Spotlight

New Delhi, 7 July 2017

Development Dilemma

INDIA VS WESTERN WORLD

By Dhurjati Mukherjee

Well-known economist Prof Michael Porter of Harvard while addressing the National Competitive Forum recently pointed out that India cannot succeed unless the government creates a business friendly environment. “Business can create wealth. Government can create wealth ....We can’t antagonise business and create prosperity”. What he meant was that more incentives should be given to the business class so that there is more creation of wealth. But Porter did not mention was what would happen to the wealth created and who would benefit from it.        

Western economists regularly come to India to lecture the need for giving more and more incentives to business and our political leaders and bureaucrats listen to their advice. We still vouch for high growth and not grass-root development without understanding which section of the population should benefit from India’s progress. This has been a fallacy of Indian planning and, as is well known, the benefits of development has not reached the poor and the economically weaker sections.      

It is ironical that the Harvard economist was making these observations about India’s economic progress when jobless growth has emerged the biggest challenge. The Congress has criticised the government’s commitment of creating two crore jobs every year. It is indeed difficult to understand two things -- give more incentives to industry while also create employment opportunities.

Today’s industry is mechanised and has few opportunities for employment. The track record of some of the business houses is less said the better because of its dishonest methods of functioning. One may also consider the fact that tax-GDP ratio in India is substantially lower than in China, Brazil and other rapidly developing countries that clearly prove the upper sections of society are under taxed or evade tax.

Business houses that have diversified into health care and education have availed of lots of benefits from the government and are now fleecing the middle and upper sections of society. The wealth addition has gone into the coffers of these business houses and not benefitted society in any way. Even the quality of their services leaves much to be desired.

The strategy that has been followed with industrialisation, on the one hand, and digitisation, on the other, can hardly help in employment generation. Porter is possibly not aware of the population and workforce dynamics in this country compared to that of America. The huge unemployment and underemployment here is indeed a big problem and the solution lies in adopting a completely different approach to planning that may even stagnate our GDP growth.

The focus of our strategy needs to shift from giving impetus to heavy industrialisation to encouraging micro, cottage and medium industries, primarily in rural and semi-urban areas, as also start-ups that could generate employment opportunities. Moreover, special incentives should be given to labour intensive sectors so that there is absorption of labour. Meanwhile, skill upgradation has been taken up by the government so that there is sufficient skilled manpower in sophisticated areas.

The other component of our development strategy has to focus on the rural sector, specially giving focus to its infrastructure needs. After a long time, the present government in the last two budgets has allotted maximum resources to the rural sector and has been trying, through its diverse programmes and projects, to promote development at the village and/or block level.  

The rural sector has to be transformed as engines of growth with participation and involvements of the people. Instead of centralised control, powers have to be decentralised, right down to the panchayats, which was visualised by Gandhi, Jayaprakash Narayan and even our late President Dr APJ Abdul Kalam. But over the years, the yearning for power and control of authority has motivated States not to decentralise authority to the panchayats while they claim for more power and resources from the Centre.             

There has been some change in this direction due to the fact that years’ of planning and development has not had the desired effect on say 40 per cent of the population. It is surprising that most economists, influenced by Western thoughts, have tried to implement their strategy in this country. The high density of the population living mostly in rural areas, the high incidence of poverty and the growing unemployment and underemployment has possibly escaped their attention.

The idea of universal basic income has gained credence recently. But for that to become a reality, subsidies to better-off sections have to be brought down -- though some initiative has already been made -- while tax collection has to be substantially improved. With resources available with the government at this point of time, it may not be possible to focus on public goods and welfare services and also ensure universal basic income for all.

The geographical and population position, the rural population and their livelihoods and the undeveloped social infrastructure in villages are not quite understood by most of our economists and planners -- coming from urban backgrounds -- who visualise development as something that can accelerate growth without considering who benefits from following such a path. Thus foreign experts advice us, based on their expertise and knowledge, on following the same strategy here where population pressure is indeed a big problem.

The proper distribution of resources and ensuring that it reaches the intended beneficiaries is indeed a big challenge for the government. Lack of poor governance and political interference in siphoning of resources for the poor needs to be checked but unfortunately there is lack of sincerity in executing these projects and schemes. 

At present economic success and progress are measured almost entirely through concepts like GDP, which accounts merely for the total material exchange in society and is blind to the dimension of actual social welfare and ecological sustainability. As Mark Lutz aptly pointed out: “It is important to realise that a line of universal material abundance is not a realistic ideal (or real development) for the planet. Life’s destiny for the human being must be something other, something more meaningful, than that”.

Like Adam Smith, who cautioned us that wealth are mere ‘baubles’ and trinkets of frivolous utility, most other philosophers also outlined that higher pleasures have no value. This is why, Lutz concludes in his book, Economics for the Common Good, “what is at stake is not just a new world order but the world itself.”                 

There has been serious debate the world over in understanding real development that would benefit the common man. Mention may be made of the The Other economic Summit (TOES), a platform of alternative economists, greens and community activists, who, in the words of James Robertson, “is grounded in social and spiritual values to address concerns the G7 consistently neglects such as poverty, environment, peace, health, safety, human rights and democratic global governance.”   

Whether this worldwide movement would have any effect on conventional economics and change the economic thinking of nation States, including India, remains to be seen. However, as regards our country is concerned, it would be pertinent to refer to Mahatma Gandhi who stressed on political and economic decentralisation and involvement of the people in the decision-making process so that their actual demands and needs are given priority in planning and development.

It remains to be seen when the strategy of alternative economics that was also propagated by Gandhi years back would be implemented in the country and how soon. But if the government is serious about poverty eradication and improving the living conditions of the people, it would be better if the new strategy of development is adopted. ---INFA

(Copyright, India News & Feature Alliance)