Economic growth: create it, don’t condemn it
I met four of India’s top economists who are simultaneously driving and observing a changing India. My question to all of them came in the context of how economic growth has been turned into some form of evil by a pseudo-literati that is rightly concerned about growth not trickling down but lacks the rigour to explore the phenomenon accurately, writes Gautam Chikermane.
In the intellectually-heavy week preceding Independence Day, I met four of India’s top economists who are simultaneously driving and observing a changing India. My question to all of them came in the context of how economic growth has been turned into some form of evil by a pseudo-literati that is rightly concerned about growth not trickling down but lacks the rigour to explore the phenomenon accurately. If growth doesn’t reach the poor, what’s the point of having it, goes the argument that’s turning popular, pandering to rabble rousers and broadly reducing growth as an idea worth pursuing in our 64th year of Independence and further. I’m not sure where this argument is leading us and I pray that it is not towards this: if high economic growth cannot be equally distributed, let’s not have it at all.
It would be criminal if this argument gained popular political support.
The 9 per cent growth we have been experiencing, and the 10 per cent growth aspiration we harbour, has brought prosperity to the rich, the middle classes and a large chunk of those living in metros, no doubt. That it has not trickled down in the same proportion to the villages in general and to agriculture in particular is also true. But certainly, rejecting the growth momentum the Indian economy has gained after decades of economic somnolence is not the way out. What do the worthies pushing for distribution over growth push — poverty?
Besides, the contention that growth has not trickled down at all is incorrect. I have heard complaints from three different rural constituencies about the way in which NREGA is changing the economic landscape there. An extremely rich farmer told me that he doesn’t get labour to work his farm. A wealthy entrepreneur who has turned his fort into a tourist resort told me that he doesn’t get hands to work his business — all of them are busy “destroying the environment through unplanned NREGA work”. Poor farm labourers in the Nainital hills I regularly visit told me that they find it better to work as construction workers because NREGA has forced contractors to raise the rates they offer.
Growth is trickling down, please don’t waste your precious tears on that movement. Instead, go to the rural areas and see for yourself the change it’s bringing — the “poor” have mobile phones, cable TV, and are rich enough for insurance agents to dump ULIP policies on them.
Has this growth reached each and every poor citizen of India? Of course not. But I can see it marching ahead at a faster pace than ever before. Also, I am excluding the Maoist-controlled tracts, where leave alone economic development, even the presence of the state through a workable law and order is missing.
“Don’t take growth for granted,” Raghuram G. Rajan, professor at Chicago’s Booth School of Business and Economic Advisor to Prime Minister, told me last week. “Too many countries have grown strongly for decades, only to stagnate,” he writes in Fault Lines, a book that you must pick up right now and read. His warning: to assume that growth can come automatically is wrong, a lot of work still needs to be done.
“It would be a mistake to take high growth for granted,” Planning Commission Deputy Chairman said. “We have the ‘potential’ (his eyebrows stressed the word) to achieve high growth.” The growth challenges he identified were to make agriculture more productive and expand infrastructure. We need to solve these problems he said, but if we gave up growth, we are doomed to fail.
“Growth in itself cannot reduce inequality,” C. Rangarajan, chairman of Prime Minister’s Economic Advisory Council said in his book-filled room at Vigyan Bhawan. “The trickle down effect will work as the economy grows. But for it to be effective, the economy has to grow at a strong rate.” High growth, he concluded, helps the government to launch distributive schemes.
“Short of political turbulence, it is reasonable to expect that we will be on a sustained 8.5 per cent growth path,” said Chief Economic Advisor Kaushik Basu over an extremely lively discussion in his North Block office. “Even if we do not have compassion and morals, a better income distribution is in our self-interest. Otherwise political instability will come home to roost.”
I look forward to the next decade as one of high economic growth that simultaneously trickles down. I think the economic model India is following — racing towards free markets to deliver growth (something the markets are best at) and simultaneously inching forward on distributive justice through government intervention — will work well to balance the two. We need to push the government to deliver more efficiently, where projects like UID will help.
But for India’s sake, let’s stop stalling economic growth simply because it’s not omnipresent today. Create it, don’t condemn it.