By Nilanjan Banik
As India heads for election, issues relating to
jobless growth and farm distress are haunting the NDA government. The common
perception is both these factors are responsible for widening income inequality
in India. Oxfam International Report 2019, however, argues this worsening
income distribution is a global phenomenon: billionaires are growing $2.5
billion richer every day, while the poorest half of the global population is
seeing its net worth dwindle. In this era of technological disruption and with
India slowly transforming into a gig economy, where the labour market is
increasingly characterised by the prevalence of short-term contracts or
freelance work as opposed to permanent jobs, getting jobs for relatively
low-skilled labour is soon going to be a herculean task.
Per-capita income in India is $1,700 per year, which
is around 16% of the world average. India’s labour productivity – economic
output per hour of work – is just 15% of the US levels. During the last
century, technology was complementing India’s workforce by making it more
productive. Electricity, combustible engines and refrigeration aided economic
growth through a more productive labour force. Unfortunately, things are now
different. In this age of big data analytics, machine and deep learning,
machines are increasingly taking over jobs performed by humans. With technology
changing at a rapid pace, no one knows where jobs of the future are coming from
and what do they look like. Daily, less than 2% of Indians who apply for jobs
get them.
There is no silver bullet that may provide immediate
respite, but nurturing growth of our core manufacturing sectors such as cement
and steel may help. Read this.
At 8 am every day, 2,000 odd labourers begin their
work at a cement plant located in Beawar, Rajasthan. Beawar, is a non-descript
town to the south-west of Ajmer, with a population of just around 0.3 million
(in comparison to Delhi’s 18.6 million). Although, cement factories have become
mechanised, the plant in Beawar has been a source of employment for thousands
of people, both skilled and unskilled. Labourers, technical people, engineers
and other professional people work for this industry. Besides, as cement
factories offer employment opportunities in smaller towns (factories are
located close to limestone mines), it is most often seen as a harbinger of
uniform growth process across India.
At a time when fewer jobs are getting created and
India’s urban centres are unable to accommodate any further expansion, growth
of core industrial sectors such as cement is important. The cement industry’s
performance tracks industrial growth. India, with an installed capacity to
produce 500 million tonnes per annum, is the world’s second largest producer of
cement after China, ahead of USA and Japan.
During 2018-19, the government is expected to spend Rs
330 billion on account of Pradhan Mantri Awaas Yojana (with the stated
objective: housing for all) and Rs 6,000 billion in spending on infrastructure,
which is expected to sustain demand for cement. In terms of revenue, cement
industry has been the fourth-largest contributor to the national exchequer,
contributing nearly Rs 500 billion per annum in the form of taxes and levies.
Cement industry attract a GST of 28%, which means a ton of cement which costs around
Rs 5,600, contributes Rs 1,560 to national exchequer.
Additionally, this sector is seen as a torchbearer of
green environment. On the World Environment Day (5 June, 2018), Cement
Manufacturers Association offered to use plastic waste (up to 12 million
tonnes) that is generated in this country for its cement kilns by 2025. Cement
industry is also using fly ash as an input, a by-product from burning thermal
coal in power plants. One can also get hiatus from stubble burning in
neighbouring Punjab and Haryana as the crop residue can very well find its use
in cement factories in the northern region.
One concern that is plaguing cement is excess
capacity. Cement industry is presently using 70% of installed capacity. In
fact, during the lean rainy season capacity utilisation falls further. Over the
last 5 years, growth in cement prices has been less than 4% annually (less than
the inflation rate). The opportunity to export and thus use the excess capacity
does not work either. Cement as a commodity falls under bulk (heavy) export
category. The cost of transport comes to around 25%, making export unviable.
Cement is second largest revenue contributor to Indian railways. Besides, only
a few ports, such as Kandla in Gujarat, have the capability to handle bulk
export items such as cement. The cost inclusive of transport cost makes
domestic cement uncompetitive in foreign markets. Only a few countries in the
Middle East buy cement from India. Less than 5% of cement produced in the
country gets exported.
Luckily, India still needs many more ports, airports,
roads, hospitals, school and houses. It is time for the government to take a
leaf out of Keynesian ideology: build infrastructure and create jobs.
Hopefully, this will make our income distribution function – depicting how an
entire population is distributed on an income scale, starting with very low
incomes to the billionaires – looks more like a normal distribution (read,
reduce income inequality). Nurturing growth of our core sector and creating
infrastructure is a much better policy option than giving doles. All such
populist measures such as farm loan waivers and direct cash transfer will not
sustain economic growth. We will be stuck in the middle income trap and make a
hole in our already fragile fiscal deficit scenario. (IPA Service)
The
writer is Professor, Bennett University, Greater Noida.
The post A Recipe For Achhe Din Through Cement appeared first on Newspack by India Press Agency.
