The impact that economic growth has on the
lives of people depends on a)
income distribution, but also on b) the use made of public revenue
generated by economic growth.
For example, the fact that India spends
only 1.2% of its GDP on healthcare and China devotes 2.7% is directly relevant
to the greater health achievements of China vis-à-vis India. Because of low
allocation to public healthcare, many poor people across India are forced to rely
on private doctors. Why is that so wrong? First, many private doctors have
little or no medical training. Second, patients know very little about
diseases, medicines required or indeed why, the possibility of defrauding is
huge [in absence of an alternative public healthcare to which they can go to
for assistance or advice]. India has started to rely on private healthcare
without developing solid public healthcare facilities. In doing this, India is
proceeding on a path different from every country that has made a successful
health transition [e.g. Britain, Japan, China, Brazil, South Korea, Costa
Rica]. All these countries first developed a well-functioning public healthcare system and only then
encouraged private health care facilities as auxiliaries. By allocating more of
the public revenue generated by economic growth to promoting healthcare, India
could more greatly enhance the living conditions of its citizens. Whether
growth facilitates development in terms of enhancing the living conditions of
people depends on what is done with the public revenue that is generated by
growth.
Moreover, while we must recognize the role
of growth in facilitating development (in the sense of improving human lives),
we also need to recognize that the
advancement of human capabilities (through healthcare, education etc) also, in turn, influences the growth
possibilities of a country. The state can play a constructive role in developing these human
capabilities.
Before the economic reforms in the 1990s,
India faced two major failures. First, it was failing to tap the
constructive role of the market (especially
in terms of promoting initiative, efficiency and coordinating complex economic
operations). India’s ‘Licence Raj’ system had made it necessary to take
government permissions for private initiatives and this made economic
enterprise very difficult; economic enterprise was put at the mercy of
bureaucrats. This stifled initiative and nurtured corruption. This failure has
been partially remedied in the post-reform period. Arbitrary controls have been
removed and there is now a greater openness to international trade – both of
which have helped India to achieve a solid basis for high rates of economic
growth. Nevertheless, there is more to be done both in terms of
removing/simplifying counterproductive regulations and ensuring that regulation, where necessary, is
well-aimed.
But there was another, second failure that
India needed to address i.e. its failure to tap the constructive role
of the state. Government
intervention in the pre-reform period was excessive and of a restricting kind.
But there were huge areas of activity where it could have engaged in constructive
public action which could have achieved a lot. For
example, the state could’ve been used to remedy India’s under-developed
physical (power, water, roads, rails) and social infrastructure (hospitals,
schools etc) and to build a functioning system of accountable public services.
The reforms of the '90s have done little to remedy this second failure.
Despite its post-reform increase in growth
rates, the benefits of this growth are very unequally shared. Poverty rates
have decreased, but a lot more could have been achieved had the distributional
side (including provision of essential services) got more attention. India’s
failures are huge in terms of widespread undernourishment in general and child
nourishment in particular. Other big failures include the lack of provision of
healthcare to the bulk of the population and a quarter of the population
remaining effectively illiterate.
The two main problems facing the Indian
economy are 1) removing the
disparities that divide the
country into the privileged and the rest while continuing economic growth and
2) bringing more
accountability into the
running of the economy, especially in the delivery of public services and the
operation of the public sector. Both these
problems stifle India’s social and economic progress and remain essential parts of the
unfinished agenda of growth and development of India.
[The purpose of the ‘Reading Dreze and
Sen’ series of blogs is to briefly summarise some of the arguments given by
Jean Dreze and Amartya Sen in their book ‘An Uncertain Glory: India and its
Contradictions’. The arguments are of the authors alone and the blogs are
merely a recapitulation of them in as simple a way possible (the style is
deliberately informal). The aim is to help myself to remember the details of
these arguments (writing always helps!) but more importantly to hopefully
trigger conversation and provoke contestation regarding the issues raised, even
if on small forums like facebook :)]
1 comment:
nice!!
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