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India must spend more on basics, says Amartya Sen

The Nobel laureate says India must use resources generated by its fast economic growth to remedy its continuing deficiencies in healthcare, education and infrastructure.

business Updated: Aug 14, 2007 10:31 IST
Arun Kumar

Nobel laureate Amartya Sen says India must use resources generated by its fast economic growth to remedy its continuing deficiencies in basic healthcare, in school education and in rapidly expanding physical infrastructure.

"Money will continue to come very rapidly into the government's hands if the fast economic growth continues," he says in a commentary on "India At 60" published on Monday by, the website of leading American business magazine.

"What is critically important is to use these generated resources to remedy India's continuing deficiencies, in particular in basic healthcare, in school education and in rapidly expanding its physical infrastructure."

"In some of these, the private sector can help," said Sen, the Lamont University professor and a professor of economics and philosophy at Harvard University who was the first Asian to be awarded the Nobel Prize in Economics in 1998 "for his contributions to welfare economics".

"But a lot more has to be spent on public services themselves, in addition to improving the system of delivery of these services, with more attention paid to incentives and disciplines, and better cooperation with the unions, consumer groups and other involved parties," he said himself posing the question, "Where will the money come from?"

Sen's answer: "If the total revenue, from taxes and other channels, of the central and state governments keeps pace with the rapid growth of the economy, when the economy is growing at eight per cent a year, that would be a big rate of increase of available funds for public services.

"As it happens, government revenue has persistently grown faster than the growth of gross domestic product: in 2003-04, the economic growth of 6.5 per cent was exceeded by the revenue growth of 9.5 per cent, and in 2004-05 to 2006-07, the growth rates of 7.5 per cent, 9 per cent, and 9.4 per cent have been bettered, respectively, by the expansion rates of government revenue (in "real terms"-that is corrected for price change) of 12.5 per cent, 9.7 per cent and 11.2 per cent."

"As we look back over the last 60 years, some things have happened well enough, and some, where the gaps were large, have started to catch up.

However, there are other areas in which there are still huge shortfalls," Sen said. "These gaps would need to be urgently remedied. We know what to do, and there are resources to do it. What we need now is some determined action to do what we can do and must do."

Noting "democracy has indeed flourished nicely in India", the Nobel laureate said, "The story is very different on the economic side. The growth rate of the Indian economy remained stuck at its low traditional point of three per cent a year for a very long time. The economic policies needed substantial reform."

"In the old days, some wise guys used to put forward the thesis that India's growth rate was low because of its democracy, which seemed to many of us rather ridiculous. But with continued low growth, that anti-democratic point of view gained some ground among high-octane commentators (never with the general public, though).

"When India changed its economic policies, the growth rate picked up as expected, without India becoming any less of a democracy to achieve this result," Sen said noting, "The economic changes came amid much hesitation and huge resistance.

"When Manmohan Singh came to office in the early 1990s as the newly appointed finance minister, in a government led by the Congress party, he knew these problems well enough, as someone who had been strongly involved in government administration for a long time," said Sen who was once Prime Minister Manmohan Singh's colleague as a professor at Delhi University.

"And Singh's response was sure-footed though cautious, given the complex politics of policy reorientation. While the going has been rough from time to time, the direction of policy change has been unmistakable from that point onwards, endorsed even by successor governments run by other political parties."

India is now getting used to its much higher rate of growth, first around six per cent a year and now about eight per cent, occasionally touching nine per cent, Sen said.

It is also remarkable that India's main success has come not in traditional areas of exports but largely on newer industries, with a large component of high-tech, such as the information technology industry, which has rapidly grown to be a giant from a very modest beginning.

Another area is that of pharmaceuticals. Even though in that field the Indian entry began with generic drugs (with a huge reduction-sometimes a cut of 80 per cent or so in the price for many essential drugs, like AIDS medicines), it is now going much more into new research as well, he noted.

There is reason enough to celebrate many things happening in India right now. But there are failures as well, which need urgent attention, Sen said citing widespread under nourishment, the astonishing neglect of elementary education in India and low life expectancy as examples.