The planet can’t afford another China: NITI Aayog’s Suman Bery

Bery proposed that emerging economic realities, including the potential of services exports, India’s prospects of becoming an agriculture superpower, and the dwindling potential of the manufacturing sector to create jobs due to increased productivity, warrant a review of the traditional notions on which development models are built.

He acknowledged the need to enable India’s aspirational youth (69% of the 1.4 billion people below the age of 24 years, according to the United Nations) to move into higher productivity or better-paying economic activities.

Bery also said states must step up their investments for sustainable growth and be fiscally responsible, subjects into which the Sixteenth Finance Commission to be set up by November should drill down. Edited excerpts:

What is the broad direction of reforms needed to accelerate our journey to a developed country?

A very important point that the Prime Minister has stressed is that it cannot be “growth at any cost” any longer. The planet cannot afford another China. We have an aspiration, an expectation to rise up the ladder in terms of the size of the economy, but it cannot be at all costs. So, the big challenge facing India is to reconcile the legitimate aspirations of improved quality of life with fidelity to our traditional values of frugality, care for nature and sustainability.

The development trajectory in the advanced countries from 1950 onwards was very resource-intensive. The model, even in the now-developed countries—Japan and South Korea—was also very dependent on natural resources. I want to make the point that we will not be resource-independent even in the green transition because a lot of the initial costs of electric vehicle batteries in the grid, all of these require resources such as lithium, copper, etc. But I think, I’m right in saying that those demands are one-off, whereas the demands of transportation or, you know, for a continuous supply of fuel sources, it is going to change.

The large point is that we will be pioneering a new development model on both the consumption side, as reflected in Mission Life (an India-led effort to preserve the environment) and also on the production side, as represented by the incremental shift from fossils to non-fossils. We know that all of this means high capital expenditure and lower operational expenditure, so this presents a substantial problem in financing the additional investment. Now, the government has rightly provided a lead by investing in infrastructure. But state governments will also have to invest in the grid, in adaptation and all of that. Greater fiscal responsibility at the level of states, presumably, is going to be something that the forthcoming finance commission will have to take up.

Being the most populous country has its advantages. For example, the labour market becomes more competitive. But, according the UN, 69% of the population is below the age of 24 years, and we have a large unemployed, unskilled youth population, which is a challenge. How do we address this?

The whole employment story is a complicated one. Our states are the size of countries, and there’s a lot of diversity among the states. So, I’m not sure we can or should be telling a uniform story on employment throughout the country.

Firstly, we now have the so-called periodic labour force survey, and it does not confirm the diagnosis that we have a large unemployment problem. What we have is a low labour productivity problem, and low labour productivity then results in low wages. So, the challenge is to do two things. One is that, as Prime Minister Modi acknowledged, it was the source of his victory as far back as 2014. India’s youth is aspirational. They want opportunities, and entrepreneurship is hard-baked into India. So, it is the role of governments—state governments’ role in labour is as important as that of the Union government—to unleash those aspirational energies.

It is also established that there are huge distortions in our labour market, which encourage the youth to prefer government employment because compensation, for political reasons, at the junior levels is so much more attractive than what is available outside government, which creates a lot of unhelpful behaviour. It is also the case that while the Union government can promote various labour codes, it is up to the states to adopt those labour codes. So, the large point I want to make is that there’s an issue of how to help aspirational youth move into higher productivity activities.

Now, against that background, what we also have to acknowledge is a couple of things. I would refer you to an absolutely excellent paper produced by my colleague in NITI Aayog, Ramesh Chand, looking at agricultural employment. It makes a very important point about the so-called Lewis model of economic development, where surplus labour in agriculture would be transferred to a rapidly growing manufacturing sector. And that is the way in which labour productivity would rise over time. His (Chand’s) submission—and there’s other research from other countries to support this—is that this does not acknowledge two new realities in the world and in India.

The first new reality is that agriculture is becoming high-tech and that productivity is rising in agriculture, and India could be an agricultural superpower. The second new reality is that because of technological change, the labour absorption capacity of manufacturing today is not what it was when Arthur Lewis wrote his book in the 1950s. So these are the realities of our Amrit Kal, and it is the role of NITI Aayog to look at the research and think about what this all means for our development trajectory when we are also facing the opportunity of the green transition and the challenge of adaptation.

This is the broad employment picture. What I would argue is that we need to examine the propositions that good jobs will be in manufacturing, that services only provide bad jobs, etc., because the world has changed so much. If you look at the G20 Delhi declaration as a whole, there is a lot there now at India’s suggestion and insistence, not only about the green transition but about creating a world that is future-ready for services. India is doing well in service exports. We have what economists call a revealed comparative advantage in services. Now, the question is to make sure that that can get scaled up.

What are NITI Aayog’s priorities?

What is clear is that there are two broad strands of sustainable growth and inclusion, which are also picked up in the G20 declaration. These streams have been reinforced as the two streams within which NITI has to work with the states through the governing council. A very important priority for many chief ministers, and therefore for NITI, is a different and more productive form of urbanization because our future growth will be in the cities. Some of the states that have been very successful in attracting FDI in manufacturing them have been now thinking about what constitutes a services strategy.

This is not yet an official part of the NITI agenda or the governing council agenda, but my own view is that India rightly should aspire as part of being a services superpower, to also develop depth in financial services, because if we have not only offshore but better onshore financial services, that will help us finance our green transition. The G20 talked about the link between energy, food security and climate. Since the G20 declaration is a call to action for the world, I will spend time with my colleagues thinking about how to bring this agenda more crisply through chief secretaries and chief ministers at the next Governing Council.

One thing that the G20 summit has highlighted is the power of diplomacy and India’s role as a consensus maker. Will it help in our other economic goals, like attracting more investments and having a greater share in global supply chains, and will it accelerate our journey to a developed nation?

The causal loop should be seen in reverse. We are now a larger economy, and that gap will widen than the UK and yet the UK has believed that with size comes an obligation for global stewardship. The PM and the people who report to him understand this, and it cannot be the case that Britain, let alone the US, does these things out of altruism. They do it because they know that the shape of global discourse will affect the opportunities for their own countries. So, they have to be at the top table so that they can influence the discourse. With size must come diplomacy and the capacity to influence the global discourse. Going back to the first G20 summit of 2008 and what happened after that, India was already, I think, by about 2011-2012 recognized as systemically important for the world economy. If that were true, then when we were 10th in terms of GDP at market prices, clearly, by the time we come to be the fifth, it is that much more important…India understood that presenting itself as a voice of the South was a niche that was available to it, and I think it has delivered spectacularly. The inclusion of the African Union as a full-fledged member of the G20 is symbolically and, in due course, substantively very important that it happened during India’s presidency. When the G20 was originally set up in 1999 at the ministerial level, not only were France, Germany, Italy and the UK, who were all then members of the EU, included individually as members, the European Union was included as a member, and Spain has been a special invitee since the beginning. If that is the kind of representation that Europe had in 1999 and has continued to 2023, and the EU is there occupying a seat, not as an observer, but occupying a seat, then I think symbolically and substantively to have all of Africa represented by the African Union, having a seat, ensures a kind of symmetry and is a demonstration that India was influential enough to persuade the other members that this would help in future deliberations. By this time, PM Modi is one of the senior members of the G20. I mean, he has been attending G20 since 2014. So, there’s credibility that comes from the individual because although leaders represent nations, they are a brand in themselves.

Updated: 17 Sep 2023, 11:59 PM IST