India’s hidden challenges

Source: By Raghav Gaiha: Mint

The budget for 2019 is a surreal mix of fact and fancy. While there is a belated recognition of investment as a barrier to the acceleration of growth and a sharp spike in the allocation for agriculture, primarily to finance higher minimum support prices (MSPs), healthcare—especially of the ageing, a growing share of the population—has been overlooked as a major priority.

Huge losses of output inherent in the incapacity of the aged increasingly vulnerable to non-communicable diseases (e.g. diabetes, cardiovascular diseases, cancer) are avoidable not just through higher outlays on health, but also through a reorganization of the health system with much greater emphasis on primary medical centres or PMCs. Ironically, neither renewed emphasis on investment-driven growth, nor higher outlays on agriculture, are likely to substantially boost employment. So, the vision of a resurgent India is distorted and lopsided, apart from the worry that the budget’s fiscal arithmetic is awry.

With the brouhaha over unemployment touching a 45-year high of 6.1% in 2017-18 dying a slow death after the National Democratic Alliance government’s release of the first periodic labour force survey (PLFS) a day after taking oath, the emphasis is beginning to shift to the slowing of gross domestic product growth. Assertions are made ad nauseam that the Indian economy is in a middle-income trap, in complete denial of the growing deficiency of aggregate demand, induced by the wrong-headed policy shock of demonetization and glaring failures of the goods and services tax.

Such assertions are intended to divert attention from a deepening crisis in agriculture, the paralysis of the informal sector, sputtering manufacturing growth and slowing exports. So, a high unemployment rate is no surprise. However, while averages are useful in helping policymakers focus on a serious problem, it is necessary to look beyond them.

We focus on the aged (60 years and above), with their growing vulnerability to NCDs and disabilities (such as the inability to walk and dress, apart from speech and vision impairment), and caste and education barriers impeding their employment. The analysis is based on a nationwide panel survey, the India Human Development Survey 2015 (IHDS 2015), covering 2005 to 2012.

Four mutually exclusive categories of farm, business, wage and salary employment were identified: Not employed, employed for less than 240 hours in a year (just employed), and those employed for more than 240 hours in a year, disaggregated as part-time employment (but not throughout the year), and full-time employment. The sample comprises persons in the age groups of 15-30 years, 31-50 years, 51-60 years, 61-70 years, and above 70 years.

Relative to those in the 15-30 years group, those in the older 31-50 years group exhibited lower probabilities of being not employed, and just employed, but higher probabilities of being employed part-time and full-time. A similar pattern is associated with the next age-group of 51-60 years, as well as 61-70 years. As expected, the oldest, aged 71 years or more, were most likely to be not employed and less likely to be just employed, employed part-time and full-time. So, old age acts as a barrier to part-time and full-time employment.

The caste divide was glaring

Brahmins and other “forward" castes showed notably lower probabilities of being not employed, or just employed, but higher probabilities of being employed part-time and full-time, compared to Other Backward Classes (OBCs). Dalits and tribals displayed patterns similar to OBCs’.

Relative to illiterates, those with 1-4 years and 5-8 years of education showed higher probabilities of being not employed and just employed, and lower probabilities of part-time and full-time employment, while those with 8-10 years of education showed no significant pattern. In contrast, those with 11 years or more of education displayed significantly lower probabilities of being not employed and just employed, and much higher probabilities of part-time and full-time employment, leading to the inference that a turning point in long-duration employment occurs at above-matriculation level.

Relative to those who were not afflicted with NCDs, those who did display higher probabilities of being not employed and just employed, had much lower probabilities of part-time and full-time employment. A similar pattern was revealed by disabilities. These findings suggest considerable loss of manpower and potential output through ill-health.

Greater state affluence is associated with lower probabilities of being not employed and just employed, and significantly higher probabilities of part-time and full-time employment. Thus, state affluence through growth has substantial employment potential.

In brief, instead of wallowing in an imaginary middle-income trap, more attention must be paid to policies designed to boost aggregate demand and provide better healthcare for the aged through Ayushman Bharat Yojana (ABY), with due emphasis on integrated medical care through PMCs. Astonishingly, the ABY, despite its transformative claims, was mentioned only once.

 

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