• In September 2019, a teenager Greta Thunberg addressed the United Nations climate change summit, which had an impact.
• But, Indian government is all-absorbed by the news of slowing economy.

What should we be worried about?

• It is true that India’s economic growth has slowed for the past few quarters — the past 2½ years, if we go by annual growth rates.
• Indian government’s desire is to give a boost to the economy.
• Those who heard Greta Thunberg’s address may not be as worried about economic growth as the government is.
• Globally, industrial growth driven by mindless consumption is the cause of climate change.
• But India does need some growth as income levels here are still very low.
• However, the problem of low incomes can be tackled even with less growth so long as it is of the appropriate type.
• So, the slowing of growth in India cannot reasonably be termed a crisis.

Why is there rural unemployment?

• Unemployment is the only feature of the economy that answers positively to the query of whether it is in crisis today.
• Periodic Labour Force Survey report 2017-18 – Points a dramatic rise in the unemployment rate since 2011-12.
  1. Apart from the category of ‘Urban Females’, the unemployment estimate shows that it is the highest in the 45 years since 1972-73.
  2. Even for ‘Urban Females’, it is double what it was in 2011-1
  3. For ‘Rural Males’, it is four times the average for the 40 years up to 2011-12.
• These figures should convince us of the existence of a grave situation with respect to employment in the country.

• Government’s responses to the slowing growth - Announced a range of measures, the most prominent of them being the reduction in the corporate tax rate.

• The tax cut is meant to be a remedy for stagnant corporate investment.
• But if the level of corporate investment reflects some underlying reality, it is only by tackling the latter that we can get to the root of the problem.
• A large part of corporate sales is driven by rural demand.
• The government does not hear their voices, as they are less organised than some other sections of the corporate world.
• The rural picture matters not only because the largest numbers are located there but also because of their low incomes.
• This means that the future growth of demand for much of industrial production is likely to come from there.

Why is there is a production decline?

• The recent history of crop agriculture is one reason why rural incomes are growing so slowly. Since 2008-2009, it has shown no growth.
• Households incurring consumption debt in bad crop years would be repaying it in the good years.
• This implies that the consumption doesn’t grow appreciably even in good years.
• The other factors range from low export growth to the state of the banking sector.
• Poor agricultural performance is a significant explanation of slack domestic demand.
• Unstable agricultural production first lowers the demand for agricultural labour, and subsequently, its supply, showing up in greater unemployment.
• It has been pointed out that the investment rate has declined.
• This is indeed correct but this may well be a reflection of the poor agricultural performance.
• Private investment both follows output growth and leads it.

What could be the long-term solution?

• Any long-term solution to the problem of unemployment to which the slowing growth of the economy is related must start with agricultural production.
• Observing the performance of crop agriculture since 2008-09, India might be witnessing something wholly new.
• India has long been recognised that there is a crop-yield cycle related to annual variations in rainfall but we are now witnessing stagnation.
• Now, unlike in the case of a cycle, recovery cannot simply be assumed.
• The expertise of agricultural scientists is needed to confirm what factors are responsible for this state.
• Factors - The role of ecological factors in causing agricultural stagnation could be considered.
• Land degradation leading to scarcity which raises the cost of cultivation.
• Most of these fact0rs are directly man-made, related as it is to over-exploitation of the earth’s resources.
• Solution - A deeper adaptation is required to deal with these factors.
• Intelligent governance, resource deployment and change in farmer behaviour would all need to combine for this.
• The reality of an unstable agricultural sector rendering economy-wide growth fragile has not elicited an adequate economic policy response.
• Policy focus is disproportionately on the tax rate, the ease of doing business in the non-agricultural sector and a fussy adherence to a dubious fiscal-balance target.
• It is time to draw in the public agricultural institutes and farmer bodies for their views on how to save the sector.