GRSV Blog no. 11
V. Ramanatha Rao
Release date: 26-07-2022
Economic growth/development means different things to different people. Among the numerous definitions, one that most appeals to me most considers economic growth as “an increase in the amount of goods and services produced per head of the population over a period of time.” The critical point here is that economic growth should increase people’s real income (i.e., people can buy goods and services at affordable cost and thus become less poor). However, economists usually measure economic growth in terms of gross domestic product (GDP) or related indicators, such as gross national product (GNP) or gross national income (GNI), or at best GDP per capita, as derived from the GDP calculation.
For some time now, we have been reading and hearing in the news that India is the fastest growing economy in the world (there are estimates that its GDP will grow at the rate of 8.2% in 2023, which is the highest that any country may achieve), translating into a 5 trillion dollar economy in the next few years, and a 10 trillion dollar economy thereafter. That is indeed good news, but it ignores the question of what that means to most citizens, who cannot even grasp the complexity of those numbers.
Let us consider what a 5- or 10-trillion-dollar economy means to the Indian citizens at large. For example, the urban poor-–the ones who live in shanty towns in our urban jungles and numbering around 13.8 million households (about sixty-four million people). What do the people labouring for less than the minimum wage (whose number is estimated at 230 million) understand by it? Will it help them to earn enough to improve their current standard of living or help in getting a regular job?
Does a smallholder or landless farmer in an Indian village (who represents around 100-150 million, or 82% of all Indian farmers) realize its impact on him or her? Will he/she be able to afford the inputs needed for planting in the next season without going to a local money lender or aspiring for government dole-outs? How about a factory worker (numbering above 5O million)—does he/she understand what it means? Would the women labouring in textile/garment factories (there are about forty-five million of them) understand what it means?
How about the poor people, whose number is just an estimate, as India has not counted its poor since 2011. The United Nations estimated that there were about 364 million such people in 2019 (28% of the population), while the Niti Aayog puts the estimate at 25% (for those living, or more aptly surviving, on less than US$ 2.0 per day). Can the poor hope that, in a 5- or 10-trillion dollar economy, they may live in slightly less hardship and a bit more comfort, say living on US$ 3 per day, instead of US$ 2, assuming prices are stable at the current levels?
No one in positions of authority seems to have a clear answer to those questions. While there is a clamour for economic growth, as reflected through GDP or GNP, many countries are losing sight of Sustainable Development Goals (SDGs), even if everyone makes appropriate noises about being ‘sustainable,’ a word that appears frequently in speeches and official proposals, which is repeated in reports numerous times. Recently, a major UN report warned that the way we understand economic growth and a global economy that is focused on short-term profit is wrecking the planet and has called for a drastically different approach as to how we value nature (see https://news.un.org/en/story/2022/07/1122322). One can, therefore, fervently hope that attempts to achieve higher levels of the economy will also integrate the efforts to improve equality, equity, and social justice among its priorities and specific goals. Within our society, a greater number of people appear to have realized the need to distance themselves from parochial issues, and to develop an inclusive path towards economic growth that includes sustainable development. Spreading such realization widely, and transforming it into action on the ground, is the next immediate step toward turning pious or noble aspirations into attainable goals.
Presently the most important need is for the development of the human element. Human capital can only improve through improved health and education. Without that, there will be little progress on the ground. Furthering social justice and a drastic reduction in inequality among us are essential to energize people so that they can truly participate in development efforts. As per the ‘World Inequality Report 2022’, India is among the most unequal countries in the world, with rising poverty and an ‘affluent elite.’ (see https://economictimes.indiatimes.com/news/economy/indicators/india-amongst-the-most-unequal-countries-in-the-world-report/articleshow/88141807.cms?from=mdr). The average annual national income of the Indian adult population is Rs 2,04,200; the bottom 50% of earns Rs 53,610 while the top 10% earns Rs 11,66,520, over twenty times more. Unless this gap is narrowed drastically, the economic progress in India will be skewed towards the privileged few.
As noted by Nilanjal Ghosh of Director, Observer Research Foundation (ORF), India, the US$ 10-trillion India, therefore, should present itself as a more equitable green economy, based on the SDG agenda and reconciling the irreconcilable trinity of equity, efficiency, and sustainability. No matter how fast India’s economy grows, poverty remains the biggest challenge. It is often difficult to pinpoint the number of people who live in poverty in India because many of them live in remote areas, and not all of them are counted as part of the national census. (see https://www.orfonline.org/expert-speak/towards-a-10-trillion-dollar-indian-economy-based-on-the-sdg-agenda/)
Finally, to solve the problems we face, it is not enough to increase overall production in the economy. We also need to make the right decisions about which goods and services we want to produce more, and which goods and services are of less importance. Indian sages from the Vedic times have emphasized the need for equity, equality, and ethics in all our actions, and for the need to curb our desires and wants (see Sharma, N. 2015. Veda-Vidyā. 26:221-224). Thus, in achieving desirable economic growth (as defined earlier), not only speed but also the direction of growth we choose are important, along with the means, so that we may achieve a sustainable future, which promotes the well-being of all (Max Roser, 2021; see https://ourworldindata.org/what-is-economic-growth?ref=refind)
There are several reports that COVID-19 not only exacerbated income inequality but also pushed many people into extreme poverty in many countries. It also resulted took a toll on health and education sectors and lead to increased hunger in many regions of the world, setting back economies, especially middle and lower-income countries at least by a decade. Recently, Cindy Holleman, senior economist at, Food and Agriculture Organization, observed: “It is quite shocking. The projections are that by 2030, we are going to be at the same level where we were in 2015 when we first adopted these new Sustainable Development Goals.” Let us turn the tide. Benefits of any economic development must result in and should be measured by improvements in the quality of life, attained through ethical means that include considerations of equality and equity. For most citizens, that improvement has to do with good health and nutrition, a roof over the head, access to education, participation in socio-cultural activities of one’s choice, happiness, respect, and a peaceful and healthy environment, which results in a world that our children can be proud of. Let us work toward it.