Wednesday, July 21, 2010

GDP growth with growing poverty

The forecasts for India’s high economic growth have been coming thick and fast. Only late last year the Paris-based Organisation for Economic Cooperation and Development predicted a 5.9% growth for India in 2009 and 7.2% 2010. In his budget speech earlier this year the Finance Minister, Pranab Mukherji, had promised to put the economy on a trajectory of high growth and there have been several occasions when he predicted that India’s GDP would grow at the rate of more than 8%. Now, even the International Monetary Fund (IMF) has predicted that India was likely to grow at 9.5% during fiscal 2010. The projection was based on “robust corporate profits and favourable financing conditions” that were likely to fuel investments. The corporate tax collections registered a growth of 21.7% in the first quarter of the current fiscal and already the job-market is opening up. Reasonably good rains, despite an indifferent start, have raised hopes of a bumper harvest. Things for the country, everyone says, seem to be looking up.

That is all very well but there are issues attached to a consumption-led GDP growth. In chasing double-digit or near-double digit growth rate the country is consuming natural resources at a fast clip without corresponding benefits, as will be seen later, to a very large section of its population. According to a report prepared by the Confederation of Indian Industries (CII) and the California-based Global Footprint Network (GFN) in 2008, “With a per person footprint of 0.75 global hectares and per person bio-capacity of 0.4 global hectares, India is running an ecological deficit of approximately 100 percent". (The ecological footprint measures human demand on the biosphere in terms of the land and sea area required to provide the resources we use and to absorb the waste we generate. Bio-capacity refers to the capacity of a given biologically productive area to generate an on-going supply of renewable resources and to absorb its spill-over wastes.)

Like per capita emission of green house gases per capita ecological footprint of an average Indian is much lower than the world average. The per person ecological footprint of an average Indian was 0.75 global hectare in 2003 when the world average was 2.2 global hectare. At the same time, because of rising population India’s total national ecological footprint has doubled since 1961, contributing to the degradation of its natural capital. As a corollary, while India’s overall wealth as measured by GDP has risen for reasons of better exploitation of resources over the years, its per capita bio-capacity has shrunk reducing its per capita ecological footprint. More and more people are sharing a shrinking bio-capacity. As the need for development grows natural resources like forests come under threat, jeopardising the livelihood of the poor, especially the tribal poor, who sustain themselves on the forest resources. As most of the densely forested areas sit on mineral-rich mines these have become conflict zones – whether in Orissa, Jharkhand, Chhattisgarh or anywhere else. What is more, these have become the reasons for conflicts between the Ministry of Environment and Forests and other ministries which relate to economic development. The catchy phrase “India now consumes two Indias”, therefore, says it all about the Indian “resource overshoot”.

Releasing the CII-GFN report, Jamshed Godrej, the then Chairman of CII-Godrej Green Business Centre, said almost two years back that it was important to “impress upon policy makers and business that no country can continue being unsustainable”. Countries with ecological deficits consume more than what the ecological systems within their borders can provide. In order to economically grow, they can either use up their own natural resources before starting to import from abroad or do vice versa. China is doing precisely that as it scours the world for natural resources. From Australia to Africa, from Latin America to the conflict-ridden Afghanistan, no place is far away for it for importing resources with its couple of trillion dollars of currency reserves. Sometimes it does so for want of those resources at home, at others it saves the domestic resources for a rainy day and gets them from abroad. What, however, is compelling is that it must run its well-oiled “factory of the world” for achieving that double-digit growth howsoever ecologically and environmentally unsustainable it happens to be. Ecologically speaking, the world has to pay the price as China chases for its citizens a life which, if not better, is at least comparable to that of an average American.

The CII-GFN advisory for policy-makers seems to be important as India’s demand driven growth is not only gobbling up the country’s natural assets and making us behave like China in looking for resources abroad, it is also skewing up the societal balance widening the gulf between the rich and the poor. The numbers of Fortune 500 Indian companies are relentlessly growing along with the numbers of Indian Dollar billionaires – 52 by the latest count, holding combined assets worth 25% of our GDP. No wonder, virtually every luxury automobile brand, from Rolls Royce, Mercedes, BMW to Audi and Harley Davidson to Yamaha motorbikes, all have set up shops in the country finding a ready market. The super-rich gift away private jets to spouses and covet helipads on top of their luxurious multi-storied residences, the kind of which one used to associate with the West-Asian oil-Sheikhs. And yet the government grants incentives and tax-concessions to them amounting to hundreds of thousands of crores. Having entered the national and state legislatures in fair numbers protagonists of big business have developed a cosy relationship with political and bureaucratic classes to be able to facilely swing policies in their favour.

As the few make hay in the Indian sunshine a vast majority are racked by malnutrition and hunger. The United Nations Development Programme update for 2009 shows that 320 million Indians, almost 25% of the population, live in extreme poverty. The World Bank’s global economic prospects show that 827 million of the Indian population live on less than $ 2 a day. This is somewhat more charitable than the findings of Arjun Sen Gupta-chaired National Commission for Enterprises in the Unorganised Sector according to which 836 million Indians (77% of the population) live on Rs. 20 ($ 0.45) a day. Even the government’s own Suresh Tendulkar Committee has, to its surprise, thrown up a figure of 37% of the population that still lives below the poverty line. A few more millions will be pushed below it with the recent deregulation of petro-product prices. Figuring at 66 out of 88 in Global Hunger Index, India lags far behind in respect of many indices (in some respects below sub-Saharan Africa), whether it is maternal or infant mortality rate or underweight or undernourished children. Clearly, the government will not be able to meet the UN Millennium Development Goal of halving poverty by 2015. With such stark facts staring it at its face, the government, according to experts, has surprisingly been trying to project a reduced incidence of poverty so as to be able to spend less under its ambitious Food Security Act. Looking at it and the incentives and other freebies for those listed in “Fortune 500” one gets the government’s drift.
It is needless to say that the progressively increasing Gross Domestic Product is not being distributed equitably among all. A few – rich, powerful and influential – are making the most of it and a vast majority remains helpless and deprived. Economic progress of this kind is meaningless – particularly when the natural world is being plundered and ravaged and, yet, most continue to live out a life of misery and want.
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