Economic Development: We Should Show Courage To Think Of A Different Model

Despite 15 years of reforms & liberalization, poor has either remained poor or become poorer.The results of the so-called reforms have not reached the lower strata to improve even their economic well-being.The rich-poor gap has only widened.It is felt that it's time for a new economic model which looks at the well-being of the members of the society

The Hindu on December 24,2007 carried an article titled “India 2007: high growth, low development” by P.Sainath on the editorial page which brings out the realities of development in the country. The author quotes the Human Development Report of the UNDP for the year 2007. According to HDR, rank of India in the Human Development Index(HDI) slipped from 126 to 128 which puts us in the bottom 50 of the 177 nations that HDR looks at. While one may feel very sad about our development ranking we have reasons to be happy & proud: rank of India in the dollar billionaires improved from 8 in 2006 to 4 in 2007 according to Forbes Magazine! Cuba has no representation in the roll call of billionaires but it is ranked 51 in HDI, 77 places ahead of India! Even in Asia, countries like Vietnam and Sri Lanka at 105 and 99 respectively are ahead of us, the so called Asian Tiger.

On Friday, February 1, 2008, Economic Times reported “India grew 9.6% in FY 07;FM hopes for an encore” (Page 17). The report says that the country grew faster in 2006-07 than previously estimated and clocked 9.6%, highest in 18 years. It continues to say that India’s per capita growth rate stood at 8.15 in the last fiscal.On the same page the paper has reported the data released by the National Sample Survey Organization(NSSO).The data pertains to the average spending by urban & rural population.The average individual spending on consumer items per day in rural area is about Rs.21 while that in urban area is aboutRs.39(or Rs.625 and Rs.1171 respectively per month) in 2005-06.And about 19% of the rural population spent less than Rs.12 a day.
On February 7,ET reported about growing inequality in the country(Proof-reading FM’s inclusive mantra: Inequality Rises In Both Rural & Urban India, page 13).The report provides the results of the India Financial Protection Survey conducted by Max New York Life and NCAER which uses the Gini Coefficient(devised by Italian statistician Corrado Gini in 1910s and is a variability measure emplyed to calculate a nation’s consumption or income inequality. The coefficient has value from 0 to 1, with 0 indicating perfect equality and 1 perfect inequality).The GINI coefficient for Rural, Urban and All India in fact increased from 0.38, 0.39 and 0.43 respectively in1995-96 to o.41, 0.43 and 0.45 respectively in 2004-05 indicating that inequality has in fact increased despite all the growth we talk about.

The Business Line on February 8, 2008 had an editorial on the same theme: The India Story: Growth Without Equity where Mr.S.D. Naik laments that it is a matter of grave concern that the recent acceleration in GDP growth has not been accompanied by an equitable distribution of wealth and wellbeing based on the India Development Report 2008 released by the Indira Gandhi Institute of Development Research , Mumbai. He goes on to say that while there has been a reduction in the percentage of people living below poverty line during the last two decades, the incidence of poverty as measured by the head count ratio(HCR) declined at a slower rate of 0.7 % per annum during 1994-2005 , compared with 0.85% per annum during 1983-1994.Also, while India has the second highest growth rate (after China), its rank in terms of Human Development Index(HDI), a composite measure of life expectancy, adult literacy and standard of living) slipped from 126 in 2006 to 128 in 2007 even when the average incomes of middle class people surged and the country’s rank w.r.t dollar billionaires rose from 8 in 2006 to 4 in 2007.

While it has become a fashion to compare our economy with that of China, the proponents of growth based on GDP conveniently ignore facts like that China has been able to bring down the incidence of poverty by 45 percentage points between 1981 and 2001 whereas we have been able to reduce the same by only 17 percentage points.

All these stories narrate hard facts that could be pointing to shortcomings in the development model that we follow. While all the macroeconomic growth indicated by the growth in GDP might result in the improvement of the economic situation of the country on a total scale resulting in better average per capita income, it does not necessarily lead to the development of the underprivileged and the poor. The allegation that the new found liberalized economy has in fact favoured the upper crest of the society while the have-nots have been pushed further down, so far has been proved correct. I feel fifteen years of reforms and liberalization is sufficiently long for economies to have an evaluation of the structural adjustment process we initiated to bring in economic development. The development of a society shall be measured by the well-being of the members of the society. Most of the nations have been overwhelmed by the wealth the nation can generate by actively promoting corporate interests by embracing structural reforms recommended by the Brettonwoods twins and WTO(influenced by a few countries and their big corporates), but one should keep in mind what David C. Korten in his book When Corporations Rule The World , “The task ahead is to transform a world ruled by corporations dedicated to the love of money to a world ruled by people dedicated to the love of life”.