[Dec 2007, Volume 4 Quarterly Issue] Pdf File size - The IIPM Think ...

MORE MARKETS, LESS GOVERNMENT
foreign institutional investments in the Indian
economy. However at the back of all
these shining stories, the cause for worry lies
in another fact. Statistics show that although
Indian GDP has grown at a rate of 7 percent
– 8 percent and is hinting to touch a doubledigit
figure of 10 percent 3 in recent times,
the employment elasticity of the Indian
economy has not grown proportionately
with respect to the growth in GDP. Thus
although income of the country has grown
by one unit it has not increased the employment
potential by one unit. Thus the growth
has created inequality in the Indian economy
which is a serious question at the backdrop
of the service led growth. Studies also
show that the sectoral inequality (Goswami
A, Chakraborty P 2007) across the Indian
economy has also increased during the period
of 1990–2003. So the question is in spite
of market led reforms leading to growth in
the economy why the growth has not been
chanellised to tackle important developmental
factors like growing inequality? The
next section highlights some of the factors
which have contributed to this gloomy side
of the India Shining Story.
The Developmental Side
The startling facts regarding development
come with certain important numbers. Data
shows that in spite of moving in a growth
trajectory India’s ranking in Human Development
Index is 126. 4 This is much lower
than the rank, which many other developing
countries with which India’s growth is being
compared. Development has many dimensions
like poverty, nutrition, fertility rates,
mortality rates, access to safe water and
sanitation. Statistics shows that although
poverty rate (Head Count Ratio) in India is
going down, the malnutrition index is going
up. 5 The moot question is whether it is due
to lack of access to public services and goods
like safe water and sanitation or is it because
of lifestyle changes. The infant mortality
rates are still quite low in certain states like
Orissa in India. The primary school drop
out rates have not decreased to a large extent
in some states and it has failed in some
instances in Rajasthan largely due to institutional
failures. The teacher attendances
in primary schools have not improved in
many rural parts of India. The mid–day
meal programme has failed in some states
like Rajasthan owing to corruption and governance
failures. These governance failures
are reflected in the fact that according to the
recent IFPRI report India stands out at 94
in the Hunger Index and is below African
countries like Burkina Faso, Zimbabwe
whose ranks are 92 and 93 respectively. 6
Some of the neighbouring countries of India
like Srilanka (with a rank 69) are above India
in the Hunger Index. Other than this, the
Transparency International Report quotes
India’s rank in corruption index as 74 7 that
is quite dismal in comparison to many other
growing developing countries like Taiwan.
India has been very poor in implementation
of contract also which is reflected in its position
beyond 150 in the “Implementation of
Contract Index”. 8 This shows that as a country
we have been not been capable of implementing
designed contracts. The next question
is as a country, whether we have the
economic freedom to implement contracts
even in today’s context of booming GDP
growth. As Prof. Amartya Sen brought out
the concept of “Freedom for Development”,
if on those lines one considers India’s development
then the facts are not too striking.
This is because India’s ranking in the “Economic
Freedom Index” stands out at 104 9
which is not an optimistic picture considering
the growth and development of many
other developing countries. Other than this,
a World Bank report also shows that it takes
much more time in opening and closing
business in India in comparison to other
countries of South Asia like Pakistan. This
reduces the ranking of the country in the
economic freedom index. According to a
report 10 India ranked 69 in 2005 amongst
141 countries by the rankings of “Economic
Freedom of the World Report 2007”. This
index gives a relative picture of the countries
in terms of how policies and institutions of
countries stand out in economic freedom.
Economic freedom according to this index
includes indicators like “personal choice,
voluntary exchange, freedom to compete
and security of privately owned property”.
Although India’s position has improved
Statistics show that although GDP has grown at a rate of
7-8% and is hinting to touch a double-digit fi gure of 10%
in recent times, the employment elasticity of the Economy
has not grown proportionately w.r.t. GDP growth
from 89 (in 1990) to 69 (in 2005) in the ranking,
it still leaves scope for lot of improvement.
Domestic institutional structures will
have a critical role to play in such upliftment
of India’s ranking. The reason for highlighting
these facts is that all the above-mentioned
factors play a role towards the development
of the country. A consideration of
these factors is also important while moving
in the service driven growth path of Indian
economy. A large outcome of the index
rankings of India is a result of the governance
failures within the country. As the
THE INDIA ECONOMY REVIEW
33