Originally Published 2011-05-03 00:00:00 Published on May 03, 2011
In many ways, India and China are running parallel growth stories with high GDP growths. However, China seems to be taking stock of what has not been achieved by their high GDP growth and India should also be more concerned with the well-being of all Indians for a more harmonious society.
India versus China: The importance of inclusive growth
In many ways India and China are running parallel growth stories. India’s exports were $246 billion in March and China’s were close to $1.5 trillion. India clocked average GDP growth of 8.5 per cent this fiscal year and China experienced 9.7 per cent growth. China is the second most important economy in the world and is so powerful that even the US is constantly worried about its next move. In particular, the Americans are worried about the huge trade surplus China has with the US, and the fact that the yuan remains undervalued giving the Chinese a distinct cost advantage. China’s dollar reserves grew to $3.05 trillion in April 2011 and it is the largest holder of US government bonds. The Chinese on their part do not think it is their responsibility alone to correct world imbalances and do not want to talk about the revaluation of the yuan and disallowed any discussion about its exchange rate in the recent BRICS meeting in China.

Yet, surprisingly, whenever you meet Chinese officials and academics they always call China a developing nation. One wonders why high economic growth has not gone to their heads. According to the official view, China is still not a rich country because there are social disparities and there still are a large number of poor there. China may have economic clout that the world fears, but it is still not happy with its own development pattern, especially in terms of the well-being of each citizen and the growing inequalities. In terms of per capita income, it lags behind many developed countries. But in terms of infrastructure, it is ahead of many OECD countries. In its 12th Plan (2011-2015), China wants its growth to be "well-being-oriented" and home market-oriented and also wishes to have a low carbon model.

China’s exponential export growth has benefited industrialized big cities, and the jobs are also there in these cities. Restrictions on migration and land sales have not allowed the prosperity to spread to the countryside. One does indeed come across primitive living conditions in villages in the interior of China where in terms of housing, sanitation, school facilities and health care, these are comparable to the situation in India in the poorer states. The decentralized political structure is also not helping in alleviating poverty in some of the poorer provinces which are not able to spend as much as the richer provinces do on social welfare, and there is a shortage of service sector providers in terms of medicines, education and finance and banking in poorer provinces. China, however, was able to bring about a rapid decline in poverty during the last 30 years and now only 6 per cent of its population remains poor.

Recently, the Government of India in the latest blueprint for the 12th Plan ( 2012 to 2017) talked of 9 to 9.5 per cent growth and poverty reduction. The official data, however, reveals that health and education received only 60 per cent of the projected allocation in the 11th Plan. But we get an optimistic poverty estimate and the Planning Commission has declared that there was a decrease in poverty in the 11th Five Year Plan by 5 per cent.

This means that only 32 per cent of the population in India is poor- down from the officially accepted Tendulkar Committee estimate of poverty of 37 per cent of the population. There are, however, sharp differences in poverty estimates by other committees appointed by the government in the past. It depends on the benchmark income that is adopted for calculating poverty. If it is taken to be Rs 20 and Rs 11 a day per person for urban and rural income, respectively, naturally there will be fewer poor than the actual numbers. The Supreme Court rightly pointed this out recently.

Interestingly, the Supreme Court has also raised an important question as to why there are starvation deaths in certain pockets of the country. Justice Dalveer Bhandari has asked, "When you have godowns full and people are starving, what is the benefit? You cannot have two Indias."

This talk of "two Indias" has raised some urgent issues that need to be focused upon. In the 12th Plan, the states in which there is rampant malnourishment, high maternal mortality, disease and chronic poverty should be given special attention. While it has been announced by the government that the planned spending on health is supposed to be doubled from around 1.3 per cent of the GDP (one of the lowest in the South Asian region) to 2.25 per cent by the end of the next Plan, more spending should be allowed in the backward states.

Unfortunately, we seem to be talking mainly of the achievable high GDP growth, fiscal consolidation, double digit (11 per cent) industrial growth and not on the reasons for the slow progress in achieving inclusive growth. It has now been admitted by the government that India will not be able to meet the Millennium Goals as far as the eradication of malnourishment is concerned. India has the largest number of malnourished children in the world. Just like China is concerned with growth that is "well-being-oriented", India should also be concerned with inclusiveness in a more meaningful way.

Much more than China, India needs cheap housing, eradication of malnourishment and 100 per cent adult literacy. But as everyone knows, whatever money is allocated is not always spent in the right direction, and implementation is faulty.

The Indian government should at least admit that faster poverty reduction, eradication of malnourishment and high maternal mortality are the main problems in this country, and poverty and lack of jobs are the root cause for the social unrest that India is facing. People without jobs will always become restless and violent. There would have to be more jobs in the villages and in the manufacturing sector, otherwise there cannot be a reduction in poverty. Encouraging local talent through training and access to credit can lead to more jobs in handicrafts and handloom production, especially for women. Skill training of youth has to be emphasised and agricultural productivity has to be increased. And like China, for India, the home market-oriented production will be important in the future for sustainable growth and in lowering India’s carbon footprint.

There are many good things about India, specially the freedom of speech, movement and protest that we enjoy as compared to the Chinese. But they seem to be taking stock of what has not been achieved by their high GDP growth and we should also be more concerned with the well-being, health and education of all Indians for a more harmonious society.

(The writer is a Senior Fellow at Observer Research Foundation)

Courtesy: The Tribune
The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.


David Rusnok

David Rusnok

David Rusnok Researcher Strengthening National Climate Policy Implementation (SNAPFI) project DIW Germany

Read More +