Balanced growth is essential for democracy

B Yerram Raju | Updated on January 31, 2020

Economic development is uneven across State lines and social classes. A consensual approach is needed to move India forward

The fabric of democracy depends on the social and economic consequences of any amendments to the law or Constitution. Recent agitations have seen the loss of many productive man-hours. Let’s not focus here on the the latest amendments to the Constitution — the annulment of Article 30 or the CAA — themselves, but rather on the political economy aspects of a democracy.

India has ethnic, cultural, linguistic and religious diversity. This diversity is both a strength and a weakness. States formed on a linguistic basis have uneven natural endowments, and there is also an imbalance in the dispensation of resources from the Central government.

Overall growth

Notwithstanding the average nominal growth of 8 per cent between 2007-12, human development indices rank India at 129. The 121-crore population (2011) is divided into 24.95 crore households, with the average habitat population per household being slightly less than five. Poverty levels have gone down in rural areas from 50 per cent in 1993-94 to 23 per cent in 2016-17, and in urban areas from approximately 32 per cent to around 13 per cent.

Rural roads constitute 70.2 per cent of the total length of roads across the country. Quite a few States have made cement-concrete roads instead of metal roads. As per the 71st round of the NSS, literacy levels went up significantly to 69.1 per cent by 2014.

Goldman Sachs estimated an average growth rate of 8 per cent per annum during 2016-20, notwithstanding the prevailing global turbulence. So did all the leading predictions from KPMG and McKinsey. Although the NDA government announced the goals of good governance and cooperative federalism, both are yet to take off.

Unless States are taken on board for the journey, prospects of sustained growth remain elusive. At the end of March 2018, 11 of the 29 States (and 7 Union Territories) showed consistently high growth during the 2014-18 period. If the nation is to attain the lofty goal of becoming a $5-trillion economy by 2024-25, the other States should also join the minimum 8 per cent growth level.

Bihar (14.50 per cent), Chattisgarh (11.2 per cent), Goa (14 per cent), Karnataka (12 per cent), Madhya Pradesh (around 18 per cent), Maharashtra (10.6 per cent), Tamil Nadu (12.3 per cent), Telangana (14.1 per cent), Uttarakhand (11.2 per cent), West Bengal (16.1 per cent) and North-Eastern States like Assam and Meghalaya lead the list.

The government would do well to lend all support to these leading States and push the others through sustainable interventions in infrastructure, communications, transport and tourism without allowing for a partisan approach. All global investment opportunities should have an equitable spread.

Economic inequality

The Vice-President in a recent address mentioned that 479 Parliamentarians are crorepatis. The State Legislatures also are crowded with such crorepatis.

The latest Oxfam report (January 20, 2020) says: “Economic inequality is out of control. In 2019, the world’s billionaires, only 2,153 people, had more wealth than 4.6 billion people.” The report attributes this to gender inequality and unpaid care-work at home by women. The richest 1 per cent have more than twice the wealth of the 6.9 billion people.

One suggestion for the Finance Minister: taxing half of the richer 1 per cent for the next 10 years would be equal to investment needed for 117 million jobs in education, health and elderly care. Good governance demands that these rich sections not receive subsidies of the order currently prevailing.

The availability of health services and supply of drinking water remains inadequate and costly. The availability of liquor, however, has enhanced, adding significantly to States’ revenues. This warrants concern for the future of a healthy democracy.

The World Bank projected that India, along with Brazil, China, Indonesia, South Korea, and Russia, will account for more than half of the global growth by 2025, with an average annual growth rate of 4.7 per cent between 2011 and 2025. This prediction is likely to change in the context of the slowdown, not just in India but in all major economies.

Addressing the resource constraints (water, energy, infrastructure) and investing more in human development (public health and education) is important to realise India’s growth potential. A consensual approach is the essence of a successful democracy. India cannot ignore it.

The writer is an economist and risk management specialist. Views are personal

Published on January 31, 2020

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