The budget is out and one thing it reflects is our continued affliction for numbers: the focus is on growth rate with the Finance Minister P Chidambaram saying 'I believe that growth is the antidote to poverty.' This also follows Prime Minister Manmohan Singh's insistence on a higher growth rate for the next Five Year Plan. The Planning Commission is working to get the approach paper for the country's 11th Five Year plan, beginning 2007, up on the table for getting a nod from the National Development Council. The paper is some weeks away.
The rampaging bull at the stock markets has complemented the growth rate by breaching the 9000 mark for the first time in history, and then, the 10000 mark. Going by news reports, $21 billion dollars were added to the $140 billion foreign exchange reserves in one year alone. According to the the Economic Survey released on 27 February, the GDP for 2005-06 has been 8.1 per cent and the country can expect to sustain a growth rate of 10 per cent per annum.
Suppose there are only 2 people in the country - the first earns Rs.100 and the other nothing. So the total GDP is Rs.100.
Next year, suppose the first one saw her income increase to Rs.120. The other saw no growth. So the total GDP is Rs.120, with 20% growth.
Despite the impressive growth, only the wealthiest person in economy benefited, and the poorest saw no gain, yet the GDP growth number doesn't reflect that.
This simple example illustrates that unless inequality in India is falling, higher growth mathematically just means higher growth for the wealthiest people.
This problem was recognized by Montek Singh Alhuwalia (then at the World Bank). Alhuwalia's solution, the Ahluwalia-Chenery Welfare Index, was an alternative measure of income growth, one that gave equal weight to growth of all sections of society.
Business and the good society
Progress by any other measure
A thin Indian poverty line
But will juggling the numbers do it?
Underlying these figures is the familiar divide between India shining and Bharat in darkness, also seen in the Economic Survey. While the growth rate may have shown steady progress, food grain availability has declined to an all time low of 438 grams per day. The prices of essential foodgrains are going up -- wheat is up by 10.7 per cent, and pulses up by 19 per cent. Markets may have performed beyond expectations but the unemployment rate in rural and urban areas has reached an all time high of 9 and 9.3 per cent respectively. Earlier, unemployment increased to an unprecedented high of 7.2 per cent, the National Sample Survey had reported. The skewed development affects no less than two-thirds of the country's population, an estimated 72 crore people.
Agriculture, that contributes to one-fourth of country's GDP and has around 410 million people in total relying on it, continues to stagnate at 2 per cent. Low farm productivity and lack of investment in farming has led to the inevitable decline in growth from an impressive 3.8 per cent during the recent past. With over 17,000 farmers' suicides in the past few years, the future of 60 per cent of India's population remains uncertain.
The poor care less about impressive numbers like the growth rate of GDP. They care about whether jobs are available, how much those jobs pay and what the cost of living is! Even if farming sector with its dependant population were merely left to the mercy of monsoon risks, growing unemployment will continue to scare the growth curves.
Under current conditions, planners have a serious task at hand - of creating a growth model sans agriculture. And it isn't that farming reforms have not been pursued by governments. Farm sector reforms have been pursued thus far under an infrastructure development model: roads, irrigation networks, potable water and sanitation, and marketing infrastructure in rural areas. Much of the proposed Rs 24,000 crore towards Bharat Nirman is aimed at building infrastructure. But infrastructure is necessary, not sufficient. Infrastructure is needed, and not at the cost of other priorities like education, employment and health.
In addition, contract farming policies being pursued by states like Punjab, Rajasthan and Andhra Pradesh and the Land Lease Act 2005 of Chattisgarh clearly reflect the tilt towards corporatisation of agriculture. Apparently, contract farming policies are aimed at easing the debt burden on small and marginal farmers through leasing out of land to companies. While contract farming is luring farmers to lease out their small holdings (which doesn't sustain them anyway), evidence is showing that they migrate to shanties in urban areas. With productivity being low even in irrigated areas, farmers already have little option and the policy environment further encourages the migratory trend. Farmers' lands in the meanwhile are tilled by someone else.
Not by GDP growth alone
The health of nations
Lens on education
Vidarbha agrarian crisis