Just how much difference can a few basis points of economic growth make in the life of the people of nation? Lots if you ask me. As India's growth rate has gone downhill from 8.5 per cent to sub-5 per cent, there are two very painful implications that straight away come to my mind. First, when an economy adjusts to lower growth rates, so does future and existing employment. There have been various reports doing the rounds of the number of jobs lost in the last 24 months. One such figure that has stayed in my mind is about 10 million lost jobs. When you consider the bloodbath that has happened in financial services especially in life insurance the figure suddenly becomes believable. When you have so many people losing jobs, staying unemployed or somehow making ends meet, this obviously has implications for the consumption economy. It also starts detering others from buying things and having as much fun as before.
The other painful implication is more significant. Lower growth translates to lower government revenues which means lesser resources to pull terribly poor people out of poverty. Over a longer period of time this might mean losing out a whole generation to poverty. In India, this could be catastrophic given our numbers. All this exactly opposite to what happened in India and China in the very high growth years when millions got pulled out of poverty. With global economic growth targets being hardly expected to be anywhere near the high growth years of the noughties, government anti-poverty resources will become even more precious and will have to be accurately directed to the needy without leakage. Viewed in that context, the government's direct transfer scheme becomes even more important.
But why I am at this today. Well, I read an article by Edelweiss' Rashesh Shah in one of the leading papers in the morning. It talks about how the organised sector has not been able to generate the employment that is required for people coming off agriculture. That is actually not a new development. Most such people have been in the adding up the massive bulge in the urban informal sector for decades. That's not to mention the large non-agri sector in rural areas. In this background, encouragement to small businesses becomes so important. Given the magnitude of problems that this sector has faced and is facing at the moment, whatever that has been done is inadequate. Government regulations, controls and corruption are the usual villains. Ask any small business owner. Possibly economic reforms will really make a difference to people's lives when enabling changes happen in areas like these.
The other painful implication is more significant. Lower growth translates to lower government revenues which means lesser resources to pull terribly poor people out of poverty. Over a longer period of time this might mean losing out a whole generation to poverty. In India, this could be catastrophic given our numbers. All this exactly opposite to what happened in India and China in the very high growth years when millions got pulled out of poverty. With global economic growth targets being hardly expected to be anywhere near the high growth years of the noughties, government anti-poverty resources will become even more precious and will have to be accurately directed to the needy without leakage. Viewed in that context, the government's direct transfer scheme becomes even more important.
But why I am at this today. Well, I read an article by Edelweiss' Rashesh Shah in one of the leading papers in the morning. It talks about how the organised sector has not been able to generate the employment that is required for people coming off agriculture. That is actually not a new development. Most such people have been in the adding up the massive bulge in the urban informal sector for decades. That's not to mention the large non-agri sector in rural areas. In this background, encouragement to small businesses becomes so important. Given the magnitude of problems that this sector has faced and is facing at the moment, whatever that has been done is inadequate. Government regulations, controls and corruption are the usual villains. Ask any small business owner. Possibly economic reforms will really make a difference to people's lives when enabling changes happen in areas like these.
