In September 2019, a teenager Greta Thunberg addressed the United Nations climate change summit, which had an impact.
But, Indian government is all-absorbed by the news of slowing economy.
What should we be worried about?
It is true that India’s economic growth has slowed for the past few quarters — the past 2½ years, if we go by annual growth rates.
Indian government’s desire is to give a boost to the economy.
Those who heard Greta Thunberg’s address may not be as worried about economic growth as the government is.
Globally, industrial growth driven by mindless consumption is the cause of climate change.
But India does need some growth as income levels here are still very low.
However, the problem of low incomes can be tackled even with less growth so long as it is of the appropriate type.
So, the slowing of growth in India cannot reasonably be termed a crisis.
Why is there rural unemployment?
Unemployment is the only feature of the economy that answers positively to the query of whether it is in crisis today.
Periodic Labour Force Survey report 2017-18 – Points a dramatic rise in the unemployment rate since 2011-12.
Apart from the category of ‘Urban Females’, the unemployment estimate shows that it is the highest in the 45 years since 1972-73.
Even for ‘Urban Females’, it is double what it was in 2011-1
For ‘Rural Males’, it is four times the average for the 40 years up to 2011-12.
These figures should convince us of the existence of a grave situation with respect to employment in the country.
Government’s responses to the slowing growth - Announced a range of measures, the most prominent of them being the reduction in the corporate tax rate.
The tax cut is meant to be a remedy for stagnant corporate investment.
But if the level of corporate investment reflects some underlying reality, it is only by tackling the latter that we can get to the root of the problem.
A large part of corporate sales is driven by rural demand.
The government does not hear their voices, as they are less organised than some other sections of the corporate world.
The rural picture matters not only because the largest numbers are located there but also because of their low incomes.
This means that the future growth of demand for much of industrial production is likely to come from there.
Why is there is a production decline?
The recent history of crop agriculture is one reason why rural incomes are growing so slowly. Since 2008-2009, it has shown no growth.
Households incurring consumption debt in bad crop years would be repaying it in the good years.
This implies that the consumption doesn’t grow appreciably even in good years.
The other factors range from low export growth to the state of the banking sector.
Poor agricultural performance is a significant explanation of slack domestic demand.
Unstable agricultural production first lowers the demand for agricultural labour, and subsequently, its supply, showing up in greater unemployment.
It has been pointed out that the investment rate has declined.
This is indeed correct but this may well be a reflection of the poor agricultural performance.
Private investment both follows output growth and leads it.
What could be the long-term solution?
Any long-term solution to the problem of unemployment to which the slowing growth of the economy is related must start with agricultural production.
Observing the performance of crop agriculture since 2008-09, India might be witnessing something wholly new.
India has long been recognised that there is a crop-yield cycle related to annual variations in rainfall but we are now witnessing stagnation.
Now, unlike in the case of a cycle, recovery cannot simply be assumed.
The expertise of agricultural scientists is needed to confirm what factors are responsible for this state.
Factors - The role of ecological factors in causing agricultural stagnation could be considered.
Land degradation leading to scarcity which raises the cost of cultivation.
Most of these fact0rs are directly man-made, related as it is to over-exploitation of the earth’s resources.
Solution - A deeper adaptation is required to deal with these factors.
Intelligent governance, resource deployment and change in farmer behaviour would all need to combine for this.
The reality of an unstable agricultural sector rendering economy-wide growth fragile has not elicited an adequate economic policy response.
Policy focus is disproportionately on the tax rate, the ease of doing business in the non-agricultural sector and a fussy adherence to a dubious fiscal-balance target.
It is time to draw in the public agricultural institutes and farmer bodies for their views on how to save the sector.
