Tag: Sen-Bhagwati Debate

WHY GROWTH MATTERS ?

The book starts with “Tryst with Destiny speech” given by the first Prime Minister of India J. L. Nehru from the ramparts of the red fort in August 1947. This was the time when India started a new journey towards nation-building and fulfilling the aspirations of million Indians. The authors mentioned this to reinforce the idea that the ‘goal of poverty’ elimination had always been the part of India’s national strategy.  The whole book gives a feel of strategy document which is divided into three parts: first is about debunking various myths related to economic growth and development of India, second talks about the Track I reforms that produce growth which has a direct impact on poverty and finally, third discusses the most important reforms in the areas of health care, education and guaranteed employment under the Track II reforms.

The authors of the book: Jagdish Bhagwati and Arvind Panagariya are the professor of economics at Columbia University. In fact, Panagariya is a protégé of Jagdish Bhagwati and he was recently appointed as the first Vice Chairman of NITI Aayog by the present BJP government. The authors of the book believe in the ideas of globalization, free trade, and especially full-fledged reforms.

In the first part of the book, the author has tried to debunk various myths- about early development strategy, inclusion of health and education, focus on redistribution to reduce poverty as compared to growth emphasising the point that the early development strategy also focussed on these goals. The authors challenged the myths about the reforms launched in 1991 and its impact on poverty reduction, farmer suicides, development of socially disadvantaged groups, the controversies surrounding poverty lines and vociferously the impact of trade and globalization on poor.

They have debunked the myth of increasing inequalities due to reforms launched in the country in 1991. The authors disapproved the “Kerala Model of Development” saying that it had a historical advantage in terms of literacy, health infrastructure, trade linkages and the dominance of the private sector. In fact, the author mentions the account of Robin Jeffrey (1992) who highlighted the key factors- matrilineal tradition, the role of various rulers, caste and religion-based groups and trade linkages with various countries which played an important role in growth and development of Kerala. The author lauded the “Gujarat Model of Development” and quashed the myth that despite high growth, Gujarat has performed poorly in health and education.

The Part II of the book talks about the Track I reform in the areas of Labor laws, Land acquisition, Infrastructure, Higher Education & Agricultural Market reforms which are aimed accelerating and sustaining growth. In fact, the recent Economic Surveys released by the Government of India discussed these critical issues which act as an impediment in the growth process. The current NDA government has launched various labor reforms like allowing fixed-term employment in all sectors, removing the arbitrary inspection system, providing EPF number portability, six-months maternity leaves to increase the female labor force participation rate, amending the apprentice law and child labor law etc. They focused on infrastructure development launching ‘Bharatmala Project’, ‘Sagarmala Project’, UDAN scheme, rural electrification, and road development. e-NAM(National Agriculture Market) and various other agricultural reforms launched to focus on doubling the farmers’ income. It has proposed the Higher Education Commission of India bill 2018 to abolish the UGC to provide more freedom and autonomy to various universities of India to reform the higher education system in India. However, according to me,  there is still a long way to go in the areas of labor reforms and land acquisition act which are still archaic and create hurdles in the ease of doing business in India.

Track II reforms discussed in Part III of the book are focussed on effective and inclusive redistribution process through providing guaranteeing employment, adult nutrition, and food security, reforming health care and universalizing elementary education. However, the authors’ main idea is that “growth will act as an instrument for poverty alleviation”. It will help in creating substantial economic resources to fund the redistribution goals. As per the author’s reasoning, “Track II reforms can stand only on the shoulders of Track I reforms; without the latter, the former cannot be financed. The whole viewpoint of authors of the book can be seen in terms of “trickle-down theory” which is labeled as “pull-up growth” strategy in the book. 

The authors completely disagree with the model of redistribution proposed by Amartya Sen and Jean Dreze because they think that it cannot be the answer to removing poverty in countries of India, Brazil, and China which has a huge population to cater. Under the Track II reforms, the author discussed the design of the redistribution programmes in terms of cash or kind transfers targeted or universal, public versus private provision, conditional versus unconditional transfers and recommends the strategy of policy mix consisting of targeted unconditional cash transfers for most needs, vouchers for elementary education and insurance for major illnesses with government covering the premiums.  In fact, the present government implemented the idea of Direct Cash Transfers (DBT) through the help of “JAM (Jan-Dhan Aadhar Mobile) trinity” for cooking gas subsidy transfers, scholarship reimbursement etc. However, targeting any cash transfers or kind transfers is a complex task in India because of lack of identification mechanism where Aadhar can play a major role.

This book came into limelight after the whole Sen-Bhagwati debate started around 2013-2014. At the same time, Amartya Sen, the Nobel Prize winner in Economics and recipient of Bharat Ratna and Jean Dreze book, “An Uncertain Glory: India and its Contradictions” published. Amartya Sen has given the ‘idea of capability-based approach’ to human development and he argues that ‘redistribution as a strategy’ will help in the elimination of poverty. In fact, he proposes the participatory growth and broad-based development model where rights are given to the people and there is freedom and agency for the people to bring about development for them. That is why Amartya Sen praises the “Kerala Experience of development” where all the social indicators are equal to the developed countries of the world. They also emphasize and compare India’s growth story to Bangladesh which has improved the social indicators in less time duration than India. Women have played an important role in improving the social indicators of Bangladesh because of the increasing employment of women in labor-intensive manufacturing sectors like apparel, textiles etc. It also indicates that providing agency to women creates a conducive climate for improving all the social indicators not only for the present generations but also future generations.

In fact, Bhagwati and Panagariya have not even discussed the gender issues in their book which is the biggest criticism of their whole strategy of growth. India being a patriarchal society has a very low labor force participation rate which needs to be improved to make the growth more inclusive and broad-based. Another criticism of the whole strategy proposed in the book is that there should not be any dependence of Track II reforms on Track I reforms as the author consistently pitched that Track II reforms will be implemented with the help of resources generated from Track I reforms. What will happen when the Indian economy is not growing at all in a doomsday scenario? In that case, the Government of India should work on both the fronts stimulating the growth process as well as creating a sustainable and humane mechanism to support and redistribute the resources to the poorest sections of the society. However, the model proposed by Sen in terms of State-led development has not resulted in substantial achievements before India has turned towards the strategy of liberalization, privatization, and globalization.

On the face of it, choosing one strategy among the two is not the option but choosing the better strategy for the overall and inclusive development of the country will be the right option. There is no option to go back and adopt the state-led development and there is a danger in leaving everything for market forces to do. The pitfalls from both the approaches are very much visible all over the world where state-led development is almost abandoned by countries around the world and pure market fundamentalism has led to the severe crisis and unrest even in the developed world.

Therefore, India should find a “middle-path” propounded by the Gautam Buddha whereby India takes the help of globalization to unleash the animal spirit of market forces to create growth and development. Along with creating a mechanism of participatory development where every individual of the country develop its capabilities to achieve the goal of sustainable development because development is not a singular concept of infrastructure, economic growth, poverty reduction, education, and health but it is a multi-dimensional concept where there is a substantial change not only in material and physical aspects but also change in social structures, popular attitudes, and national institutions.