The Super wicked nature of present pandemic demands a multipronged approach from governments to shield the economy from the ill effects. It is well known that covid 19 has impacted the economy negatively as a huge slowdown has been witnessed. The two main drivers of the Indian economy i,e investment and consumption have gone down . As per report by CMIE, 122 million people lost job and unemployment rate rose to 7.11 percent in 2020 (worst in 29 years).All this reflects in form of shrink in GDP by 7.3 percent in 2020-21.
Along with these issues a bigger challenge looms large as 94 percent of the people work in unorganized sector. As per Oxfam’s report top 100 billionaires saw a rise in 12.97 trillion of wealth and inequality has increased in Indian society. Although rise in economic inequality has been witnessed globally, a new challenge of managing the “Great Gatsby Curve” has emerged .This curve represents the relation between two measures: intrageneration inequality and the intergenerational mobility.
Nordic countries have performed very well on this curve. USA lies on the middle while the Latin American countries have been worst performing on the curve. If India doesn’t perform well in terms of both the measures it risks a performance like the Latin American countries. Although, Indian government has been trying its best to boost the economy through “ATMANIRBHAR” packages, we must understand that rebuilding economy, promoting social capital and bolstering human capital are intricately related in the present pandemic era.
In the short term, policy makers may try to promote revenue raising mechanisms like inheritance tax and wealth tax to control inequalities in wealth across generations. But if we take a hawkish stance towards the issue there is a need to create inclusive growth and value added employment through skill building and renovating our higher education system through creative destruction.
At a crucial juncture when people want to save more, demand is low, the capacity utilisation has come down to 63 percent(2021 Jan) and consumer sentiment has gone down , government must not worry much about the fiscal deficit and try to provide stimulus packages for sectors like education for creative destruction that brings LPG moment for the sector. Surprisingly, when we consider the capacity of education to effect intergenerational mobility and intra generational inequality around the globe, results have been mixed. In Denmark, Austria and Belgium parental education did not impact the income of children but in France, Korea and UK substantial impact was seen. Still, building human capital through education stands out as the most effective means to tackle inequality in developing economies like India.
In Indian context, our endeavour to build a “multicultural meritocracy” by using Education as a tool of enhancing intergenerational mobility needs a complementary intervention in enhancing the scale and scope of healthcare ,social protection schemes. Issues like minimum wage determination, promoting entrepreneurship through government sponsored schemes(START UP, STAND UP) and use of land reforms to tackle inequality must be in correlation with educational landscape in India.
Further, bringing creative destruction in education in the fight against inequality requires addressing issues like “socio economic disadvantage” prevalent in our education system. In present pandemic era, this disadvantage can be tackled through increased social spending by government on providing public goods and services. This can enhance disposable income with poor in rural and urban areas for child education. Unpaid care work by woman, promoting maternal health, tax breaks (to distribute more profits), strong labour rights for woman are some needed policy moves which must not be seen mutually exclusive with building a robust educational system.
We must understand there are skill gaps in children at a very early stage in life which tend to increase more owing to “learning begets learning” mechanism. So, the National Education policy 2021 must be channelised in the direction to bolster the skills of disadvantaged children as soon as possible. Well monitored comprehensive schooling system in next five years in rural areas is a must to prevent skill gap as success barrier in polarized and unregulated job markets like India and vice versa. Creation of employment opportunity for all and achieving high intergenerational mobility is just the logical extension of this move .Similarly solving principal agent problem and eliminating institutionally determined balance of power in society are part of the policy mix to reduce inequality through education.
Learning from successful countries with high intergenerational mobility like Nordic and Canada, India needs to decrease labour market discrimination and nepotism in long run to foster employment for all based on skills and talent. Special attention for poor people from all sections of society through a new form of affirmative action is the need of the hour to reap the fruits of education for all. Further increasing the government expenditure on education to 6-7% of GDP may give more funds.
Education being a concurrent subject in India, both state and central government must coordinate properly to take on the burden of transforming the education system in the present VUCA times. Education system is pillar of development of any nation and its best time to strengthen it when demographic dividend will peak by 2041 to tackle the issues like position on Great Gatsby curve in long term.
The writer is an incoming candidate at the London School of Economics. He is an alumnus of Lee Kuan Yew School of Public Policy and Indian Institute of Management Ranchi.
