Topic Guide

Economic growth:
The Indian Government is too narrowly focused on GDP growth
Indias economy is growing at a rapid pace, and so too are its aspirations to become an influential global power. In the past few decades the economy has been growing impressively. Using Purchasing Power Parity (PPP) measures (an economic technique used when trying to determine the relative values of two currencies) Indias Gross Domestic Product (GDP) last year alone was $4.06 trillion, with a growth rate of 8.5%. Impressed by Indias rise, the Economist magazine speculated in 2010 that Indias growth rate 'could overtake Chinas by 2013, if not before'. But while many have rejoiced at Indias economic trajectory, others have suggested a one-sided concentration on growth rates has meant important determinants of human development and well-being are sidelined. Recently an intellectual disagreement between two of India's most noted economists on the relationship between economic growth and poverty became something of a cause clbre, prompting a degree of soul-searching in the public sphere. While few could fail to be impressed by Indias impressive rise, some have begun to ask whether the economic model currently being pursued is the right one. In particular there is a growing concern that Indias poor have been abandoned in the pursuit of economic global power status, and with them the more recently developed principles of social justice and human development, which aspire to go beyond income and assess peoples long-term well-being. Citing growing inequality, concerns about environmental degradation and a hollow consumerism, some even argue that a Western model of growth should be resisted, and an alternative developed. After two decades of reform and corresponding growth, Indians are thus questioning the agenda: is the governments focus on growth too narrow, ignoring what some consider to be the more important questions of social justice and equality? Or are economic growth and material progress themselves important ends, which will ultimately improve the lives of all Indians?

The Debate in Context:

What are the benefits of economic growth? Since the economic reforms of the 1990s, India has risen to become the tenth largest economy in the world. It is now an important destination of global business, per capita income has quadrupled since 1991, it has witnessed a consumer revolution of huge proportions, and a relative explosion in Foreign Direct Investment. Few would disagree however that India faces many challenges as far as growth is concerned; as of 2010, about 37% of the Indian population still lived below the poverty line. Novelist Pankaj Mishra has argued that 'the narrative of India as a vibrant democracy and booming economy suppresses more than it reveals'. In a climate of both optimism and concern, some commentators argue growth mania has gripped Indias political and financial elites to the detriment of the wider population, who see little of the benefits. But others warn against what they see as a pervasive ambivalence towards the gains of material progress. Indeed, writer and former businessman Gucharan Das say recommendations that India slows her growth are immoral. While the type of growth pursued matters, he explains, 'the truth is that growth in itself is virtuous, and we should celebrate that India is experiencing this miracle'. Are we looking in the wrong place? It is widely reported that there are two sides to Indias growth story: those who have benefited and those who havent. There is little dispute that the economic data shows the lives of hundreds of millions of Indias citizens have vastly improved. Nevertheless, there is also much to suggest the lives of many others have not. So, do growth figures hide more than they reveal? One of the problems, argue some, is that we are looking in the wrong places to assess the well-being of a country; in particular we are too focussed on Gross Domestic Product (GDP). Leading economist Amartya Sen argues the obsession with comparing Indias growth rates with China's is silly. An alternative focus, developed over the past twenty years, is the Human Development Index (HDI), a measurement that uses indicators such as life expectancy, child mortality and education in assessing what is described as human as opposed to merely economic development. Ranked 119 in the 2010 HDI, India is still struggling to deal with very basic problems like malnutrition, infant mortality, maternal

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mortality and the lack of universal primary education. China, meanwhile, has made enormous strides in all of these areas, scoring higher in all. Jean Dreze and Amartya Sen both argue that social progress in India has been slower and less broad based than in Bangladesh, despite a much faster rate of growth. It is against this backdrop that Sen worries, distorted perceptions of prosperity may prevent India from bringing social deprivations into political focus. Is it not time then for the growth discussion to take account of other social indicators, and to adapt economic and social policy in India accordingly? Economists such as Jagdish Bhagwati argue not. In his opinion the Human Development Index is nonsensical and reduces noncommensurate elements such as health and literacy to a single number - an example, he says, of bad science. We must remember, he argues, that when the reforms of the 1990s were first devised, growth was regarded as a radical and active strategy for pulling people out of poverty, never as a passive trickle-down strategy and less still one inspired by the idea of growth for its own sake; this, he argues, is still very much the case. What about inequality? Alongside tremendous growth rates, inequalities in India and indeed all of Asia, are reportedly rising fast. This has prompted some development experts to warn against viewing social impacts as the residual outcome of necessary market-led growth, requiring merely compensatory measures. According to such experts, strong social policies and protection must form part of a longer-term development strategy based on inclusive models of economic growth, rather than being treated as narrow and residual measures for those in greatest need. One social welfare scheme regularly cited as a shining example of such an approach is the National Rural Employment Guarantee Scheme (NREGS); Deccan Herald columnist and academic SL Rao argues that the rebalancing of growth with a push towards services for the poor must be a priority, and if lower growth figures are the result, we must accept them. But others argue that while such schemes work as an important component of a social safety net, they do not in themselves solve the problems faced by the poor. Programmes such as NREGS, the spread of education, and the availability of cheap healthcare are of course desirable, but they will not alleviate poverty until growth creates more jobs to absorb people into productive employment. India must now ask itself some difficult questions, says economist Alok Ray: if the conditions of growth are brought about by private sector initiatives, it is likely that India will see more Indian billionaires and greater inequality of income and wealth. But if, as a result of such initiatives, a much larger number of people are pulled above the poverty line, should we object? Another way? Debates around economic growth are being had the world over. Earlier in the year Chinas Prime Minister Wen Jiabao said China, must not any longer sacrifice the environment for the sake of rapid growth and reckless rollouts. In all corners of the world, activists, intellectuals and commentators have argued a new model of sustainable development is needed to address the environmental and social challenges the world faces. Looking at the legacy of Western models of growth and development, some suggest environmental degradation and growing social inequality are too high a price to pay for emerging economies. One such thinker, Chandran Nair, has called on Asian governments to adopt a new model - constrained capitalism. In his words, 'billions of Chinese and Indians may aspire to an American standard of living, but it will be a catastrophe if such aspirations are ever fulfilled'. Underlying his approach is the conviction that Western capitalism has failed to meet human needs. Noeleen Heyzer, head of the UNs economic and Social Commission for Asia and the Pacific, appears to agree with him, arguing Asian governments simply do not have the luxury of growing fast and cleaning up later'. But others argue it is critical to restate the benefits growth brings to society, at a time when there appears to be a growing pessimism around the gains that increased wealth can bring. It is worth remembering, says one Financial Times writer, 'that the human race is in riper health than it has ever been before'; we also live longer lives, are better educated, and work shorter hours. Some suggest the new models of development put forward by Nair and others are not just wrong, but dangerous; in demoting growth, they are effectively condemning the poor to penury. It is against this climate of growth scepticism that British economist Daniel Ben-Ami has argued that a stronger, more robust case needs to be made for growth as a precondition of the more general project of social progress and improvement. To realise human potential, says Ben-Ami, what we need is more growth, not less.

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Essential Reading
Growth in India the state of the trickle-down debate Priti Praitnik Poverty Matters Blog The Guardian 25 March 2011 http://www.guardian.co.uk/global-development/poverty-matters/2011/mar/25/indiachina-growth-economy-equality The elusive fruits of inclusive growth, The Economist, 13 May 2011 http://www.economist.com/node/16106603 Growth and Other Concerns Amartya Sen The Hindu 14 February 2011http://www.thehindu.com/opinion/oped/article1451973.ece?homepage=true I beg to differ, Prof Amartya Sen, Arvind Panagariya, The Economic Times, 23 February 2011 http://articles.economictimes.indiatimes.com/2011-02-23/news/28625838_1_economic-growth-poverty-indiachina In India, Doubts Gather Over Rising Giants Course Paul Beckett Wall Street Journal http://online.wsj.com/article/SB10001424052748703313304576131792120382006.html The Asian century calls for a rethink on growth Kevin Brown Financial Times 30 June 2011 http://www.ft.com/cms/s/2/34701e9e-847a-11df-9cbb-00144feabdc0.html#axzz1VCxNaIBY 20 years later, Indias Transformation Is Incomplete: World View Chanrahas Choudhury Bloomberg 26 July 2011 http://www.bloomberg.com/news/print/2011-07-26/20-years-later-india-s-transformation-is-incompleteworld-view.html 30 March 2011

For:
Arguments for constrained capitalism in Asia, Madeline Bunting The Guardian 21 April 2011 http://www.guardian.co.uk/global-development/poverty-matters/2011/apr/21/arguments-constrained-capitalismasia-chandran-nair Growth and Other Concerns, Amartya Sen, The Hindu, 14.2.2011 http://www.thehindu.com/opinion/oped/article1451973.ece?homepage=true In India, dynamism meets dysfunction Jim Yardley Live Mint 9 June 2011 http://www.livemint.com/2011/06/09213242/In-India-dynamism-meets-dysfu.html Bangladesh Shows the Way, Jean Dreze, 17 June 2004 http://www.hindu.com/2004/09/17/stories/2004091701431000.htm The myth of the new India Pankaj Mishra New York Times 6 July 2006 http://www.nytimes.com/2006/07/06/opinion/06mishra.html?adxnnl=1&adxnnlx=13135872519ReJXC15K/EyWhnryrBYYg&pagewanted=1 Whose game? Jeremy Seabrook Outlook Magazine 14 February 2011 http://www.outlookindia.com/article.aspx?270401 Creating wealth without justice K S Jacob The Hindu 27 April 2011 http://www.thehindu.com/opinion/lead/article411026.ece?homepage=true Shining & starving Praful Bidwai Frontline Magazine 13-26 August 2011 http://www.frontline.in/stories/20110826281703600.htm

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Against:
India a reform and growth have lifted all boats Jagdish Bhagwati Financial Times 30 November 2010 http://www.ft.com/cms/s/0/e9f0d3b8-fcba-11df-bfdd-00144feab49a.html Growth as a tool to alleviate poverty Alok Ray The Hindu Business Online 25 March 2011 http://www.thehindubusinessline.com/opinion/article1568255.ece?homepage=true It is immoral for us to slow growth Gucharan Das Blogspot 6 March 2011 http://gurcharandas.blogspot.com/2011/03/it-is-immoral-for-us-to-slow-growth.html Indias reform-led growth benefits the poor, Nabeel A. Mancheri, 27 May 2011 http://www.eastasiaforum.org/2011/05/27/india-s-reform-led-growth-benefits-the-poor/ Unacknowledged Facts Laurence Chandy and Geoffrey Gertz Outlook 7 July 2011 http://www.outlookindia.com/article.aspx?277570 The myth about the rich and the poor Amit Varma India Uncut 8 December 2004 http://indiauncut.blogspot.com/2004/12/myth-about-rich-and-poor.html Let It Grow, Let It Grow, Let It Grow Daniel Ben-Ami The American 3 March 2011 http://www.american.com/archive/2011/march/let-it-grow-let-it-grow-let-it-grow At last good news about poverty Gucharan Das Times of India 13 November 2009 http://blogs.timesofindia.indiatimes.com/men-and-ideas/entry/at-last-good-news-about

Further Reading:
Growth and Poverty: The Great Debate Pradeep S Mehta & Bipul Chatterjee (eds) Cuts International June 2011 http://cuts-international.org/pdf/Full_Version-Growth_and_Poverty-The_Great_Debate.pdf Does India compare poorly with China on peoples well being? Arvind Panagariya Economic Times 23 May 2011 http://articles.economictimes.indiatimes.com/2011-03-23/news/29178227_1_capita-income-worlddevelopment-indicators-mortality-rate Indian Reforms: Yesterday and Today Jagdish Bhagwati Speech delivered to the Indian Lok Sabha, December 2, 2010. http://www.columbia.edu/~jb38/papers/pdf/Lok-Sabha-speech-FINAL-EXPANDED-Deceber-14.pdf Is India's Economic Growth Leaving the Poor Behind?, Gaurav Datt and Martin Ravallion, The World Bank Development Research Group, Poverty Team, 2002 http://wwwwds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2002/07/16/000094946_02060404051087/Rendered/ PDF/multi0page.pdf Is India An Economic Superpower In the Making, Centre for Civil Society 7 March 2011 http://ccs.in/media/20110307_forbes.php

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The elections and after Deepak Lal Business Standard 26 May 2004 http://www.business-standard.com/india/news/deepak-lalelectionsafter/150942/ Strong growth yet to improve the lives of the poor James Lamont Financial Times 26 January 2011 http://www.ft.com/cms/s/0/415b0bd6-2827-11e0-8abc-00144feab49a.html Indias Fortune: The Prospects of a country on the rise Edward Luce Foreign Affairs Magazine http://www.foreignaffairs.com/articles/65161/edward-luce/indias-fortune?page=show GDP has critical limitations Lola Nayar Outlook Magazine 5 October 2009 http://www.outlookindia.com/article.aspx?262021 Growth thats even more exclusive Michael Walton The Financial Express, 24.7.2009 http://www.financialexpress.com/news/column-growth-thats-even-more-inclusive/493246/0 A Curzon Without an Empire Pankaj Mishra Outlook 31 January 2011 http://www.outlookindia.com/article.aspx?270145 Camerons Cuz Is More the Curzon Patrick French Outlook 14 February 2011 http://www.outlookindia.com/article.aspx?270323 Financial inclusion: A bridge that refuses to be built, Pallavi Nahata, INDIA Future of Change http://www.indiafutureofchange.com/featureEssay_D0086.htm Is Indias Economic Growth Socially Sustainable? Jean-Pierre Lehmann India Journal Wall Street Journal 15 April 2011 http://blogs.wsj.com/indiarealtime/2011/04/15/india-journal-is-indias-economic-growth-socially-sustainable/

Key Terms
Gross Domestic Product (GDP) http://www.businessdictionary.com/definition/gross-domestic-product-GDP.html Gross National Product (GNP) http://www.investorwords.com/2186/GNP.html GDP vs GNP http://www.diffen.com/difference/GDP_vs_GNP Mahatma Gandhi National Rural Employment Guarantee Act (NGREA) http://www.nrega.net/ International Human Development Indicators, UNDP http://hdr.undp.org/en/statistics/ Purchasing Power Parity http://economics.about.com/cs/money/a/purchasingpower.htm Social Justice http://www.cesj.org/thirdway/economicjustice-defined.htm Human Development Index http://hdr.undp.org/en/statistics/hdi/

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In the News:
India shunning big bang economic change risks Singh legacy Bloomberg Business week 1 August 2011 http://www.businessweek.com/news/2011-08-01/india-shunning-big-bang-economic-change-risks-singhlegacy.html Reforms failed to bridge urban-rural divide Times of India 29 July 2011 http://articles.timesofindia.indiatimes.com/2011-07-29/patna/29829091_1_economic-reforms-savings-rateprivate-sector India to match Chinas economic growth by 20, Oman Tribune, 18 July 2011 http://www.omantribune.com/index.php?page=news&id=96594&heading=Business Inequalities among states affect human development: Study, The Economic Times, 15 July 2011 http://articles.economictimes.indiatimes.com/2011-07-15/news/29777798_1_human-development-inequalityhdi India needs unique development model: Mukesh Ambani, The Hindu Business Line 10 July 2011 http://www.thehindubusinessline.com/industry-and-economy/article2216713.ece?homepage=true Growth momentum will continue: Pranab Msn News 7 July 2011 http://news.in.msn.com/business/article.aspx?cp-documentid=5268095 High growth not sustainable with high inflation: Chakrabarty, The Hindu Business Line 26 June 2011 http://www.thehindubusinessline.com/industry-and-economy/economy/article2137015.ece? homepage=true Winning the growth world cup Economist 15 April 2011 http://www.economist.com/blogs/freeexchange/2011/04/india_outpaces_china China lowers growth rate target in sustainability drive BBC News 27 February 2011 http://www.bbc.co.uk/news/world-asia-pacific-12589757 India ranks 119 on human development index Economic Times 5 November 2011-08-17 http://articles.economictimes.indiatimes.com/2010-11-05/news/28490370_1_capita-income-life-expectancyhuman-development-index