India is improving on economic performance, but growth eludes struggling lower middle class: Index

Whether you like it or not, India is still behind its South Asian counterparts in terms of social parameters, despite its remarkable economic performance. The performance of many other lower middle income countries is better on social parameters than India.

The latest data released by Social Progress Index confirms this trend. The index is one of the initiatives that argues for a broader and a holistic view on development that moves beyond economic parameters. It ranks countries on the basis of a wide range of social and environmental parameters across three dimensions – basic human needs, foundations of well-being and opportunity.

India’s overall score is 56.26, and the country fares better than its three South Asian counterparts – Bangladesh (52.18), Nepal (56.07) and Pakistan (49.18). But if we look at the basic human needs dimension that captures survival needs including shelter facilities, nutrition and medical care, safety and security, and water and sanitation facilities, India (63.02) is outperformed by Nepal (67.88), Bangladesh (66.07) and Sri Lanka (78.48) by significant margins. The five-year trends reveal that all other South Asian countries have progressed on social progress by higher margins than India. On the basic human needs dimension, Bangladesh (6.05) and Nepal (7.62) have shown higher improvements than India (5.47).

Similar results are observed when comparisons are drawn with some lower middle-income countries.

So, the question arises:

Why is it the case that the fastest growing major economy isn’t able to provide for the basic needs of its citizens?

Why have the public resources generated through economic development not been utilised in a determined way for improving basic social conditions?

Representational image. Reuters

Representational image. Reuters

Having said that, the achievements of modern India are starting to be recognised across the globe. The country has made significant progress on the economic front, transforming from a country with a slow rate of growth to one of the fastest growing major economies. These economic achievements become more momentous if one considers the challenges of rising from the legacy of colonial rule.

It is not only the economic parameters that have improved, but there has also been some progress on the social front. If we look at the health landscape, the life expectancy in India has increased by 8 years during the last two decades, which is higher than the average increase. The infant mortality rate in the country has dropped from 73.5 in 1997 to 32 in 2017 and is now comparable to the world average. In terms of education, adult literacy rate has improved from 48 percent in 1991 to 69 percent in 2011 . The country has also made significant progress in providing improved water and sanitation facilities to its citizens.

The data from the Social Progress Index that analyses the relationship between social and economic progress provides the answer. The data reveals that neither is economic progress the sole driver for advancing social outcomes nor is the capacity of all the economies to transform economic progress to social progress. This provides an explanation of two things. First, this explains why the performance of some lower income countries is comparable to high income countries.

For instance, Nepal and India fall in the same tier of social progress despite the former being a low income country. Secondly, this also explains that there are differences in social progress performance of countries with similar GDP per capita. For instance, the performance of lower middle income countries vary from 37.29 to 73.07 on social progress. This is mainly because some of them are able to transform their growth to social advancements in a better way.

For example, Sri Lanka, a lower middle-income country has focused investments on education and the quality of public educational institutes is very high there. In fact, there are hardly any private educational institutes. This focused approach is reflected in the country’s scores on education that are higher than 90 on a 0-100 scale.

An in-depth analysis of the countries whose performances are relatively better reveals that a lot of factors such as a right mix of government policies addressed towards priority areas, investments by private sector, targeted programs towards addressing social issues, play an important role in advancing the social progress of the country. It is the adequacy of the government’s interventions in social sectors such as healthcare and education that is reflected in the country’s social progress performance.

For instance, India’s public expenditure on education (as a percentage of total government expenditure) is comparable to the world average of 14 percent and the performance of the country on the components of education is better than the components of health. This can be attributed to the lower public expenditure on health, as a percentage of total health expenditure that has hovered between 25-30 percent and is higher than only 16 countries in the world.

Given such a scenario, the country needs to adopt strategies for directly targeting the social issues as they not only hinder the social development of the country but also impact the economic development. The potential gains from addressing these issues, in terms of higher productivity and economic growth, will far exceed the costs that will be incurred for making such interventions.

(Amit Kapoor is chair, and Manisha Kapoor is senior researcher, at Institute for Competitiveness. Kapoor tweets @kautiliya.)

Updated Date: Sep 22, 2018 18:28 PM

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