India is on the cusp of major change in its social contract – LSE Director

There are many reasons to think now is an ideal time to debate the social contract that will best serve India in the 21st century.
- Minouche Shafik - LSE Director

“…There are many reasons to think now is an ideal time to debate the social contract that will best serve India in the 21st century.”

This was the message given by Dame Minouche Shafik, Director of the London School of Economics and Political Science (LSE), during her speech at Mumbai university last night (11 September).

In the lecture, which was given in honour of former LSE Director Dr Indraprastha Gordhanbhai (IG) Patel, Minouche highlighted a number of factors which have brought India to the cusp of re-examining its social contract to meet new demands. These include technological advances, a young population, the changing role of women in the labour market and the development of environmental rights.

In the speech, Minouche focused on the changing nature of the social contract - the balance between rights and obligations of citizenship - and how technology is accelerating this change in India and around the world:

“As in the advanced economies, technological and social changes will affect the evolution of the social contract in India in future.  The rise of artificial intelligence, machine learning and automation will mean that India is unlikely to follow the path of East Asian economies that relied on labour-intensive export-oriented manufacturing to transition to middle and high incomes.”

While stressing the importance of education in navigating these changes and India’s considerable progress in enrolment at primary and secondary levels, particularly for girls, Minouche noted the country still relies heavily on unpaid female labour. She highlighted the fact half of young Indian women are not in employment, education or training:

“Over time that will change as it has in many countries – more educated women will want to work outside the home and the social contract will have to adjust to accommodate that, in part because the economic rationale in terms of higher incomes will be very compelling.” 

In terms of social protection, Minouche highlighted how India’s systems have expanded, through initiatives such as school meals, the Integrated Child Development Service and the National Rural Employment Guarantee Act.  These have provided a minimum floor on poor people’s incomes and improved opportunities for young children. However, these protections haven’t come without their challenges including the uneven delivery of benefits, problems with corruption and delays in wage payments.

Minouche also noted how human rights in India, and particularly environmental rights, are increasingly seen as part of the social contract:

“Air and water pollution and lack of access to sanitation violate human rights and are particularly damaging for poor people. There is a lively debate in India about the “right to breathe” and the huge social costs for both outdoor and indoor air pollution. Increasingly, these environmental issues are being seen as central to the social contract.”

These factors along with other developments including progress in economic growth, rising incomes, urbanisation and a growing middle class mean the social contract in India is due to be reassessed to create a fair society for everyone, Minouche noted:

 “Good social contracts enable modernisation of the economy because everyone in society believes they will be looked after during the inevitable dislocations that result. Rather than vested interests blocking change … a just social contract provides equal opportunities for all and a stake in a better future.”

In India, as in the rest of the world, Minouche argued emerging pressures can be managed if the social contact provides people with insurance against risk. Suggested policy avenues, highlighted by Minouche that could help insure against risk, include a minimum income for all (which is structured to retain incentives to work), opportunities to retrain and re-skill, wide-spread early years education and better use of the growing pool of female talent.


Behind the article

For a full copy of the speech please contact

Minouche Shafik is a leading economist, whose career has straddled public policy and academia. Before becoming the Director of LSE in September 2017, she was Deputy Governor of the Bank of England.  Prior to this, she was Deputy Managing Director of the International Monetary Fund, Permanent Secretary of the UK Department for International Development and the youngest ever Vice President of the World Bank.