Saturday, 31 January 2015

Growth with structural transformation: A development agenda for India

Dr. Devendra Kothari
Population and Development Analyst
Forum for Population Action

For far too long, India has been a chronic under-achiever relative to potential. Economic growth is not enough; it must be accompanied by structural transformation to unlock the human potential.

Happy New Year to all!

Prime Minister Modi shared certain ‘dreams/visions' in 2014. 2015 is the year for deliverance of the same. No doubt, PM Modi is moving forward with his plans to put the stalled economy back into top gear. According to the latest report of the International Monetary Fund that   Asia's third-largest economy is showing signs of clawing out of sub-5 per cent growth recorded in the last two years, and that the raft of measures that the Modi government has announced has raised hopes that the government will be able to engineer a quick turnaround. The government has vowed to remove red tape and ease rules, and pledged a non-adversarial governance regime to push investors to make India a manufacturing hub through initiatives such as `Make in India’. Indeed, such relatively straightforward steps could make a powerful difference, raising the Indian growth rate by two or even three percentage points from its current 4-5% but will not create an environment for sustained economic growth, which is needed to solve all the problems of India. Also, for this, one needs a game plan, which should not be lost sight of.

India has enjoyed high but vacillating economic growth in the post-liberation period, although it is at a crossroads.  We have the largest number of hungry, malnourished, illiterate and under educated people in the world. Moreover, the current pool of labour force has very low employability. The National Employability Report 2013 [1] reveals that India generates more than five million graduates every year. A significant proportion of them, nearly 47%, were found not employable in any sector, given their poor English language and cognitive skills. The report also revealed that among the six hundred thousand   engineers who graduated in 2011, only 17.4 per cent were employable. What this also means is that the rest, that is, 82.6 per cent engineering graduates were unemployable.

These are facts the Indian elite/policy makers do not want to look at. ‘We just want to prove we have arrived at the world stage’. It appears that, 63 years of planned economy has not been able to resolve some basic issues, especially, those related to the development of human resources. The Human Development Index (HDI) is a summary measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable and having a decent standard of living. It ranks countries in a descending order into four tiers of human development.[2] India’s rank in the Human Development Reports fell from 123rd in 2001 to 134th in 2011 and 135th in 2014 out of 187 countries  during the high economic growth period.
Understanding this “paradox" – high economic growth and low HDI values - is crucial to the development of a coherent post-2014 agenda. The paradox arises from the failure of India to achieve structural changes despite having grown vigorously as a result of liberalization economic policies since 1991. It is interesting to recall that in the early fifties the economy and living standard of people of China and India were almost at the same level; in fact, India was little bit ahead of China. China sidetracked other ‘non-important’ issues and concentrated on improving the quality of human resources and developing economy. Consequently, China is on the way to become a super power of the world. Its cities are shining and economy is booming. People are prosperous and relatively happy and their productivity is high (Table 1).

Table 1: A comparative statement – India and China
Human Development Index, 2014 (Rank  and  Value)
135 (0.585)
91 (0.719)
Gross Domestic Product (GDP)
Gross Domestic Product (GDP) per capita in US$, 2013
% of Population living below International Poverty Line   ($1.25 per  day), 2009-11
% literates (age 15 and over  who can read and write), 2012
Life Expectancy at birth (in years) , 2010
Number of children per woman (TFR) 2010
Infant deaths/1000 births (IMR) 2010
Maternal deaths/100000 live births (MMR), 2013
Source: UN Population Division, and World Bank

Productivity, a measure of the efficiency of the human capital, can be measured by per capita Gross Domestic Product (GDP). [3]  In their recent book, Beyond 2020: A Vision for Tomorrow's India, A.P.J Abdul Kalam and Y.S.Rajan analyzed this fact. [4]  They write: “The GDP per capita standings are the true indicators of how much India has been able to empower its citizens”. Table 2 makes it clear how much progress India needs to make to be on a par with Brazil, China and even Indonesia. India has become the tenth largest economy in the world in terms of GDP; however, has a very low per capita GDP. The country placed at the 148th position among the 187 countries, as per the World Bank. This is perhaps the most visible challenge. GDP per capita in India averaged 462.43 US$ from 1960 until 2013, reaching an all time high of 1499 US$ in 2013 and a record low of 228 US$ in 1960. Table 2 shows that China’s GDP per capita value in 2013 was more than four and half times that of India.

Table 2: Per capita GDP, selected Countries, 2013
World Rank
GDP per capita (In US$)
South Korea
S. Africa
Sri Lanka

Source:  World Bank National Account Data, 2013.

How to forge ahead:
So what need to be done to unlock India’s potential? In other words, what should be agenda for human development?  No doubt, putting the economy back on track and reducing inflation should be the government’s first priority. However, for sustainable development it is equally important to focus on human capital. Central to the human development approach is the concept of capabilities. Basic capabilities valued by virtually everyone include: good health, access to knowledge, and a decent material standard of living. The young demographic profile of the country also favors this agenda. Of all the Modi government’s popular initiatives in its first eight months in office are directed towards this end. Among these,   the Jan Dhan Yojana (the financial inclusion scheme); Swachh Bharat (the cleanliness drive); Digital India (promoting e-governance); Beti Bachao Beti Padhao (Save girl child, educate girl child); and Make in India (transforming India into the manufacturing hub) have caught the nation's imagination. All these will allow talent to grow. But we need a comprehensive agenda to raise human potential. In my opinion, the agenda should rest on five pillars: 

1. Reducing unwanted fertility: One has to recognize that population is an important factor in development, especially when it is growing seemingly out of control, since it leads to a significant diversion of national investable resources to consumption which could otherwise be used for increasing investment and productivity and for improving the quality of public social services, such as education, health, sanitation, provision of safe drinking water and for control of environmental degradation.

India’s population has grown from 846 million in 1991 to 1210 million in 2011- that is by 364 million  in the last  twenty years,  and is still growing by around 17 to 18 million every year. Current population growth is mainly fuelled by unwanted fertility.   More than four in ten pregnancies are unintended/unplanned or simply unwanted by the women who experience them and half or more of these pregnancies result in births that spur continued population growth.   Today 26.5 million babies are born each year and out of this about 6 million births could be classified as unwanted or unplanned. It is estimated that around 450 million people out of 1200 million in 2011 in India who were the result of unwanted pregnancies.[5] 

The consequences of unintended pregnancy are serious, slowing down the process of socio-economic development as well as process of change, and is being reflected in widespread hunger, poor health, poverty, illiteracy, unemployment,  regressing governance as well as increasing scarcity of basic resources like food, water and space despite concerted developmental efforts since 1991. And all these have adverse impact on the process of human development. So letting women have the means to manage their childbearing will help to make India a more stable and equal place. It is because when women (or couples)  have access to contraception appropriate to their needs, desires, and budgets, the potential benefits are many, including reduced maternal and child mortality as well as lesser number of abortions and unwanted pregnancies. In addition to its health benefits, family planning allows families and communities to invest more in education and health care and helps reduce poverty, as argued by the President of Population Council, Peter J. Donaldson.

Over the last few months, there has been a steady stream of outlandish statements advocating that every Hindu couple needed to produce four children (the number has now gone up to ten). What is the chance that these declarations of intent will get picked up and adopted by a significant number of Hindu women? In the last two decades, the Total Fertility Rate (TFR) that is the number of children that would be born to a woman has gone down from 4.5 children in 1991 to 2.4 in 2011, as per the Sample Registration System.  Similarly, the number of children per Hindu woman has gone down from 3.3 children in 1992-93 to 2.6 in 2005-06, as per the National Family Health Surveys. No doubt, Muslims have higher fertility than any other religious group.  The Hindu-Muslim fertility differentials, however, declined from 1.1 children per woman in 1992-93 (NFHS-1) to less than 0.5 children in 2005-06 (NFHS-3). It is interesting to note that the rate of decline in total fertility rate is faster among Muslims than Hindus. Looking to these facts, a question arises: How many families will take to active reproduction on a war footing to please their so-called religious/community leaders?

In the changed situation, most women, Hindu or Muslim, do not want more children. Around 20 million currently married women in the reproductive ages, mostly in poor performing States of Bihar, Madhya Pradesh, Rajasthan and Utter Pradesh, seek to postpone childbearing, space births, or stop having children, but are not using a modern method of contraception. Often, these women travel far from their communities to reach a government health facility, only to return home “empty handed” due to shortages, stock outs, lack of choices and/or non-availability of doctors and paramedical staff. When women are thus turned away, they are unable to protect themselves from unintended/unplanned pregnancies or simply unwanted fertility.  
As such, a child by choice not by chance is the only way the poor can aspire to have a better life and good health: most important ingredients unlocking the human potential. For this, efforts should be intensified through greater access to suitable voluntary reproductive health services, information, education, and acceptable methods of family regulations.

2. Ensuring quality education: According to the latest Annual Status of Education Report (ASER) 2014, around half of our school students, after spending six years in school, cannot read basic sentences or perform simple arithmetic.  Unless education is rescued from the quagmire of mediocrity, all talk about realizing India’s demographic dividend will be without substance; and the country would be inching closer to socio-economic disaster. If India is to meet the more ambitious development goals in a more challenging external environment, the post-2014 agenda needs to focus on ensuring a structural transformation of education system. That will enable labour to shift towards higher value-added sectors and more knowledge-intensive activities, thereby improving labour productivity relative to other developing countries. It is argued that the enjoyment of the right to education could be enhanced if there is an acknowledgement of the problems that beset our educational system and if there is a willingness to solve such problems. [6]  In other words, the government must focus on quality education, infrastructure rather than attempting to introduce controversial issues in the education system.

3. Improving living conditions: Better living conditions are equally needed to create enabling environment for human development.  Only 47% of households have a source of water within the premises while 53% of households travel more than a kilometre in rural areas and more than 100 meters in urban areas to fetch their supplies, as per the findings of Census 2011. This problem is further compounded by lack of access to sanitation. About half of the total households in India still defecate in the open. This situation is particularly piquant for women and girls.  It is estimated that around 290 million women in India in 2011, the worst sufferers of open defecation, continue with the age-old practice even after 20 years of economic reforms.  Any improvement in access to toilet facilities, water, electricity and LPG is likely to result in a considerable reduction in domestic drudgery, especially for girls/women, freeing up their time for other activities including schooling and perusing professional life. We must focus on improving sanitation facilities in rural and urban areas.

4. Reducing gender gap: India is simply not doing enough for its women to improve access to resources and freedom of movement as well as improving decision-making power.  To deal with a problem that has roots in social behavior and prejudice, mere legislation is not enough. One has to create an environment where sons and daughters are equally valued.  For this, women must have access to education and training along with economic empowerment through property rights and paid employment opportunities. [7]

5. Shifting labour to urban areas: Since non-agricultural sectors will drive most of India’s future growth, this growth will mainly show up in the development of cities and towns. The level of urbanization in India, unlike the experience of several Asia’s miracle economies, has been quite low. It increased sluggishly from 17.3 per cent in 1951 to 31.2 per cent in 2011. As such, India has to invest heavily in manufacturing and service sectors, which will encourage farmers/rural people to move to more productive jobs in urban centres, especially to new or smaller cities. So far, India has encouraged rural people to stay home by subsidizing rural incomes through programs like NAREGA (National Rural Employment Guarantee Act) and Food Security Bill.

In short, foregoing discussion argues that India is trapped in a vicious circle of economic and human underdevelopment. Sustainable but inclusive economic progress depends on reversing this process in order to unleash an upward spiral of economic and human development by harnessing the synergies between the two. The main concern today is the impairment of human potential, which is not allowing India to reap its rich demographic dividend. It is high time that political parties focused on improving people’s ability to earn more rather than dolling out subsidies that make people dependent on the political class and system.  The above noted action areas are much effective interventions in creating an enabling environment, which allows talent to grow. This does not require much by way of resources; it needs reorientation of the priorities. Recently created NITI Aayog (National Institution for Transforming India Aayog), a policy think-tank of the Government of India that replaces Planning Commission of India, may be asked to prepare a comprehensive approach aiming at overarching solutions to unlock human potential. To make India relevant again, the Modi government has no time to lose.

[2] The HDI combines three dimensions: A long and healthy life: Life expectancy at birth; Knowledge and education, as measured by the adult literacy rate; and a decent standard of living, as indicated by gross domestic product per capita at purchasing power parity.

[3] The measure is especially useful when comparing one country to another because it shows the relative performance of the countries. A rise in per capita GDP signals growth in the economy and tends to translate as an increase in productivity.

[4] A.P.J Abdul Kalam and Y.S.Rajan. 2014.  Beyond 2020: A Vision for Tomorrow's India, Viking, New Delhi. 

[5] Kothari, Devendra. 2014. “Managing Unwanted Fertility in India: Way Forward”, Institute of Economic Growth (ed.):   National Rural Health Mission: An Unfinished Agenda, New Delhi: Book Well, pp.25-36.  

[6] Kothari, Devendra. 2014. Education in India needs intensive care, not a quick fix, RAEA Policy Paper No. 1. Rajasthan Adult Education Association, Jaipur. 

[7] Kothari, Devendra. 2014. “Empowering women in India: Need for a Feminist Agenda”, Journal of Health Management, 16 (2), pp 233-43.