While robust job creation and wage increase would drive sustainable growth, formalisation of employment would make the economy more resilient to future crises, Subramanian said during a virtual conference hosted by the Confederation of Indian Industry on Monday.
The CEA was referring to the host of changes brought in by the government in laws and regulations concerning the manufacturing, agriculture, labour and micro, small and medium enterprises (MSMEs) sectors.
“If you take the agriculture law changes, the production-linked incentive scheme, the changes in MSME definitions together, it is an attempt to change the macroeconomic configuration of the economy towards those sectors which are more employment intensive, especially the primary and secondary sectors of agriculture and manufacturing,” Subramanian said.
“All these are ways to enable economies of scale, especially among MSMEs, which will help to create jobs and thereby demand in the economy,” he added.
This was important since sustained growth would only come from robust job creation which would be accompanied by wage increases, as against the jobless growth which India saw over the last 50 years, the CEA said.
The other key theme behind the reform agenda was to increase the level of formalisation in order to build resilience into the economy, according to Subramanian, since formal sector firms are much more resilient in a crisis than informal firms.
From 2011-12 to 2017-18, the number of salaries workers increased by 5% or over 2 crore, the CEA said, adding that these were changes from casual labour to the salaried class.
“The formalisation is particularly crucial because formal sector firms are far more resilient to shocks than informal sector firms,” he said.
“Within the last ten years, the global financial crisis and the covid crisis have shown that crises that are beyond anyone’s control are something that are maybe here to stay and therefore, building resilience in the economy by enabling formalisation is extremely important,” he added.