Getting India wrong

Critics and supporters of the country's economic liberalisation make the same error–they forget about pollution and population

by Partha Dasgupta / July 15, 2013 / Leave a comment

Published in August 2013 issue of Prospect Magazine

A sewage pipe runs into the Dal Lake in Srinagar, India: economists overlook the link between poverty and destruction of the environment © AP Photo/Mukhtar Khan

An Uncertain Glory: India and Its Contradictions
by Jean Drèze and Amartya Sen (Allen Lane, £20)

Why Growth Matters: How Economic Growth in India Reduced Poverty
by Jagdish Bhagwati and Arvind Panagariya (PublicAffairs, £19.99)

A central message of modern development economics is the importance of income growth. By this, economists tend to mean growth in gross domestic product, or the market value of what a country produces (including services). 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 doesn’t guarantee an equitable distribution of incomes, but that problem can be offset by government taxes and transfers. Or so the argument would have it.

But this account is inadequate, as the experience of India shows. In the early 1980s 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 per cent and been accompanied by improvements in a number of other economic indicators. The proportion of people whose incomes are below the country’s official poverty line declined from 45 per cent in the early 1980s to 28 per cent in 2005. The decline is impressive, but the latter figure tells us that the country still harbours widespread deprivation.

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Comments

ashim choudhury
July 28, 2013 at 14:19
You are saying, what I have been saying in private conversation....just that you speak in the jargon of an economist. Simply put, our obsession with growth and GDP is dangerous...It only accelerates the pace of destruction of our natural resources. In fact, with the sheer size of our population, even a small rise in per capita consumption can have a devastating impact on our environment and natural resources (each day there are millions who are buying not on Tvs and fridges but Ac's and cars). Climate Change and Global Warming are not just fashionable topics of discussion...their impact is being felt in our coasts, in our rivers, in our mountains (uttarakhand is a case in example). Thanks for bringing in the environment angle to economics.
ankur
August 7, 2013 at 03:12
Being in the proximity of environmentalist (my father), I always looked at the way economic indicators were identified and used to showcase the economic health. Most are the keep the stock markets in control and people on the bourses to funnel the money into it. Even the macroeconomic indicators are far from realistic. It feels as if deliberate attempts are made to hide the stark realities from general public. Thanks for such an insight. Its heartening to see that there are attempts to factor the environmental degradation rampant with such brashness.
Nkem Caulfield
August 11, 2013 at 19:16
Interesting (and quite frankly, refreshing) critique of the Sen/Bhagwati debate that is currently at play in the indian media. Will definitely read more of your work!
Ramesh Raghuvanshi
August 14, 2013 at 18:41
Greatest asset of India is population 65 p.c. youngster are there ,of total population but unfortunately most are unskilled. Indians.Greatest capitalists are by nature traders not a single entrepreneur borne in India in last many centuries. India importing more than exporting so Indian economy always remain deficit ..India always wooing for FDI.so always remain under neocolonialism Whether is also not favorable to India 75 p.c. population depend on farming,Farmers are depend on unpredictable monsoon,Indians are very unsecured people so they are purchasing gold. greedily. Most of India dollars spend on energy and gold..For all sophisticated technology we depend on western countries.Here India`s real trouble.
Anavadhya
January 10, 2014 at 12:58
One very simple example to illustrate your point. Till about 8-10 years back, in a small town in UP, all of used to drink water from the tap supplied by the municipality. Fresh water was given for 2 hours each, we stored it and used it for cooking and drinking. With huge population pressures, the Yamuna changing into a drain with affluents and sewage water being pumped into it directly, the tap water is now totally unfit for drinking. Each household in the town either had to buy a water purifier system, or pay money to local vendors who have set up dubious units of cleaning up the municipal waters. A can of 25 litres costs 50 bucks. In summers, a family of 5-7 would need at least 2 cans of water. Monthly expenditure, 800-1000 Rs. Was talking to a labourer the other day who was ruing the fact, that though his wages have increased, he now has to pay for drinking water - whoever has heard of such times where you pay for water? I have a very basic knowledge of economics, but I know in life you always give some and take some. I just hope that the policy makers understand that there has to be a trade-off always and take informed decisions.