Category: Development Economics

A caveat to India

According to the World Bank (Calculated using Atlas method)India is a low income country along with 53 other countries. Low income countries are countries which have a GNI per capita of less than $876. So the Indian development projects are aided by the International Bank For Reconstruction And Development (IBRD) and the International Development Association (IDA).

On August 1st 2006, the World Bank (WB) approved the Orissa Socio-Economic Development Loan II which provided development aid to the state on Orissa inIndia. The commitment of the entire project was a huge $225 million.

Surprisingly, health, education and the primary sector each gets 10% of the aid. (I was of the opinion that these were the crucial areas where growth is needed.) A greater chunk of aid is going for the development of Public administration, law and justice.

Let’s take a look at the Orissa economy. According to Census 2001
1) The overall literacy rate in the state was 63.61.
2) Sex ratio was 972.

According to the Economic times, ‘Despite its rich endowment of mineral wealth, forests, lakes, rivers and a long coastline facing South-East Asia, Orissa remains among the poorest of India’s major states.’ And also that Orissa has the third highest concentration of scheduled tribes inIndia, accounting for 22.2 per cent of the total population and more than 40 per cent of the total number of poor.’

The aid is flowing in and we are accumulating large external debt which is a burden on the economy as a whole. But I wonder if the outcomes are pro-poor or for that matter even pro-development.

Earlier caveats have been expressed by Dweep and Alex.

Greg Mankiw’s blog: Letting poor nations prosper would be worth a lot more than the equivalent amount in foreign aid.

Amit Bhaduri envisages Development with Dignity

In Amit Bhaduri’s recent book ‘Development with dignity’, he has argued perspicuously the case for a full employment in India. It is a great book to read for economists and non-economists alike. (Amit Bhaduri is internationally famous as an unconventional economist.)
I have listed some of his arguments below.

1) India’s continuation to rely on English has created a linguistic divide and inequality of opportunities between those who know and those who do not know English.

2) He says that agriculture is so overcrowded and devoid of earning in poor states like Bihar and MP, that even selling peanuts on the streets bring more income. There is a very high prevalence of disguised unemployment.

3) ‘India’s immense diversity creates a bewildering variety of identities, and politicians try to manipulate them to their advantage in the game for gathering votes at any cost.’

4) ‘India has given its citizens political rights, but not economic rights to a decent livelihood, with or without economic liberalisation.’

5) ‘Narrow minded policies focussing on ‘cost’ reduction fail to see that cost is a concept defined in a particular social context of contending economic interests.”The worker might think of profit as the ‘cost’ he has to bear for being employed, just as the employer thinks of wage as the ‘cost’ of employing the worker!’

He has shown us unequivocally how to go about the attainment of full employment. He has stressed the need for wider participation in the development process.Moreover, he is of the view than FDI has more positive outcomes for growth than the portfolio investments buy FII’s.
Bhaduri’s main stratagem was ’employment first, with growth as outcome’ and not ‘growth first, and full employment later.’

(The other main attraction of the book is that it comes at a frugal price of 50 INR and it is published by the National Book Trust, India.)

Here is Frontline’s review on the book.

Development: A suspicious Alternative

Recently, I came across an article by Jagdish Bhagwati, a renowned economist at Columbia University. After reading the article I was in a doubtful state of mind.

His main proposal to combat poverty in Africa was ‘If it is hard to think of aid being spent productively in Africa, why not spend elsewhere for Africa”

He was of the view that Africa would not be able to absorb the aid efficiently. So it would be profitable and more pertinent to spend the aid for Africa in Developed countries itself, by conducting research for development of new vaccines and cures for crippling diseases afflicting African nations. I call this proposal strange. Because then Africa for ever after, will’be dependent on these rich nations.

This would further widen the disparities in Income between developing and developed countries. It is a wise plot aimed at reducing aid to developing nations.

He goes further to state that he is against those like Jeffrey Sachs who insists that the aid ought to be spent in Africa itself.

It wouldn’t be difficult to predict the outcome. The rich nations would not have to hesitantly part with the aid, instead they would be able to invest in within their geographical territories itself.

What do you feel about Jagdish Bhagwati’s proposal’

Is India on the path of Development’

India is shining with 7% GDP, SENSEX at 10684.30, Inflation at about 4.6 and foreign exchange reserves have crossed $150 billion. What an acievement! It can be seen in the indian media both electronic and print. The governement and the Indians deserve to be applauded. And that is exactly what the media is doing. The people(middle and upper class) are happy and the media is happy too. What a rosy picture!
But is the whole country rejoicing’ NO!

While going through the current issue of Economic and political weekly, some facts surprised me.
In India, the prevailing poverty line is Rs 368 and Rs 559 per person per month for rural and urban areas.(Could any individual live a decent life with this money”)

Malnutrition is another problem faced by Indians.Around one in four indians are malnourished.
Presently 47% of Indian children below the age of 5 are underweight for their age.(Malnourishment hinders developmentand capacity to learn.)

Only 20% of Indians are covered by public health care.( Due to the bad condition of public hospitals, no one prefers going there even though the costs are less.)

At least one in three Indians does not get the basic daily water requirement.

Presently, about 57% of Indian households do not have electricity.( I wonder if about 10% of the ducated in India knows this fact.)

Education is a fundamental right. 71.16% of the people in the 15-19 year age group had not completed a secondary education-a 2001 survey. (Unimaginable! and what ahve the priveleged been doing about it, nothing!)

According to the article in EPW, Redefining Poverty: A new poverty line for a new India, the poverty line in India should be about Rs 840 per capita per month. “At this expenditure level nearly 69% of India’s population is below the povert line which is over two and a half times the present official poverty rate of 26.1%.

Related links:
http://nanonomics.blogspot.com/( A Friend’s view on india shining)
http://www.thehindubusinessline.com/2006/07/11/stories/2006071101391100.htm(On the economic progress made)