Context

With the Indian economy caught in the middle of a socio-economic upheaval, the government needs to make its focus on the economy clear and pronounced.

India in the middle of a socio-economic upheaval

• Weakening economy: The economy has been weakening for a couple of years now.
• Social upheaval: The social upheaval is new but its seeds have been fermenting for a while.
• Consequences of the two: The social and economic sides of an economy are not divorced from each other.
  • Each influences the other and the current quagmire threatens to unleash the worst type of feedback between the two.

Consequences for the employment

• Most severe consequence due to the interaction between the social and economic sides is unemployment.
• Rising unemployment disproportionately affects the young.
• India’s job market: India whose median citizen is in the 30s and which is inducting 10 million new young people to the job market every year.
• Demographic dividend turning into a curse: This dynamic, popularly hailed as India’s demographic dividend, can rapidly turn into a demographic curse if the employment situation doesn’t improve.

Falling investment rate, increased risk perception

• Where will the jobs come from? The job creators are entrepreneurs, conglomerates, and multinationals.
  • It is in their nature to take investment risks as long as the returns are high enough.
• Investment rates below 30: In India, investment rate fell well below 30 per cent a while back.
  • Falling returns: The returns on investment were not compensating entrepreneurs for the risk.
  • The recent social upheaval is only adding to the perceived risk.
• Wait and see approach: The more investors adopt a “wait-and-see” approach, the worse the job situation will become.

Way forward

• Structural reforms: The government needs to announce a clear plan and timeline for structural reforms.
• Prioritising domain competence in staff: The government has to start staffing technical positions by prioritising domain competence and empowering these hires with policy relevance.
• Maintaining the integrity of institutions: The government need to maintain the integrity of institutions tasked with the regulation of corporations and banks, monetary policy management, data collection/dissemination and law enforcement.
• Accommodate dissent: The government also needs to desist from trying to drown out protesting voices with state muscle power.

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