Economic agenda for Modi 2.0 should concentrate on employment generation

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It is the soothing thing about history that it does repeat itself.

  • Gertrude Stein

Hit hard by the five-year low GDP growth and a 45-year high unemployment rate of 6.1%, Modi government formed two new cabinet committees to check the declining trend in growth and employment and spur demand as well as consumption. A five-member cabinet panel on investment and growth has members which include Union Home Minister Amit Shah, Highways Minister Nitin Gadkari, Commerce Minister Piyush Goyal and Finance Minister Nirmala Sitharaman. The stupendous success of the Modi government with 303 Lok Sabha seats was marred by the news on the economic front. The labour ministry data revealed joblessness in the country was 6.1% of total labour force during 2017-18, the highest in 45 years. Much to the discomfort of the government, this has confirmed the unemployment rate projected in a pre-election leaked report. Data from the labour ministry showed that 7.8% of all employable urban youth were jobless, while the percentage for the rural segment was 5.3%.

There is a growing financial turbulence which is likely to rock the country within a few months because the country is likely to continue witnessing growing imports and slowing exports. The near-empty coffers– a lot of money has been spent on social welfare without focusing on wealth generation as well– will ensure that the government will have little money to spend either on infrastructure or the promotion of industry. Without these, unemployment could get worse. FDI won’t pour in unless India assures investors that it is willing to protect investments. This cannot be done till the process of judicial dispute redressal is improved considerably. In contrast, the government went about cancelling all bilateral investment treaties (BITs) with as many as 58 countries in 2015. It instead demanded that all these countries sign a modified investment treaty which forbade parties from approaching international arbitration tribunals without first exhausting existing legal remedies in India. And everyone knows how efficient Indian dispute resolution can be!

For the past three years none of the countries has bothered to sign the modified agreement proposed by the government. A fresh one has been mooted, but has yet to meet with the approval of countries apart from Cambodia and Belarus. Without BITs in place, investments have slowed down. If government wants to create jobs, it will need investments. For that, it will have to ensure investment protection. Without that, unemployment just cannot be wished away. And if the situation gets any worse, it will be difficult to rule out riots and acts of violence, much directed against the state machinery and its representatives.  India is thus at a crossroads. It must either show investing countries that it is willing to protect investments, or it could end up becoming a failed state. The line dividing a failed state and a respected one is thin, but clear. The dividing line is respect for speedy judicial redressal, and respect for other people’s money. India has some difficult lessons to learn.

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