Prime Minister Narendra Modi came riding high on a wave of discontent as well as aspirations of a young India. Modi became synonymous with his catchy slogan ‘Sabka Saath Sabka Vikas’ . This was a promise of high growth which is inclusive in nature. Manmohan Singh also made a similar promise of ‘inclusive growth’ but failed to deliver. The GDP, whether the old or the new series, has to be seen in this context.

There has been a change under Modi on how the GDP is measured and, hence, comparisons with his predecessors are fraught with problems since they amount to comparing chalk and cheese. For the record, the average growth rate of the Modi government under the new GDP series was recorded at 7.4 per cent as compared to 8.4 per cent under the old series during UPA-I.

The jury is still out on the new methodology. While the Central Statistical Organisation (CSO) has recently released data going back to 2004-05 using the new methodology, it has come with its own share of controversy.

To put it simply, the controversy arose because the new GDP trends did not match other economic parameters, such as growth in bank credit, investment, tax collections which normally move in tandem with the GDP.

 

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To make matters worse, there were two contradictory figures calculated by bodies under this government, the first, ‘unofficial’ estimates (new estimates 1 in the chart) put out by a panel set up by the National Statistical Commission and the second (new estimates 2) officially released by the CSO.

The ‘unofficial’ one shows the UPA governments in an even better light compared to the Modi government and the ‘official’ one downgrades them! No wonder it kicked up a political storm. This divergence itself makes both estimates suspect, and neither should be taken at its face value.

Growth vs development

But why obsess with the GDP? It seems as if the discourse based on development as opposed to mere growth, initiated by economists such as Amartya Sen, among others, never took place. An obvious question to ask is even if the growth rates are high, does that necessarily mean the cake is distributed among the people evenly?

If it’s not, then despite high growth, a section of the population is left untouched by it. Even as there is no reliable data on income inequality in India, the extent of wealth inequality can put things in proper perspective. While the Indian economy has been growing at a breakneck speed since the 2000s, Credit Suisse reported that the wealthiest 1 per cent increased their share in total wealth from 40 per cent to more than half between 2010 and 2016 i.e. within just six years! The richest 10 per cent today own four times what the rest 90 per cent own as a whole.

It’s not very difficult to find why the distribution of the cake, whether bigger or smaller in size, has been adverse during this entire period. An employment report prepared by the Centre for Sustainable Development at Azim Premji University has discovered that while the economy was growing at an average 7 per cent, job growth was less than 1 per cent. And those getting formal employment were receiving an ever-decreasing share of the total output.

So, a low-employment-low-wage-share kind of a growth path by its very nature cannot be inclusive. But even income inequality, according to Sen, does not fully capture the broad spectrum of development. After all what good would come out of rising income of a poor Dalit woman if there are no schools, hospitals, water, sanitation and other basic facilities over and above what she suffers at the bottom of the caste and patriarchal hierarchy? The process of economic development instead has to do with, in Marx’s words, “replacing the domination of circumstances and chance over individuals by the domination of individuals over chance and circumstances”.

Positive freedom

From here, Sen develops the idea of ‘positive freedom’, which constitutes, enhancing the ‘capabilities’ of human beings through access to quality health, education, and jobs which provide them with ‘entitlements’ in terms of alternative commodity bundles, to the ones they currently have.

But mere availability of such bundles is not enough, for what happens often during famines is not the lack of physical production of food but its lack of access to the poorer sections. Growing farmer suicides even in wealthy States such as Maharashtra is a sad reminder of the larger point that Sen is making.

To capture these capabilities, Sen, along with other economists, came up with the Human Development Index (HDI), which is a comprehensive statistic capturing life expectancy, level of education along with other per capita indicators. To give an example of the difference between growth and development, Sri Lanka and Kerala show up quite high in the HDI even with modest per capita income. Sen estimates that if Sri Lanka had focused exclusively on growth instead of direct public intervention using a multi-indicator approach, it would have taken anywhere between 58 and 152 years to reach its high quality of life! Take for example India, which is globally ranked first in growth rate among the large economies and sixth in GDP, is ranked 130th in the HDI! While this debate between growth and development is an old one, it needs to be reiterated, especially if issues such as freedom of opportunities and quality of life have taken a back seat in this obsession with growth.

In today’s world, the frontier on development itself has moved with ecological sustainability of high growth threatening the feasibility of such a path. If we want to measure development in the sense of genuine freedom of human beings, then that set should include future generations too.

The need is to develop concepts which measure an economy’s sustainability index; this would add another layer to the development discourse.

The writer is Assistant Professor of Economics at JNU

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Published on December 18, 2018