The Big Picture – Raghuram Rajan’s red flag on GDP
The context of the topic is the real state of the economy and the question of whether we are the fastest growing economy in the world.
Earlier GDP was computed keeping 2004-05 as base year however in 2014 it was revised to 2011-12. This change is hugely debated questioning the credibility of the GDP numbers. Nonetheless GDP numbers do not capture the real state of the economy, New series of GDP calculation is improvement upon the old series and in any case the new series is comparable to international series. The new methodology is more consistent than the previous one.
Policy makers are conscious enough of the fact that real GDP numbers do not capture the state of the economy and also devising plans and policy which are actually required.
Employment generation is the biggest concern of the economy right now. Even though India is the fastest growing economy in the world the situation on the employment front is dismal. There is a demand of 8 million jobs every year but we are able to generate only half a million, which is a tremendous backlog on employment front. Reasons for it is technological obsolescence-because of which lots of jobs are going out, second is labour laws, and third is skill issue.
It is pertinent with respect to India that it learns few lessons from china model of growth in which it not only grew at 8-10 % for 30 years, but also created employment at the same time. India needs to learn from china on how capital intensive industry can evolve in terms of creating more jobs.
People are getting educated like never before in last decade. It is now the duty of the state to guide young generation by skilling them to meet the demands of contemporary global skill gap.
On the rural side it is necessary to address variety of issues that are creating a potential problem in employment generation. The issues like MSP, Climate change ,MGNERGA wages etc needs to be dealt in a sensible way so that the employment is not displaced to urban areas cresting whole set of new problems. It is very important to address these issues to say that growth rate of GDP and employment generation are going in tandem.
Q.1) Recently IMF declared that India is the fastest growing economy in the world; however on the ground level the rate of employment generation nowhere reflects this positive sentiment. Critically analyse