TOI2019 ⁽¹⁶⁾

Read full article Abstract: A common tactic that large corporations in India have learnt to deploy effectively whenever they incur large losses is to impress upon the government that unless they are bailed out, the entire sector, even the whole economy, might run into deep trouble. I witnessed the use of this tactic first hand during my years at the Niti Aayog. In 2015, a leading industrialist whom I had known for a long time came to see me and made this “too big to fail” argument to me. I smiled and told him, “I am afraid such fear mongering does not impress me.” The industrialist smiled back and said, “You are right [about fear mongering]. But when I make this argument to officials in ministries, it often produces the desired result.” Unsurprisingly, now that the auto industry is experiencing a slump in sales, its captains can be seen making the “save us or else deluge” argument everywhere. For instance, appearing on a foreign television programme, the vice-president of sales at Suzuki Motorcycle India recently noted that commercial vehicles are…

Read full article Abstract: A key feature of China, South Korea, Taiwan, Singapore and Hong Kong during their decades of miracle level growth was their high level of labour market flexibility. Once these economies opened to global markets, their enterprises could take full advantage of this flexibility, grow larger, produce at lower costs and rapidly expand the exports of labour intensive products such as apparel, footwear, furniture and other light manufactures. In the process, they also created jobs for masses that paid decent and rising wages. The end result was elimination of abject poverty within a matter of two to three decades. Though India too has opened its economy following the launch of economic reforms in 1991, inflexible labour markets have proved a serious hurdle to the emergence of large enterprises in labour intensive sectors. As a result, the economy has been slow to create well-paid jobs for the masses. Successful sectors such as information technology, pharmaceuticals, machinery, auto and petroleum refining have been capital- or skilled-labour intensive.

Read full article Prime Minister Narendra Modi has made exports a high priority. Indeed, India would do well if it gave them the highest priority and pursued their success in mission mode. No nation has sustained growth rates of 9-10% for two or more decades without succeeding in global markets. China’s share in global merchandise exports rose from 2% in 1991 to 12.4% in 2012. These two decades saw China fully transform from a primarily agrarian to a modern industrial economy. Today, India’s share in global merchandise exports remains low at 1.7%. In 2000, when China’s GDP was no more than India’s today, it already accounted for 4% of global merchandise exports. Sustaining high growth and creating good jobs will require a strategy centred on building an export-friendly ecosystem in the country. The starting point for this strategy is shedding three of our current obsessions: import substitution, micro and small enterprises, and a strong rupee. Import substitution has never produced sustained rapid growth anywhere. On their own, micro and small enterprises can provide low productivity, subsistence wage employment to the…

Read full article Abstract: The report on Periodic Labour Force Survey 2017-18 has now been released. Critics of Prime Minister Narendra Modi had made much of the leaked estimate of unemployment rate of 6.1%. Hoping to turn voters against him, they repeated ad nauseam that unemployment rate had turned the highest in 45 years. But with their blinkered vision, they failed to see that the flip side of unemployment rate is employment rate, which stood at a hefty 94%. For most voters, unemployment was not an issue. But the survey does point to a difficult road ahead for India. It reveals that the transition of workers out of agriculture into industry and services has continued to move at a snail’s pace. Agriculture’s share of employment, which had fallen rather slowly from 58.5% in 2004-05 to 48.9% in 2011-12, fell yet more slowly in the following six years to 44.1% in 2017-18. The fact that 44.1% of workers employed in agriculture produce only 15% of GDP means that output per worker in this sector is less than one-fourth of that in…