For an economy that is battling to reverse a quarter-century slide, the Economic Survey, the government’s official annual report card, could not have been more precise. Any plan to turn things around would necessarily have to factor in the millions of hopefuls who join the workforce every year. This cannot happen unless there is specific focus on small and medium firms. These factories are central to absorbing job aspirants, removing them from unproductive farm work, skilling them and future generations adequately for them to graduate to the bigger corporations. As the survey says, the defining challenge in
India today is of generating employment and growth.
That the Indian economy, which till recently was touted to emerge as a regional titan rivalling China, is now struggling to even record 6% annual growth, is a telling commentary on the current shakiness. The survey has projected that the economy would grow at 5.4-5.9% in 2014-15. This is still a very far shot from the 9% growth India had achieved during the last decade. That said, even sub-6% growth would be a big step in the turnaround story, given the real economy’s recent record, which has been anything but spectacular. Industrial output contracted 1.4% in 2013-14, the worst since 1991. India’s wholesale inflation rate rose to a five-month high of 6.01% in May on high vegetable and food prices.
That said, all is not lost yet. If 2013-14 will be remembered for slumping growth, high cost of living, poor salary hikes and shooting EMIs, 2014-15 and the next couple of years may well define the story of Indian economy’s great come-from-behind innings. This would require a bit of political will. India’s creaky infrastructure is in striking contrast to the image of a country that is aspiring to be an economic superpower. Quick decision-making and speedier implementation are vital to overhaul India’s collapsing infrastructure, which, if built, could catalyse every sector, spin jobs and multiply income.
Factor markets, such as labour, land and capital remain largely unreformed, hindering India’s growth as a global manufacturing hub. Union finance minister Arun Jaitley’s first budget on Thursday will hold out cues on how the government plans to deliver on some of its electoral promises, including jobs, price control and speedier implementation of infrastructure projects. This may require the minister to take some decisions that may hurt in the short term.