Three essentials the Budget must provide to see Modi's development dream

Coming to a theatre near you is the next installment of the Union Budget. This essentially is an income and expenditure statement of the government's finances, but has now unfortunately turned into a theatre itself for the hype and hoopla associated with it.

What this means is today we believe the Budget will offer a panacea for all the woes and ills that the nation and its people grapple with. But as we all know, there is no magic wand and no silver bullet. Though, this Budget is more important than most, for it will hopefully provide direction; show the intent of the BJP; along with what it hopes to achieve over the next four and a half years. In that sense, it is pregnant with possibility.

Finance minister Arun Jaitley's first Budget was a work in progress, it had the UPA's handprints all over it, and - to be honest - it didn't say or mean anything. This one's different. It is said that the currency of any war is information and one is off the grid, if you don't have the juice. Modi and Jaitley know that. They have to provide a big picture on what they want to do with the economy, wrestling with growth imperatives, and acute capital deficit.

To my mind, the Budget has to encompass three vitals if the development dream sold to Indians and Modi's many simple ideas are to fructify:

Jobs

More than 150 million people will join the workforce over the next 10 years at 15 million a year. Finding jobs for them is not going to be easy. The promise of "Achhe Din" will have to involve creating meaningful and productive jobs for these millions of restive young people. The problem gets compounded if we add skills and mass urbanisation to the equation. Rapid urbanisation means villages are beginning to mimic towns and cities-both in terms of aspirations and lifestyles.

It is not about creating jobs for the dreamy-eyed village youth within the rural economy. It is also about upward mobility, which will come only with skill enhancement. As more and more villages and semi-towns metamorphose into glitzy cities, the land available for farming will shrink rapidly. This would imply that millions of young rural boys and girls will seek jobs and opportunities to educate themselves and enhance their skills to make them ready for the job market.

Having set the stage for a transformation through "speed, skill and scale", the onus is now on the finance minister to create the right policy conditions, appropriate incentives, and necessary fund availability to help these young aspirants get ready for carving out a career to suit contemporary industrial needs. To begin with, the government should demonstrate that India will modernise its apprenticeship programmes.

Apprenticeship programmes generally sponsor students financially through college, pay them to do internships, train them in the skills necessary for full-time employment, and then hire them full-time immediately after graduation. Apprenticeships then, are a way for employers to ensure that they are getting the type of workers they need and for the youth to go to college - without the burden of cost and uncertainty of future employment. Germany and Denmark are two nations that have formal apprenticeship programmes, and they have low youth unemployment rates of 7.5 per cent and 14 per cent respectively.

Moreover, the Budget is a good way of showing that vocational schools are as good, if not better, alternatives to universities. A major roadblock for the youth enrolling in vocational schools is the perceived lack of prestige and respectability. One way to change the mood surrounding vocational schools and thus increase enrollment, is to give employers incentives to take a more proactive approach in working with primary and secondary schools, and thus encourage them to put impressive vocational school graduates in front of them. Half-hearted attempts in this direction have been made in the past too.

Manufacturing

If jobs have to meaningfully meld into manufacturing, then it requires "Make in India" to be given a booster shot. India is set to become the world's fastest growing major economy within the next two years, beating China to the post. But rapidity of expansion is one thing, size is another. India remains the 10th among the world's top 10 economies in size of GDP.

India's economy is $2 trillion, which is one-fifth of China's $10 trillion. China's per capita income is about $8,000 compared to India's $1,300. The reason is simple: China is the world's factory, despite the recent slowdown. The 'Make in India' campaign promises to make India a manufacturing powerhouse. But the success of India's manufacturing critically depends on just how frenetic the activity is among the millions of small and tiny firms spread across the length and breadth of the country. The success, thus, will depend on how quickly we are able to hand-hold start-ups. With the unprecedented interconnectivity and of today's young people and the proven innovative abilities of this generation, youth-led entrepreneurship could be one of the most promising routes to creating jobs.

In the US, the University of Miami created an entrepreneurship programme called Launch-Pad in 2008 that emphasises entrepreneurship as a post-graduate career path that deserves serious consideration. In four years, Launch-Pad has supported recent graduates in starting 45 companies. Additionally, US President Barack Obama announced the White House's Startup America initiative towards the end of January 2013 to promote the means for young people to start their own ventures.

To be sure, Jaitley did announce a Rs 10,000 crore start-up fund in his last Budget. This year, he should push the frontiers, widen the fund and offer incentives in a manner that will incubate and create a culture of entrepreneurship that becomes aspirational and innovative. Sample this: If 1,000 firms dip into the pool of this fund with Rs 10 crore, each on an average to create a business that employs 10 people, the direct employment addition will be at least 10,000 people. The power of a small firm in creating jobs can never be over-emphasised. Whoever said agriculture is a way of life in India, could not have been more correct. About half of India's population are engaged in farming. Yet, it accounts for only about 17 per cent of India's GDP. What does this tell us? Farming techniques in India are unproductive compared to global standards. In other words, people can be lifted out of farms and still the same amount, if not more, can be produced from the same plot of land.

Rural Economy

The central question, however, is people are engaged in farms because of a lack of a viable alternative. There is also the constraint of diminishing land-holdings to deal with because of urbanisation. Smart cities will, like it or not, will end up gobbling up farm land. That is an inevitability. The focus, thus, should be on creating a vibrant non-farming rural economy, which is currently tilted towards farming activity.

Jaitley should thus use the Budget as an opportunity to rebalance the focus on economic activity in the countryside. One way of doing that is through additional encouragement, through tax breaks for rural start-ups, with appropriate marketing and institutional support. Needless, of course, is to say that roads and other infrastructure linking villages and towns will all come bundled together as a necessary condition for this model. By all measures this could be a make or break Budget. The Sensex is mirroring only one set of expectations, which is a fair deal. But meeting the ambitions from the real world will hold the key to long lasting "Achhe Din".