The time has come to broaden the focus from just growth to the quality of growth
T N Ninan / New Delhi Jan 02, 2010, 00:51 IST
The big economic challenge of the past two decades was to improve efficiencies and achieve faster growth. Both goals have been achieved in substantial measure. Savings and investment rates have shot up, laying the ground for the GDP growth rate to accelerate from under 6 per cent to 8.4 per cent in the past seven years. The expectation now is that sustained 9 per cent annual growth is possible. The other challenge was to end the foreign exchange problem, which had brought India to near-bankruptcy in 1991. That too has been achieved, with a manageable current account situation and large net capital inflows. These results came from greater market-orientation, freer rein to the private sector, and opening up the economy to the world. All of it was needed, and the results are there for everyone to see. The largest reductions in poverty in recent decades have been achieved by the fastest-growing economies. But given the evidence of rising inequality, much of which has a state or regional dimension, and the threats posed by those excluded from the benefits of rapid growth, the time has come to broaden the focus, from just growth to the quality of growth. It is also time to assess what is urgent in all that remains undone.
Hence, the following four propositions for the new decade. First, since India’s enterprise sector works better than its government sector, it is vital to focus attention on improving government systems, processes and capabilities. Without this, it becomes impossible to create a modern physical infrastructure, provide quality social infrastructure (health care, education services), and put in place the required institutional infrastructure, including policies that bring the best out of the private sector.
Second, it is not enough to free the Tatas, Ambanis, Birlas, Mittals and others to compete; the narrow base of large private industry and the problems in public-private partnership arrangements make it essential that quality public institutions continue to get built. After all, no privately created management institute other than one has been able to replace the Indian Institutes of Management at the top of the B-school rankings. It needs to be asked why the country could create five Indian Institutes of Technology in the late 1950s and early 1960s, and enterprises like Bharat Heavy Electricals in the 1960s and National Thermal Power Corporation in the 1970s, and why it is so difficult to replicate them now; why it was possible to set up the Indian Agricultural Research Institute then, and why agricultural research is floundering today.
Third, no one can be proud of India in 2020 if the eastern hinterland is not brought up to speed. It is not possible to solve the problems of Bihar by forcing Biharis to go to Mumbai; they need options in their own state. Once again, it is public policy that has failed. The surprising truth is that fiscal transfers from the Centre to the states have worked against the poorest states; if Maharashtra got the same per capita fiscal transfers that Bihar did, the story in that state would have been the same as in Bihar (as the Thackerays should be told). As in so many other things, the starting point has to be public investment.
Finally, India as a lower-middle income country has reached the stage where it should have a proper social security system to take care of those who cannot take care of themselves. Not boondoggles marked by leakages and misallocations, not subsidies that mostly go to the non-poor, but straight fiscal transfers that go directly to the poorest.
These are not new issues, but they will define the India of 2020.
I think that Business Standard and its editors , its guest writers and columnists should devote some time and monitor the progress being made by Government of West Bengal. Bihar & Jharkhand can be very well managed but difficult to say about West Bengal due to political reasons.
Sir,
In my opinion, instead of export driven growth or consumer driven growth the focus should be need driven growth. Identify the needs and then find ways to fulfill it.
Else we face ecological and economic disaster.
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