From UPSC perspective, the following things are important :
Prelims level : Not much.
Mains level : Paper 3- Socio-economic upheaval in Indian economy and its consequences for the Indian economy.
With the Indian economy caught in the middle of a socio-economic upheaval, the government needs to make its focus on the economy clear and pronounced.
India in the middle of a socio-economic upheaval
- Weakening economy: The economy has been weakening for a couple of years now.
- Social upheaval: The social upheaval is new but its seeds have been fermenting for a while.
- Consequences of the two: The social and economic sides of an economy are not divorced from each other.
- Each influences the other and the current quagmire threatens to unleash the worst type of feedback between the two.
Consequences for the employment
- Most severe consequence due to the interaction between the social and economic sides is unemployment.
- Rising unemployment disproportionately affects the young.
- India’s job market: India whose median citizen is in the 30s and which is inducting 10 million new young people to the job market every year.
- Demographic dividend turning into a curse: This dynamic, popularly hailed as India’s demographic dividend, can rapidly turn into a demographic curse if the employment situation doesn’t improve.
Falling investment rate, increased risk perception
- Where will the jobs come from? The job creators are entrepreneurs, conglomerates, and multinationals.
- It is in their nature to take investment risks as long as the returns are high enough.
- Investment rates below 30: In India, investment rate fell well below 30 per cent a while back.
- Falling returns: The returns on investment were not compensating entrepreneurs for the risk.
- The recent social upheaval is only adding to the perceived risk.
- Wait and see approach: The more investors adopt a “wait-and-see” approach, the worse the job situation will become.
- Structural reforms: The government needs to announce a clear plan and timeline for structural reforms.
- Prioritising domain competence in staff: The government has to start staffing technical positions by prioritising domain competence and empowering these hires with policy relevance.
- Maintaining the integrity of institutions: The government need to maintain the integrity of institutions tasked with the regulation of corporations and banks, monetary policy management, data collection/dissemination and law enforcement.
- Accommodate dissent: The government also needs to desist from trying to drown out protesting voices with state muscle power.