The Prime Minister’s Economic Advisory Council’s projections of 6.4% growth for the economy in the 12 months to March 2014 has rekindled hopes that India’s industrial and farm sector is set for a U-shaped recovery, if not for a sharper V-shaped turnaround. Industrial output is set grow at 4.9% during the year, more than a percentage point higher than last year, while agricultural output should expand at 3.5%, nearly twice as fast as last year.
The jumpstart in the economy, if it holds true to estimates, will likely bring cheer to millions of families who have been hit hard by elevated inflation, especially at a time when thousands of factories and firms, squeezed by costly input and borrowing costs, have offered meagre salary hikes and are holding back expansion and hiring.
Is the grave slowdown that pushed the economy into its worst growth cycle in a decade, decidedly behind us? Not yet. For this to happen, growth or rise in earnings, greater investment and, above all, speedier project implementation, are necessary conditions. Achieve this, and jobs and the ability to spend will follow. Spinning new jobs, therefore, is critical for India’s long-term socio-economic equilibrium.
Large corporations that are visibly and aggressively global are important, but as many experts point out they are, in a sense, incidental to India’s future, which appears to lie in the estimated 40 million small, micro and medium enterprises that are spread across the dark tanneries of Mumbai’s Dharavi slum township, in the room-sized waste-recycling units of outer Delhi and elsewhere in the country. Put together, these grubby factories contribute to half of India’s factory output, 45% of exports and employ more than 60 million people (India’s high-profile organised service sector employs no more than 40 million).
Introducing urgent reforms in agriculture, India’s most unreformed and least productive sectors, should, therefore, be at the core of current policy-making. It’s also critical to fast-track roads, ports, airports, and railways projects to create jobs, raise non-farm incomes and catalyse large scale industrialisation across India. These reforms could potentially catalyse every sector, from farm to factory. Then, and only then, can India hope to be firmly on the path to join the elite league of high-income nations.