A ‘Republic Of Inequality’ Or PM Modi’s 5 Trillion Dollar Economy?

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Soon after assuming office for the second term in May 2019, Prime Minister Narendra Modi aimed for a 5 trillion dollar economy by 2024. Earlier, speaking at the release of BJP election manifesto in April 2019, PM Modi said: “India should aspire to be a developed country by 2047, the 100th anniversary of its Independence”, and added that his government “will lay the foundation for this in the next five years” (2019-2024). Both goals are interrelated to make empowered India.

Soon after assuming office for the second term in May 2019, Prime Minister Narendra Modi aimed for a 5 trillion dollar economy by 2024.

No doubt, a five trillion dollar economy will make India a global economic powerhouse. It will also help in alleviating poverty. “…our ambition to become economically strong has been driven more by our desire to become a less poorer nation,” finance minister Nirmala Sitharaman said while delivering a lecture on ‘Indian Economy: Challenges and Prospects’ at prestigious Columbia University’s School of International and Public Affairs on  October 15, 2019. [1]

An increasing GDP (Gross Domestic Product) is often seen as a measure of development and economic success. The economy, according to Niti Aayog CEO Amitabh Kant, needs to “grow (at) 8%-plus year after year to become a $5-trillion economy,” nearly double from its current $2.9 trillion. [2]

The pre-budget Economic Survey also said, to reach the magic $5-trillion; India needs to “sustain a real GDP growth rate of 8%”. But that possibility looks to have been kicked into the long grass, with the Reserve Bank of India slashing its growth forecast for the financial year 2019-20 to 5% or less, from an earlier estimate of 6.1%, citing weak domestic and internal demand.

So, What Should India Do?

There is no secret that in the era of high economic growth, India’s growth is very much skewed and its benefits go disproportionately to few people, as gets manifested by Oxfam’s Wealth Report (2019) which points out that during last year, “wealth of top 1% in India increased by 39% whereas wealth of bottom 50% increased at a dismal 3%”. [3]

The concern raised by many experts is that income inequality in India is rising much faster than expected. The top one per cent of the richest individuals in India appropriated six per cent of total income in the early 1980s, and now, this figure has gone up to twenty-two per cent. This suggests that wealth is not trickling down to the poor and India is turning into a ‘republic of inequality’.

The results of the cross country analysis indicate that the level of productivity is negatively related to income inequality and that in turn pushes the level of poverty.[4]  The Multidimensional Poverty Index (MPI), developed by the Oxford Poverty & Human Development Initiative (OPHI) and UNDP, identifies how people are being left behind across three key dimensions: health, education and living standards, and 10 indicators – nutrition, child mortality, years of schooling, school attendance, sanitation, cooking fuel, drinking water, electricity, housing and assets.

According to the MIP report, [5] India has the highest multidimensional poverty after Afghanistan in South Asia. Nearly 54% of the Indian population is multidimensional poor compared to 5% in China.

There are more multidimensional poor people (421 million) in the eight poorest Indian states (Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh, and West Bengal than in 26 poorest African nations combined (410 M). [6] It means around 700 million (70 crores) out of the total population of 1,370 in 2019 can be classified as deprived or vanchit Indians. [7]

And, there is no wonder that the World Bank ranked India at 115th out of 157 countries on the Human Capital Index in 2018. [8] HCI seeks to measure the amount of human capital that a child born today can expect to attain by the age of 18.

According to its parameters, a child born in India today will only be 44% as productive as she could have been if she had enjoyed quality education and full health, as well as better living environment, including water and sanitation.

In other words, there are grave deficiencies in India’s human development inputs that are preventing children from reaching their full potential. As such, the productivity, measured as per capita GDP is very low.

There are more multidimensional poor people (421 million) in the eight poorest Indian states (Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh, and West Bengal than in 26 poorest African nations combined (410 M).

India became the fifth largest economy in the world in terms of GDP in 2018 but still, it has a very-very low per capita GDP, as per IMF. It is placed at 119th position among 185 countries.

Delhi School of Economics professor Ram Singh says what help the economy could reach $5 trillion would be a near doubling of exports to $1 trillion annually. But that’s a big ask as India’s export performance has been normally weak. In fact, it is declining mainly due to the low level of labour productivity.

The goal of making India a USD 5 trillion economy by 2024 is difficult but not impossible.  So what India should be doing? The only way one can achieve the target by improving labour productivity or human capital.

Several recent studies have found that the higher is income inequality within a country the more limited is the impact of growth on reducing poverty. A study conducted by the Centre for the Study of Living Standards, Canada uses several sources of international data on labour productivity, poverty, and income inequality, and finds that across the developing countries for which data are available productivity growth plays a substantial role in reducing poverty. [9]

This conclusion suggests that developing countries like India, in attempting to reach their poverty reduction objectives, should pursue policies that foster productivity growth. However, a strong social safety net is also required, to ensure that the adjustment costs that come with productivity increases, do not fall disproportionately on the poor and that all members of society realise the gains from growth.

It is, therefore, an investment in people, especially those who are deprived, that is a need of the hour, because only educated, skilled and healthy or empowered manpower can achieve the goal of a 5 trillion dollar economy with inclusiveness. 

How To Empower People?

All people have the potential to succeed. Our job is to see the potential, find out what they lack to develop it, and equip them with what they need. Here, the capability approach, which was conceived as an alternative approach to welfare economics by Amartya Sen and others, [10]  may be an effective strategy. It is an approach that is focused on people and their opportunities and choices.

The policy monograph – Nurturing Human Development: A Strategy for New India – [11]  proposes a strategy to unlock the human potential based on the capability approach; and it is christened as “HDPlus” (Human Development Plus).

It is a dynamic agenda based on a ‘whole child’ concept, that is a school-going child and his/her family (that is HDPlus family) should be the fulcrum of human development efforts.

The concept is being described by policies, practices, and relationships which ensure that each child is healthy, educated, engaged, supported and encouraged. For this, integrating the child and his or her family more deeply into the day-to-day life of the school and home activities represents an untapped instrument for raising the overall achievements, including learning skills and health parameters, and hence improving overall productivity.

In other words, creating an enabling environment at family and school levels is a way to empower people.

To start with, the HDPlus strategy focuses on five interventions in a more closely integrated form. They are: Improving the quality of elementary education, facilitating water and sanitation, enhancing primary health, reducing the gender gap, and stabilising population. Additional interventions may be added or given interventions could be dropped from the list, looking at the needs of specific people/area. Hence, the strategy has been termed as “HDPlus”.

Implementing Strategy:

The Nature of Mass Poverty” is a book by John Kenneth Galbraith, Harvard Professor of Economics. [12]  In this book, Prof. Galbraith argues that “to eliminate poverty, we must invest more than proportionately in the children of the poor community (families).”  Now the question arises on how to identify the target population or HDPlus families?

MUMBAI, INDIA – MAY 14, 2006: Children Poverty Street Children Street urchins play an impromptu round of pull the wagon at frot on Sunday. (Photo by Natasha Hemrajani/Hindustan Times via Getty Images)

India is committed to compulsory free education for each child till the age of 14 years and so on. Almost all children go to school. Therefore, the real problem is perhaps not with the question of access to education, but rather it is about the quality of education being provided.

In India, there are two types of schools – the government-owned and aided ones, and the privately-owned schools. The government schools are indeed doing a commendable job of making education available to a greater number of children since they are everywhere and are normally doing it for free or for fees that are really within the reach of everyone.

They are of great help for people in urban areas too, for whom it is impossible to get their children to the more expensive private schools, and in the rural areas; perhaps, they are the only ways in which children can get educated and dream of a better future. However, some teething problems do remain.[13]

Most government schools today, however, lack even the most basic requirements, such as classrooms, desks, drinking water, etc. There are no separate toilets for boys and girls.

Broken window panes, furniture, fans and lights, paint and plaster peeling off the walls, leaky roofs, stinking toilets and garbage piled up in corners, children being taught sitting on the corridors due to lack of classrooms, etc. are a common sight in most government schools across the country.

As such, Government schools in India mainly cater to the very poor section of the society. As per the Annual Economic Survey 2018, around 80% of students in the government primary/elementary schools are from the weaker sections of the society. [14]

Based on the findings of National Achievement Survey 2017 (NAS) and Annual Status of Education Report 2017 (ASER), it has been found that “government schools have become the schools of OBCs, Dalits, and Muslims as every child who can afford it has moved on to private schools.”  [15] The public elementary schools are, therefore, one of the most convenient institutions for reaching the target population – Deprived Household.  

After selecting students, the strategy will focus on their families and provide all basic needs for better living including water, toilet, electricity, cooking gas, primary health, and more to promote human development. Further, efforts will be made that all students complete compulsory education.

In addition, it will be assured that  they are well prepared to read, write and be efficient in mathematics & basic digital technology before moving to secondary  education, thus will be laying down the foundation of human capital formation, as shown below:

  • To start with, the focus of the HDPlus strategy will be on government-school-going children, aged 6 to 14 (that is I-VIII standards), and their families to be known as HDPlus families. An effort will be made to ensure the total involvement of community/panchayat in the management of the school.
  • The focal point of governmental pro-poor schemes along with HD interventions will be HDPlus families in order to create an enabling environment for human development.
  • The strategy will be implemented by government agencies with the help of grassroots workers in collaboration with civil societies. 
Creating an enabling environment at family and school levels is a way to empower people. Representational image.

Conclusion:

India has to address the root causes of poverty and inequality in order to empower people. Persistent poverty and inequality are not just a violation of the basic human rights of the people but they also undermine the economic growth of a nation by wasting talents and human resources.

It leads to a skewed society where power and decision-making remain in the hands of a few, leading to greater conflicts and undermining social cohesion. And that is happening in India.

The paper argues that there are grave deficiencies in human development endeavours in India that are preventing children from reaching their full potential, as noted by the Human Capital Index of the World Bank (Box A).  What should be done?

Commenting on the poor quality of human development, measured in terms of HDI, Bill Gates and Ratan Tata (2016) rightly noted:  “Human capital is one of India’s greatest assets. Yet, the world’s fastest-growing economy hasn’t touched millions of Indian citizens at the bottom of the economic pyramid”. [16]

For this, India has to empower its people through a dedicated human development approach. Accordingly, the paper suggests a workable framework – HDPlus – as to how to invest in the people for enhancing productivity in order to achieve the goal of a developed country.

In sum, the HDPlus strategy, which aimed to lay the foundation for the human competency, should be an immediate priority of India. It provides a workable process in achieving not only a target of 5 trillion dollar economy but also making an empowered India in a generation.

[1] Source

[2] Source

[3] Chancel, Lucas and Thomas Piketty. 2017.  “Indian income inequality, 1922-2014: From British Raj to Billionaire Raj?”  WID, World Working Paper Series No. 2017/11, World Inequality Lab, Paris School of Economics. Also, refer here.

[4] DiPietro, William R. 2014.  “Productivity Growth and Income Inequality,” Journal of Economics and Development Studies, Vol. 2 (3): 01-08.

[5]Refer OPHI Global Multidimensional Poverty Index 2016 here: ReserachGate

[6] Source

[7] India is the second most populated country in the world after China. The population of India is projected close to 1.37 billion or 1,369 million in 2019, compare to 1.354 billion in 2018. The population growth rate for 2019 is projected at 1.08%. For details, refer here.

[8] Refer  2018 Human Development Index (HDI) here.

[9] Centre for the Study of Living Standards. 2003.  Productivity Growth and Poverty Reduction in Developing Countries, CSLS Research Reports 2003-06, Centre for the Study of Living Standards, Ottawa, download here.

[10] Sen, Amartya. 1985. Commodities and capabilities, Amsterdam: North-Holland. Also refer to Nussbaum, Martha and Amartya Sen. 1993. The Quality of life, New York: Oxford University Press.

[11] For details, see:  Kothari, Devendra. 2019. Nurturing Human Development: A Strategy for New India, New Delhi: Paragoan International Publishers.

[12] Galbraith, John Kenneth. 1979. The Nature of Mass Poverty, Cambridge: Harvard University Press.

[13] Kothari, Devendra. 2017. “Managing school education in India”, in Administrative Change, Vol. XLIV (2): 78-89.

[14] Economic Survey is an annual document of the Ministry of Finance, Government of India. It reviews the developments in the Indian economy over the previous 12 months, summarizes the performance on major development programs, and highlights the policy initiatives of the government. It also highlights the prospects of the economy in the short to medium term. Refer to Economic Survey of India, Vol. 2.

[15] Refer National Achievement Survey(NAS) here.

[16] Gates, Bill, and Ratan Tata. 2016, “New nutrition report underscores the importance of leadership in addressing stunting in India”, Times of India.

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An ambassador and trained facilitator under Eco Femme (a social enterprise working towards menstrual health in south India), Sanjina is also an active member of the MHM Collective- India and Menstrual Health Alliance- India. She has conducted Menstrual Health sessions in multiple government schools adopted by Rotary District 3240 as part of their WinS project in rural Bengal. She has also delivered training of trainers on SRHR, gender, sexuality and Menstruation for Tomorrow’s Foundation, Vikramshila Education Resource Society, Nirdhan trust and Micro Finance, Tollygunj Women In Need, Paint It Red in Kolkata.

Now as an MH Fellow with YKA, she’s expanding her impressive scope of work further by launching a campaign to facilitate the process of ensuring better menstrual health and SRH services for women residing in correctional homes in West Bengal. The campaign will entail an independent study to take stalk of the present conditions of MHM in correctional homes across the state and use its findings to build public support and political will to take the necessary action.

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The long-term aim of the campaign is to develop an open culture where menstruation is not treated as a taboo. The campaign also seeks to hold the schools accountable for their responsibilities as an important component in the implementation of MHM policies by making adequate sanitation infrastructure and knowledge of MHM available in school premises.

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Harshita is a psychologist and works to support people with mental health issues, particularly adolescents who are survivors of violence. Associated with the Azadi Foundation in UP, Harshita became an MHM Fellow with YKA, with the aim of promoting better menstrual health.

Her campaign #MeriMarzi aims to promote menstrual health and wellness, hygiene and facilities for female sex workers in UP. She says, “Knowledge about natural body processes is a very basic human right. And for individuals whose occupation is providing sexual services, it becomes even more important.”

Meri Marzi aims to ensure sensitised, non-discriminatory health workers for the needs of female sex workers in the Suraksha Clinics under the UPSACS (Uttar Pradesh State AIDS Control Society) program by creating more dialogues and garnering public support for the cause of sex workers’ menstrual rights. The campaign will also ensure interventions with sex workers to clear misconceptions around overall hygiene management to ensure that results flow both ways.

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With YKA MHM Fellow Vineet, Sabna launched Menstratalk, a campaign that aims to put an end to period poverty and smash menstrual taboos in society. As a start, the campaign aims to begin conversations on menstrual health with five hundred adolescents and youth in Delhi through offline platforms, and through this community mobilise support to create Period Friendly Institutions out of educational institutes in the city.

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A student from Delhi School of Social work, Vineet is a part of Project Sakhi Saheli, an initiative by the students of Delhi school of Social Work to create awareness on Menstrual Health and combat Period Poverty. Along with MHM Action Fellow Sabna, Vineet launched Menstratalk, a campaign that aims to put an end to period poverty and smash menstrual taboos in society.

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A former Assistant Secretary with the Ministry of Women and Child Development in West Bengal for three months, Lakshmi Bhavya has been championing the cause of menstrual hygiene in her district. By associating herself with the Lalana Campaign, a holistic menstrual hygiene awareness campaign which is conducted by the Anahat NGO, Lakshmi has been slowly breaking taboos when it comes to periods and menstrual hygiene.

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A Guwahati-based college student pursuing her Masters in Tata Institute of Social Sciences, Bidisha started the #BleedwithDignity campaign on the technology platform Change.org, demanding that the Government of Assam install
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campaigns, which were widely recognised. Through the #BleedwithDignity campaign; she organised and celebrated World Menstrual Hygiene Day, 2019 in Guwahati, Assam by hosting a wall mural by collaborating with local organisations. The initiative was widely covered by national and local media, and the mural was later inaugurated by the event’s chief guest Commissioner of Guwahati Municipal Corporation (GMC) Debeswar Malakar, IAS.

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