Investment in health, education, a must

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The policies and investment strategies of the last five decades

need a serious rethink. There is inadequate investment in the real economy as well as health and education, and lack of accountability

among those charged with the responsibility of designing

and implementing the policies.

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G. Chandrashekhar

"Thani Oruvanukku Unav(u)ilaienil, Jagattinai Azhithiduvom' was the war cry against hunger the celebrated Tamil poet Mahakavi Subramaniya Bharathiar unleashed almost a century ago. Loosely translated, it means, "Even if a single person goes without food, we shall destroy the world". One can well imagine the fervour the maverick poet-patriot brought to the subject of poverty and hunger.

What has the world come to in the last many decades? Despite tremendous advances in science and technology, huge gains on the economic front and, more recently, a globalising world, today, one out of every six in the world or close to 1.25 billion are mired in poverty and hunger.

A large majority of the world's poor (typically earning less than $1 per day) are in developing countries, concentrated mainly in Africa and Asia. India is home to a large number of poor. Most of India's poor are homeless, under-fed and under-clothed.

Admittedly, Asia's contribution to poverty reduction has been noteworthy. Rapid economic growth in some key Asian countries (led by the world's most populous nation China) and pro-poor policies have, no doubt, combined to reduce the number of the poor; yet, income disparities have considerably widened in this region. Struggling to cope with the challenges thrown by this disparity, governments are constantly exploring ways and means to raise the living standards of those at the bottom of the pyramid.

Impressive growth numbers

In each of the last four years, India registered robust GDP growth (in excess of 8 per cent a year, with the highest recorded at 9.4 per cent in the last fiscal 2006-07). In the Ninth Plan (1997-98 to 2001-02), the annual average GDP growth rate was a decent or not-inconsiderable 5.4 per cent.

These impressive growth numbers should have automatically translated to more widespread income generation among populations across the country. But it has not been the case, unfortunately. The benefit of economic growth has not flowed evenly to the entire population of the country.

Look at the composition of growth. Both the industry and services sector have registered double-digit growth. Income in the hands of those engaged in these two high growth sectors have risen and continue to rise.

However, these two sectors employ only one-third of the country's workforce. In other words, income in the hands of a third of the workforce continue to rise fast. It is this section of the population (representing some 60 million families or about 30 per cent of the 195 million families at present in India) with higher disposable income, which is now driving the demand for goods and services — be it food, clothing, housing, health or education. A majority of these families is concentrated in the urban and peri-urban areas.

Rural income growth tardy

What is the fate of the other two-third of the population? Most of them are engaged — directly or indirectly — in agriculture and related activities, and live in the rural areas. While industry and services sectors both demonstrate impressive growth, agriculture has languished. Annual average growth in farm and related activities in the last ten years — 1997 to 2006 — was a woeful 2.3 per cent. In other words, income in the hands of a vast majority of rural population has grown at an extremely modest rate. This tardy income growth has crippled their financial capacity to access goods and services.

While India's overall growth story unfolds impressively and the world watches with amazement the dazzling economic performance, the soft underbelly of the economy — agrarian distress — goes largely unnoticed. Even top government functionaries look uncomfortable talking about the poor and hungry. Whether the discomfort is out of ignorance or indifference or guilt is hard to tell. The media continues to chase sensational stories relating to the glamour beats of the stock market (the rise and rise of the Sensex), wealthy corporate moghuls, foreign investor interest, high fashion and entertainment and so on.

Symptoms of malaise

How long can this lopsided growth story go on? It is slowly but surely reaching unsustainable levels. There is simmering discontent among the masses, especially the poor — small peasants, small traders, artisans, the unemployed. Protests in different parts of the country from time to time — against organised retail, for instance — are but symptoms of a deeper malaise.

The deeper malaise is the lopsided or non-inclusive nature of current growth. If left unchecked, this trend is sure to first precipitate into a crisis and then snowball into a major socio-political upheaval.

Fortunately for the government, Indians generally are fatalistic. Believing in destiny, they blame themselves (and their past sins — Karma theory) for their present woes. But how long will they remain fatalistic? The government cannot take them for granted any more and cannot remain a mute witness to their worsening plight.

As Swami Vivekananda said, "It is futile to talk philosophy to a person whose stomach is empty". It is time to fill the empty bellies of the poor, not through charity, but by building capacity among the poor to get out of poverty and hunger. The national policies of the last five decades and, importantly, their implementation have failed to deliver adequately. The policies and investment strategies need a serious rethink.

There is inadequate investment in the real economy (agriculture and allied activities) and there is utter lack of accountability among those charged with the responsibility to design policies and implement them in public interest. This needs to change.

Demographic Dividend

Policymakers and researchers have begun to talk about favourable age profile of the country's population and how today's young India would reap demographic dividend in the coming decades. India is an old country, currently inhabited by a young population. Nearly 40 per cent of today's population of 110 crore is said to be less than the age of 30. Over the next 20-25 years, this young population is expected to unleash its productive forces and contribute to economic activity as producers, consumers, entrepreneurs, investors and so on.

However, for the country to benefit in future from today's latent energy, the young population of today needs to be equipped. We need to build capacity among the young people — to become good producers, consumers, investors, entrepreneurs etc. — so as to be able to contribute to economic activity and growth of the future. This calls for investment today in the future of the young generation — investment in health and education.

Nutrition security

One of the most sinister aspects of the country's current state of affairs is pervasive malnutrition and under-nutrition, especially among women and children. As important as food security is nutrition security. The country is slowly turning nutrition insecure. This is because a significant number of people have inadequate access to adequate quantities of food. There has been a decline in per capita foodgrains availability.

It is the question of access and affordability. Access to food is restricted as the public distribution system does not cover the entire universe of poor or financially vulnerable people. Rising food prices of recent years — due to shortages, market distortions, high international prices — further reduce the quantum of food intake. Those in whose hands incomes are rising — about a third of the population — are in a position to consume more because they enjoy both access and affordability. It is not the case with poor people.

'A sound mind in a sound body' is a dictum more relevant to the country today than at anytime. In addition to food and nutrition, the young population of today needs education. Again access to and affordability of education will determine the mental quality of the young population in the years to come. Therefore, investment in education, training and development of skills is the need of the time.

Shortage of skill sets

There is already evidence of a creeping shortage of skill sets. Those with skills will come at a price; and those without it will languish. There may develop a situation when there will be a large number of unemployed but they will all be 'unemployable' because of the lack of skills.

It is only through investment in health and education that the young population of today will acquire physical and mental capacity to become agents of change and engines of economic growth.

If India Inc. desires to declare a dividend (demographic dividend) at a future point of time, it must make profits; and profits come only through timely investment and innovation.