Rags remain India's true story
By Kunal Kumar Kundu
BANGALORE - India continues to be the toast of the world, given its high growth
rate, even in these most difficult periods. Indeed, recent lower growth
notwithstanding, the resilience exhibited by the economy is praiseworthy. From
the growth angle, the future does seem bright, as the original sardar of
India's economic reform - Dr Manmohan Singh - is at the helm of the government.
And, that too, for a second consecutive term as prime minister.
Indeed, things seem to be going well for India. Or are they? The response
depends on which section of the population the question is thrown at. A
comparatively smaller section of the population has indeed benefited from the
high growth rate. But for a larger, poorer section, reform has hardly made a
dent. Manmohan always emphasized reforms with a human face or more broad-based
growth.
In reality, after nearly 20 years of economic reforms, the plight of
a vast majority of the population hardly shows any signs of improvement. An
economy that is hailed as an emerging global economic superpower, India lags in
various social dimensions.
Some hard facts drive home the point.
India still has a highly undesirable rate of under-nourishment. Although there
has been some improvement, other countries have moved at a much faster pace and
many countries have overtaken India, with a few that were much worse off than
India now pipping it to the post. (Click
here for table.)
The malnutrition rate is one of the highest anywhere.
India also has one of the lowest routine immunization (RI) rates in the world.
Estimates from the 2005-2006 Indian National Family Health Survey (NFHS-3)
indicate that only 43.5% of children aged 12-23 months were fully vaccinated
(received BCG, measles, and three doses of DPT (covering diphtheria, whooping
cough and tetanus) and polio vaccines), and 5% had received no vaccinations at
all.
Given an annual birth cohort of 24 million surviving infants and an
under-five-years-old mortality rate of 74/1,000, this results in over 12.5
million under-immunized children each year. As per WHO/ UNICEF estimates (2006
estimate), India's immunization rate compares quite unfavorably with even many
African countries.
India also ranks low in infant mortality rate, even lower than Bangladesh. (Click
here for table.)
Despite significant economic progress, a fourth of the nation's population
earns less than the government-specified poverty threshold of US$0.40 per day.
Official figures estimate that 27.5% of Indians lived below the national
poverty line in 2004-2005. A 2007 report by the state-run National Commission
for Enterprises in the Unorganized Sector (NCEUS) found that 25% of Indians, or
236 million people, lived on less than 20 rupees per day with most working in
"informal labor sector with no job or social security, living in abject
poverty".
In fact, when the World Bank revised upward its international poverty line norm
from $1 a day, they found that nearly five out of 10 Indians were living on
less than $1.25 (about 55 rupees) a day. What is worse, their number is on the
rise, despite a fall in percentage terms.
In an update on its "International Comparison Program", the World Bank said
that out of an estimated population of about 1 billion in 2005, the number of
poor people living below $1.25 a day had increased from 421 million in 1981 to
456 million in 2005. This is the biggest challenge facing India.
The study also pointed out that even as the number of people living on the
earlier poverty line norm of less than $1 a day had come down, there were still
a large number of people living just above this line of deprivation and their
numbers were not falling.
The revised estimates on poverty based on new purchasing power parity norms
show that India's poverty rate fell by a mere 19% between 1990 and 2005 as
compared with a global decline of 38%. In terms of a dollar a day, the number
of people living below the poverty line decreased from 296 million in 1981 to
267 million in 2005. In comparison, China achieved a much faster rate of
poverty reduction.
It is important to note that at the time of India's independence in 1947, the
total population of the country was about 330 million. What this means is that,
after more than 60 years of independence and nearly 20 years of reform, an
entire independent India lives in abject poverty.
Even clean water supply is a scarce commodity. The standards of health and
literacy also are dire.
More importantly, the post-reform period has also failed to bridge the
rich-poor gap. This can be best understood by looking at the trend in regional
disparities. The richer, better-run and more literate states - broadly, western
India - have proved more attractive to investors than the poorer, more chaotic
ones in the east.
Between 1999 and 2008, when the Indian economy grew at an average annual rate
of 7.3%, many richer states grew faster: Gujarat at 8.8%, Haryana at 8.7% and
Delhi at 7.4%. Among the poorest and most populous states, Bihar grew at 5.1%,
Uttar Pradesh at 4.4% and Madhya Pradesh at 3.5%.
Does this mean that reforms have been a failure in India? The answer would be
both "yes" and "no". "No" because the post-reform period has seen some
structural improvement in the Indian economy, thereby leading to a higher
growth path. "Yes" because policymakers have clearly exhibited that they do not
have the stomach for difficult, yet essential reforms.
Administrative reform is a case in point. This has been amply made clear by a
recent survey of Asian civil servants by the Hong Kong-based Political and
Economic Risk Consultancy. In a survey of 12 nations, India received the wooden
spoon, with its bureaucracy found to be the least efficient.
"They are a power center in their own right at both the national and state
levels, and are extremely resistant to reform that affects them or the way they
go about their duties," said the report, which involved inputs from more than
1,200 expatriates working in these countries.
This is surely not a surprise as Indians have good experience of the slothful
ways of the their bureaucracy. Unfortunately, the amount of economic output
lost due to bureaucratic delays cannot be readily calculated and hence cannot
be dealt with effectively. But if some studies are to be believed, improvement
on this front alone could easily add a couple of percentage points to India's
gross domestic product growth. Add to that the vested interests of politician
policymakers and it seems almost a miracle that India manages to grow rapidly.
India's infrastructure is a famous victim of stifling red-tapism, as a result
of which India always needs to play catch-up and is perennially an
infrastructure (physical) deficit country. However, the biggest victims of
bureaucratic inefficiencies are the delivery mechanisms of various
social-sector projects.
As a result, despite substantial amounts of money being earmarked and
officially spent on social projects, the intended beneficiaries are mostly
bypassed. In the early 1980s, Rajiv Gandhi famously stated that only one-tenth
of every rupee spent went to the intended beneficiary. That was in the
pre-reform period.
Nothing has changed in the post-reform period. Indeed, lagging social
indicators do point toward the sheer lack of administrative capability and
proactive development delivery mechanisms pan-India. That is because most civil
servants are politicized, personalized and corrupted.
Kunal Kumar Kundu, a former senior economist with a leading bilateral
chamber of commerce in India, now works with the Knowledge Service Division of
Infosys BPO Ltd. He has a Masters in Economics with specialization in
econometrics from the University of Calcutta. The author here is expressing his
personal views.
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