A budget that includes

Syllabus: General Studies Paper 3

Context

The last two quarters have seen a substantive recovery in the Indian economy per major indicators

• Corporate profitability of our largest firms has hit a new record this year.
• GST collections, another indicator of the formal economy, with an average monthly collection of Rs 1.2 trillion in the second and third quarters.
• The budget deficit is expected to be well the forecast from last year.

On the flip side

• The informal economy was badly hit by Covid and its associated lockdowns. Small enterprises, retail, hospitality, and construction were all hammered. These were our main source of recent employment growth.
• Agricultural employment has risen in the last year-and-a-half, while manufacturing and services employment has fallen — this is the opposite of development.
• Informal urban employment has led to first-time buyers of everything from toothpaste to two-wheelers. This consumption story has driven our economic growth for the last 30 years.
• Covid and its associated restrictions have been a perfect storm for the informally employed.
  • A study by researchers from Azim Premji University tells us that both earnings and employment fell for those at the bottom of the urban employment pyramid.

What should be done?

There is a need to insure the most vulnerable against such shocks by creating good job opportunities for the unskilled, equip people at all levels to participate more fully in the modern economy, and systemically promote wider policies of inclusion.

Budget should consider-

• Create good jobs for the unskilled by focusing on infrastructure. The National Infrastructure Pipeline has identified a good set of projects. The government’s intention and ambition should be followed by implementation.
• To have a bigger impact on the economy, there is a need to invest quickly and at scale.
• Most countries developed by putting millions to work in labour-intensive manufacturing.
  • Millions of the unskilled and less-educated can be employed in good manufacturing jobs where average productivity is 15 times the national average. We do not have the huge firms in export-oriented labour-intensive sectors that employ millions in China, Vietnam, and Bangladesh.
• Labour reforms-In 2020, the government passed four labour laws that are a major step forward in helping balance flexibility with protection for labour, formal and informal. These laws have since been left dormant. The budget should announce a time frame for implementation, notification by the Union government and then by the states.
• The budget must also look at investments in education and skilling.
  • India has among the least skilled workforces in the world. Under 5 per cent of our workforce is formally skilled, compared to 96 per cent in South Korea, 75 per cent in Germany and 52 per cent in the US. That is why the work of the National Skills Development Corporation is so important and must go much further and faster.
• Education is even more important, especially primary education.
  • Pratham’s education reports says that just 44 per cent of children in Class V can read a text meant for Class II. And just 23 per cent of children in Class V can do division. With schools closed for the last year-and-a-half in most states, education outcomes have fallen further. The New Education Policy has a proposal that every second standard child should be able to read and do arithmetic at the second standard level as a foundation for further education. This welcome initiative must receive greater dedication and focus from both government and industry.
  • School education is a state subject, so the Union budget should incentivise states by linking the flow of additional funds with improved second standard learning outcomes.
  • CSR funds can be utilized for education sector as well.

Other policies for economic inclusion must go beyond social inclusion. These include measures like

• Reducing tariffs to benefit millions of consumers instead of thousands of firms. Industrial policies that help all firms such as the ease of doing business, instead of incentivising a selected few.

The Indian Express Link

https://indianexpress.com/article/opinion/columns/naushad-forbes-writes-indian-economy-budget-gst-budget-deficit-7730640/

Question- Covid pandemic and associated lockdowns impacted the informal economy disproportionately. Why? Describe the efforts needed to insure the vulnerable groups against such economic shocks.