Spending on skills, jobs...

Yesterday the RBI left-out all expectations of rate cut in the view of falling growth and growth expectations due to low demand in the economy, both investment and consumption are held back due to slow recovery in private demand owing to higher inflation, higher interest during UPA, and, rising NPAs of firms and banks and the lingering effects of reforms such as demonetisation and GST, during NDA. However, low growth rate due to reforms was widely expected and the economy is likely to bounce back after the September quarter as the effects of DeMo and GST would fade away and as long as we have low growth and growth expectation the RBI may have helped the economy to bounce back quickly by cutting on the lending rates, real rates in INDIA are much higher than targeted by our former RBI Guv Raghuram Rajan who started inflation targeting. But, to achieve the 8% and over growth the economy must sway away the problem of bad loans and demand with proper incentives from the RBI and government in the form of higher liquidity and lower interest rates and supply side measures to keep inflation under the target. Nonetheless, public spending on improving the supply side, especially the food which has had been a major cause of inflation in the modern INDIA could help lower interest rate and further strengthen the supply-side in the country. More spending on the food and agriculture economy which is a source of income to 60% of the population would help make the economy strong. Moreover, the government has also committed to double farmers income who face vagaries of all kind including weather and lack of irrigation facilities and floods, too. Even though, the government has a lot of spending schemes on the rural INDIA in the pipeline they should be implemented on the ground level, from the point of view of votes and constituency villages that inhabit 80% of the INDIA’s population may also prove helpful. A very large part of the workforce is in the villages and is employed in the unorganized sector which are hit by demonetization and less money-supply and GST and low supply of goods and services and creating employment for this unskilled pool of labour, partly dependent on NREGA and agriculture, for livelihood is important to revive demand in the economy and without massive industrialization of the economy it is really difficult to provide employment to all. The government instead of only creating jobs through NREGA might look further to employ them in industry by providing education and skills according to the industry demand. By providing employment the government could reduce poverty much faster than doling out freebies, the government should directly transfer funds for education and skill development through the DBT. Education and training of skills and job are the best antidotes to hunger, malnutrition and poverty. The huge demographic dividend which is at the base of INDIA’s growth story and optimism would be simply lost if the country falls on education and skills levels behind other countries…