India's double-digit
dream By Paranjoy Guha Thakurta
NEW DELHI - As India's leaders gear up to
boost the country's gross domestic product growth
(GDP) to a dizzying 10% per annum, analysts warn
that although double-digit growth is achievable,
the country's problems of poverty, unemployment,
inequality and slow rural development are unlikely
to disappear any time soon.
On October 18,
presiding over a meeting of India's Planning
Commission, Prime Minister Manmohan Singh said 10%
economic growth "is an ambitious target, but I do
believe it is a
feasible one". His remarks
came just after the commission approved the
"approach paper" to India's Eleventh Five-Year
Plan, which starts on April 11 next year.
India is one of several countries that
follow planned national development plans set for
five-year periods.
The document states
that India will aim for an annual growth rate of
9% over the 2007-12 period, with the economic
growth rate touching the 10% mark in the last two
years of the plan period. If these targets are
met, India's growth rate would become comparable
to that of its bigger neighbor, China, the only
country that has in recent times been able to grow
at 10% or more on a sustained basis for over a
decade.
Singh, a former World Bank
economist regarded as the architect of India's
liberalization, predicted that India "would be
finally emerging into the front ranks of
fast-growing developing countries". Every
five-year plan that the Indian government has
formulated in the past has set growth targets that
were never achieved. But independent economists
believe that the new growth targets will not only
be achieved, but also perhaps exceeded, provided
the government substantially improves the working
of the country's inadequate and notoriously
inefficient social and physical infrastructure.
"Given the fact that for the first time in
the nearly six-decade-long history of
[post-colonial] India, the country's economy has
grown by 8% three years in a row and is almost
certain to grow at a similar pace during the
current financial year [ending March 31, 2007], I
think we can confidently aim for a 10% annual
growth target," said K Joshi, principal economist
with Credit Rating and Investment Services of
India Ltd, now controlled by Standard and Poor's,
the reputed US credit rating firm.
Joshi
said the 8% average rate of growth that had been
achieved in real terms over more than three years
was especially significant because this had
occurred despite crippling power shortages (of at
least 10% of total demand, often more) and
spiraling prices of petroleum products that had
fueled inflationary pressures. India currently
imports three-fourths of its requirements of crude
oil. The inflation rate in the country is at
present in the region of 5% to 6%.
"A real
rate of GDP growth of 10% is not just possible;
this figure could go up to 12%," said Manoj Pant,
professor of economics at New Delhi's Jawaharlal
Nehru University. "The issue is not really one of
the growth rate but whether the pattern of growth
is inclusive so that a dent is made on poverty,
unemployment, inequality and rural development."
Pant points out that in India as well as
in other countries, rapid growth of GDP has taken
place without a significant fall in levels of
poverty. Currently, at least one out of four
persons in the country of 1.1 billion lives below
the internationally-defined poverty line of US$1 a
day. "Whereas it is possible to grow at 10% and
not make a dent on poverty, the reverse is not
true - it would not be possible to significantly
reduce poverty if the economy does not grow at
10%," says Pant.
Whereas India's
manufacturing industry as well as its burgeoning
services sector - including the much talked-about
computer software and information technology
enabled services businesses - have been growing at
over 10% a year, the agricultural sector has
lagged at a niggardly 2% annually. The share of
the farm sector in the country's GDP has declined
from 40% to 20% over the past decade or so, but
the share of the population dependent on
agriculture has not dropped proportionally - from
roughly 70% to around 60% - over this period.
Manmohan himself acknowledged that "there
is a crisis in agriculture in many parts of our
country". The day he approved the approach paper
to the Eleventh Five-Year Plan, he told a
conference: "The more I travel to interior areas
and meet farmers, I get the feeling that in many
parts agriculture is being carried out in adverse
conditions. The problems may be attributable to a
wide range of causes but the end result is that
there are large tracts where farmers seem to be in
acute distress."
In recent months,
Manmohan has travelled to different parts of the
country such as the Vidharba region in the western
Maharashtra state, where thousands of farmers have
committed suicide after failing to repay loans
obtained from local moneylenders at usurious rates
of interest. Federal Agriculture Minister Sharad
Pawar, who comes from the same province, admitted
in parliament that at least 100,000 indebted
farmers had killed themselves in various parts of
India between 1993 and 2003.
The prime
minister said that farmers would have to be paid
remunerative prices even if this meant hardship
for others who had to pay more for food. "This may
hurt some sections of the middle class to a small
extent, but it benefits the farmers who are the
backbone of our economy," Manmohan observed. "We
need a balanced approach where we provide for food
security for the poorest sections without
compromising the returns to farmers - our strategy
must be based on improving the real incomes and
the quality of life of our farmers."
The
approach paper to the Eleventh Plan has set a 4%
target for the growth of the farm sector. It talks
of doubling the country's per capita income by
2017 and the creation of 70 million new jobs over
the next five years that would, in turn, reduce
the proportion of the educated unemployed in the
total workforce to less than 5%. The paper sets
2009 as the target year by when clean drinking
water will be provided to all Indian citizens.
As far as the social sector is concerned,
the approach paper states that the Indian
government intends to reduce the drop-out rate of
children in primary schools from 52% at present -
the highest in Asia - to 20% by 2012. By then, the
literacy rate is slated to rise to 85% from around
two-thirds of the population at present. By the
end of the Eleventh Plan, New Delhi hopes to bring
down the infant mortality rate to 28 per 1,000
births and the maternal mortality rate to one for
every 1,000 births.
Regarding physical
infrastructure, the Indian government states that
there would be electricity in each of the
country's 600,000 villages by 2009, a telephone
line by November 2007 and broadband connectivity
by 2011-12. By 2009, the government is hopeful
that there would be proper road connections to
every village with a population of 1,000 or more.
The approach paper states that there would
be considerable improvement in the country's
environment by 2011-12. Green cover would be 5% of
the total land area, all urban waste water would
be treated before being discharged into rivers and
the air quality in major cities would be on par
with standards laid down by the World Health
Organization.
