India has a population of 1.4 billion with 724 million males and 678 million females which means 45 million of the male population are in excess. The median age of Indians is 26.7 years. That’s a significant figure as it tells that about 700 million people in India are below the age of 26.7 years. The percentage of the working-age population in India (15 years -59 years) is 66 %. It means more than 900 million Indians have the potential to contribute significantly towards the nation’s GDP.
India’s average literacy rate is about 77.7 %. To be literate in India means a person who is aged above seven years and is able to read and write with understanding in any language. It means that about 270 million Indians (a rough estimate) who are aged above seven are not even trained to do that. States like Andhra Pradesh and Bihar have a low literacy level.
The literacy rate among the females and their participation in the workforce is particularly a matter of concern. The government has implemented programs like ‘Beti Bachao Beti Padhao’, Sukanya Smariddhi Yojana, Mahila Shakti Kendras, among many others as detailed here. Yet, these measures can’t be enough unless the outcome is quantitatively backed by authentic data. Publishing credible data even when the problem at hand looks grim is important.
The unemployment rate in India is close to 8 percent. In particular, the unemployment rate among the youth is very high in India i.e. close to 24 percent. The higher is the unemployment rate the less we are reaping our demographic dividend. Employability is also a major issue due to the gap between existing and required skill sets.
To address the employability issues the Indian government started the Pradhan Mantri Kaushal Vikas Yojana, Skill India Mission as well as to support self-employment and small businesses it launched the Pradhan Mantri Mudra Scheme. However, it is reported that there are cases of bogus enrolments and the target remains underachieved. Also, cases of NPA need to be checked within a certain percentage.
Zero poverty is the first Sustainable Development Goal (SDG 1). In India, 130 million people live in extreme poverty taking into account the international poverty line of 1.9 US dollars a day (2011 PPP basis). Poverty if not addressed properly acts like a trap that can affect further generations.
A look at data that indicates India’s position in 2019-2020 is given below:
|Infant mortality rate||29.848 (deaths per thousand live births)|
|Fertility rate||2.2 births per woman|
|Life Expectancy||69.73 years|
|Rural Population||895 million|
|Urban Population||471 million|
|Population density||419.8/sq. km|
|Population peak projection||1.65 billion (2060)|
|Arable land||156.4 million hectares|
|Crime rate||3.8 %|
|Carbon dioxide emissions||2.4 billion tonnes|
|Trade balance||– 77.47 billion US dollars|
|Exports||536.56 billion US dollars|
|Imports||614.03 billion US dollars|
|Foreign Direct Investment||50.61 billion US dollars|
|Tourism||29.43 billion US dollars|
|GDP||2.6 trillion US dollars|
|Debt to GDP||89.3 %|
|Inflation rate||7.66 %|
|Manufacturing output||395 billion US dollars|
The trade deficit of India including the exports and imports has narrowed due to the corona crisis. The most worrying data is about the downfall in India’s GDP consecutively post 2016-17 to as low as 3.1 percent. The corona event pushed the Indian economy into a recession. The inflation levels are also high. Due to the increased borrowings, the debt to GDP ratio has also gone up.
To tackle the economic crisis is of utmost urgency as it can accelerate or decelerate India’s growth story by a considerable margin if adequate measures are not taken. Advertising brown shoots as green shoots will not be of help.
So far, the government of India has stimulated the economy in two different stages – a 266 billion US dollar stimulus popularly phrased as the “Aatmanirbhar Bharat” in May, a 27 billion US dollar production linked incentive in November, and another 35 billion US dollars to boost jobs and consumer demand.
Let’s have a look at the five tranches of the first 266 billion US dollars stimulus:
- Businesses including MSMEs
- Poor, including migrants and farmers
- New Horizons of Growth
- Government Reforms and Enablers
|Revenue lost due to tax concessions since Mar 22nd, 2020.||INR 7,800 Crores|
|Pradhan Mantri Garib Kalyan Package (PMGKP)||INR 1, 70,000 Crores|
|PM’s announcement for the Health sector||INR 15,000 Crores|
|Emergency W/C Facility for Businesses, incl MSMEs||INR 3,00, 000 Crores|
|Subordinate Debt for Stressed MSMEs||INR 20,000 Crores|
|Fund of Funds for MSME||INR 50,000 Crores|
|EPF Support for Business & Workers||INR 2,800 Crores|
|Reduction in EPF rates||INR 6,750 Crores|
|Special liquidity Scheme for NBFC/HFC/MFIs||INR 30,000 Crores|
|Partial credit guarantee Scheme 2.0 for Liabilities of NBFCs/MFIs||INR 45,000 Crores|
|Liquidity Injection for DISCOMs||INR 90,000 Crores|
|Reduction in TDS/TCS rates||INR 50,000 Crores|
|Free Food grain Supply to Migrant Workers for 2 months||INR 3,500 Crores|
|Interest Subvention for MUDRA Shishu Loans||INR 2,000 Crores|
|Special Credit Facility to Street Vendors||INR 5,000 Crores|
|Housing Credit Linked Subsidy Scheme-Middle Income Group||INR 70,000 Crores|
|Additional Emergency Working Capital through NABARD||INR 30,000 Crores|
|Additional credit through KCC||INR 2,00,000 Crores|
|Food Micro-enterprises||INR 10,000 Crores|
|Pradhan Mantri Matsya Sampada Yojana||INR 20,000 Crores|
|TOP to TOTAL: Operation Greens||INR 500 Crores|
|Agri Infrastructure Fund||INR 1,00, 000 Crores|
|Animal Husbandry Infrastructure Development Fund||INR 15,000 Crores|
|Promotion of Herbal Cultivation||INR 4,000 Crores|
|Beekeeping Initiative||INR 500 Crores|
|Viability Gap Funding||INR 8,100 Crores|
|Additional MGNREGS allocation||INR 40,000 Crores|
|RBI Measures||INR 8, 01, 603 Crores|
|GRAND TOTAL||INR 20, 97, 053 Crores|
Source: Government of India
However, according to analysis only about INR 2 lakh Crores would be the fiscal hit to the Government. Most of the package is formed by loans, liquidity measures, and structural reforms and are supply-side measures. India was already going through a demand crisis when the pandemic hit. Its annual Industrial Index of Production Growth was already falling prior to the pandemic. Hence, these supply-side measures were not adequate to immediately boost demand.
Hence, in the month of November 2020 the government announced the Production Linked Incentive (PLI) scheme to 10 sectors over a period of five years as shown below:
|Advanced Chemistry Cell Battery||INR 18,100 Crores|
|Pharmaceuticals drugs||INR 15,000 Crores|
|Electronic/technology products||INR 5,000 Crores|
|Textile products||INR 10, 683 Crores|
|Automobiles and auto components||INR 57, 024 Crores|
|Food products||INR 10,900 Crores|
|White goods (ACs, LEDs)||INR 6,238 Crores|
|Telecom and Networking Products||INR 12, 165 Crores|
|High-efficiency Solar PV module||INR 4,500 Crores|
|Speciality Steel||INR 6,322 Crores|
Source: Government of India
Finally, the government announced measures of INR 1,20,000 Crores to boost job creation by taking measures such as covering 12 percent of the contribution of an employee hired after October 10, 2020, and of the employer for the next two years in a firm with under a thousand EPFO registered employees.
The total cash expenditure to the Government of India still amounts to be less than 60 billion US dollars if all three packages are considered. Extraordinary measures are required when faced with unprecedented situations. At such times, it would be of harm if one worries more about fiscal discipline and ratings. Hence, there is still a lot that needs to be done in order to not only recover the economy from the shock of the pandemic but also technically gear it into an accelerated and sustained growth rate of at least seven percent.
India is at a crucial juncture in its economy where it can reap the benefits of its demographic dividend. It has all the potential to compete with the large-sized economies of the US and China given its high human capital and abundant natural resources. India needs to look at how China made a leap and surpassed India to become an economy five times larger than India.
We can chart our own growth model but in order to do that, we must empower our human capital in terms of accessibility to energy, electricity, education, health, fast internet, among others, and rise above any form of polarizing politics. We can pull out millions of Indians from extreme poverty so that they can realize their full potential and contribute towards the nation’s development.