Training Brings Value

Muslim Murasu, August 2011
Economist Dr. Amir Ullah Khan speech at lamakaan, Hyderabad

This will be a free-wheeling discussion instead of a lecture. I am 44. If you interfere me appropriately, I will understand your expectations. State of Indian economy is the topic. When asked about the most pressing problem that India is facing, you listed corruption, education, leadership etc. During my childhood days population was considered the biggest challenge. Population was a problem 20 years back, but no more. 120 crore population looks OK. Population growth has come under control. Average family size in 1991 was 7.1. Today it is 3.3, and it will be 2.3 in near future. Two births and two deaths will balance out. Population will become stagnant. Population will become 135 crore by the end of this decade and become stable there.
This is a young population. Growth has proved to be the best contraception. While many family planning schemes failed, growth has finally reined in the population growth. Indian Prime Minister declared in Parliament in 2006 that population is our greatest strength and asset.
Let me take you back 60 years. Between 1950 and 1980, GDP growth was constant at 3.5% and this was called Hindu rate of growth. But population growth was 2.5% and because of this growth did not reach people. A poor country will have to grow much faster. Japan can afford to have GDP growth of 1%, France can have just 1.5%. It is sufficient for them. But 7.5% growth is inadequate for India. Because our base is poor. GDP, which is calculated based on some ten thousand factors, miraculously did not change in fifties, sixties and seventies. As they say, this can happen only in India.
In 1981, population growth dropped to 1.9% and GDP growth shot up to 5%. In 1990, it further went up to 6.5% while population growth dropped further to 1.7%. Today GDP growth is 7.5% and population growth is 1.6%. This is double whammy.
Sikhs were portrayed as terrorists in the eighties.Punjab, which was the most industrialized state in India, was on fire. One cannot walk in Ludhiana after 4 in the evening. Even New Delhi was not a good place to live. Patiala was nearly dead. Ironically Punjab problem came to an end with the death of Indira Gandhi; a very cruel coincidence. Rajiv Gandhi became young Prime Mister with new ideas. Growth was good. But financial discipline was terrible. When Punjab problem was ended, Srilanka, Tamil issue and Kashmir unrest started. A small motley group ruled India during 1989-91. Many won’t even remember those party names. It was confused, unstable politics. They were confused between Mandal commission and economic reforms. Then Narasimha Rao became Prime Minister with wafer-thin majority after buying some small parties in Jharkhand. But he bravely implemented drastic reforms that previous majority governments shied away from. There was sea change in foreign investment and internal banking system. The same period 1992-93 that saw economic reforms, also witnessed Babri masjid demolition and Bombay riots. Then came Devgowda, Gujral, 13 days Vajpayee and 6 years Vajpayee. We did nuclear test emphatically, for which the world has not yet forgiven us. Those were the two years when GDP growth went down.
In past 30 years, government has changed seven times. GDP remained unimpaired by these shifts. It continually grew. Growth remained intact despite famines, earthquakes, war situation, floods, government instability.
When Japan grows, growth is reflected in everything and in every dimension. This happened in India only during Mughal period. There was all-round growth, in arts, economy, army, security and culture. Today’s growth is not similar. Politics is not promising.
Today we are witnessing female foeticide. This has increased in urbanised areas. South Delhi is the worst accused of all 618 districts. Female foeticide is less in tribal districts, but more in urbanised areas.
Average Indian age is 24. This is a young nation. 65% population is less than 35. Japan, England and America went past this same stage in the past. Young population is important not because they will produce more, but they will consume more. So a young country won’t hesitate to spend. I finished B.E in 1987. Two companies BHEL and ECIL used to come for campus recruitments. Monthly salary was 1200 rupees. Only five students will be recruited. I joined BHEL. I proudly told my friends that I will buy a scooter before 1995. Scooter costed 9000 rupees. My friends told me not to be arrogant. But today I see youngsters buying cars and flats. I feel happy. Young population brings benefit to the nation.
But this is a fragile population. Recently I read small a news about inauguration of National Academy of Construction here near Charminar. This is stupendous development. This will yield good quality plumbers, carpenters and electricians. Training and certification can increase wage by 300%. Skilled workforce is scarce in India. Uncertified, untrained labourers are not reliable. Certification is a sure shot way for poverty alleviation. Youth population that is untrained holds no promise for future. There won’t be growth.
In 2000, 50% did not go to school. Of the 50% enrolled in schools, 74% were absentees. Because teachers were regularly absent. In 2010, 97% children have been enrolled in schools. This is a huge development. Work from developed countries was outsourced to India. Now some small countries depend on India’s help. Salary hike has been 14% continually for the past 9 years. This is the highest in the world. It took 18 years to double the salary in 1960s. Now it takes just six years. Hereafter quality should take precedence in lieu of labor arbitrage. Of the 60 crore working employees in India, only 22 lakh work in IT industry. But IT contributes to 9% of services sector. Even though workforce is less, its contribution to exports and services is huge. IT contributes to 26% in exports growth.
Quality has to be improved in education. An average sixth standard student struggles to read second standard textbooks.
Tuberculosis medicine costs just 6 dollars, 300 rupees. Yet one crore people die because of this disease. Only 3.5% of GDP is allotted for healthcare. When we go out just 5 k.m out of the city, stark malnutrition cases are visible aplenty. Protein deficiency is acute. Inflation has been continually rising in the past two years. Of all the vegetables consumed, 72% is of potatoes and onions. Onion has become center of politics. Inflation results in malnutrition.
An engineering graduate can work anywhere in India. But a farmer cannot sell his produce anywhere in India. There is liquor prohibition in Gujarat. This only benefits cops. When I was undergoing training there, liquor used to be sold in police stations.
Grain production in India is 220 million tonnes. 190 MT is sufficient for all Indians to eat joyfully. But 50 million tonne is wasted in storage and logistics. This results in scarcity of 30 MT. A person brings his produce from village to the market. When he started in his village, rates were different. Market rates are different. He ends up dumping his produce in the wayside out of sheer frustration and returns home. A farm produce changes 14 hands before it reaches final consumer. Some Indian barons are creating obstacles for the entry of investments like Walmart in retail industry. In 1961, farming gave employment to 79% and it contributed to 60% of GDP. Now 60% workforce in farming contribute to only 14% of GDP. India is fourth largest economic force in the world. We will overtake Japan quite soon. Yet we are home to 30 crore poor people. Growth is there, but distribution is missing. Is growth important or inclusive growth important? If we target inclusive growth, there will neither be inclusion nor will there be growth. This is my opinion. America is the most unequal nation in the world. Indian economy is 1.7 trillion dollar. Black economy will be half of this. Highest foreign investment to India comes from Mauritius. Indian money is re-entering India. Only 1.5% people pay income tax. 94% belong to unorganised sector. Income tax collection has increased 65% y-o-y continually for the past 14 years. Customs and Excise collection also has increased. But direct tax increase is good. Northern states are witnessing growth.