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Economy

Beyond GDP: The economy of well-being

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Beyond GDP: The economy of well-being

Altaf Hussain Haji

All of us have heard about the term ‘standard of living which means all the elements in someone’s life that contribute to their happiness.   Standard of living is a broad term that encompasses many factors including some that are not bought and sold in the market.  The standard of living is an economic opportunity that focuses on basic material factors such as income, gross domestic product (GDP), life expectancy, etc.  It is closely related to the quality of life, which can also explore factors such as economic and political stability, political and religious freedom, environmental quality, climate, and safety. In the present scenario, economic growth is commonly taken to mean a sustained increase in real GDP per capita and somehow linked with social, economic, and environmental growth. There are a lot of challenges today regarding growth and standard of living.

To solve the social, economic, and environmental challenges faced today by governments and other institutions around the world that need to embrace new ways of thinking and actively engage in widespread systems innovation to make real progress toward a healthier and more prosperous life.

The economy of well-being highlights the need for putting people at the centre of policy. It is important to move away from an attitude of “grow first, redistribute and clean up later”, towards a growth model that is equitable and sustainable from the outset.

The well-being economy encompasses a diverse array of ideas and actions aimed at advancing social well-being through governance structures that support peaceful co-existence and meet basic human needs. A well-being economy provides people with equal opportunities for advancement, a sense of social inclusion, and stability—all of which contribute to human resilience and, importantly, sustains and supports harmony with the natural world. It aims to serve people and communities first and foremost and offers a promising path toward greater social well-being and environmental health. The current economic system s become addicted to “growth at all costs”, as measured by Gross Domestic Product (GDP) but ignores the wellbeing of the individuals at all levels of development. Instead, we need an economic system that takes a preventive approach to social and environmental challenges to ensure that the kinds of related, follow-on problems of the standard of living or a person’s happiness.

The level of GDP per capita, for instance, captures some of what we mean by the term standard of living, as illustrated by the fact that most of the migration in the world involves people who are moving from countries with relatively low GDP per capita to countries with relatively high GDP per capita.

The GDP is a limited tool for measuring the standard of living because many factors that contribute to people’s happiness are not bought and sold. The GDP includes what is spent on environmental protection, healthcare, and education, but it does not include actual levels of environmental cleanliness, health, and learning. GDP includes the cost of buying pollution-control equipment, but it does not address whether the air and water are cleaner or dirtier. GDP includes spending on medical care, but it does not address whether life expectancy or infant mortality have risen or fallen. Similarly, GDP counts spending on education, but it does not address directly how much of the population can read, write, or do basic mathematics.

The OECD is one such organization, which has been working on the measurement of well-being beyond GDP since the 1970s and has seen the concept of well-being develop from an interesting side-note into a well-established agenda for policy. As we know that the Organization for Economic Cooperation and Development (OECD) is an international organization that works to build better policies for better lives.  The main goal is to shape policies that foster prosperity, equality, opportunity and well-being for all at the international level. The OECD’s Well-Being Framework has further developed the concept by providing us with a clear definition and rigorous analytical basis. The Framework for Policy Action on Inclusive Growth has helped identify the channels through which governments can promote greater well-being and sustainable economic growth for all their citizens.

The economy of well-being highlights the need for putting people at the centre of policy. It is important to move away from an attitude of “grow first, redistribute and clean up later”, towards a growth model that is equitable and sustainable from the outset.

An economy of well-being has four main pillars. The first pillar is education and skills. Skills are the most important driver of long-term economic growth. The policy can help leverage the benefits of education. For example, higher attendance in pre-primary education, greater autonomy of schools, reduced gaps between academic and vocational branches of education and higher funding for tertiary education can all boost human capital, while also improving the efficiency of education systems. At the same time reducing inequalities of access and opportunity at school is essential to promote better educational outcomes, as countries with high levels of inequality in education and skills also record lower average educational performance.

The second pillar is health. Evidence shows that good health fuels economic growth, productivity and individual earnings. Good health is also a key factor for people’s well-being. It allows them to invest in education and skills, access quality jobs and enjoy a better quality of life.   It has seen that increased spending has driven much of the improvement in health outcomes, but we need to go beyond. This means looking at the range of services covered by primary healthcare, as well as addressing new or persistent risk factors. Reducing inequalities of access is also essential to promote better health outcomes, as the proportion of people in poor health weighs heavily on key health indicators. Moreover, health inequalities are often stratified along economic, educational or occupational lines. For instance, unmet care needs are substantially higher for low-income groups.

The third pillar is social protection and redistribution. Both play an important role in reducing economic volatility and fostering resilience. They also prevent inequality today from translating into inequality of opportunities for the next generation. Recent OECD research confirms that lower inequality is associated with higher GDP growth.  Combining income-support schemes with active labour market policies provides effective protection and supports employment. Promoting more progressive tax and benefit systems can help countries promote equality of opportunity and social mobility. Social protection systems also need to adapt to a changing world of work, notably by improving coverage for non-standard workers, and to evolving social risks, notably the increasing prevalence of lone-parents and frail elderly.

The fourth pillar is gender equality. Raising women’s employment and hours worked can deliver productivity gains and higher GDP growth. It can also reduce income inequality, strengthen resilience and consolidate the middle class.

There are many other dimensions to an economy of well-being, for instance, the quality of housing and infrastructures, as well as the equitable access to those; and of course the quality of the environment that significantly affects health outcomes, especially among the poorest.

The fact that GDP per capita does not fully capture the broader idea of the standard of living has led to a concern that the increase in GDP over time is illusionary. It is theoretically possible that while GDP is rising, the standard of living could be falling if human health, environmental cleanliness, and other factors that are not included in GDP are worsening. Fortunately, this fear appears to be overstated.

Since 1970, the air and water in the United States have generally been getting cleaner. New technologies have been developed for entertainment, travel, information, and health. A much wider variety of basic products like food and clothing is available today than several decades ago. GDP does not capture leisure, health, a cleaner environment, the possibilities created by new technology, or an increase in variety. Ignoring these factors, GDP would tend to overstate the true rise in the standard of living.

At the last to mention here, that during COVID19 pandemic in the whole world regarding health and well-being. The pandemic affects badly the standard of living due to the poor health system at every level and is continued to create many hurdles in the processes of wellbeing. It is difficult to maintain a healthy lifestyle when we are in the middle of a crisis like this. The uncertainty and worries related to finances, childcare, elderly parents, and job security disrupt our routines, our lifestyles and mental health. The uncertainty about the future, the ceaseless news coverage and a constant social media-driven flood of messages can increase our sense of anxiety. It is also important to maintain a healthy lifestyle and get back into a routine at this movement. This also showed how important is wellbeing as compared to gross domestic product nowadays.

Altaf Hussain Haji, ISS, is Deputy Director General National Statistical Office, Shimla. He can be contacted at [email protected]

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Economy

Major industrial activities in J&K – II

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J&K's major industrial activities

Dhaar Mehak M

Major industrial activities in J&KThe informal sector is the part of an economy that is not registered with the relevant government authorities. The birth and growth of this sector is non-linear and follows no set pattern or the existing theoretical prediction. The empirical investigation following the developmental paths and trajectories of various developed and developing nations shows that birth, growth, decline and death hasn’t been the same. While the experiences of developed nations validate the eventual decline and end of the informal sector, the experiences of developing nations put the informal sector in an important position to usher in the process of industrial development.

In the developmental context of India, the informal sector has been an important source of providing sustenance to families, generating employment and meeting the local demand. Given the limited availability and access to public resources at the national level, the government policy and public sector have not been able to cater to the needs and demands of the people. As a coping strategy and a way out, people have found their ways towards the informal sector engagements. Over time the sector has rather shown an overall growth across the nation as against the prediction of the theories visualizing an end of this sector as one of the pre-requisites of development.

Agriculture for years has been a dominant economic activity in the region however mountain agriculture is not able to come out of subsistence to commercialization. As a result the returns from this sector have been low, pushing people out from it. Tourism has been another comparative advantageous economic venture in the region. Fragility and political instability has kept this sector from flourishing. As a result, people in J&K have steadily been pushed into the informal sector.

In Jammu and Kashmir, the trend corresponds to the national level evidence. The informal sector in the region has also registered growth over time as is validated by various national level data-sets including the NSSO and PLFS. Agriculture for years has been a dominant economic activity in the region however mountain agriculture is not able to come out of subsistence to commercialization. As a result, the returns from this sector have been low, pushing people out from it. Tourism has been another comparative advantageous economic venture in the region. Fragility and political instability have kept this sector from flourishing. As a result, people in J&K have steadily been pushed into the informal sector.

The Table ranks the dominant activities in the informal sector in Jammu and Kashmir as per the latest data availability. The ascendancy of these units points to their viability as low risk and viable profit ventures. Like the formal sector, the informal sector too mainly consists of need-based units. Most of the units deal in the retail sale of household perishable goods. These units which are in the form of shop establishments are found in all the localities of the region across rural and urban belts.

There is always business viability associated with these types of ventures. People from the households prefer to buy groceries from the nearest possible retailer and thus the normal profit is the least and assured return promised by these types of businesses. Tailoring activities rank just next. Given the changing seasons in Jammu and Kashmir and the distinct clothing style of both men and women, they prefer to stitch their clothes than buying ready-made and at the same time need different fabrics across the seasons. The investment in these ventures is small and can be household-based too. At the same time, this sector has the potential to empower women through household-based flexible employment.

J&K's major industrial activities

Being a consumer economy, the demand for all types of goods is very high in the region across the year, opening scope for the transportation industry. Over time there has been the development of the trend among the locals to invest in the freight transportation sector at the individual level. Though very popular among the lower-middle-class sector it has come to witness some decline in recent times due to a number of natural disasters and political fragility shocks. The current viability to invest in the sector is not too high however a huge number of existing informal sector participants is involved in this business activity.

Another related sector ranks just next. Despite the loss faced by the tourism sector the demand for Jammu and Kashmir tourism still exists in the country and across the globe. As a result, the taxi service in the region has been yet another promising venture in the informal sector. The use of taxi services has been rather limited among the people and startups like Kehwa and Jugmu cabs for the general public have just begun.

To begin with, the current major potential lies in the necessity-based industrial ventures. Based on the level of investment in hand both formal and informal sector are equally viable. If given proper consideration based on entrepreneurial instincts and government support, the businesses mentioned in formal and informal sector are low risk ventures.

The development of the beauty industry in the region appeared late but grew quick. Women especially have been involved in this sector. Opening and growth of the beauty parlours and salons can be seen spanning across the lengths and breadths of the region. This sector has especially shown growth in the region. Many women have opened these ventures inside their household premises making their operation flexible and demand localized. The local embroidery styles including hand Tilla and Aari are very famous across the globe. Families have been involved in these skill laden trades and have been passing on the same.

Both the demand and supply are high and being skill-based this sector always promises returns to the participants. The beginning of restaurant and café culture is equally novel in the region, the growth equally rapid! This sector has lately been growing and receiving an immense response, especially from the youth population. The startups in this industry have been doing well and the potential still exists for further diversification.

The construction and allied industry in Jammu and Kashmir, especially the Kashmir region has always had high-end potential given the local demand. As a result, the informal sector has shown some considerable growth in the manufacturing, production and sale of items corresponding to this sector. From the wood-based requirements to furniture and flooring and beyond the potential of this sector is yet to be explored completely. Given the innovations, people at the micro and household level can get involved in the customization of these items and expect a genuine profit and growth of the business over time.

From the analysis of both the formal and informal sectors in Jammu and Kashmir, it can be seen that the scope and potential of industrialization in the region is very high but specific. To begin with, the current major potential lies in the necessity-based industrial ventures. Based on the level of investment in hand both formal and informal sectors are equally viable. If given proper consideration based on entrepreneurial instincts and government support, the businesses mentioned in the formal and informal sectors are low-risk ventures. The future policymaking should be informed about the specific business potential in the region and the industrial policy push can be given based on these considerations.

Specialising in the industrial process of J&K, the author is a Senior Research Fellow in the University of Kashmir’s Economics Department. She can be reached at [email protected]

 

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Economy

Major industrial activities in J&K – I

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Major industrial activities in J&K

Dhaar Mehak M

Major industrial activities in J&K The economy of Jammu and Kashmir is known for its ironic characteristics. Being a mountainous region the agricultural potential does not go beyond subsistence. Climatic extremities with geographic remoteness limit the viability of the industrial sector. The services sector like the rest of the nation has been pacing up. The contrary facts include a low incidence of poverty in the region as compared to the rest of India. Low levels of inequality and possession of some or other assets by every household. All this comes in the business environment of fragility characterised by conflict. The major business shocks in the previous decade can be broadly summed up as (i) the 2010 agitation resulting in mass lockdown, (ii) 2014 flood, (iii) 2016 agitation, (iv) blanket curfew of 2019, and (v) ongoing sprouts of pandemic lockdowns since 2020.

All these features can be visualized through two lenses. The first and obvious one that of loss of economic opportunities. The second one not so obvious is the resilience that has developed among the people over time. Given the fragility in the region that has lasted for decades on a stretch, the businesses having the least shock resistance have ceased to exist and the businesses having the resistance to face the jolts and challenges have continued to exist.

The business viability in Jammu and Kashmir is focused on necessity-based goods over any other type be it non-necessity items or luxuries. Jammu and Kashmir continues to be a hotspot consumer economy feeding on the output from the industrialization process concurrent with the rest of the county. This increases the leakages from the local economy, boosting the rest of the nation. As a result, the overall growth in general and industrial growth, in particular, in a crippled form currently.

Every economy consists of the formal and informal sectors. On the same lines, the economy of Jammu and Kashmir can be bifurcated into the formal and informal parts when it comes to major economic activities excluding agriculture. Broadly the formal sector can be defined as the firms that are registered with the relevant government authorities and have fixed working hours and wages. This part of the economy is stark visible and open to scrutiny all the time. On the contrary, the informal sector is hard to locate and lacks features like formal registration, fixed wages and working hours, labour unions and formal channels of business.

State-level secondary data shows that the major economic activity that has continued over time in the formal sector is the manufacturing of insecticides, rodenticides, fungicides, and herbicides etc. The reason for the persistent survival of these units is the inelastic demand for their output. Jammu and Kashmir economy is predominantly an agrarian economy and lately has been turning into a horticulture economy. Given its association with the land, it is unmoved by factors like conflict and pandemics. Thus, the viability of this business in the region is the greatest with a fair possibility of supernormal profits given the excess of demand for the output as compared to the existing level of supply in the region.

This is followed by the flour mills. The demand for flour in the region is high as people habitually as a matter of culture consume approximately three teas a day. The tea in the region unlike the rest of the country is taken with either homemade or ‘Kandur’ made roti. This factor keeps the demand for flour inelastic in the region and the business turns out to be shock resistant. In the region, several households prefer to go directly to the mill and buy fresh flour than to buy the packed versions from the store. This business, though small in scale has sustainable potential in the region.

The manufacturing of allopathic medicines and allied goods is also a viable and sustainable business here. Given the necessity-based demand for the goods produced by these firms, no kind of shock impacts the demand for the medicines. In light of the harsh winter, a high-intensity conflict in the past and the current pandemic people in Jammu and Kashmir tend to hoard and stock medicines that last for more than a month. At the same time, the frequent change in weather throughout the year makes people more vulnerable to seasonal illnesses like flu and the common cold. This factor has always kept the demand for regular medicines high. The Kashmir region especially has a culture of having high-fat foods, dairy products, spicy and sweet foods all leading to diabetics and high blood pressure. These factors additionally contribute to the high demand for pharmaceuticals in the region.

Major industrial activities in J&K

The mountainous geography coupled with harsh climatic conditions increase the wear and tear cost of the transport goods. As a result, people have to take extra care of their vehicles. This increases the potential of the businesses to sustain that deal with the maintenance and repair of motor vehicles. One of the basic characteristic features of the local population, predominantly in the Kashmir region is owning at least one motorized vehicle per household. Given the experience of the locals with uncertainty and the frequent shutting down of the public transport because of the same has made the motorized vehicle a basic necessity in the region. The existence of more vehicles in a region points out the high demand for maintenance for the same thus the viability of the business in the region. Another business sector closely associated with the geographic, climatic and conflict-related conditions is the need and necessity of the Kashmiri households to have a permanent, pucca and owned roof over their head. This has spiked the demand for all the raw materials used in the construction of the house. Now that the construction process has modernized the demand for cement is higher than ever-increasing the viability of this type of business activity in the region.

Demand for power generators is high in the region because of the lack of regular electricity. Though Jammu and Kashmir has a very high potential for hydro-power, a number of technical and political factors have kept it from the Pareto-improvement. As a result, the region has been facing a severe shortage of electricity, especially in the winters. To keep the houses and offices lit and warm the demand for alternate sources has always been high. As a result, the viability of the firms manufacturing and assembling power generators is high in the region.

For the local youth seeking entrepreneurial ventures, the good news stand hidden as a blessing in disguise. The necessity goods industry has a huge scope of potential with the least risk of failure. The indigenous formal industrialization process in Jammu and Kashmir can begin with the startups producing the inelastic necessity goods.

While having more and different types of clothes is a luxury for people across most parts of the country, it is a necessity in this part. The frequent change in climate and four strongly different and influential seasons demand different types of clothes. Extreme weather in January declines to minus 10 degrees sometimes while summer goes beyond 30 degrees. The poorest of the poor need accommodating clothes. At the same time by tastes, an average Kashmiri is highly considerate about what (s)he wears. These factors have always sustained the viability of the clothing industry in the region. The demand is very high while the supply is extremely short. The clothes market of Kashmir has been the hotspot of producers across the country. Consequently, the importance and viability of this particular type of business can’t be ruled out from the high viability rating.

There are a limited number of places where the Willow tree grows. As a matter of comparative advantage, Kashmir is one such region. The highest demand for Willow wood comes from the cricket bat industry. However, the lack of relevant policy intervention from the government and a lack of market boost have crippled the sports goods industry in the region for a long time continuing to date. In light of the same, one of the prime business segments in the region is the sports goods industry. In the current state of affairs, the potential is very high but the current situation is way below efficiency. A relevant policy intervention can change the whole potential of this business and increase the overall viability of sports goods production in the region.

It can be concluded that the business viability in the region of Jammu and Kashmir is focused on necessity-based goods over any other type of good be it non-necessity items or luxuries. Jammu and Kashmir continues to be a hotspot consumer economy feeding on the output from the industrialization process concurrent with the rest of the county. This increases the leakages from the local economy, boosting the rest of the nation. As a result, the overall growth in general and industrial growth, in particular, is in a crippled form currently. However, for the local youth seeking entrepreneurial ventures, the good news stands hidden as a blessing in disguise. The necessity goods industry has a huge scope of potential with the least risk of failure. The indigenous formal industrialization process in Jammu and Kashmir can begin with the startups producing the inelastic necessity goods. … to be continued …

Specialising in the industrial process of J&K, the author is a Senior Research Fellow in the University of Kashmir’s Economics Department. She can be reached at [email protected]

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KU’S Economics Deptt lauds Tanveer for securing second rank in IES  

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Economics Deptt lauds Tanveer

Srinagar,  Aug 1:  Kashmir University’s Department of Economics congratulated it’s alumni Tanveer Ahmad Khan for securing All India Rank-2 in the prestigious Indian Economic Services (IES) 2020.

Tanveer a student of batch 2016 -17 is the first candidate to qualify All India Economic Services Exam, which is an extremely professional service engaging with economic administration and development policy implementation.

Department of Economics is one of the oldest economics departments in North India. “It has a tradition of training extremely talented students and scholars. Remarkably, over the recent past our students have made it to the highest research centres and Universities across India and abroad,” it said in a statement.

“Within J&K our students constitute the majority in Higher Education, Department of Planning as well as in the Subordinate Services.”

In this march towards excellence this rare feat achieved by Khan is going to give a new “big push” to the efforts underway at the department to scale new heights in shaping the future of extremely talented youth, said HOD Economics Department Prof Imtiyaz Ul Haq.

The entire faculty, supporting staff, students and alumni of the department congratulate Tanveer Ahmad Khan and wish him all the best for his future.

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