Indian Economy: Who’s Right? - Amartya Sen

Amartya Sen tells Shougat Dasgupta

Why have we been so ineffective in using our rapid economic growth, over decades now, to reduce extreme poverty and deprivation?
There has been some decline in poverty and deprivation with rapid economic growth, and the main question is why have the effects been so limited. I think there are two main reasons for the ineffectiveness. First, unlike the process of development in Japan, China, Korea and other countries, which pursued what Jean Drèze and I have called “Asian economic development” in our book, India has not had enough focus on public spending on school education and basic healthcare, which these other countries have had. They have made human capability development central to their economic expansion, and having an educated and healthy workforce is not only good for sustaining quality economic growth, but also favourable to expanding the earnings of the workforce. For example, while India’s wage rates, correcting for inflation, have grown very slowly, the Chinese wage rates have gone up rapidly (by about seven percent per year, in real terms). China has remained competitive, despite this wage rise, because of its fast-growing productivity and the skill of its educated and healthy workforce.

Second, these countries have used a much higher proportion of the extra income generated by economic growth to further expand their facilities of education and healthcare, and consolidated and expanded their early lead in human capability formation. There are lessons there for India which we have persistently overlooked thanks to the strong temptation — often fed by the business media — to see the pursuit of growth to be a matter of cunning commercial policy, in particular providing extra incentives for business, rather than as a social and economic exercise of enhancing human lives and human productivity. I am not against incentives being offered for economic expansion (and Indian entrepreneurs are admirably adaptable and responsive), but the balance that has been lost requires emendation through appropriate reorientation of public policy and democratic pressure to make policy priorities more humane as well as more intelligent.

You write that the gulf between the lives of the poor and the rich has “an intensity — indeed an outrageousness — that aggregate inequality indicators cannot capture.” Why is the State so cavalier about providing people with even the most basic services, elementary education, for instance, public toilets or rudimentary healthcare?
In a democratic country, government policy tends to be strongly shaped by the nature of political demands that are aired, and the public pressures that are generated. If the government is constantly pressured to spend public money to help the relatively privileged, then the government sees its political advantage in taking those steps. So it is not just a matter of the state and its policies that we have to look at, but also the nature of public demand and the balance of media coverage. If we, the Indian citizens with our voices and votes, thunder in support of subsidising electricity for those who have it (one-third of Indians have no electric connections), for subsidising diesel or cooking gas for those who have implements to make use of them (most Indians do not have such implements), while remaining silent on medical deprivation, educational backwardness, or the lack of toilets at home, then we must share the blame for being “cavalier.”
The book that Drèze and I have written focusses on the deprivation of the Indian population precisely for us to be better informed and more determined to create a better India, rather than being inadvertently callous. Indian citizens — no less than people anywhere else — can respond to empirical information and analysis, and we have to rely on public action based on that to put our house in order.

Are inclusive, universal programmes such as school meals or NREGA evidence of the value of State intervention?
These are surely among the examples to consider, even though there are many others. Also, these schemes, as they exist now, have faults that can be remedied. However, empirical studies show that despite the faults and limitations, mid-day meals in schools and NREGA have improved the lives and health of a great many people. But we must never forget that each of these programmes can be improved. Even when the basic idea is sound, as these are, there should not be any exemption from close public scrutiny.

Speaking of large programmes, we come to the Food Security Bill. One critic described it as “something cooked up by a Soviet planner on a bad day”. What do you say to those who argue that such programmes are unaffordable?
This is the best defence of Soviet planning I have heard for a long time. The Food Security Bill, which alas had to be promulgated as an ordinance rather than through parliamentary endorsement (a great pity), has a number of faults, but if that is the alleged critic’s idea of a disastrous bit of policy, then he has clearly led a sheltered political life. If it is the case, as many other critics argue, that the present government is going forward with it in order to get more votes, that is not as much of an indictment in a democracy — where voting is meant to have an important function — as it would be in a system in which voting had no role in the politics of the country. The Soviet planner, even on a bad day, did not have much reason to worry about securing votes.

However, the issue of affordability is serious. Those who have nothing critical to say about the public policy of providing artificially cheap electricity for those who are lucky enough to have power connection (the cost of this subsidisation is monumental: it absorbs about two percent of the GDP) do not have much moral right, it could be argued, to wax eloquent on the unaffordability of the Food Security Bill (which will absorb a bit less than one percent of the GDP). It is a bit exasperating that critics jump to cry “unaffordable” only when the beneficiaries are the poor and the hungry, rather than the well-fed users of subsidised electricity, subsidised diesel, subsidised cooking gas, artificially cheapened fertilizers, or import-duty free gold from abroad. I wish I could call these critics “cavalier”, but that surely would be too kind.

Affordability, in general, is, however, a legitimate concern, but any policy has to be judged with full knowledge of who gets the benefit and how it helps to remedy, if it does, the deficiencies of the contemporary India. There are serious issues to examine about all public policies, but we are unlikely to get there by a deeply class-biased analysis of what India can or cannot afford.

You argue that the State must become more active. You cite the interventionist governments of Scandinavian countries as an example. But can we trust the State to deliver on its promises? That well-intentioned programmes will not be undone by corruption?
This too is an excellent question, like the others you have put to us. State action calls for constant scrutiny and assessment, and it should never be a matter of just “trust”. Your rhetorical question points exactly in the right direction. Eternal vigilance is not only – as has often been said – the price of liberty; it is also the price of having efficient and non-corrupt governance.

However, just as it is a mistake to expect too much from the state, it could be a great mistake to assume that the state cannot do anything, no matter how vigilant the public is and how the political process of checks and balances function. Indian public policy did eliminate famines immediately after independence; it did prevent the explosion of an AIDS pandemic as many experts abroad feared; it did eliminate polio as a disease from the land of India; it runs postal systems, railways and some other public services with efficiency that does not compare unfavourably with what happens elsewhere in the world.

It is extremely important to avoid what can be called “the smugness of cynicism,” which can take the form of arguing: “The Indian state cannot achieve anything, therefore let me not bother to think about public policy: my partners at bridge are waiting for me.”