A new paradigm for creating jobs

It would be prudent to take up a few sectors initially, get the policy instruments right, and put in the critical mass of resources to achieve a self-sustaining inflection point

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The belief that we need higher GDP (gross domestic product) growth rates and employment generation would follow is crumbling. We have had high GDP growth rates but have not been creating the jobs that we need. The focus now has to be on job creation with GDP growth becoming the consequence.

This needs a fundamental change in our mindset. We need to move beyond the "Washington Consensus", which we embraced with the economic reforms in 1991. The state should limit its role to maintaining sound macroeconomic fundamentals, providing better physical and social infrastructure, and improving the ease of doing business. Free markets would then deliver.

The limitations of this approach are best seen if we compare ourselves with China. In 1991, we were on a par in per capita incomes and technology. They are now five times ahead. Instead of leaving market forces alone, the state in China steered industrialisation and success in exports, making China "the factory of the world". The Chinese learnt and improved on the policies adopted by South Korea and Japan, which had succeeded earlier.

The Indian state now needs to assume greater responsibility for job creation.

But for this, we have to first believe that the state can craft smart policies and implement them to get the private sector to invest in creating the jobs that we need. Leaving markets alone is no longer an option. We underperformed till 1991 by believing in centralised planning and the ability of the state to micro-manage the economy. After the reforms of 1991 we have underperformed by accepting that the state should not try to steer market forces to get desired outcomes.