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View things through a new prism

The GDP and the HDI are inaccurate indicators. We need a framework that will help give us a more holistic view. Ramakrishnan TS writes.

india Updated: Mar 05, 2013 22:53 IST
Ramakrishnan TS
Ramakrishnan TS
Hindustan Times

India’s Gross Domestic Product (GDP) figure for the second fiscal quarter of 2012-13 was disappointing. The country’s growth rate eased to 5.3%, the slowest pace since January-March 2009. The general view was that the economy is bottoming out and that more bad news was in store. A similar reaction is seen whenever the Human Development Index (HDI) shows India languishing at the bottom. Perhaps we attach too much importance and emotion to the two indicators. The notion of development must look beyond both State-centric GDP and people-centric HDI. After realising that the progress in the last 30 years was not commensurate with higher levels of satisfaction, Britain has also developed a well-being programme and is in the process of defining and measuring well-being.

Gujarat’s governance model has resulted in better infrastructure, uninterrupted electricity and higher GDP growth, but it has a poor HDI track record. The HDI measures and ranks countries according to levels of social and economic development. The HDI gives one-third weightage each to the income, education and health index, measuring per capita income (or expenditure), average literacy and years of schooling, and life expectancy respectively. But, does it capture the benefits of the State’s capacity building?

High GDP growth does not always indicate the State’s ability to provide a better quality of life in terms of health and education for its people. But, the slowdown in GDP from 5.5% to 5.3% will increase the gap between the budgeted and earned revenues, while the deteriorating fiscal deficit will dent social expenditure.

Contrast this with Kerala: the state scored well in HDI (0.68 in 1999-2000 and 0.79 in 2007-08) but it lags behind in the area of self-sustained economic development. Kerala’s high-income index primarily emanates from the repatriated earnings of its large migrant population (about 36% in 2007), comprising about 20% of its Gross State Domestic Product (GSDP) in 2006-07. Kerala’s high health and education indices are the outcome of high purchasing power. The high HDI of Kerala comes at a price: breadwinners stay away from their families for years together. States in India with lower HDI have indirectly contributed to Kerala’s high HDI by providing significant economic opportunities to Keralites.

On the other hand, the percentage of improvement in Gujarat’s HDI between 1999-2000 and 2007-08 was lower than the national average, although the GSDP growth of Gujarat was higher than the national average during the same period.

Kerala’s growth is patterned on the education index driving the economic (although not self-sustained) and health indices. Keralites enjoy better living conditions despite limited growth opportunities in the state. Unlike Gujarat, which is more state development centric, Kerala is more people development centric. Gujarat’s growth is patterned on the income index (arising from self-sustained physical infrastructure and industrialisation) driving the education and health indices.

The model of state development preceding people’s development appears to be the stronger and more sustainable route. The higher GDP growth enables the state to implement better social infrastructure while increasing revenues for its exchequer. The near-universal electrification of Tamil Nadu, a people-centric move, has not ensured uninterrupted power supply even today. Tamil Nadu’s serious power generation deficit (about one third of its power requirement since 2007) is unlikely to change for at least two more years. On the other hand, Gujarat’s Jyotigram project for mass rural electrification began only after augmenting its power generation capacity and strengthening its grid infrastructure.

Continued development of physical infrastructure (roads, power, transport, etc) and social infrastructure (education, health, sanitation etc) would bolster a state’s sustainable growth and increase self-supporting economic opportunities. It will consequently ensure a better quality of life. For this, development has to be viewed beyond state-centric GDP and people-centric HDI. A new index reflecting this idea may be more appropriate than GDP and HDI per se. In the new index, the augmentation of social and physical infrastructure will be assigned an importance of 25% each. People-centric development that enables access to infrastructure facilities and meaningful economic opportunities should be assigned the remaining 50%. This new index is the need of the hour.

Ramakrishnan TS is a doctoral scholar of Public Systems Group, Indian Institute of Management Ahmedabad

The views expressed by the author are personal

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