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Double-Digit Growth Possible but Poverty Will Stay

Double-Digit Growth Possible but Poverty Will Stay

by Jude ()

Paranjoy Guha Thakurta

NEW DELHI, Oct 23 (IPS) - As India's leaders gear up to boost the country's gross domestic product (GDP) to a dizzying 10 percent per annum, analysts warn that although double digit growth is achievable the country's problems of endemic poverty, unemployment and agrarian distress are unlikely to disappear in a hurry.

On Oct. 18, presiding over a meeting of India's Planning Commission, Prime Minister Manmohan Singh said 10 percent economic growth "is an ambitious target, but I do believe it is a feasible one". His remarks came just after the commission approved the "approach paper" to India's Eleventh Five-Year Plan that starts Apr.1 next year.

India is one of several countries that follow planned national development plans set for five-year periods.

The document states that India would aim for an annual growth rate of 9 percent over the 2007-12 period, with the economic growth rate touching the 10 percent mark in the last two years of the plan period. If these targets are met, India's growth rate would become comparable to that of its bigger neighbour China, the only country that has in recent times been able to grow at 10 percent or more on a sustained basis for over a decade.

Singh, a former World Bank economist regarded as the architect of India's liberalisation, predicted that India "would be finally emerging into the front ranks of fast growing developing countries".

Every five-year plan that the Indian government had formulated in the past had set growth targets that were never achieved. But independent economists believe that the new growth targets would not only be achieved but also perhaps exceeded, provided the government substantially improves the working of the country's inadequate and notoriously-inefficient social and physical infrastructure.

"Given the fact that for the first time in the nearly six-decade long history of (post-colonial) India, the country's economy has grown by eight percent three years in a row and is almost certain to grow at a similar pace during the current financial year (ending Mar. 31, 2007), I think we can confidently aim for a 10 percent annual growth target," says D. K. Joshi, principal economist with Credit Rating and Investment Services of India Ltd., now controlled by Standard and Poor's, the reputed United States credit rating firm.

Joshi told IPS that the eight percent average rate of growth that has been achieved in real terms over more than three years is especially significant because this has occurred despite crippling power shortages (of at least 10 percent of total demand, often more) and spiralling prices of petroleum products that have fuelled inflationary pressures. India currently imports three-fourths of its requirements of crude oil. The inflation rate in the country is at present in the region of 5-6 percent.

"A real rate of GDP growth of 10 percent is not just possible; this figure could go up to 12 percent," says Manoj Pant, professor of economics at New Delhi's Jawaharlal Nehru University. "The issue is not really one of the growth rate but whether the pattern of growth is inclusive so that a dent is made on poverty, unemployment, inequality and rural development," he said in an IPS interview.

Pant points out that in India as well as in other countries, rapid growth of GDP has taken place without a significant fall in levels of poverty. Currently, at least one out of four persons in a country of 1.1 billion, lives below the internationally-defined poverty line of one US dollar a day. "Whereas it is possible to grow at 10 percent and not make a dent on poverty, the reverse is not true -- it would not be possible to significantly reduce poverty if the economy does not grow at 10 percent," says Pant.

Whereas India's manufacturing industry as well as its burgeoning services sector -- including the much talked-about computer software and information technology enabled services businesses -- have been growing at over 10 percent a year, the agricultural sector has lagged at a niggardly two percent annually. The share of the farm sector in the country's GDP has come down from 40 percent to 20 percent over the past decade or so, but the share of the population dependent on agriculture has hardly reduced -- from roughly 70 percent to around 60 percent -- over this period. Singh himself acknowledged that "there is a crisis in agriculture in many parts of our country". The day he approved the approach paper to the Plan, he told a conference: "The more I travel to interior areas and meet farmers, I get the feeling that in many parts agriculture is being carried out in adverse conditions. The problems may be attributable to a wide range of causes but the end result is that there are large tracts where farmers seem to be in acute distress."

In recent months, Singh has travelled to different parts of the country such as the Vidharba region in the western Maharashtra state where thousands of farmers have committed suicide for failing to repay loans obtained from local moneylenders at usurious rates of interest. Federal Agriculture Minister Sharad Pawar, who comes from the same province, admitted in Parliament that at least 100,000 indebted farmers have killed themselves in various parts of India between 1993 and 2003.

The Prime Minister said that farmers would have to be paid remunerative prices even if this meant hardship for others who have to pay more for food. "This may hurt some sections of the middle class to a small extent, but it benefits the farmers who are the backbone of our economy," Singh observed. "We need a balanced approach where we provide for food security for the poorest sections without compromising the returns to farmers


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