The Hindu Business Line : Inclusiveness and inequality

Growth is bound to be imperfectly distributed in an economy like India's even if development policy is made as inclusive as possible. Using this yardstick, one would perhaps not be far off the mark in suggesting that the UPA regime has done well till now under the leadership of its economist Prime Minister.

The United Progressive Alliance Government has completed three years of its term and this is the time once more to put its performance under the scanner. Not surprisingly, the views are as numerous as are the commentators. To this writer, however, there are two broad aspects which have received most of the attention, namely, the `inclusivity' of the growth programmes drawn up and implemented by the Government and whether, and to what extent, `inequality' has been fuelled by the pursuit of such programmes.

In fact, in recent days, the common refrain has been that the UPA's growth programme has increased the content of inequality in Indian society, specifically, that the fruits of growth have till now bypassed aam aadmi and to that extent gone against the tenets of the Common Minimum Programme, which is the bedrock of the governance programme of the Manmohan Singh Government. As evidence for this drift away from the CMP, this school of thought has pointed to the election results in States such as Punjab and Uttar Pradesh, the gist of its argument being that the aam aadmi has shied away from the UPA parties because of their failure satisfactorily to attend to his requirements. Furthermore, these parties, especially the Congress, have fared poorly because of the creeping cancer of economic inequality promoted either deliberately or otherwise by the pursuit of the Government's economic policies.

The Tussle

This may or may not be true, but the very basic issue — at least to this writer — is whether one should see the Indian growth experience as a tussle between inclusivity and growing economic inequality or whether one should view the entire exercise as one of registering growth based principally on the principle of inclusivity but which will also exhibit the traits of growing inequality stemming from the link between high-performance and high material recompense.

In other words, it would appear that there is no fundamental conflict between `inclusiveness' of growth policies and the phenomenon of `rowing inequality' because the two relate broadly to two different sectors of the economy. While the inclusivity of public development programmes is the foremost characteristic (hallmark) of such programmes — meaning that the policies are directed towards the economic betterment of the vast majority of the population — the inequality aspect refers essentially to the non-public sphere of the economy — that is, to employment in the private sector, to the rewards distributed by private sector employers to employees deemed to be specially endowed with talent.

Have the UPA's policies during the first three years of its term been directed to improving the quality of life of the average citizen of the republic? If one has recourse to the foreword by the Prime Minister to the alliance's latest `Report to the People', one cannot but be impressed by what he has to say on the subject. At a very macro level, he says: "The main objective of our Government in the past three years has been to ensure that, while sustaining higher rates of economic growth, the improved performance of the economy contributes to employment generation, poverty reduction and human development. In this 60th year of our Independence, the country should have the satisfaction of recording for the fifth year in succession a rate of economic growth of over 8.5 per cent. The recent acceleration of growth to 9 per cent has been made possible by an unprecedented increase in the rate of investment which is at an all-time high of around 35 per cent of national income."

People's Condition

But growth in figures does not automatically imply that the condition of the people at large has improved, as Dr Manmohan Singh himself says in the document. To quote him: "However, our Government recognises that high national income growth alone does not address the challenge of employment promotion, poverty reduction and balanced regional development. Nor does growth in itself improve human development. The National Common Minimum Programme is based on the recognition that economic growth must be socially inclusive and regionally balanced. This has been the guiding principle of our Government's policies in the past three years."

In terms of sectoral attainments, he says that the UPA regime "has ensured a massive increase in public investment in the past three years, without reneging on our commitment to fiscal discipline." Thus, Rs 1,74,000 crore has been invested through Bharat Nirman in rural roads, rural housing, rural drinking water supply, rural electrification and rural telecommunications. The budgetary allocation for education has been increased from Rs 12,000 crore in 2003-04 to more than Rs 32,000 crore in 2007-08 (which Dr Singh describes as `unprecedented'). The allocation for health and family welfare has been more than doubled, from Rs 7,620 crore to Rs 17,560 crore. Investment in agriculture and rural development has risen from around Rs 20,000 crore to more than Rs 60,000 crore over the three-year period.

These are impressive increases, and in terms of policy-priorities the UPA cannot be faulted for such action. Of course, it is another thing altogether whether the `delivery system' has been good enough to translate the promise of such investments into comparable tangible benefits for the beneficiaries concerned. Going by past experience, there is bound to be some leakage, but having said this one must admit that, as far as the evidence on paper is concerned, the Manmohan Singh Government has been quite `inclusive' in the framing and implementation of its development programmes since 2003-04.

Growing inequality

Of interest is the fact that, at the same time, there has been growing inequality as well if the increase in the general level of salaries is any indication, particularly in some of the so-called sunrise sectors at this point of time. Profits too have soared which, if nothing else, is a direct function of growth in the services, industrial and agro-based sectors. Indeed, it can even be said that the gap between the rich and the poor has increased. This would have been unacceptable if the poor had remained where they were at the beginning of the growth exercise. But then - and this is the crux of the issue — this is not the case.

True, agriculture has lagged behind but, as recent NSSO statistics indicate, demand in the rural areas has increased, which would not have been possible if there was no increase in the wherewithal with which to satisfy rising human aspirations for material well-being.

The point, in short, is that growth is bound to be imperfectly distributed in an economy like India's even if development policy is made as inclusive as possible.

Using this yardstick, one would perhaps not be far off the mark in suggesting that the UPA regime has done well till now under the leadership of its economist Prime Minister.