Focus on development, not on growth alone

Jayshree Sengupta
Senior fellow, Observer Research Foundation

THERE is little room for complacency when the World Bank announces this year that India shall be surpassing Britain’s economy and become the fifth biggest economy in the world. The Indian economy is vastly different from the UK’s. The latter is an advanced country where the per capita income ($44,177 or around Rs 31 lakh) is much higher than ours ($2,134 or about Rs 1.5 lakh). Besides, they have social security, which provides quality healthcare to every citizen. In school education, the standard is high in free state schools and the quality of teaching is not vastly different from that in private institutions. Housing for low-income groups is supplied by the government and council flats accommodate thousands living in British cities. The public transport system is also good and efficient, catering to the public’s needs. On the whole, life in Britain is not comparable to India, where there are still pockets of stark poverty (22 per cent of the population or 27 crore people are poor) and huge disparity of income and wealth permeates the economy. India is one of the most unequal countries in the world. 

India’s rich can afford the lifestyle of the British rich, but for the average Briton, life is smoother, regular, more predictable and overseen by an efficient city government. The cities and villages are relatively clean and the environment is safe.

Prime Minister Narendra Modi tried to address some of the problematic issues in a fast-growing emerging economy like India. He started Swachh Bharat to clean up India and wanted to stop open defecation. But there was much inefficiency in the programme execution. Though the outcome is quite impressive in terms of the number of new toilets built, it is not perfect in terms of making India completely free of open defecation. Cities and towns remain dirty. Solid waste disposal is a huge problem in urban areas. The menace of air and water pollution is unresolved, making various achievements look small and insignificant.

Regarding guaranteeing livelihood to workers, minimum wages have not been enforced universally and the progress has been scattered across states.  In rural areas, there has been a decline in wages. With around Rs 8,059 (according to NABARD) being the average monthly income of a rural household, it is extremely difficult for families to make ends meet. They incur expenditure on food, education, health, farm inputs and pay off debts to the moneylenders from it.

The urban scene is different. The average informal sector worker earns Rs 10,000 to Rs 15,000 a month in a city like Delhi. But in the same city, some people wouldn’t hesitate to spend Rs 10,000 for a family dinner. Private company executives get hefty salaries, especially the higher echelons. True, they are more qualified, speak better English and have the right connections, but it is not enough to justify this kind of inequality. In advanced countries such as the UK, there is not much difference between the blue-collared and white-collared workers. The basic necessities can more or less be met by all. The more egalitarian the country, the less are the differences between the rich and the poor. 

Regarding jobs in the formal sector, the news has not been great. Most people in India seem to be self-employed, perhaps because jobs are difficult to get and retain. How these self-employed persons sustain themselves round the year is a moot point. There is alarming news from the Centre for Monitoring Indian Economy: last year, 1.1 crore people lost their jobs, mostly in rural areas. Women were the main losers as they are less educated or skilled and are a soft target. In Britain, such people would be on dole and they can collect money from the State for being unemployed.

In India, unemployed women have to go back being non-earners and it weakens their position in the household. People stop looking for jobs after sometime. That is why the participation in labour force is declining for both men and women. As a result, unemployment has been rising in India.

The World Bank’s forecast that India’s GDP growth for 2019 and 2020 will be at 7.5 per cent is also controversial. It believes that India’s economy is robust and resilient and has the potential to deliver sustained growth. There are, however, many indicators that may translate into slower growth than 7.5 per cent. There are still problems in increasing private investment because of banks’ reluctance to lend easily. Private consumption is also not going to be as high as predicted because of lower agricultural incomes among farmers and the rural population, which is likely to reduce rural demand. The fall in food prices and lower inflation at 2.19 per cent reflects continuing agricultural distress.

Government expenditure is going to be up for sure because of the various ways the government is trying to woo the voters; the fiscal deficit is unlikely to be met. The deficit (April-November) was Rs 7.17 trillion, breaching the target of Rs 6.24 trillion for the 2018-19 financial year.

There is good news on the fixed capital formation front, which rose to 12.5 per cent from 10 per cent in the April-June quarter, but it is unlikely to boost GDP growth right away. Industrial and manufacturing growth are supposed to be higher, but the Index of Industrial Production (IIP) for November 2018 has been only 2.19 per cent, which means it is substantially lower than the projected IIP growth. There is also a problem of demand in the service sector and it is likely to bear the brunt of a global slowdown this year.

Despite our high rate of growth, unless we clean up our cities, have better quality of air and water and improve our education and healthcare system, it will take us many years to enter the ranks of advanced countries which take pollution-free environment, clean drinking water and round-the-clock power supply for granted. Thus, a much more focused approach to address the micro needs of the people is required. The emphasis should be on development rather than on growth alone.