Editoral 1 : It is about the jobs
Introduction: India is projected to be the 3rd largest economy by the end of this decade. The economic growth will be closely monitored whether the economic growth will be producing enough quality job for the growing workforce in India.
India's Economic Growth Projections
- India expected to surpass Japan as the fourth-largest economy by end of 2025.
- It is predicted to surpass Germany and become the third-largest economy by 2027.
- The top three economies likely to be the US, China, and India barring major catastrophes.
IMF GDP Projections about India
- India's GDP projected to increase to $5.8 trillion by the end of the current government's term.
- Current GDP is $3.5 trillion, indicating an addition of $2.3 trillion.
Growth Rates projections of Indian economy
- IMF projects real growth averaging 6.5% over the next five years.
- In line with the historical growth rate of the past two decades.
- Growth rates not as high as the mid-2000s, indicating a gradual upward climb.
Income Levels for India’s population
- Per capita income expected to reach $4,281 by 2028-29.
- India likely to remain the poorest nation among the largest economies.
- It is unlikely to achieve upper middle-income category by 2028-29.
Projections and Challenges
- Economic projections can vary, being off the mark both positively and negatively.
- Sustaining healthy growth rates over the medium to long term will be challenging.
- Broadened consumption base needed amidst large sections of the labour force in low-productive jobs.
Informal Sector Employment
- Number of informal enterprises rose from 5.76 crore (2010-11) to 6.5 crore (2022-23).
- 11 crore workers engaged in informal establishments, many being one-man roadside shops.
- Productivity and earnings in informal employment are low.
Informal vs. Formal Sector
- Value added per worker in informal enterprises: Rs 1.4 lakh.
- Value added per worker in formal enterprises: Rs 15.04 lakh.
- Wage growth in informal enterprises has barely kept pace with inflation.
Labour Force Composition
- 23 crore workers engaged in agriculture.
- Two-thirds of the labour force in low-productive jobs in less productive sectors.
- Growth in precarious gig economy employment due to lack of opportunities in formal manufacturing.
- Defence and Railways, Uber, with more than 10 lakh drivers in the country, now ranks as amongst the largest employment generators in the country, followed by companies like Zomato and Swiggy, which together have more than six lakh delivery personnel.
Employment Issues
- Declining migration impacts resource transfer from urban to rural areas.
- Fiscal transfers to the less well-off will be difficult to restrict.
- High levels of taxation on affluent individuals likely to continue but has limits.
- Collections from the surcharge levied on high-income individuals have increased by almost 50 times over the past decade, from Rs 1,343 crore in 2014-15 to Rs 65,000 crore in 2023-24.
Conclusion: The fallout from not being able to create more productive jobs on a sufficiently large scale, the deepening labour market duality, is likely to manifest in many ways, perhaps more visibly in the form of less social mobility and high-income inequality. As others have also noted, it will determine whether the country will resemble East Asia or end up going the Latin American way.
Editorial 2 : Moody’s warning
Introduction: India’s persistent water crises and increased vulnerability to climate change could dent its sovereign credit strength, at a time when the country is gearing up to be the world’s third-largest economy. The rare use of this non-economic metric is especially pertinent given the difficulties people face in several cities and towns this summer.
How water scarcity can damage the economic growth?
- With meteorologists warning of more exacting heat waves in the coming years, water security would be critical to the country’s economic ambitions.
- Any drop in water supply could disrupt operations in farms and factories, Moody’s has said.
- This can precipitate a rise in food prices and lead to a decline in people’s real incomes.
- The agency identifies coal-fired power generation and steel production as the industrial sectors most vulnerable to water stress.
The status of availability of water in India
- According to government estimates, per capita water availability in the country is likely to fall from an already low 1,486 cubic metres — much below the Ministry of Water Resources’ benchmark of 1,700 cubic metres — to less than 1,400 cubic metres by 2030.
The water conservation and harvesting methods: On paper exercise
- India’s historical inclination to address water-related deficits by focusing on supply-side parameters has led to uneconomical use of this resource, especially the overutilisation of groundwater.
- Water pricing mechanisms do not adequately account for the perilous state of the country’s aquifers.
- In 2019, the Water Resources Ministry launched the Jal Shakti Abhiyan for rainwater harvesting and water conservation.
- Metros such as Delhi, Bengaluru and Mumbai do have laws on using rainwater.
- But, by all accounts, these have remained on paper.
- India’s metros do not have any data on buildings with water-harvesting structures.
- State governments and municipal corporations do very little to either incentivise housing societies — by linking rainwater harvesting with tax regimes such as property taxes, for example — or penalise builders who do not factor water efficiency in construction projects.
Water crisis: The gloomy picture ahead
- In the next 20 years, India will likely add more than 270 million people to its urban population, intensifying the competition between businesses and households for water.
- Conversations on water audits are at a nascent stage in industry.
- The Moody’s report could occasion such discussions.
- For instance, as the International Energy Agency has pointed out, 70 per cent of India’s projected electricity generation for 2040 will come from plants not yet commissioned.
- Technologies — dry cooling and non-fresh water cooling, for instance — to reduce pressure on water resources are available today.
Conclusion: The non-financial metrics to decide the credit rating of any economy is new. Going forward more such efforts of effect of climate change related events on growth prospectus of nations will find resonance around world. Moody’s warning should push policymakers to arrive at innovative ways for ensuring sustainable use of water.