An uncertain glory

There is a surreal aspect to the high growth story. The International Monetary Fund expects India to be the fastest-growing economy in 2015 and 2016, galloping at 7.5 per cent in both years and outpacing China, which is expected to grow at 6.8 per cent and 6.3 per cent respectively. The finance ministry is still more optimistic, projecting a growth rate of 8-8.5 per cent for 2015-16, against the Reserve Bank of India’s 7.6 per cent. But a host of other indices tell a different story. The factory output index numbers in recent months, where sub-5 per cent growth has been the norm, are yet to inspire confidence. The IIP growth for April-May 2015-16 (3 per cent) is worse than the corresponding figure for last year (4.6 per cent). While the IIP is not a reliable indicator, the overall trend it projects cannot be dismissed altogether. It is a moot point whether negative growth in the wholesale price index should be viewed as an achievement or a pointer to a demand slack. The Centre has said that the deceleration in growth of rural wages has stemmed inflation; but this may be impacting rural demand as well — a prospect about which industry observers have expressed concern. The recent hike in wages for the rural jobs scheme seems to reflect this realisation. Therefore, the key to meeting ambitious growth targets is to clean up bank balance-sheets on the supply side and prop up the economy through asset creation on the demand side. Public sector banks seem to be proceeding against big ticket defaulters, thereby improving credit growth prospects. Early trends in kharif sowing are encouraging. Things are looking up, but the optimism in certain quarters seems unrealistic.

The chest-thumping over India’s growth rates overtaking China’s is misplaced in view of our poor human development indicators. Our performance compares poorly not just with China but also with our South Asian neighbours that are way down the growth ladder, raising questions about the quality of our growth. The Socio-Economic and Caste Census points to an illiteracy level of 36 per cent in rural India. A per capita monthly income of ₹7,400, with only 8 per cent of the rural population earning more than ₹10,000, underscores the serious rural-urban disparity, with implications for the even spread of markets.

India’s progress in the reduction of infant and maternal mortality since 1990 has been tardy. While Sri Lanka’s health and education indices are on a par with China or better, it is remarkable that even Nepal, Bhutan and Bangladesh have achieved steeper reductions than India since 1990 in their infant mortality and maternal mortality rates, and can boast of better numbers on these counts today. Female literacy is total in China and Sri Lanka as against less than 75 per cent in India. A country with such indices will find it hard to move up the productivity ladder. Growth numbers are important but we also need to take a more holistic view of development.

COMMENT NOW