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Getting to the other side

The Indian economy is receiving unprecedented international attention. The Economist featured India on its cover with the poser: ?Can India fly??

india Updated: Jun 15, 2006 01:52 IST

The Indian economy is receiving unprecedented international attention. The Economist featured India on its cover with the poser: “Can India fly?” BBC World featured a global telecast highlighting the prospects of India and China dominating the global economy in the near future. Nobel laureate Amartya Sen gently reminded all of us that mere reliance on aggregate growth rates does not reflect the real health of the economy – a point he has been consistently putting forward over the years.

An important issue in the India-China comparison that he raises is relevant for our future policy prescriptions. The Chinese economy, led by its manufacturing sector, has generated much higher levels of new employment. However, Indian economic growth, propelled as it is by the services sector, generates much lower levels of employment. Hence, relying on aggregate growth rates to generate desired levels of employment is, besides being ineffective in tackling growing economic and income inequalities, simply unrealistic.

Given India’s demographic composition, it should be borne in mind that an additional 71 million people will be added to our workforce (a quarter of the world’s extra workers) in the next five years. Needless to add, with 54 per cent of our population already below 25 years of age, India’s future lies in providing this huge human resource asset with proper knowledge, skills and employment. In this lies India’s future.

That the Indian economy should grow faster than it is doing today is everybody’s wish. The moot question is, how? The neo-liberal Economist suggests, “It [India] has taken off at last. Only with further reform can it spread its wings and soar.” At the same time, it goes on to comment that while Indian business will benefit if the economy continues to grow at the present rate, in order to tackle the problems of poverty and unemployment, India needs to grow much faster.

The unmistakable inference is to the discredited ‘downward filtration’ theory. Global experience shows that it simply does not work. It is only through an affirmative policy intervention that the State can address the problems of poverty and unemployment.

The current political dispensation in our country, the UPA government supported from the outside by the Left, offers us the possibility to put in place a policy perspective of economic growth combined with State intervention. This is necessary not only to bridge the mismatch between ‘India shining’ on the one hand and growing distress suicides by our farmers on the other. More importantly, this is required to radically change certain worrisome aspects of the Indian reality.

It is by now widely recognised that the agrarian distress in India is disturbingly grave. The per capita availability and consumption of foodgrains is on the decline. In 2005-06, total foodgrain production will be lower than what it was in 2003-04. According to the statistics provided by the Ministry of Agriculture, the number of suicides by farmers has been 16,415 in 2001, 17,971 in 2002 and 17,164 in 2003. Unofficial surveys and estimates indicate that these figures have been on the rise during the last couple of years. Preoccupation with reforms should not prevent us from taking necessary measures such as much larger public investment in agriculture and institutional availability of credit to farmers.

The status of young India is more disturbing if we take into account other official data. The Unicef reports that infant mortality rate in India stands at 407 per one lakh births compared to 13 in the developed countries. Thirty per cent of the babies born in India are underweight. This rises to 47 per cent by the time they reach three years of age. The proportion of children under three years suffering from anaemia is a whopping 74.3 per cent. Thirty-nine per cent of our women and 37 per cent of our men suffer from chronic energy deficiencies.

The status of the girl child is impermissibly pathetic. The fall in the sex ratio between the 1961 and 2001 Census from 976 to 927 females per 1,000 males clearly points to growing gender discrimination and continuance of the criminal practice of female foeticide and infanticide. The large-scale prevalence of child labour, despite legal legislations (the number of female child labourers is estimated at 63 lakh), is indicative of the huge gaps that exist in training and empowering young India. Add to this, in the first instance, our inability to achieve till date universal enrolment in schools, and second, the significant drop-out rates at all levels. It shows that we are far away from providing elementary knowledge and skills to empower young India.

Preoccupation with the reform process cannot be permitted to disarm the government of the day from positive intervention to correct these anomalies. Therefore, the crux of the economic reforms in India must be directed not merely at enlarging corporate profit but at vastly improving the social welfare of its people. Under these circumstances, it is absurd to pose the question whether one is pro-reform or anti-reform. If the reforms are pro-people, i.e., while improving people’s welfare they seek to bridge the gap between growing economic inequalities, then we are pro-reform. If reforms are anti-people, i.e., they increase the burden on the people and widen the gulf of economic inequalities, then we are anti-reform.

While the National Rural Employment Guarantee Act has been enacted, it needs to be effectively implemented to result in a positive improvement in people’s lives. The UPA government has many more promises, which it has made in the Common Minimum Programme, to keep. These include the promise of providing primary schools in every habitation, vastly expanding the public educational system, and developing a vast network of primary healthcare centres, besides providing potable water and proper sanitation. The UPA government must address these issues with urgency.

The natural question that arises is, from where does the government find resources for such programmes? India, with one of the lowest tax:GDP ratios in the emerging world, needs to consider radical proposals for widening the tax base. This is resisted by those who can afford to contribute more. But even these sections must realise that India’s future growth is crucially dependent upon the growth of its domestic market, which is, in turn, crucially dependent on the health and welfare of its vast human resource asset.

This becomes apparent from the fact that while we are home to one-sixth of the world’s population, our share in world trade in both goods and services is a mere 1.3 per cent. And, we receive 0.8 per cent of global foreign direct investment inflows.

While the reform process is preoccupied with improving these figures, it would be missing the woods for the trees if it fails to economically and socially empower the Indian people. The latter is the only course available for India to convert its 100 crore-plus population into a market that is capable of consuming what is produced, which, in turn, will boost further production and economic growth. The UPA government can make India a powerful emerging economy of the 21st century if it pursues such a course.

The writer is a Rajya Sabha MP and member, CPI(M) Politburo