Dear Finance Minister:
The Indian economy is showing signs of slow a down, when one measures its performance from the conventional yardstick, viz., the growth in GDP. But the relevance of this method has crossed its sell-by date. There is no appropriate tool to measure the health of a deflationary economy.
Analysts are saying that domestic consumption has come down and hence the slowdown. They also say that there are no private investments and, therefore, there is a job crisis. Let me explain to you each of these.
Consumer preferences changed
Domestic consumption has come down, and no new private investments are happening because consumer preferences have changed. Private industrialists are low in confidence, not with the government or governance, but with the prospects of them making profits. They missed the cue from 2008 itself. They have no control over their business to have any long-term vision. Consumption pattern has not changed overnight. Capacity utilization has been consistent at 72 per cent for 10 years, that too, on the capacity was created 10 years ago.
no job crisis…
As for the job crisis, I don’t see one in existence. I completely agree with your assessment if there was a job crisis of the magnitude projected by analysts, there would have been a revolution. No one is tracking jobs generated by SMEs, service sector and social enterprises, where a lot is happening. Incidentally, there is a link between this and a change in consumer preferences.
My request to you is to just ignore ‘Inflation.’ Forget the fiscal management process. The world has moved into a perennial deflation economy. Please put money in the hands of people, particularly in those from the lowest income group. Any money you put there cannot cause inflation because the price is not controlled by demand but by technology. You cannot control the effects of technology. The money will help the poor to buy the food items.
Invest heavily on infrastructure. Develop tourism. Tourism that gives experiences, of heritage, spirituality, etc. Do not expect the private sector to create production capacity. When needed, create it in the public sector. If Nehru is criticized for his policies after 50 years, while they looked good at his time, Modi should avoid similar criticisms. At current speed, it will happen in 20 years. Appropriate investment in the public sector is the right policy today.
Millennial not aspirational…
An economy must satisfy the needs of its citizens. Please notice that I have avoided the word ‘aspiration.’ The government should understand what the citizens want and try to fulfill those wants. Today, the millennials are not aspirational; they seek experiences. They don’t seek luxury. Instead, they seek wellness. They are not seeking knowledge. They are seeking more in-depth understanding and wisdom. They don’t explore luxurious houses. They find living homes. They do not want to indulge in rich food. They want healthy meals. They want to travel.
They do not want 5-star luxuries. They want clean and functional facilities. They don’t want to own cars. They want facilities for mobility. They don’t want to earn, save and amass wealth as they don’t like profit, competition and growth. Instead, they want to share and serve. They believe in ‘Co-Optition.’ (Cooperative competition.)
Incidentally, millennials form 70 per cent of our population. You must concern yourself about the needs of theirs, instead of the other 30 per cent. I remain yours, J Prakash
