Who is developing?
Human Development Report’ 09 poses questions on development of the country when the growth rate is projected to be one of the highest
Every now and then, comes by some hard facts that jolts one out of slumber. Unfortunately, more often than not, we raise some hue and cry to only go back to our slumber and the fact is almost wiped out of our mind. You might call it the ‘Ghajini Effect’.
One such ‘fact’ is the Human Development report. The HDR, as it is better known, is published by the United Nations, one of the biggest and most revered global institutions. It is usually launched with massive media coverage, only to be conveniently forgotten. So let me just add to it, with my views on this year’s HDR reporting.
India is ranked 134th amongst the 182 countries studied in the HDR. Last year, we were ranked 132nd, and the year before that we were 128th. This is India’s worst ranking in the last decade. Given the fact that we were never really bothered about our HDR rankings over the decade in question, this really does not amount to much, isn’t it?
Let us go into some comparisons. Bhutan is ranked 132nd, yes it does rank above India! So does Sri Lanka at 102nd position. Our neighbouring rival China is ranked 99th. Laos Republic, one of the smallest and poorest countries in Asia ranks right above us at 133rd. So do Namibia, Botswana, Nicaragua, Tunisia, Suriname and other such poor African countries. But we can take heart from the fact that our arch rival Pakistan ranks below us at 142nd position. And before we start talking about the great global financial crisis, let it be clarified that these figures are based on 2007 data. It takes time to compile a global report, even for the UN. So the report of 2009 is actually based on 2007 figures when the economy was booming. The Sensex ended the calendar year with a huge gain of 47 per cent in 2007. India’s GDP growth figures, the Holy Grail for most analysts was over 9 per cent for 2007. So what really went wrong? Why is it that in 2007, when our economy was growing robustly, the stock markets were bullish with investments flowing in faster than we could count, we actually slipped in human development index?
To put matters into perspective, a ranking is but a comparative figure and is hence relative. When we were ranked 132nd last year, we had an HDI count of 0.609. This year, we are ranked lower, but have an HDI count of 0.612. Thus, there has been an improvement in the measure, which means there has been improvement in overall development. As a matter of fact, ever since the HDR reporting was started by the UN, India has made steady progresses. Over the last 27 years, life expectancy at birth rose by approximately 8 years are adult literacy rate rose by 25 percentage points. What the lower ranking actually says is that some others countries have done a better performance in overall human development than we have.
Moreover, our development is frugal, grossly insufficient and more than that, lesser than overall developments achieved globally. That by no means does away with a more basic question; why is it that with so much growth we consistently keep failing in the most basic measures of human life?
As an economist, let me pose the question as: Why is that despite economic growth, rise in GDP and overall economic development, we are unable to ensure human development, or rather, improvement in the life of our population? How come certain small countries with lower growth are doing a better job? Is there a de-link between economic growth, investment, booming economy and the lives of common men? Is not economics all about the livelihood, income, expenditure and basic wellbeing of our society? If the economy grows, does not the growth reach the agents that drive it?
The de-link perhaps exists because of the myopic vision that we all have developed over the last few decades. We are too obsessed with the notion of growth. It is well accepted that no development can sustain without growth. To deal with our problems of poverty, malnutrition and all the other ills that plague us, we need resources. Only economic development can provide the long. lasting cure to these problems. One important criterion for economic development is growth. However, growth by itself is but a part of the overall picture. Mis-notion about the term has reached such levels that we have made growth synonymous with economic development.
When we talk about this generic ‘growth’, what exactly do we talk about? Just pause for a moment and ask yourself, what do you really mean when you say ‘the Indian economy has been growing’?
What it actually refers to is the rise in GDP. Yes, GDP has been growing, profits have been growing, returns on investments have been growing, FDI as a result has been growing. But for economic development, this accrued growth needs to be distributed. It is this distribution that has failed miserably, and this is where the de-link perhaps occurs.
How is this distribution supposed to occur? By the current scheme of thoughts, it is supposed to trickle down. Trickling-down effect is the most common notion of distribution in the growth focused development model. The argument states that once you have sustained growth, the benefits will eventually trickle down to the lower strata of society. Intrinsic in this argument is a disturbing notion that growth by itself is not going to be uniform for all sections of society, one section will derive it later. More troubling is the magnitude of the trickled down effect. No one talks whether it is sufficient to meet the rise in needs, whether by the end of the day enough will trickle down to uplift the poor, and more importantly, how much of it will trickle down, and how much of it will be retained by the upper sections of society. Clearly, over the last 27 years of reckoning, it has tricked down or else we would not have the HDI rise by 0.003. But given the lower levels of trickle down, we as a country have slid down in the development index.
Much of this distribution is sought to be achieved through the ‘market’, which forms the bulwark of our model economy. The market is supposed to be perfect, most efficient and certainly the fastest institutional mechanism to do all this. There are two problems with this notion. One, the market is never perfect; or rather the market is designed to be perfect according to those who control it, which means that it suits the requirements of certain sections perfectly, but often at the ‘cost’ of others. The financial crisis in the US and the subsequent findings about the stock market perhaps best illustrates this point. You now suddenly have a scurry about controlling the financial market because the agents operating in it are more interested about corporate bonuses than giving salaries to the employees, and the thousands others, who have invested can jump off the cliff!
Two, the market is not a distributional mechanism at all. A market is a platform for exchange. Thus, even in a free market, nothing is actually free! Such a platform is not suited to ensure distribution between the haves and have-nots, because the latter wouldn’t have been have-nots if they had anything worthwhile to exchange with the former! The haves would not be willing to concede portions of their share of the growth as that would adversely affect the growth of their profits, benefits etc. the myopic notion of growth thus becomes inward looking, where more and more have to be denied to ensure further growth, and you soon have growth for growth's sake.
Thus, distribution clearly needs to be done by non-market agencies. Distribution needs to be based on prioritised needs and not ability to buy. The target should be to empower those who cannot buy their basic needs to be able to acquire it. It is not talking in terms of charity. There is an old saying, “Give a man a fish and you feed him for a day. Teach him to fish, and you feed him for life.” Well, all of it is true. But simply teaching him to fish is not enough! You have to give him a reel as well, a pond or a river where he can fish, and moreover, access to the right to use his skills to earn his living. Imagine some one teaches you to fish, and leaves you stranded in the middle of the Sahara desert. What good will your newly-acquired skill do? Distribution is thus not only in terms of passing on of money, or few shreds of bread. Distribution is more in terms of establishing opportunities and enabling the destitute to access those opportunities; in short, empowerment. This in turn will generate further economic activities, and this the real notion of economic development. This is the broader picture. However, we can only see it when we can break out of our fixation about growth, and start prioritising people over profit.
Till then HDR reports will come and go, and we will remain indifferent to each like we have been. It does not matter if we slip in ranking in the HDR.