The Hindu Business Line : Making the growth model more equitable

If we abandon the existing model and start an endless debate on a new model of more equitable growth, we may lose even whatever momentum we have achieved.

— V. Ganesan

Bridge the wedge.

P. K. Doraiswamy

Economists and social activists have highlighted the existence in India of a ‘wasteland’ side by side high growth. By ‘wasteland’, they mean sections of the population insignificantly benefited by, excluded from or marginalised by growth.

The growth process not merely produces these inequalities but is dependent on them to sustain itself.

Something, therefore, is seriously wrong with the way our development process works. The usual response is to call for an alternative, more inclusive and participative model of development. No one has spelt this out comprehensively or in detail except proposing piecemeal solutions to tide over specific crises. Let us consider some aspects of this quest for an alternative model.

Search for alternative

Has there ever been any successful model of growth in any country that has not produced inequality at least in the short run or produced nearly equal benefits to all sections of people? Perhaps, not even in the Communist countries. Economists may even argue that if the GNP were perfectly equally distributed, assuming this is possible at all, there would be no further growth as all savings and investment would cease and we would have merely distributed poverty equally

Inequality is bad if it is the result of deliberate human exploitation, neglect, inefficiency or the result of an existing unjust socio-economic structure. But as long as growth is a ‘rising tide which raises all boats’, the lot of those at the bottom keeps improving quickly enough (though slower than that of those at the top) and they have reasonable opportunities to rise to the top, inequality per se at any given point of time need not amount to a condemnation of the development process itself.

Unless there are some fast-growing, profitable sectors, even if these benefit the rich or the corporates disproportionately, the Government cannot gather any tax revenues to finance administration or development. If our new equitable growth model primarily benefits poor people in a decentralised way but produces negligible growth, where would Government revenues come from?

Tech takes over

No doubt the imperatives of technology, profitability and global competitiveness have compelled production to be concentrated in big factories using capital-intensive and labour-minimising techniques. But this need not result in employment stagnation if, as a result, the product is produced at the lowest cost, becomes affordable for more people and downstream employment is created in marketing, distribution, transport, storage and domestic consumption.

Foreign competition

The World Trade Organisation (WTO) and globalisation are irreversible realities. Can we afford, therefore, to ignore global competitiveness and become inward-oriented and switch over from centralised factory mass production to decentralised employment intensive production by the masses? In any case, under the WTO regime, we cannot prevent cheap foreign goods from competing with our locally produced ones.

We must have growth first before its benefits can be shared. The present model, with all its deficiencies, has succeeded in producing sustained, significant growth. We have no ready, proven successful model of significant growth that produces growth and equitable distribution of its benefits simultaneously.

If we abandon the existing model and start an endless debate on a new model of more equitable growth, we may lose even whatever momentum we have already achieved. What should bother us is not just the prevailing gross inequality, squalor and abject poverty but the appalling fact that these are getting accentuated and not reduced as growth takes place.

Tackle inequities

Factors like the neglect of agriculture and related activities, non-improvement of the rural infrastructure, the callous treatment of project displacees, exploitation of labour and lack of access of the poor to even basic amenities and services are all remediable given the necessary political will within the existing development strategy.

Let us assume that these inequities contribute to the present high rate of growth of 8-9 per cent of which only 1 per cent benefits the poorest. Suppose by rectifying these inequities and making the existing growth model more equitable, we achieve a growth rate of only 6 per cent of which 3 per cent benefits the poorest. The latter would still be a more preferable model and a quicker and more practical solution than searching for a new model.

Empowerment not sops

According to Prof Amartya Sen, the way to empower the poor is to build in them intellectual, social and economic capabilities. This would equip them with marketable skill, awareness to recognise and take advantage of opportunities and conscientised assertiveness to demand them if they are denied.

Instead of waiting for the growth to trickle down to the poor or searching for an ideal growth model, the poor should be enabled to break into the existing growth process.

(The author is a former IAS officer. blfeedback@thehindu.co.in)