GROWTH

A central message of modern development economics is the importance of income growth. By this, economists tend to mean growth in GDP, or the market value of what a country produces. In theory, rising GDP creates employment and investment opportunities; and as incomes grow, both citizens and government are increasingly able to set aside funds for the things that make for a good life. One of the tasks of government is to establish conditions that encourage this kind of economic development. Its role should thus be active (protecting the rule of law; investing in infrastructure, health and education) and passive (permitting markets to operate). Of course, GDP growth in itself doesnt guarantee an equitable distribution of incomes, but that problem can be offset by government taxes and transfers.

But this account is inadequate, as the experience of India shows. In the early 1990s the government of India initiated a programme of economic liberalisation. It is now widely acknowledged that the resulting structural reforms led to the impressive economic growth of recent years. Since 2000, GDP has grown at an average annual rate of 7.6% and been accompanied by improvements in a number of other economic indicators. The proportion of people whose incomes are below the countrys official poverty line declined from 45% in the early 1980s to 28% in 2005. The decline is impressive, but the latter figure tells us that the country still harbours widespread deprivation. As the World Bank noted recently, 45% of Indian children under-five are underweight and 25% of women remain illiterate, figures that are worse than those in a number of countries that are poorer in terms of GDP per head. So, if we look at how figures measuring the quality of life in India have changed since the early 1980s, the country would appear to be a winner but if we compare the current figures for the same indicators to those in some countries where GDP per head is lower, India would seem to be a loser. Bhagwati and Panagariya (experts in Indian Economy) insist that two stages of reforms are necessary for successful long-term economic development: Track I reforms - aimed at enabling GDP growth and pulling up the poo r, and Track II reforms aimed at providing healthcare, education and guaranteed employment in rural areas.

All of which would be made possible by increasing revenues from higher incomes. Without the former phase, there would be no finance to produce the latter benefits. In their view, the fast growth rates emanating from Track I reforms enable the Indian government to move now to Track II. Jean Drze and Amartya Sen, are well-known critics of the liberalisation programme. Their target is the neglect by successive governments of health and education, which they see as having given rise to the enormous inequities that characterise the Indian economy. They compare the current state of affairs in India with other poor countries and find India wanting. The sequencing of Track I and Track II reforms is repugnant(inconsistent). In their view a far better pattern of economic development is one in which GDP growth is to an extent traded off for more rapid improvements in health and education. They show that in as much as improvements in health and education raise human productivity and thereby GDP growth rates. It can be shown that development should be assessed on the basis of a comprehensive notion of wealth (adjusted for the distribution of wealth in the economy). Wealth mean the social worth of an economys stock of capital assets, comprising manufactured capital (roads, ports, machinery, and so on), human capital (population size and composition, education, health), knowledge (the arts, humanities, and sciences), and natural capital (ecosystems, sources of water, the atmosphere, land, sub-soil resources). Wealth is the measure of an economys totality of assets. Hence, wealth per head (adjusted for the distribution of wealth) tracks well-being across the generations exactly: wealth increases over a period of time if and only if well-being increases over that same period. So, if we interpret sustainable development to require that well-being across the present and future generations should not decline, we should be checking whether wealth per head is increasing and is likely to increase in the future. GDP is the market value of the flow of final goods and services during a year. If a wetland is drained to make way for a shopping mall , the construction of the latter contributes to GDP, but the destruction of the former goes unrecorded. If the social worth of the mall were less than the social value of the wetland, the economy would have become poorer (wealth would have declined) and potential well-being across the present and future generations would mimic that decline, but GDP would signal otherwise.

The UNs seemingly more humane HDI misleads in the same way. An economys GDP could be made to grow and its human development index made to improve by mining its natural capital.

There are links between those externalities and factors such as acute poverty, population growth, and deteriorations in natural capital. (Empowering women and expanding education certainly help to reduce fertility, but the externalities or spill-over effects just alluded to are a potent presence.) There are deep connections between the persistence of rural poverty in the Indian subcontinent and the habitat destruction that has accompanied economic and population growth. It has been found that relationships between people and natural resources depend greatly on the site and context. It also means that interactions between people and the environment harbour tipping points, an unexpected collapse of the rural resource base means a sudden dramatic loss in a communitys wealth. Its source could have been population pressure and unprotected property rights over a fragile resource base. Civic strife has been known to follow attempts at migration by local populations. The massive transformation of Indias ecological landscape in recent decades as a factor in the lives of the countrys poorest. Drze and Sen do note environmental problems, but only in passing making the exacerbation of inequity one of the primary concerns about the consequences of unchecked climatic developments. In April 2013 an expert group, chaired by Parthadas gupta was convened by the Indian government, released its report on a framework for greening Indias national accounts. It recognises the necessity of presenting figures for GDP and consumption, but takes wealth to be the basis for economic evaluation and presents a road map for transforming the way national statistics are collected and collated. Measuring wealth requires that assets are valued, and that cant be done unless there is some understanding of the socio-environmental processes at work, for market prices can mislead greatly.

EMPLOYMENT AND GROWTH IN INDIA ( Yojana- Oct 2013,pg 11)

In a country like India with surplus labour, importance of an employment oriented growth is important. But over emphasis on employment generation without any regard to income and productivity of workers is also not desirable. Overall productivity is increasing particularly in formal sector but new employment is being created in low productive informal sector.

Employment growth and elasticity have declined for primary sector. Decline in share of agriculture in employment is needed but it is declining in manufacturing sector also. Employment was generated more in construction sector, trade, hotels, transport and storage. Additional employment generated mainly relates to informal workers. Around 92% of workers are in unorganized sector with low productivity, low earnings, poor conditions of work and lack of social protection. Report of Global Employment Trends 2013 (ILO, 2013) Global unemployment has increased from 170 million in 2007 to 197 million in 2011. Around 39 million people have dropped out of labour market as they do not see any job prospects. These are also called discouraged workers. The conclusion ILO (2012 a) is that a) growth is not a necessary condition for employment generation b) structural changes in world economy not conducive for employment generation. The share of manufacturing employment in India is only 11 % as compared to 30-40% in East Asian countries in 2009. Service sector is unlikely a destination for un/low skilled millions of job seekers. India needs to focus on manufacturing sector to provide large scale employment . labour intensity of organised manufacturing sector has to be improved apart from increasing productive employment in SMEs and unorganised manufacturing. Manufacturing and services are both required to absorb Indias large additions to labourforce. .12th plan objective is achieving faster, sustainable, and more inclusive growth is in line with thinking of post 2015 development agenda at global level. Quality and skill development is the focus. The focus is also on labour intensive manufacturing sector so that workers can be shifted from agriculture to high productivity sectors. Problems in post reform period 1. Slow infrastructure development - power shortage, IFPRIs study shows that public expenditure on roads hav better impact on poverty compared to that of poverty alleviation programmes. 2. Failure in raising labour intensive manufacturing only 1.4%of world exports of manufactures while China accounts for 15% 3. Sluggish growth in education and skill level of workers. MMS Young population is an asset only if it is educated , skilled and finds productive employment. 52% of total workers illiterate or educated upto primary level 4. Slow social sector development 5. Governance failure corruption.