More reason to cheer — the IMF forecasts that India will grow at a projected 7.8 per cent growth rate in 2019.
There were two ringing messages from the Swiss ski town of Davos where billionaire philanthropists and the world’s elite ritually huddle together every year. India remains a bright spot in the global economy, despite what naysayers say. There was a second, equally critical message from the World Economic Forum’s Davos meet — that India trails its peers in “inclusive development”. In short, “vikas” is happening, only it’s not with “sabka saath”.
First, the good news. According to the International Montetary Fund, India is projected to grow at 7.4 per cent in 2018, against China’s 6.8 per cent, making it the fastest growing emerging economy. More reason to cheer — the IMF forecasts that India will grow at a projected 7.8 per cent growth rate in 2019.
All this is good news. True to form, Prime Minister Narendra Modi, the first Indian Prime Minister to address the World Economic Forum’s annual meet at Davos in two decades, stirringly showcased the Indian economy’s many virtues during his hour-long keynote speech in Hindi. However, there is a nagging concern around “Sabka saath, sabka vikas” – the rallying cry of the Narendra Modi government over the past three years. It isn’t quite
A chilling reminder comes from the WEF’s latest Inclusive Development Index, which puts India at 62nd place among emerging economies, way below China’s 26th position and Pakistan’s 47th. No one would mistake the World Economic Forum for a club of bleeding heart liberals; thus its pronouncements can’t be dismissed as the dirges of disgruntled liberals.
The IDI, which has been an annual feature for quite some time now, takes into account “living standards, environmental sustainability and protection of future generations from further indebtedness”. On the inclusiveness stakes, India was not clubbed along with the rich countries, the likes of Norway and Switzerland. That was a separate list, covering 29 advanced economies. India was being assessed in a peer group of 74 emerging economies.
Why does an elite club, meeting at a Swiss ski town famously known as a place where deals get made, care so much about inclusiveness? And why should we heed the warning embedded in the WEF’s measurement tool, the Inclusive Development Index?
The answer is simple. Inclusive growth is not just a moral, ethical issue, it is also the big issue for hard-nosed businessmen and women. If economic growth is not spread wide enough, it creates a roadblock for expansion of the market. Industry needs not only a continuously expanding consumer base but also consumers with enough money in their pockets. If this doesn’t happen fast enough, there is reason to worry. Which is why you also see publications like The Economist lamenting of late the gaping hole where India’s much-touted “middle class” should be.
In a recent issue, the magazine, read by leaders and opinion-makers around the world, scathingly pointed out that while “exuberant management consultants speak of a 300-400 million horde of potential frapuccino-sippers, Fiesta-drivers and globe-trotters”, in reality, “the Indian middle class conjured up by the marketers and consultants scarcely exists”. Only the top one per cent of Indian adults makes at least $20,000 a year, similar to roughly Hong Kong in terms of population and average income. The next nine per cent, according to the Economist, is close to central Europe; the next 40 per cent of India’s population is similar to other South Asian countries like Bangladesh and Pakistan. The starkest vignette relates to the remaining half-billion or so, who are on a par “with the most destitute bits of Africa”.
The most worrying part of the story is that widening inequalities is hampering the chances of India developing a middle class in the sense that the word is understood in China, for example. Gross inequalities where vast numbers of people don’t even have access to basic minimum amenities also raises the chances of social turmoil as we are seeing in India today.
Given this scenario, is it surprising to find that the key message from the snowy slopes of Davos tonally strikes a note not so different from what an organisation like Oxfam, which focuses on equity, has been saying. According to Oxfam, the world’s wealthiest one per cent got 82 per cent of the wealth generated in 2017.
Back to the WEF. The forum loudly states that while it has long been acknowledged that gross domestic product is an important measurement of the state of a country’s economy, it is far from sufficient. Today, the WEF’s public position is that reliance on GDP alone is fuelling inequality and short-term policies for political gain. The forum hopes that its Inclusive Development Index will become the hallmark for measuring growth that includes a wider strata of society — and also to tackle the widening wealth gap.
According to Credit Suisse Global Wealth data for India, 73 per cent of the increase in wealth in India went to the top one per cent last year. This needs to change. Specific policies and measures are needed to ensure that the bottom half gets a larger chunk of the country’s economic progress. Or the slogan of “sabka saath, sabka vikas” must translate into action on the ground. Results of a new global survey commissioned by Oxfam points to a groundswell of support for action on inequality as Nisha Agrawal, CEO of Oxfam India, reminded us in a recent article in a national daily. Out of the 120,000 people surveyed in 10 countries — including India — nearly two-thirds of respondents thought that the divide between the rich and poor required urgent attention. Roughly 83 per cent of Indians agreed or strongly agreed that the gap between the rich and poor in India is too large. When the talk shops of the rich and non-profits begin to sound alike, it is time to stop playing the ostrich. Ignoring the persistent warning signals about iniquitous economic growth is dangerous not just for the poor, but also for the rich.
The writer focuses on development issues in India and emerging economies. She can be reached at email@example.com