The purpose of the proposal is to show the common man, policymakers, Government & other stakeholders that it is possible to achieve full employment and price stability through sustainable development of villages, in a country like India which is resource rich. And we are providing a model & structure to do that.
Is it possible to have a workable structure to achieve this?
India occupies top 3 position in cultivation of many of the farm produces. To sustain and get the maximum benefit out of this, we need to streamline the entire process. This strength is not utilized to get maximum economic benefit to farmers, farm workers and villages. We need an innovative structure to get the best possible outcome.
Farmers not getting adequate return is a perennial problem in India; produces like tomato thrown to landfill due to excessive supply is a regular occurrence, conveying lack of planning. Middle men and retailers reap the benefits at the cost of farmers
India gets plenty of rain, but storage is very limited. Rural India is home to farming and vast number of unorganised, informal workforce - most of their productive capacity is not utilized. Rural India also is lacking in facilities to produce value added farm products & other essentials which could be produced with rural workforce participation. Rural population is 980 million, out of which at least 400 million could be part of this productive activity.
So, rural India has all the necessary real resources to create facilities to produce all the needed basic essentials.
Water security is an integral part of this process, as only 8% of rainwater is stored in a year (detailed presentation on water security is provided in our Oct 9th (2019) proposal). Chain of water bodies to store rain water have to be built.
Energy needs can be met by local solar projects to encourage distributed power systems and our traditional gobar gas system could be revived.
Additionally need to have investment in production facilities for essentials, processing facilities, storage facilities, educational facilities/research facilities/health facilities/sports facilities and supporting infrastructure to promote greatly enhanced real wealth/higher standard of living without adding to emissions.
Villages have availability of the raw materials, including cultivable land, water which needs to be stored, human resources which needs to be employed and sunlight throughout the year to generate solar power. So, real resources are available to produce value added food products and whatever else could be, given their skills. With improvement in skill, more products and services could be added.
Rural enterprises owned by workers & managed with the assistance of local & district administration would be an ideal model to execute this.
Is it possible to achieve and sustain full employment?
India is a vast country with huge population, predominantly living in villages. It is a major strength, as human labour is an important component of productive activities. India's workforce has an extremely high share of informal workers, 85%, and dependents on agriculture & related activities are at least 65%. If they remain informal and unorganised, they will continue to be exploited. Everybody wants to transition to better employment, but the problem is lack of choices in villages. So, they become migrants, live in pitiable conditions in cities, as their work is not valued much wherever they work. With big farmers shifting to mechanisation, small farmers & farm labourers move to Cities & other States for most part of an year to earn some money, leaving their families behind. Moving to cities for employment without much skill and adequate qualification, would only give room for exploitation. It is not a natural progression. Organised and formal sector employment is only 58.9 million. With climate catastrophe more likely than ever and threatening newer pandemics, a sustainable economic model is the need of the hour, rather than a model driven by billion aspirations. So, an ideal solution is getting better employment opportunities in the village itself, as the size of the rural workforce is humongous & there are many issues connected to migration.
Given the above context, we are talking about achieving formal and organised work for at least 400 million people. First, these 400 million strong workforce cannot be absorbed by the existing formal and organised private sector, as it employs only 59 million formal workers presently. Second, government cannot provide either regular or guaranteed transitional job to all of them, as it is the private sector which provisions the government by supplying goods and services and so it necessarily has to be a large enough sector. Third, ideally it needs to be located at the villages. This is a very unique and challenging context and so a unique solution is warranted.
Our proposal is that Government spends to create infrastructure in all the villages, so that every village will be equipped with roads, water bodies, drinking water facility, school, library, health facility, sports and recreation facilities, solar power and biogas plants, cold storage, warehouse, and skill training facility.
Every village would promote a rural enterprise making the villagers as working partners and engage in production of goods and services for local consumption and sale. This includes vegetable and fruit cultivation, processing and value addition to farm produces. Through training, skills could be imparted and improved to enlarge the number of products and services.
Government would play facilitatory role, coordinate at reginal level to streamline production of essentials to meet the demand, with active participation of village, taluk and district administration and Agriculture University.
This structure would create a vast producer, consumer community consisting of at least 400 & 980 million people respectively.
To address the issue of periodical downturn in economy, the existing NREGA, expanded to urban areas with the number of days extended to 300 in stages, could act as the transitional job guarantee program. So, NREGA would be expanding during downturn and shrinking during upturn in economy, so that it supports it as an automatic stabilizer. NREGA wage also has to be increased in stages.
Nature of work in rural enterprises is production related. NREGA works are related to asset creation & maintenance in water storage & conservation, ground water recharge, soil productivity enhancement, rural housing, livestock promotion infrastructure and other social infrastructure. With the growth of rural enterprises, infrastructure demands in villages will grow. Water storage in series of ponds should be expanded massively to capture most of the rain water.
As long as loose enough fiscal is maintained, the NREGA pool won't grow all that much as workers transition to private sector employment.
As the rural enterprise is a producer-consumer group, additionally producing value added essential products for sale, it can structurally sustain itself and profitable. Within a year of operation, it could become self sustaining and start making profit.
With this model, full employment and price stability could be established.
Conclusion
The plan clearly shows, real human resources produce and consume real goods and services and in this real economy, the role of nominal money is to make it all work.
Under the present system of money creation, the fiat non-convertible floating exchange rate currency system, government spending doesn't get funded by tax revenue, as gold reserves doesn't limit currency creation (gold or dollar reserves is not required to maintain the currency peg (as it is floated) and meet convertibility into gold on demand (as it is non-convertible)). The spending of the currency issuing government in the present currency system is constrained only by the availability of real goods and services to purchase with those spent currency in real economy and regulatorily restricted by the parliamentary approval of Budget and Appropriation Bill. As part of the budgetary process, every spending proposal is analysed from multiple perspectives, including real resource availability, inflationary impact and suitable preventive measures. The government continues to assume that it has only limited capacity to create currency and so is financially constrained to fund production, when productive capacities are available..
Government only needs the political will and is not financially constrained to increase the productive capacity in the country by multiple times and the way to do that is the infrastructure development as suggested above in the villages, which will pave the way for rural enterprises to be promoted by villagers themselves, inclusive growth, universal distribution, full employment and price stability. With this, we could have 600,000 model villages with all the facilities and people earning to lead a peaceful and comfortable life. The multiplier effect of this will lead to further economic development. Efficiency will be achieved with the help of technology, research and skill enhancement, thereby making the productive activities move up in the value chain.
This essential economy requires only planning and willingness, everything else is available! A country of 142 Cr people with assured income and basic facilities would be a land of peace & comfort, one of its kinds in the world!
The above proposal has evolved out of conversation with Warren Mosler & the verbatim extract of the correspondence is given
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