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Promoting equitable growth for 2050

As of 2018, India has become the sixth
largest economy in the world displacing France from this position and nearly
tying with the United Kingdom. While there is cause to celebrate, there are two
major concerns about India’s growth experience. The first has been a well documented subnational divergence in
growth; some states lag far behind while others enjoy diverse labor
opportunities and robust economic development. Second, there has been a
continued dependence of labor on agriculture for employment and livelihoods
even though agriculture’s contribution to overall GDP has been falling.

With regards to the former, subnational
divergence has created a situation where states such as Bihar have development
outcomes similar to Sub-Saharan Africa while states like Goa look like
countries in Latin America. Reviewing TCI’s new book Transforming Food Systems for a Rising
India
(Chapter 2),
we identify two main reasons for this sub-national divergence. First, we argue
that currently lagging states were left behind in the development process because
they lacked comparative advantages in
the implementation of green revolution technologies
, keeping them stuck in
traditional agriculture practices. Agricultural policies overemphasize rice and
wheat, a “staple-grain
fundamentalism
” which impedes production diversity and income growth.
In comparison, states with greater flexibility in their development approach, which have focused on developing
sectors and industries in which they have local or global comparative
advantages in resource availability, have been more successful in enabling
greater structural transformation of their economies.

 

Divergence in growth
at the state-level has led to different welfare and nutrition outcomes (Source:
Pingali,
et al 2019)

Second, differential opportunities within the labor market have also played
a role in reinforcing this subnational divergence. Not surprisingly, in lagging
states, a greater proportion of the workforce earns its livelihood through
agriculture. However, even as state economies transform, urbanize and
diversify, many agriculture laborers have found it difficult to transition to
the non-agriculture sector. In the book, we discuss that the heart of the
employment conundrum lies in labor market frictions. In lagging states
especially, inefficiencies in labor
markets
have reduced the ability of the non-agricultural sector to absorb
the marginal, underemployed agricultural laborer. Thus agricultural wage labor
still dominates much of the rural employment in these areas and agricultural
wages remain depressed. This has reinforced a vicious cycle of low productivity
and low growth in these areas. In more urbanized states, growth has come from
the high skilled services sectors. Human capital investments in health and education have been
instrumental in facilitating this growth. However, limited capacity of urban
and peri-urban areas and high levels of socio-economic-cultural costs
associated with permanent migration have slowed down the employment transition
out of agriculture. This has prevented migration of workers towards
opportunities in the non-agricultural sector (both within and across state
borders), reinforcing differences in productivity and hence growth across
states.

Catching up: Options for lagging states

We envision a future where there is greater and more equitable growth that allows currently lagging states to catch up, or at the very least, reduce the divergence gap. To do so,

  • In lieu of a national growth strategy, we
    ask for state-specific development
    policies that prioritize the experience of each state are implemented. In our
    vision for the future, states in India need to reorient their economies towards global growth opportunities based on their comparative advantages.
  • As the global manufacturing world becomes
    more mechanized, creating a clear pathway for young people to benefit from
    economic growth through greater human
    capital investments in health and education
    should be an important policy commitment.
  • For the currently low skilled laborer,
    reducing search and entry costs in
    non-agricultural labor markets
    is the need of the hour. Human capital
    investments in education and health, developing new urban safety nets, creation
    of employment exchanges, creating opportunities for reskilling oneself, and
    increasing public health investments & access to finance will be important
    in this regard.
  • We believe in the unlocked potential of women in the workforce. Data confirms there
    has been an increasing number of women working on farms; however, current agricultural
    technologies are not gender neutral in access and use. To grow agriculture GDP,
    crop technologies and extension services need to reach women.
  • Crop
    technologies of the future need to be climate smart

    if they are to increase rural productivity.
  • A key to ensuring greater rural growth in
    this dynamic environment is in the development
    of non-agricultural, rural-based value chains.
    Engaging individuals in the food value chains and the health services
    sector
    will help more people transition out of agriculture and into the non-ag
    sector.

For more details and
analysis, we invite you to review Economic Growth, Agriculture and Food Systems: Explaining
Regional Diversity
 – Chapter 2 in Transforming Food Systems for
a Rising India.

By Anaka Aiyar and Jessica Ames

Anaka Aiyar
is a Postdoctoral Associate at the Tata-Cornell Institute and co-author of the
book Transforming Food Systems for a Rising India. On twitter @AiyarAnaka.

Jessica Ames is the
Communications and Outreach Manager at the Tata-Cornell Institute. She tweets
@TataCornell and @j_scott_ames.