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News: Covid has substantially sharpened economic dualism in India. Poverty rates are increasing and government needs to focus on the expansion of job opportunities in both the formal and informal segments
India has been characterised by significant economic dualism and disparities over many years.
| Dualism indiciates co-existence of two different worlds. Economic dualism therefore denotes existence of disparities in economic sphere. In this case it denotes the disparities between, Urban vs rural, formal vs informal, land (and other assets)-owning vs landless. employed vs jobless, well-educated vs ill-educated, and rich vs poor states. |
What are the possible reasons for the economic dualism in India?
Rise in poverty: India is witnessing a substantial increase in rural poverty in several major states and an overall increase in the poverty ratio for the first time in four decades.
Slow economic growth in the last ten years
Twin shocks of demonetisation in late 2016 and transition to goods and services tax in 2017-18.
Sharp deterioration in employment conditions, youth unemployment rate and a massive decline in female labour force participation between 2011-12 and 2017-18 as recorded by the employment/labour force surveys.
Impact of the Covid pandemic and the nationwide lockdown imposed in late March 2020. This further worsened the unemployment rate and labour force participation rate.
Disproportionate impact on the non-agricultural informal sector: The loss of jobs and earnings was disproportionate in the non-agricultural informal sector accompanied by slow recovery.
What are the possible consequences of an increase in economic dualism?
It is likely to exert lasting negative influences on our economic and social trajectory in the medium and long run. These might include
– Reduced potential for economic growth
– The persistence of very weak employment and poverty situation.
– Rising social and political discord
– Heightened vulnerability to geopolitical challenges.
What is the way forward?
The central focus of the government has to be the expansion of job opportunities in both the formal and informal segments of the economy. Higher rates of employment will reduce poverty and strengthen overall economic growth.
This can be done via the following measures:
– Strengthening rural employment guarantee programmes.
– Encouraging labour-intensive manufacturing for both domestic and external markets through better policies.
– Enhancing learning outcomes in schools and overall skill-development.
– Removing regulatory impediments to employment expansion in all areas.
– Strengthening programmes for public health and basic health care.
– Raising the national tax to GDP ratio to undertake more expenditure on public goods like education, health, roads and other social infrastructure.
– Improving the business climate to nurture higher private investment.
Source: This post is based on the article “Dualism and its discontents” published in the Business Standard on 11th November 2021.
