Where is inclusiveness?

Lop-sided growth

The theme of the Eleventh 5-year Plan (2007-12) and beyond is ‘faster and more inclusive growth’ meaning that the benefits of faster economic growth should reach a much higher number of poor and disadvantaged people.

But, how ‘inclusive’ has been the Indian growth story?

There is no single measure by which one can judge inclusiveness. However, human development indicators collectively give some broad idea about the performance on ‘inclusiveness.’

For example, in terms of country ranking by Human Development Index (HDI) — a composite measure of achievement in health, education and standard of living — India stood at 128 out of 177 countries in 2005 (124 in 2000). China’s position was 81 in 2005 (96 in 2000) and  Bangladesh ranked at 140 in 2005 (145 in 2000). The disturbing fact is that India’s relative ranking is worsening, whereas that of China and even Bangladesh has been improving over the same period.

According to the latest available World Bank indicators, in 2007 the adult literacy rate for India is 66 per cent as against 93 per cent for China and 92 per cent for Indonesia. So, India is a lot behind China or Indonesia (two other populous countries) in terms of mass educational attainments. Moreover, by restricting the creation of industrial employment (which requires workers with basic literacy and numeracy at the minimum, though that may not be enough) this would stand in the way of a faster and more inclusive growth in future.

Life expectancy at birth for India (2007 data): 63 (male) and 66 (female). For China, the corresponding figures are 71 and 75. The infant mortality rate per 1,000 for India was 52, while it was 18 for China. Regarding births attended by skilled health staff, India’s attainment is 46.6 per cent as against 98.4 per cent for China. Again, India lags way behind China in providing basic health and medical services.

In terms of malnutrition (underweight) of children under five years of age, India’s figure (2006) is 43.5 per cent as against 32.8 per cent for Somalia and 31.7 per cent for Sudan. India’s performance on malnutrition is worse than all countries (including sub-Saharan Africa) for which data were available for comparable periods.

On the basis of international poverty line of $1.25 a day, the poverty ratio (percentage of people below the poverty line)) was 49.4 for India in 1993-94. After a decade in 2004-05, it became 41.6 signifying a 7.8 percentage point improvement over a decade. By contrast, China’s poverty ratio was 28.4 in 2002 and 15.9 in 2005. So, poverty in China went down by 12.5 percentage point in just over three years!

Inequality
However, the picture on inequality is different. The Gini Index (a measure of inequality in distribution of income or consumption) was 32.5 in India in 1999-2000 while it was 44.7 in China in 2001. So, India has far lower income/consumption inequality than in China.

One area of major concern is that post-liberalisation, job creation which is a major mechanism of inclusion of more people in economic prosperity, has been slowing down. Employment growth fell sharply in the post-reform years, from 2.6 per cent per annum over 1983-1993 to 1.2 per cent over 1993-2000.

The fall in employment growth rate was specially concentrated in organised sectors (particularly in the public sector). This trend has been reversed to some extent as the latest available National Sample Survey (NSS) data show employment growth during the period 2000-05 was 2.7 per cent per annum. But, then again, the growth in jobs has been mostly concentrated (about 87 per cent) in the unorganised sector.

How about the trend of poverty reduction over time? Despite vigorous debates over the comparability of poverty ratio estimates over time, the broad consensus seems to be that the rate of decline in poverty in the post reform period (1994-2005) is not higher compared to the pre-reform period, despite a higher growth rate of GDP in the post-reform era.

Interestingly, however, a recent National Council of Applied Economic Research study using 2004-05 data for the BPL (Below Poverty Line) families find 30.3 per cent of urban ‘poor’ own a colour TVs, 24.9 per cent own a two-wheelers, 10.5 per cent a refrigerators and 55.6 per cent pressure cookers.  

Further, the study shows that around 60 per cent of all 400 million odd BPL population reside in a few relatively low-income states (used to be called BIMARU before some states were further subdivided into more states) like Bihar, Orissa, UP, MP, Rajasthan, Chhattisgarh and Jharkhand.

Such studies underline that poverty (and its manifestations in various forms) is much more concentrated in the rural areas of some specific states and regions within the states. At the same time, all the official ‘poor’ in India are not necessarily the destitutes that we usually associate with the term ‘poverty.’ There was no question of a ‘poor’ family owing a colour TV set or a refrigerator some 15 years back.

Overall, though the picture is still pretty bad (specially on malnutrition and child mortality), real poverty (in the sense of utter destitution) is now concentrated in a few pockets (like the remote tribal belts) where the benefits of growth and development have not yet percolated. Government’s limited resources should best be focused on the development of infrastructure and connectivity in a time-bound manner for such areas.
(The writer is a former professor of economics at IIM, Calcutta)