In­dia’s pro­duc­tiv­ity is low Too early for con­clu­sions

Business Standard - - ISSUES AND INSIGHTS -

In the ar­ti­cle, “Is fis­cal deficit of 3.2% of GDP writ­ten in stone?” (Oc­to­ber 12), Anand P Gupta dis­cusses an im­por­tant sub­ject of how much the Bud­get deficit should be.

I agree with him that the limit to the Bud­get deficit should be based on the pro­duc­tiv­ity of sec­tors. If the pro­duc­tiv­ity is high or the po­ten­tial to raise pro­duc­tiv­ity is high, more fi­nan­cial re­sources should be al­lo­cated to them so that the present limit to growth can be raised. What is the pro­duc­tiv­ity of var­i­ous sec­tors in In­dia? One ex­am­ple will suf­fice to say that there are se­ri­ous is­sues here.

In­dia takes pride in the White Rev­o­lu­tion, hav­ing an am­ple sup­ply of milk. For vege­tar­i­ans in In­dia, milk con­sump­tion is cru­cial. This year, the re­tail price of milk per litre in Pune is ~42, which, in terms of US dol­lar, is about 80 cents. This works out to about $2.50 per gal­lon. In the United States, bot­tled milk costs $1 per gal­lon. Also, the av­er­age in­come of milk con­sumers in In­dia is around one-tenth of the per capita in­come in the US even at pur­chas­ing power par­ity. Rel­a­tively speak­ing, pro­duc­tiv­ity in In­dia is low, which puts con­sumers in hard­ship.

Of course, the bud­get deficit in the United States has sky­rock­eted, but that is a sub­ject to worry about at the global level. Chan­drashekharGRanade Wash­ing­tonDC of In­dia and the In­ter­na­tional Mone­tary Fund. But it won’t be right to blame de­mon­eti­sa­tion and the goods and ser­vices tax (GST) only for the cur­rent state of the econ­omy. Ev­ery­one knew there would be teething problems with the GST. For­tu­nately, the GST Coun­cil is will­ing and open about re­solv­ing some is­sues; hope­fully, all the glitches will be sorted out soon. EAC head Bibek De­broy has stated the panel will pro­vide clearly de­fined rec­om­men­da­tions that can be im­ple­mented swiftly.

Fis­cal pru­dence is key here. Also, un­less pri­vate in­vest­ment revives, not much will change in the econ­omy. With ca­pac­ity be­ing un­der­utilised at present, it is any­thing but an easy task. A good mon­soon will likely spur de­mand, but that alone won’t be enough to raise con­sump­tion across sec­tors and re­vive capex in­vest­ment by In­dian Inc. The govern­ment needs to push re­forms, take bolder steps and closely mon­i­tor its on­go­ing projects and ini­tia­tives. Bal Govind Noida With ref­er­ence to the re­port, “Sithara­man’s charm may break In­di­aChina ice af­ter Dok­lam: Chi­nese me­dia” (Oc­to­ber 11), it was nice to learn that the In­dian de­fence min­is­ter greeted Chi­nese sol­diers with “Na­maste” and they re­sponded with “Ni hao”.

The re­port also quotes from the editorial of the premier Chi­nese news­pa­per, Global Times. Ti­tled “Sithara­man greet­ing sends warm sig­nal”, the editorial goes to the ex­tent of ob­serv­ing that her tra­di­tional greet­ing to Chi­nese sol­diers con­veyed hope for peace along the border and un­will­ing­ness to pre­cip­i­tate a new stand-off.

While the at­ti­tude of both sides is ap­pre­ci­ated, it may be too early to draw con­clu­sions. Let’s see how China’s Peo­ple’s Lib­er­a­tion Army be­haves in the near fu­ture. It would be naive to count the chick­ens be­fore the eggs are hatched.

S Ku­mar New Delhi

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