The Economic Survey, the annual flagship document of the Finance Ministry’s Department of Economic Affairs, is the best document to understand, study and analyse the state of the Indian economy. This document holistically reviews the performance of the economy over the previous 12 months. It is released a day before the Union Budget. The different chapters deal with everything from basic data, GDP numbers, growth rate trends, fiscal conditions, monetary indicators, sustainable development, challenges, issues and prospects. It also provides policy options to address existing issues and challenges and ways to ameliorate the socio-economic set-up. Of course, the survey provides SWOT analysis of the economy, that is, strength, weaknesses, opportunity and threat of the Indian economy.

The Economic Survey 2017-18 was tabled in Parliament on 2 January by Finance Minister Arun Jaitley. The document was designed in pink to highlight gender issues and the government’s support to the growing worldwide movement to end violence against women. This edition lays special emphasis on gender and son meta-preference and provides an assessment of India’s performance on gender outcomes relative to other economies.

The Economic Survey 2017-18 consists of two parts. Volume 1 discusses policies, outlook and contains an analytical review of the economy. Volume 2 describes recent developments in all major sectors of the economy and incorporates descriptive reviews of the economy with detailed statistical tables and data. The then Chief Economic Adviser, Arvind Subramanian, managed the process of bringing out this year’s edition.

Ten new economic facts

A separate chapter in the Economic Survey is dedicated to climate change and environment. The chapter on sustainable development, energy and climate change noted that India has strengthened its response to the threat of climate change in accordance with the Paris Pledge. Systematically, the survey has relied upon analysis of the new data to highlight 10 new economic facts…

• There has been a large increase in registered indirect and direct taxpayers

• Formal non-agricultural payroll is much greater than believed

• States’ prosperity is correlated with their international and inter-state trade

• India’s firm export structure is substantially more egalitarian than in other large countries

• The clothing incentive package boosted exports of readymade garments

• Indian society exhibits strong son meta-preference

• There is substantial avoidable litigation in the tax arena that government action could reduce

• To reignite growth, raising investment is more important than raising savings

• Own direct tax collections by states and local governments are significantly lower than those of their counterparts in other federal countries such as Germany and Brazil

• The footprint of climate change is evident and extreme weather adversely impacts agricultural yields

The current scenario

The latest survey highlights the current status of the Indian economy in terms of GDP growth. The World Economic Outlook 2017 released by the IMF shows that India’s economy is growing and bagged seventh rank in terms of nominal GDP and third position in purchasing power parity (PPP) format only next to China and the US. India is one of the emerging economies of the world, one of the G-20 major economies, a member of BRICS and Shanghai Cooperation Organisation with approximately 7 per cent average growth rate for the past two decades. India ranks second worldwide in farm output.

Interestingly, India became the world’s fastest growing major economy from the last quarter of 2014, replacing China. India is often seen by most economists and policymakers as a rising economic superpower and is believed to play a major role in the global economy in the 21st century. The Economic Survey 2017-18 has estimated that the economy will grow by 7-7.5 per cent in 2018-19, thereby reinstating India as the world’s fastest-growing major economy. The survey also states the anticipated real GDP growth to reach 6.75 per cent during 2017-18. The major agenda set by the Economic Survey 2017-18 for the next year include stabilising GST, completing the twin balance sheet actions, privatising Air India and staving off threats to macroeconomic stability.

Medium-term focus of economic policies

The Economic Survey argues for proper direction and ground-level implementation of schemes that focus on improving the living standards of the marginalised and the downtrodden. A major plank of government policy has been to rationalise State resources, redirecting them away from subsidies towards public provision of essential private goods and services at low prices, especially to the poor. The fact is that the pace and magnitude of this improvement will depend upon the extent to which increased physical availability and provision is converted into greater actual use.

The Survey puts emphasis on job creation and employability, that is, finding good jobs for the young and burgeoning workforce, especially women. Secondly, imparts quality education to create an educated and healthy labour force. Thirdly, raising farm productivity while strengthening agricultural resilience. Finally, take bold steps for improving the climate for rapid economic growth on the strength of two truly sustainable engines - private investment and exports.

The phenomenon of decoupling growth rate

Until early 2016, India’s growth had been accelerating when growth in other countries was decelerating. But then the converse happened. The world economy embarked on a synchronous recovery, but India’s GDP growth and indeed a number of other indicators such as industrial production, credit and investment decelerated - ‘decoupling’ of Indian growth from global growth. The Economic Survey provides five explanations for this decoupling phenomenon…

First, India’s monetary conditions decoupled from the rest of the world. Until the middle of 2016, real policy interest rates were following the global trend downwards. Since then, the downward drift has continued in most other countries, with rates falling on an average by 1 percentage point between July and December 2016 in the US. But in India, for the same period, average real interest rates increased by about 2.5 percentage points. The second and third factors were demonetisation and GST, which disrupted the flow of economic activities for at least a short period. The note ban temporarily reduced demand and hampered production, especially in the informal sector, which transacts mainly in cash.

The fourth factor exerting a drag on the Indian economy was the twin balance sheet challenge. The problem refers to the stress on the balance sheets of banks due to non-performing assets (NPAs) or bad loans on the one hand, and heavily indebted corporates on the other. The final factor is the oil prices hike. It is estimated that a $10 per barrel increase in the price of oil reduces growth by 0.2-0.3 percentage points, increases wholesale price index inflation by about 1.7 percentage points and worsens the current account deficit by about $9-10 billion.

Quarter-wise analysis of GDP growth rate

In its India Economic Update 2018 report, the World Bank divides India’s economic growth history since 1970 into four segments. The first is from 1970 to 1990, when the economy maintained an average growth rate of 4.4 per cent. This subsequently accelerated in the 1991-2003 period to an average of 5.4 per cent. Thereafter, growth accelerated sharply for a short period from 2004 to 2008, where it averaged 8.8 per cent, which then slowed down to a “still impressive” average of 7.1 per cent in the 2009-17 period.

Recent trends in NPAs and bad loans

Obviously, the level of NPAs is one of the drivers of financial stability and growth of the banking sector. According to the RBI, a non-performing asset is one whose repayment of principal and interest of their own has not been received for more than 90 days. NPAs reflect the performance of banks. A high level of NPAs suggests high probability of a large number of credit defaults that affect the profitability and net worth of banks and also erodes the value of the asset.

The deteriorating asset quality of the banking sector emerged as a major concern, with gross NPAs of banks registering a sharp increase in the past four years. The gross NPAs to gross advances ratio shot up to 4.72 per cent in March 2014 from 3.84 per cent in 2012-13 from 3.1 per cent during 2011-12. As a percentage of credit advanced, NPAs were at 2.09 per cent in 2008-09. Sadly, more than four-fifths of the NPAs were in public sector banks, where the NPA ratio had reached almost 12 per cent.

The financial stability report released by the RBI on 27 June 2018 has warned that the gross non-performing assets (GNPAs) of scheduled commercial banks could rise from 11.6 per cent in March 2018 to 12.2 per cent in March 2019, which would be the highest level of bad debt in almost two decades. At its current level, India’s NPA ratio is higher than any other major emerging market (with the exception of Russia), higher even than the peak levels seen in South Korea during the East Asian crisis.

Fiscal indicators

The prime focus of the fiscal policy designed by the Union government is to accelerate economic growth. The changes in the tax administration and public expenditure are the vital instruments in the hands of the public authority to regulate the economy and thereby reduce the gap between the rich and the poor. That is, sound public financial management has been one of the pillars of India’s macroeconomic stability in the past three years. Based on this firm footing, the Union government, in partnership with the states, ushered in the long-awaited GST era. The GST was unveiled after comprehensive preparations, calculations and multi-stage consultations, yet the sheer magnitude of change meant that it needed to be carefully managed.

In 2017-18, one can see three distinct patterns on the revenue front/receipts of the Union government. First, gross tax collections are reasonably on track. Second, non-tax revenues have visibly underperformed. Third, non-debt capital receipts - mainly proceeds from disinvestment - are doing well. As against last year’s achievement of Rs 46,247 crore realised from 16 transactions of disinvestment, the Budget estimates for 2017-18 was set at Rs 72,500 crore. In this regard, the government has already exceeded the Budget estimates and expecting receipts of Rs 1 lakh crore in 2017-18. The total revised estimates for expenditure in 2017-18 are Rs 21.57 lakh crore (net of GST compensation transfers to the states) as against the Budget estimates of Rs 21.47 lakh crore.

Taking a bold step with GST

Of course, GST is the single biggest tax reform in India’s history, which came into effect from 1 July 2017. Prime Minister Narendra Modi termed the GST as a “good and simple tax”, which will end harassment of traders and small businesses while integrating India into one market with one tax rate. The GST will eliminate the compounding effects of multi-layered tax system.

The GST embodies and heralds a radical alteration and enlargement in the understanding of the Indian economy. There has been a 50 per cent increase in the number of indirect taxpayers; and a large increase in voluntary registrations, especially by small enterprises that buy from large enterprises and want to avail themselves of input tax credits. The GST has been widely heralded for many things, especially its potential to create one Indian market, expand the tax base and foster cooperative federalism. As of December 2017, there were 9.8 million unique GST registrants, slightly more than the total indirect tax registrants under the old system. Maharashtra, Uttar Pradesh, Tamil Nadu and Gujarat are the states with the greatest number of GST registrants. Uttar Pradesh and West Bengal have seen large increases in the number of tax registrants compared to the old tax regime.

Food and non-food inflation

The government’s economic policies can be judged on the basis of its capabilities to attain high economic growth with less price volatilities. Of course, the persistent high food and non-food inflation erode the purchasing power of the people and make imbalances in the ‘family budget’ of the common man. Inflation continued to moderate during 2017-18. The Survey rightly argues that the significant reduction in food inflation - particularly of pulses and vegetables - moderated the general inflation. The economy witnessed a gradual transition from a period of high and variable inflation to more stable prices in the past four years.

Food inflation has been much higher than non-food inflation. Within the food group, the contribution of commodity sub-groups - fruits and vegetables and egg, meat and fish - has been high. Inflation in these protein-based items is on account of increase in share of consumption of these items arising from growing income levels. Food inflation partly owes to large wastage of food articles in the supply chain owing to inefficiencies in distribution channels.

FY 2017-18 began with an annual inflation rate of 3 per cent. Headline inflation rate reached its series low of 1.5 per cent in June 2017. Food inflation measured by the consumer food price index (CFPI) declined to a low of 1.2 per cent during FY 2017-18 (Apr-Dec). The average inflation based on the new series (2011-12) of wholesale price index (WPI) stood at 1.7 per cent in 2016-17 compared to -3.7 per cent in 2015-16 and 1.2 per cent in 2014-15. WPI-based inflation for FY 2017-18 (Apr-Dec) stood at 2.9 per cent. The average CPI-combined (CPI-C) inflation declined to 4.5 per cent in 2016-17 from 4.9 per cent in 2015-16 and 5.9 per cent in 201415. Average inflation for FY 2017-18 (Apr-Dec) stood at 3.3 per cent, below the threshold of 4 per cent.

The trends of inflation in August 2018 show that inflation as measured by the consumer price index (CPI) eased to a 10-month low of 3.69 per cent. That is, retail inflation in the country fell below the RBI’s medium-term target of 4 per cent. This trend was driven by a sharp decline in the prices of fruits, vegetables, eggs, pulses and sugar and confectionery products. As per data released by the Ministry of Statistics and Programme Implementation, retail inflation stood at 4.17 per cent in July 2018 and 3.28 per cent in August 2018. However, fuel and light inflation stood at 8.47 per cent in August, up from 7.96 per cent in July.

Low productivity remains a concern

The economy of any country consists of three vital sectors - primary, secondary and tertiary. The overall development of all three sectors is decisive for the unique development of the country. The modern theory of development argues that the right path for the development of the country is the transition from primary to secondary and ultimately to the tertiary sector. Truly, accelerated growth of agriculture is instrumental not only in raising the income levels of agricultural workers but also in transforming India from a chronic food-deficit country into a food self-sufficient country.

Real agricultural growth since 1960 has averaged about 2.8 per cent in India. The period before the Green Revolution saw growth of less than 2 per cent; the following period until 2004 yielded growth of 3 per cent; in the period after the global agricultural commodity surge, growth increased to 3.6 per cent. The reports on long-term weather patterns imply that climate change could reduce annual agricultural incomes in the range of 15 to 18 per cent on average, and up to 20 to 25 per cent for unirrigated areas. During the past five years, growth rates in agriculture have been fluctuating at 1.5 per cent in 2012-13, 5.6 per cent in 2013-14, -0.2 per cent in 2014-15, 0.7 per cent in 2015-16 and 4.9 per cent in 2016-17.

The government’s laudable objective of addressing agricultural stress and doubling farmers’ incomes consequently requires radical follow-up action such as decisive efforts to bring science and technology to farmers, replacing untargeted subsidies (power and fertiliser) by direct income support and dramatically extending irrigation but via efficient drip and sprinkler technologies.

Policy initiatives for female farmers

For sustainable development of agriculture and the rural economy, the contribution of women to agriculture and food production cannot be ignored. As per Census 2011, out of total female main workers, 55 per cent were agricultural labourers and 24 per cent were cultivators. However, only 12.8 per cent of the operational holdings were owned by women, which reflects the gender disparity in the ownership of landholdings in agriculture. Moreover, there is concentration of operational holdings (25.7 per cent) by women in the marginal and small holdings categories.

With growing rural to urban migration by men, there is ‘feminisation’ of the agriculture sector, with increasing number of women in multiple roles as cultivators, entrepreneurs, and labourers. Globally, there is empirical evidence that women have a decisive role in ensuring food security and preserving local agro-biodiversity. Rural women are responsible for the integrated management and use of diverse natural resources to meet daily household needs (FAO, 2011). This requires that female farmers should have enhanced access to resources such as land, water, credit, technology and training, which warrants critical analysis in the context of India. The following measures have been taken to ensure mainstreaming of women in the agriculture sector…

• Earmarking at least 30 per cent of the Budget allocation for female beneficiaries in all ongoing schemes/programmes and development activities

• Initiating female-centric activities to ensure benefits of various beneficiary-oriented programmes and schemes reach them

• Focusing on women self-help groups (SHGs) to connect them to micro-credit through capacity building activities and to provide information and ensuring their representation in different decision-making bodies

• Recognising the critical role played by women in agriculture, the Ministry of Agriculture and Farmers Welfare has decided to mark 15 October as Women Farmers’ Day

World Bank’s Doing Business Report

India again marked a good improvement in the World Bank’s latest Ease of Doing Business Index, especially in areas of dealing with construction permits, trading across borders and starting business. In the 2018 report, India has jumped 23 ranks to 77. The country was ranked at 100 in the 2017 report. India was ranked 130 and 142 in 2016 and 2015, respectively. Obviously, India’s steady improvement reflects an improvement in the business environment.

India is now the highest-ranked country in South Asia; it was sixth in 2014. China’s performance was even better: it moved 30 spots to 46th place. The top three are New Zealand, Singapore and Denmark, followed by Hong Kong, South Korea, Georgia, Norway, the US, UK and FYR Macedonia.

The Index ranks 190 countries based on 10 indicators across the lifecycle of a business - from starting a business to resolving insolvency. India’s performances in getting credit, getting electricity and enforcing contracts also improved. However, India made little improvement in parameters such as paying taxes, resolving insolvency, enforcing contracts and protecting minority investors.

Services sector drive India’s economy

The services sector has emerged as the most dynamic one of the world economy, contributing almost one-third of world gross value added (GVA), half of world employment, one-fifth of global trade and more than half of the world foreign direct investment flows. Vividly, India’s vibrant services sector has grown rapidly in the past decade with almost 72.4 per cent of the growth in India’s gross domestic product in 2016-17 coming from this sector.

As per the UN National Accounts Statistics data, India’s ranking improved from 14th position in 2006 to 7th position in 2016, among the world’s 15 largest economies in terms of overall GDP. Among these top 15 economies, China (9.8 pp) recorded the highest increase in services share to GVA during 2006-16, followed by India (7.1 pp) and Spain (7 pp). In 2016, services GVA growth rate (at constant prices), was highest in India at 7.8 per cent, followed by China at 7.4 per cent.

As per the latest WTO data for first half of 2017, services export growth for the world was 4.3 per cent and robust at 9.9 per cent for India, though the highest growth was registered by Russia at 18.4 per cent. China’s growth was at 0.2 per cent. As per the ILO’s estimates, among the top 15 economies, the services sector accounted for more than two-thirds of total employment in 2016 in most of them except India and China, with India’s share of 30.6 per cent being the lowest. While China had the highest increase in the share of services employment (10.2 pp) during 2006 to 2016, the increase in India was 5.2 pp.

India’s services trade

Services exports have been a dynamic element of India’s trade and globalisation in recent years. India remained the eighth largest exporter of commercial services in the world in 2016 (WTO, 2017) with a share of 3.4 per cent, which is double the share of India’s merchandise exports in the world at 1.7 per cent. Moreover, the ratio of services exports to merchandise exports increased from 35.8 per cent in 2000-01 to 58.2 per cent in 2016-17, indicating the growing importance of the services sector in India’s exports. While, India’s services exports registered a compound annual growth rate of 8.3 per cent during 2006-07 to 2016-17, in 2015-16, it registered negative growth of -2.4 per cent.

State-wise comparison of services

Out of the 32 states and Union territories (UTs) for which data are released for new base 2011-12 series by the Central Statistics Office, the services sector is the dominant one, contributing to more than half of the gross state value added (GSVA) in 15 states and UTs. The major services in most of the states are trade, hotels and restaurants, followed by real estate, ownership of dwellings and business services. However, there is wide variation in terms of share and growth of services GSVA.

Out of the 32 states and UTs for which data are available for 2016-17, in terms of services GSVA share, Delhi and Chandigarh are on top with more than 80 per cent share, while Sikkim is at the bottom with 31.7 per cent share. In terms of services GSVA growth, Bihar is on top and Uttar Pradesh at the bottom with 14.5 per cent and 7 per cent growth, respectively, in 2016-17. Bihar’s services sector growth was among the fastest with a consistent double-digit growth in the past seven years due to high growth in the high weighted sectors such as trade, hotels and restaurants, and real estate and business services besides transport by other means.

An assessment of the insurance sector

Being an integral part of the financial sector, insurance plays a significant role in India’s economy. The potential and performance of the sector should be assessed on the basis of two parameters - insurance penetration and insurance density. Insurance penetration is defined as the ratio of premium underwritten in a given year to the GDP.

Insurance penetration, which was 2.71 per cent in 2001, increased to 3.49 per cent in 2016 (life at 2.72 per cent and general at 0.77 per cent). Insurance penetration in emerging economies in Asia such as Malaysia, Thailand and China during the same year was 4.77, 5.42 and 4.15 per cent, respectively. Globally, insurance penetration and density were 3.47 per cent and $353 for the life segment and 2.81 per cent and $285.3 for the non-life segment, respectively.

Insurance density is defined as the ratio of premium underwritten in a given year to the total population (measured in $ for convenience of international comparison). The insurance density in India, which was $11.5 in 2001, has increased to $59.7 in 2016 (life at $46.5 and general at $13.2). The comparative figures for Malaysia, Thailand and China during the same period were $452.2, $323.4 and $337.1, respectively.

The way forward for the external sector

In the current global era, there is no scope for ‘inward-looking’ strategy of industrialisation, where there are no active trade engagements with the rest of the world. Currently, our economy is more open and highly integrated with the rest of the world. The external position of the Indian economy is reflected in the balance of payments (BoP). India’s external sector position has been comfortable, with the current account deficit (CAD) progressively contracting from $88.2 billion (4.8 per cent of GDP) in 2012-13 to $22.2 billion (1.8 per cent of GDP) in the first hale (H1) of 2017-18.

India’s BoP position improved dramatically in 2013-14, particularly in the last three quarters, and in the subsequent years. India’s CAD stood at $7.2 billion (1.2 per cent of GDP) in Q2 2017-18, narrowing sharply from $15 billion (2.5 per cent of GDP) in the preceding quarter. On a cumulative basis, India’s CAD increased from $3.8 billion (0.4 per cent of GDP) in H1 2016-17 to $22.2 billion (1.8 per cent of GDP) in H1 2017-18. The twin objectives of safety and liquidity have been the guiding principles of foreign exchange reserves management of the RBI. As a proportion of GDP, the trade deficit was 7.1 per cent in 2014-15, the lowest since 2006-07. Robust inflow of foreign direct investment (FDI) and net positive inflow of foreign portfolio investment (FPI) were sufficient to finance CAD, leading to an accretion in foreign exchange reserves in H1 2016-17.

Foreign exchange reserves

Among major economies with CAD, India is the second largest foreign exchange reserve holder after Brazil. India’s foreign exchange reserves reached $409.4 billion in December 2017. Foreign exchange reserves grew by 14.1 per cent on a year-on-year basis from December 2016 ($358.9 billion) to December 2017 ($409.4 billion) and it grew by 10.7 per cent from March 2017 ($370 billion) to December 2017. Foreign exchange reserves increased further to $424.366 billion on 1 April 2018, which represents a comfortable cover for about 12 months of imports.

Exchange rate and rupee depreciation

India is vulnerable to external shocks as the economy is confronted with policy challenges such as CAD, economic slowdown and price volatility. It is important to note that episodes of volatility are not a new phenomenon in India and this isn’t the worst of what has been seen in terms of volatility.

The depreciation five years ago, precisely on 28 August 2013, remains a watershed as the rupee touched 68.361 to the dollar. Obviously, the movement in the exchange rate is influenced by demand for and supply of foreign currency liquidity (dollar liquidity). In the balance of payments framework, demand for foreign currency is broadly determined by import of goods and services and outflows of foreign capital, whereas the supply of foreign currency is influenced by export of goods and services, worker remittances and inflow of foreign capital.

In the Indian context, CAD and net capital outflows influence the shortage of dollar liquidity, which result in rupee depreciation. Evidence suggests that in all the years barring 2015-16 and 2016-17, speculative capital flows (foreign portfolio flows) and debt capital flows (external commercial borrowings and NRI deposits) predominated capital flows. However, during 2015-16 and 2016-17, there were debt capital outflows. That is, there were net outflows in external commercial borrowings and NRI deposits to the tune of $6.1 billion and $12.3 billion, respectively, in 2016-17. In short, there are three important elements linked to the weak rupee - persistent CAD, episodes of net capital outflow in terms of speculative and debt capital outflow, and predominance of debt capital in forex reserves.

In a nutshell, the depreciation of the rupee could be linked to CAD because of higher trade deficit contributed by higher import bills. In addition, there were outflows of speculative capital from India due to higher interest rates in the US as the Federal Reserve increased the fund rate. The effective bold steps to further strengthen FDI and promote exports and focusing more on developing and emerging market economies are essential to prevent this steep fall in the value of the rupee. That is the only long-term sustainable and viable way to prevent the rupee from falling.

Social infrastructure and human development

Not surprisingly, skilled and quality human resources/capital play a decisive role in the economic development of the country. That is, investment in human capital is a prerequisite for a healthy and productive population for nation-building. Human capital is defined as “the sum total of a population’s health, skills, knowledge, experience and habits”. There is a strong association between investments in education and health and improved human capital and GDP.

Certainly, a country with an increasing number of young people and declining fertility has the potential to reap a demographic dividend. Interestingly, India is confronted with this situation. However, the quality and skill of India’s labour force is not mature enough to reap this dividend. The fact is that India has more than 50 per cent of its population below the age of 25 and more than 65 per cent below the age of 35. It is expected that, in 2020, the average age of an Indian will be 29 years, compared to 37 for China and US, 45 in Western Europe and 48 for Japan. Undoubtedly, strategies to exploit the opportunities offered by the country’s demographic transition must be seized. The need of the hour is that policymakers must focus on 4Es - expansion, education, employability and employment.

Sadly, our social sector is filled with formidable issues and challenges. India has the most number of people in the world defecating in the open. More than 3 lakh children aged below five die each year due to diarrheal diseases. In the technical side, India has only 3.5 science and engineering personnel for every 1,000 people against 100 for Japan, 76 for Israel and 45.9 for South Korea. India ranks 131 out of 188 countries in the UNDP’s latest Human Development Report; in the BRICS grouping, India has the lowest rank.

Despite being one of the fastest growing economies, India has been ranked at 103 out of 119 countries, with hunger levels categorised as ‘serious’ in the Global Hunger Index 2018. India’s child malnourishment level is not only the highest in the world but varies considerably across states. As per the National Family Health Survey 2016, the proportion of stunted (low height for age) children under five is significantly higher (38.4 per cent) than the global (22.9 per cent) average. The underweight (low weight for age) children rate (35.7 per cent) is a lot higher than the global average (13.5 per cent) too. India is home to more than 53.3 million stunted, 49.6 million underweight and 29.2 million wasted (low weight for height) children under five.

The naked truth is that India’s GDP performance is not reflected in the human capital of the country. A World Bank report indicates that India’s human capital productivity will be half of what Singapore citizens will achieve. The bigger concern for India is the continuing deep disparities in society that are only widening with every percentage point growth in the GDP. India performed only marginally better than countries in Sub-Saharan Africa on education, healthcare, female literacy, sanitation and nutrition.

Gender and son meta-preference

The Economic Survey 2017-18 shines light on various scenarios leading to skewed sex ratios and provides a comparison on sex ratio by birth between India and Indonesia. More clearly, it shows the skewed sex ratio in favour of males led to the identification of “missing” women. But there may be a meta-preference manifesting itself in fertility stopping rules contingent on the sex of the last child, which notionally creates “unwanted” girls, estimated at about 21 million, adds the Survey. It points out that most parents continued to have children until they get a desired number of sons. The data highlights another seemingly known fact that Indian society exhibits a strong desire for a male child.

The Survey acknowledges that the Union government’s Beti Bachao, Beti Padhao and Sukanya Samridhi Yojana schemes, and mandatory maternity leave rules are all steps in the right direction. The Survey states that just as India has committed to moving up the ranks in Ease of Doing Business indicators, a similar commitment should be endeavoured on the gender front.

Concluding remarks

In a nutshell, public investment in social infrastructure such as education and health is critical in the development of an economy. The criticality of skill development in our overall strategy is that if we get our act right, we will be harnessing the demographic dividend; if not, we could be facing a demographic disaster. Of course, India is in the midst of a process where it faces the window of opportunity created by the demographic dividend.

Noushad Chengodan is Assistant Professor of Economics at PSMO College, Tirurangadi. The views expressed here are personal.