The “World Development Report 2024”, released recently by the World Bank, has drawn a lot of attention in India. The report indicates that over 100 countries around the world are facing the “Middle-Income Trap” and India is at risk to fall into this trap.
Dr Indermit Gill, the renowned economist working with World Bank Group, had also opined that India’s rise as a high-income developed country could not be guaranteed. In fact he was the one who coined the concept of the “Middle-Income Trap” in 2006 to describe how countries stagnate after reaching a certain level of income.
Law of diminishing return on physical capital starts functioning when countries do not refine & strengthen their innovative capacities. Consequently, such countries start facing stress upon economic growth. This leads to falling into Lower Middle-Income and Middle-Income Traps. The report suggests that nations must maintain steady growth by sustained investment, infusion of technologies and innovations to avoid this trap.
India has to escape the “Middle–Income Trap” to realize its ambitious “Vikasit Bharat @2047” mission a success. This milestone is achievable if India takes decisive steps to up-grade & up-date it’s infrastructure as per emerging requirements besides breeding a culture of recognition to talent and reward for efficiency, creativity & meritorious entrepreneurial skills. The success stories of Japan, Singapore, and South Korea, who escaped the Middle-Income Trap and became High-Income countries, can be a guiding source for our country.
Quests for Infrastructure Development
Fortunately, the government of India had timely anticipated this emergent issue and started taking strategic initiatives since 2014 and introduced several investors’ and business friendly reforms, infrastructure development programs and establishment of several new institutions for the development of cutting edge technologies & skilled human resource.
“National Master Plan for Multi-Modal Connectivity (PM Gati Sakti Yojana) implemented on October 13, 2021 is demonstrating a big success in providing world-class connectivity including digitisation of services. Over 3500 km long two high speed dedicated freight corridors (Eastern DFC and Western DFC) of railways, modern logistic hubs and a huge network of highways & express ways besides water and air ways are now dynamically supporting the national efforts to strengthen the economy. The impact of increasing connectivity is visible in the form of swelling investment, manufacturing, transportation and tourism. The “PM Gati Shakti Yojana” is now being extended to rural India too.
To meet the energy demand and also to reduce the cost of energy, a number of mega schemes for the generation of renewable energy have been launched. The impact is visible as India achieved the target of producing 200GW electricity in 2023-24. This is more than 85% higher over the production realized in 2014. The NITI Aayog’s “Report on Renewable Electricity Roadmap 2030” has shown huge potential to harvest this energy for transitioning to green energy utilization.
The “Jal Shakti Abhiyan” launched in the year 2019 in 1,592 blocks of 256 water stressed districts in the country is successfully moderating potable water problems and also supporting agriculture and industry requirements.
The scarcity of storage facilities for grains and horticultural & animal products was continuously incurring enormous losses in the agriculture sector. For example, India produced 311 MMT food grains in 2021 but the total storage capacity was only 145 MMT (FAO statistical data 2021) clearly reflecting that nearly 50% food grains were exposed to loss. Therefore, the Ministry of Cooperation had come out with an unparalleled initiative—the “World’s Largest Grain Storage Plan” in the Cooperative Sector sanctioned on 31.5.2023.
All such efforts would certainly have a big leap on reduction of cost on production and logistics which, in turn, would help in making our products competitive in the global market. Ultimately, these efforts would prove to be a big booster to the Indian economy.
Talent Management Pursuits
The government is now strongly pursuing “talent management” in the country. One of the most important initiatives has come in the form of “PM Internship Scheme” announced in July, 2024. It is targeting one crore (ten million) youth for internships with high valued companies as a part to bridge the skill gaps. As per reports (ToI,12,2024), 198 top industrial/business houses of the country have already posted a total of nearly one lac internship opportunities on PM Internship Portal spreading over 24 sectors for the current year. Similarly, a large number of institutions across the country are organizing “Skill Development Programs” with the financial support of the government.
The industries/investors landing in India know very well about the talent potential of Indian Youth and they look for technically skilled local talent. Indians have been recognized best in the world in chip designing and hardware & software development as observed by American semiconductor giant Qualcomm’s country president Sri Savi Soin.
Perhaps this is one of the reasons that investors are also attracted to the establishment of a multi-million dollar semiconductor industry in India. Therefore, talent search and up-skilling programs are being conducted countrywide with greater enthusiasm and seriousness with government support.
However, there are growing apprehensions about the ground reality of implementation of these programs. There must be an impact evaluation of these programs through an independent agency to know whether the program has been implemented in true spirit or it is just a formality to utilize funds allotted to the institutions.
The government has recognized the importance of start-ups in driving innovation and economic growth. Therefore, the government has come out with about a dozen schemes implemented to support the talent in different areas of the economy (see on Start-up India Portal). The Indian start-up scene has experienced an incredible upsurge from 471 only in 2016 to a total of 127,433 in 2024 which is evolving into a vibrant engine of innovation and economic expansion (statista.com).
India stands third in the world in terms of number of unicorns (combined valuation of $347bn= over Rs 25 lac crores) which is a remarkable achievement reflecting the rapidly evolving nature of the Indian’s dynamic business landscape. These start-ups are not only creating path-breaking solutions and technologies but also fuelling significant job growth (forbesindia.com).
The PM Research Fellowship scheme is another important initiative to attract the talent of our country toward opting doctoral degree programs with prime institutions and for carrying out research in cutting edge science and technology domains, with focus on national priorities. “Production Linked Incentive” scheme has also triggered a lot of enthusiasm amongst entrepreneurs to make themselves competitive at domestic and global levels.
The poverty alleviation programmes helped in stimulating a sizeable population to earn better through the participation in nation building programmes. National Education Policy 2020 has also been implemented to unlock human potential to take forward the national development agenda.
Stop Trapping Farmers in Political Net
The agriculture sector would certainly play a vital role in getting India escaped from the “Middle-income Trap” if its potential is unlocked. To unlock the full potential of the agriculture sector, the structure of reforms needs to be carefully built after taking real farmers into confidence. All sectors of economy including defence production have undergone reforms in order to develop a competitive edge at international level.
Unfortunately, the agriculture sector is in a “Political Trap” which is barricading the reforms required to make it globally competitive and vibrant. Our farmers are hard-working and highly receptive to new ideas and technologies but 86% of them are small and marginal farmers. They are suffering most due to the misleading approach of those farm leaders who carry their political ambitions.
These leaders always oppose the government’s initiatives without offering any sustainable proposal. In fact, the agriculture sector is suffering from an inherent weakness to maintain the status quo. The so-called farm leaders take advantage of it to establish themselves as leaders. Therefore, much needed reforms in the agriculture sector are no longer in discussion.
Most of the experts committees have recommended the dire need of private sector participation in the agriculture sector particularly in the areas of modern storage facilities development, processing & value addition, branding & marketing and supply chain establishment/management etc.
Private sector has its expertise in many such areas and therefore, its participation would be of great help in making our agriculture sector globally competitive. Experts Committees have also suggested to take due measures for empowering small and marginal farmers as they have the key to unlock potential of this sector.
The latest amongst several initiatives in this endeavour taken by the government is rupees one lac crore “Agriculture Infrastructure Fund” scheme for funding Agriculture Infrastructure Projects through Primary agricultural cooperative societies, farmers producer organizations, agriculture entrepreneurs, start-ups, etc.
The scheme covers post-harvest management projects like supply chain services including e-marketing platforms, warehouse, silos, pack-houses, assaying units, sorting & grading units, cold chain, logistics facilities, primary processing centers, ripening chambers besides other viable projects for building community farming assets. All loans up to a limit of ₹ 2 crores under this financing facility will have interest subvention of 3% per annum (https://agriinfra.dac.gov.in/).
This initiative will certainly bring a massive change in farmers’ thinking and strengthen the rural economy. Nevertheless, there is an urgent need for hand holding of farmers by the private sector too. For that a suitable system must be evolved which should benefit both farmers and private sector. The change in economic mind-set including in agriculture sector and encouragement to wealth creators could be the key to escape the “Middle-Income Trap” (KV Kamath, Chairman, NBFID).
Accordingly, the central and state governments are doing their all out efforts to strengthen agriculture and other sectors of the economy through the implementation of short-term and long-term schemes.
However, the prerequisite for implementation of any reform in agriculture is to sensitize farmers and rural youth on the recommendations made by expert committees so that they themselves come forward to destroy the political trap.
(The author is Professor (Retd), Haryana Agriculture University, Hisar, and Ex-Consultant Haryana Farmers’ Commission; Views are personal)
