IOS On-line lecture on The Way to Economic Recovery after the Scourge
New Delhi: A virtual lecture on “The Way to Economic Recovery after the Scourge” was organised by the Institute of Objective Studies on September 20, 2021. Delivered by the noted economist, senior civil servant and the former deputy chairman of the Planning Commission of India, the lecture focused on the current state of economy and the prospects for recovery in the post Covid-19 period.
The lecture began with the recitation of a verse from the Qur’an by Hafiz Athar Husain Nadwi. The secretary-general of the IOS, Prof. Z.M. Khan briefly highlighted the activities of the Institute.
Dr. Amir Ullah Khan, research director of the Centre for Development Policy and Practice (CDPP), who introduced the subject, said that the lecture would offer answers to several questions which the policy makers were grappling with. Describing Dr. Ahluwalia as a development economist, he observed that his advice on economic reforms during the preceding two regimes at the centre was core to India’s economic development.
Speaking on the topic, Dr. Ahluwalia held that today economists went by the data that was frequently revised. But phenomenon created by the unofficial sources pointed to a difficult problem that arose as a result of the pandemic. All the estimates made pre and post-pandemic were based on the activities in the formal sector. He exuded confidence that the stagnating GDP at the current level below 7 per cent caused by Covid-19, could bounce back if 18 percent population of the country was vaccinated against the pandemic. Pandemic was an extended shock. Earlier, the government had said that the economy would recover by December, but that did not happen. He held that the situation three years before the pandemic was good. The current situation threw challenges not only before India, but also to the world as a whole. There would be no adverse effect on the world economy but it might affect India considerably. If India wanted to improve, it should start now. Given the situation, the pandemic is likely far from over and that should not halt the efforts at economic recovery, he said.
Dr. Ahluwalia pointed out that the economic growth during the last three years had been sluggish, with a swing between 6 to 4 percent, and the output in 2020 remained at the level of 2019. Calling for the recognition of the changes that were taking place, he said that China was dominating the world economy, particularly in the field of telecommunications and cyber security. Chinese export to other countries had registered a phenomenal growth. In share and high check areas also, China was dominating the world. Compared to China, the United States had lost its economic position as a super power in terms of the GDP.
He called for increasing the volume of export by doing away outdated set of ideas. Instead, India should adopt the policy of openness. It would help the country grow faster. He expressed the confidence that Indian economy would perform better as the country was well-positioned to grow in 2022. Referring to the economic growth that stood at 7.6 percent from 2003 to 2017, i.e., the pre-pandemic period, he said that the Covid-19 vaccination drive, undertaken on a massive scale by the government demonstrated well for the economic health of the country. The economy next year was likely better, particularly in the formal sector. The informal sector, which was not in good shape, would, however, grow with the advancement of the formal sector. Palliatives were needed to put the informal sector back to good health, he added.
Dr. Ahluwalia emphasised the need for reduction of poverty. Significant work on the eradication of poverty should be undertaken to generate employment in the unorganised sector. Social security net should be widened to bring in more and more people under its cover. Similarly, regulatory provisions should be strengthened to secure the interest of the industry. There should be no reason to remove labour regulations. Flexibility for the industry was needed to create a healthy environment for its growth and expansion. He said that the present labour laws discouraged an industry to get rid of labour force without the permission of the government. He suggested that the contract employment should be introduced to allow the industry to engage workers initially for one year with the provision for its renewal at the expiry of the period. He argued how one could continue with the labour when there was a downswing in the economy.
Laying emphasis on better quality of education, Dr. Ahluwalia made special mention of Indian Institutes of Technology (IITs). But he batted pressed for improvement in particular courses linked to the requirements of industry. He called for introducing skill development programmes that were tailor-made to business and industry. This would help produce skill-based labour force. He said that the percentage of hiring people in self-owned business was less than that in the big business. But the employment in businesses had expanded. He also pleaded that the kirana market be modernised. People had certain expectations from the government which should be attended to by ensuring that the economy was rapid with no downslide. He said that the problem started when people’s hopes of better jobs were belied. Pitching for better infrastructure like roads, power; etc., he observed that one should have good access to other parts of the country – Improvement in the infrastructure was also important because globalisation was now turning back to the domestic economy. Thus there was the need to focus on the expansion of the private sector. This called for suitable regulations to allow competition in the private sector. He said that there was a consensus to allow domination of the private sector to boost economic growth. There were high expectations from the private sector to generate money. Another route to involve the private sector in the process of development was the Public-Private Partnership (PPP) model, which was more empowering. In this connection, he shared his experience while he was in the government. He said that he suggested partnership with Jawaharlal Nehru Stadium to earn revenue, which was not a conventional approach but it worked. Though one might not be sure of the money to earn from the partnership, yet once it came, it would continue to come.
Dr. Ahluwalia also focused on the climate change around the globe. Expressing concern over global warming, he said that governments’ actions to push growth around the world had led to an unsavoury situation. And if nothing tangible was done about it, global climate would be hugely impacted. He warned that India would be among one of the most affected countries if this happened with severe droughts, rising sea level, and irregular rainfalls. He was optimistic that India could achieve seven plus percent growth rate. But this could happen only when India did not articulate a particular policy. He also laid emphasis on asset modernisation programme. This was not asset privatisation. It was for the government to have balanced minimum pay. He asked the government to consider changes suggested by the public by way of discussions.
In reply to a question by Prof. Furqan Qamar, professor in Finance, Jamia Millia Islamia, Dr. Ahluwalia, said that 65 percent grain was available in the country for distribution under BPL programme. He claimed that people under the BPL were provided more food grains during 2004-2011 period. But today, this group was hugely hit. He pleaded that the government should provide some support to this group. He noted that the GDP went down substantially after 2017. On the financial sector, he said that banks had not been able to reduce NPA (Non-Performing Assets). This resulted in writing off loans which implied that loans were bad. It was for the banks to assess the value of these loans. He said that there was no reason why the Reserve Bank of India should be so weak. There needed to be some amendment in RBI Act to make it more powerful. While pitching for serious bank reforms, he said that public sector banks needed more reforms. He called for re-structuring of public sector enterprises. He also noted that informal sector survived due to tax evasion to some extent. However, more leverage should be given to the informal sector. Small and medium industries and micro-enterprises should get more support, he emphasised.
Dr. Ahluwalia remarked that education system had become very poor because of no examinations at all or online examinations. He said that there was a need to spend more money on education and health. It was also the duty of the government to see to it that states were doing good on the count. He laid stress on developing a strong health system for tackling health-related issues in future. Regarding employment, he said that unless it was effectively addressed the demographic dividend could become demographic disaster. Long-term policy should be formulated to provide employment. Strengthening of social security system was equally important, he concluded.
The chairman of the IOS, Dr. Mohammad Manzoor Alam in his concluding remarks, raised the question of a big gap between haves and have nots. He said that poverty among economically backward sections had only deepened. To this question, Dr. Ahluwalia, replied that due to growth of 8 per cent GDP, the employment increased during 2004-2011 period. Employment was thus linked to growth. This was also a fact that the poor did not get the benefit of growth. But still, the increase in growth was a must, he added.
While Prof. Z.M. Khan wrapped the proceedings of the lecture, Prof. M. Afzal Wani, Dean, School of Law, Guru Gobind Singh Indraprastha University and vice-chairman, IOS, proposed a vote of thanks.
Trust in Financial Market should be maintained, hence need more transparency
Dr. Montek Singh Ahluwalia
New Delhi: September 20, 2021: Noted economist and former Deputy Chairman of Planning Commission, Dr. Montek Singh Ahluwalia, on Monday expressed hope that if 80% of India's population is vaccinated, it may make a pitch for economic growth which has now stagnated below 7% due to the pandemic.
Participating in a webinar on “The Way to Economic Recovery After The Scourge”, organised by the Institute of Objective Studies, New Delhi, Dr. Ahluwalia said that during the last three years, the economic growth has been slow and pegged between 6% to 4% and the output in 2020 was at the same level of 2019. “It's time we start to rethink about our approach and actions to be taken as, pandemics are going to be common,” he added.
To realise this, Dr. Ahluwalia said one should look at the economic growth during the pre-pandemic period, which was 7.6% from 2003 to 2017 and slipped later. “With the vaccination drive undertaken by the government of India, the country may position itself to grow in 2022,” he stated.
Measures to be taken: Stating that he was not a “soothsayer”', Dr. Ahluwalia listed out a few areas which needed to be strengthened for the economy to boost. One such subject was the public health system which should be further consolidated to face any other pandemic in future. He said that India needs proper planning in view of global changes and emerging technology-based business culture.
He also discussed the Chinese HiTech approach to emerge as a major global player and in that context, gave the example of USA which lost its position with regards to its share of GDP.
The West feels threatened by China because of its dominance in telecommunications, cyber security among others, which has resulted in a pushback, '' Ahluwalia said.
He also referred to the present labour laws of the country which, according to his opinion, discourages employer.
He advocated the idea of introducing contract employment, which will be for just one year and has to be renewed. “You need to have flexibility. How does one continue with the labour when there is a downturn in the economy?”' he asked.
On export, Dr. Ahluwalia stressed the need to bring in dynamic changes in our export policy in view of global changes and technological advances. Increased export enhances the industrial activities and issues of employment, which can have a direct impact on our GDP.
Dr. Ahluwalia had a word of praise for the educational institutions, which he said were excellent. However, they need to focus more on providing education that can churn out skill based labour force.
Whilst dealing with government approach towards PSUs, he tried to clear some misunderstandings towards the recent actions being taken by the Government of India and explained the concept of Public Private Participation. Due to paucity of time, he could not expand his argument, which was well attended by participants who posed several important questions.
Institute of Objective Studies, New Delhi (India)