What the economy needs now

Asian Age

Agriculture is still the mainstay of employment.

It is commonly accepted that the national economy is in dire straits. We are not sure at what rate it is now growing. But one thing we know for sure, that is we have fewer and fewer new jobs, investment has slowed down to a trickle and that something is seriously amiss. The title above is of a book, which is a compilation of prescriptions by some of our most distinguished economists called "What the Economy Needs Now", might have been just the clutch of straws for us to hang on to. The book has been edited by a collection of blue-riband economists headed by Raghuram Rajan, Gita Gopalan, Abhijit Banerjee and Mihir Sharma of ORF. The first three in particular are names that will add lustre to any marquee.

There are in all 14 prescriptions, and each one of them is by a shining star of India's economic and policy firmament. Each prescription is short, to the point and addresses the issue of concern directly. It covers all our concerns. But is this the book that Narendra Modi needs to read? Particularly since each chapter is organised with precise brevity. But I wonder if the immediate implementation of these prescriptions will solve our problems?

The problem with short prescriptions is that they are inevitably trite. What is being prescribed is well known. Like paracetamol for a flu. Take for instance the prescription for healthcare by Abhijit Banerjee. There is nothing new in what he suggests, save for the idea that we need to build a new district hospital in every district to parallel the existing ones. I agree the old district hospitals are now mostly beyond redemption and gradually need to be shut down. This is just about the only new policy idea I could spot in what the doctors prescribe.

In a book that features such luminescent names, I would have expected more. For instance, either Raghuram Rajan or Gita Gopalan could have addressed the issue of declining capital expenditures and how the government could reverse the trend. We now have a system that mostly takes care of itself leaving the poor people of India to take the hindmost. That is the problem with the book. When it doesn't grapple with some big issues, what it suggests is mostly anodyne.

Agriculture is still the mainstay of employment. Neelkanth Mishra starts well by letting us know that way back in 1880 the Indian Famine Commission "had observed that India had too many people cultivating too little land". This about encapsulates the current situation also. While as a percentage farmers and farm workers have reduced as a part of the workforce, in absolute terms they have almost tripled since 1947. This has led to a permanent depression in comparative wages, but has also led to a decline in per farmer production due to fragmentation of holdings. The average farm size is now less than an acre and it keeps further fragmenting every generation. The beggaring of the farming community is inevitable. The only solution to this is the massive redirection of the workforce into less skilled vocations such as construction.

But Mishra misses this entirely. Neither does he mention the fact that almost two-thirds of farmlands in India are rain-fed and increasingly dependent on tubewells for irrigation. Free power has led to uncontrolled extraction of aquifer water and wasteful use. Massive water harvesting is the answer, but there is hardly any government in our villages, so who will undertake the job of getting the tens of thousands of water harvesting structures built?

There is another aspect to this reality: to see how the contribution of agriculture to GDP has declined to around 13 per cent while the number of people still dependent on it remains at about 60 per cent of the population. In 1947, the share of agriculture was about 70 per cent of GDP. The growing regional disparities further compound the widening urban and rural disparities.

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