GDP

GDP GROWTH AND TRICKLE DOWN EFFECT


To businessmen, some of the economists, pundits in fourth estate and some of the Ministers and babus in Government, high GDP growth is the ‘be all and end all’ in economic development. All of them are pinning for +9% growth, if not this year, at least from next year onwards. And then they say with euphoria unmatched in respect of any other subject that such a development would take India to be the third country after USA and China with highest GDP level in 2020 or 2030.

To the awkward question as to what extent such continuous high growth in GDP would improve the living conditions of the poor, they all quote the ‘ trickle down ‘ theory.

But there is the uncomfortable fact that even after 60 years of planned economy, this country still have millions of people who are living in absolute misery, i.e., the GDP growth has bypassed them. They have not enough to eat for mere sustenance. They have no drinking water or medical facilities or a roof over their head or school facilities or assured work throughout the year. Then what is the guarantee that further growth would also not overlook them.

Out of the last twelve years, on an average there have been 10,000 suicides per year of farmers in this country in the first ten years, with last two years the figure going up to 13,000 and 15,000 respectively.

Simply put, developments plans of the past had virtually skipped a large mass of people in the rural areas. And hence migration of rural unemployed in large numbers to cities and also to other States.

‘ GDP yardstick is badly flawed as a guide to a nation’s economic well being. A nation’s well being depends on many factors ignored by GDP, such as leisure time, income inequality and the quality of the environment.’ - Economist, London

‘The way GDP is measured yields at best a very gross estimate of productive activity in the country. In spite of everyone knowing this, the slightest fluctuation in the estimated GDP becomes the basis for elaborate theses – for gloom or elation. The imperfections of measurement apart, what has grown in the reference period is almost never the object of scrutiny.’- Arun Shourie:


Aware of the limitations of GDP as a yardstick of growth, economists are often circumspect on the subject. World over, increasingly more and more ‘wise-men’ have started making contrary noise on high GDP growth, with its ill effects on ecology, fast depletion of natural resources, wastages, etc., They also point out that quite often the benefits of high GDP growth do not percolate to low income people, whereas the negative factors of such high growth will have to be borne by all people and possibly more by poor people.

( The large number of cases before the various courts in India would indicate that we are a litigant prone people. Related to the subject under discussion, processing such a large number of cases by courts, does add to the level of GDP growth, because income accrued by service rendered is included in GDP. Alcohol and cigarette consumption goes up. The same improves the level of GDP. More gossip magazines come into the market. That also adds to GDP ).

Developmental economists, foremost among them being Prof. Amartya Sen, has been emphasizing this aspect in their writings. It is in this context that the importance of various schemes announced by the Government to tackle the above mentioned problems have to be seen, though, sadly, except for lip sympathy, businessmen, educated and high salaried Indians, fourth estate, government babus have not evinced any interest in these schemes. But politicians have, primarily in their own interest ( poor people look at them for an assisting hand and also for claiming votes ). Suicide of a boy for failing in an exam. is repeatedly telecast in TV channels with lot of commentaries, whereas suicides of over thousand farmers get a few minutes of lip sympathy in both print and visual media. Hardly any of the papers / TV channels have done in depth stories on farmer suicides or come up with suggestions on how to arrest the repetition of such horrifying catastrophe. For both print and visual media, India by far means the megalopolis.

Only 2% o Indian population are involved in stock market one way or another. Yet as it is about real money, it occupies a lot of space in Indian politics and economics. GDP growth in India, particularly that area related to high tech and business growth touch 10% to 20% of the population. For another 50% or 60% of the population it is business as usual. Then there is the bottom of the pyramid consisting of the poor. 50 years of planned development had hardly touched them in the sense their lot has been as it was fifty years back. It is clear that ‘trickling down’ theory had not worked for them. If that be so, then the big ticket reforms proposed also would not touch them. So after a decade India may be counted in the big league in the comity of nations in GDP, but 10 to 20 crores of people in India would continue to live in miserable conditions.

It is in the above context one has to view the mega projects for improving the lot of those who are in the lower rung of pyramid now being undertaken by Government. There would be any number of economic arguments against the schemes. Be that it may. Such schemes are necessary to give succor to the poor.

What the Government should do is to enlist the support of all parties, State Governments and Civil Society in effectively implementing the following developmental projects announced by Government, primarily directed towards improving the lot of the poor in villages.

Agenda for/of the new Government:

A modern nation is defined by four non negotiable rights: equality of citizenship across origin and gender; secularism; liberty of speech; and economic equity ( M.J. Akbar, veteran journalist ). While in respect of the first three rights, there has been considerable advancement in the past, for a large number of people the last right has remained elusive. The projects mentioned below have to be considered in that background.

In other words, while the Governments ( including the period when BJP was in power ) in the past have been striving to achieve all the postulates on the count of economic inequity, we have yet to go far.




1. Bharat Nirman Project ( Rs. 1.74 lakh crore project )

Every village in India with over 1000 population to have an all-weather road, every habitation to have water supply, every village to have a telephone and every village to be electrified. Launched in 2005 – So far spent Rs. 1.14 crore )

2. National Rural Employment Guarantee Scheme (NREGS) ( Rs. 44,480 crores )

Launched in 2006, the Scheme provides for 100 days of assured employment per year per person per household. ( or cash payment @ Rs. 100 per day for 100 days ). Panchayats to oversee the implementation of the Scheme. The scheme has been lauded world over. The implementation level varies from State to State.

The scheme would reduce the level of migration of poor landless unemployed persons from villages to cities/towns. It is said that the Scheme had brought in lot of votes to Congress. Some of the opposition ruled states have also tried to take credit for bringing out with such a scheme. But that is not the point. Nobody disputes that the scheme has given succor to a lot of unemployed people.
Inevitable that in respect of such a scheme, there would be leakages. Further, as had happened in respect of many such welfare schemes, vested interests ( including political ) would muscle into managing the scheme.
Many an economist may argue against the concept of the scheme. Since employment has to be provided under the scheme, even non-worthwhile projects may be taken up. It would be difficult to measure the return from investment. But there can be no two opinion that the scheme would to some extent mitigate the grinding poverty many unemployed in the villages are going through. ( As could be expected, World Bank had expressed reservations on the concept while ILO had welcomed the Scheme )

3. Sarva Shiksha Abhiyan ( Rs. 60,000 crores )

Launched in 2001, the scheme is to provide elementary education to all children. While enrolment aspect has been quite successful, it was found that by far a large number of children drop out at the VIIIth standard level. In the rural areas the scheme has become extremely popular.

1. Mid Day Meal Scheme ( Rs. 33,000 crores )

Supreme Court had also directed Government to implement the scheme, which was originally started in 1990 but gained real momentum during the last few years. 11.74 crore school children have been benefitted under the scheme. In fact the scheme has given a major impetus for the really poor to send their children to schools.

2. National Rural Health Mission ( Rs. 31,000 crores )

Launched in 2005 to build a healthcare delivery system the entire rural population. What is lamentable is that the States have been able to spend so far only Rs. 20,000 crores under the scheme.

6. Total Sanitation Campaign ( Rs. 5,100 crores )

This is a scheme which has been in operation for long but not very successful. The Scheme was to build toilets in rural areas. Lack of water and habit of using open places as toilet have been cited as reasons for the lacklustre performance of this scheme. Civil society and social workers have a major role to play in successful implementation of the scheme.

7. Integrated Child Development Services – (Rs. 32,000 crores )

The Scheme provides nutiritional supplements, health check-ups and immunization coverae to children up to the age of 6 years to reduce mortality and disease. It also provides nbutritional supplements to pregnant and lactating mothers.


8. Jawaharlal Nehru National Urban Renewal Mission ( Rs.7500 crores )

The Scheme is to build basic infrastructure, improve governance and provide basic facilities to the urban poor in 63 cities over seven years.

9. Polio eradication ( Rs. 9000 crores )

A Scheme in respect of the above was launched in 1994 which helped in reducing polio cases and India was to become polio free. But a few pockets are now showing resistance to immunization. Hence this Project.


Concluding remarks:

· Yes, there would be leakages and project implementation could be delayed. Having seen that such schemes could work, Government of India is placing all out emphasis on the projects. In political circles also there is awareness on the need to efficiently managing these schemes.
· But where is the money to be found – naturally that would be the second question. From high GDP growth which would bring in more revenue to Government.
· Once the funds earmarked for the projects are spent, there would renewed demand from all quarters to further extend the schemes and also for bringing in more such schemes. And Governments ( whichever party is in power ) must accede to such demands.

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