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The New Poverty and Inclusive Growth Agenda in India as Emerging Middle Income Country Amita Shah
Gujarat Institute of Development Research 1. Introduction:
India’s progression from low income to lower-middle income country is a matter of fair amount of satisfaction and pride, especially for those who spearheaded the process of economic reforms and growth-induced poverty reduction in the country since early nineties. The progression from stagnant and/or low growth to high growth trajectory is acclaimed internationally; and that the recognition has come not only for India having emerged as a potential economic super power but also for making the transition happen within a democratic framework. Of late India’s economic power particularly, its growing middle class, is being seen as a potential market, which could help absorbing the recessionary shocks experienced by a large number of high income countries in the developed world [ADB, 2010]. Beside this, the historical experiences of some of the developed economies also suggest a number of positive externalities associated with expansion of the middle class as it may bring new aspirations as well as democratic ethos, which in turn, may help enhancing political commitment towards social policies and welfare measures [Alesina and Rodrik, 1994]. The present scenario in India is however different, and perhaps far more complex than what was historically experienced in a number of developed and also by some of the emerging economies in the contemporary context. The most complex phenomenon pertaining to the Indian scenario is that a large part of what is deemed as `middle income category, which apparently has surpassed the number of poor’ [NCAER, 2010], is highly vulnerable and devoid of basic amenities as well as services thereby low attainment in terms of human development [Kannan, 2010]. Addressing poverty and vulnerability covering as large as three fourth of India’s population therefore, remains the most daunting challenge, notwithstanding the emerging middle class in the country. Prima facie, the extent to which the newly acquired status of an Emerging Middle Income Country (EMIC) would help fostering poverty reduction and at the same time work as a stimulus for the global economic recovery and growth eventually, may depend on two important factors: a) the path and pattern of growth through which higher per capita income has been achieved in the post-reforms period; and b) the main driving force envisaged for attaining future growth in income, and also its distribution across different segments of the economy. Essentially, this may draw attention to two alternative scenarios with respect to the nature and composition of growth experienced in the recent past and also likely to take place in the period of next 5-10 years. The first path consisting of growth with trickle down may refer to a situation where the growth is driven mainly by the growing consumerism and the associated lifestyle demonstration effects-all these emanating from the emerging middle class, especially in urban centers, combined with heavy dependence on the state funded social protection measures such as cash transfers to reach 1
out the poor. Against this, the second path may refer to widening of the production base by involving a large segment of the un/under employed labour class through careful selection of production technology and resource use in a manner that it may lead to expansion of wage income among the poor (and also vulnerable among the middle class) along with expanding production of wage goods within the economy [Patanaik, P. 2011]. Strictly, the two may not necessarily be mutually exclusive approaches; rather these approaches may represent different conceptual categories, which may be quite useful while gauging the poverty reducing implications of economic growth in the contemporary Indian context. Putting it simply the outcomes of the emerging middle class, at least in short and medium terms, may depend on whether the future growth hinges mainly on the demand coming from the upper middle and the top income strata or, be induced by the fresh boost up provided to specific activities as well as sectors within the economy where the lower middle class and the poor are located. It is essentially this policy choice, which would shape the `inclusiveness’ of the future agenda for economic growth and/or welfare of poor in the next 5-10 years and perhaps beyond [Shah, 2011]. This is particularly relevant at this juncture of India’s stride for economic growth which has also brought into its fold widening inequalities [Basu, 2008; Chaudhuri and Ravallion, 2006; Ravakkuibm, (2005), `wasteful’ consumerism [Bardhan, 2007], and increased informalization of the workforce [Vijay, 2005]. Much of this often gets reflected in terms of growing employment as well as income insecurities, particularly within urban economies; haphazard growth of urban areas along with neglected rural habitations; and a large segment of poor and also the vulnerable within the middle income strata [Sengupta, et. al; 2008]. According to some assessment, income inequality is likely to get further accentuated. Such inequalities may prove to be environmentally damaging owing to the growing consumerism, and may also hamper future prospects of growth [Ravallion, 2005; Bardhan, 2007], besides being socially and politically non-tenable [Shah, 2011]. Whereas the experiences of some of the Latin American countries and also China may provide useful lessons, the choice that India should make has to be grounded primarily, in the situation specific realities obtaining within the country rather than getting driven by the global economic scenarios [Bhaduri, 2006]. It is here that the non-economic factors such as environmental, sociocultural and political may assume critical importance [Hariss, 2007]. Conversely, India may also look into these aspects while designing her policies as a developmental aid agency especially in Asia. Being a large and robust democracy, India may have a strategic role to play in the region [Price, 2004] for fostering not only faster but also pro-poor economic growth where the poor and the vulnerable have their legitimate space in shaping the nature and composition of growth itself rather merely being seen as recipient of the welfare schemes. This obviously may have significant implications on India’s developmental aid in the region. Given this backdrop, the paper will focus on following aspects in the context of the emerging middle class in India: 1. India. Profile of poverty and the policies for helping the very poor and vulnerable groups in the
Opportunities and challenges with special reference to the changing labour market conditions, migration and urbanization, environmental implications, and social policies, in the wake of the emerging middle class, and discuss policy choices for making the growth inclusive. Assessment of India’s role as a development aid agency and discuss the likely impacts on the processes of inclusive growth on the recipient countries in Asia Lessons emerging from India’s experiences on poverty reduction with special emphasis on employment generation and provisioning of basic amenities where rights based approach seems to have gained increasing importance. Strategic policy measures needed for steering inclusive and also sustainable growth trajectory with stability and security. The analysis is based on a desk review of the existing literature as well as evidence, and it seeks to feed into the ongoing debate on finding new pathways for poverty reduction and inclusive growth in the context of emerging economies in the region. 2. Middle Class and the Poor in India:
Inhabited by about 1210 million people, India is a home of the largest poor population in the world. In 2005 456 out of the 1400 million poor the world over resided in India. The share of India’s poor in the global total has increased from 22 to 33 percent during 1980 to 2005 [Ravallion, 2008]. According to the estimates using the NSSO-data for 2004-05, 42 per cent of India’s population were living below the level of 1.25 $ a day; of these 24 per cent were below the level of 1$ a day [ibid].. Apart from the poor (i.e. below 1.25$/day), a fairly large proportion of the population is in the category of vulnerable population [between 1.25 and 2 $/day]. Many of these are deprived of adequate calorie intake and nutrition, basic amenities such as safe drinking water and sanitation, access to health and educational services at affordable price; and regular employment with minimum social security, not to talk of `decent work’ conditions [Sengupta, et.al; 2007]. The estimates for the countries in Asia prepared by ADB (2010) suggest a large middle class in India consisting of about 38 per cent of India’s population; about 33 per cent of the rural population and 50 per cent of the urban population [See Table 1]. In terms of absolute size, this is a huge number i.e. 418 million during 2004-05 [ADB, 2010; op. cit]. Table 1: Poor, Middle Income and the Non-Poor in India: Changes Over Time Per capita Expenditure All India Urban Rural per day ($) 1993-94 2004-05 1993-94 2004-05 1993-94 2004-05 Poor <1.25 46.5 36.3 34.0 26.0 51.0 40.5 Vulnerable 1.25-2.0 23.6 23.2 20.8 17.7 24.5 25.4 2.0-4.0 18.0 22.3 22.1 23.6 16.5 21.8 4.0-10.0 8.7 12.3 15.2 19.6 6.4 9.4 10.0-20.0 2.1 3.5 5.0 7.4 1.1 1.9
Middle Class 28.8 38.1 42.3 50.6 24.0 33.1 Rich >20.0 1.1 2.4 2.9 5.8 0.5 1.0 All 100 100 100 100 100 100 Based on Table 2.6 in Bhaduri as cited in ADB, 2010 What is however, equally important is note that the size of the middle class is almost same as those in the category of poor. If we consider the poor and the vulnerable together close to 60 per cent of India’s population is below the middle class; 65 per cent in the case of rural areas and about 44 per cent in urban areas. It may also be noted that the middle class is also tilted heavily in towards the lower end i.e. in the category of 2-4 $ a day; almost 58 per cent of the middle class is concentrated in the lower end of the spectrum. In fact if we consider the population above the range of 4$ a day, it comes to only 18.2 per cent of the total population in the country. Prima facie, poverty reduction in India is a combined result of both-higher economic growth on the hand and poverty reduction programmes on the other. The trajectory of poverty reduction may have followed a sequential process whereby a small segment of the vulnerable may have shifted to the higher strata of income. Similarly some of those in the very poor segment may have moved up to the category of vulnerable. By and large, the former may have been influenced by the path of economic growth and percolation whereas the later may be an outcome of the antipoverty programmes. Segregating the two may be difficult given the poverty dynamics in the country. The euphoria about the middle class in India therefore has to be seen in the context of the larger scenario, which still continues to be driven by poverty and vulnerability rather than by abundance and prosperity. The issue therefore, is whether and to what extent the upper and the rich class in India can take into its fold a vast majority of the poor, the vulnerable and the lower middle class, consisting of more that 80 per cent of India’s population to wards better job opportunities; food and nutrition securities, basic amenities, and better l human development. Essentially it is this reality, which makes the dynamics of middle class in India fairly different from several other emerging economies countries, especially China. 3. 3.1 Poverty Reduction: Slow and Uneven Moderate Pace and Regional Imbalance
As per the poverty estimates based on the official poverty line prior to 2004-05, the poverty head count ratio (HCR) in India, declined from about 55 per cent in the mid seventies to about 45 per cent in the mid eighties and 27 per cent in the mid-2000. This suggests that poverty ratio was almost halved over a period of 30 years. The recent analysis however, suggests that the pace of poverty reduction has reduced in the post-nineties, thereby raising the issue of growing disconnect between economic growth and poverty reduction in the post liberalization period [Dev and Ray, 2007; Datta and Ravallion, 2010]. Similarly Ravallion (2008), based on the international poverty line (1.25 $ a day), suggests that the poverty has reduced from 60 per cent in 1980 to 42 per cent in 2004-05. Whereas this is a substantial reduction, the overall pace is fairly slow. According to the analysis, the trend rate of
growth of poverty reduction is only 0.71 per cent per annum, which is fairly low considering the faster economic growth witnessed by India over the past two decades. Apart from being slow, poverty reduction is also uneven across the states [See Table 2]. There are states where the incidence of poverty is fairly high as compared to the All India average as highlighted in Table 2. What is also indicated is the high incidence of hunger and undernourishment among children among a number of major states in the country. Recapitulating trend over time, a dis-aggregated analysis based on the NSSO-regions suggested that the 15 most poor regions in the country have remained more or less same over a period of two decades, thus suggesting that the poverty geography in India is by and large static [Shah, 2009]. The studies examining the inter-state disparity in the post-reforms period (covering up to 200304) suggest that the industrialised states like Gujarat, Maharashtra, Tamil Nadu, Karnataka and West Bengal plus Kerala had grown faster during this period [Dholakia, 2009]. Only a few states have achieved faster economic growth and rapid poverty reduction at the same time. What is also indicated is absence of convergence in growth across the statesi, and also a growing disconnect between growth and poverty reduction across and also within states [Dubey, 2009; Jaydev, 2007; Jh, 2000]. This observation defied the general expectation that slow pace of poverty reduction is mainly due to lower economic growth, and that the pace will pick up once the economy moves to a high growth trajectory [IBRD, 2000]. Overall one finds that although in states where poverty is wide spread economic growth has been low there are a number of states where poverty reduction is sluggish, despite the higher economic growth. The later scenario could be highlighted by the experience of Gujarat and Maharasthra, the two leading internalised states with fairly high level of urbanisation, yet having very high incidence of rural poverty-close to 40 per cent in the case of Gujarat and 47 per cent in the case of Maharashtra. . Table 2: Poverty among Major States in India: 2004-05 States Poverty Head Count Ratio Rural Urban Himachal Pradesh 25.0 4.6 Punjab 22.1 18.7 Uttaranchal 35.1 26.2 Haryana 24.8 22.4 Rajasthan 35.8 29.7 Uttar Pradesh 42.7 34.1 Bihar 55.7 43.7 Assam 36.4 21.8 West Bengal 38.2 24.4 Jharkhand 51.6 23.8 Orissa 60.8 37.6 Chhatisgarh 55.1 28.4 Madhya Pradesh 53.6 35.1 Gujarat 39.1 20.1 5 Hunger Index NA 13.64 NA 20.01 20.99 22.17 27.30 19.85 21.00 28.67 23.79 26.65 30.90 20.69 Underweight Children (%) NA 24.6 NA 39.7 40.4 42.3 56.1 36.4 38.5 57.1 40.9 47.6 59.8 44.7
Maharashtra Andhra Pradesh Karnataka Kerala Tamilnadu All India
47.9 32.3 37.5 20.2 37.5 41.8
25.6 23.4 25.9 18.4 19.7 25.7
22.81 19.54 23.74 17.66 20.88 23.39
36.7 32.7 37.6 22.7 30.0 42.5
Note: Poverty estimates refer to the new poverty line suggested by Tendulkar Committee. The estimates are obtained from Planning Commission, 2009. Data on Hunger Index and underweight children have been obtained from Menon, et.al; (2008).
Essentially, the unevenness in poverty reduction is rooted in the sectoral/spatial pattern of India’s economic growth, especially in the recent past [Ravallion, 2008] It is this imbalance, which has not only reflected in the growing inequity, and also slow pace of rural-urban migration as well as urbanization as discussed in the next section. Together these may lead to further dampening of poverty reduction impact of India’s economic growth; the issue of choosing an appropriate growth strategy therefore assumes special significance as argued earlier in the paper. 3.2 Multi-pronged Approach:
Given the vast, diverse, and chronicity of poverty, India, over a long span of the planned development has adopted a multi-pronged approach to address the issue. The approach encompassed three major elements: i) Growth and percolation mechanisms; ii) Targeted schemes/programmes to directly approach the poor (though not poverty per se); and iii) Rights based mechanisms to guarantee basic requirements including employment and cash transfers. In what follows we have tried to recapitulate number important policy initiatives that have been taken up especially since the eighties-the decade when the first phase of economic reforms had started in India. Table 3: Main Features of Policy Approaches for Poverty Reduction in India
Poverty Reduction Effectiveness Remarks Mechanisms 1. Growth Overall Poverty reduction elasticity of The elasticity has reduced over time private consumption is –0.7 in the [Datt and Ravallion, 2010]. post 1991 period Agriculture Fairly high at macro level and also Higher per capita agricultural income across states leads to significantly lower poverty ratio across the major states [Shah and Pattanaik, 2011] Tertiary/Service Sector Service sector is the fastest growing Employment growth (in service sector) sector during the 2000, besides is concentrated mainly in urban areas construction activities. [Unni and Naik, 2011] and mainly in the informal sector with low quality of employment. Infrastructure and Appears to be a major driver of Created substantial opportunity for Construction growth and employment generation; migration, mainly transient in nature; much of the employment in the past led to increased conflicts over land and two decades has been generated in land use
tertiary sector, especially construction activities.
in These do not reach out to the landless and semi-landless, constituting the hard core poverty, in absence of substantial improvement in demand for labour, thereby wages. Sustainable water use is also a serious concern. More than the adequacy, safety and quality of drinking water is still a huge problem; only a minority of the rural population has access to sanitation facilty where availability of funds, physical space, and water are huge challenges. About one fourth of the urban population in cities and towns with > 50,000 population lives in slums as well; sanitation facilities.
2. Special Programmes NRM Irrigation and Water Harvesting Structures especially in dryland areas have significant impact on poverty reduction and preventing entry into poverty respectively Water and Sanitation Very low access to safe drinking water and low coverage of sanitation facilities in rural areas and also poor living conditions faced by the slum dwellers in urban areas
Immunization and Nutrition; ICDS
Immunization has covered 44 % of the children and has worked reasonably well; IMR has declined to 58, but nutritional status especially among children is fairly low with 46 % of underweight children at the time of the 11th Plan. Special nutritional supplement for school going children and also for lactating mothers. A massive programme of Indira Awas Yojna for rural poor and also for slum improvement in urban areas; the effectiveness in terms of quality of design and structures as well as location is rather poor. While this may have significant potential for employment generation, finding land especially for poor’s housing in urban areas, is faced with lot of difficulties. Long term migration, captured by the official statistics, has stagnated; short term migration may have increased, but little is known about the extent and actual outcomes. A massive programme is on the horizon of creating 10 million additional jobs a year. This may help absorbing a part of the un/underemployed labour force. But, skill training alone may not provide the complete solution unless the overall capacity of the productive segment of the economy to generate additional jobs is substantially enhanced. The self-help group led micro credit have widened the net and potentially a good approach; however, their outreach to the poor is somewhat limited mainly to the southern states [Nair, 2011]. Fiscal federalism has worked reasonably well; poverty is an
Close to 40 % of India’s population suffered from chronic energy deficiency in 2000-01; the scenario is more or less same particularly due to food inflation and increased expenditure on healtheducation; housing and transportation [Shah and Pattnaik, 2011].
Commutation and Migration
Lack of appropriate housing in urban areas is a major stumbling block for rural-urban migration [Kundu, 2009]. The boom in real estate however, has led to elite capture and excluded the poor. The recent development suggests that much of the increase in income among the upper-middle class and the rich has been diverted to real estate sector in urban economies, which eventually meant almost complete denial of access to housing among the poor. Urban economies have by and large led to informalisation of jobs at lower end of the market and also without creating the requisite provisions for amenities; commutation to large cities and periurban areas is an important phenomenon. The overall employment growth is low; much of this is low-paid and uncertain in nature. The wage increase to a large extent is linked to inflation and/or in the personal service sector at the high end.
Self-Employment and Micro Credit
Recent evidence suggest that the new Micro Finance Institutions, working mainly with the external funds, have endeavored into sub-prime lending thereby low recovery rates and closure Increasing recognition about the role played by direct investment by the
Centre-state Resource Transfer
important consideration in centre-state resource transfer
3. Social Security/Protection; Rights Based Approach (RBA); Public-Private Partnership (PPP); and Deepening of Democracy NREGA
the central Government into the lagging states and also the centrally sponsored schemes for poverty reduction rather than the fiscal transfer owing to the low absorbing capacities of these states. Increased social sector expenditure; Land reforms in the initial phase were various targeted rural effective in in reducing poverty; the development/poverty focused need is to redefine and reinvent land programmes; measures for social reforms in the contemporary scenario. protection and social security. Social sector expenditure is still at lower There are issues of outreach in rural than the desired level. Affordability areas; privatization and PPP models under the growing privatization of are being tried out. health and educational sector is a serious concerns; for many this implies entry into poverty. The largest programme for Complexities in implementation and enhancing wage income among rural empowerment of local communities poor with positive impact of tightening of rural labour markets Limited effectiveness even under Move towards `Right to Food Act’ to targeted programme [Khera, 2011]. attain effective universal food security Special provisions for limited [Himanshu, 2011]. quantity of grains at nominal price in some of the Southern states. The bill has passed recently in the Parliament and approved social security measures for workers in selected unorganized sectors Area based approach for focusing on tribal poverty, which is by far the highest among all social groups The provisions seem to be fairly lower than what was recommended by the special Commission st up by the Government of India [NCEUS, 2008]. A potentially good approach, but representation in the governance remains a huge issue; it has worked where tribal communities have been the deciding authority Development induced displacement R & R Policy is being revised and has increased in the recent time linked to the proposed revision in the owing to growth in mining, Land Acquisition Act, under which most infrastructure and urbanisation of the land for developmental projects are being acquired/purchased.
Tribal Area Development and Forest Rights Act Resettlement and Rehabilitation (R & R)
Note: Collated from various Plan Documents. Also see, Mehta et.al; 2011 3.3 What has Worked?
The vast canvass of poverty reduction policies listed above speaks volumes of the innovation as well as efforts on the part of the state to address the poverty issue over a long period of time. Against these the actual achievements could at best be treated as moderate and of late, receding. Prima facie three sets of issue shave been identified for explaining less than the desired levels of achievements. These are:
a) limited commitment thereby low levels of financial allocation; b) problems of implementation and governance; and above all c) design deficiency. Whereas all the three sets of constraints seem to have operated simultaneously and often in a mutually reinforcing manner, what is most critical is the design deficiency. By this we question the very strategy of poverty reduction, which at the most, address the symptoms rather than the root causes that are often structural in nature. A strategy such as this emanates from the mainstream economic thinking that growth maximization is the core objective and poverty is a tangential phenomenon. The `growth alone’ approach therefore implies that solution to poverty could be found outside the sphere of the growth process. The recent experience as noted above however has at least partially, unveiled the myth, which has now led to fairly widespread recognition that growth is essential, but not growth alone may not be able to address the issue. The recognition is particularly relevant in a country like India where, the absolute number of the poor is fairly large and also scattered over thousands of villages as well as urban settlements. But far more important than the funding and the implementation issues, is the recognition of the fact that much of the poverty that remains at present is structural in nature, hence difficult to resolve. The recent growth experience seems to have loosened the financial crunch, as reflected by the additional allocation of funds to a large number of anti-poverty programmes. Nevertheless other constraints, related to the structural aspects and also the governance mechanisms, could hardly be attained merely by enhancing the financial allocations. It is here that the relative merit of cash transfers–conditional or otherwise- have started assuming importance among the policy circles. In this back drop, we may highlight some of the important aspects of poverty reduction policies that seem to have worked in the past 2-3 decades [See Box1].
Box 1: Polices that have Worked for Poverty Reduction
• • • • • • • Land Reforms and Land Development Public Investment in Irrigation and Water Harvesting Structures R & D and Extension Services for Agricultural Growth Institutional and Infrastructural Support for Rural Economy Subsidies/Price Support and Restricted Trade in Agriculture Sustained High Rate of Growth; FDIs; and Rise in Income among Upper Middle and the Rich Segment, Leading to Boom in Service Sector Infrastructure and Real Estate Development creating Additional Jobs in Construction Sector
• • • • •
Development of Peri-Urban Areas Employment Guarantee and Influx of Wage Income Distribution of Grains at Highly Subsidized Price Involvement of Civil Society Organisations; Rights based Approach; and Strengthening of Local Governance (yet to work) Some Innovative Models of PPP
Needless to say that the list presented in Box is neither exhaustive, nor universally applicable. Rather it captures some of the important elements that have worked reasonably well in substantial parts of the country. What also important is that some of the initiatives such as MGNREGA or PPP-models or growth of jobs in service sector are still in the early stage; gauging the full impacts are difficult for the time being. The earlier experience of employment guarantee scheme in Maharashtra did bring some positive results [Shah and Mehta, 2010]. The MGNREGA has gone much beyond that in terms of community mobilsation and convergence with a number of schemes being implemented under the umbrella of rural development. 4. Urbanisation: A Panacea for Future Growth and Poverty Reduction?
There has been a growing interest in seeking urbanization as a major path way for future growth in economy and employment thereby way out of poverty in the country. Rural-Urban (RU) migration becomes an important vehicle in this direction. Whereas migration and urbanization combine has been a proven means by which people in the emerging economies tend to attain upward mobility, there are significant variations to this pathways-temporally and spatially [World Bank, 2009]. Some of the important arguments in favour of this particular strategy for growth and poverty reduction include: sectoral diversification of workforce; sustained growth in real estate sector as a major booster to the economy; efficient planning and resource management for provisioning of amenities; effective outreach by the various service providers especially for health and education; life style aspirations; and freedom form the strict social hierarchies that perhaps, are more oppressive in rural than in urban areas. Most of these arguments apply to the contemporary Indian scenario. This is particularly so when rural economy in general and agriculture in particular is caught under long term stagnation; over crowding of workforce in agriculture is degenerating to a vicious cycle of low productivity-low wages-low investment etc; state’s withdrawal under the moves towards privatization of healtheducation-infrastructural sectors further accentuates the issue of access to these services among the poor and in the remote areas; degradation of land and water leads to distress selling of the agricultural land especially in the wake of the growing market for urban land often fuelled by speculators; and above all quest for seeking basic amenities like electricity, drinking water, transport facilities etc.-all of which continue to bypass large number of rural areas. 11
Strangely, despite of the valid justifications and the context specific needs that generally should push a large number of rural population/workforce to urban areas, the pace of urbanization is rather low in India [Table 4]. What is more important is that the poverty outcomes of urban growth are fairly uneven. By 2004-05, poverty in large/metro cities, which have attracted larger share of incremental migration, is rather low i.e. below 10 %; however, towns with less 50,000 people have much higher levels of poverty and are faced with worse living conditions in terms of basic amenities, almost similar to that in rural areas [Kundu, 2008]. Table 4: Urbanisation in India: Growth across Size Categories of Cities/Towns Exponential Growth Rate (% per annum) 1981-91 1991-01 Metro Cities 3.25 2.88 Class I 2.96 2.76 Towns 2.57 2.22 Note: Estimates based on the decadal census. See Kundu (2009). At the same time migration rates area fairly low and almost stagnating in the recent past [Table 5]. It may be noted that much of the migration among female in India is caused by marriage or social customs regarding the place where child birth take place. Hence, for understanding from the view point of economic mobility, the focus is generally on male migration. The estimates presented in Table 2 suggest that the migration rate among male are fairly low and that it has declined over time; and that this is particularly true for rural as compared to urban areas. Whereas a part of the low levels of migration is due to the data limitations; the official estimates in India do not cover short duration or circulating migration, which is fairly large in size as compared to long term migration [Shah, 2010]. Table 5: Migration Rates by Categories, 1983 to 2007-08 Rural Male Female Person 1983 7.2 35.1 20.9 1987-88 7.4 39.8 23.2 1993 6.5 40.1 22.8 1999-00 6.9 42.6 24.4 2007-08 5.4 47.7 26.1 Urban Female 36.6 39.6 38.2 41.8 45.6
Male 27.0 26.8 23.9 25.7 25.9
Person 31.6 32.9 30.7 33.4 35.4
Source: National Sample Survey organization (NSSO), Various Rounds, Ministry of Statistics and Programme Implementation, Government of India, New Delhi.
Together the pattern of urbanization and migration suggests that: a) both the pace of urbanization and migration in India is rather low, and is concentrated in larger cities; and b) the gains of high economic growth have been confined mainly to the larger urban agglomerates. Thus, the experience so far, provides a perfect recipe for promoting large mega cities perhaps at the cost of smaller towns. A prescription such as this, however may be treated with utmost caution owing to the growing tendencies and exclusionary nature of the urban growth that has taken place in
response to the economic stimulus of high economic growth in the recent past. Some of these aspects have been discussed below. Rural-Urban Linkages: Some Peculiarities First of all, whereas the rural economy has been stagnant, the recent spurt in the economy especially in the lower segment of urban areas has not created additional jobs under decent work conditions. Most of the jobs in the urban economies have been informal in nature. Second, the jobs at times, are also subject to market uncertainties and fluctuations. In absence of substantial social security provisions, such jobs may not enable workers to support the livelihood of their families in urban locations. This leads to a situation of increasing dependence on multiple jobs and activities that may work as social safety net for the poor and the vulnerable segment of the population because of the absence of adequate measures for social security. Third, another factor linked closely to the above two is the high cost of living and absence of urban space for the poor migrants. As a combined result the poor from rural areas either abstain from migrating or indulge in circulatory migration by undertaking and exchanging different jobs among the family members across seasons in a year. Fourth, while short term migration and low quality jobs in the informal economy in urban areas help improve the livelihood base among the poor, the circulating nature of their migration keeps them away from attaining a rightful citizenship at the place of destination. This also affects education and overall social wellbeing of these families which are partly rural and partly urban. Fifth, stretched between the two spaces (socio-cultural-economic and also political) these households get increasingly attracted to the urban life style thereby move away form the rural economies and societies before getting integrated into the urban spaces-cultural, economic and physical. At present the urban growth is pulled driven mainly by the high end segment of the society, which in alliance with the real estate developers (and often politicians), cordon a large proportion of the space within and in the periphery of urban centers with little space for the poor and the vulnerable who may aspire to enter the urban spaces. Concentration of disposable income in the hands of the few may then lead to severe hike in the prices of real estate, thus resulting in the scenario of elite capture and marginalisation of the poor. Sixth, whereas this, along with the pull from the increased purchasing power of the upper middle class and those above that, lead to substantial hike in wage rates, which in turn, also have a positive impact in terms of tightening of rural labour market. This of course, is a positive phenomenon. Interventions such as MGNREGA may enhance the process further. On the down size, this may lead to increased mechanization of various job-both in agriculture and also in nonagriculture sector. This kind of `pre-mature’ mechanization may lead to increasing the volume of underemployment already affecting the poor and also non-poor. In the process these `neither here nor there’ type of households and the workforce thereof loose their occupational skills as producers and get trapped into the spiral of casualisation in the daily labour markets in the urban areas.
Finally, this leads to two important implications: a) increased demand for education in the wake of almost non-existent increase in demand for labour in rural economy [Bhalla, S. 2010] along with limited scope in urban areas; and b) demand for cash/income transfer rather than for employment in the productive spheres of the economy [Bhaduri, 2008]. Though desirable, the first leads to significant increase in expenditure especially in the wake of privatization, without at the same time getting additional opportunity to earn wage income among the poor. It is within this complex and also dynamic realities the RU migration and urbanization has to work as effective pathway toward growth and poverty reduction. Obviously the solution is not strait and unidirectional as evidence by the slower [pace of urbanization in the country. According to the tentative estimates, about 40 per cent of India’s population is urbanized and migration, other than circulating type, remains more or less stagnant. What is therefore important is to build further on the rural-urban linkages and create interfacing spaces to accommodate the transition. Equally important is creation of additional jobs within well connected rural economies where incomes may get ploughed back rather than siphoned away to accommodate the `part rural-part urban existence’. Prima facie, agriculture growth driven prosperity in rural areas may pave way for creating the interfacing spaces leading to rural urban continuum. On the other hand, urbanization process has to be more inclusive and conducive for development of a number of `Rurban’ centers rather than focusing on mega and compact cities [Kundu, 2011; World Bank, 2009].driven mainly by the pull effect of the emerging high-end middle class. This implies working on both rural as well as urban economies, job creation, and spaces rather than focusing mainly on planning and management of big cities as has been the experience elsewhere in the region. . Stabilizing the agrarian economy in the backward regions ---has emerged as a key challenge for ushering in healthy urban development in the country.-----While it can be argued that people must not and should not be forced to migrate, it would dangerous, politically as well as economically, to suggest that the poor do not have right to a city. [Kundu, 2009; xxvii-xxviii] 5. Lessons from High Growth Trajectory: A Case of Gujarat State
The complex interface between growth and poverty could be captured through a case study of Gujarat state, which is one of fore runners in terms of economic growth among the major states in the countries. The state has performed particularly well during the post-liberalization period; the last decade has witnessed a substantially high rate of growth not only in the secondary sector but also in primary and agriculture sector. The state however, has lagged behind in terms of human development indicators, which of late, have also started showing up dome improvements. Table 6 presents a brief profile of the state’s economy including agriculture sector, and some of the basic indicators of human development.
Table 6: Economy and Human Development in Gujarat Sr. Economy Sr. Human Development No. No. 1. Growth in NSDP: 2000- 10.22 (1) 6 Rural Poverty ((Rank) 10 (Rank) 2. Sectoral Share in GSDP Hunger Index (Rank) (2009-10) Primary 14.2 Nutritional Deficiency Secondary 38.6 Underweight Children Tertiary 47.2 Infant Mortality Rate 3. Growth in NSDP from 13.12 (1) 8 Chronic Calorie Deficiency Agriculture (2008-09) (CED) among Women (Rank) 4. Per Capita SDP from 3954 (8) 9 Anemia among Ever Agri. (Rank) Married Women (Rank) 5 % Area under Irrigation 33.90 10 Literacy Rate (Rank) (2008-09) Note: Ranks are in descending order and they refer to 17 major states in India
39.1 (11) 24.69 (13) 23.3 (11) 44.7 (13) 6.1 (8) 36.3 (9) 55.5 (9) 69.97 (5)
Source: (1, 2, 3, 4). NSDP: Director of Economic and Statistics, Government of Gujarat. (5). Area under Irrigation: Socio Economic Review of Gujarat, Government of Gujarat (2008-09). (6) Poverty: Report of the expert group to Review the methodology for Estimation of poverty: Government of India, Planning Commission, November, 2009. (7) Hunger Index: Menon, Deolalikar and Bhaskar (2008), IFPRI. (8) CED among Women: Dev (2010). (9) Anemia among Women: Jose and Navaneetham (2008). (10) Literacy Rate: Socio Economic Review, Government of Gujarat.
It may be noted that despite a phenomenally high rate of growth in Gujarat’s agriculture during the last decade, the per capita SDP from agriculture in the state was slightly lower than that at the All India level. During 2000-08 per capita income from agriculture in the state was Rs. 4393 as compared to Rs. 5000 at the All India level. Employment and Earnings: The higher rate of growth, especially in the infrastructure sector, in the state has rendered relatively larger work opportunities as reflected by the higher worker participation rate (WPR) as compared to most states in the country. However, higher WPR is also associated with lower wage earnings among casual workers and also salaried workers in the state [See Table 7]. It may be noted that Gujarat has larger proportion of workers in the category of self employed vis-a-vis regular salaried and casual workers as compared to most other states covered in Table 4. It is perhaps due to this that the earning per regular and even casual workers is far below several other states where these two form the more important/preferred forms of employment. Table 7: Employment and Earnings: A Comparative Scenario (2009-10) Gujarat Maharashtra Andhra Tamil Kerala Indicators
Pradesh 729 527 Nadu 690 540 WPR-Urban (15-59 yrs) usual Status (PS-SS) WPR-Rural* WPR-Urban * Punjab All India 616 505
Unemployment Rate-Rural 9.0 16.0 13.0 21.0 (15-59 yrs)-UPS* Unemployment Rate-Urban 21.0 38.0 32.0 37.0 (15-59 yrs)-UPS* Distribution of WorkersRural Self Employed* 553 487 408 333 Regular Wage* 67 69 69 99 Casual Labour* 380 444 522 569 Distribution of WorkersUrban Self Employed* 428 334 367 325 Regular Wage* 413 545 448 399 Casual Labour* 160 121 185 276 Average Wage/ Salary Earning (Rs./day) 15-59 yrs Rural 185.87 280.23 175.22 230.58 Urban 291.83 430.59 325.1 310.92 Average Wage/ Salary Earning-Casual Labour (Rs./day) 15-59 yrs Rural 83.25 75.19 98.47 110.76 Urban 106.17 109.9 138.2 136.71 Source: NSSO (2011), Key Indicators of Employment and Unemployment in India, Sample Survey Organisation, Government of India, New Delhi..
398 194 407 341 342 318
581 118 301 418 427 155
542 73 386 411 412 175
206.52 130.43 93.06 217.66 138.67 121.83 2009-10; 66 th Round, National
*Distribution of 1000 Workers What is however, surprising is that Gujarat has relatively lower per capita consumption expenditure, which could partly be linked to the generally observed higher saving rates (among the self employed), but it may also be a reflection of the lower wages/earnings among the regular and casual workers as noted above. Together this may lead to the important aspect, which pertains to migration and urbanization. The state historically has higher rate of urbanization as well as in-migration from other parts of the country [Shah, 2000]. The 2011 census also indicated about 42 per cent urban population, which is higher than the national average. Also the Census data indicates that Gujarat has relatively higher rate of decadal population growth (19.17%) as compared to most of the better off states like Maharashtra, Punjab, Kerala, Andhra Pradesh, Karnataka etc. and also the national average (17.64%) , in spite of the higher economic growth in the state. Together the recent estimates, though tentative, tends to suggest that Gujarat has attracted larger number of inmigrants due to the high rate of economic growth. It is however, likely that the job opportunities created by the high rate growth is not commensurate with the high level of economic performance-the usual scenario of informalisation may have prevailed as reflected by the lower overall earnings and spending as noted earlier. If so this suggests higher economic growth being combined with larger number of job opportunities, but with lower earnings. This in turn, may substantiate the widely held phenomenon of labour migration, especially of circular type, associated with suppressed wages [Berman; 2005]. Child labour may be another mechanism by which labor cost is kept low in a
competitive market; this seems to be widely prevalent in cotton cultivation, which seems to have forged the way towards high growth agriculture in the state [Shah, et.al; 2009]. On a positive side, migrants from the poorest tribal pockets in the state have started operating as share croppers thereby earning more than what they may have earned as wage laborers. Since this arrangement is not legally permissible, it is difficult to gauge the actual impacts on poor workers/share croppers in agriculture. A similar phenomenon may have obtained in urban labour markets-where some, including migrants, may have gained and some have not gained as much as they could have in the wake of the high growth economy in the state. The central message that comes out of this narrative therefore is- growth is important for creating job opportunities, but those opportunities need to be carefully calibrated by appropriate institutional mechanisms so as to make that work in favour of the poor workers and migrants. 6. Challenges of Inclusive Growth Policies:
The polarised discourse on economic growth and poverty reduction in India consists of those on the mainstream pro-neoliberal path, pleading for the completion of much-needed economic reforms in a number of sectors (e.g. infrastructure, agriculture, labour, banking, energy, education and retail trade) (Acharya, 2008; Virmani, 2004). It also includes those disillusioned as to the efficacy of neoliberal growth in addressing poverty. This latter view is influenced particularly by critiques of the neoliberal approach and is informed by a reaction to the slow but also fairly uncertain outcome of economic growth with respect to poverty reduction in the country. The central issue here lies in whether to continue with a growth approach that is inherently uncertain with regard to the next 10-15 years, during which a great part of poverty reduction goals ought to be realised. Perhaps implicit in the current approach is an assumption that poverty reduction can take place irrespective of fluctuations (cyclical or otherwise); uncertainties with respect to global finance and trade, environment and climate, food production and prices; and political insurgency – internal as well as external threats. This, in turn, implies disconnect between growth and poverty reduction, or between the processes by which wealth is generated and by which it reaches the poor. Concern such as to this disconnect led to the initial shift towards an inclusive growth approach in the Eleventh Plan. It may however, be noted that the approach adopted during the 11ith Five Year Plan did not seek to change the composition of growth; rather, the emphasis was first on promoting economic growth by completing the reforms agenda, and next on setting up effective distribution mechanisms to reach out to the poor through a series of anti-poverty programmes and social protection measures. This is at variance from an approach where the growth-outcome on the social front is integral to economic policies, instead of merely add-ons that depend critically on the outcomes of such policies. It is therefore aptly argued that the dichotomy between economic and social policies is inadequate, just as the dichotomy between economic and social development is inappropriate (Nayyar, 2008). 6.1 Towards More Broad Based Growth: Sectoral and Spatial
The road map towards a conceptually different `Inclusive’ growth than what has been adopted in the Indian planning and policies in the recent past, should essentially harp on the seven major components as listed in Box 2. It may be noted that the inclusive growth in India is contingent of the existing and continuously evolving democracy in the country; at times, this may hamper the economic growth through a series of political vested interests; insurgencies, and also `restrictive’ environmental polices. On the positive side the democracy may provide a strong platform for pursuing rights based approach, which may potentially change the very nature of economic growth. The bottom line is-democracy has an intrinsic value; it must work for the poor at least in the medium term.
1. 2. 3. 4. 5. 6. 7. 6.2
Box 2 Enhancing the productive capacities that generate additional productive work to absorb the under-employed in the informal sector Tightening of the wage markets through skill formation employment-linked education Public sector investment and ploughing back a part of the incomes and profits into enhancement of the rural economy Promoting inclusive urbanization and rural-urban continuum by simultaneously working on sectorally integrated as well as balanced growth in rural as well as urban economies. Rights based approach for basic livelihood and human development among the poor and vulnerable Involvement of citizenry and civil society organizations as part of the PPP models for service delivery Strengthening local governance through innovative institutions and empowerment of the poor. Imperatives for the Future Growth in India:
The contemporary policies in India have tried to include several of the features noted above. Nevertheless, one does not find a clear pro-poor commitment in the growth strategy, which continues to work towards consolidation of the high end economic gains obtained through knowledge based segment such as information and technology (IT); foreign direct investment especially in mining and infrastructure sectors; involvement of private sectors in some of the basic segments such as agriculture R & D and retail food chains; health; education; and provisioning of food at subsidized rates to the poor; and above all promotion of exports through multilateral as well as bilateral trade agreements. Overall the strategy is still driven by the economic reforms agenda, expecting that the higher GDP will facilitate expenditure on the various pro-poor programmes. It is pertinent that most of the features of the growth strategy noted above have in fact created certain negative spill over effects in terms of environmental degradation, displacement, exclusion of the poor, economic risks and uncertainties, informalisation of labour market, and last but not the least, staggering inflation which is likely to have pushed many of the poor and the vulnerable
segments in the society reduce the expenditure on food and other essential services like health and education. At the same time privatization of these basic services have led to a situation where accessing good quality services, like housing in urban areas, has gone out of the reach of these marginalized segments of the society. This not only implies scenarios of elite capture, but has also resulted in increased indebtedness among the lower and the middle class who get pushed to catching up with the upper middle class and those above that in the society. There is little doubt that the recent high growth trajectory has created new divides and accentuated the inequalities that are socially and political non-tenable [Shah, 2011]. In fact the policy making scenario in India is facing severe opposition with respect to a number of proposed projects/proposal for reforms; some of the glaring cases of controversies include environmental clearance to mining projects in Orissa; conversion of agricultural land; permitting FDI in agrifood retail chains; forward trading in agriculture and export of basic food commodities; social security for unorganized as well as migrant workers; urban planning etc. Given the complexities and contestations, it is difficult to clearly identify the policies that may work for the poor and for those in the lower end of the middle class. Broadly speaking one may argue that the rights based approach for social protection (entailing employment, food distribution and nutritional support; and housing), and provisioning of basic amenities like drinking water, electricity, roads and transport facilities, cater to the poor (< 2$ day). Whereas the programmes that help promoting agricultural productivity through high value chain, providing social security to informal sector workers, and above all skill training for educated youth may cater mainly to the lower middle class. Most of these are old programmes, barring the rights based programmes, which also have been transformed from the existing schemes by bringing them under the fold of statutory framework. At the same time what India has resisted till now is-major progression towards cash transfer mechanisms. The public private partnership (PPP) approach, in some sense, is a gate way for moving towards the mechanisms of cash transfer. Under this, the government seeks to involve private agencies to implement several of the basic provisioning services such as health, education, agriculture extension, skill training, environmental protection etc. which hitherto were managed by the state machinery. Here the Government passes on the funds to the private agencies towards the services offered by them. In the process the private agencies also tend to gain in terms of expanding their business or widen the net of their cliental. How would that unfold is still not clear. Pending that the debate, at present, is about harping on widening the base of effective domestic demand through creation of employment, assets, and wage income at lower end; as against focusing mainly on high technology-high value generating-production and employed geared towards consumerism within and outside the economy. 6.3 Rising Consumerism and Environment:
people, much of the response remains symbolic. The fast growing consumerism, in absence of environmental friendly technological options and commodity choices, may lead to further drag on the natural resources. Increased use of private vehicles, air conditioners and disposable consumer items including food products with higher environmental foot prints are some of the examples in this context. The poor in most cases do not have access to these commodities. At the same time there has been a small yet persistent voice that pleads for regenerating agriculture vs. input intensive agriculture in the country. These voices, at best, are provided with sympathetic hearing and a small space in planning for agriculture and allied sectors in the plan documents. Going beyond this is found difficult, as it may necessitate a paradigm shift from the input intensive growth in agriculture sector, which in turn, is deemed as an essential precondition of poverty reduction as already noted in section 3. The same holds true with respect to a number of mining and infrastructure project, which have either overlooked the environmental concerns and/or remained in limbo for the want of a clear and systematic policy for sustainable extraction of natural resources. There is indeed a real trade off between economic growth and sustainable as well as equitable natural resource management; the need therefore is to draw up a carefully calibrated plan with at least a medium term perspective. In absence of this piecemeal decisions are taken, with little transparency and commitment towards environmental compliances. This, in turn, breeds suspicion and among the local communities, who perceive them as net losers in the process of economic growth. The choice is indeed tough. Hence the decision making may go beyond the realm of mainstream economics by incorporating the real life issues pertaining to social exclusion and political compulsions within a multi-cultural democracy. 7. India as an Emerging Donor:
In 2003-04, India entered a new phase in the arena of global aid, trying to position herself as an emerging donor instead of recipient of the largest aid in the world, which of course did not mean much in terms of per capita volume of aid [Price, 2004]. Driven by what appeared as mainly image building initiative, the country moved fast towards converting this into a strategic move for claiming her `legitimate’ economic and political space in the global scenario. The most important policy instrument created towards achieving this goal was setting of the India Development Initiative (IDI) with an initial allocation of Rs. 2billion for the year 2003-04.. The initial aim was to: `attract foreign investment from the west to support Indian interests overseas and to provide assistance to other developing countries’ [GoI, 2003; Press Release]. With surging foreign exchange, India also moved towards writing off the dues of seven heavily indebted poor countries, mostly in Africa. What was however, unclear was whether India will achieve this through bilateral agreements or, jointly through multilateral mechanisms. The policy was modified by the subsequent Government, which over time has taken a more comprehensive shape. By mid 2010 India became the fifth largest donor to Afghanistan and its aid to Africa has grown at a compound annual growth rate of 22 per cent over the past 10 years [Vijaya, 2010]. More recently, India has also announced her commitment to contribute a sum of $2 billion toward the European bailout programme thus, staging a complete turn around in her role in the global aid scenario [TOI, 2011].
This section tries to understand India’s approach as an emerging donor agency with a view to find congruence between the internal as well as external policies for promoting inclusive or propoor growth in the developing economies. The Approach and Instruments: At the outset, India has chosen a rather different approach and routes for leveraging the aid programmes unlike several other emerging donor countries like China and Brazil. In the process the country has deviated from the standard definition adopted by the Development Assistance Committee (DAC) [Chanana, 2020]. At present, India’s aid programme consists of three different features: a) grants and preferential bilateral loans to Governments; b) contributions to International Organisations and Financial Institutions; and c) subsidies for preferential bilateral loan provided by India’s EXIM Bank. In what follows we present the flow of funds through different routes over a period of 7 years [See Table 8]. Table 8: Foreign Aid Related Budgets in India: 2004-2010 (Rs. Million)
Details 2010 2009 A. Foreign Aid-Budget Grants & Loans 23,834 24,083 Of which grants (%) 84.1 82.3 Contributions to IOs 5,578 5,317 Investments in IFIs 2,948 67,627 EXIM Bank expenditure 4,300 4,394 Total estimated budget 36,600 101,421 In US$ million 785 2,171 B. Loan and Guarantee Approval by EXIM Bank Loans NA NA Guarantees NA NA Total NA NA Source: Tables 1 & 2 in Chanan, 2010. 2008 26,999 65.6 12,775 30,900 5,098 75,772 1,622 NA NA NA 2007 18,133 93.7 3,550 137 2,350 24,169 517 328,045 21,994 350,039 2006 17,290 90.7 3,595 580 1,600 23,065 494 267,622 49,878 317,600 2005 21,620 79.1 3,320 180 1,717 26,836 574 104,887 43,264 148,151 2004 19,619 70.9 2,568 101 2,266 24,554 526 158,535 15,887 174,422
Though not large in size, India’s aid to Asian countries (Afghanistan, Nepal, Bhutan, Myanmar, Cambodia, Laos PDR, Vietnam etc), and also in Africa and elsewhere seeks to promote a developmental paradigm that is based on the historical experience of democracy and self reliance. It is therefore argued that the strength of India’s aid should be judged not by the volume, but should be seen in terms of `how it directs its aid and what else it offers’ [Chanan, 2010]. It is in this context, it is important to reiterate that India’s has abstained from joining the DAC; rather it has chosen to form new groups such as Development Cooperation Forum (DCF) and Global Network of EXIM Banks and Development Finance Institutions (G-NEXID). While it is somewhat premature to assess the desirability as well as effectiveness of an approach such as this, also its beyond the scope of the present analysis, the pertinent point is that deviating from the larger mechanisms, may keep open an alternative avenue for promoting global development and aid. This may have special significance at a time when the giant economies in the west are undergoing unprecedented crisis, which potentially, may have huge adverse implication on the emerging and less developed economies in Asia and rest of the world.
How far India could peruse this approach would depend on her ability to convince the policy makers in a large number of developing and also developed countries about feasibility of promoting a broad based and equitable-sustainable growth in the region. The best way to do this is of course, putting the vision of a distributive or pro-poor growth at home. Historically, India’s aid programme has laid special emphasis on technical assistance under the Indian Technical Cooperation (ITEC) under the Ministry of External Affairs. As per the official information, the ministry spends about $11million every year covering about 3000 persons globally; has offered the skill manpower to multilateral organizations like the Commonwealth, The World Bank, Asian Development Bank etc.; and provides the largest number of peacekeepers for the UN. Some of the areas of skill development and training offered by the Ministry refer to entrepreneurship development, administrative and defense personnel, and also technical education. There is still further scope for sharing a number of developmental initiatives especially in the fields of institutional innovations for rural economy, mobilization of local communities with the help of civil society organizations; planning for sectorally and spatial balanced economic development; designing of rights based programmes for social protection; and carefully planned inclusive urbanization that takes care of the rural-urban continuum rather than widening the gulf between rural and urban economies, spaces, and people. The dilemma faced by the policy makers in India is that- it has to take some hard decisions to forge a pro-poor growth agenda that was discussed earlier, and steer that in a manner that it could set a model for the rest of the emerging economies. The critical message that should go from the Indian experience is that: pro-poor growth is different yet feasible, and also inevitable for sustenance within a democratic framework. India has fairly rich and varied experience to demonstrate potential of an approach such as this; nevertheless it has to take certain decisive actions before it could create a convincing model for others to follow. 8. Concluding Remarks
The forgoing analysis high lighted some important aspects of India’s trajectory towards Emerging Middle Income Economy. This, no doubt, is a laudable achievement, especially given the scale, diversity, and socio-political milieu characterizing the country. With 38 per cent of population, India’s middle class consists of a huge number-about 418 million persons by 2005. With persistent high growth momentum, this opens up significant opportunity within and outside the Indian economy, especially at a time when the developed economies of the world are yet to get out of the deep crisis of 2008. Ironically, the opportunity offered by the emergence of middle class in the country, has thrown up a huge challenge and a serious policy dilemma as the rise of the middle class has taken place, if not entirely caused by, an almost equally large proportion of those below the international poverty line of $ 1.25/day and another 23 per cent in the category of vulnerable (i.e. between 1-2 $/Day). This essentially implies a trade off between growth per se and distribution or adopting an approach of distributive growth. It absence of a counter narrative, it is difficult to discern whether and to what extent the rise of the middle class is at the expense of the poor, this by itself
does not rule out case for an alternative growth agenda where the poor may have beniftted more than what they have till now. The contemporary policy dilemma therefore involves making a difficult choice for shaping the future course of economic growth. Apparently the choice is between driving the growth to cater to the requirements and aspirations of the upper middle and rich segment of the population, which have substantial purchasing power to push the economic growth, or to orient the growth towards provisioning the basic needs, including employment, among the poor and the vulnerable. There is real trade off and the choice is difficult. It is therefore imperative that the trade off are properly identified and analyzed and the decisions are made based by taking a holistic view of the choices not only in the arena of the economy but, also going beyond that. The analysis in the paper has tried to unfold the experience of India’s high growth trajectory in the recent past. The important observations emerging from the analysis are: 1. Poverty in India had halved over a period of three decades since the mid-seventies. The pace of growth however, has slowed down since the mid-nineties. The trend rate of poverty reduction during 1980 and 2004-05 was about 0.7, which is fairly low. Along with emergence of the middle class, the high growth trajectory has accentuated inequity across states, communities, and rural-urban locations. Poverty reducing migration has remained confined mainly to big cities; in fact smaller cities and towns and also migration seem to have slowed down and/or stagnated in the last decade. The high growth trajectory has brought into its fold skewed pattern of employment generation; a few jobs with very high salaries and earnings concentrated in large cities, combined with a large segment of informal workers in urban and rural areas. Overall one may observe widening of the gap between those included (or moved up) in the process of growth and those excluded from that. The migration-urbanisation combine is poised with certain peculiarities, which make it imperative to build further upon the existing rural-urban linkages. The recent evidence on increased number of small towns is perhaps an indication of a process such as this. It is imperative to look at the process closely and build further on that. A large number of anti-poverty programmes/policies have been undertaken over a long period of time. Broadly these could be grouped into three: growth and percolation mechanisms; special schemes; and rights based programmes. There are indeed some good lessons to learn though, several of the policy initiatives are rather too new to be made amenable to a critical assessment. It is difficult to clearly identify the policies that may work for the poor and for those in the lower end of the middle class. Broadly speaking one may argue that the rights based
approach for social protection (entailing employment, food distribution and nutritional support; and housing), and provisioning of basic amenities like drinking water, electricity, roads and transport facilities, cater to the poor (< 2$ day). Whereas the programmes that help promoting agricultural productivity through high value chain, providing social security to informal sector workers, and above all skill training for educated youth may cater mainly to the lower middle class. 8. A quick look at the case of high growth trajectory in Gujarat suggested that: growth is important for creating job opportunities, but those opportunities need to be carefully calibrated by appropriate institutional mechanisms so as to make that work in favour of the poor workers and migrants. By mid 2010 India became the fifth largest donor to Afghanistan and its aid to Africa has grown at a compound annual growth rate of 22 per cent over the past 10 years. India has chosen a rather different approach and routes for leveraging the aid programmes unlike several other emerging donor countries like China and Brazil. It is pertinent that deviating from the larger mechanisms, may keep open an alternative avenue for promoting global development and aid to promote indigenous growth by strengthening the local resources including manpower. An approach such as this may have special significance at a time when the giant economies in the west are undergoing unprecedented crisis of the double dip, with a potential adverse implication on the emerging and less developed economies in Asia and rest of the world. It is however, not clear how India could actually peruse this approach given the limited financial and also political leverage given the geo-political scenario in the region. There is still further scope for sharing a number of developmental initiatives especially in the fields of institutional innovations for rural economy, mobilization of local communities with the help of civil society organizations; planning for sectorally and spatial balanced economic development; designing of rights based programmes for social protection; and carefully planned inclusive urbanization that takes care of the rural-urban continuum rather than widening the gulf between rural and urban economies, spaces, and people.
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Bhattacharya and Sakthivel (2004).
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