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Economic Growth For Whom

According to the Economic Survey 2004-2005, the Indian economy grew at 8.5 per cent in 2003-04 and this year it is certain to register a growth rate of 6.9 per cent. It is being loudly claimed that, in the decades to come, India is sure to emerge as a big economic power. Some say, as a super power, if it continues to pursue the path of economic reforms, underlined by the Washington Consensus. Plainly speaking, India must pursue the goals of liberalisation, privatisation and globalisation, irrespective of all the political ups and downs. Ever since the 1990s, these goals have been pursued in spite of the changing ideological complexions of the different combinations of political parties in power.

Even though it is pleasing to hear that this ancient land of ours is going to be counted among the world economic powers, there is one troubling question to which no convincing answer is coming from any quarters. The question is: economic growth for whom?

Despite all the demagogy, economic inequalities and regional disparities have sharply increased ever since the beginning of economic reforms. The claim that reforms alone have led to a decline in the incidence of poverty owing to economic reforms is not wholly true. In fact, the process of reduction in poverty began, much before economic reforms were initiated by the Narasimha Rao—Manmohan Singh dispensation, as a result of Green Revolution and the measures initiated under the Indira Gandhi regime in pursuance of her promise to remove poverty. The rate of poverty reduction, in fact, has declined since 1990s. During 1973—1990, the incidence of poverty went down at a greater pace in both rural and urban areas. In the rural areas the proportion of population below poverty line went down from 56 per cent to 34 per cent and in the urban areas, it declined from 48 per cent to 33 per cent. It is a fact that the declining trend has continued albeit at a slower pace. At the turn of the third millennium, 26.03 crore people were below poverty line. In 1977-78, 32.89 crore were below poverty line. Even though in percentage terms it came down from 51.3% to 26.1%, in absolute terms the decline is not that impressive because of our increased population.

A recent report by the Mumbai-based Indira Gandhi Institute of Development Research (IGID), entitled India Development Report 2004-5, has highlighted the fact that ever since the beginning of economic reforms the extent of inequalities has been increasing in an unprecedented manner. According to the data presented by it, the per capita monthly expenditure increased from Rs 158 in 1970-71 to Rs 213 in 1989-90. During the 1990s it ranged only between Rs 202 and Rs 214. The annual trend growth rate was 1.54 per cent during the pre-reform, which fell down to 1.17 per cent during the reform period of the 1990s. During the same period the annual rate of growth in per capita monthly expenditure in the urban areas increased from 1.45 per cent to 2.77 per cent. Thus the urban-rural gulf widened substantially. It needs to be remembered that during the pre-reform period, there was no significant alteration in the urban-rural disparity. It needs to be remembered that in the 1970-89 period there was no long-term increase in the urban per capita expenditure but during the 1990s, the trend rate of growth in per capita expenditure came to 1.4 per cent per annum.

Another thing to note is that, in urban areas economic inequalities widened. During 1970-89, the per capita expenditures of the bottom 30 per cent increased by 1.44 per cent, of the middle 40 per cent by 1.5 per cent and of the top 30 per cent by 1.4 per cent. During the 1989-2000 period these rates came to 1.49 per cent, 2.11 per cent and 2.55 per cent respectively. Obviously, the fruits of economic growth not only went largely to urban areas but mostly to middle and upper layers.

Another interesting fact underlined by India Development Report is that, relatively speaking, the middle and upper layers of the rural population were not able to improve their economic position. An important factor in this has been worsening terms of trade for agricultural produce. The incidence of suicides by farmers was one of the manifestations of this phenomenon. Notwithstanding the experiences of Western countries that when there was a large scale exodus of the rural poor to urban areas in the initial decades of Industrial Revolution, those who were left behind could better their lot because the demand-supply equation of labour became favourable to them, in India the per annum growth rate of per capita expenditure of the bottom 30 per cent of the rural population went down from 1.71 per cent in 1970-89 to 1.49 per cent in 1990-2000. During the 1990s and the two initial years of the present decade the poor performance of agriculture failed to create adequate employment opportunities.

An important fact to be borne in mind is that most of the poor people are also socially oppressed for ages. Thus they suffer from double injustice.

While, on the one hand, the number of people below poverty line continues to be alarmingly very high, on the other hand, they have come to be concentrated in the states like Bihar, Orissa, Uttar Pradesh and Madhya Pradesh. The proportion of the rural poor in them increased from 53 per cent in 1993-94 to 81 per cent in 1999-2000. In the same period the proportion of the rural poor in Punjab, Haryana and Himachal Pradesh declined from 3 per cent to 1 per cent. Obviously, reform period witnessed increasing regional disparity.

Some states and areas have benefited from reforms while others have been bypassed and their plight has worsened. To give an example, the annual growth rate of per capita gross state domestic product (GSDP) in Punjab increased from 3.05 per cent during the pre-reform period to 3.18 per cent during the post reform period. In Haryana it went up from 3.57 per cent to 3.83 per cent and in Himachal Pradesh from 2.88 per cent to 4.93 per cent. In Bihar and Uttar Pradesh the growth rate declined. In Bihar it went down from 1.80 per cent to 1.77 per cent and in Uttar Pradesh from 2.38 per cent to 2.04 per cent. Orissa and Madhya Pradesh had marginal improvement in the growth rate.

Commenting on the Report, Asia Times Online, in its dispatch (March 4), says: “The increase in inter-state disparity is also reflected in the wider dispersion of the per capita GSDP in the 16 states as compared with the pre-reforms period. While the standard deviation of the per capita GSDP in 182-83 was around 570 rupees only, it increased substantially to 4,078 rupees by 2000-01. While the per capita GSDP increased by another 3 times in Bihar in two decades , in case of Punjab, the increase has been more than 5 times.”

During the reform period, while the growth rates of agriculture and manufacturing remained lower than what they were during the pre-reform period, the contribution of the service sector to GDP increased by 10 per cent. The average annual growth rate of agriculture declined from 3.43 per cent in the 1980s to 2.7 per cent in the 1990s. Since almost 70 per cent of the population depends on agriculture, its position worsened as compared to those engaged in service sector. A peculiar phenomenon is being witnessed in India as a result of globalisation. The transition of the country from an agrarian economy to an economy dominated by services, bypassing the stage of a developed industrial economy, is aggravating economic inequalities.

The Report has very pertinently remarked: “Economic growth is, after all, for the people. If the people are poor, if they remain unemployed, or their livelihoods are threatened, if they don’t have access to clean water and clean fuel, if they do not have adequate health services, and if rural and urban development remains unsatisfactory, the growth loses its lustre.”