Dr. D. Mukhopadhyay
India shall be celebrating 100th Anniversary of her independence in 2047 and this year is of high significance for every Indian as India is expected to emerge as the third largest economic power house across the globe by the end of 2047. In other words, India according to the experts shall be in the league of the countries attributed with the high-income status in 2047 as she has demonstrated the capability to have potential for becoming the third largest economy in world for which she has to register for about 10% of global GDP. In simple per capita GDP of India by 2047 has to increase from about 3% of current US figure to 25% and the same is by and large the threshold mark in order to achieve the high-income status. It is important to opine that India needs average sustaining growth rates over 8% per annum for more than three decades in order to be in the bracket of high-income status. This is not very easily achievable target and to achieve the same requires an overall concerted effort from all sectors of the society and more particularly the degree of effectiveness , efficiency and productivity of human capital is of paramount importance. There is enough empirical evidences that many middle- income countries across the globe have failed to maintain the high growth rates required for attaining high-income status and on the contrary remained captive in “Middle-Income-Trap”. It is worth mentioning that only 13 out of the 101 middle-income countries in the world could sustain the growth rates required to reach the high -income status during the period falling between 1960 and 2008.
Human capital formation helps to a great extent in promoting capabilities of the people in the era of globalization and for becoming successful in achieving productive human capital, it needs to make substantial increase in expenditure on education, health and poverty alleviation programmes. If the entire responsibility for financing health and education sector is borne by individuals and then the same is left to the market forces, then only the haves will be able to acquire human capital and the have- nots , by and large shall remain excluded. Inclusive economic growth and prosperity is the prime condition for reaching the high -income status . In this context, a pertinent note of interrogation arises in inquisitive minds and the same is whether India is channelizing her available resources to that direction is a billion dollar question from the experts. Since early 2000s, the eye-catching economic growth of India has truly propelled her into the ranks of middle-income nations of the world. To go by statistics, per capita income of India has increased almost five folds from US$ 325 in 1991 to US$ 1582 in 2014. This remarkable economic prosperity has been accrued due to increase in the rate of capital accumulation, consistently accelerating factors productivity, export growth and structural transformation. There has been considerable economic shift of the people from agriculture sector to manufacturing and service sectors during this period. It is worth noting that agriculture’s share in India’s output has sharply declined from 29% in 1990s to 20% in 2015 and at the same time share of service sector rose to 48% from 40% according the World Banks Indicators. Services such as financial, professional and real estate services have emerged as the prime mover of such economic growth.
Let us have the snap shots at individual level of economic progress in country. There is enough evidence that due to economic growth, millions of have-nots have been alleviated from acute poverty but still it cannot be called inclusive economic growth. Gross National Income (GNI) per capita grew at an average of 7.3% per annum in Purchasing Power Parity (PPP) terms but income of a household grew only by 1.9% per annum. The income of the bottom 40% grew slightly faster at 3.2% according to WDI, NSSO and World Bank Staff Calculations. In order to reap the benefit high-income status, India needs to prioritize her available resource allocation in the healthcare, education and social protection so that capability and productive human capital shall be available at the disposal of the nation at large. Pre-natal health, child birth and early childhood nutrition and overall physical development are the influential factor that affect the productivity of human capital. For example, lack of micronutrient such as iodine can lead to lower intelligent quotient level and this limits the ability of an individual’s ability to acquire technical and managerial skills. India currently does not have sufficient budget allocation for education sector and it is about 3.74% of the GDP. In order to provide quality education, much higher quantum of budget allocation is necessary. It is well accepted that human development is conducive to economic growth. Moreover, focus should be on early childhood education and improving the quality of higher education since it can build socio-economic emotional skills and promote critical thinking as well as problem solving skills. This in turn would enhance productivity of human capital across many occupations. Without health and basic education, workers shall not be able to take part in full gear in the socio-economic developmental operation of the nation.
Investment in both technical and higher education is a must besides investment in healthcare sector. Thirdly come the issues concerning social protection and a caution against inefficient income re-distribution is warranted though there are many examples of efficient re-distribution in a modern social protection system viz. conditional cash transfer, social insurance and the same have been proved successful in Brazil and Mexico. These countries introduced cash transfers that were linked to keep children’s health and in school and generated significant increase in enrolment and eventually declining inequality. As India moves away from price subsidies to more efficient form of social protection via direct benefit transfer, emphasis could be placed on higher transfers which are provided to families where children are the most vulnerable. It is vitally important to promote an integral approach to development. It is pertinent to mention that a much greater effort in terms of both monetary and non-monetary resources have to be made in order to promote employment growth, social security, education and health and an efficient poverty alleviation schemes by Government of India such as MNREGA.
Moreover, new technologies are overtaking the earlier ones at accelerating rates. The situation of short-life-cycle of modern technology necessitates retaining existing employees and skill development of new entrants to the labour force. In order to obviate the problem of skill development, it is imperative to establish new institutions for imparting training keeping pace along with requirements of the needs of the market.
The Institutions set up by the State should totally be free from bureaucratic control so that they can redesign the training programmes without any influence of bureaucratic limitations of rule for the sake of rule. Moreover, it is necessary to have salaried class of people from having been transformed from self employment class of people of the society. India needs to have serious preparation for emerging as high-income society by 2047 and lot of concerted efforts are necessary to achieve such status. According to World Economic Forum, India is 62nd on Inclusive Development Index and placed far behind China . China is 26th on Inclusive Development Index. Moreover, India has to keep in mind for controlling population explosion since it directly retards the socio-economic development of the country.
(The Author is Professor of Management, School of Business and Dean-Faculty of Managment, Shri Mata Vaishno Devi University, Katra, Jammu & Kashmir, India)
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