India – A Cruel Paradox of Rising GDP and Low Social Development

“Money is like manure. You have to spread it around or it smells”- J Paul Getty

“We are still one of the poorest large countries in the world on a per capita basis, and have a long way to go before we reasonably address the concerns of each one of our citizens.”- Raghuram Rajan

The testosterone levels of the well-heeled in India goes on overdrive when there are reports from foreign sources extolling the virtues of India’s rising GDP. In a report titled “The World in 2050,” consulting firm PwC projects that “India’s GDP would exceed US GDP in purchasing power parity terms by 2040 (purchasing power parity accounts for the different prices levels across countries). This would make India the largest economy in the world after China.” This report also adds that India is set to overtake the US economy by 2040.

While such rosy predictions have the same credibility of astrological predictions found in Chinese fortune cookies, it seldom dampens the sharp spike of anabolic steroid of frenzied nationalism in the privileged members of our society. Shobhaa De, a writer, captures this feeling of hyper nationalism rather nicely. “All of us bleat away on how fantastic it feels to be an Indian today. How amazing it is that the world is finally recognizing our real worth and giving us ‘respect’. I feel depressed at the end of all the chest-thumping. And ask myself how much of this new strut is self-delusionary. Whom are we kidding? And, by trotting them out often enough, will we really start believing our own illusions about ourselves?”

For the more discerning observers of the Indian economy, De’s angst at the irrational exuberance of nationalism riding on steroids is understandable. For beneath the unmeasured hyperbole of INDIA having arrived and sprinting to join the pantheon of ‘Super Powers’, lies a dark secret: its low social development index. While India has been racing ahead in terms of its GDP (achieving 7 per cent growth rate during the last decade and projected to be in the range of 7.5 per cent in the years to come) the social and economic conditions have worsened for the major sections of society. Nothing etches this fact more powerfully in our minds than the towering private residence Antilia belonging to India’s wealthiest Dollar Billionaire – Mukesh Ambani. Built at a cost of $1.8 billion, the opulent tower overlooks massive slums of Mumbai.  The view from the top of Antilia offers an embarrassing visual confirmation of what rising GDP means to the great masses of people. As one looks below, one sees slums everywhere teeming with people in various stages of decay, defecating in the open and washing themselves from fetid pools of water in nearby ditches.

For the more cerebral, who are suspicious of anecdotal details, the census data offers a stark reality of the systemic poverty and social degradation of the many. As Pankaj Mishra observes: “The 2011 census revealed that half of all Indian households have to practice open defecation. Nearly half of all Indian children are underweight (compared to 25 per cent in sub-Saharan Africa), and as Amartya Sen and Jean Drèze point out, despite a rise in literacy rates, “a large proportion” of them “learn very little at school.” Almost all Indians buy health services from private providers, exposing themselves to crippling debt as well as quackery. Inequalities have widened between classes, regions, and rural and urban areas. More worryingly, they seem unbridgeable, owing to the lack of adequate education and public health. Not surprisingly, poverty declines very slowly in India, slower than in Nepal and Bangladesh, and unevenly. Calorie and protein intake among the poor has actually dropped.”

If such social indicators are bad enough, there is another road block to trip our country’s dash to breast the winning tape. That road block simply put is income inequality. In a report prepared by French economists Thomas Piketty and Lucas Chancel titled ‘Indian income inequality, 1922-2014: From British Raj to Billionaire Raj’ explodes the myth that the rising GDP and the economic growth rates, which the benign forces of economic liberalisation unleashed by both the Congress government of Manmohan Singh and the NDA government of Modi, did not empower the great majority of the people. The great wave of rising GDP did not lift as many small boats as claimed by the neoliberal gurus Jagdish Bhagwati and Arvind Panagriya. In fact, economic liberalisation benefitted 10 per cent of the population, especially the top one per cent of the income earners.

As the authors of the report point out: “Shining India” corresponds to the top 10 percent of the population (approximately 80 million adult individuals in 2014) rather than the middle 40 per cent. Relatively speaking, the shining decades for the middle 40 per cent group corresponded to the 1951-1980 period, when this group captured a much higher share of total growth (49 per cent) than it did over the past 40 years. It is also important to stress that since the early 1980s, growth has been highly unevenly distributed within the top 10 per cent group.” A recent Rupe India article quoting the Vanneman and Dubey study based on the NCAER-University of Maryland survey confirms this finding. Moreover, as Kaushik Basu, the Cornell economist says-“The bulk of India’s aggregate growth is occurring through a disproportionate rise in the incomes at the upper end of the income ladder.” By 2010, close to hundred people had 300 billion which works to around a quarter of the country’s GDP.

But these dry statistical details do not convey the full spectrum horror of deprivation and suffering of the toiling masses who have not benefitted from the rising GDP growth. As Amartya Sen and Jean Dreze point out in their book An Uncertain Glory: India and its Contradictions that the pervasive inequality in India is made worse by the fact that the low incomes of the largely poor makes basic necessities of life unaffordable. Pervasive inequality also exacerbates the already outrageous gulf between the well-heeled and the poor which the low social indicators do not fully capture. To add to the agony of the poor and the destitute, basic public services in the spheres of education, health care and social care are negligible or practically absent making poverty and social deprivation in India specially terrible even when it is compared to countries like China where such wide disparities of income exist, but are softened by the presence of basic public services.

One of the main reasons why there is inadequate funding for pro-poor welfare schemes is the revenue foregone for the benefit of corporate houses which simply translates into free lunches for the corporate entities. P Sainath, a senior journalist, says, for the period 2005-06 to 2013-14 alone (a period of nine years), the corporate free lunch amounted to Rs 36.5 trillion which could have funded the Mahatma Gandhi National Rural Employment Guarantee Scheme for around 105 years, and fund the Public Distribution System for 31 years. The frenzy of lending by public sector banks to top industrial houses, which becomes bad debts in the books of the banks, offers a sleazy side to liberalisation process initiated by the Congress government in 1991 and continuing at a brisk pace under the NDA-Modi government.

The corporate bailouts running into trillions of rupees offer an obscene contrast to the niggardly social spending on the poor.  According to Jean Dreze, India spends just 4.4 per cent of its gross domestic product on health and education, compared to 7 per cent in sub-Saharan Africa and 6.3 per cent in the least-developed countries of the world.

Under the Modi government, things have gone steadily downhill by cutting off rural employment schemes from central funding and leaving the burden of funding to the respective states. To make matters worse, the Public Distribution System is hampered by the Aadhaar identification, which excludes the poor who are unable to prove their identity by their fingerprints, as they are worn off by hard manual labour. The problem of Aadhaar is further compounded by poor internet connectivity in the poorest states. Thus, the Aadhaar identification system has been a winnowing machine in denying poor people access to subsidised food grains.

India’s success story as the fastest growing economy of the world coexists with an insular, selfish, and antidemocratic elite in an unequal society, where “predatory forms of capitalism”, supported and promoted by the State prevail driving the poor to the wall. Recent corruption scandals in the mining and the telecom sector only serves to highlight the fact that crony capitalism and rent seeking are the main drivers of the GDP growth not innovation or entrepreneurial dynamism.

The seedier aspect of India’s growth story, which is that GDP growth has not resulted in tangible gains for the poor, does not get sustained coverage or attention in the mainstream media. The reasons are not difficult to fathom: the mass media is itself a big business which is itself controlled by business oligarchs either through ownership or through the appointment of directors on the boards of media representing big corporate interests. Moreover, the profitability of the media does not depend on subscription revenue, but on advertising revenue generated by corporations. Hence, media in India are echo chambers of big business interests where social spending is condemned as a waste, while free lunches for corporate are glowingly described as growth incentives. No wonder P Sainath, a journalist, calls the Indian media (with a few honourable exceptions) as a prisoner of profits.

The ruling elites and their wealthy hangers are perched on the horns of a cruel dilemma: how to reconcile the heady nationalism of unstoppable incredible India with the teeming millions crying for social justice? An elegant solution to this dilemma presented itself to the audience at a book launch in a five star hotel in Bangalore some years ago. A tech billionaire who was the guest at the event famously said, “I don’t see poor people as I always stay in five star hotels.”

By denying the existence of poverty in India, the billionaire club class can sip Earl Gray Tea served in bone china cups in utter tranquility. As the obsequious waiters fussed around them, they would perhaps glimpse through the spotless glass window of their five star hotels, a sea of angry people in ragged clothes descending upon them with pitchforks in their hands. From a distance, one heard the breaking of crockery and saw frightened people in their fancy clothes jump out of the windows.

And then, pandemonium broke loose…

C R Sridhar is a lawyer

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