Both FDI and remittances are driven by policymaking at the state level, which encourages entrepreneurship and migration. Technology has become the star attraction for FDI with infotech clusters cornering the biggest slice, and white collar migrants have kept remittances stable over the course of the pandemic.
Both trace back to education outcomes that GoI hopes to improve through the National Education Policy (NEP). States would do well to draw up a timeline for implementing the programme that sets out to improve productivity of the largest labour pool on the planet. India is not creating jobs to keep pace with its economic growth. States must accept their inadequacy in this area. Services-led growth is ultimately constrained by labour productivity. Mature economies derive a large part of their economic momentum through wage-earners with tertiary education. Indian states must align syllabi to enable its labour force to find employment opportunities as machines take over unskilled jobs.
Resource mobilisation for social infrastructure will be facilitated by improved collections of GST. The tax is yielding some of its promised efficiency gains, but it is quite some way away from delivering its full potential. Modi flagged this as another focus area for states, underlining its criticality in India’s becoming a $5 trillion economy. The recent surge in GST collections should ease some of states’ reservations over revenue elasticity and could lower barriers to its expansion and streamlining that are holding it back. States would take the next step in improving their finances if they encouraged small enterprise that led to job creation and improved tax collection.