Rapid growth will generate quality jobs

Montek S Ahluwalia

Rapid economic growth and the creation of an equitable and socially just society have been the twin beacons guiding economic policy for many years.

The approach to the Eleventh Plan (2007-12) recognises and reflects this. The good news is that we are perhaps better placed than ever before to deliver on both.

As far as growth is concerned, there is no doubt that the Indian economy can accelerate from its current average performance of 7% plus, to between 8 and 9% a year in the Eleventh Plan.

This may appear modest, but it will require a steady acceleration over the next five years to something close to 9 or 9.5% in the later years of the Plan. This would be no mean achievement.

But are we obsessed with growth and in danger of pursuing an elitist strategy, ignoring the condition of the bulk of the population? Not at all. Our target is not just set in terms of aggregate growth. We are talking of restructuring the composition of growth which will clearly help the poor and the rural population. This is evident from the fact that we are targeting agriculture to grow at 4% a year, instead of less than 2% over the past several years.

This ambitious target cannot be achieved through a “business as usual” mode of the same strategy. The approach document outlines a multi-faceted strategy for achieving this improvement, focusing on both demand side and supply side measures. A major challenge is to define a set of productivity enhancing strategies applicable in dry land areas. The second green revolution cannot be as water intensive as the first was.

Revival of agricultural growth will directly help the poor engaged in agriculture and also indirectly help those in non-agricultural activity in rural areas, since agricultural income growth will stimulate the non-agricultural growth in rural areas. This is not a mere trickle down strategy. 

The Eleventh Plan also envisages major programmes which directly affect the welfare of the poor. These include the Bharat Nirman programme, focusing on rural infrastructure, the National Rural Employment Guarantee, which will provide a minimum assured employment of 100 days to those who want it, the Sarva Shiksha Abhiyan, which will ensure 100% school enrolment, the Mid-Day Meals Programme for school children and the Integrated Child Development Services programme which addresses the nutritional needs of the pre-school child.

A major new initiative is the National Rural Health Mission. India lags behind even sub-Saharan Africa in many critical health-related indicators and it is time to address this shameful situation. Our total public expenditure on health is 0.9% of GDP, one of the lowest in the world. The objective is to raise this to 2 to 3%.

This is not to say that mere outlays can deliver outcomes. People are rightly cynical about this but we cannot achieve outcomes if we provide no outlays. The effort to put resources behind these programmes is, therefore, a first step. We will combine that with a sustained effort at monitoring performance and improving implementation. This will be done by increasing participation and monitoring by local bodies.

The effort to deliver benefits for the poor must be accompanied by a policy environment in which the economy as a whole can grow rapidly. We need 12% growth in manufacturing and around 10% in services. This is not just an elitist fascination with dazzling numbers. The fact is, it is only rapid growth that will create a sufficient expansion in good quality employment which our expanding labour force desperately needs. This is what China has done and we should do no less. Besides, it is only growth that will generate the resources we need for our anti-poverty programmes.

Can we achieve this growth target? Most observers would agree that the Indian economy is now in a position where it can achieve such growth rates. India’s private sector has come of age in the past 10 years. It has benefited from liberalisation and shed its initial doubts and fears. Today our entrepreneurs know they can compete, provided we give them a supportive environment. And highest on their list of demands is high quality infrastructure.

This is clearly a major weak spot. If we concentrate on generating infrastructure, our entrepreneurs will do the rest. Reflecting the importance of this subject, we have outlined an ambitious strategy of infrastructure development relying upon private-public partnership (PPPs). PPPs will not work everywhere and we will rely on public investments in areas where PPPs are not possible. However, they can be used in many areas to leverage the public sector effort.

Finally, a word on skills. We have got used to talking of having the third largest pool of scientific manpower. That may be true quantitatively, but not if we focus on quality.

As we move to higher growth rates and are relying on knowledge-intensive areas, skill constraints are beginning to appear. We need to expand total supply as quickly as possible. We also need to address the issue of expanding access. Education is the key to future prosperity and we must ensure that access is sufficiently wide. We need to address this issue with urgency and imagination.

Montek Singh Ahluwalia is deputy chairman of the Planning Commission. The views expressed here are personal