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Friday, March 09, 2012

Whither India - why not focus on Human Well-being (Happiness) and let it take care of GDP?


Outline

The other day we were discussing the issue of development among colleagues and few mentioned that India has really developed in last 60 years.  Out of my inquisitiveness I asked how do they defend this view, their indicators were like, use of mobile, availability of ice-cream, motorcycles, cars and such other products.  I put a simple question before them, before 30 years what was the state of education and health in the villages and what it is today.   To my surprise I could not get the view of any of them on this.  Certainly there is huge wealth creation which has happened in all these years, more in the real monetary terms.  The availability of all branded products and services across different industries, proliferation of multi-national corporations, increase in the number of cars, television, mobiles, and such other products might surely reflect positive side of an economy like that of India, might surely boast of higher GDP growth, however one needs to look at its sustainability, the reasons behind and then reach to a conclusion – are we really developing fast, are we really on the right path.  This is the motivation of this small write-up to vent my thoughts on the issues of concern and propose in my little way, the remedies to make it more sustainable. 

My line of argument is we can’t afford to boast off a high GDP growth until we improve the basic social infrastructure in the villages, mind it India still lives in villages.  Still we have more than half of our children who are undernourished, still we have more than half of our primary schools where there is only one teacher every two classes, many of the schools in the villages have only one teacher and many of the primary health facilities in the villages are in shabby conditions without proper monitoring of the staff employed there.  Asia’s second-largest slum is here, in the world’s fastest-growing democracy.  A nation that is a burgeoning knowledge power also has the largest number of school dropouts in the world.  Our biggest businesses are building international brands, yet red tape continues to throttle the new entrepreneur and frustrate the small business owner.1  This brief piece is just to highlight what has happened and what we should be doing now.

How we grew

India is a great country, land of opportunities, aspirations and a huge market.  When I was young, I grew up in a time, when our elders use to say that India was once called a golden bird, it was a land where the rivers of milk were flowing, and it was a great rich country known for its cultural, aesthetic, family, social, secular, and moral values.  This land was ruled by different leaders who made their empires by imposing different types of taxes on the residents.  The testimony of this fact is witnessed through the historical buildings which were constructed out of the wealth created through revenues generated by the kingdoms.  The leaders or rulers of these times boasted of their power through their armoury, huge palatial palaces, extravagance in expense on showing off, carrying on with their eccentricities and the size of exploited citizens/followers2.

Much of the tangible wealth generated was used and taken away by the Britishers while they ruled India through East India Company.  Though the company had never thought that they would be leaving this country ever however through the efforts of nationalist movement led by Mahatma Gandhi which was dominated by his philosophy of non-violence, the Britishers were compelled to leave India. India got independence and followed the development path based on the premise of mixed economy and socialist pattern of society.  It was Jawaharlal Nehru who spearheaded this development path in the capacity of the prime minister of India in 1947.  The process of developing different sectors of economy began.  The planning commission was set up, public sector undertakings were started and policies were put in place to develop infrastructure to facilitate the growth of different sectors of economy. 

Amartya Sen3 examines the historic ‘tryst with destiny’ speech made by Nehru on the midnight of the 14th August through three criterions viz., practice of democracy, removal of social inequality and backwardness, and achievement of economic progress and equity.  So far as practice of democracy is concerned, he seem to be reasonably satisfied, however on the cause of removal of social inequality and backwardness, he shows his reservations.  We have not been able to achieve much on this count, especially when we look at China.  We have not been able to tackle on the issue of removal of poverty and developing a sustainable social infrastructure. As far as economic progress (which is reflected through GDP) is concerned, India seem to have done better than many other countries and that too in the last 20 years in the wake of globalization and liberalization initiatives of different governments at the helm of affairs.  As Sen4 mentions - the overall performance of the economy may not have matched that of post-reform China (with its sustained growth rate of 8 to 10 per cent a year), but India’s move from the rigid box of a 3 per cent growth rate to the 5 to 8 per cent arena is certainly not a negligible development.

There has been a visible growth in the GDP of India however this growth has not resulted in improving the well being of people as expected.  India still ranks much lower in Human Development Index (119th) as compared to many of the countries which have much lower GDP growth.  It clearly indicates that our policy framework has somewhere missed on the development of the social sector as compared to many other countries. Further when one looks at the projections by PriceWaterouseCoopers5, it is visible that India shall be second largest economy in the world after China in 2050 on the basis of the GDP at PPP (at 2009 prices).  The economists and the Indian policy makers shall be very satisfied looking at this projected GDP in the years to come but one would have to see the social conditions to judge and reach to a conclusion whether we would really be having a developed economy by that time.  I have my own reservations on this and the primary reason of this is that the growth of GDP has not really been through the means which are sustainable.   Quite interestingly the black economy is operating parallel to the mainstream economy.  The money goes out of the country through tax evasion, crime and corruption6 and is brought back through foreign direct investment for financing industries through Mauritius route.  It has fuelled existing growth of GDP which is based on the basic premise of black money.    

Such growth of GDP has certainly resulted in creation of ample opportunities for the youth in the urban areas.  The farmers who are wealthy, have started shifting to urban areas in search of greener pastures, farmers who do not have enough money are not able to send their children to schools in the adjoining town areas where private education is available at higher price, least to say about the health infrastructure in rural India where the availability of health facilities and medicine, attendance of medical staff is very poor. 

Where did we reach so far

While I was doing my college, it was taught to us in the course on economics that India is a rich country, while its residents are poor.  However Gurcharan Das7 writes that India’s strength is its people and its weakness is its governance.  The potential level of people in India is immense; their ability to perform is beyond any doubt as it is quite visible that Indians are dominating in their respective areas especially when they are working outside the nation.  India has produced some of the best entrepreneurs who have excelled in their ventures.  The governance deficit as observed in India has somehow influenced the mindset of people to make money by any means.  The legal system is such that one can easily get away with all kinds of excuses even when one is found guilty of committing a wrong. 

The focus on GDP has resulted in concentration on economic well-being and we have moved away from our community values to more materialistic values.  Everything has a price tag, be it relationships, favors, or gratifications.  Here we can buy the ‘cooperation’ of the income tax official; we can buy driving licenses; we can pay our way out of having to do pollution checks on our vehicles8. The collectivist culture is flaunted in such a way that the commodity like favor is in great demand and is available cheaply.  The corruption is at rampant since only wealthy or rich (monetarily) are respected in the society.  Everybody seems to be after money which has somehow eroded strong human values such as honesty, truthfulness, and integrity.  The impact these policies (economic reform – globalization, liberalization & privatization) had on most members of a class which for quite some time now had quite demonstrably surrendered all pretence of idealism or morality or social sensitivity on the twin altars of self-interest and material well being9The phrases like inclusive growth, equitable distribution, and social development are just there to serve for their inclusion in the policy documents as catchy jargons which are much beyond reality.  Consumerist culture has plagued the social fabric of Indian society as we have started strongly believing that the more we consume we become more developed.

It is also surprising that the government has got into the thinking of redefining poverty and is boasting that poverty status has improved significantly in the last six decades.  The methodology of drawing poverty line (below or above) is being discussed at length as there are differences between the World Bank, Lakdwala methodology and Tendulkar methodology. Montek Singh Ahluwalia told the Supreme Court that to survive in urban India one requires Rs 20 per day as against Rs 15 in rural India, which is less than one third of what World Bank projects.  One of the members of the National Advisory Council, Harsh Mander says – The government has failed to provide estimates of poverty and identification of poor households.  Tendulkar Committee’s benchmarks for identifying poor are at a ridiculously low level.  For a person to manage his existence, he needs to earn at least $2 per day and if that is taken as the benchmark, then 74 per cent of the people in India are living at BPL levels, and not 37 per cent, as the government is projecting.’10 

It seems that the government is trying to defend the argument that poverty has been alleviated significantly in India through its initiatives in that direction.  Statistics tend to sanitize deprivation…Statistics can hardly convey the pulverizing, degrading poverty of the millions of Indians who, live below the poverty line.11 Beyond these statistics, figures and methodologies, one has to draw a line after seeing whether people are able to fulfill their basic needs or not and what is there size.  The spectrum of basic needs does not just restrict to food, clothing, and shelter (roti, kapda or makaan), it also includes education, sanitation and medicine (padai, safai or dawai).  Montek Singh Ahluwalia12 agrees that many families that are above the poverty line in terms of per capita consumption may lack access to basic services such as education, health, clean drinking water and sanitation.  The villages which are just adjacent to the urban areas have improved on certain indicators, however in the other villages things have really not improved much.  Indian agriculture still suffers from the vagaries of weather conditions as we keep witnessing drought and flood like situations in one or the other regions.

What should be done?

The concentration on GDP growth has resulted in creating an infrastructure which does not look very sustainable, especially when we look at the inflow of capital through illegal means.  The mindset which is driven by market forces has resulted in a thinking that money is the important mean to achieve almost every goal.  The dominance of monetizing culture has somehow disturbed the balancing act.  Most of the school going children are aspiring to become engineers and doctors because it seen to better market value, more job prospects, more opportunities to go abroad (to escape from prevailing system in which they are growing), more money, better respect in society, so forth and so on.  In order to become engineers they land up in getting a deal sign up with the couching centers and learn the art of cracking exams. 

The responsibility of the state is to have strong public policies to prioritize human well being over GDP and to honestly committing itself for the cause of welfare of its citizens.  I would like to suggest some of the following measures to be taken up at the policy level -  

First, the state has to look beyond GDP and initiate policies focusing on the well-being and happiness of people.  Once the people are satisfied and happy, it takes care of GDP.  At present GDP is used as a platform to improve standard of living and quality of life, however well being and happiness should be used as a platform which would improve on the GDP itself. 13  Such GDP would not depend on the FDI channeled through Mauritius route.

Second, improvement in education and health system at different levels especially in the rural areas, provisions of urban amenities in the rural areas as former president, Abdul Kalam14 phrased it – PURA, has to be initiated through greater participation.  The educational system must have components on innovation, creativity and values.  It should ideally orient the young ones on the importance of human values, faith in hard work, trust, integrity and honesty as much more sustainable solutions leading to better standards of living rather than money becoming the mean to achieve one’s goal.     

Third, there has to be a national resolve to remove poverty.  After the call of purna swaraj (total self rule) for which there was a national resolve, (which resulted in India getting independence from the clutches of british rule), we never had any resolve of any kind at national level for which each citizen is committed.  In this line we need to have a strong national resolve to alleviate poverty.  Can we make sure that at least no one sleeps in this country, which has one of the highest GDP growth, without having meals.

Fourth, an infrastructure to support strong agriculture base has to be created through linking of rivers across regions for better irrigation support in order to reduce the dependence on monsoon. 

Fifth, social entrepreneurship should be encouraged and such policy guidelines should be framed which are more entrepreneurs friendly. 

Sixth, the menace of corruption has to be tackled seriously without delay.  The commitment of the state in this direction is of foremost importance.  The sense of belonging and responsibility towards the nation has to be such that the citizens themselves feel ashamed of such acts of corruption and general perception of society has to change towards the people who acquire wealth much disproportionate to their legal sources of income.  

There could be many more such ways through which the governance deficit can be reversed, through which the concentration on material well being can get shifted towards human well being which ultimately shall culminate into meeting out the ultimate goal of human life, viz., happiness.  My friends who told me that we have more vehicles, more branded products, more opportunities, more money, more multi-national corporations, etc etc., should remember that these are not the correct indicators of development, it is highly skewed.  My intentions are not at all to dishearten you, please look around visit those places where around 70 per cent India lives and then say for yourself, what really we have achieved in the last six decades by focusing 80 year old measure called Gross Domestic Product.  It is high time that we start thinking of concentrating on education, health, water, sanitation and such other issues which are more important for human well being or happiness. There are very many things which should be kept beyond monetization.   Tangible infrastructure cannot sustain itself until intangible values are strong.

As an optimist, I get reminded of these lines by Morris15, a Victorian poet -

O strange new wonderful justice! But for whom shall we gather the gain?
For ourselves and for each of our fellows, and no hand shall labour in vain.
Then all Mine and all Thine shall be Ours, and no more shall any man crave
For riches that serve for nothing but to fetter a friend for a slave.
[The Day is Coming, William Morris (1834-1896)]

End Notes & References:

1.       see Nandan Nilekani (2009), Imagining India – ideas for the new century, Penguin Books, India, p 3-4.
2.    see chapter 7 (Palaces and Tigers, Elephants and Jewels, p 130-145) in Freedom at Midnight by Larry Collins and Dominique Lapierre (1976) Tarang Paperbacks – a division of Vikas Publishing House Pvt Ltd, India. 
3.       see chapter 9 (Tryst with Destiny, p 193-103) in The Argumentative Indian by Amartya Sen (2005) Penguin Books, India.
4.       Ibid. p 196
5.       see John Hawksworth and Anmol Tiwari (2011), The World in 2050 -  The accelerating shift of global economic power: challenges and opportunities,  PriceWaterhouseCoopers Publication, (January), available at http://www.pwc.com/en_GX/gx/world-2050/pdf/world-in-2050-jan-2011.pdf
6.      BV Kumar, former director general of Revenue Intelligence in India, (The Dark Side of Black Money – an insight into the world of financial secrecy and tax havens – 2011, Konark), alleges - $462 billion have been removed from India through tax evasion, crime and corruption and the total capital flight out of India represents approximately 16.6 per cent of India’s GDP as of year-end 2008Indians have by far the largest deposits in Swiss banks by any nation (see Business India, July 10, 2011, p 130)
7.       see Gurcharan Das (2002), India Unbound – from independence to the global information age, Penguin Books, India.
8.      see Kaushik Basu (1994), Of People, Of Places – sketches from an economist’s notebook, Oxford University Press, Delhi, p 143-144.
9.       see Pavan K Verma (2007), The Great Indian Middle Class, Penguin Books, India, p 191.
10.    for detailed discussion on the government’s defense and the methodology see Business India, July 10, 2011, p 113-115.
11.    Op cit,  Pavan K Verma (2007), p 190.
12.    see Montek Singh Ahluwalia (2011), Prospects and Policy Challenges in the Twelfth Plan, Economic and Political Weekly, Vol 46 (21) May 21, p 89.
13.   Bhutan is a tiny nation which prioritizes happiness of its people over GDP through following a development philosophy called Gross National Happiness (GNH).  for details: see VK Shrotryia (2011), The Alchemy of Development: Lessons from Bhutan, The Indian Economy Review, Vol 8 (15th Feb – 15th May 2011), p 150-153.  Also see VK Shrotryia (2006), Happiness and Development – Public Policy initiatives in the Kingdom of Bhutan, in Happiness and Public Policy – theory, case studies and implications by Yew-Kwang Ng and Lok Sang Ho, Palgrave Macmillan, Great Britain, p 193-208.
14.     see Dr. Kalam's PURA Model and Societal Transformation, Edited by P Jegadish Gandhi (2005), Deep and Deep, India.
15.    Victorian Poetry 1830-1890 (1971), edited by Charles & Hallam Tennyson, Ginn & Co, London. p 201
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