Let's not blame the poor for inflation or slow growth: UNDP's Ajay Chhibber

In an interview with Firstpost, Ajay Chhibber, Regional Director of the UNDP, tells us why India ranks low on the Human Development Index, below China, Sri Lanka and Iran, what we need to do to improve our standing.

Arlene March 14, 2013 21:35:13 IST
Let's not blame the poor for inflation or slow growth: UNDP's Ajay Chhibber

New Delhi: In an interview with Firstpost, Ajay Chhibber, Regional Director of the UNDP, tells us why India ranks low on the Human Development Index, below China, Sri Lanka and Iran, what we need to do to improve our standing and why welfare schemes are not to be blamed for poor growth or inflation.

Excerpts from the interview:

Why does India lag other BRIC countries in the HDI ratings?

Compared to the other BRIC nations, India is a poorer country. It lags in HDI is simply because in terms of its level of income and other indicators like health and education, it is not at par with other BRIC countries. However, it must be noted that India has been one of the countries with the fastest improvement in HDI. It is among the top 10 HDI increasing countries in the world and while the level of income is still low comparatively, there has been a rapid growth in income. That said we must see the progress it has made. It's the change that is important and not the ranking.

What distinguishes other countries in the region like Sri Lanka, Thailand, Indonesia and Vietnam, who despite lagging behind India in terms of economic growth, rank higher on HDI?

HDI goes beyond income. It also takes into consideration health and education. Look at Sri Lanka. It has the highest HDI in the South Asia region and it has always been such. It performs much better on indicators like education, life expectancy and health. It's the same for Indonesia, Thailand and Vietnam. They rank higher because they have not done better just on income, but on education and health.

Lets not blame the poor for inflation or slow growth UNDPs Ajay Chhibber

Ajay Chhibber in this file photo Image credit: UNDP

What needs to be done to improve the situation in India? What has slowed down its human development despite some model policies and also improvement in technology and innovation?

While India has grown rapidly in income, we have not grown rapidly on education and health - part of the reason being inequality in both, where the best facilities are reserved only for the privileged. While there are many who have done well and gone to good universities, they constitute a small elite.

This is not to say that there have not been huge efforts to bridge that gap in the past few years. The last six years have seen huge efforts, but as the HDI shows and suggests, what you do in health and education today will show results only 10 years later. We are moving in the right direction.

India still has a dismal Gender Inequality Index. What can it do to improve it and what should India learn from other southern countries in this regard?

India doesn't do well because of the way the Gender Inequality Index (GII) is constructed and there are three factors why we are placed low on the GII. One, the countries that have a quota for women in Parliament score better than us. For example, Pakistan has a 25 percent quota and thus ranks above us in the GII. In India, we have a quota for women in Panchayat elections but local bodies are not represented in the GII. It's just the way the index is set up.

Two, participation of women in the labour force. On one hand, while more girls are getting educated, they are not getting jobs as rapidly as they should. Also, in some rural areas the participation of women in labour is decreasing because the wealthier a family gets, the more likely it is that they do not want their women to work. Three, there's not as much employment available as there is a workforce in India.

Despite economic gains and growth, why does India still rank so low in the Multidimensional Poverty Index, with 53.7 percent of its population or 612 million people being deprived?

The Multidimensional Poverty Index (MPI) is based on the deprivations people have in food, education, housing and other factors that affect the way people live. So it shows higherdeprivationthan the measure of poverty in income. It is also clear why we have high multidimensional poverty. India has had rapid economic growth, but, we still have many who live in very poor housing conditions; more people are getting educated but it is an effort that is still to bear full fruit; access to water/sanitation, etc is still shoddy - and that's why the MPI is so high.

What should the government do to improve the lot of its people?

The government has so many of these flagship programmes and while the intention is to improve all indicators, the question is how well are these schemes being run? What is needed is a thorough review and overhaul of these schemes. That should be a priority in coming years.

The results in getting these services to people have such mixed results - some state are able to implement them well and some states just cannot, as a result wasting money. So we have to take a good look at the methods of implementation, how it can be improved and how it works at the state level, where ownership of the schemes should be taken.

Is India in stagflation as some say - the growth is low and inflation is high? What are the reasons for this?

Yes, we could say India is in stagflation now. We have had real growth, higher than inflation, and now we have the reverse. In my mind we did well after the global economic crisis, where our GDP was revived but then started sliding. Reason being, we have not had major reforms to keep GDP high or micro reforms that have done enough - example, land acquisition policies, labour policies and more financial inclusion. Part of it is also that we have a very adverse macro economic position - the stimulus after economic crisis was maintained so we have a very large fiscal deficit. The outcome of the fiscal deficit was that to finance the deficit one had to crowd out the private sector or run higher inflation. Fiscal deficit has caused the problem of lower growth and higher inflation.

How does India get out of this? Are aggressive reforms the answer as some suggest or more welfare spending?

Many people say higher inflation is higher food inflation. But the food inflation is because we have followed a very bad PDS policy, which has very high storage and procurement costs. We have an absurd situation of remarkably high agricultural growth of 3.5 percent, which is a global record, yet we have high food inflation primarily because of a poor procurement and public distribution system in India.

We have to reform the PDS and one of the ways is direct cash transfer. Overhauling the PDS will help decrease the fiscal deficit and get the grain to the poor for whom it is directed. In a way what we need is to stem the decline. But we also need a well thought through second generation of reforms.

One needs a combination of macro policies. One has to change land acquisition laws and PDS in order to contain inflation and revive growth. We also need a more inclusive financial system and systems to serve the needs of a vast majority of Small and Medium Enterprises (SMEs).

Is large-scale welfare spending such as the National Rural Employment Guarantee Scheme (NREGS) fueling inflation without contributing to growth?

I think if the NREGA programme is just a welfare programme it won't be sustainable in the long run. But, if it used to build assets in the community (like build ponds, roads, irrigation channels and encourage and improve reforestation) that will help lift the population from poverty and also improve productivity, then it will be a positive benefit to the welfare of people. So, this shouldn't be seen just as an employment scheme. It has to be seen as a scheme that helps lift the communities it is aimed at.

It may not be ideal and, of course, there may be a lot of variability in states, but it is moving in the right direction. To say that we spend money on our people and that's what is causing stagflation is absurd. If that's the case then we should be finding a solution. Let's not blame the poor for the inflation or poor growth. Let us not say, they shouldn't get welfare.

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