By John Samuel

Policymakers never fail to make a connection between the rate of economic growth and the apparent fall in poverty levels in the '90s. But the rhetoric is at variance with reality. The total number of poor has actually increased substantially in the decade following liberalisation

The Indian economy has grown at an average rate of 6.4 per cent a year since 1992. Following a decade of liberalisation, the average rate of economic growth in the '90s has been impressive, compared to the 5.8 per cent growth recorded in the '80s.

Policymakers never fail to make a connection between the rate of economic growth and the apparent fall in poverty levels from 36.19 per cent in 1993-94 to 26.10 per cent in 1999-2000.¹ But such rhetoric is at variance with reality.

The total number of poor has increased substantially in the '90s. So have inter-regional disparities. The fact is that 44.2 per cent of the Indian population lives on an income of less than US $1 a day.² India ranks a low 115th in the Human Development Index (HDI) of 2001.

The three important reasons for the development deprivation and increasing levels of inequality are:

1. inequitable distribution of land and natural resources;
2. lack of adequate financing for social development; and
3. the adverse impact of liberalisation, structural adjustment and the WTO-led trade regime on the poor.

Inequitable distribution of land

About 70 per cent of the people depend on land and agriculture for their survival. A total of 42.4 per cent of the people are landless.³ Tribals, who account for 8.3 per cent of the population, are further trapped in the vicious circle of displacement, poverty and disease. During the last 50 years, it is estimated that 30 million people have been displaced due to various infrastructure development projects. Of them, 40 per cent are tribals and 25 per cent Dalits. A majority of the landless labourers are from the historically marginalised Dalit and tribal communities. It has been reported that 9,15,442,57 acres of land have been alienated from tribals.⁴ Small and marginal farmers, with 78 per cent of the land, are cultivating only 32.2 per cent of the cropped area, whereas medium and large farmers, with 8.8 per cent of the land holdings, are cultivating 47 per cent of the cropped area. In India, 91 per cent of employment is in the unorganised sector: the majority work as landless labourers. The increasing instances of land alienation, the crisis in the agricultural sector, drought and lack of rural employment worsen the development deprivation of the poor and marginalised.

Source: Economic Survey 2000-2001, p. 4, p. 192 and p. S-24.

Note: 1. Employment refers to the organised sector where the bulk of investment has gone.
 2. Food Per Capita Availability in the last column is in grams per day.
3. Fiscal Deficit for 2000-01 is projected on the basis of the latest data available.
4. IIP = Index of Industrial Production.

Decreasing financing for social development

While there have been numerous lofty claims about economic growth by policymakers, public expenditure for social development has consistently declined during the last decade. This has further marginalised the poor and made the poorest more vulnerable.

The public health investment has been one of the lowest in the world. As a percentage of GDP, it has declined from 1.3 per cent to 0.9 per cent in 1999. The central budgetary allocation for health over the last ten years, as a percentage of the total central budget, has been stagnant at 1.3 per cent, while in the states it has declined from 7 per cent to 5.5 per cent. The current annual per capita public health expenditure is Rs 160, less than US $4. As public health is the responsibility of the states, the principal contribution in funding public health services comes from the state budget, with supplementary financial allocations from the central budget. The contribution of central resources to overall public health funding has been limited to 15 per cent. The draft of the proposed National Health Policy, 2001 of the Government of India admits: "Economic liberalisation has resulted in the declining per cent of state resources allocated to the health sector".

The lack of adequate public health has further increased the vulnerability of the poor. The infant mortality rates of Scheduled Tribes and Scheduled Castes are 84.2 and 83 respectively, much higher than the national average of 70 per 1,000. Among the Scheduled Tribes and Scheduled Castes, the percentage of underweight children is 55.9 and 53.5 respectively.⁵ Outbreaks of contagious diseases like TB, malaria and HIV/AIDS are very high among the poor. The withdrawal of the State from public healthcare affects the primary health of the poor, particularly the reproductive health of women. The proposed user fees for primary healthcare will practically push the poor out of the public healthcare system, and will further strengthen the unregulated private health sector.

With state governments reducing budgetary allocation for elementary education, 63 million children in the age-group 6-14 are out of school. Though the Kothari Commission Report (1964-66) prescribed 6 per cent of the GDP for education, public expenditure on education has been around 3 per cent. Latest estimates show that Rs 470 billion would be required to provide universal elementary education by the year 2015.⁶ Even the World Bank-funded District Primary Education Programme (DPEP), extended to 240 districts in 16 states of India, has failed to make the desired impact. In the '80s, the national growthrate of enrolment was about 2.5 per cent per annum, whereas between 1995 and 1998 it declined to about 0.41 per cent, followed by a decline in the share of public expenditure.⁷ The 93^rd amendment to the Indian Constitution ensures the fundamental right to education. However, lack of required budgetary allocation and ongoing attempts to privatise education will eventually deny the poor this right.

A study of the central budget over the last three years shows that the government not only failed to allocate adequate funds for social development, but also failed to spend a large chunk of the allocation. For instance, the human resource development ministry has surrendered Rs 15,980 million because it failed to spend the money. The rural development ministry surrendered Rs 13,800 million out of the Rs. 319,950 million sanctioned. The health and family welfare department surrendered Rs 11,070 million because the government failed to make use of the amount. According to the latest Economic Survey (2001), 91 per cent of rural India does not have any sanitation facilities. Nevertheless, out of the allocated budget of Rs 3,360 million for three years, the government failed to spend Rs 510 million.⁸

The lack of budgetary commitment and failure to properly implement social development programmes clearly exposes the hollow claims of growth with development.

The economy and social development

During 2000-2001, there was a substantial decline in the growth of industrial production, infrastructure, Indian share in world trade, saving and investment rates and in the Foreign Direct Investment (FDI) flows. The index of industrial production growthrate declined from 6.45 per cent to 5.7 per cent. Since 1997, FDI inflows to India have been on the decline. During 1998, FDI inflows to India declined from $3,577 million to $2,168 million. During the same period the Indian share in the world declined from 0.765 per cent to 0.38 per cent and 0.259 per cent.⁹ The anticipated rise in FDI and the resultant increase in employment opportunities proved to be so much wishful thinking.

Source: Indian Investment Centre FDI - Foreign Direct Investment
RBI - Reserve Bank of India
NRI - Non Residents of India

The decline in FDI has been accompanied by a decline in domestic savings and investment rates. The saving rate (gross domestic savings as a percentage of GDP) declined from 25 per cent in 1995-96 to 19 per cent in 2000-2001. The share of Indian exports in world exports has also been stagnant at 0.6 per cent. During 2001 there have been severe droughts as well as other large-scale natural calamities like the earthquake in Gujarat and floods in Orissa. This has resulted in a crisis in the agriculture sector, making agricultural activities difficult, particularly for small-scale farmers. These facts indicate the slowdown of the economy and increasing vulnerability of the poor, in the absence of a long-term financing strategy for socio-economic development. They also indicate the hollowness of free market logic and market-driven development strategies.

In the central budget for the year 2001-2002, the targeted fiscal deficit of 5.1 per cent has been achieved. However, the combined fiscal deficit of the states and the centre is about 10 per cent of the GDP. Foreign exchange reserves have increased from $5.8 billion in 1990-91 to $41 billion in the current year. But the country's debt is higher by $15 billion and the inflow of foreign capital (which is a country's liability) adds up to $40 billion. There is a public debt of $100 billion and a significant part of the budget goes towards debt servicing. The union budget of 2000-2001 heralded "second-generation reforms" to accelerate the process of liberalisation and economic growth. However, the performance of the economy during the year and the complete lack of political will and economic agenda for long-term social development clearly show that the rhetoric belies reality.

In spite of all the promises and a large chunk of investment in the last decade, employment-generation in the organised sector of the economy has been completely stagnant. Due to the lifting of quantitative restrictions from April 1, 2001, the market is flooded with cheap Chinese goods that may affect the small-scale sector adversely. Because of the provisions of the WTO-led policy regime, the livelihood resources of hundreds of millions in agriculture and the small-scale sector are under unprecedented threat.

The market-driven and WTO-led policy regime has increased the vulnerability of the poor, particularly landless labourers and women. There has been an increasing casualisation of labour and feminisation of poverty. Around 85.4 per cent of women workers are in the agricultural sector. The crisis in the agricultural sector adversely affects the livelihood and food security of the rural poor. The total unemployment rate has increased between 1993-94 and 1999-2000. There has also been a sharp increase in the number of deaths due to poverty and malnutrition.

The figures for GDP have given a false sense of growth and development. The GDP for 2000-2001 is estimated at Rs 19.727 trillion. The total expenditure of the union government for 2001-2002 is estimated at Rs 3,752,23 billion. In spite of this mammoth expenditure, the real amount spent on social development is insignificant when compared to the defence expenditure and the expenditure on running the government machinery. Simultaneously, budget allocations for some key areas of social development have declined. In the current year, there has been a shortfall of Rs 6 billion in social services, Rs 10 billion in rural development and Rs 6.8 billion in agriculture.

After ten years of liberalisation, we need to raise critical questions about the increasing gap between macro-economic development and micro-social development. Why is it that the 'fastest-growing' economy is so slow in reaching out to the impoverished millions in remote villages and congested urban slums? If economic growth is achieved without social development at the grassroots level, it will not only widen inequality but also give rise to socio-political unrest and instability. Growth without development will have dangerous socio-political consequences that could undermine the very essence of freedom and democracy.

Notes

1. Economic Survey 2000-2001, Government of India.
2. Draft National Health Policy, 2001, Ministry of Health and Family Welfare, Govt. of India.
3. Indian Rural Development Report 1999, NIRD, Hyderabad.
4. Land for Life, 2001, NCAS, Pune.
5. Draft National Health Policy 2001, Ministry of Health and Family Welfare, New Delhi.
6. Documents of National Alliance for Fundamental Right to Education,2001.
7. Aggarwal, Yash (2000) Monitoring and Evaluation under DPEP, NIEPA, New Delhi.
8. Budget of Poverty and Poverty of Budget. The Hindu 23.03.2001.
9. World Investment Report 2000.

---

Add this page to your favorite Social Bookmarking websites

Comments (1)

Written by sanjeev shrivastava, on 06-07-2009 08:42 Very detailed treatment of a subject which requires immediate attention of policymakers.

Comment
Please keep your comments relevant to the subject of the article. Only moderated comments will appear on the site. Comments should be limited to 250 words. If you wish to submit a longer comment, it might be better to write an entire article and submit it to us for consideration
Name:
Comment:
Key in the Security Code:*