Dr. Mallika Kumar is Associate Professor for Economics at the Shri Ram College of Commerce (SRCC) of the University of Delhi. She is the Head of the Commerce Department and the Coordinator for the Office of International Programmes at SRCC &the Cultural Coordinator for the University of Delhi. She is also a member of the UNDP Microfinance Solution Exchange. She has done her PhD on Financial Cooperatives and works on promoting cooperatives among the youth across the globe. Dr.Kumar coordinates with the Youth Committee of the International Cooperative Alliance which is the apex organisation for cooperatives worldwide, representing 306 cooperative federations and organisations across 105 countries.
Recently, she was invited by the Kelaniya University to deliver a lecture on Cooperative Business Model-Perspectives from India as part of a collaboration between SRCC and the Kelaniya University to connect the youth of India and Sri Lanka.The High Commission of India facilitated the collaboration between these two universities. In an interview with the Daily Mirror she spoke about the role of the youth in developing the economy, unemployment, skills mismatch, poverty, microfinance and debt repayment. She said that Government revenue being spent on debt repayment is a worrying situation.
Q India is a developing country like Sri Lanka. What role does the youth play in developing the economy?
Today’s generation of youth (ages 15-24 years) at almost 1.2 billion, is the largest in history. It is estimated that 89% of the world’s youth live in developing countries and in many of those countries the youth constitute over half of the population.
Developing countries like Sri Lanka and India have a large youth population. Being the most dynamic and energetic segment of the population, the youth contributes most to the workforce of the economy of a country. In India, 50% of the population is below age 25 & 65% of the population is below age 35.This is a demographic dividend for the country. If they are educated,skilled, trained and employed well according to their abilities, they add to the productivity and significantly contribute to the GDP and the economy of the country.
I am glad to hear about the appointment of the new Youth Envoy, Jayathma Wickramanayake of Sri Lanka as the youngest member of the Team by the UN Secretary General on the UN International Youth Day, August 12th, 2017. Whether it is India, Sri Lanka or any other developing country,youth is energy untapped.They possess not only new ideas, but also the energy and the power to turn ideas into action that may empower themselves as well as others. Empowered youth can play an important role not just economically as agents of change, but also from a social perspective in preventing conflict and building peace for sustainable development of the economies.
Developing countries like Sri Lanka and India have a large youth population. Being the most dynamic and energetic segment of the population, the youth contributes most to the workforce of the economy of a country
Q There are around 43 000 unemployed under graduates in Sri Lanka. Why do you think that they are unable to find suitable employment?
The focus on education is very high in Sri Lanka. The Ministry of Education says, ‘Education First’. But, despite the high literacy rate and high quality of life, compared to other developing countries, unemployed under graduates may be high. This is because they are not properly skilled or given vocational training. There may be a mismatch in their capabilities and the expectations of employers.
Q How can we overcome skills mismatch?
Skills mismatch between education and skills demand and supply can be overcome through reimagining the education system and making it more relevant and adaptable to the current trends and also identifying the skills required by different sectors of the economy and accordingly focusing on skills development. There can also be skills based training programmes for the unemployed. The youth should be skilled to undertake jobs in the future and not only the ones available at present.
There is a need to identify each youth’s orientation and interest and then provide him or her with the requisite set of skills to ensure that contributions are made willingly and happily to the nation’s economic well-being.
In India, the National Skills Development Corporation(NSDC) operates through partnerships with multiple stakeholders in catalyzing and evolving the skilling ecosystem.
There is also support to early-stage social entrepreneurs working on innovative business models to address gaps in the skilling ecosystem, including programmes for persons with disability.
I believe in the 3Cs- Connect, Collaborate and Cooperate. Opportunities can be explored whereby youth of both nations can collaborate with each other and share their ideas to be not just job seekers, but also job givers/creators.
My research was based on cooperatives and the purpose now is to help the youth connect to bridge gaps and learn from each other.The International Cooperative Alliance Youth Committee helps the youth connect with each other from different parts of the world.Thus a good career counseling, on-the-job training, a revamped education system and a global connect with focus on skill development can help overcome skills mismatch.
Q How does the issue of under graduates being unemployed affect the economic growth of a country?
This is a very relevant question in today’s world where pace of labour force growth outstrips job creation. Employment has both economic, social and political aspects to it. Economically, if the youth are unemployed it will affect their livelihoods. They will not be able to participate in any economic activity. Socially, it can lead to other evils. Further, they would not be able to represent the youth in the political and economic debates. Unemployment affects the economic growth of a country as it results in waste of valuable human resources. Under graduates are ready to contribute, but find no opportunity to do anything as per their abilities. It is a sheer waste and limits economic growth to that extent.
I believe in the 3Cs- Connect, Collaborate and Cooperate. Opportunities can be explored whereby youth of both nations can collaborate with each other and share their ideas to be not just job seekers, but also job givers/creators
Q Brain drain is said to affect the economy adversely. How can it be prevented?
Brain drain takes the best of brains away from the home country. To prevent it, the home country must invest heavily on education, vocational training, skills development, Research and Development, Innovation,Technology and create opportunities for youth. It can also be prevented by changing the culture and mindset of people to give back to the society he or she was raised in and by bringing the large companies to the country and allowing for a better pay scale.
Creating better-paid opportunities at home and ensuring sustainability of employment would thus prevent brain drain. Reversing brain drain should be the key priority for developing economies like India and Sri Lanka.
Q What are the sustainable options available to India and Sri Lanka to combat poverty?
Both Sri Lanka and India face similar types of challenges, problems and have similar strengths too. Going by the SWOT Analysis (a study done to find its Strengths, Weaknesses, Opportunities and Threats) in both India and Sri Lanka, our strength is our human capital. But this strength can also become a weakness if we fail to utilize that potential. As you rightly mentioned there is the challenge of unemployment and the challenge of the youth getting disoriented when their potential is not utilized.
The sustainable options available to India and Sri Lanka to combat poverty start with providing food, shelter and other basic necessities through welfare schemes and secondly by providing skill sets to these people so that they can be gainfully employed in some economic activities in their surroundings.
A very good opportunity for both the countries is that since the Governments are open to new ideas they can get the best use of technology. Technology can be utilized to make good use of these ideas and translate them into reality. In this year’s Republic Day speech Ambassador Taranjit Singh Sandhu said that India and Sri Lanka have familial ties. Family is not just by blood, it is also created by those who lend a helping hand to each other. So Sri Lanka and India can lend a helping hand to learn from each other.What is required is to strengthen the educational ties. We from the University can help students, so that the youth of both nations can share their ideas and implement them.
Brain drain takes the best of brains away from the home country. To prevent it, the home country must invest heavily on education, vocational training, skills development, Research and Development, Innovation,Technology and create opportunities for youth
Q How has microfinance uplifted the economy of India-especially rural India?
In India, the National Bank for Agriculture and Rural Development (NABARD) finances banks that on-lend funds to Self-Help Groups.(SHGs). The NABARD SHG-Bank Linkages Programmes, is the largest Microfinance Programme in the world which has touched 10 crores households through more than 85 lakh SHGs. It is the most widely participated programme in the country and perhaps in the world. The large number of Channel partners, which at present is more than 100 Scheduled Banks, 349 District Cooperative Central Bank (DCCBs), 27 State Rural Livelihood Missions and over 5000 NGOs, are engaged in promoting Self Help Groups.
Rural Financial Cooperative credit institutions have played a very important role in providing microfinance to uplift the rural economy of India.There are around 100,000 Primary Agricultural Cooperatives covering almost all villages and they reach wide covering remote areas as well. Cooperatives and SHGs have facilitated microfinance to make credit available to the needy in time and at their doorsteps. There are a number of examples of Microfinance by Cooperatives in India. Bhagini Nivedita Coop in Pune and Cuttack Urba Coop Bank in Odisha are examples. They are doing microfinance with lower interest rates compared to other banks and serve as a tool for financial as well as social inclusion.
The customized schemes and options have been created by microfinance companies to suit the needs of the rural artisans, traders ,entrepreneurs and especially women.
The only disadvantage of mobile banking is that it is usable by the literate and educated lot alone. Less educated countrymen are unable to utilize its advantages to the best
Q What are the advantages and disadvantages of using mobile banking in microfinance in developing countries?
Mobile banking, being a subset of branchless banking, increases the access of banking facilities by adding the ‘Anytime Anywhere’ feature. One of its main advantages is that it addresses the cost of roll out (outreach) and the cost of handling low value transactions by using agents instead of banks. Through the Business correspondent model, microfinance provided facilities in the remotest corner of the rural countryside. This has kick started economic activities in every nook and corner of the country.
The only disadvantage of mobile banking is that it is usable by the literate and educated lot alone. Less educated countrymen are unable to utilize its advantages to the best. Phones that use internet browsers, but do not have antivirus may be at a risk of getting hacked for sensitive information.
Government revenue being spent on debt repayment is a worrying situation. Debt servicing is a committed liability of a Government
Q In Sri Lanka microfinance loans have made many families debt ridden especially in the Northern and Eastern provinces. Last year a 28-year-old mother, reportedly in debt, committed suicide giving poisoned ice cream to her three very young children. How do you prevent mounting debts and such fateful incidents caused by microfinance schemes?
This happens normally in multiple lending or lending beyond the capacity of the household. Given that the cost of debt in microfinance being very high, in adverse situations like drought, flood, natural calamities and some unforeseen circumstances, microfinance has led to heavy debt burden in some regions and some cases.
Giving more time for repayments and rebates can help. Close monitoring by Government is required to avoid multiple MFIs.
In Andhra Pradesh, India a similar situation prevailed when the supply of microfinance was more than the demand and there was no control of Government in terms of regulating interest. Then Reserve Bank of India (RBI) regulated the outer limit of interest.
Q Sri Lanka is currently trapped in debt and reportedly about 95% of Government revenue is spent on debt repayment. What are the feasible solutions available?
This indicates debts raised have not been productively used in the past. It is important to focus on the what, why and how i.e.for what purpose the money is borrowed, why it is being borrowed and the most important is how it will be utilized.
All wasteful expenditure must be cut. Unproductive, uneconomical and loss making activities need to be pruned.A credible fiscal consolidation plan which commits to shoring up revenue and rationalize expenditure is needed to keep fiscal deficit in check.
Government revenue being spent on debt repayment is a worrying situation. Debt servicing is a committed liability of a Government. Therefore, nothing much can be done to reduce the liabilities except by way of bilateral rescheduling of repayment to mitigate the short-term debt stress.
On the receipt side, the Government needs to broaden the tax base, ensure tax compliance, tap more sources of non-tax revenue, etc. On the expenditure side, there can be austerity measures to keep in check the wasteful recurrent expenditure, unwarranted subsidies, size of Government, etc.
We are aware that the Fiscal Management (Responsibility) Act has been in place since 2003 to strengthen fiscal discipline of the Government of Sri Lanka. The Fiscal Management Act aims at achieving fiscal sustainability. In addition, the New Inland Revenue Act seeks to improve tax administration.
I am hopeful that adherence to the contours of Fiscal Management (Responsibility) over time will go a long way in bringing about fiscal consolidation in Sri Lanka. We have the example of India to quote in this context. Adherence to the Fiscal Responsibility and Budget Management Act of 2003 and medium term fiscal frameworks of the Government over time have already started yielding the desired outcomes. These outcomes may be seen in significant reduction in debt-GDP ratio, fiscal deficit, revenue receipts particularly tax revenue, rationalization and prioritization of current expenditure, etc.
I am hopeful that adherence to the contours of Fiscal Management (Responsibility) over time will go a long way in bringing about fiscal consolidation in Sri Lanka.
Q Recently the Auditor General said that the country’s foreign and domestic loan was Rs. 8.9 trillion by the end of 2016, but the audited domestic assets was Rs. 1.1 trillion. What implications does such a discrepancy have on the country’s economy and debt management?
This discrepancy indicates that debts raised have been utilized for consumption or non productive or revenue expenditure, which has led to lack of capital formation, infrastructure and industrial growth
In June 2016, Sri Lanka entered into a three-year arrangement under the Extended Fund Facility (EFF) of USD 1.5 billion with IMF. By July 2017, USD 501.5 had already been disbursed. Country’s debt may have suddenly gone up on account of the disbursal of loan under EFF.
Under the medium-term fiscal strategy, the Government remains committed to its fiscal strategy of containing budget deficit to a sustainable level by maintaining fiscal discipline, revenue-based fiscal consolidation and rationalizing Government expenditure to improve productivity.
Debt-Assets Ratio is over 800% in this case. For a private commercial entity, this would reflect extremely serious insolvency. However, I think that this financial health indicator for a public entity, that too, for a Government of a developing economy can be seen in a different perspective.The assets will continue to be acquired while liabilities gradually done away with steadily rising current revenues for a Government of a developing country like Sri Lanka. This would bridge the current gap between debt and assets in the long-term together with fiscal prudence and fiscal consolidation over time.
(**The views expressed are those of the interviewee and are not necessarily those of the institution she is attached to)
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