Niti Aayog vice chairman Arvind Panagariya on Monday made a strong case for shifting workers from agriculture to industry and encourage small enterprises to grow big with a view to accelerate economic growth. He further said that at the aggregate macro level, bringing about rapid growth is most critical as no major success in poverty alleviation is likely to happen without it. “If we set the output per worker in agriculture equal to 1, then output per worker in industry is 5 and that in services 3.8.
“In other words, even at the current productivity levels in each sector, moving one percentage-point workers out of agriculture into industry can increase the GDP by 1.5 per cent,” Panagariya said, while addressing the National Conference of Chief Secretaries here.
Observing that the underemployment is probably the biggest economic challenge India faces, he said, “Our enterprises are excessively small and they have remained so.” Panagariya said that raising productivity requires creating a policy environment that will help our enterprises grow bigger. “We must specifically look for policies that keep the enterprises small. Micro must grow into small, small into medium and medium into large,” he said.
The Niti Aayog vice chairman pointed out that the level of per-capita income limits the scope for redistribution. Citing example, Panagariya said Bihar has far less room for redistribution than Kerala, but even Kerala has limits to how far it can rely on redistribution. “Politically, redistribution is lot more feasible if the overall income is growing rapidly,” he noted.
The Niti Aayog vice chairman stressed that if India wants to increase the total expenditures on education, health and infrastructure then the counry has only two options. “We either cut expenditure on something else or increase the GDP. Unfortunately, our ability to cut the expenditures on items other than education, health and infrastructure is extremely limited. “Therefore, raising the GDP is the only practical option,” he suggested.
Stating that in the government, each ministry is focused on the details of what it must do and how it can best do it, Panagariya said, “While desirable, this has the unintended side effect of the neglect of the overall strategy and direction of the economy.” “It is essential for us therefore, to step back and pay attention to the broader strategy,” he stressed.