Economy: Where's the human face? - Views on News from Equitymaster

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Economy: Where's the human face?

Jul 5, 2005

The UPA government, after it had come to power last year, harped a lot about initiating 'reforms with a human face.' In its one year of staying at the 'hot seat', what one has come to see is more of political haggling than any concrete reform. And, as for the 'human face', one sees more of the Left party faces than of those for whom the reform process seems to have been planned. Even the Prime Minister has now come to realise that the 8% GDP growth target of the tenth plan (2002-07) seems unachievable. But, who thought that was really achievable in the first place?

Actually, when was the last time you heard the current ruling government discuss about the long-term growth and development of the economy while not keeping a close eye on the reaction of the Left? We have had some policy makers who have taken bold decisions in the past. But one or two people from a large government cannot shape the country's destiny. Short-term political compulsions have overshadowed the long-term economic progress.

Someone had once said, "...you cannot fool a large number of people all the time. But you can fool enough of them to rule a large country." Bureaucratic hurdles and corruption are probably the biggest factors that might deter long-term strategic foreign investors from investing into India's growth story. While the country has bred a class of active entrepreneurs, burdensome internal regulations and bureaucracy has impeded such efforts. This very bureaucratic nature has led to rampant corruption. If everything is black and white, there will not be any grey areas!

Also, while factors like acquaintance with the English language and high levels of technology skills play a very vital role, sustenance in growth can only be brought about by addressing basic needs of the populace. As is evident from the table below, India has been a laggard on some of these human development factors. Also, due to a huge workforce and inability in proper distribution of wealth, a large proportion (around 35%) of India's population is poor. These factors, if not taken proper care of, are likely to ruin India's chances of building up a solid and sustainable growth model for the future. Policy makers also have to balance decisions between rural and urban development.

India: All's not well!
Human Development Indicators India China
Population (million, 2001) 1,033.0 1,285.2
Annual population growth (1975-2001) 2.0% 1.3%
Population density (people per sq km) 324.0 130.0
Population under age 15, 2001 33.7% 24.3%
Population living below US$ 1 a day (1990-2001) 34.7% 16.1%
Unemployment (% of labour force, 2002) 9.9% 9.0%
Adult literacy rate (15 years and above, 2001) 58.0% 85.8%
Female adult literacy rate (15 years and above, 2001) 46.4% 78.7%
Life expectancy (years, 2001) 63.3 70.6
Infant mortality rate (per 1,000 live births, 2001) 67.0 31.0
Human Development Rank, 2003 127 104
Source: UNDP

Finally, if one were to list the factors that have impeded India from attaining a higher growth path in the past, the government's fiscal imprudence (excessive borrowings to finance spending) would appear at the top. This fiscal imprudence has then cost the country in form of high inflation and interest rates. These high levels of deficits are not necessarily bad, more so for a developing country where governments need to spend for infrastructure and social development. However, if unchecked, they have the capability to ruin its finances, thus having an ultimate impact on all its stakeholders (the populace).

There is buoyancy in the Indian stock markets and it has created wealth for a large number of people. Good! But how large is this 'large'? 5%? Or maximum 10% of the population? Experts are talking about the BSE-Sensex reaching 25,000 by the year 2012. But how would that affect the masses? The Indian government must now stop showcasing the rise in equity markets as the barometer of well being of the citizens of this country. For long-term sustainable growth and development, we do need reforms with a human face. Who needs the Left?

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