In his talk on ‘Rebuilding India's Economy Post Covid-19,’ the economist called for a rapid sectoral shift in employment and a policy framework to enable the creation of high productivity jobs in labour intensive industries
06 August, 2020, Bengaluru: Tracing the economy’s growth rate post reforms – a cyclic effect of acceleration and slowdown, well-known economist Dr Arvind Panagariya said when COVID-19 hit India, the country’s economy was already in stress and on a weak footing. “However, I think the government has handled it pretty well with its focus on ensuring that people had the necessities – food and shelter. A big stimulus, contrary to some views, could never have given a supply response. The government was also correct in announcing measures to create a guaranteed fund and ensure cash flows.”
Dr Arvind Panagariya, Jagdish Bhagwati Professor of Indian Political Economy & Professor of Economics, School of International & Public Affairs, Columbia University, delivered a special virtual lecture titled, ‘Rebuilding India’s Economy Post Covid-19’, to the students of IIMB Bangalore, this evening.
His talk was hosted by IIM Bangalore’s one-year fulltime Master of Management Studies (Public Policy) – the Post Graduate Programme in Public Policy & Management(PGPPM), as part of PGPPM’s event ‘Policy Speaks’, a Public Policy talk series.
Listing the government’s announcements of policy reforms in the agriculture sector, PSUs, coal and mining, electricity, rental housing and the MSME sector by liberalising the definition of MSMEs, Dr Panagariya said that one must recognise that even with relatively restrained fiscal policy, fiscal deficit would rise to 13 per cent. “You will see NPAs rising quite dramatically and there will have to be another big round of recapitalization by banks. So, the government will have to bite the bullet and announce privatisation of banks.”
Road ahead
Pointing out that the pandemic remains the principal challenge not just on the public health front but also for the economy, he said: “Once medical recovery happens, economic recovery will happen. I am optimistic about that.”
On the long-term future of the Indian economy, he said in the process of development, India had created too many tiny economy units. “We need to become modern and urban in order to speed up the process of transformation – in 20 to 30 years ideally instead of 70-80 years -- and to do this we should recognise that tiny units slow down the process.”
Explaining why he believes that agriculture could never become a high productivity sector because of its small and fragmented nature, Dr Panagariya said: “The only way ahead is to go large in industry and services – consolidation will enhance productivity. About 42 per cent of the total work force in India is in companies that are less than 20 workers. Dominantly, most of this work force is in ‘own-account enterprises’, which do not employ hired workers, where, again, the productivity is low. Small and medium sized enterprises in China and Taiwan are productive, but these countries also have large enterprises. The problem with India is that we mostly have small enterprises.”
To create high productivity jobs, he said the focus should be on labour intensive industries like apparel, footwear, furniture, electrical and electronic goods, etc. “We think our IT sector will do wonders. But can you bring farmers or domestic workers into IT and Finance sectors? If you want to speed up growth, you need scaling up of labour intensive industries. The near absence of large and medium enterprises has slowed our growth.”
Remarking that has India has been focusing only on the ‘micro’ in MSMEs, forgetting the medium enterprises, he said: “We need a policy framework to address this as a problem. If more medium and large enterprises begin to emerge in the labour intensive sectors, they will begin to draw labour from small enterprises, turn some small enterprises into ancillaries and encourage competition and growth.”
What India needs is a dramatic transformation in employment share -- a rapid sectoral shift in employment like South Korea, he added.
About the speaker
Dr. Arvind Panagariya holds a PhD in Economics from Princeton University. He served as the first Vice Chairman of the NITI Aayog between January 2015 and August 2017, and played a key role in shaping the institution. He was previously Chief Economist at the Asian Development Bank. In the past, he has been a Professor of Economics at the University of Maryland. He has also worked for the World Bank, International Monetary Fund, World Trade Organization, and the United Nations Conference on Trade and Development (UNCTAD).
Dr. Panagariya has written more than 18 books, including India: the Emerging Giant, published in March 2008. This book was listed as the ‘Top-Pick’ by the Economist magazine in 2008. For his contribution to the field of Economics and Policy Making, he was awarded Padma Bhushan in 2012. He has been adviser to the Board, US-India Strategic Partnership Forum (USISPF), Non-resident Senior Fellow, Brookings Institution, Washington DC, Member, International Advisory Board, Securities and Exchange Board of India and Founding Editor, India Policy Forum (2004 to 2014) of the journal jointly launched in 2004 by the Brookings Institution and the National Council for Applied Economic Research (NCAER).
The Q&A
Over 125 students of IIMB, from the PhD programme, the two-year MBA pogramme, the one-year Executive Post Graduate Programme and the one-year Public Policy and Management Programme, attended Dr Panagariya’s virtual lecture and engaged him in a lively discussion on topics around the labour crisis caused by the pandemic, the creation of autonomous employment zones and the rise of AI & ML in industry.
In his talk on ‘Rebuilding India's Economy Post Covid-19,’ the economist called for a rapid sectoral shift in employment and a policy framework to enable the creation of high productivity jobs in labour intensive industries
06 August, 2020, Bengaluru: Tracing the economy’s growth rate post reforms – a cyclic effect of acceleration and slowdown, well-known economist Dr Arvind Panagariya said when COVID-19 hit India, the country’s economy was already in stress and on a weak footing. “However, I think the government has handled it pretty well with its focus on ensuring that people had the necessities – food and shelter. A big stimulus, contrary to some views, could never have given a supply response. The government was also correct in announcing measures to create a guaranteed fund and ensure cash flows.”
Dr Arvind Panagariya, Jagdish Bhagwati Professor of Indian Political Economy & Professor of Economics, School of International & Public Affairs, Columbia University, delivered a special virtual lecture titled, ‘Rebuilding India’s Economy Post Covid-19’, to the students of IIMB Bangalore, this evening.
His talk was hosted by IIM Bangalore’s one-year fulltime Master of Management Studies (Public Policy) – the Post Graduate Programme in Public Policy & Management(PGPPM), as part of PGPPM’s event ‘Policy Speaks’, a Public Policy talk series.
Listing the government’s announcements of policy reforms in the agriculture sector, PSUs, coal and mining, electricity, rental housing and the MSME sector by liberalising the definition of MSMEs, Dr Panagariya said that one must recognise that even with relatively restrained fiscal policy, fiscal deficit would rise to 13 per cent. “You will see NPAs rising quite dramatically and there will have to be another big round of recapitalization by banks. So, the government will have to bite the bullet and announce privatisation of banks.”
Road ahead
Pointing out that the pandemic remains the principal challenge not just on the public health front but also for the economy, he said: “Once medical recovery happens, economic recovery will happen. I am optimistic about that.”
On the long-term future of the Indian economy, he said in the process of development, India had created too many tiny economy units. “We need to become modern and urban in order to speed up the process of transformation – in 20 to 30 years ideally instead of 70-80 years -- and to do this we should recognise that tiny units slow down the process.”
Explaining why he believes that agriculture could never become a high productivity sector because of its small and fragmented nature, Dr Panagariya said: “The only way ahead is to go large in industry and services – consolidation will enhance productivity. About 42 per cent of the total work force in India is in companies that are less than 20 workers. Dominantly, most of this work force is in ‘own-account enterprises’, which do not employ hired workers, where, again, the productivity is low. Small and medium sized enterprises in China and Taiwan are productive, but these countries also have large enterprises. The problem with India is that we mostly have small enterprises.”
To create high productivity jobs, he said the focus should be on labour intensive industries like apparel, footwear, furniture, electrical and electronic goods, etc. “We think our IT sector will do wonders. But can you bring farmers or domestic workers into IT and Finance sectors? If you want to speed up growth, you need scaling up of labour intensive industries. The near absence of large and medium enterprises has slowed our growth.”
Remarking that has India has been focusing only on the ‘micro’ in MSMEs, forgetting the medium enterprises, he said: “We need a policy framework to address this as a problem. If more medium and large enterprises begin to emerge in the labour intensive sectors, they will begin to draw labour from small enterprises, turn some small enterprises into ancillaries and encourage competition and growth.”
What India needs is a dramatic transformation in employment share -- a rapid sectoral shift in employment like South Korea, he added.
About the speaker
Dr. Arvind Panagariya holds a PhD in Economics from Princeton University. He served as the first Vice Chairman of the NITI Aayog between January 2015 and August 2017, and played a key role in shaping the institution. He was previously Chief Economist at the Asian Development Bank. In the past, he has been a Professor of Economics at the University of Maryland. He has also worked for the World Bank, International Monetary Fund, World Trade Organization, and the United Nations Conference on Trade and Development (UNCTAD).
Dr. Panagariya has written more than 18 books, including India: the Emerging Giant, published in March 2008. This book was listed as the ‘Top-Pick’ by the Economist magazine in 2008. For his contribution to the field of Economics and Policy Making, he was awarded Padma Bhushan in 2012. He has been adviser to the Board, US-India Strategic Partnership Forum (USISPF), Non-resident Senior Fellow, Brookings Institution, Washington DC, Member, International Advisory Board, Securities and Exchange Board of India and Founding Editor, India Policy Forum (2004 to 2014) of the journal jointly launched in 2004 by the Brookings Institution and the National Council for Applied Economic Research (NCAER).
The Q&A
Over 125 students of IIMB, from the PhD programme, the two-year MBA pogramme, the one-year Executive Post Graduate Programme and the one-year Public Policy and Management Programme, attended Dr Panagariya’s virtual lecture and engaged him in a lively discussion on topics around the labour crisis caused by the pandemic, the creation of autonomous employment zones and the rise of AI & ML in industry.