Can India, Pak stumble into a war?
If the World Bank is to be believed, automation threatens 69 per cent of jobs in India and 77 per cent in China.
Samay ke bandhano se, paristhitiyon ki aavashyakton se, yudh kabhi anivarya ho jata hai (Compulsions of time and the requirements of a situation can render war unavoidable) — thus spoke Narendra Damodardas Modi at a Dussehra event in Lucknow on Tuesday. What are these circumstances and compulsions? Is it only terror or is it something very deeply intrinsic and internally dysfunctional? Consider the following data points that profile a very gloomy spectre.
In 2015, India added the fewest organised-sector jobs in large corporations and manufacturing facilities in seven years across eight core industry sectors. The ratio of jobs in the unorganised sector without monthly payments or social security benefits is set to rise to 93 per cent in 2017. Rural wages are at a decadal low as agriculture, that accounts for 47 per cent of jobs, contracted 0.2 per cent in 2014-15 and grew by one per cent in 2015-16. Around 60 per cent of people with jobs don’t find employment for the entire year, indicating widespread underemployment and temporary jobs. The formation of companies has slowed to 2009 levels, and existing firms are growing at two per cent, the lowest in five years. With large corporations and public sector banks financially stressed, the average size of companies in India is reducing, at a time when well-organised large companies are central to creating jobs.
Without a fundamental transformation in the economy, a basic reset of economic priorities, these jobs will not materialise. The traditional way countries have developed, through low-end manufacturing like garment exports, and then migrating to higher-end work like automobiles and electronics, is now passé. Another equally big reason is the lack of trained manpower. This may astonish the urban Indian elite, who can get jobs relatively easily due to their access to reasonably good education. But the vast majority of Indians don’t have access to this resource and, therefore, aren’t equipped to work in a modern economy. The no-brainer solution, therefore, is to equip millions of people with basic blue-collar skills. Even here, despite the Skill India programme, results will take time as the quality of primary instruction in India is very poor. A period of mass unemployment and social unrest is looming over the immediate horizon unless there is an internal and external shift that at the moment is conspicuous by its absence.
If the World Bank is to be believed, automation threatens 69 per cent of jobs in India and 77 per cent in China, and a whopping 85 per cent in Ethiopia. A recent Bank report underscores that technology could fundamentally disrupt the pattern of the traditional economic path in developing countries. “As we continue to encourage more investment in infrastructure to promote growth, we also have to think about the kinds of infrastructure that countries will need in the economy of the future. We all know technology has and will continue to fundamentally reshape the world,” says World Bank president Jim Yong Kim. “But the traditional economic path from increasing productivity of agriculture to light manufacturing and then to full-scale industrialisation may not be possible for all developing countries,” Mr Kim adds.
If this is accurate, and if India is going to lose so many jobs, we have to understand what paths to economic growth are available, and then adapt our approach to asset creation accordingly. Mechanisation and technology have disrupted conventional industrial production, upended manual jobs and call time on work that has been done by generations. According to the labour ministry’s 27th Quarterly Employment Survey of eight job-intensive industries — textiles, leather, metals, automobiles, gems and jewellery, transport, IT/BPO and handloom/powerloom — there were 43,000 job losses in the first quarter of FY 2015-2016. There have been no signs of recovery in FY 2016; in fact there is a decline.
The monthly economic report for August 2016 by the department of economic affairs underlines these ominous trends. It states overall growth in the index of industrial production (IIP) was (-)2.4 per cent in July 2016, in contrast to 4.3 per cent in July 2015. IIP growth during April-July 2016-17 was (-)0.2 per cent, compared to 3.5 per cent in the corresponding period last year. It says that merchandise exports and imports declined by 0.3 per cent and 14.1 per cent (in dollar terms) respectively in August 2016 over August 2015. In August 2016, oil imports and non-oil imports declined by 8.5 per cent and 15.6 per cent respectively over August 2015. In April-August 2016, merchandise exports fell 3.0 per cent while merchandise imports fell 15.9 per cent. The rupee appreciated against the US dollar and pound sterling by 0.4 per cent and 0.8 per cent respectively in August 2016 over July 2016. The wholesale price index (WPI) headline inflation increased to 3.7 per cent in August 2016, from 3.5 per cent in July. If you go out into the market, business sentiment is at a nadir, with realty sector promoters even willing to go to jail rather than honour their obligations. There is blood on the streets and gloom and doom is the prevailing strop.
The next 24-36 months in the run-up to the 2019 general election are going to be worse, with crude prices starting to harden. Oil stood at $51.35 on October 10, 2016. Some analysts claim that oil will hit $120 a barrel by early 2018. If that happens, the Indian economy would be up a creek without a paddle. It doesn’t even have the intellectual bandwidth to handle such a volatile economy. The exit of Raghuram Rajan shows how uncomfortable this government is with independent intellect and autonomous action.
Under these circumstances, what would Prime Minister Narendra Modi need to hang onto the coattails of office? He is driven by only one impulse: the insatiable hunger for power. A diversion and a very strong one indeed. There is nothing like a good old war hysteria or even a war to get the blood of raw jingoism flowing in the nation’s loins. The nuclear overhang be damned.
The Pakistani deep state continues to provide the necessary ingredients for this diversion by its persistent use of semi-state actors against India. It suits Nawaz Sharif to attach himself to the apron strings of the Army-ISI-terrorist nexus, given his standing is at an all-time low after the Panama Papers and other exposes. A distinguished analyst with a global think tank who was in Pakistan recently has said Pakistan almost seems like a country coming apart at the seams, making its last stand. Between 2011 and 2015, the Pakistani economy grew by a mere 3.84 per cent on an average. In 2016, it clocked a mere 4.7 per cent and in 2017 it is expected to grow by 5.2 per cent, stagnating at the Urdu rate of growth. With a public debt of $50 billion, of which around $30 billion was due for repayment in July-September this year, the fact that the Pakistani economy is floundering is a gross understatement.
There is thus a strong incentive on both sides of Wagah to keep the pot boiling, just as Atal Behari Vajpayee did between December 2001 and May 2004. However, he knew the red lines, and that is why he didn’t allow the Indian armed forces to cross the Line of Control. With many in the current establishment cocking a snook at the LoC and hysterical right-wingers and certain dubious Pakistanis egging them on, there is a real chance that we may just stumble into a war. If the missiles fly there would be little left of the subcontinent. We would have effectively bombed ourselves back into the Stone Age.