Tuesday, August 11, 2009

India 9 percent Inclusive Growth Issues and Challenges

India Growth Story

In the previous post I have written about farmer’s suicide and status of poverty in India. In this post I am talking about how it can be managed and reduced.

Seasonal Rainfall Scenario (1 June to 29 July)

The cumulative seasonal rainfall for the country as a whole during this year’s monsoon has so far been 19% below the Long Period Average (LPA). Progressive cumulative rainfall departure from LPA during monsoon season 2009 for the country as a whole and over the four broad homogeneous regions of India are given below
Out of 36 meteorological sub-divisions, the cumulative rainfall during 1 June to 29 July 2009 was excess/normal in 17 and deficient in 18 and scanty over 1 (West Uttar Pradesh) meteorological sub-divisions.

Can we Change Monsoon?

No, we can’t do anything to it. It was like this for all the time, it is becoming more and more unpredictable so because of Global Warming.
This reminds of what the former Finance Minister of Pakistan and the author of the UNDP's Human Development Report, the late Mahbub-ul-Haq (who was a personal friend of Dr Manmohan Singh) had once remarked, ''We were wrongly taught that we should take care of GDP and it will automatically take care of poverty. Let us reverse it. We need to take care of poverty and it will automatically take care of GDP". And the World Bank reluctantly acknowledged, though belatedly, ''the gap between some of India's largest and poorest states exhibit slow progress in human development indicators; low growth rates particularly in the agricultural sector. If the present trends continue, the bulk of the poor in these states will be unable to participate in future growth.'' Like Mr. Chidambaram, Mahbub-ul-Haq too refused to accept the stark reality – economic growth will not reduce poverty and deprivation.

India Growth Story

India’s economy has come a long way, especially since the start of this century. It is impossible to ignore India’s rise in every field.
GDP at market prices has increased from US$ 20 billion in 1950-51 to US$ 912 billion in 2006-07 and is expected to cross a trillion dollars in the current year. In terms of purchasing power parity (PPP), India’s GDP at US$ 4 trillion in 2006-07 accounted for 6.3 per cent of global GDP.
Average annual economic growth, which had been constant and tardy at 3.5 per cent during the first thirty years of Independence, increased to 5.7 per cent during the 1990s and, since 2003-04, the average rate has increased further to 8.6 per cent. 2006-07, in particular, was a splendid year with the GDP growing at 9.4 per cent.

This growth has not been jobless growth. During 1999-2000 to 2004-05, India added to its workforce about 12 million people each year. During this period, the rate of growth of employment was 2.9 per cent per year.

Present Status of Poverty and Employment in India

Protectionism, self-reliance and village republics are not enough to lift 1.3 billion of the world’s poor out of absolute poverty. There is sufficient empirical evidence to demonstrate that trade can be a powerful catalyst for poverty reduction, that free trade with fairer policies will benefit the world's poor more than aid or charity. The problem is that World Trade Organization negotiations and global trade are far from free and fair, with the balance skewed in favor of powerful trading blocs like the US and EU and against poorer nations

Employment Generation

The latest Economic Census of India 2005 reports that rural India witnessed a higher rate of employment-generation in recent years compared to urban India
Rural India has outshone its urban counterpart in generating employment, reports the latest Economic Census of India 2005. In the average annual growth in employment since 1999-2000, with employment growth rates of 3.33%, rural areas have outperformed the urban sector, which registered a rate of 1.68%, according to provisional results of the census. Interestingly, the results also show that 42.12 million enterprises are engaged in various economic activities other than crop production and plantation.
If poverty reduction is an explicit over-riding concern, any programmed, project or policy must be evaluated for its effects on this, which means assessment of its impact on poorer populations in terms of:
productive employment opportunities

access to and price of basic food requirements

access to basic housing/shelter requirements

access to and price of basic infrastructure services, including power, water, sanitation

access to and price of health services

access to and price of education services

access to and voice in the institutions of governance and administration

Focusing on all these indicators in turn imply that poverty is viewed as a multi-dimensional phenomenon, rather than simply in terms of nutritional deprivation, and the effects of material poverty on social exclusion are also recognized.

Trust on Agriculture

Studies by the Ministry of Agriculture have clearly demonstrated that farm incomes have fallen in the past five years. Rice farmers in West Bengal for instance earn less by 28 per cent in 2002-03 than what they earned in 1996-97. Incomes of sugarcane farmers decreased in Uttar Pradesh by 32 per cent and in Maharashtra by 40 per cent. Farm incomes of north Indian farmers eroded by 10 per cent on an average. The sharp decline in farm incomes is happening at a time when incomes in the urban areas are on an upswing. Add to it the declining consumption of cereals in real terms, the message is crystal clear. For bulk of the population, the capacity to buy food is eroding fast. This is leading to worsening of poverty and thereby leading to acute malnutrition. The Economic Survey, presented a day before the Budget, clearly stated that cereal consumption within a year had fallen drastically, indicating worsening poverty levels.
The HDI for India is 0.619, which gives the country a rank of 128th out of 177 countries with data

This year’s HDI, which refers to 2005, highlights the very large gaps in well-being and life chances that continue to divide our increasingly interconnected world. By looking at some of the most fundamental aspects of people’s lives and opportunities it provides a much more complete picture of a country's development than other indicators, such as GDP per capita. Figure illustrates those countries on the same level of HDI as India can have very different levels of income.
Of the components of the HDI, only income and gross enrolment are somewhat responsive to short term policy changes. For that reason, it is important to examine changes in the human development index over time

One suicide every 8 hours

Vidarbha remains a grim statistic. One suicide in every eight hours. More than half of those who committed suicide were between 20 and 45, their most productive years. The Maharashtra government says as many as 1920 farmers committed suicide between January 1, 2001 and August 19, 2006. Nearly 2.8 million of the 3.2 million cotton farmers are defaulters, reports Jaideep Hardikar

India's Growth - Luxury for the rich, squalor for the poor

"India is one land, but the rich and poor exist on apparently different planets. Virtually unreported are some awful daily realities: the rate of malnutrition in children under five is a shamefully high 45%. Less than a third of India's homes have a toilet and most women have to wait until the dark of evening to venture out to answer the call of nature. The talk of making poverty history sounds hollow in India, a land which is home to a third of the world's poor and where some 300 million people live on less than $1 a day."
Even in macroeconomic terms India is still poor and small. It holds a sixth of the world's population but accounts for just 1.3% of world exports of goods and services, and 0.8% of foreign direct investment flows.
Even the investment that is trickling in is becoming more and more capital intensive rather than labour intensive. Hence this whole propaganda that investment creates more jobs is being proven to be utterly false in India.
In urban India this whole phenomenon of liberalization is playing havoc with city dwellers. As India's famous novelist and social activist Arundhati Roy put it, "This project of corporate globalization has created a constituency of very rich people who are very thrilled by it. They do not care about the hawkers being cleared from the streets or the slums that are disappearing overnight. India is not coming together but coming apart because liberalization has convulsed the country at an unprecedented unacceptable velocity."
Now half of Delhi's 14 million inhabitants live in slums and 18,000 structures outside of slum clusters have been deemed illegal. But if this capitalist aggression is devastating the lives of the workers and the urban poor, it has had a more devastating effect in the villages where 70% of India's population lives. As Roy says, "Where India does not live, it dies."
There have been reports of the phenomenon of endemic farmer suicides across India. In some states it worse than in others. The arrival of new pesticides, genetically modified seeds and swanky tractors that soak up increasingly expensive fuel have pushed up the cost of production.

First cousins: The ties between rural and urban India

At 27.8% of the total population, India’s level of urbanisation remains quite low. But that’s still 285 million urban citizens, a number that would constitute the fourth-largest nation in the world. To feed these ever-consuming cities electricity, water and natural resources, the habitats of rural India are becoming more and more depleted, forcing further migration into the cities
Thus, as urban studies scholars such as Amitabh Kundu have time and again pointed out, the level of urbanization in India actually remains quite low even though its contribution to the national economy has become extremely high--calculated at 60% in 2001.
But unfortunately, a hard-headed study of urban habitats around the world reveals that their goals may just not be achieved. And this could have everything to do with the situation of the 745 million rural Indians that shadow the horizon of all Indian cities. A shadow that may darken over a period of time when one finds that to feed the ever-consuming cities with electricity, water and natural resources, the habitats of rural India gradually become more and more depleted, forcing larger and larger numbers to migrate to cities, thereby further straining resources, especially since all the existing policies are doing little to absorb the needs of the urban poor.

Commitment to reduce Poverty Is Lacking

The ministry of water resources had demanded Rs 4,500 crore for the completion of major irrigation projects in the coming Budget.
The state governments' failure to complete irrigation projects has led to an escalation of their combined cost by close to a whopping one lakh crore rupees. According to the Planning Commission, 383 irrigation projects in 23 states have spilled over from the Ninth Five-Year Plan to the tenth plan.These projects were to irrigate more than 20 million hectares, reducing the farmers' dependence on the monsoon. By the end of the ninth plan, only 35 per cent of the area was covered. The delay in implementation is attributed to several factors. For one, the allocation to the sector in the Union budget has been coming down, point out sources. Another reason is that the number of irrigation projects has been increasing over time, without the earlier ones getting completed.

Agriculture as Thrust Area

Agriculture plays an important role in the rural economy of India. This sector provides gainful employment as well as raw materials for a large number of industries in the country. Of late, amid economic reforms and trade liberalization, considerable changes have been noticed in this sector. The reform process introduced in the early 1990s failed to recognize the crucial importance of this sector due to which it has faced serious difficulties. These difficulties manifested in a variety of forms like loss of livelihood, consequent decrease in purchasing power of the rural masses, and a steady increase in input prices crippling the agricultural producers. Complete failure of land reform programmes in turn resulting in a distorted land holding pattern, the crisis in this sector during the post-liberalisation has aggravated.
Looking at the core concerns of this sector, the growth of this sector in terms of increased public investment is of immense necessity at this juncture to revive the fate of the rural economy of India.
Looking at the expenditure pattern of the present government towards agriculture and allied activities, the share of agriculture and allied activities from total expenditure and GDP declined drastically to 10.37 percent and 1.64 percent respectively compare to the previous budget (2008-09 RE). The obvious conclusion from this expenditure trend shows how committed is present UPA government at the centre towards reviving the rural economy of India as more than 52 percent of the total population of India depends on agriculture as their means of livelihood.
Graph-1: Percentage Distribution of Plan Allocations in Agriculture and Allied Activities Since the Seventh Five Year Plan
Source: Compiled from the data given in Economic Survey, 2007-08, GoI

Plan expenditure shows the commitment of the government towards the overall development of that sector over the plan period. Share of plan investment (both Center and States/UTs) in agriculture sector has been declining since 1985. Declined share of investment in agriculture shows that less priority has been accorded to this sector. During the Seventh Five Years Plan, the share of plan investment in agriculture and allied activities out of total plan investment was 5.8 % and this got reduced to 3.7 % in the proposed Eleventh Five Year Plan.
The Solution
There can’t one single pill which can solve the Problem, we need step by step approach. And first of this step is Reducing dependence on Rain fed Farming and Monsoon

Step 1

Water Conservation

  • Farm Level

  • Village Level

  • Taluka Level

  • State Level

  • National Level


(TBS) built many check dams in Alwar district, in the 503 sq km watershed of the 45-km-long Arvari river some 238 water harvesting structures had been constructed by the mid-1990s by the 70 villages located within its watershed. The work started in 1986 and, lo and behold, the Arvari, till then a drain that flowed during the monsoon did not dry up but slowly became a perennial river. In 1990, it had a flow till October and, by 1995, it had become perennial. tbs now lays claim to revival of five rivers.
Hydrogeologist R N Athavale who visited the Arvari watershed has made the following estimates based on his experience to explain the revival of rivers. Earlier, only 15 per cent of the rainfall would go into the soil 5 per cent becoming soil moisture and about 10 per cent going deep into the ground, most of it below the bottom of the wells and the level of the Arvari bed because of the depleted groundwater reserve. Therefore, only 5 per cent of the rainfall would slowly seep into the Arvari and villagers could use just about 1 per cent for drinking and irrigation. Now, with check dams, 35 per cent goes into the soil instead of 15 per cent. As a result, the monsoonal runoff to the Arvari has dropped from the earlier 35 per cent of the rainfall to only 10 per cent. But an estimated 22 per cent of the total rainfall now seeps into the Arvari from the recharged groundwater reserve in the post-monsoonal months to give it a perennial flow. The villagers themselves now use about 3 per cent of the total rainfall that falls in the watershed with which they can take two crops a year.

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