Superpower? Not just yet

The Good News: India is on the list of six major economies which will account for more than half of global growth by 2025.

The Bad News: Corruption, inefficiency and poverty in India will get a lot worse before they start getting better.

In its Global Development Horizons 2011 report, titled: Multipolarity: The New Global Economy, the World Bank says the global GDP share of Brazil, China, India, Indonesia, South Korea, and Russia will increase from 36 to 45 per cent.

The news may have given India Inc and Dalal Street a cause to celebrate, and the Sensex a boost. But even as we join in the celebrations, we must ponder one fundamental question: Can a nation’s progress be measured only by it economic growth?

Several economists, sociologists and social thinkers have always replied in negative. In fact, that is the idea behind the Human Development Index, (HDI) which measures a nation’s real progress and not only its capitalization growth or soaring share index or the growth in wealth of a few selected hands.

Superpower in waiting?

And therein lies the rub. Because according to the 2010 HDI figures, India falls in the medium category, ranking 119 among among 169 countries. Its HDI is 0.519 when the highest HDI is 0.938 and the lowest is 0.140.

Compare that with the five others on the list of nations who are supposed to lead global growth in the next decade: South Korea is ranked 12th, (0.877 – very high human development), Russia is at 65 (0.719 – high human development), Brazil – 73 (0.699 – high human development), China is 89 (0.663 – Medium human development), and Indonesia is 108th (0.600 – Medium human development).

India, which has more than 37 per cent of its population of 1.35 billion still living below the poverty line, comes last by a long shot. As per 2010 figures, more than 22 per cent of the entire rural population and 15 per cent of the country’s urban population exists in this difficult physical and financial predicament.

Yet, according to the World Bank’s new global poverty estimates, India has shown a continuing decline in poverty. The revised estimates suggest that the percentage of people living below $1.25 a day in 2005 (which, based on India’s Purchasing Power Parity rate, works out to Rs 21.6 a day in urban areas and Rs 14.3 in rural areas in 2005) decreased from 60 per cent in 1981 to 42 per cent in 2005. Even at a dollar a day ( Rs 17.2 in urban areas and Rs 11.4 in rural areas in 2005 ) poverty declined from 42 per cent to 24 per cent over the same period.

But statistics can be deceptive. In 2005, thought the World Bank revised the international poverty line up from $1 a day to $1.25 a day, individual countries were allowed to set their own national poverty line.

Accordingly, our Planning Commission set India’s national poverty line at Rs 578 a month, the equivalent of 43 US cents a day. The World Bank believes that this is too low, and that a more realistic level would be $1.17 a day. If one goes by that figure, India is estimated to have about 600 million poor who go hungry to bed each night. By setting the poverty line at 43 cents, India magically brought down this figure considerably.

But since statistics and figures can be deceptive, let us keep them aside for a moment.

What we see as on ground realities? Increasing number of farmers committing suicide. More children dying each day due to malnutrition or lack of access to health facilities. Rural children unable to write their own name or do some simple calculations despite attending school. Women walking up to six km every day to fetch drinking water in rural areas, which reel under 16 to 20 hours of power cuts each day.

Urban areas are full of slums where people live in sub human conditions. Long queues in front of fair price food grain shops, with no grains in them. Thousands of street children, wandering, begging or working as child labourers with no hope for education.

This is the picture of one India, which is far larger than the India with malls, stock exchanges, corporate high flyers, cars, appliances, gadgets and restaurants. These, no doubt, will boost growth.

After all, as the World Bank says in its latest report: “with the emergence of a substantial middle class in developing countries and demographic transitions underway in several major East Asian economies, stronger consumption trends are likely to prevail, which in turn can serve as a source of sustained global growth.”

Economic growth no doubt plays an important role in development as it creates surplus wealth for investment, more jobs, growing affluence. More demand leads to more production, more industries mean more jobs, more affluence, and even more demand.

This circle, if drawn properly, can encompass the entire nation. But if not, wealth and affluence does not percolate downwards, and is concentrated among a few. The poor get poorer, and this in turn lead to social tensions.

India is land of such contradictions, where we have incredible poverty and squalor on one hand, and a growing number of citizens making it to Forbe’s Rich List. Where we have eight people sharing a tiny shack without any basic facilities, living right next to a 25-floor building built for a family of five.

Lack of transparency and governance and large scale corruption add to this dichotomy . Further growth without overcoming these evils is bound to widen the gap.

Which is perhaps why the World Bank, while predicting incredible growth for these six nations by 2025, has also warned that four of them–China, Indonesia, India, and Russia– face major institutional and governance challenges. Human capital and ensuring access to education is also a concern Brazil, India, and Indonesia.
India figures in both groups.

So even as we celebrate our new-found path to the world’s top table, it is important to remember the growing fault lines that could tear us apart before we get there.