[Dec 2007, Volume 4 Quarterly Issue] Pdf File size - The IIPM Think ...

MORE MARKETS, LESS GOVERNMENT
Figure 1: Sector Wise Factor Productivity
Average Annual Percent Change
7
6
5
4
3
2
1
0
Labor And Total Factor Productivity Growth In India
Output Per Worker
Total Factor Productivity
1960-73 1973-83 1983-93 1993-99 1999-2004
Source: Bosworth, Collins and Virmani (2006)
Table 4: Capital Formation And Employment sion. A better provision
of services
Investment (as a % of 1993-94 1999-2000 2004-2005
total investment)
especially in the
Agricultural and Allied 8.42 8.48 6.63
education sector
will usher in an
Industry 50.09 51.44 54.06
even income distribution.
The sec-
Services 41.19 40.08 39.31
Employment Ratios (as a % of total employment)
ond major problem
Agricultural and Allied 60.39 56.70 58.60
is associated with
Industry 15.83 17.57 18.50
volatile agricultural
Services 23.78 25.73 22.90
income. As we have
Source: Reserve Bank of India (2006) and Central Statistical Organization (2006)
seen volatile agricultural
is because the governments put emphasis
on vocational education. Growth in these
economies is primarily driven by increase
labor force participation. It would make
sense to impart adequate training so that
labors from countryside have necessary
skills to find employment in the services
and manufacturing sectors. Government
expenditure should be directed towards
sectors, like primary education, where social
return is higher than the private return.
For the sector, like higher education and
also vocational education, government can
encourage private participation. Private
participation brings in accountability and
hence efficiency in the way of service provi-
output contributes to rural poverty
affecting the distribution of income. It also
leads to increase migration which in turn is
contributing to inequality. A reason for
volatility in agricultural production is because
of lack of adequate infrastructure.
Because of lack of cold storage facilities,
irrigation system, dams and roads network
connecting to market considerable portion
of agricultural produce depends on weather.
There is a loss of agricultural output either
because of flood or because of drought.
There are not enough man made tanks and
canals which can store water during flood
and supply water during drought.
To reduce this volatility there is a need
to build rural infrastructure. A proper
infrastructural investment in rural sector,
such as irrigation and drainage, storage,
soil conservation, water management systems
and road networks connecting the
rural markets with their urban counterpart,
is necessary to reduce this fluctuation
in agricultural output. Demand management
policies like introduction of crop
insurance, futures trading in agricultural
commodities and greater accessibility to
credit will complement these supply side
measures. None of these exists at this
point of time. It’s a little wonder why the
people in the country side feel deprived
and with further reforms the level of desperation
is growing. Finally, referring
back to our issue about Nandigram what
started the flare in Nandigram was lack of
well defined property rights. Initially, it
was the marginal farmers or share croppers
(working on other’s lands) who were
up in arms against the government. The
land owners were happy with the price
offered by the government for acquiring
their land. However, there exist no property
rights which spell out how the money
is going to get distributed from the land
owners to these share croppers or the
land less laborers. The seed of unrest
could have been solved by addressing
this issue.
End Notes
1 Bosworth, B., Collins, S. and Virmani,
A. (2006), ‘Sources of growth in the Indian
economy’, paper presented to the
Indian Policy Forum, New Delhi, July.
2 Bhanumurthy N. R. and A. Mitra
(2004), ‘Economic growth, poverty, and
inequality in Indian States in the prereform
and reform periods’, Asian Development
Review, Vol. 21, pp. 79-99.
THE INDIA ECONOMY REVIEW
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