Reserve Bank of India (RBI) Governor Shaktikanta Das said on Tuesday that there was a need to improve the supply chain in the agricultural market, and that increasing the average share of farmers in retail prices should be a priority area.
The average share of farmers in major primary food items varies between 28 per cent and 78 per cent, the governor said, but “the higher share of retail prices going to farmers augurs well for the rural economy, which, in turn, could help sustain domestic demand”.
Das said this in his opening remark at the third Suresh Tendulkar Memorial Lecture by Tharman Shanmugaratnam, senior minister, Republic of Singapore.
According to the RBI governor, wider rural road network, better communication facilities, and easier access to micro credit will contribute to better price realisation for farmers. “This ongoing process needs to be sustained alongside further agricultural market reforms,” said Das.
The government and the RBI have taken steps to improve financial inclusion and will continue to undertake important reform measures, he assured. In this context, the RBI’s mandate also contributes to better financial inclusion. The RBI is reviewing priority sector lending norms, “keeping in mind the changing needs of the economy with a view to make them more inclusive”.
“The mandate given to the RBI on maintaining price stability, financial stability, and economic growth is not only important from a macroeconomic perspective, but also for the objective of inclusive growth. Persistently high inflation adversely impacts the economy’s allocative efﬁciency and impedes growth. It also contributes to a worsening of income distribution by depreciating the real income of the poor,” the RBI governor said.
At the same time, high growth with financial stability can bring inclusiveness in the process of wealth creation and its spread effect. Improved tax collection can be utilised for social and infrastructure expenditure.
Shanmugaratnam in his speech pointed out that India has achieved a lot in the past five years in social and economic parameters, particularly in electrification, sanitation, financial inclusion, insurance to poor, but much more needs to be done as the country continues to suffer from legacy issues.
The country needs to be more export-focused. “If you can get into the global value chain in the next five years, there’s scope in the market,” said Shanmugaratnam.
The country must create jobs at a rapid rate to accommodate the youth of the country, where the unemployment rate is as high as 30 per cent.
“India needs to create 140 million jobs over the next decade, which is much more than what it has done before. Half of the jobs must come in the next five years; skills should be developed at a fast rate. We are competing with machines, which are increasingly getting smarter,” said Shanmugaratnam.
“Job growth is critical for India. Youth under-employment will not only be a continuing problem, it can get worse,” the celebrated economist said.
India’s productivity growth has been decent in the past, but it needs to grow at a faster clip. Labour reforms are needed, so that companies can grow beyond a size. There should be more urbanisation, so that pressure on existing cities doesn’t mount. The cities should be “crucibles of inclusive living”. Manufacturing and construction sectors should be promoted because these sectors absorb the bulk of jobs, and that way labour can be reallocated from low productivity agriculture sector.
“Financial stability is a critical public good, while in the future, the green economy and moving away from unsustainable practices should be priority,” he said. In a country like India, temperature variation of even 1.5 per cent could wreak havoc on the environment, and the lives of the people.