Indian GDP's explosive imbalance

Let truth prevail

It makes for an impressive headline across India's newspapers each year - "Services sector leads sectoral growth once again; clocks double-digit growth, pushes GDP above 7%".
The latest Economic Survey of India (2011-12) presented in March 2012 pegs the share of Services in India's GDP at a staggering 59%. Agriculture and Industry both account for the rest.

Such a figure not only makes a great headline, but creates a great comfort zone for our politicians. They love it. It gives them something to showcase, and hide the systemic faults. It creates a strong illusion that the entire economy is moving forward at a good pace. An illusion that somehow the great discomfort that stems from poor contributions from both the agriculture and industry sectors can be padded using the impressive growth figures of the services sector. And to top it, taxing this sector gives easy recourse to funds.

But the truth is far from this.

The truth is : Among the three, the Services sector - by its very nature - is the poorest employer of people. And when such a sector starts dominating the GDP with the wild swagger that we see today, it's the most visible sign that a stage of imbalance has already been reached.

The risk of such an imbalance is clear : Large employment disparity, leading to social chaos. 

Trained manpower is in abundant shortage

India is a huge country, with present population nearing 120 crores (1.2 billion) people. Services sector at present does not employ more than 10-15% of the population. A huge 75% plus of India's working population works in its most unproductive sectors - agriculture and industry.

We cannot ever hope that the service sector will become the biggest employer, or a mass-rapid employer, because it needs "skilled" manpower, and those skills take time to develop; and it has been proven through many studies that the Indian mainstream education system has shamefully failed in staying apace with what corporates want today. Even the National Skills Development Mission cannot hope to remedy the situation because by the time its efforts will start paying off in a big way (if they ever), the imbalance will have tilted the ship over.


The possible solutions:

Give her some hope

1. Reform agriculture, raise Industrial productivity: Due to legacy factors, Indian agriculture is terribly unproductive. We cannot hope that segmentation of farmlands will stop overnight and consolidation leading to greater productivity will start happening. It will take time - but it can be done. Also the trend of people selling their agricultural lands to make way for modern shopping malls, residential gated communities and industrial hubs is a dangerous indicator of our future food insecurity. Similarly, due to outdated labour laws, industries in several sectors have little incentive to innovate, or create new lines of revenues.
2. Skills development on a humongous scale: The horrendous situation of mainstream education, the stubborn insistence of Indian parents on "earning formal degrees and diplomas", and the poor social acceptance of vocations that earn well but are not white-collar... these factors contribute to a culture of unproductive white-collarism on a large scale. It's destructive for the nation eventually. The governments (central and state) need to reorient their efforts massively to address these core issues. If skills development starts to happen, a lot of young people can be migrated from agriculture to services sector.
3. Social change: Parents must start accepting the fact that the world has changed, and degrees have lost much of their significance, if only for the reason that most of what is being taught in Indian colleges is outdated, and most of the teachers who teach them are underpaid, unproductive and disengaged. What results do we expect from such a system! So start putting your kids into vocational training programmes, and if your son can become a great carpenter (and earn 20-30 thousand rupees a month eventually), accept it. Much better than becoming an office-clerk who stagnates and hates it.
4. Large scale manufacturing growth, and consequent employment: One does not have to think too hard; just use the Chinese trick. The Communist Party realised early on in the 1980s that to save the nation (and hence the Party!) from social turmoil, they needed to generate quick employment for the masses. And they chose the easiest route : industrial production of all sorts, catalysed by easy government policies. India needs to seriously think about this. And it can only happen when New Delhi directs a massively funded central programme, overriding all legacy obstacles.

But as much as we are faced with these problems, we are still running out of time!

If India does not start the process of change now, 2020 will be staring at us with all its seething troubles soon. And we will have only ourselves to blame.

I find no political awareness that's visible, on this topic. It's not a good sign. Wake up folks. We owe it to our coming generations.

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