India, with 1.4 billion population faces dual challenge on economic front-low consumer demand and high unemployment among youth. To tackle this problem, Government needs to explore different avenues, apart from conventional approaches that have been tried and tested in past by many countries. High government spending comes with risk of inflation surge and debt problem, As can be seen with United states where inflation and debt has reached a record high. On the other hand, not spending more will result in low demand-low growth cycle. Investors would shy away from investing, and businesses won’t produce more as there is not enough demand. Banks will have to sit with large capital at their disposal, and no one to lend to. This scenario is akin a double-edged sword for India.
Should we increase government spending by giving more freebies and direct benefit transfer and face the wrath of inflation or should we let market pick up pace on its own? The latter has to be taken with a pinch of salt as an artificial economic push, in the form of increased government spending will be needed to gain confidence of investors and make Adam Smith’s invisible hand effective, which will again come up with issue inflation and debt. However, there is a beacon of hope that cut through this dilemma – foreign remittances.
With $87 Billion, India is the largest recipient of remittances in the world in 2021. To give some perspective, IT industry contributed roughly 8% to India’s GDP in 2020, which is around $240 billion (India’s GDP as $3 trillion) and employs 4.5 million people. Agricultural share in India’s GDP is 20% for FYR 2020 which roughly makes around $600 billion (India as $3 trillion economy), but more than 50% of Indian population is still dependent on agricultural sector. According to Ministry of External Affairs report, there are 32 million NRIs (Non-Resident Indians) and PIOs (Persons of Indian Origin) living abroad. So the per capita output from them is far more than other sectors in economy which is getting far more attention of Government.
The expatriate community of India is spread over different parts of the world, from United States to Middle east to Canada to UK to Australia. These expats send money to their family members, who spends it here in India that drives consumer demand to a certain extent. Indian government, apart from focusing on Make in India initiative and Atmanirbhar policies, should focus on sending more skilled labor abroad. Although, it would be considered as brain drain by few, but with huge young population, it would be more like taking away a bucket of water from ocean.
Apart from this, Modi government should work to end the mental roadblock our society collectively holds about hierarchy in jobs. Some jobs hold more social status than others, but no job is inferior. India needs to instill it in our collective mindset before we go ahead in our endeavor to be a superpower. Ensuring access to employability skills to rural and semi urban youth of India and less hoops to jump through for the technical support to go abroad should be a priority. Some states, like Kerala and Punjab, have beginners’ advantage as many people from Kerala move to gulf countries to do a blue collar job mostly, while people from Punjab move to Canada to either study or work, while some move to settle permanently. Indians move to America and European countries to do both white as well as blue collar jobs. India, with its second largest English speaking population in the world, has an edge over other countries.
The expat community also help increase soft power of India. Japan has used anime to increase its soft power globally. US uses its entertainment industry to establish cultural hegemony over the world. China uses its pandas to help improve diplomatic ties. Its famously called as “Panda Diplomacy”. Different countries use different resources to project their soft power. India can use her people for the same.
India has, for long, focused on exporting goods and services to other countries in order to increase its GDP, but too many bottlenecks have hampered that prospect. Signing Free Trade Agreements comes with its own merits and demerits, which makes it harder for India to increase exports. So, instead of focusing on complicated and multivariate solutions for Indian economy, Modi government should keep it simple and focus on sending more people abroad. As the law of Parsimony goes, the correct explanation is usually the simplest one.
