20 Jun 2019 18:43 IST

Education system needs a major overhaul

NDA 2.0 should now take audacious steps for country’s long-term benefit

The Indian economy stands at the cusp of great change. The government faces difficult choices which will determine the course or inertia of the economy for decades to come. Economic growth is dwindling. The Purchasing Managers’ Index (PMI) and export growth remain in the doldrums. The employment rate is at a 45-year low.

Though inflation is contained, it has not translated into more credit for business. Consumption, due to the rising income levels of the top 15 per cent, is driving the economy and is now largely satiated through imports. There are tell-tale signs which suggest that the Indian economy may be heading towards a middle-income trap. The unrelenting and sticky rural distress continues even seven decades after Independence.

Setting the course

With ministers like Piyush Goyal, Nitin Gadkari and Nirmala Sitharaman, the government is on a good wicket to execute economic course correction. The need of the hour is to focus on long-term eradication of the root cause of problems rather than administering painkillers. Ideally, governments prefer keeping external geo-politico-economic influences predictable to formulate the optimum economic policy.

This objective may be impossible to achieve in its entirety. However, the 90-10 rule suggests that the government should focus on 10 per cent of the most impactful factors, through an effective strategy. The government will do well if it selects strong allies rather than adopting the please-all tactic as it did in its last term. With external factors stable, it should focus on setting the economy in order.

Education, skilled workforce

Before the demographic dividend transforms into a disaster, the Centre must think ahead and start investing in the education sector and in upskilling the youth. Instead of palliative measures such as unemployment allowance, the government must undertake an overhaul of the primary and secondary education system, especially in the rural sector.

The selection criteria for teachers must be more stringent and their job should be financially more rewarding. Without providing quality education to children, it is hopeless to assume they would be employable additions to the workforce later. Initiatives such as ‘Skill India’ must be reinvigorated and upcoming disruptions such as 5G, IoT, machine learning and AI must be anticipated. This will generate a skilled workforce, and will fuel entrepreneurship, which should be a critical component of the government strategy for employment generation.

Labour-intensive industries such as leather, textile and footwear have a great capacity for female-labour absorption. New commercial centres must be built, with the appropriate infrastructure and connectivity, to lead the change.

Agrarian sector

Farmers don’t need handouts in the form of loan waivers. They need MSP and protection from the Agricultural Produce Market Committees (APMC) when they try to market their products. Technology must be made the enabler, not just in marketing of the farm produce, but also when it comes to adopting modern methods of farming to increase productivity.

The government must undertake aggressive improvement in its supply chain and develop storage warehouses to maintain buffer stocks and manage supply. This will stabilise commodity prices. By containing inflation, the RBI should have the required elbow room to relax interest rates, which should lead to higher credit availability. However, the government must develop a mechanism where banks are empowered to clean their balance sheets while adhering to rational criteria, without facing threats of investigations. Without this being done, the choke points will never be unclogged, and the liquidity will never spillover from the banks to the markets.

Potential of PSUs

There has been much clamour for closure of loss-making PSUs as a means to give government the funds for social investment. While the move makes sense, the selection of such PSUs requires deeper inspection of their current and future utility for the government in creating social welfare. The top management of PSUs is appointed by the President of India. This has led to a stifling administrative hold on the PSUs by the ministries, constantly putting the former at a disadvantage vis-à-vis their private counterparts.

Contrary to the naïve view that the public sector is a burden on the public exchequer, PSUs have the potential of becoming commercially viable, and more importantly, a potent tool for implementation of the government agenda. The government must take steps which will allow PSUs to realise their full promise.

(The writer is a student of EPGP 2019-20 at IIM Bangalore.)

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