Indian economy is reported to have grown by over 7% during 2015-16. This statistics should be correct. But on the ground one does not see the growth. The unemployment continues to be as before. Government’s Employment guarantee scheme continues. If economy grows, employment opportunities are created, and therefore there should less dependence on government guarantee scheme. On the other hand unemployment situation appears to have deteriorated so that the government has increased the number of days the people are employed in a year.Unemployment among educated people is growing. Many people depend on government grants and subsidies to survive instead of on working and earning. This is an indication of poor management of the economy. The media mostly carries news of governments’ schemes to assist people to acquire amenities rather than establishment of factories, research institutes,undertaking infrastructure works etc.for generation of employment so that the people will work and earn for their survival. Government should also not depend solely on foreign investment. It should assist local entrepreneurs with liberal policies to establish factories and undertake infrastructure works.
It is unfortunate that the people of India do not talk much of the Prime Minister of India during the period June 1991- May 1996, Mr.P.V.Narasimha Rao, who was responsible for bringing in economic reforms. Implementation of these economic reforms lead India to be the 3rd largest economy in the world after USA and China. To attain this position, India has overtaken Japan, Germany,France, UK, Italy, Russia and Brazil.In 1991, when Mr.Rao became Prime Minister the foreign exchange reserves were only about US$ 1/-billion and now it is around US$ 300 billion. When Mr. Rao assumed Office, the gold reserves of the country had been pledged to raise loan. Now the country is importing hundreds of tonnes of gold for its reserve. India has also emerged as an investor in foreign countries.Even developed countries are inviting Indian industrialists to invest in their countries. In 1991 Foreign authorities were tightening their visa restrictions for Indian nationals but now they are liberalizing their visa regulations for Indians to attract Indian tourists. In 1991 there was huge unemployment but now there is acute shortage of labour in every sector of the economy.
(Of course there is a long way to go to reach the per capita income level of developed countries. Agricultural production is still very low.Infrastructure is grossly inadequate in spite of the initiatives taken by Mr.Rao.)
Considering the impact of his policies and initiatives on Indian economy,India should honour Mr.Narasimha Rao in an appropriate manner- naming his birthday as national economic liberalization day, issuing commemorative stamps etc.
Indian economy is quite sound as can be judege from the following:
i. there is no unemployment or the unemployment is very low now, compared to what it was in the past. In fact there is shortage of labour in every sector of the economy- in agriculture, industry, plantations, transport etc. Shortage of labour is seen both in the urban and in rural areas.
ii. production is increasing as can be seen from the increasing number of trucks moving goods across the country
iii. industry has no problem in getting finance, either by way of equity or loan from banks or other financial organizations-postponement of initial offerings by companies does not mean that the public are not interested in buying equity shares. It only shows that the prices of the offerings have been placed high.
iv. there is no dearth of loan facilities for agriculture
v. finance for acquiring vehicles is available from a large number of organizations
vi. there is no problem in selling products/commodities, (though sales promotions are required. ) This is because of higher purchasing power of people in general.
vii. the expenditure on food as a percentage of total expenditure f the households is continuously decreasing showing an increasing number of products being used by the people. This shows higher standard of the living of the people.
viii. prices are going up, but wages have already gone up and still are going up. Thus,price increases is not a major problem. For example, between 2006 and 2010 wages have gone up by about three times in most l cases. On the other hand, prices have gone up by 50%- 100% (which has resulted in higher standard of living of the people).
ix. people no longer walk even short distances. They use mopeds,motorbikes and cars. Very few people use bicycles. People are in a position to afford these luxuries now. They even travel by motorbikes for even the currently “low” paid jobs.
x. there is no communication problem now. Most of the people have cell phones.
xi. the markets are full of things –food items as well as industrial products.
xii. stock markets are volatile. Price of gold and silver is increasing,but this cannot be called economic crisis,but can only be called speculative activity. If FIIs are banned ,institutional investors are restricted in the secondary market, the markets will be steady.
xiii. however, there is a lot of scope to increase productivity, increase consumption and thus, expand production and GDP.
xiv. interest rates have gone up leading to higher cost of production, but the prices of all products have also gone up .Thus,the purchasing power of the interest amount from the deposits in banks,etc. Would have become lower, if interest rates are not raised. In other words, depositors would have suffered badly.
xv. there is shortage of labour. This can be solved by increasing mechanisation. In agriculture for example, mainly ploughing has been mechanised. There is scope of mechanisation in planting, weeding, harvesting,thrashing,etc. In industry also, there is a lot of scope for further mechanisation. This is how industrial revolution took place in Europe a few centuries ago.
Xvi. The problem of pollution should be tackled with proactive participation of the government.
xvi. Global warming is talked about but we are witnessing coldest winters and hottest summers which can rightly be called weather extremes rather than global warming.
xvii. higher public/government debt in itself cannot be an economic crisis if the debt has been incurred for productive purposes and the labour productivity remains high. after all, money can always be created by the government monetising debt.
As the fundamentals are strong in Indian economy, external happenings should not affect it. However, it does affect because of speculative activities. It would good to control speculations.
There is economic slow down in most of the countries currently i.e. early 2009. These countries try to stimulate the economy by
- Lowering interest rates
- Giving tax benefits
- Offering incentives to industries
By lowering interest rates for housing loans, vehicle loans etc. the governments try to encourage people to avail of the loans which in turn leads to construction of houses, production of vehicles etc, thus reducing unemployment. But at the same time, people who deposit their money in the banks receive lower interest and thus the disposable income with them comes down leading lower consumption expenditure- lower retail sales, low demand and low production.
Giving tax benefits would make the companies and individuals to have additional money, but the governments would lose tax revenue and thus will not be able to undertake large infrastructural work. Instead of reducing taxes, the governments can undertake infrastructural work and generate employment and additional spending.
Offering incentives would again reduce the government funds. It is likely that many of the industries would reduce the ex-factory prices of their products. They would however result in lower cash balance with the governments and lower government spending which is not good for the economy.
Cost of the production should be reduced by increasing the productivity of the employees. This could be done by requiring employees including the top managements in all the establishments in the country as well as self employed persons to work for additional one hour a day without any increase in salary.