INDIA RISING: Laissez-faire economics is not the way forward for India.

The recent news that India has overtaken China as the world’s most populous country has prompted optimistic predictions that the South Asian nation will become the next global powerhouse. India’s relatively youthful population purportedly gives it a competitive edge in the labor-intensive manufacturing and services sectors.

However, despite this optimism, India currently struggles to create enough employment for its continually growing pool of young job seekers. A 2021 survey by the World Bank revealed that India’s labor force participation rate stood at 46 percent, compared to 57 percent for Bangladesh and 68 percent for China.

Commenting on India’s unemployment crisis, economist Amartya Sen emphasizes that by failing to provide comprehensive access to elementary education, successive governments have neglected to train a workforce capable of sustaining long-term economic expansion. Sen asserts that it is vital for developing countries to equip their citizens with basic literacy and numeracy skills to enable them to utilize global trade employment opportunities.

Market in Mumbai. (CREDIT: Sudhir Sharma)

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Citing China as a successful example, Sen argues that the East Asian nation prepared its citizens for future integration into global labor markets by significantly investing in basic education.

Unfortunately, India continues to underprioritize public education, spending a meager 3.1 percent of its GDP on public education. Even comparatively poorer countries like Afghanistan and Burkina Faso spend 3.9 and 4.2 percent, respectively.

Due to this chronic underfunding, only 9.6 percent of Indian schools can offer free education to children aged 6 to 14. Many state and district-level administrations struggle to hire permanent teachers or provide regular salaries for existing staff. Not surprisingly, illiteracy remains widespread, with 30 percent of the population falling into this category.

School children. (CREDIT: NEOSiAM 2021)

Moreover, Sen observes that developing states must also ensure access to essential healthcare. Referencing China again, Sen describes how it boosted its average lifespan to 68 years by 1976, when economic reforms began. India’s average life expectancy remained at 54 years at that time. China’s initial investment in healthcare quality is hailed by Sen as a significant reason for its developmental lead over India.

Similar to education, India’s healthcare system also lacks funding. A 2016 WHO study revealed that India spends only 3.66 percent of its GDP on healthcare, trailing countries like Burkina Faso (6.75 percent).This lack of funds has crippled public hospitals, forcing patients to seek private care. Consequently, healthcare costs are primarily borne by individuals, reaching as high as 90 percent in some northern states.

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Professor Suresh Babu, an industrial economics specialist at the Indian Institute of Technology Madras, corroborates Sen’s claims. In an interview, he acknowledged India’s uneven economic development, attributing it to limited access to health and education in the early years.

Additionally, Indian workers now face the threat of automation, imperiling 69 percent of existing jobs. Unskilled workers are at risk, but even the lucrative IT sector faces massive job losses.

Professor Babu, while skeptical of the 69 percent figure, agreed that automation could cause significant job losses in India unless the government embarks on large-scale skill development. He emphasized aligning education with labor market demands, underscoring Sen’s focus on an educated workforce.

One way to mitigate automation’s impact could be to increase government spending on public job creation schemes. Studies show that such schemes have employed 52.5 million households and skilled professionals, addressing environmental issues and rural poverty.

However, the Indian government’s failure to privatize state-owned companies has left it without the funds needed to support public education, healthcare, or job creation. French economist Thomas Piketty suggests that increasing taxes on the top one percent of earners could address this funding gap.

This proposal has both moral and practical justification. Philosopher Elizabeth Ashford argues that those preventing others from living a ‘minimally decent life’ commit rights violations. Following this reasoning, India’s wealthy elite should support government efforts to improve the lives of disadvantaged citizens rather than obstructing them.

WORDS: Shree Raaman.


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