The Hindu Business Line : Mission for 2007 — Defusing long ignored time-bombs

The New Year undoubtedly starts with a sense of euphoria suffusing economic players over the impressive macroeconomic fundamentals. But unless the Government bestirs itself to defuse a couple of time-bombs, merely singing hallelujahs of self-congratulation will mean indulging in self-delusion. The bombs are ticking away and there is no time to lose, warns B. S. RAGHAVAN.

India's carefully designed and painstakingly built economic edifice has legitimately been the country's pride, developing nations' envy and the world's showpiece. The New Year undoubtedly starts with a sense of euphoria suffusing economic players over the impressive macroeconomic fundamentals, combined with India Inc.'s aggressive bid to join the big league, the ascending trajectory of GDP growth, the rise in domestic and foreign investment, the burst of activity of all sorts, expansion, diversification, modernisation and launching of new products on the industrial front.

Also contributing to the feel-good factor are the apparently never-ending saga of the breath-taking conquests of the services sector, the boom in real-estate and the retail business, and the surge of purchases brought on by an insatiable middle-class buoyed with bulging purses. There are people who confidently predict that 2007 will be a year of Sensex 30,000.

Mother of problems

It may come as an unbelievably rude shock to India's policy-makers, planners, academics, business persons and the general public were I to say that it will not be too long before all this comes crashing down like a house of cards.

The greatest service one can do for India at this juncture is to sound an advance warning, however unpalatable and politically incorrect it may be, that unless the Government bestirs itself to defuse a couple of time-bombs which, ostrich-like, it has long ignored, merely singing the familiar hallelujahs of self-congratulation will mean indulging in self-delusion and illusions of grandeur. The bombs I am going to mention are ominously ticking away and there is no time to lose.

Population is far and away the mother of all problems. Notwithstanding claims about falling fertility rates, India's population rose by 21.34 per cent between 1991 and 2001, touching 1,067 million on March 1, 2001.

As per the United Nations publication, World Population Prospects, India's population will be 1,395 million in 2025, and 1,593 million in 2050, against China's 1,441 million and 1,392 million for the same years. In other words, while China is drastically reversing the trend, India is stacking the odds in this respect against itself by adding more than 500 million in just the next four decades.

The disturbing aspect is that the population is not growing in a proportionate fashion as regards regions or religions. For instance, the Southern States have, by and large, been successful in keeping the rates down, whereas the BIMARU (Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh) States have done little or nothing to enforce any kind of control. The numbers there are multiplying frighteningly, soon to swamp the better-to-do States in search of jobs and opportunities to improve their lot, and in the process, sowing the seeds of social tension.

Similarly, birth control measures go against the precepts of certain religions, and this may, over a period of time, lead to disharmony born out of changes in the demographic configurations.

Harmful impact

There is no need to pile up statistics which are, in any case, readily available. The harmful impact of numbers on everything that touches the economy is there for all to see. The economy, in fact, is facing the grave danger of becoming a hostage to numbers which, in their turn, are bound to pull down the growth rate, sooner or later. The more the number of mouths to feed, the bleaker the prospect of food, energy and livelihood security. Since everything produced or sold has to be divided among larger and larger numbers, the benefits per capita of what growth there is will also progressively shrink, until, like the grin of the Cheshire cat, they vanish altogether.

How long can the Government strive to cater to the exploding numbers by going on adding ad infinitum, as it were, to the social and physical infrastructure, increasing the number and capacities of buses and trains, or expanding the range and reach of services such as drinking water supply, health-care, and generation and distribution of electricity?

Can it ever hope to push GDP growth to 20, 30 or 40 per cent in tune with the population, just to make sure that the people enjoy at least a perceptible modicum of the fruits of development? Where will it find the resources and the raw materials to meet the requirements of a population approaching two billion?

With people driven by desperation to encroach on, and occupy, even the beds of water bodies, where will the extra land for agriculture, industry or housing come from? Institutions, mechanisms and devices, whether under the aegis of the government, private or public sectors, can cope with the pressure of numbers only up to a manageable limit. Once it is crossed, they will find themselves in a situation akin to climbing a greasy pole, only to be overtaken by a state of exhaustion and collapse.

This is a spine-chilling scenario, holding the prospect of a catastrophe made up of an explosive mixture of instability, unrest, breakdown of law and order, and widespread violent upheavals. Thus, all the collective will and strength of the Government, local bodies, corporates and, indeed, all sections of society should be brought to bear on efforts to achieve zero population growth in the foreseeable future, before everything achieved so far is swept away as if by a tsunami.

Cascading effect

The second time-bomb, not approaching population in destructive potential but capable of crippling the economy all the same, is the looming shortage of professional manpower. The supply of IT professionals, for instance, is expected to be far short of the demand of one million or more in 2007-08. The scarcity of knowledge-workers in 2010 will also be acute, estimated at 500,000.

These alarming demand-supply gaps will not only result in India losing its pre-eminent position in the services sector, but put paid to the ambitious plans of attaining an annual growth rate target of more than 25 per cent in IT/BPO industries, raking in $60 billion in export revenues. Since these expectations have been built into projections of future growth, their failure to materialise will have a cascading effect on the economy as a whole. In fact, advance signals of the coming crisis are already manifesting in various ways. Students of premier technical and management institutions are being offered astronomical salaries, apparently in excess of their worth, but reflecting the limited availability of people of calibre.

Engineering units are complaining of poorly qualified and trained technical workers for even basic engineering functions. High attrition rates in software companies and BPO units are pushing up salaries and training costs, forcing many to move to other countries to expand their operations.

Enlightened companies from overseas, which were first attracted to this country by its quality manpower, are suddenly in a bind and have to go back to the drawing board; some are even having second thoughts on their choice of location here. Bright youngsters, unable to seek admission in good institutions in the subjects of their preference, are forced to go abroad to pursue their dreams, often incurring heavy debt and wiping out family savings. Students of professional institutions, fearing the drying up of opportunity and access based on merit, are taking recourse to agitational methods of redress.

Crisis management task force

Some of the firms, both domestic and foreign, are entering into collaborative arrangements with academic institutions in respect of intake, curriculum, industry orientation and practical training by means of internship programmes and the like, to insure against feared shortages of the right type of professionals in adequate numbers. But, even in the best of times, it is not going to be easy to put such arrangements in place on a nation-wide scale covering a significant number of firms and academic institutions, and softening the severity of the crisis will remain far cry.

The Government will have to act as the prime mover in finding a solution to this problem. It is time a special manpower planning group, composed of representatives of all interests, applied itself comprehensively to the task of drawing up a crisis management strategy, taking into account the emerging need for qualified personnel of various categories, the constraints in the way of ensuring their availability in required numbers, the measures in terms of strengthening the existing institutional facilities and establishing new ones within the country, besides networking with suitable ones abroad, and computing and allocating the financial, technical and human resources for carrying them out. The matter brooks no delay.