More than 50 per cent of India’s population at present is below the age of 25, and more than 65 per cent below the age of 35. It should be the government’s main priority to work on development of opportunities for youth.
According to the Annual Employability Survey 2019, nearly 80 per cent of Indian engineers are not fit for any job in the knowledge economy and only 2.5 per cent of them possess the requisite new tech skills that industry requires. Therefore, the government should not only focus on providing basic education but also undertake a complete overhaul of the education system. India requires a smart, educated young population that is capable of contributing meaningfully in the corporate or industrial space.
Create more jobs
For more jobs to be available, it is up to the government to create greater employment opportunities and put in place the kind of environment where companies can function easily. The Modi government 1.0 did a lot on this front, with India’s ease of doing business rank at 77th position in 2018 as against 134 in 2014. The latest NSSO report shows unemployment at a four-decade high of 6.1 per cent in 2017-18.
It is of utmost importance that the government goes on to revamp the archaic labour laws and encourage companies to invest in India. A revision of business laws on all fronts is also required to ensure that Industry 4.0 can be a success story.
Bond market
To help companies invest, financing has to be made cheaper; it is high time the Centre and the regulators took on the task of deepening the fixed income markets. Currently the bond market is dominated by AA rated bonds, and issuances by A-rated companies are less than two per cent of the total bond market.
Given that the bond markets react immediately to a rate hike, and with a 75-100 bps rate cut expected in stages this year, it would be wise to take actions to deepen the market now. This would help prevent the crowding out effect from cheaper bank loans. Currently, investment regulations either do not permit, or discourage, investment in private corporate bonds with a rating lower than AA. It would be helpful to relax norms on this front and deepen the market.
Banking system
India’s banking problem is far from solved. With the FRTB norms kicking in and our banks still struggling with capital adequacy requirements, the Finance Ministry will have to infuse much more capital into the banking system. The Insolvency and Bankruptcy Code (IBC) has helped recover a lot of money, but there are plenty of issues within IBC too that require addressing. It would be an important task to work on NPAs and to clear the bad loan mess.
In the absence of proper private investments, it is government expenditure that will boost consumption. The government had promised to double agri-income by 2022-23. Steps such as soil health cards, cheaper crop insurance, raising the MSP, and the PM-KISAN scheme did help to an extent, but a lot more work is required. The project to provide irrigation to all farmers should be one of the biggest targets followed by providing cold storage facilities and a proper market to sell the produce. A successful implementation of these policies will help achieve exponentially good results.
(The writer is from the PGPM Class of 2019- 2020, Great Lakes Institute of Management, Chennai.)