Dynamics of development : Status quo needs to change

India today faces a dual challenge. On one side, the number of cases of COVID 19 are rising, on the other, there are millions of migrant laborers who are spending days in misery and uncertainty

Dynamics of development : Status quo needs to change

Sampada Saxena and Abhishek Khadgawat

India today faces a dual challenge. On one side, the number of cases of COVID 19 are rising, with no hope of its cure anytime soon, on the other, there are millions of migrant laborers who are spending days in misery and uncertainty. These are undoubtedly the darkest days of this century. This situation is harrowing but at the same time, it is a signal to understand how unbalanced our growth has been.

The Indian economy has shown remarkable progress over the years, but we all know how we had a lopsided growth pattern i.e. a service-led growth, skipping the manufacturing sector. The services sector itself has been driven by the IT-BPO sector, concentrated in a few megacities. This follows from the very concept of NEG (New Economic Geography), where various scholars have studied and concluded that in India, there is a spatial agglomeration of the services in high-density areas whereas, in other countries like the US and China, the same is seen in medium-density locations. This has posed a big concern, especially when we look at the current scenario. Agglomeration economies attract formal as well informal workers. This continuous exodus of people from rural to urban areas is supported in economic theory by the famous development model of Lewis Ranis Fei which identifies the presence of disguised unemployment in rural areas as the main reason behind the migration.

These millions of migrants had left their homes in search of better opportunities, in search of hope. Thus rural out-migration is the present-day reality. This would not have been an issue if migrants were able to secure decent employment in an industry with an appreciable standard of living, ensuring them better wages than agriculture at the same time increasing the surplus in the primary sector thereby benefiting the left behinds as well. This win-win situation is far from reality as the economic transition in India has been from agriculture to the service sector, neglecting manufacturing which is highly employment elastic. The absence of employable skills with the migrants plus the rampant subcontracting disincentivizes any on the job training effort by the employer. The result being mass employment in low skilled manufacturing and service sector jobs with utter negligence of a decent quality of life culminating in urban congestion, slum development, dilapidated housing with the sheer absence of standard facilities like drinking water, adequate sanitation and the like.

Moreover, with the agglomeration of economic activity, we are getting closer to the point where the congestion costs will start being greater than the benefits of the concentration. This puts a strain on the public welfare responsibilities of the civic bodies which are already crunching under inadequate financing avenues coupled with the adverse effect it puts on the environment as manifested with rapid city encroachment on nearby green buffers.The degrading standards of social life leading to an increase in crimes are a direct result of gross inequality which becomes evident to the migrants dwelling in sub-par conditions near high rise skyscrapers.

According to a paper by Desmet et al., when compared to the US, medium-density locations in India are performing poorly. This also diverts us to think about the possible frictions, policies, or lack of infrastructure in medium-density cities that prevent them from growing and thus favoring concentration in high-density ones. The future lies in working on these loopholes.

The primary reason that migrants don’t get readily absorbed in the high paying jobs is the absence of relevant skill endowment. The need of the hour is to focus on their skill enhancement through vocational courses and the initiatives like learning by doing. Indigenous production has a paramount role in the development of our economy in contemporary times. Quoting Epicurus, ‘Self-sufficiency is the greatest of all wealth.” Looking at India, a land full of youth and opportunities there lies colossal potential to manufacture products that we otherwise end up importing. To make manufacturing attractive and increase its rate of growth, the policy focus should be on indigenous production. Here, the recent steps by government in the form of Make in India, manufacturing exports from India scheme, terming logistics sector as infrastructure would be the game-changer. The steps are taken to boost MSME growth( second largest employer after agriculture) through initiatives like compulsory public procurement thereby giving them a demand push along with ensuring institutional credit. MSMEs not only play a climacteric role in providing large employment opportunities at comparatively lower capital cost than large industries but also help in industrialization of rural & backward areas, thereby, reducing regional imbalances, assuring more equitable distribution of national income and wealth.

Concepts like smart cities, small townships can help make the development process spatially dispersed. These small townships would provide all the basic facilities, employment opportunities and a better standard of life, which would also majorly curtail the large-scale migration that we have been witnessing over the years, keep the resources in check and also take care of the environment as these cities are smartly planned to keep in mind all these aspects.

As we move forward, we must not neglect the primary sector and find ways to make it sustainable. Making agriculture remunerative by taking steps such as mixed farming i. e. combining agriculture with activities like livestock rearing, dairying, poultry farming can ensure a stable stream of income reducing variability.

The ongoing health crisis has also made us realize how us humans have harmed nature in the wake of economic growth. COVID-19 has also made us realize that the future that lies ahead of us entails ‘New Normals’, and these new normals should, therefore, be molded in a way to our benefit. With Social Distancing, we might as well distance the economic growth from the selected nuclei and help it spread across the country.

All the institutional and technical measures need to be implemented efficiently. Much needs to be achieved and we can't be complacent. "If you're walking down the right path and you're willing to keep walking, eventually you'll make progress." We need to identify the right path, persevere; success will follow. To sum up, "Do not go gentle into the good night.

Rage... Rage... Rage for the dying of the light "

Submitted by:

Sampada Saxena and Abhishek Khadgawat MA ECONOMICS first year students at Delhi School of Economics, University of Delhi.

Sampada Saxena :

Previously interned with NITI Aayog in Development Policy and Perspective Planning department. Also worked with Invest India, with a focus on Sustainable Development Goals.

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