs, at Amroha in Uttar Pradesh, was found so commonplace that it buried it in the inside pages.
Narendra Modi, before becoming prime minister, routinely condemned the previous government for "jobless growth". On assuming office, he launched a slew of projects such as Start up India, Digital India, Smart City, Skill India, MUDRA. All these were aimed at creating a new class of Indians educationally and professionally equipped to manage their careers themselves. But so far these have remained largely signboards. On the other hand, a million boys and girls are entering the labour market each month with little hope to land a job. In a recent sample survey, 77 per cent of households were found without a single member with regular income. Unemployment rate has hit a five-year high of five per cent. It is argued that definition of employment and employability has changed with the change of time and merely obtaining an engineering degree alone cannot take the person to an upper income bracket. Lakhs of such graduates passing out each year are casual employees or have some seasonal income.
Modi came to power promising a remedy to jobless growth, but it seems he does not have a silver bullet. The new entrants in the labour market severely lack training. Just 2.5 per cent of the country's working population have any vocational training, compared to 60 to 70 per cent in OECD countries. As its natural consequence, reservation demands in jobs and educational institutions from caste groups like Patel, Maratha and Jat have become the defining feature of electoral politics.
Modi is a globe-trotter and claims having strong views on all nations, including China, the neighbour with which he is involved in duelling on terrorism. Since he has a deeper knowledge of global economy, he’d have noticed that China emerged as the ‘workshop of the world’ by systematically keeping its currency devalued for decades, with its workers producing goods cheaply because they were paid very little. Something similar, though on a smaller scale, is happening in Bangladesh, where unskilled or semi-skilled workers, mainly women, have turned the country into an international hotspot for ready-made garments.
At a time when jobs are disappearing everywhere, and Artificial Intelligence has been to industry what steam was two centuries ago, it requires innovative thinking to create jobs for the multitude. It calls for a deeper understanding of how resource-poor nations engage large number of workers in making export-grade products. Maybe India needs to rethink its strategy of holding the exchange value of its currency at a high level, as it is more necessary to earn dollars than to let the rich buy his BMW cheap. It is also necessary to enable more women to join the productive work force. That will be more useful than leaders showering advice on women about dressing and lifestyle.