GDP means nothing to poor: Time to get over lust for growth
Most likely, India’s gross domestic product (GDP) numbers will turn out to be around 7.5%-7.6% for the fiscal year 2016 when the numbers come out around 5.30 PM in the evening. That’s another reason for the Narendra Modi government to continue with its two-year celebrations. One can expect keywords such as ‘China-beating growth’, ‘world’s fastest growing economy’ and ‘India’s emergence as economic super power' and 'bright spot in Asia ’ from the government’s top functionaries. It’s a good feeling to be the topper in the class.
What does the GDP growth number mean to the common man, if the growth doesn't percolate to the grassroots, one always wonders.
As India awaits more evidence for beating China in economic growth (India has achieved the tag of world's fastest growing major economy beating China with 7% plus growth last year), it's a good question to ponder over.
There are even more disturbing statistics if one takes a closer look at the economy that force us to rethink on how relevant is the 'fastest growing economy' tag to India's poor.
For instance, according to a United Nations annual report for 2014-15 released last year, India has the world’s highest number of hungry people in the world. Ironically, we have beaten China here too. India has 194.6 million hungry people compared with 133.8 million in China, of the total of 795 million people in the world. In other words, one-fourth of the world’s hungry population is in India. What does being the citizens of world’s fastest growing economy mean to them?
“It’s a big issue which is hardly discussed,” said Madan Sabnavis, chief economist at Care Rating. “The deprivation of poor (from the fruits of economic growth) is so huge in India,” Sabanavis said. This is not necessarily the problem of the new methodology, but a larger issue of the inability of the statisticians to assess the quality of the growth in the economy, Sabnavis added. Most economists agree with him, but say there aren’t sufficient alternatives to get a better measurement.
Where are the jobs?
Everyone loves to talk about 7.6% growth, be it Modi or his Finance Minister, Arun Jaitley. The Narendra Modi-government, particularly, has highlighted the 7% plus economic growth as an indicator of India turning the corner to the trajectory of high economic growth. But, for a larger section of people at the bottom of pyramid, these are mere numbers in the newspapers. Even if one looks at the job data, the picture is disappointing. There has been no corresponding increase in the number of jobs in the economy to align with what the headline GDP numbers indicate.
As this piece in Mint elaborates, data from the Labour Bureau shows that employment growth plunged to a six-year low in 2015 across the eight key labour-intensive industries and only 0.1 million jobs were created in last year. This is compared with the 0.4 million jobs created in 2014 and even worse than the 0.3 million figure in 2012. So, where has the high economic growth in successive years, whether it is gross value added (GVA) or not, benefited the masses?
Already, the GDP numbers (based on the new methodology) itself is being questioned by economists purely on account of a protruding disconnect with the high frequency data that should ideally support the headline GDP number. Forget about that debate for now. The fact is that India continues to be a vulnerable economy. There are no strong growth triggers except private consumption and favorable monsoons.
Private investment cycle is yet to resume and the economy is still facing a major banking crisis. Stressed assets currently account for almost 11 percent of the total loans given by the banks. If a banking crisis happens, that can take the country in reverse gear by several years, forget about competing with China on the economic growth front. With private investment cycle yet to resume, stalled projects are on the rise and the 17-month consecutive fall in exports do not offer any comfort to the economy.
To be sure, the Modi government has begun the process of setting the stage for a high-growth phase by addressing the issue of inclusive growth. It has launched a slew of rural-focused schemes and begun rationalization of subsidies. But, portraying the economy as a super power today based on what the GDP numbers show is a mistake. It’s time to say goodbye to the obsession on GDP numbers. The focus, instead, should be on ensuring that the fruits of economic growth reach the grassroots, ensuring prosperity to all and work to make actual growth happen on the ground, not just managing headlines.
Comparing India’s growth with that of China and patting one's back by saying that we grow even faster than China is big bunkum. The Chinese economy is five times bigger than us and even if they grow 2%, it equals to India’s 7% growth.
Whoever is pitting India against China and self-proclaiming that we are the world’s fastest growing economy and uncorks the bubbly is making a fool of himself. We are not.
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