Issues facing Indian Economy

(This post elucidates Poverty Alleviation, Jobless growth, Rising Inequalities, Migration and excessive pressure on resources, possible remedies, and Pandemic situations)

Poverty has many dimensions, but its causes include unemployment, social exclusion, and the high vulnerability of certain populations to disasters, diseases, and other phenomena that prevent them from being productive.

Poverty Alleviation is the set of steps taken in an economic and humanitarian way to eradicate poverty in a country. Eradicating extreme poverty for all people everywhere by 2030 is a pivotal goal of the 2030 Agenda for Sustainable Development. Extreme poverty, defined as surviving on less than $2.15 per person per day at 2017 purchasing power parity, has witnessed remarkable declines over recent decades. The global poverty headcount ratio at $2.15 is revised slightly up by 0.1 percentage points to 8.5 percent, resulting in a revision in the number of poor people from 648 to 659 million. (Source: World Bank). Under the emergence of COVID-19, the number of individuals living in extreme poverty increased for the first time in a generation by almost 90 million over previous predictions. Source: The Sustainable Development Goals Report 2023.

Some of the important poverty alleviation programmes in India are integrated rural development programs, MGNREGA, PMEGP, and National Food for Work Programme, Pradhan Mantri Jan Dhan Yojana, Pradhanmantri Kaushal Vikas Yojana, Gramin Swaraj Abhiyan, and national rural livelihood mission.

 Unemployment and rising inequalities:

There are many reasons for unemployment. Jobless growth occurs when unemployment remains high even as the economy grows. This can happen due to various reasons including technological advancements, capital-intensive growth, or structural shifts in the economy. Even when the economy expands without creating new jobs, unemployment stays persistently high. These include recessions, depressions, technological improvements, job outsourcing, and voluntarily leaving one job to find another. This generally happens when many people have lost their jobs, and the ensuing recovery is insufficient to absorb the jobless, under-employed, and newcomers to the labour market. India has largely seen jobless growth over the last two decades, which has contributed to soaring inequality in this millennium. As per a study by IIM, BITS (Pilani) and the Ministry of Agriculture and Farmers Welfare find that India is not generating enough jobs. The gender disparity is sticky and while there is a jobs crisis also for unskilled labour, proportionately there are far fewer jobs for the better educated. It is also reported, “a stagnating employment growth rate, weakening employment elasticity, slow structural transformation” as per The Hindu, which has reported on their findings published in the Indian Journal of Labour Economics.

Between 2012 and 2019, there was an alarming increase in unemployment because of the decrease in women’s participation in the workforce, a trend which has been slightly reversed post-2019. Between 2014-15 and 2022-23, the rise of top-end inequality has been particularly pronounced in terms of wealth concentration. By 2022-23, the top 1% income and wealth shares (22.6% and 40.1%) are at their highest historical levels and India’s top 1% income share is among the very highest in the world. (World Inequality Database).

India has been riddled with inequality for a long time, but it has intensified in recent years, especially during the pandemic. While India ranks fifth in the world based on GDP, and as the fastest-growing major economy, this growth has been accompanied by a sharp rise in inequality. According to a recent UNDP report on Asia-Pacific Human Development, in the time that India added nearly 40 billionaires (the count rose from, 102 to 143), 46 million other Indian fell below the poverty line. Although the per capita income increased over the years, much of the income and wealth generated has gone to the top one percent of the population. Therefore, the disparity within the nation has increased both in terms of income and wealth.

Migration and excessive pressure on resources:

Migration is a social phenomenon caused by wide-ranging reasons including the search for better economic or educational opportunities, the desire for family reunification, climate change, or disasters. Climate change may impact and lead to a significant increase in internal and regional migration in emerging markets and developing economies. There are two types of migration to the recipient country in international migration. The first one is the regular route that takes place legally through regulator channels and legal means.

By contrast, the second one is irregular migration, it occurs when a person enters, stays, or works in a country without the necessary authorization or documents required under immigration regulations. In response to the growth of irregular migratory movements, many countries are looking towards border control as a solution such as closing ports of entry to deter migration to prevent irregular migration, dismantle organized criminal networks, and protect the rights of migrants.

Migrants often settle within their home region. However, a significant part of international migration takes place over long distances (for example, from South Asia to the Middle East) and, in particular, from emerging markets and developing economies toward advanced economies. (Source: United Nations and IMF staff calculation)

Consequences of migration:

While most people have positive perceptions about immigrants, there are misconceptions and concerns. For instance, some think that migrants are a burden on economies. Immigrants in advanced economies increase output and productivity both in the short and medium term.  Migration is a powerful driver of sustainable development, for migrants and their communities. It brings significant benefits in the form of skills, strengthening the labour force, investment, and cultural diversity, among others. Migration has the potential to bring positive socioeconomic outcomes for both host and recipient societies and migrants.

Migration affects both the area of origin of migration and the areas of destination of the migrant population. The following consequences may take place due to the migration of human beings from one place to another.

1. Demographic consequences: Migration changes the characteristics of the population in regions of outmigration and regions of in-migration. It changes the age and sex composition of the population with the rate of growth of populations of the regions.

2. Social consequences: Migration results in the intermixing of diverse cultures and leads to the evolution of composite culture. There are also risks of migrants eventually inducing social, economic, and political problems in receiving countries, including 1) increases in the population, with adverse effects on existing social institutions; 2) increases in demand for goods and services; 3) displacement of nationals from occupations in the countryside and the cities.

3. Economic consequences: Migration alters the resource population ratio. The movement of people from an overpopulated area to an area of underpopulation results in balancing the resource-population ratio. By contrast, if the migration is from under-population to overpopulation or optimal population, the results damage both areas. Migration affects the work-related structure of the population. The population of receiving areas becomes more productive causing a dependency ratio in the source areas. Migration of skilled population from developing countries to developed countries for better opportunities results in brain drain in developing countries. However, People migrating out send remittances to their families at home and add to the economic prosperity of their country of origin.

Possible remedies:

Migration has been a sensitive and contentious topic for ages. Escaping violence, war, poverty, and environmental disasters, more people than ever are migrating worldwide. Since it is not a cyclical, but a structural phenomenon, which means that whatever the method put forward migration cannot be stopped. Currently, according to the UNO estimates, 258 million people live outside their country of birth (3.4% of the world’s population). In 1970, about 2% of the world’s 3.7 billion people lived abroad (UNHCR 2017). This figure grows due to inequality, climate change, conflicts, and the interconnectivity that facilitates the movement of people.

Normally, migration carries immense gains to recipient countries and provides an opportunity for a better life for migrants. However, it may also create distributional challenges, as native workers in specific market segments could be hurt economically, at least temporarily. Thus, fiscal and labour market policies of the Governments should therefore be used to support the income and retraining of those natives facing labour market difficulties. Besides, active labour market and immigration policies geared toward integrating immigrants, such as language training and easier validation of professional titles, can help build even better outcomes from immigration in recipient countries.

Forced migration can be reduced if education and employment opportunities are available in home Countries, thereby enabling individuals to choose between staying and migrating. Regional cooperation can help minimize the negative consequences of migration and preserve its integrity. It can also contribute to regional and global development goals by improving human capital through sustainable development and ensuring longer-term economic growth.

Pandemic situations:

The pandemic COVID -19 exposed many of the challenges faced by migrants that predated the crisis and are likely to persist and be worsened in future crises if left unaddressed. According to a report, there were 600 million internal migrants in India, most of them workers unable to enter the formal labour market. In many instances, the families in native places depend partially or entirely on the money sent by the migrant-earning family members. Immediate concerns faced by such migrant workers relate to food, shelter, and healthcare, fear of getting infected or spreading the infection, loss of wages, concerns about the family, anxiety, and fear. Sometimes, they also face harassment and negative reactions from the local community. However, the pandemic has also prompted some positive responses by States that provide examples for building back better, including inter alia by adapting regular migration trails to shifting health necessities and creating momentum to expand regular corridors.