Demographic Tax
MUCH of the world is ageing, facing the demographic tax of having to pay for an increasingly elderly population with a shrinking work force. Much of the world has run out of easy paths to growth. Having built infrastructure everywhere and exploited natural resources to their fullest, many countries are left with building bridges to nowhere to stimulate growth. Much of the world is also well-educated, well-fed, and well-connected through roads, telecommunications, and finance. India is unlike the rest of the world. Our population is young, our infrastructure inadequate, and too many Indians are poorly educated, poorly fed, and poorly connected. But this is precisely why our low-hanging opportunities for betterment are plentiful in the coming years. All we need to do is to pluck them.
Our measure of success should be the jobs that are created, not by giving government subsidies or protections to labour-intensive industries or sectors but by developing a facilitating, though competitive, environment that will result in the emergence of the best solutions.
Disciplined focus on four issues:
1. We need to improve the quality of our infrastructure, especially the logistical support and power that industry and services need. Grand plans are on the anvil, such as, the Delhi-Mumbai Industrial Corridor. We need to complete such projects on time, and within budget. The success of the New Delhi Metro suggests that timeliness and cost control are not foreign to the Indian psyche.
2. Our youth need education and training for the jobs that will be created. Some of this will be higher degrees, not just computer science but also design or civil engineering. Some of it will be appropriate vocational education that teaches them to be good plumbers and electricians rather than unemployable low-skilled engineers. Teaching our citizens can be a stepping-stone to teaching the world. India can be at the forefront of providing mass technology-enabled education laced with appropriate human inputs to the world.
3. We need better business regulation. This does not always mean less regulation but it means regulation that is appropriate to the objective and that is enforced. I am told that factories in one state are still required to have a snake trap on the factory floor by law, a law that has not been changed since the days factories were surrounded by jungles. The lack of change may be sheer inertia, but it may be more sinister rent seeking. All too often, we have too much regulation on the books and too little regulation in practice, with the worst of the regulated finding unscrupulous ways around the regulation while the honest are stymied.
We have strong labour laws in theory that are meant to protect employees, but in practice we have a very flexible system with no incentive for firms to invest in their workers or hold on to them, and no loyalty towards the firms from workers. This needs to change if we are to have more skilled manufacturing jobs.
4. And finally, we need a better financial system, which will finance the needed infrastructure and the expansion of every producer ranging from the kirana shop owner to the industrialist even as it allows households to save safely with positive real returns, insure themselves against health emergencies or old age costs, and borrow at low cost to finance consumption. Importantly, the financial system should not require constant subsidies to bail it out.