Theory of "High growth - Low poverty" - A Mirage

Sunday, May 4, 2008

"Faster growth rate is essential for faster reduction in poverty. There is no other trick to it", said Dr. Muhammad Yunus, the Nobel laureate. India has been growing fast at the handsome rate of 7-9%[...], but "it continues to have anywhere between one third to one fourth of its population living in subhuman, absolute poverty", more over, the most hurting fact is that the unprecedented inequality due to the high growth rate. To put it in simple terms, rich is getting richer and the poor is getting poorer. Worst part is, poor spend more than the rich on some basic necessities (The Hindu reported that, "Poor spend more than others on cooking fuel"[source]).

As on May 2nd 2008, Inflation touched 42-month high at 7.57% (where the "tolerance limit" is 5.5%, according to RBI). When the economy is struck by inflation, the first person to feel the heat is common man. How? First, the consumption basket of the rich is different. The likes of Anil and Mukesh Ambani do not compete with the poor people as much as people like me do for their consumption basket. Second, super-rich people save more than merely rich people, putting downward pressure on prices[...]. "Since 2000-01 to date, each additional percent growth of GDP has led to an average of some 2.5 percent growth in corporate profits. India's high growth has certainly benefited the corporations more than anyone else"[EPW, April 19, 2008]. More over the number of Indian billionaires rose from nine in 2004 to 40 (yeah, four and zero), more than many richest countries like Japan, France, Italy and even China! [source]. Also, "India is second only to the US in terms of combined total wealth of its corporate billionaires coexisting with the largest number of homeless, ill-fed and illiterates in the world"[EPW, April 19, 2008]. The market friendly policies of government have passed the benefit of high growth to corporate sector and the poor are made to bear the burden of so called GDP (economic) growth.

In his budget speech, Finance Minister said, "Our human and gender development indices are low not because of high growth but because growth is not high enough"[Budget Speech 2007]. Our FM might have achieved high growth rate, but so far, has it changed the way poor live in country side? Has it created more jobs for the needy? Has it at least brought down the number of absolute poor? Certainly not. Here are the facts [source, EPW].

1. "We have state-of-the art corporate run expensive hospitals for the rich, but not enough money to control malaria and tuberculosis which requires INexpensive treatment. So they continue to kill the largest numbers." My own village still do not have the hospital, not even a primary health centre! And of course, we have high growth rate.

2. India is experiencing a jobless growth, i.e. increase in GDP growth with decreasing (or stagnant) employment rate. When our growth rate was just 4%, the employment growth rate was little over 2%. In recent times, though India is experiencing a growth rate of 7-8%, the growth of regular employment has hardly exceeded 1%. This means, most of the growth, some 5-6% of GDP, is the result of higher output per worker, i.e. productivity and growth comes from mechanisation and longer work hours. So, you can imagine the misery of unemployed common man (due to the high growth rate).

3. Regarding government's agricultural policies, the number of suicides in Vidharbha, Andra Pradesh, Karnataka and other states would give you the better picture. To give you the practical example, in most of villages (including mine), the electricity is available only in the odd hours like midnight. So farmers have to wake up in the middle of the night for irrigating their crops. Water and electricity are taken away from farms in the critical agricultural seasons to supply posh urban urban localities and industries. Recent Rs. 60,000 crore loan waiver will do no good for the actual farmers in the long run[earlier notings].

I am not sure why government still believe that "high growth will soon be trickling down to poor." It is evident from the contemporary situation that the high growth is bringing unprecedented inequality and never succeeded in bringing down the absolute poverty. Our FM and PM's theory of "High grwoth-Low poverty" seems to be just a myth. "India is said to be poised to become a global power in 21st century, with the largest number of homeless, under nourished, illiterate children coexisting with billionaires created by this rapid grwoth."

So, what do you think should be done? I believe,

1. The idea of inclusive growth should get out of the papers and come into reality. Some of the programs/policies which create rural employment should be given higher priority and should be implemented in all parts of the country. Thanks to NREGS, at least it is making some difference.

2. Instead of loan waivers, the money should be invested in building rural infrastructure and strengthening the rural credit structure. This would help the agriculture and farmers in long term.

3. The taxpayers' money should be judiciously used to improve the basic amenities like health, education, home. Policy implementation needs to be strengthened. How? Read it here.

4. Policy making should not be focused around vested interests and pressure groups, rather, popular participation in policy making should be given the higher priority.


Sushant said...

Very good article.. But do you think it will be implemented? who has power to do this? You'll see politicians in your area or probably at your door step only when it's election time.. Loan waiver came only when it's election time!? I would say only Government is the reason..and it's really not a democratic! and there will be a much awaited out food cost!
All these things just boils blood!


hey Sushant... i agree with you, as you said, implementation is still a big problem. there is no dearth of good ideas, but only implementation that hurts.

hope this time's elections in KARNATAKA has some surprises which can actually give little push... lets see...

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This work by Manjunath Singe is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 2.5 India License. The views and opinions expressed in this work are strictly those of the author and do not represent his employer's views in anyway.