Some thinkers in recent times have been trying to pin the government on slowing down of Indian economy based on their own analysis. They may be correct in their own assessment. But India continues to be a bright spot amidst global doom. Indian economy is one of the fastest-growing economies and a major driver of global growth in current times. However, it can be agreed to an extent that the GDP growth rate in India is yet to reach the expected trajectory of double-digit growth. But at the same time another factor that requires attention is behavioural change. It is this change which may not result in growth numbers in short run but it is the foundation block for robust and sustainable growth in the future.
Economic Survey 2018-19 has rightly focussed on this aspect and mentioned, “a key principle of behavioural economics is that while people’s behaviour is influenced significantly by social norms, understanding the drivers of these social norms can enable change. In India, where social and religious norms play such a dominant role in influencing behaviour, behavioural economics can therefore provide a valuable instrument for change.”
In the last 5 years, the government of India has launched several initiatives that focus on bringing about a behavioural change which will contribute to economy in the long run. Here is a list of them.
Swachh Bharat Mission (SBM)
SBM was launched in 2014 to achieve universal sanitation coverage. This mission, first government programme to address sanitation issues at such scale, bore results. The constant appeal to construct and use toilets by the Prime Minister himself nudged people to adopt the social change. Within five years of the launch of SBM, household access to toilets has increased to nearly 100 per cent in all states.
Source: Economic Survey 2018-19
In Long Run: The success of this mission inspiring people to use toilets and maintain cleanliness in their surroundings received international praise from institutes like World Health Organisation (WHO). Cleanliness leads to healthy population. Healthy population is more productive human capital to the country especially when India enjoys a youth bulge or a demographic dividend.
The findings of a report ‘True Cost of Sanitation’ published on Down to Earth has revealed that on a national level, in terms of total cost, India suffers the most, with US $ 106.7 billion wiped off the GDP in 2015. It is almost half of the total global losses and 5.2 per cent of the nation’s GDP. This was a huge burden on Indian economy. But, success of Swachh Bharat ensures that this cost declines and the trend is reversed in future.
Beti Bachao Beti Padhao
BBBP Scheme was launched in 2015 to address the issue of decline in Child Sex Ratio. The messaging of the scheme was to empower girls and women. The behavioural change that the scheme has been able to bring around all these years is reflected in the data. The key takeaway from the data is that the all-India sex ratio at birth (SRB) has risen from 923 girls per 1,000 boys to 931 girls per 1,000 boys in the four years between 2015-16 and 2018-19. Even in case of Haryana, a poorly performing state, an increase in the SRB has been steep from 850 girls per 1,000 boys to 933 girls per 1,000 boys after the scheme was started in the state.
In Long Run: According to a PWC report, “India would see a US$245 billion boost to female earnings from closing the gender pay gap and a US$7 trillion increase in GDP from increasing the female employment rate to the level of Sweden.” This is one of the many findings that suggest an increased role of women in workforce which will help in achieving a huge jump in GDP size. In the light of these findings, the achievements of BBBP like saving the girl child and empowering women are very encouraging. Won’t these encouraging results of BBBP help the Indian economy in the long run? Yes, they will.
Prime Minister Narendra Modi, in many of his speeches and several episodes of Mann Ki Baat programme, has emphasized upon the significance of wearing Khadi. In fact, after his appeal and his own trademark Khadi clothes, a significant jump in its sale has been noticed.
Read here one of our earlier articles to know more on this.
In Long Run: Apart from the agriculture, most of the people in India are employed in Micro, Small and Medium Enterprises (MSMEs). The boost in the sales of Khadi will give more opportunities to people working in the MSMEs as Khadi is mostly produced in this sector. Moreover, it will increase both domestic production and consumption of Khadi. Interestingly, like Yoga, Khadi is also becoming popular globally. It will lead to increase in its exports expanding the foreign exchange earnings and GDP base.
According to a report, Khadi Village Industrial Commission in the year 2018-19 saw 25 per cent jump in its sale to Rs 75,000 crore, twice that of largest consumer goods company, Hindustan Unilever’s at Rs 38,000 crore. Much of this growth has been pushed by increase in demand for Khadi products in the last four years. This behavioural change in Indians to wear Khadi clothes has opened up another channel for economic opportunities.
Give It Up Campaign
The government had launched the “Give It Up” campaign to encourage Above Poverty Line (APL) households to voluntarily surrender their LPG subsidies so that a BPL household can get a gas connection. This campaign was much difficult than others as it snatched the economic incentives from a section of population for another section. Yet, it achieved success. About a crore people gave up their LPG subsidy in the first year of the campaign helping government to give it to needy people.
Apart from the LPG subsidy, about 9 lakh senior citizens had given up on their railway subsidy leading to savings of worth Rs 40 crore for the railway.
Source: Economic Survey 2018-19
In Long Run: India has been seen as a country where many people don’t want to leave any chance to get a subsidy. But this commonly held perception was broken up by ‘Give It Up’ campaign. The success of this campaign shows that there is a shift from ‘What can I get from the economy’ to ‘What can I contribute to the economy’. Many people in the country are no longer willing to claim subsidies the way they used to. It is this attitude that contributed to nation building the most.
Further, this gave access to cleaner fuel and healthier life to poor population in the country. A healthier population is more likely to contribute to the economy than a population with poor health profile. According to OECD observer, “The effects of health on development are clear. Countries with weak health and education conditions find it harder to achieve sustained growth. Indeed, economic evidence confirms that a 10% improvement in life expectancy at birth is associated with a rise in economic growth of some 0.3-0.4 percentage points a year.”
Giving up railway subsidy will help in the investment of that sum in railway infrastructure or other avenues. This capacity addition will boost the GDP of the country.
Startup Culture in India
PM Modi had launched Startup India to promote the spirit of entrepreneurship in the country. Entrepreneurial drive enables → Flourishing Startup ecosystem which → Changes the behaviour from being a job seeker to job creator → Bringing in more investment and creating more jobs and → Adding innovation to goods and services and thus making exports value-driven and not induced by exchange rates → Leading to more sustainable GDP growth.
Read here one of our earlier articles explaining how the government is enabling a Startup ecosystem in the country.
In Long Run: The middle class and the young population in India was programmed to see quality of life in getting a salaried job. Few years back, if young people were asked a question, what do you want to become in your life? Most of them replied by saying, engineer or doctor. This is changing. Many of them can now be heard saying that they want to start something on their own. This is a behavioural change brought about in short span of time.
The aspirations of youth in India are now not limited to getting a salaried job, but going beyond to become entrepreneurs. Nurturing of these Startups may not get immediate results but once they are grown, they will become the growth drivers of the country. Importantly, it is the culture of entrepreneurship which helps in laying the foundation of a country which can lead the world in terms of innovation and technology.
In addition to all the initiatives listed above, there are many like Khelo India Scheme, Jan Dhan Yojana, aimed at bringing about a behavioural change in the people. It is the Jan Dhan Yojana which brought a large part of the population under the net of formal banking institutions. Money deposited by these people in their Jan Dhan accounts (even if only the term part of the deposit is concerned) can be used in nation’s infrastructure.
Thus, numbers are important but economy is not limited to numbers only, it is people who are the most significant aspect of it. And, Modi government has got it right.