Invest in people: India needs a strategy for durable growth
The main aim of the forthcoming Budget will be to repair last year’s economic damage. Most forecasts for the next fiscal anticipate a sharp rebound as normalcy returns. That will not necessarily answer the more important question: What will the economic trajectory beyond that look like? Rating agency Fitch has taken a shot. They anticipate that the economy will grow around 6.5% in the four years up to 2025-26. Given the sense of urgency because millions enter the job market annually, that will be a disappointing trajectory.
India lost economic momentum for at least two years before the pandemic struck. Some problems have been around longer: Banks struggling with bad loans, manufacturing losing productivity and weak private investment. While these problems need to be addressed, the solutions must break away from old templates. Even as the world comes out of the pandemic induced recession, it is beginning to find that the shift towards the fourth industrial revolution has accelerated. This phase will be dominated by AI and nanotechnology. To illustrate, automobile companies spread across North America, Europe and China have idling factories because of a semiconductor shortage. This was inconceivable a decade ago.
India’s long-term performance will be significantly influenced by the quality of human capital available. Even as the government crafts a strategy to get out of last year’s recession, it needs to simultaneously unclog pathways to build human capital. Education and healthcare are areas which deserve serious policy attention. They are weighed down by trivial debates and heavy regulation in the wrong places. India’s education has to move away from the dominance of rote learning to prepare the next generation for radically different workplaces. The emphasis on deregulation in agriculture, industry and services is praiseworthy. But it needs to be complemented by similar measures in education and healthcare.