Some thoughts on the Inclusive growth chapter of the Economic Survey

The Economic Survey was released today. To the ones who usually skip such “heavy” economic matters, an Economic Survey, according to an ET columnist Mythili Bhusnurmath are ready reckoners on the state of the economy during a year that is fast drawing to a close. Only to a far lesser extent can they be said to be a portent of what is likely to follow in the subsequent year. This is because they are largely a technical view of finance ministry technocrats. Thus to the extent Surveys are relatively divorced from the political ground realities that play a dominant role in decision-making by democratically elected governments, they also tend to be a little idealistic.
This year’s survey includes a chapter on inclusive growth. And I am very happy about it as increasingly there is disenchantment with the “high rates of growth” talk that usually crowds our newspapers. It is extremely naïve ( and I was naïve) to believe that high GDP rates of growth would automatically mitigate poverty and bring prosperity to large sections of Indians. But that of course is not true.
The increase in GDP is due to high growth in services and to some extent in industry. Services account for more than fifty per cent of our GDP and hence high growth rates in this sector will propel our GDP to high levels as well. Industry is doing well but since 80s its contribution to GDP has stagnated in the mid twenties.
The problem then lies in Agriculture. We have a sector which employs more than 60 per cent of our population and is projected to grow at .2 percent this year. It also contributes least to the GDP of our country. Now that leaves a huge section of our population staring at abject poverty. Farm output growth is projected at 0 per cent largely due to the drought that occurred last year. So this high GDP growth does not really matter to around 60 crore people of our country.
It’s a big deal for policy makers to include a chapter on inclusive growth as it reflects the realities that we confront today.
So what is inclusive growth? The survey mentions “A nation interested in inclusive growth views the same growth differently depending on whether the gains of the growth are heaped primarily on a small segment or shared widely by the population. The latter is cause for celebration but not the former. In other words, growth must not be treated as an end in itself but as an instrument for spreading prosperity to all. India’s own past experience and the experience of other nations suggests that growth is necessary for eradicating poverty but it is not a sufficient condition. In other words, policies for promoting growth need to be complemented with policies to ensure that more and more people join in the growth process and, further, that there are mechanisms in place to redistribute some of the gains to those who are unable to partake in the market process and, hence, get left behind.”
It is an acknowledgement of the fact that a large section of population needs to be integrated with the mainstream economy so that they too can enjoy the fruits of the high growth we are fortunate to witness in these times.
The chapter deals with the role of the government as an “enabler” which does not try to directly deliver to the citizens everything that they need. Instead, it (1) creates an enabling ethos for the market so that individual enterprise can flourish and citizens can, for the most part, provide for the needs of one another, and (2) steps in to help those who do not manage to do well for themselves, for there will always be individuals, no matter what the system, who need support and help. Hence we need a Government that, when it comes to the market, sets effective, incentive compatible rules and remains on the sidelines with minimal interference, and, at the same time, plays an important role in directly helping the poor by ensuring that they get basic education and health services and receive adequate nutrition and food.This rollback of the Government in the former will enable it to devote more energy and resources to and be more effective in the latter.
It elaborates how this can be done by focusing on specific issues like replacing the PDS with a “food voucher coupons”, advocating the same coupon approach in lieu of subsidy for fertilizers, etc. It also looks at bureaucratic delays and costs to buttress its point of advocating the “enabler” role of the government.
Overall it is a refreshing addition to the Economic Survey as it goes beyond sector wise discussion, and fascination with the short term numbers and takes a hard look at the long term.
If this post prods you to read that chapter, here is the link. http://beta.thehindu.com/multimedia/archive/00034/Economic_Survey-2_pd_34134a.pdf

For posterity

After my fieldwork segment we had to submit a report which included "personal reflections." I wrote it at 4 in the morning after having forced myself to write 7000 words about a village which had a population of about 1500. That was in November. Yesterday I went through it again and was startled at what I wrote. Startled because I wrote exactly what I meant and reading it again made me aware that my views have changed. Not radically but yes they have changed. So I put it down here so that it remains for posterity.

“Village life is tough but the village people are nice.” This was the parting advice given by Prof H.S. Shylendra who was the pre-field work visitor to the Nandurbar District of Maharashtra.

My village Toranmal had a web presence by virtue of being the second highest hill station in the state. All the beautiful pictures on the various websites coupled with the tough life that awaited us created a lot of anxiety in me as I boarded the bus to my village.

In the village we were made to stay in a hut with minimum provisions of lighting, bedding and bathing. While a solar panel with a CFL light provided illumination in the night, my partner and I had to share a single cot. While a small portion of the hut was earmarked for bathing, there was no toilet facility.

Since it was a village in the forests, we had insects and snakes in our hut from time to time. Also unseasonal rains in the first week made us grow more anxious and scared.

As time progressed, we realized that we had been exposed to the minimum standard of living. While difficult in the beginning, I later adapted myself to the living conditions. I also realized how fortunate I was in terms of resource availability compared to the villagers. I now value clean drinking water, twenty four electricity and the education that was provided to me by my parents.

Interacting with the villagers was a unique experience. While I did possess an elementary understanding of Marathi, it was rendered useless in the village as the tribals spoke their own language called Nahali. Overcoming this barrier was the most difficult part of the fieldwork segment. The tribals by nature are a shy community and interactions with outsiders is negligible. Hence it took around two to three weeks for us to gain their trust and initiate information gathering.

Though a tourist spot, it seemed that the villagers were in a time capsule. I was surprised to know that most of them had not heard about terror attacks in Mumbai and an old man still thought Indira Gandhi to be the PM of the country. This was because the village did not have newspapers, there was no telephone network and the literacy rate was very low.

The tribals considered the forest to be the most important part of their lives. They worshipped the lion and the trees. Although dependence on the forests had decreased to a great extent they still considered the forest to be inextricably linked to their well being.

I was amazed at the knowledge of the tribals with respect to the forest produce. This knowledge had passed down from ancestors and was passed down by word of mouth. They knew the medicinal properties of the plants and the various uses of the trees available in the forest.

Government as expected was omnipresent in the village through various institutions. The number of schemes that were available to the villagers in spheres of education, health, food, and livelihood was commendable. However the implementation of these schemes was not done properly. While the physical infrastructure like buildings and facilities like ambulances were present, they were in a dilapidated condition.

The rampant absenteeism of government officials ranging from the talati to the panchayat secretary was a major deterrent to providing good governance to the village. This absenteeism existed because of apathy of the villagers and no supervision by senior administrative officials.

Polygamy, child marriage, tobacco addiction and liquor addiction were some problems that we came across in the village. Most of these problems had a social perspective to it. For someone who thought economic growth was the panacea for all problems, this fieldwork was an eye-opener.

We were fortunate to witness the holding of elections for the State Assembly during our village stay. Vote for cash and distribution of liquor to the villagers was a common phenomenon and was practiced by all political parties who had fielded candidates in that constituency.

The love and affection showered on us by the villagers was a unique experience. To befriend two people who are completely different from their community in terms of dressing, speaking, and lifestyle and make all efforts to make us comfortable without any expectations was very touching.

Some of my learnings that developed or were reinforced during the fieldwork segment are

1. Rural People are very hospitable and extremely loving especially towards people who come from outside and live with them.

2. Their simple life and minimum needs ensure that they live a happy life.

3. The government while delineating funds for rural development should monitor its implementation and efficacy. A bottom up approach would be more effective than a top down approach.

4. All livelihood interventions should be people focused. People should be involved in the planning as they are the best judges of their own lives.

5. The tribals are extremely shy people. This is misinterpreted as hostility. They are very hospitable and befriend you only after you have demonstrated your sincerity towards them and their friendship

6. I come from Mumbai. The only city in the state which does not have electricity cuts. In fact the rest of the state compromises on its power requirements so that the city of Mumbai lives upto its reputation of “a city that never sleeps”. This inequity and the anger was personally experienced during the village stay. It also drove home the point about the division that we now refer to as “Bharat vs India”.

7. We need to question the importance attached to Gross Domestic Product growth. Our consumption patterns cannot be replicated in rural areas. This will lead to huge environmental problems. Hence alternatives need to be developed to achieve the goal of poverty alleviation without adverse effects on the environment

This village trip was an excerise in humility. It has made me realize my good fortune of being brought up in a family which provided all the necessary resources required to lead a decent life. Most importantly it has raised several questions both personal and academic which I seek to answer during my stay at IRMA and beyond. The birth of these questions, some of which are presented above is my biggest gain for which I will be greatful to the people of Toranmal and to IRMA.

Superman....and Superwomen

A year since my Dad fought back a life threatening disease. Reaffirmed my belief that I am a fighter's son.
Also realised that the two women in my life were superwomen.
Only hope that if and when I do fall for someone, she has some qualities of the superwomen in my life.
PS-I still think my brother is the most intelligent person I have met.