IS CONSUMER DRIVEN ECONOMY THE RIGHT CHOICE FOR INDIA? 

So GDP for the Quarter ending Jun to Aug grew at 7.8%, well most of us are no economists, and thank God for that, as we know the academic economists can only talk theory, far divorced from the on ground situation. Economy for most of us relates to the money available for spending, some savings and the ever increasing costs, what these economists like to call ‘inflation’. We commoners choose the Hindi equivalent ‘महँगाई डायन  खाए जात है’, some of you may recall this song from the cult classic movie ‘Peepli Live’. But when an ex Finance Secretary decides to cast aspersions on this data, it is quite obvious that he has an axe (pun intended) to grind. 

The economic mumbo jumbo of double deflation, the shifting to base data etc is all Greek and Latin to us. Surprisingly, there are no takers for this raging controversy amongst the so called wizards such as Chidambaram, Raghu Raman though has expressed his curiosity about the number of jobs, if the economy is really doing so well. A very valid observation, most of us would agree. While we may not understand these matters, the barren job market is quite visible and naturally causes serious concern. We thankfully are past that stage of seeking jobs, happily retired veteran with a generous pension, but the youngsters today, our so called demographic dividend has to rely on just gig work for employment. Contractual labour was a term associated with farm hands or civil construction  workers, essentially unskilled or semi-skilled ones. But today even governments resort to  this contractual hiring of even teachers and doctors. The primary reason for that is not the bloated government machinery being right sized, on the contrary the bureaucracy finds ways of rising unabated. Having adopted adhocism as a policy, the powers that be have discovered their method of controlling expenditure by saving on salaries, pensions and other ancillary benefits which form part of the package. Imagine they have even resorted to schemes like Agnipath for the Armed Forces for a similar cost cutting exercise.

The private sector too is bound in shackles by trade unionism and hence prefer to outsource their requirements rather than hiring on a permanent basis. But even then we are the fastest growing economy and that too without being a manufacturing and export oriented one. We have seen China, Vietnam, South Korea, Japan rise economically due to precisely this reason. We have chosen the consumerism model, the American style, where economy is driven more by expenditure and to an extent by service sector. Consumer driven economy is ok for a developed nation as they have outsourced their requirement of manufacturing to developing world. 

The drawback of this model is that our energy requirement has grown exponentially over the years, what with the proliferation of two wheelers and cars in almost every household. Automobile sector has grown, no doubt, but even that is primarily for domestic consumption. While these items are highly desirable and indicators of financial growth and well being of the society,  imagine if we had invested in public transport at massive scales, requirement of mobility of the population would have been met to quite an extent, which would have reduced the oil import bill as well. Mobile phones and internet have been drivers of our economy, no doubt and the purchasing power with the common man has also increased considerably due to policies like direct benefit transfer and free rations to almost 80 crore people.

So bottom line is manufacturing jobs are not available and with the advent of AI, the service sector especially IT, our cash cow is seriously under cloud. With Bill Gates advocating reservations for humans, I am sure we too ought to take notice of the elephant in the room. To be fair to the government, they had attempted to pursue the Chinese model of SEZs for providing a fillip to the industry, but Land Acquisition bill met the same fate as that of the Farmer’s bill. Economic reforms in India are not conducted by consensus, as that runs contrary to electoral politics, they have to be shoved down our collective throats. Same is the state of Reforms of the Labour laws, these are tough calls which the governments have to take even if they are not popular, rather than relying purely on freebies to win elections. 

If economic reforms are pursued in right earnest, the potential for growth in double digits is not far fetched. May be it is time to smell the coffee…