February , 2018
Sabka saath; sabka vikas’ Modi’s inclusive growth agenda needs more reforms to succeed
00:50 am

Tushar K. Mahanti

As if the slogan ‘Sabka saath; sabka vikas’ (Along with all, development for all)” was not fully expressing his concern for the country’s poor, Prime Minister Narendra Modi has come out with another charming phrase “ease of living”. This one is exclusive; the earlier slogan has travelled Indian political agenda, although in different words, for years and evoked mixed reactions from cynicism to optimism. These are beautiful phrases and Modi’s dramatic orating prowess spreads an illusory web.  An average Indian likes to believe in him.

Optimism apart, what has been done to achieve an inclusive growth, nay, development for all? India seems to have depended largely on the trickle-down effect of growth so far to benefit the poor who were not direct participants of economic growth. But despite this, high growth has helped to reduce the percentage of people living below the prescribed poverty line. The proportion of people living below the poverty line came  down from 37.2% in 2004-05 to 21.9% in 2011-12.

Good progress by any standard, but India still has the largest number of poor people. According to a 2015 World Bank report, ‘Taking on Inequality’, India has the most number of people, some 224 million, living below the international poverty line of $1.90 a day.

How to bring this figure further down? Modi’s ‘ease of living’ slogan probably has the answer. Ease of living, in a way refers to inclusive growth that does not stop at raising income of the poor or by proving with time-bound employment opportunities.

According to the World Bank, “rapid and sustained poverty reduction requires inclusive growth that allows people to contribute to and benefit from economic growth. Inclusive growth refers both to the pace and pattern of growth, which is considered, interlinked, and therefore in need to be addressed together”.

The inclusive growth approach takes a longer term perspective as the focus is on productive employment rather than on direct income redistribution, as a means of increasing incomes for excluded groups.

But if Modi is talking about inclusive growth, New Delhi is putting its faith on reform measures to shore up GDP growth figures and bring down poverty. The government has liberalised FDI limits in a number of sectors, allowed 100% FDI in select areas, and has increased the cap in “state-of-the-art” defence manufacturing to boost the sagging morale of the investors.

These measures are apparently working; FDI inflows hit an all-time high of $60.1 billion in 2016-17 following the easing out of rules. The government has eased 87 FDI rules across 21 sectors in the last three years.

The recent reform measures have heightened India’s growth prospects. According to the latest World Economic Outlook of the International Monetary Fund (IMF) released in January 2018, India will reclaim its fastest growing economy tag in 2018. India’s GDP is projected to grow at 7.4% in 2018 against 6.8% of China. India’s GDP will grow even faster at 7.8% in 2019, the report said.

The 2018 Global Economics Prospect (GEP) of the World Bank published earlier projected India’s GDP to grow at 7.3% in 2018-19 and to 7.5% for the next two years. Private investment is expected to revive as the corporate sector adjusts to the GST, which over the medium term will benefit economic activity and fiscal sustainability by reducing the cost of complying with multiple state tax systems.

Higher FDI inflow will probably improve further the confidence of industrialists back home and by extension, will raise GDP growth, but such move once again shows Indian policymakers obsession with growth figures – achieving higher GDP growth has been at the centre of these measures. Indeed, none of these measures talked of how it will help the average Indian who is suffering from high inflation rate or the squeezing of work opportunities.

And this has once again brought forth the issue of Indian policymakers’ obsession with GDP growth figures. In fact, Amartya Sen has warned our policymakers about the dismal side of its obsession with higher GDP growth rate. The focus on growth figures has a tendency to ignore whether higher output generation translates into improved human development indicators. Indians suffer from some of the severest nutritional deficiencies in the world despite higher GDP growth, Sen said.

And if higher output generation has not translated into improved human development indicators, it was largely because of the miss-match between output generation and job creation. India seems to have increasingly gone for capital intensive technology needing less labour input to generate the same output leading to a fall in employment elasticity of output.

The Government’s own statistics show that fewer new jobs have been created in the post-2014 years. In 2015, a year after Modi took charge; some 1.35 lakh new jobs were created in India. It was the lowest in seven years, very much lower than 4.19 lakh new jobs created in 2013 and as many as 11 lakh two years ago, in 2011.

The slow rate at which India’s job market grows looks pretty scary, at a time when an increasing number of youngsters come out of professional colleges and scout for jobs. Decelerating domestic demand has hit capacity utilisation across several sectors in the country and inevitably, job creation.

If job creation in the organised sector has faltered, the rural sector, where the larger part of India’s workers is engaged, too has failed to translate Modi’s rhetoric. Calling for converting farmer’s challenges into opportunities, prime minister Narendra Modi had urged Indian states to give priority to implement the ‘roadmap’ for boosting the agriculture sector with a target of doubling the income of the farmers by 2022. Agriculture should be made employment-oriented to make it attractive to the new generation cultivators and its growth must keep pace with that of the manufacturing and the services sector, he has noted.

The Prime Minister has called for transforming the sector and doubling the income of the farmers in the next six to seven years. And if the move would include larger investment in the sector and shifting to high value crops, the primary objective must be to raise the crop yield of Indian farms. The negative consequences of low agriculture yields extend from precarious incomes of farmers to large tracts of land locked in low value agriculture, despite growing demands for high value products. According to the NSS data, the average annual income of the median farmer net of production costs from cultivation is less than Rs 20,000 in 17 states. This includes produce that farmers did not sell (presumably used for self consumption) valued at local market prices. Given high wedges between retail and farm gate price, this might underestimate income but it is still low. Moreover, the variance in agriculture income between the more and less productive states is also very stark.

Despite leading the world GDP growth chart India is home to the largest number of hungry people. India has witnessed high economic growth in the past two decades. GDP has grown 4.5 times and per capita consumption by three times and foodgrains production has doubled during this period. However, despite phenomenal industrial and economic growth and sufficient availability of food to feed its population, it is unable to provide access to food to a large number of people, especially women and children.

India ranked 100th position among 119 countries on Global Hunger Index (GHI) 2017 prepared by Washington-based International Policy Research Institute (IPRI). India has slipped three positions this year against 97th rank in 2016.

According to this report, 190.7 million people are undernourished in India. By this measure 14.5% of the population is undernourished in India. Also, 51.4% of women in reproductive age between 15 and 49 years are anaemic. Further, according to the report 38.4% of the children aged under five in India are stunted (too short for their age), while 21% suffer from wasting, meaning their weight is too low for their height. Malnourished children have a higher risk of death from common childhood illnesses such as diarrhea, pneumonia, and malaria.

India’s pathetic performance would look further glaring when compared with its neighbours. Nepal, Myanmar, Bangladesh and Sri Lanka have better rankings. Worse, with a GHI score of 31.4, India is at the high end of the ‘serious’ category, the report said, adding that “given that three quarters of South Asia’s population reside in India, the situation in that country strongly influences South Asia’s regional score”.

But if India’s GHI ranking has worsened, the number of billionaires or the super rich has gone on rising signifying that higher GDP growth itself will not improve ‘ease of living’ index for the common people, let alone ‘sabka vikas’.

India is now home to world’s fourth largest number of billionaires with more than 100 super rich living here, according to the latest list of world billionaires of Forbes magazine. Despite India’s decelerating economic growth, the combined fortunes of the Indian billionaires soared 26% to $ 479 billion in 2017. In two years, between 2015 and 2017, the wealth of Indian billionaires increased by a huge 62%.

This dichotomy of affluence and poverty at the same time is reflected in the poor ranking of India in the Inclusive Development Index. India is ranked at the 62nd place among the emerging economies on the World Economic Forum’s Inclusive Development Index, two points below its previous year’s ranking of 60. India is way behind China (26) and Pakistan (47).

The index takes into account and ranks the countries on the basis of the living standards, the environmental sustainability and the protection of future generations from further indebtedness. The 2018 index, which measures the progress of 103 economies was based on three individual pillars — growth and development; inclusion; and inter-generational equity.

Of the three pillars that make up the index, India ranks 72nd for inclusion, 66th for growth and development, and 44th for inter-generational equity. Besides Pakistan, the neighbouring countries ranked above India include Sri Lanka (40), Bangladesh (34), and Nepal (22). Even Mali, Uganda, Rwanda, Burundi, Ghana, Ukraine, Serbia, and quite a few poor African countries were placed above India in the  WEF’s ranking.

Add new comment

Filtered HTML

  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em> <strong> <cite> <blockquote> <code> <ul> <ol> <li> <dl> <dt> <dd>
  • Lines and paragraphs break automatically.

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.