Open Forum

New Delhi, 30 January 2019

Economic Reality

NEGLIGIBLE PROGRESS OF POOR

By Dhurjati Mukherjee

As the interim Budget is expected to be presented later this week, one may analyse the economic scenario though there has been high growth (7+) and the government carried out some significant important reforms like the GST, bankruptcy code and lowered inflation. However, while the Government has initiated fiscal discipline at the Centre, some States continue with their profligacy. The path as laid down by the Finance Commission of 5 per cent fiscal deficit and 60 per cent debt-GDP ratio has been correctly defined and States need to follow this judiciously.

For balanced economic growth, it is essential that such growth must be spread across regions and percolate down at the grass-root level. This obviously calls for creation of massive physical and social infrastructure, mostly in the rural areas, to reinvigorate the economy and enhance the living conditions of the impoverished and neglected sections of society.

In this connection, it needs to be mentioned that in view of reports, specially the recently released Annual Status of Education Report (ASER), there is need for the Central as also State governments to get involved in improving school education by extending Niti Aayog’s School Education Quality Index across the country. Governments should remove all input based mandates on schools – they should focus on outcomes.

Similarly, considering the poor condition of health facilities in rural areas, there should be plan to have one hospital in every sub-division all over the country and there should be a speciality division in every district hospital. Moreover, funds should be made available to the State governments to modernise health centres – to start with at least one in every block – so that villagers do not have to travel a distance for getting treatment. Though a recent national plan has been rolled out, it has to be ensured that affordable medicines and medical equipments and devises are made available at the block hospitals or health centres.          

A most distressing aspect of the NDA’s performance is the job scenario and increasing unemployment and underemployment. Though there is no official data yet about the post 2016 unemployment situation, the Centre for Monitoring Indian Economy (CMIE) found the rising unemployment figures owed not just to lack of jobs but also to people’s reluctance to accept jobs they deemed unsuitable. As is well known, new jobs are created but far less than the requirement. Private sector investment is not growing to the extent that it can create enough jobs as this sector is harping on contract jobs.

President Ram Nath Kovind painted a rosy picture of rapid development and stated that “India is at the doorstep of eliminating extreme poverty for the first time in memory. But analyzing the recently released ‘Oxfam Inequality Report’, it becomes quite clear that though statistically it can be proved that the numbers of poor are declining, their social and economic conditions are no less improved. This is demonstrated by the Report’s finding that wealth of top 1 per cent increased by 39 per cent, whereas wealth of bottom 50 per cent increased by a dismal 3 per cent. Also the fact that India has been ranked at the 103rd position among 119 countries on the Global Hunger Index with “serious levels of hunger” is indeed quite distressing and may not be in tune with the President’s observation.

In this connection, the report highlighted India’s dismal spending in healthcare and education among others as public spending on health continues to hover around 1.3 per cent of the GDP and also fails to spend minimal norms set by the Right to Education Act. Some of the notable findings which should be a pointer to politicians and planners are: 

Six  crore Indians, who make up the poorest 10 per cent of the country, continued to remain in debt since 2004; As inequality rises, women and girls are hardest hit by rising economic inequality; Children from poor families in India are three times more likely to die before their first birthday than children from rich families; Tax rates for the rich and corporations had been cut in recent decades and when governments fail to tax the wealthy, they pass the tax burden on to poor people through consumer levies like value-added tax.

It is significant to mention here that as per the Report, getting the richest to pay just 0.5 per cent extra tax on their wealth could raise more money than it would cost to educate all 262 million children out of school and provide healthcare that would save the lives of 3.3 million people. The ‘Move Humanity’ campaign estimated that if the wealth of the world’s billionaires were to be taxed an additional 10 per cent, this could raise $100 billion annually.

Added to this inequality is the widespread farmers’ distress, as the smaller ones are at the receiving end as they get inadequate returns and cannot sustain themselves. As per Shanta Kumar committee report only 6 per cent of farmers’ benefit from minimum support price (MSP) and mainly in paddy and wheat. According to a kisan leader, “we have lost Rs 1 lakh crore in every crop season because of the cost formula.” Moreover, he pointed out that though the government said all farmers benefit from procurement that really doesn’t happen, as many farmers feel “We are in debt due to government policies.” It is significant to mention here that banks write-off loans by corporates who haven’s repaid and then say it’s just a technical entry and recovery of these loans may be around 15 to 20 per cent. 

One may refer to a recent interview of BJP leader, Varun Gandhi, who aptly pointed out: That the Indian farmer requires a loan waiver today is a foregone conclusion with the incidence of debt in farm households increasing from 24 per cent in 1992 to 52 per cent in 2016. The average debt among agricultural households is about Rs 1 lakh and above whereas the income is as low as Rs 9000 per month. In other words, average debt is roughly the annual income. 

Thus, it can be said that though the Government may claim of achieving 7 plus growth that is even faster than that of China, the conditions of the poorest segments of society are yet to improve. A large section of economists have found that growth is not an indicator of development. Growth and development are not synonymous and the state of grass-root development that benefits the people at the base level has been rather poor in the country over the years. It is indeed surprising that high GDP growth finds reflection in development matters, obviously with a dubious intent.

Though the Government has been announcing various schemes, a total of around 400, most are poorly funded, badly administered and inefficient. Meanwhile, the flagship scheme, MNREGA, has been reported to face serious financial crunch due to inadequate funds made available.

It would be better if the number is reduced and those that deliver services at low cost should be expanded. The choice between cash and kind should be left to people’s preferences. Moreover, the services of voluntary organisations should be enlisted for ensuring that beneficiaries are getting due benefits.---INFA

(Copyright, India News & Feature Alliance)