Updated: December 12, 2019 9:52:48 am
The machinations to form and topple governments may be a priority for grabbing and sustaining political supremacy. However, with the economy tumbling for six straight quarters and GDP growth at 4.5 per cent (July-September quarter), we are in trouble. Tax receipts in Q2 (April-October) at Rs 6.83 lakh crore, with an expenditure of Rs16.55 lakh crore are worrying.
The output of eight core industries in October contracted by 5.8 per cent compared to October 2018 with six of the eight sectors witnessing negative growth. Coal production fell by 17.6 per cent, crude output by 5.1 per cent, steel production by 1.6 per cent, natural gas by 5.7 per cent, cement by 7.7 per cent and electricity consumption by 12.4 per cent.
Various international agencies have cut down their GDP predictions for the current financial year by 1.5 per cent on an average. The RBI, too, on December 6 lowered the growth estimate to 5 per cent in 2019-20 from 6.1 per cent. What is required is not patience, as the finance minister persuades us to believe, but urgent prescriptions to address structural issues.
What are these issues? First, the wheels of economic growth are undergoing qualitative changes. Automation and artificial intelligence are replacing manpower. Consequently, Indian industry is bound to suffer. While the adoption of both AI and automation by domestic industry is inevitable, it will also lead to a substantial loss of jobs. In recent years, we have seen job losses in IT and other labour-intensive sectors, which have in the past fueled growth.
Second, it is imperative for our labour force to acquire skills to meet the needs of the fourth industrial revolution. To do that, we need to affect structural changes in our education system as children move from school to higher education.
Instead, the Ministry of Human Resource Development is more concerned with changing the way we look at our past than reflecting upon the needs of the future. One might resurrect the heroes of the past but what we need is to put in place an environment to discover and encourage our heroes of the future. Unless we create an ecosystem in which our graduating students acquire the skills to meet the demands of the economy, we will not get the appropriate labour force required by industry.
Third, the contribution of both the Opposition during the UPA years as well as judgments of the Supreme Court to the economic mess that we find ourselves in. The C&AG’s preposterous theory of presumptive loss in telecom latched on to by the then Opposition, resulted in a judgment cancelling telecom licences, which killed the goose that laid the golden eggs. Subsequent auctions of spectrum resulted in high bids. The revenue earnings of telecom operators were insufficient to discharge the debt to banks for loans taken to buy spectrum.
Little was left for investment in infrastructure for mobile telecom efficiency. The result is, today, the sector which was efficient and highly competitive is reeling with a debt of close to Rs 8 lakh crore. Soon, the telecom sector may see the emergence of a duopoly. The telecom sector would have thrived but for the legacy of unsustainable prescriptions forced upon it. Auction money was viewed as a source of revenue to enrich the treasury rather than ploughing it back into the sector for investments in infrastructure.
The story of another sector, coal, is even more depressing. The SC, in an allegedly historic judgment, set aside all coal allocations since the early ’90s. The government, upon such cancellations, assured the Court that coal production will see a new sunrise with the auction of coal mines. The result was the opposite. The auctioned coal mines had no takers and those who participated in the auction, preferred to have their securities encashed rather than pay the balance amount for the auctioned mines. Consequently, the import of coal has increased at an alarming pace, adding to cost since coal is the raw material for several industries.
Coal India has not been able to meet the increasing demands of our emerging economy. Coal is the life blood of every industry including power, steel, and cement. As a result of these auctions and the SC judgment, the power sector is in the doldrums. The NPAs of banks reaching more than Rs 10 lakh crore is partly the result of the mindless protests by the Opposition and the SC judgments.
Fourth, is the crisis in agriculture as we promise to double farmers’ income — a daunting task with agricultural growth at 2 per cent per annum. We need innovative policies in agriculture. Use of technology to increase productivity per acre, rational policies to reduce the mindless exploitation of groundwater and remunerative returns for the farmer are imperatives. The plight of indebted marginal farmers too must be addressed.
Crucial sectors of the economy that generate employment are in decline. Thirty million of the 100 million employed in the textile industry, our second largest employer, for a variety of reasons both domestic and global, have lost their jobs. Close to 3.5 lakh workers in the automobile industry have been laid off as auto sales have slumped to a two-decade low. With increasing incidents of lynching, the leather industry is facing challenges with local units closing down.
The cumulative effect of all the above coupled with the mindless decision of demonetisation followed by the implementation of a flawed GST made matters worse. These decisions paralysed the economy. The result: Economic growth is eluding us. Tax breaks for industry already flushed with cash will see no immediate outcomes. The key is to boost incomes of those at the bottom of the pyramid.
Finally, government must recognise that fear and enterprise don’t go together. Keep the ED and the CBI at bay and ensure that income tax authorities act within the law. Enterprise alone can help fuel our economy. Otherwise the Ides of March are not far away.
This article first appeared in the print edition on December 12, 2019 under the title ‘Enablers of a slowdown’. The writer, a senior Congress leader, is a former Union minister.
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