It is hard to talk about South Asia without invoking its demographics. The region will contribute nearly 40 percent of the growth in the world’s working age (15-64) population, and will need to add a staggering 1 to 1.2 million new entrants to the labor market every month for the next two decades. Absorbing the influx of youth into the labor force is one of South Asia’s core challenges. But while economists grapple with employment statistics and economic policy, jobs are created at the grassroots. Entrepreneurship is the spark that lights the fire, and the engine that generates opportunities in local communities.
Yesterday, I discussed India’s incredible economic transformation over the last two decades and some of the challenges that the country is currently facing. So, what can India do to reduce the impact of global uncertainty and improve growth performance and boost investor confidence?
India’s firepower to respond to a crisis with traditional monetary and fiscal stimulus is much weaker now than prior to the 2008 crisis. Fiscal space for additional spending is severely constrained in light of continued high deficits. Room for monetary policy easing is modest in light of continued high inflation, and still low real interest rates. Moreover, when investor confidence is at a low ebb as it is in India, easing monetary policy would be tantamount to “pushing on a string.”
India has been a beacon to the world on how a thriving and vibrant democracy can transform itself into an economic powerhouse. The metamorphosis that took place in the Indian economy after the reforms of the early 1990s is nothing short of spectacular. The Indian economy was transformed into a dynamo of innovation and diversification. This fundamental transformation unlocked two decades of explosive growth in which poverty rates fell by nearly 20 percent, exports as a share of GDP increased nearly five-fold, and standards of living increased by a factor of almost four. This trajectory received but a glancing blow from the 2008 global financial crisis—this resilience was a testimonial to the benefits of the economic reforms of the previous 15 years.
Challenges to India’s Growth
But now, India’s economy once again faces formidable challenges and the fear is that it is considerably less well placed to deal with these challenges than at any time over the past two decades. The global economy is facing a new phase of the crisis characterized by an extreme bout of uncertainty, risk aversion and volatility, this time originating in the Euro Area. Some skeptics have recently questioned: Will India weather this storm as well as it did in 2008-09 and will the story of “Incredible India” remain credible?
The results are in! The selection committee has chosen 25 winners in the World Bank’s Imagining Our Future Together art contest for young artists.
"With sensitive brush strokes and unusual photo angles, the young artists of Imagining our Future Together offer jointly for the first time a harmonious and joyous regional song of beauty, poetry, irony, and talent," said Marina Galvani, art curator for the World Bank.
Back in the mid-1980s, India's then-Prime Minister Rajiv Gandhi lamented that out of every rupee spent on welfare schemes, only 15 paise reached the poor. More than a quarter of a century later, the scale and ambition of India’s social sector programs have become far bigger than what even Rajiv’s 21st-century vision could have comprehended. But one thing has remained constant – the system still leaks.
That’s not to say the problem hasn’t received attention. There is increased awareness about pilferage and diversion of assets meant for a target population. Programs now are better designed to detect leakages, estimate what’s being delivered and allow monitoring at various stages.
But these measures have met with varying degrees of success. Clearly some states – and indeed some projects – have been better at drawing benefits and utilizing funds than others.
So how do you get more bang for your buck when it comes to development projects? When the World Bank invited me to visit some of its assisted projects in Tamil Nadu in early May this year, I got a firsthand opportunity to mull this issue.
Arif Jafar had no choice about coming out as gay. In 2001, he was arrested in the northern Indian city of Lucknow at the AIDS prevention agency where he worked, charged with running a sex club, jailed for 47 days, and named in the newspapers, in a case that helped spark a legal challenge to India’s sodomy law, known as Section 377. (Needless to say, he denies that the AIDS agency was a sex club.)
“Before jail, I was open, but not that open,” says Jafar, 42, a mosque-going Shiite Muslim who now runs the Maan Foundation, an AIDS prevention group (“maan” means “respect” or “pride”). “Now everybody in the city knows.” Despite the arrest, Jafar (right) says he loves Lucknow and will never leave. “If I ran away, people would start having the perception that I did something wrong,” he says.
Jafar’s case has dragged on for 11 years without coming to trial, but in the meantime, the law criminalizing homosexuality has been overturned in Delhi High Court. Retired Justice Ajit Shah, who wrote the decision, is an unassuming man, greeting us in sandals in his modest apartment. Yet his landmark opinion broke through several centuries of bias and freed up India’s nascent movement of lesbian, gay, bisexual, and transgender (LGBT) people to come into its own.
“While unemployment is around 5% in Sri Lanka, youth unemployment is nearly 3 times that. Youth unemployment is a critical challenge for us right now”, I said, in my remarks on Sri Lankan perspectives at a South Asian youth dialogue on the sidelines of the World Bank–IMF Spring Meetings last month. “Hey, what are you complaining about? Youth unemployment is almost 50% in Greece right now!”, was the immediate response I got from a World Banker in the audience. I was taken slightly aback, but it made it very clear to me - the youth unemployment issue is a gripping issue for many of the world’s economies right now, and even if the numbers may not always be on the same scale and each country has different reasons for why it’s a high-priority policy issue right now.
The last year and a half has seen everyone sit up and take notice of youth unemployment like never before – either because of the Arab Spring or protests by discontent educated youth in European capitals. The attention of economists and governments alike is on it – how did it become such a challenge? How can we address it?
Last week, I discussed the optimistic and pessimistic views of South Asia's development potential. As I highlighted in my book, Reshaping Tomorrow, South Asia is among the fastest growing regions in the world, but it is also home to the largest concentration of people living in conditions of debilitating poverty, human misery, gender disparities, and conflict.
I also ask if South Asia is Ready for the Big Leap. The optimistic view is that India will achieve double-digit growth rates benefiting the rest of South Asia. The pessimistic view is that growth will be derailed by structural and transformational challenges. In this entry, I will make some suggestions on how South Asia could realize the optimistic view.
What can be done?
Five years ago, M. Revathy was a single mother abandoned by her husband, living in the small town of Tirunellikaval in Tamil Nadu. She is high school educated but was unable to find any employment except in a loom in her town. She was paid a pittance there and had the status of a bonded laborer. Today, she has her own loom at home and sells her saris at a good price to the wholesale market. She has a smile on her face as she says proudly that she sends her three sons to school and supports them and her father on her income.
Revathy was one of the women identified under the Tamil Nadu Empowerment and Poverty Reduction Project, 75% funded ($274 million) by the World Bank a few years ago. This project called Pudhu Vaazhvu (meaning New Life) has given a livelihood, and hope for thousands of women, unemployed youth and the differently abled in the state and has also been recognized by the World Bank as one of the best such projects in the world.
India’s estimated 700,000 hijras, or transgender women, generally get little or no schooling, their families often reject them, and they join marginalized and feudal communities where their employment options are sex work or ritualized begging. They are likely to die young, of violence – like Anil Sadanandan, a transgender activist murdered in Kerala state during my recent visit to India – or AIDS. They are among India’s most destitute women, yet they are ignored by the World Bank, despite its strong focus on the “gender agenda.”