Indian Economy, 5th edition (104 page)

Introduction

Income enhancement does not automatically bring in development, rather it needs support of a conscious public policy with committment of good governance. After the worlds acceptance of welfare economics the standard of life of the masses has emerged as a popular measuring scale of development for the economies–to a great extent, synonymous to the UNDP concept of human development.
1

The Government of India has been conscious ever since Independence about the development of the social sector which includes areas like, health, education, shelter, social welfare, social security etc. Once the economy went for the process of economic reforms, a higher emphasis was felt on these areas by the government and experts alike. Increasing emphasis on the social sector is clearly visible from 1991 onwards.
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The ultimate objective of development planning is human development or increased social welfare and well-being of the people. Increased social welfare of the people requires a more equitable distribution of development benefits along with better living environment. Development process therefore needs to continuously strive for broad-based improvement in the standard of living and quality of life of the people through an inclusive development strategy that focuses on both income and non-income dimensions. The challenge is to formulate
inclusive
plans to bridge regional, social and economic disparities. The Eleventh Five Year Plan sought to address this challenge by providing a comprehensive strategy for inclusive development, building on the growing strength of the economy.
This strategy has to be continued and consolidated further in the Twelfth Five Year Plan. The Approach Paper to the Twelfth Five Year Plan (2012–17) rightly stresses the need for more infrastructural investment with the aim of fostering a faster, sustainable and more inclusive growth.

This chapter focuses on issues related to
‘inclusive development’
in India and uses both international as well as inter–state comparisons to shed light on the subject. Apart from highlighting the international position of India vis-à-vis other emerging market economies and similarly placed countries in terms of the human development index (HDI), an attempt has been made to examine the interrelations between different parameters of the HDI.

From the domestic angle, the chapter focuses on trends in social-sector spending both at the centre and the state levels. It looks at social-sector policies implemented by the government, particularly poverty alleviation and employment generation, health, education, rural infrastructure, development of the weaker sections of society, women and child development, and social security. It also discusses climate change and its impact on development in the context of intergenerational equity.

HUMAN & GENDER DEVELOPMENT

The widely quoted document to know about India’s ‘Human’ and ‘Gender’ related situations is the HDR released by the United Nations Development Programme (UNDP). The
Human Development Report-2013
of the UNDP, released on
March 14, 2013
, puts India’s HDI value for the last year at 0.554, placing it in the
medium human development category
(which it shares with
Equatorial Guinea
). India has been ranked
136
among 187 countries evaluated for human development index (HDI) – a measure for assessing progress in ‘life expectancy’, ‘access to knowledge’ and a decent ‘standard of living’ or ‘gross national income per capita (at PPP)’. Some of the highlights of the HDR-2013 about India may be seen as given below:

•
On the positive side, India’s HDI value went up from 0.345 to 0.554
between 1980 and 2012
, an increase of
61 per cent
or an average annual increase of 1.5 per cent.

•
Despite India’s progress, its HDI of 0.554 is below the average of 0.64 for countries in the medium human development group, and of 0.558 for countries in South Asia.

•
From South Asia, countries which are close to India’s HDI rank and population size are Bangladesh and Pakistan with HDIs ranked 146 each. But the report points out that the ranking masks inequality in the distribution of human development across the population.

•
Life expectancy at birth increased by 10.5 years, mean years of schooling by 2.5 years and expected years of schooling by 4.4 years (1980-2012).

•
Importantly, the gross national income (GNI) per capita went up by 273 per cent, the report says (1980-2012).

•
On the
Gender Inequality Index
– inequalities in reproductive health, empowerment and economic activity – India has been ranked 132 among the 148 countries (for which data is available).

•
In India, only
10.9
per cent of the Parliamentary seats are held by women, and
26.6
per cent of adult women have reached a secondary or higher level of education, compared with
50.4
per cent of their male counterparts.

•
For every 100,000 live births, 200 women die of causes related to pregnancy (i.e.,
Maternal Maortality Rate
), and female ‘participation in the labour market’ is 29 per cent, compared with 80.7 per cent for men.

•
As for the
Multidimensional Poverty Index (MPI),
which identifies multiple deprivations in the same household in education, health and living standard, India’s value averages out at
0.283
(a little above Bangladesh’s and Pakistan’s).

•
The figures for evaluating MPI have been drawn from the 2005-06 survey, according to which 53.7 per cent of the population lived in multidimensional poverty, while an additional 16.4 per cent were vulnerable to multiple deprivations.

The Report notes that
social movements
and the specific issues media highlight do not always result in political transformations benefiting the broader society. Citing the example of
Anna Hazare’s
‘movement’ against corruption, which pressured the government for change, the report says critics, however, point out that such a campaign can favour policies that may not be supported by a wider electorate. ‘Thus, it is important to institutionalise a participatory process that can adjust the political balance by providing a platform for excluded citizens to demand accountability and redress of inequities, ranging from systemic discrimination to unfair and unjust exclusion,’ the report adds.

There is a
word of appreciation
for India for its policies on
internal conflicts
. ‘India has shown that while policing may be more effective in curbing violence in the short term, redistribution and overall development are better strategies to prevent and contain civil unrest in the medium term,’ the report says, referring to
Operation Green Hunt
launched against Maoists, which has come under sharp criticism from human rights activists within the country. The other initiatives that have been lauded are the
right to education
and the
rural employment guarantee scheme
(MGNREGA) that provides up to 100 days of unskilled manual labour to eligible poor at a statutory minimum wage. ‘This initiative (the job guarantee scheme) is promising because it provides access to income and some insurance for the poor against the vagaries of seasonal work and affords individual the self-respect and empowerment associated with work,’ the report says.

INCLUSIVE DEVELOPMENT

This section and the one that follows on social sector initiatives, examine the major dimensions of inclusive development like poverty alleviation, employment generation, health, education, and social welfare besides giving the progress of important government programmes in those sectors.

Inclusive development can be viewed in terms of progress in social and financial inclusion. A large part of the population, particularly segments like landless agricultural labourers, marginal farmers, scheduled castes (SCs), scheduled tribes (STs), and other backward classes (OBCs), continue to suffer social and financial exclusion. Accordingly, the government’s policies are directed towards economic and social upliftment of these segments so as to enable everyone to reap the benefits of growth and bring marginalised sections of the society into the mainstream. This is also reflected in social-sector expenditure by the government.

Expenditure on Social Sector

Central support for social programmes has continued to expand in various forms although most social-sector subjects fall within the purview of the states. In the post-reform period, governments concern for the social sector has increased in a big–way. As per the latest
Economic Survey 2012–13,
India’s expenditure trends on social sector today are given below –

(i)
Central government
expenditure on ‘social services and rural development’ (Plan and non-Plan) has increased from
14.77
per cent in 2007–08 to
17.39
per cent in 2012–13 (BE) with an
all-time high
of
18
per cent in 2010–11 due to the combined effect of higher expenditure under the Pradhan Mantri Gram Sadak Yojana (PMGSY) and education.

(ii)
General Government
(centre and states combined – Plan and Non-plan) expenditure on social services has also shown increase in recent years reflecting the higher priority given to this sector –

(a)
Expenditure on social services
as a proportion of total expenditure
increased from 22.4 per cent in 2007–08 to 24.7 per cent to 25 .1 per cent in 2012–13 (BE). Among social services, the share of expenditure on
education
has increased from 43.9 per cent in 2007–08 to
46.6
per cent in 2012–13 (BE), while that on
health
has ‘fallen’ from 21.5 per cent to
19.2
per cent.

(b)
As a
proportion of the gross domestic product
(GDP), expenditure on social services increased from 5.91 per cent in 2007–08 to 6.79 per cent to 7.09 per cent in 2012–13 (BE). While expenditure on
education
as a proportion of GDP has increased from 2.59 per cent in 2007–08 to
3.31
per cent in 2012–13 (BE), that on
health
has increased from 1.27 per cent in 2007–08 to
1.36
per cent in 2012–13 (BE).

Health
is the most important determining factor of ‘living standard’ of a society – continues to be an area of concern – for India. India’s expenditure on health as a per cent of GDP is very low compared to many other emerging and developed countries. Unlike most countries, in India, private-sector expenditure on health as a percentage of GDP is higher than public expenditure and was more than double in 2010. Despite this, the total expenditure on health as a percentage of GDP is much lower than in many other developed and emerging countries and the lowest among
BRICS
(Brazil, Russia, India, China and South Africa) countries.

POVERTY

Since India commenced the process of economic reforms, a major shift has taken place in the country’s policy-orientation towards poverty alleviation and employment generation – in place of
wage employment
, the focus has shifted to
self-employment –
so that ‘gainful employment’ could be created and poverty could be alleviated permanently.
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The Planning Commission estimates poverty using data from the large sample surveys on household consumer expenditure carried out by the National Sample Survey Office (NSSO)
every five years
. It
defines
poverty line on the basis of monthly per capita consumption expenditure (MPCE).

The methodology for estimation of poverty followed by the Planning Commission has been based on the recommendations made by experts in the field from time to time. The Expert Group headed by
Prof. Suresh D. Tendulkar
which submitted its report in December 2009 has computed the poverty lines at all India level as MPCE of Rs. 447 for rural areas and Rs. 579 for urban areas in 2004-05. After 2004-05, this survey has been conducted in 2009-10.

The Planning Commission has updated the poverty lines and poverty ratios for the year 2009-10 as per the recommendations of the Tendulkar Committee using NSS 66th Round (2009-10) data from the ‘Household Consumer Expenditure Survey’. It has estimated the poverty lines at all India level as an MPCE of Rs. 673 for rural areas and Rs. 860 for urban areas in 2009-10. Based on these cut-offs, the percentage of people living below the poverty line in the country has declined from
37.2
per cent in 2004-05 to
29.8
per cent in 2009-10. Even in absolute terms, the number of poor people has fallen by 52.4 million during this period. Of this, 48.1 million are rural poor and 4.3 million are urban poor. Thus, poverty has
declined on an average by 1.5 percentage
points per year between 2004-05 and 2009-10. The annual average rate of decline during the period 2004-05 to 2009-10 is twice the rate of decline during the period 1993-94 to 2004-05.

Infant mortality rate (IMR) which was 58 per thousand in the year 2005 has fallen to 44 in the year 2011. The number of rural households provided toilet facilities annually have increased from 6.21 lakh in 2002-3 to 88 lakh in 2011-12. Similarly MPCE (at constant prices) has also increased from Rs. 558.78 and Rs. 1052.36 during 2004-5 to Rs. 707.24 and Rs. 1359.75 in 2011-12 in rural and urban areas respectively. The improvement in these social indicators is also a reflection of fall in deprivation. The Planning Commission has also constituted an Expert Group under the Chairmanship of Dr. C. Rangarajan to ‘Review the Methodology for Measurement of Poverty’ in June 2012.

INEQUALITY

HDR measures inequality in terms of two indicators. The first indicator is the income
Gini Coefficient
which measures ‘the deviation of distribution of income (or consumption) among the individuals within a country’ from a perfectly equal distribution. For India, the income Gini coefficient was
36.8
in 2010-11. In this respect, inequality in India is lower than many other developing countries, e.g., South Africa (57.8), Brazil (53.9), Thailand (53.6), Turkey (40.8), China (41.5), Sri Lanka (40.3), Malaysia (46.2), Vietnam (37.6), as well as countries like USA (40.8), Hong Kong (43.4), Argentina (45.8), Israel (39.2), Bulgaria (45.3) etc., which are otherwise ranked very high in terms of human development index.