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By Professor Santosh Mehrotra
- India is now the fastest growing large economy of the world, with its 7.6% GDP growth rate in 2015-16. This is the fastest the Indian economy grew in the last five years (i.e. since 2011-12). But will it continue to grow at this pace?Equally importantly, economic growth is meaningful mainly as long as it creates new non-agricultural jobs. Job growth leads to increases in consumer demand which has the effect of sustaining GDP growth, and reducing growth volatility.
One of the most important sources of increased consumer demand since the turn of the century was the increase in infrastructure investment. Starting with the Golden Quadrilateral Highway network which began construction in 2001 infrastructure investment picked up. As a result the number of workers in construction rose from 17 million in 1999-2000 to 26 million in 2004-05. Investment in infrastructure rose strongly thereafter and during the 11th five year plan infrastructure investment in the public and private sector together grew by $475 billion. The result was that employment in construction jumped from 26 to 51 million, tripling compared to the turn of the century.
But job growth has been much slower since 2012; however the good news is that infrastructure investment has picked up again in the last financial year (2015-16), thanks to the government’s efforts. The government acted to clear 42 stalled projects worth Rs 1.15 lakh crore since February 2015, which activated the idle investments locked in the projects. This has also begun yielding results in 2015-16. That is why, despite slower growth in investments, GDP has grown by 7.6% in 2015-16. Further unlocking of stalled projects will accentuate the GDP, as the BJP National Executive’s Economic Resolution (in Allahabad) noted last week.
This is especially good news for the 5 million per annum who leave agriculture to look for work in construction. It is also good news for the persons aged 15 years and above who were available for work for all the 12 months of the year, but only 60% of them found work (as the 4th Annual Survey of Employment in 2013-14 noted). It is especially important news for the 7 million young people who are joining the labour force, for whom the open unemployment rate is 10 times higher than that of those 30 years and above. Unemployment for 15 to 17 year olds is 10.2 % and for 18 to 29 year olds is 9.4 % in 2013, but 0.8% for over 30 year olds.
It is also good news for those leaving agricultural due on account of two years of drought. The fall in construction investment after the policy paralysis of the previous government in its last 2 years, has now been reversed.
Especially important for jobs in rural areas is the increase in investment in Pradhan Mantri Grameen Sarak Yojana. Compared to Rs 7000-8000 cr. allocation to PMGSY in 2012-13 and Rs 9000 cr in 2013-14, the allocation increased to Rs 19 000 cr in 2015-16 from the Union government. However, equally importantly, this is only 60%, since the remaining 40% is to come from the state governments; as a result the annual allocations will be Rs 27 000 cr total, taking into account both central and state expenditures. This same sum will be available for each of the next three years, until 2018-19; this has been assured to the Ministry of Rural Development by the Finance Ministry.
Such an increase in allocations automatically means rural roads will be constructed much faster than they were being done over 2011-14, the last three years of the UPA. The average construction of rural roads under PMGSY was 73 kms per day over 2011-14; over 2014-16 that number had already gone up to about 100 kms a day. With the increased allocation in the current financial year, it is expected to rise to 130 kms a day, according reliable senior sources in the Ministry of Rural Development. In 2017-18 and 2018-19 it is targeted to touch 170 kms a day.
Equally important is the focus on ‘Housing for All’, especially of low-income housing. There are two parts of the rural housing programme now: one is the erstwhile Indira Awas Yojana, which has existed for rural BPL households for several decades; and the second is the new programme, of the NDA government that came to power in May 2014. For both, the Socio-Economic and Caste Census (conducted by the Ministry of Rural Development over 2011-2014) data will be used to identify the low-income eligible households.
The objective is to build, under the new PMAY a total of 1 cr houses for identified households over the next 3 years (2016-17, 2017-28 and 2018-19). That means that some 33 lakh houses will need to be build every year. In addition, under IAY 38 Lakh houses are to be built. For both programmes sufficient funds have been allocated this year, and are also assured for the remaining two years. (The SECC-based estimate of the MORD is that nearly 4 cr households will need to be built for low-income households, who currently lack a house of their own; this will be the agenda to be completed beyond 2019.)
Thus in the last two years of UPA the allocation to rural housing was in the range of Rs 8 000 to 10 000 cr per annum. In 2016-17 the allocation is Rs 15 000 cr or so, expected to rise to Rs 20 000 cr next years. In addition, NABARD will borrow about Rs 21 000 cr to supplement these budgetary funds. Moreover, since the states are to contribute (under 60/40 formula), the total sums available will be higher. Accordingly, under the IAY, the allocation per household used to be Rs 70 000 per house. That has been raised to Rs 1.2 lakhs, plus Rs 12 000 per household for the toilet (from the Ministry of Drinking Water and Sanitation), plus 90 days of wage labour from MGNREGA allocated to the house-building activity. In 2015-16 a total of 18.27 lakh houses were constructed under the rural housing scheme, the Pradhan Mantri Awaas Yojana .
However, for the two Awaas Yojanas the challenge will go beyond financial resources to limited labour and material availability. To double the pace of construction of houses, the Union government is recommending to states to use local material and technology to meet any shortage. The government also started a rural mason training programme to supply the workforce to expand these construction activities.
Similarly, the significant ramp up in spending on sanitation through the Swacch Bharat Abhiyaan, is also going to cause much more work creation in rural areas in the building of toilets. There has been a remarkable ramp up of infrastructure investment in area of building communities that are free of open-defecation, again in rural areas. There have been four transformations, thanks to the Swacch Bharat Abhiyaan, in the nation’s 40 year old programme to create villages without open defecation.
1. Rural sanitation is on national agenda, as the PM himself has focused on it, and speaks on the subject regularly;
2. A campaign or movement on sanitation is visible in each state. Thus many Collectors are emerging as champions;
3. Counting toilets is stopping open defecation. This is a hugely important development as the earlier focus under the Nirmal Bharat Abhiyaan (the UPA programme) was very much on simply building toilets, and the administrative machinery was focused on reporting toilets built. That is the not the same goal as creating communities who are counted as being free of open defecation (or ODF), are proud of that status, and can sustain that status. Simply building a toilet in households that did not have one, does not lead to whole communities actually becoming ODF. Now, the Government MIS system is counting ODF communities (Villages, Blocks, Districts), not merely toilets built.
4. Focus is on behaviour change, through appropriate information, education and communication strategies.At the same time, the status today in regard to toilet construction is as follows:
1. Increase in % of households with Toilets since 2nd Oct 2014 – 10.31%; 2. % of household with toilets 52.44%; and 3. No of ODF Villages- 61850. This is again thanks to the increase in financial allocation since 2014, as compared to the period before that. Thus, expenditure on the overall sanitation drive was Rs 2250 cr in 2013-14. It had increased to Rs 2850 cr in the first year of the SBA; but it jumped to Rs 6524 cr in 2015-16. The allocation for the current financial year (2016-17) is Rs 9000 cr. The mission mode in which it is being done is also vastly different from previous years.All in all, there is strong hope that this rise in infrastructure investment will create jobs, especially in rural areas, but also for those at the bottom of the pyramid. That has profound implications for reviving the now stalled real wage growth, and hence consumer demand, with the consequent potential for sustaining economic growth and poverty reduction.
(Santosh Mehrotra is Professor of Economics, Jawaharlal Nehru University, (JNU), New Delhi and ex-Director General of the National Institute of Labour Economics Research (of the NITI Aayog).)