The Pains of Growth

A pros­per­ous econ­omy – but not a pros­per­ous peo­ple.

Southasia - - CONTENTS - By Dr. Raza Khan

In­dia has ex­pe­ri­enced a high rate of eco­nomic growth over the last decade but in many re­spects this growth has not trans­lated into over­all de­vel­op­ment of the coun­try and so­ci­ety, rais­ing many ques­tions marks re­gard­ing the sus­tain­abil­ity of the In­dian mod­els of eco­nomic growth.

Usu­ally econ­o­mists mea­sure eco­nomic growth in terms of gross do­mes­tic prod­uct (GDP) or re­lated in­di­ca­tors, such as gross na­tional prod­uct (GNP) or gross na­tional in­come (GNI). In terms of GDP growth, In­dia has done re­mark­ably in the last

decade, main­tain­ing 7 to 8 per­cent growth and at times even higher. At the end of the last cen­tury, In­dia's GDP was around US$480 bil­lion. Af­ter the eco­nomic re­forms in­tro­duced in early 1990s gath­ered steam, the GDP grew five-fold to reach US$2.3 tril­lion in 2015 (as per IMF es­ti­mates). This GDP growth dur­ing Jan­uary-March 2015 was 7.5% com­pared to China's 7%, mak­ing it the fastest grow­ing econ­omy.

This GDP growth has not trans­lated into high lev­els of de­vel­op­ment be­cause that is a holis­tic and al­len­com­pass­ing con­cept. GDP growth only does not de­ter­mine that the state or area in ques­tion, by hav­ing high eco­nomic growth, could nec­es­sar­ily be de­vel­oped. This is specif­i­cally the case with In­dia. It is im­por­tant to note that in terms of de­vel­op­ment, it is not the ag­gre­gate GDP that is im­por­tant, but what mat­ters more is the GDP per capita. In­dia has much higher lev­els of GDP than, say, Sin­ga­pore, New Zealand or Bel­gium, but the lat­ter are more de­vel­oped in al­most all re­spects than In­dia due to the higher GDP per capita.

In­dia lags be­hind the men­tioned coun­tries in GDP per capita be­cause of her mam­moth pop­u­la­tion, which is nearly 1.2 bil­lion. The mea­sure of GDP per capita is achieved by di­vid­ing the GDP over the num­ber of peo­ple in the coun­try. Sin­ga­pore, New Zealand, etc. are more de­vel­oped than In­dia be­cause they have a very low pop­u­la­tion in com­par­i­son to In­dia. Ac­cord­ing to econ­o­mists, if a coun­try has to have sus­tain­able de­vel­op­ment its econ­omy must grow at a rate three times higher than its pop­u­la­tion growth. In case of In­dia, the coun­try has ex­pe­ri­enced eco­nomic growth be­tween 7-9 per­cent in the last decade but in real terms its pop­u­la­tion growth has not been below 2.5 per­cent.

In­dia has been able to have sus­tain­able de­vel­op­ment. How­ever, for such de­vel­op­ment, high level of eco­nomic growth and low level of pop­u­la­tion growth is the only con­di­tion. Sus­tain­able de­vel­op­ment also re­quires a coun­try to have a high hu­man de­vel­op­ment in­dex (HDI). The HDI is a sum­mary mea­sure of av­er­age achieve­ment in key di­men­sions of hu­man de­vel­op­ment: a long and healthy life, be­ing knowl­edge­able and hav­ing a de­cent stan­dard of liv­ing. The health di­men­sion is as­sessed by life ex­pectancy at birth, the education di­men­sion is mea­sured by means of years of school­ing for adults aged 25 years and more and ex­pected years of school­ing for chil­dren of school en­ter­ing age. The stan­dard of liv­ing di­men­sion is mea­sured by gross na­tional in­come per capita. On all th­ese counts of the HDI, In­dia lags far be­hind the ‘de­vel­oped’ states of the West.

Com­ing back to GDP per capita as a yard­stick of de­vel­op­ment, even the mea­sure is not a good tool of gaug­ing de­vel­op­ment in a coun­try. In this sit­u­a­tion, spend­ing pat­terns that are skewed to­wards the rich ex­clude the needs of the poor. Thus growth in per capita GDP may not lead to a re­duc­tion in poverty or to broader so­cial and eco­nomic de­vel­op­ment. In case of In­dia, eco­nomic growth has not re­sulted in sig­nif­i­cant lev­els of re­duc­tion in poverty. Ac­cord­ing to the 2014 World Bank re­vised method­ol­ogy for cal­cu­lat­ing poverty, the world had 872.3 mil­lion peo­ple below the poverty line, of which 179.6 mil­lion peo­ple lived in In­dia. In other words, In­dia with 17.5% of to­tal world's pop­u­la­tion had 20.6% share of world's poor­est in 2011. The lev­els of poverty in In­dia can also be gauged from the fact that more than 300 mil­lion peo­ple, al­most one-fourth of the coun­try’s pop­u­la­tion, in In­dia (a fig­ure close to the pop­u­la­tion of the USA) still have no elec­tric­ity. Even the ac­cess of ba­sic so­cial ser­vices like potable wa­ter and ac­cess to san­i­ta­tion fa­cil­i­ties to most In­di­ans is not avail­able.

De­vel­op­ment not only con­cerns hu­mans ma­te­rial needs but also im­prove­ment in their so­cial con­di­tions. Thus, de­vel­op­ment is growth plus change in­clud­ing so­cial, cul­tural and in­sti­tu­tional change for the bet­ter as well as eco­nomic trans­for­ma­tion. This is a very vast but quite ap­pro­pri­ate ex­pla­na­tion of the con­cept of de­vel­op­ment. De­vel­op­ment in the so­cial con­text may mean im­prov­ing the life stan­dards of peo­ple. In this con­text, In­dia lags far be­hind the de­vel­oped coun­tries as the life stan­dards of the ma­jor­ity of In­di­ans leave a lot to be de­sired. In­so­far as cul­tural change is con­cerned, a lot of In­di­ans may have shat­tered tra­di­tional shack­les to have ob­tained some mea­sure of so­cial and political mo­bil­ity, still a very large num­ber of In­di­ans could not shat­ter the tra­di­tional fet­ters to de­velop their per­son­al­i­ties and so­cial con­di­tions.

This is very much ev­i­dent from the fact that the caste sys­tem is still very much en­trenched in In­dia, of­fi­cial claims not­with­stand­ing. In­sti­tu­tional change in In­dia may have oc­curred sig­nif­i­cantly but the very fea­tures of good gov­er­nance that pri­mar­ily in­clude, trans­parency, ac­count­abil­ity, par­tic­i­pa­tion and rule of law, are still very much ab­sent in In­dia. The coun­try may have a demo­cratic political sys­tem but this sys­tem is more os­ten­si­ble than demo­cratic at the core. In other words, democ­racy is not only the name of elec­tions but a whole cul­ture. In­dia has not been able to evolve a true demo­cratic cul­ture. For in­stance, democ­racy re­quires equal­ity of all peo­ple and equal­ity of op­por­tu­nity but hav­ing a well en­trenched caste sys­tem that in many re­spects is quite in­sti­tu­tion­al­ized. How­ever, In­dia has held na­tional elec­tions in a very sus­tain­able man­ner since the coun­try’s birth, which is some­thing of a great achieve­ment in the Third World.

Keep­ing the afore-stated facts and fig­ures in view, one can safely de­ter­mine that In­dia has in­du­bitably achieved high rates of eco­nomic growth but has largely failed to use this growth for over­all de­vel­op­ment which must be an alarm­ing sit­u­a­tion for pol­i­cy­mak­ers. The writer holds a doc­toral de­gree in In­ter­na­tional Re­la­tions and is a political-econ­omy and se­cu­rity an­a­lyst.

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