By Abhinav Kumar.
Economic development can be defined as a process which combines economic growth, human development, and maintains an ecological balance at the same time. However, it is a common perception that economic growth alone, measured by GDP, leads to the economic development of a country. Whilst the statement is partially true, economic development is much more than just economic growth.
Economic development can be defined as a process which combines economic growth, human development, and maintaining an ecological balance at the same time. However, there is a common perception that economic development is economic growth alone, often measured by Gross Domestic Product (GDP) considering consumption, investment, government expenditure, and net exports, but this lacks a holistic approach to measuring development. Whilst the statement is partially true, economic development is much more than just economic growth. Development in most countries around the world is skewed, which often gives rise to inequalities and in some cases to negative externalities like environmental degradations. As mentioned by the Commission on the Measurement of Economic Performance and Social Progress, economic growth looks at development from an objective point of view and fails to capture subjective measures like quality of life, participatory power, and freedom. Thus, there are multiple aspects of economic development which are left out while measuring development in terms of income. I believe economic development can be looked at as a fully-grown tree where economic growth is supported by branches accounting for multiple dimensions of well-being like education, health, and standard of living. In order to support my stance, I would like to bring attention to the ground reality of India’s ‘high’ economic growth.
As mentioned by the Commission on the Measurement of Economic Performance and Social Progress, economic growth looks at development from an objective point of view and fails to capture subjective measures like quality of life, participatory power and freedom etc. Thus, there are multiple aspects of economic development which are left out while measuring development in terms of income.
India is often referred to as one of the fastest growing economies in the world. There are numerous articles on India that praise India’s economic growth. According to an article in The World Economic Forum (2018) and latest IMF statistics, India is the 7th largest economy in the World in terms of GDP, based on current prices. Even though such growth rates and rankings look promising on paper, they share contrasting interpretations when we compare them to the factors that judge the quality of life (sanitation, quality education, and health facilities), freedom (human rights and social inclusivity), and choices being provided to the general public.
Two of the most common indicators of measuring human development are the Human Development Index (HDI) and Human Capital Index (HCI). The HDI was created to emphasize that people and their capabilities should be the ultimate criteria for assessing the development of a country, not economic growth alone. On the other hand, the HCI quantifies the contribution of health and education to the productivity of the next generation of workers.
On comparing Figure 1 and Figure 2, India has the lowest HDI and HCI value among the top 10 growing economies, with 0.64 and 0.44 respectively. Countries like Canada, Brazil, and Italy, that are ranked below India in terms of GDP growth have achieved better growth in terms of human development and capital. India’s low HCI value of 0.44 demonstrates that if a child is born in India today and receives full access to education and healthcare facilities, she/he will be 44 percent productive in her/his life. If an average human being in India is losing out on more than 50 percent of her/his productivity despite getting access to quality education and health, it is a cause of major concern for the development of a country. This sheds light on the fact that good economic growth, if not channelled into the right areas, can have a critical impact on the individuals of a society. Even though India is lauded as one of the fastest growing economies, the ground reality is very different.
When accounting for inequalities, India is ranked 130th in the world. In the late 1930s, the top 1 percent of earners had 21 percent of the country’s total income which later fell to 6 percent in the early 1980s. In 2017, it had drastically risen back to 22 percent showcasing growing income inequalities in India. With limited amount of resources, there is a need to provide every citizen with equal opportunities which are linked to having quality education and healthcare facilities.
As per HDI 2018 statistics, India spends less than 3.8 percent and 3.9 percent of its GDP on education and health respectively which I believe is much lower than what a country of 1.3 billion people requires! Moreover, India’s Global Hunger Index (GHI) score of 31.3 falls under the “serious” category showcasing bad redistribution of food within the country. India is ranked 103 out of the 119 countries included in the GHI. It can be said India’s population size could be one of the primary reasons for its poor performance, but China, despite having similar population density, is ranked 25th in the GHI. Countries like Bangladesh and Nepal, that are ‘poorer’ to India in terms of economic growth have been able to deal with hunger better.
Another important aspect of human development is education. According to the HCI (2018) report on India, by the age of 18, children are expected to complete 10.2 years of pre-primary, primary and secondary school. However, when equating years of schooling to quality of learning, it only accounts to 5.8 years of schooling. It shows that 4.4 years of their schooling has not been productive. In order to materialize India’s demographic dividend, there is a need to empower young children with quality education. As per the 12th Annual Status of Education Report (ASER) on rural India, it was noted that about 25 percent of children between the ages of 14-18 still cannot read in their own language. In the same age group, more than half struggle to solve basic arithmetic problems which are usually required in daily life.
These empirical findings in India’s context provide compelling evidence that even though India is growing at a fast pace in terms of real GDP, it does not represent the quality of life and the standard of living of its citizens. Perhaps, it can be premature to calculate economic development without accounting for all the multiple facets that exist within the development discourse.
By Abhinav Kumar
Abhinav Kumar is from India and has an undergraduate degree in Economics from the University of Delhi. Before pursuing his Masters in Development Studies at IDS, he worked on projects in the agriculture and health sectors of India. He is interested in studying ideas and theories that link education and health to development for greater good.