Even though the
government at the Center has succeeded in preserving the macro-economic
indicators such as fiscal deficit, current account deficit and inflation it has
still a lot more to do on employment, demand and growth, when private
investment are shying away from more investment and employment due to slow
recovery in growth contingent on NPAs and bad loans which are holding new
investment and loans back. However, slow private investment has given rise to
the clamour for more government spending, but devolution of more funds to the
states as a result of the decentralisation has left the Center with few options
and less resources to increase public spending to invigour private demand,
consumption and investment, nonetheless the center might still invoke local
public spending by the states to increase wages or incomes for more demand in
the economy, the government might force the state governments to increase their
expenditure outlay on increasing productivity, infrastructure and employment
which could increase both the demand and supply or the economic activity and
growth… The local governments have, now, more capacity to spend when a larger
part of funds are now with them and they might play a constructive role in
increasing demand in the overall economy… The full employment is very important
for the full demand and growth rate… The government might push the local
governments to create more employment and growth in their localities…
Services equally have
potential to create jobs for the workforce and workforce that join the
mainstream everyyear... By lowering the service tax the government might
further incentivize job creation... Nonetheless, INDIA has a comparative
advantage in labour intensive line of production because labour is in plenty
and cheap, real effective wages are low... Moreover, real effective interest
rate is higher in INDIA which makes capital dear... Even normally, capital
intensive techniques are costlier than labour intensive techniques... Therefore,
to provide gainful employment to its workforce INDIA should specialize in labour
or services intensive techniques in order to achieve competitiveness and demand
and growth...
No comments:
Post a Comment