Contemporary India’s economic growth performance is remarkable. India is now the world’s fastest growing economy next only to China. The turnaround happened since about the late 1980s. India adopted a neo-liberal economic policy in 1991. The average growth rate over the reform years has been 6.5 per cent per annum. It even shot up to 9 per cent during 2002 to 2009. But has this spectacular growth benefitted the common man? The pathetic slip of India in the global hunger index from 55th rank in 2014 to 100th rank in 2017 at least is clear proof that the growth has bypassed India’s common man. The divide between the poor and the rich has widened.
From the low ‘Hindu’ rate of growth of 3.5 per cent that persisted during the period from the 1950s to the mid-80s, the Indian economy has come a long way to post almost double-digit growth. It’s GDP in recent years at $1.95 trillion has made India the world’s tenth richest country, has placed her in the ranks of ‘middle income’ countries. So many remarkable developments in Indian economy since reform have caught the notice of the world: GDP growth, export, balance of payment, significant accumulation of foreign exchange, IT revolution, stock market, telecommunications and banking reforms.
Despite these manifest accomplishments, India is the home to the largest number of poor on this planet. About 42 per cent of India’s 1.2 billion population lives under global poverty line of $1.25 per day. In many social indicators, some of India’s leading states are lagging behind Sub-Saharan African nations. The bulk of India’s growth is occurring through disproportionate rise in income of the rich. Household consumption survey does not capture the huge income of the neo-rich class in Indian society. But massive penury persists side by side with visible affluence in India’s expanding urban locations. One study in 1999-2000 revealed that the gap in per capita income between the 99th and 99.5th percentile was almost four times as large as the gap between the median person and the 95th percentile. Wealth inequalities have been widening in contemporary India. Wealth holdings of Indian billionaires are estimated to have gone up from 0.8 per cent of GDP in 1996 to 23 per cent of GDP in 2008.
India is witnessing widening inequalities between classes, among regions and between rural and urban areas within the same region. India’s society is historically hierarchical, embedded in the long past of social division on the basis of caste, class and gender, reinforced by ‘class divide’. So, the task for inclusive growth is far more challenging for India.
Poverty eradication programmes initiated after independence have focussed more on subsidies and ‘political sops’. Poor are led to depend on government dole. Politicians ensure solid ‘vote bank’. Economic empowerment of the masses has taken a back seat. Economic growth in the beginning of the planning era was expected to remove poverty through ‘trickle down mechanism’ but the fruits of growth have poured on the ‘possessed’ sidestepping ‘dispossessed’ Indians.
Persistence of mass poverty reinforced by widespread inequality poses a serious challenge for India. Inclusive growth strategy of any nation must focus on the understanding of causation of inequality. Inclusive growth can be achieved through providing opportunities for development of all citizens. India’s public expenditure on health, for example, is just 1.3 per cent of GDP as compared to Nepal’s 2.6 per cent as per a WHO report. India is spending 3.8 per cent of GDP on Education which is significantly lesser than countries like Brazil and South Africa. Economic growth in India coupled with increasing inequality despite some reduction of headcount poverty measured through per capita consumption is set to make this growth unsustainable.
The historically entrenched ‘caste divide’ in Indian society is now supplemented by a ‘linguistic divide’ and ‘digital divide’. Another type of divide in contemporary India is also an issue of concern and that is the ‘education divide’. This divide is created by the ‘dual-delivery system’ of education. Well-equipped institutions, mostly in private sector, are delivering some quality education. But overcrowded government-run institutions beset with deficient infrastructure are spurning unskilled and low-skilled learners. Modern-day jobs are eluding the latter.
India’s rising income inequality to a large extent is caused by the enormous difference in learning outcomes after completion of education. Enrolment and attendance in primary and secondary education has gone up significantly in recent years but those completing school are learning very little or even nothing at all. Evaluation study on learning outcome in primary education by a research group called Pratham reveals that a significant number of those completing primary school cannot read, write and do any arithmetic.
Through successive phases of education, they are not attaining skills needed for evolving job opportunities entailing specialised skills in agriculture, manufacturing and service sectors. Job opportunities in primary and manufacturing sectors have been shrinking in the wake of economic liberalisation. Service sector is growing over the years as manifest in the share of service sector in India’s GDP that stands at almost 59 per cent. But service sector employment is comparatively low at only 26 per cent.
One main reason of low employment participation is lack of needed skill in emerging areas of employment. NASSCOM recently reported that only 10 per cent of engineering graduates in IT education are employable in India’s flourishing IT sector which is a key driver of India’s service sector growth. India must try to achieve sustainable inclusive growth by incorporating four points in public policy: opportunity, capability, access and security.
Public investment on universal quality education and universal quality health care hold the key to inclusive growth in India. Most important of all is strengthening the public institutions that deliver health and education. The system of accountability, checks and balances in the delivery system, must be incorporated to pave the way for equal opportunities and shared prosperity for Indians irrespective of caste, class, gender and region.
The writer, a former Fulbright Visiting Professor, is Associate Professor at Ananda Chandra College, Jalpaiguri.