The Hindu Business Line : At crossroads of development

At a recent meet in New Delhi, the Prime Minister, Dr Manmohan Singh, outlined the challenges that India faces in turning into a developed nation. He adumbrated five challenges: Revitalisation of the rural economy, more efficient delivery of the essential public services, improved management of urban areas, more financial inclusion, and a regulatory culture that allows for cost-effective private investment in infrastructure. Overcoming these challenges, he said, would enable India move into the league of developed nations and lead to a faster and more sustained economic growth. Inclusive as the list is, it is important to disaggregate the challenges in the light of their impact on growth so that policy becomes more effective by moving beyond rhetoric.

To start with, it is significant that the Prime Minister called for a "revitalisation" of the rural economy. The fact that it is today almost moribund reflects the trajectory of India's economic growth and, more pertinently, its policy orientation. Although 60 per cent of the population depends on agriculture, the sector contributes only 20 per cent to GDP with the ever-present danger that its share may fall to 15 per cent. It is refreshing that the architect of India's reforms should admit to a failure in effecting the same level of change as in growth sectors such as services and industry. Second, an admission that the delivery of public services has to be improved, that the urban mess has to be cleared, and that the financial sector, recipient of the most sweeping reforms, must be prepared for greater inclusion are evidence of official neglect even as the country moves onto the fast track growth. In short, Dr Manmohan Singh has basically outlined the problems of current growth; to the extent that they are not tackled, the current rate of GDP growth may become unsustainable.

At the same time, policymakers ought to realise that the fastest growing economy in the world today has thrown up fresh and unforeseen challenges. India has a young population and, according to one estimate, employment needs to be created for 71 million people over the next five years. At the same time, there is manpower shortage at various skill levels across industries, creating its own set of problems, mainly of increasing labour costs and the possibility of being priced out by developing economies that are moving up the scale. Clearly, then, not just literacy but quality higher education must receive attention with due emphasis on meritocracy. The most important message from the Prime Minister is that the nation stands at the crossroads of development with a huge backlog of stagnation. Till policy moves fast enough to clear this, growth will remain non-inclusive and unsustainable.

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