Rich India: does economic growth really alleviate the lot of the poor?

On the one hand, India is the world’s twelfth largest economy1 and a member of the G-20. On the other hand, per capita income in India is only $2,750 compared to $70,490 in Luxembourg and approximately $35,000 in Belgium, France and Germany2. India continues to figure among the low income countries in the World Bank country classification table. The global significance of the Indian economy reflects the size of India’s population of 1. 2 billion.

India is a country of stark contrasts: beside the “shining India”, with an expanding middle class that enjoys strong economic growth, there is also the other India, in which the majority of the people have not really benefited from the economic growth of recent years. An increase in gross national product does not necessarily create new jobs, nor does it necessarily improve the situation of the poorer segments of Indian society3 . In a recent paper, the World Bank

even concludes that India’s rapid growth led to ”rising inequality”, and “disappointing outcomes for the poor”4 .

Facts and Mythsabout India

Luxembourg-based NGOs financing development projects in India prepared this document in 2010. The NGO’s intention is to document that, while India enjoys strong economic growth, the majority of the people do not really benefit from it. As a consequence, Indian NGOs continue to support poor communities in the country in their fight for a better future. Indian NGOs continue to play an important role in empowering the poor communities and enabling them to defend their rights as well as ensuring that they benefit from government programs designed to improve their social and economic situation.

1Ranking based on GDP in 2007. Source : The Economist, Pocket world in figures, 2010 edition.2Gross domestic product (GDP) per head in US$, expressed in purchasing power per person (PPP), Source: The Economist, Pocket world in figures, 2010 edition. The data for Luxembourg are inflated as the methodology doesn’t reflect correctly the contribution of the migrant population (commuters from neighbouring countries).3See in particular: Amit Bhaduri, The face you were afraid to see, essays on the Indian economy, 2009, Penguin Books.4The World Bank, Policy research working paper n° 5080, a comparative perspective on poverty reduction in Brazil, China and India, October 2009

Facts

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India is unfortunately still a very poor country :

• According to studies by the World Bank in 2005, 41% of the Indian population (or 455 million people) had to survive on a purchasing power equivalent to U.S. $ 1 per person a day and 85% of the population, or 938 million people, had to survive on a purchasing power per person of less than 2 U.S. $ a day5.

• 43% of children under five suffer from malnutrition, according to official statistics6. • According to hunger indications in the world - developed by Welthungerhilfe, a major German NGO, - India is in the same group of countries as Cambodia, Burkina Faso, Zimbabwe, Tanzania and Haiti7.

It is ironical that during the years of high income growth since 2002, Human Development Indices in the country have been

regularly falling. According to the Human Development Report, India has moved down from 126th among the 179 nations to 128th in 2007-2008 and 132nd in 2008-2009.

There are also huge differences in development and in poverty levels between the 29 States of the Republic of India.

Some States are significantly less developed than others, and poverty is significantly higher in the less advanced States.

However, there is only a limited correlation between economic growth and poverty reduction on the one hand and the improvement of child nutrition: education, health, social protection, empowerment of women on the other. Inclusive growth and integrated development focused on the specific needs of deprived groups (dalits, adivasi) make the real difference8.

A case study: Development of India and the poverty of Adivasis 9

India is home to an indigenous population called the “adivasis” (meaning the “original inhabitants” in Sanskrit) of about 67 million. Adivasi people are among the poorest segments of the population, with 85% of adivasis living below the official poverty line. Approximately 90% of adivasis depend on agriculture for their livelihood. Adivasis depend on the forests for survival, and hunting and gathering activities continue to play a role, even though it is declining.

Some 90% of India’s coal mines, 72% of the forests and natural resources and 80% of India’s minerals are in Adivasi land. Over 3000 hydroelectric dams are also located in these areas. Therefore the primary resources for India’s industrialization lie in Adivasi lands.

For the Adivasis, “development” means a radical change in their traditional lifestyle. Mining projects and hydroelectric dams deprive Adivasi villagers of their land, and very often the “development” projects do not provide for adequate resources for the Adivasis to start a new existence in a different environment. These development projects, based on heavy industrial investments, fuel the growth of India’s gross national product, but the same “development” projects often create increased poverty and deprivation for the Adivasis who have lived in the same areas for generations.

5Aseem Shrivastava, Measuring global poverty; India on 20 cents a day. Figures are based on World Bank data and reflect purchasing power.6Quoted from OCDE Economic surveys, India, volume 2007/14, October 20077Welthungerhilfe, Comparison of hunger across States, February 2009: India (66th), Cambodia (64th), Burkina Faso (65th), Zimbabwe (67th), Tanzania (68th) and Haiti (69th). 8Inclusive growth signifies the creation of a cohesive society giving individuals the means to anticipate and manage changes and so to participate in the society and the economy. 9In the aforementioned study of Welthungerhilfe, the International food policy research Institute and UCRiverside (University of California) the State of Punjab ranks number one with a global hunger index of 13,6 between Vietnam and the Philippines whereas the poorest States, Chhattisgarh, Bihar, Jharkhand and Madhya Pradesh (index : 26,6 – 30,9) rank between Bangladesh, Mozambique, Mali, Ethiopia and Liberia. India’s global hunger index 2008 score is 23,7, which gives it a rank of 66th out of 88 countries.

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The industrial sector and the information technology (IT) sectors are the primary drivers of India’s economic growth and its social development: true or false?

India’s IT sector is undoubtedly an economic success story. Today, Indian firms and Indian IT experts compete with the largest companies worldwide.

However, the IT sector employs only 2 million people directly, out of a labour pool of 700 million people10.

The industrial sector does not create enough jobs to absorb a growing population : regular employment in the organized sector over the last decade grew at only about 1 percent per year, much less than the growth of the population.

The rest of the average 6-7 percent growth in gross domestic product (GDP) came from

growth in labour productivity, or output per worker11. In fact the total employment in public and private sector establishments does not exceed 30 million persons12.

Even today, the Indian population still depends largely on agriculture for its subsistence : 57% of all jobs are provided by agriculture, but agriculture only accounts for 18% of the gross national product. 36% of the workforce makes its living in the informal economy (mainly menial jobs in the unofficial economy other than agriculture13) .

Conclusion : Today as in the past, poor people still have to seek employment in agriculture and in the informal sector for their living, even though these activities do not generate enough income to care for a growing population.

The Myth In the following, we discuss seven myths about modern India. These myths are the most common misconceptions of India in Europe and such images are often largely reproduced by the media. It seems important to us to present the facts and to explain the reasons why Luxembourg based NGOs continue to support development projects in India; a country where much has changed in these last few years but where much still remains to be done.

India has more mobile phones than toilets

India is a country of paradoxes. It is a high technology country with a national programme developing an aerospace industry, but at the same time the country suffers from insufficient sanitation. India’s mobile phone subscribers totalled 563.73 million at the last count, enough to serve nearly half of the country’s 1.2 billion population.

But just 366 million people -- around a third of the population -- had access to proper sanitation in 200814. It is a tragic irony that India is unable to provide all its citizens with the basic necessity and dignity of a toilet. Access to clean water and adequate sanitation are important millennium development goals - India is at risk of failing to achieve these.

Myth n°1 :

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10The poverty line corresponds to the amount of money for the minimum required diet for a moderate activity corresponding to (2100) calories per person and per day. Minority Rights Group International, report on The Adivasis of India, by Ratnaker Bhengram C.R. Bijoy and Shimreichon Luithui, 1999.11Bloomberg business week, December 24 2009, five myths about India, http://www.businessweek.com/globalbiz/content/dec2009/gb20091224_238332.htm. 12Amit Bhaduri, The face you were afraid to see, essays on the Indian economy, 2009, Penguin Books. 13Government of India, Statistical Pocket Book India, 45th edition, page19.14Government of India, Statistical Pocket Book India, 45th edition, page 53-55 and OECD Economic Surveys, India, 2007.

India’s education system is really world class: true or false?

Even if India’s elite engineering and business schools provide high quality education, the same cannot be said in general for the education system throughout India. There are wide disparities in the literacy rates of the different states.

Whereas in 2001 the literacy rate was as high as 91% in Kerala, it was much lower in Bihar with only 48%15. But high literacy rates do not necessarily equal efficiency and a quality education, nor a high achievement of students.

Poorly qualified teachers, very high student-teacher ratios, inadequate teaching materials and outmoded teaching methods result in a low quality of education that often imparts little or no real learning. It is not uncommon for students completing primary schooling to lack even rudimentary reading and writing skills.

The national Midterm Achievement Survey (MAS) of 2008 assessing the learning achievement of children in 5th class shows

that in the national average nearly 45% of the students are not able to master fundamental mathematical operations. An average of nearly 40% of the students did not perform well in the different language skills like reading comprehension, use of vocabulary or sentence structure16.

India’s many state-of-the art medical research institutions and clinics staffed by highly trained doctors attract patients from all over the world, so good health care is surely available to everyone: true or false?

It is true that India boasts a very high number of medical colleges and produces many highly trained doctors whose excellent skills are sought after in many countries. Furthermore, India’s many modern clinics with their highly trained staff attract medical tourists from all over the world who come looking for good treatment at relatively low prices. India is also a leading producer and exporter of pharmaceuticals.

A lot has been achieved since India gained its independence. In 1947, life expectancy was below

Adult literacy rate17

(% aged 15 and above)

Luxembourg 99%

China 93.3%Vietnam 90.3%

Brazil 90%Cape Verde 83.8%India 66%Bangladesh 53.5%Burkina Faso 28.7%

Mali 26.2%

15Sanitation as a Key to Global Health: Voices from the Field. A report prepared by the United Nations University Institute for Water, Environment and Health, ISBN: 92-808-6012-7 UNU-INWEH 2010. http://www.un.org/apps/news/story.asp?NewsID=34369&Cr=mdg&Cr1.15Office of the Registrar General, Census of India, India, 200116National Council of Educational Research and Training (NCERT), Learning achievement of class-V children: A midterm national survey, India, 2008. 17Source: UNESCO Institute for Statistics (2009a), Correspondence on adult and youth literacy rates, February, Montreal.

Myth n°2 :

Myth n°3 :

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30 years18 while today it has risen to 66 years19.However, access to health provision in India is characterised by massive inequalities. There is an enormous gap between the top-level medical provision available to those who can afford it (wealthy Indians and foreign medical tourists) and the health care available to the majority of the population, who have very limited access. India is in 112th place on the World Health Organisation list of 199 countries in terms of health care and in 127th place with regard to the percentage of GDP on health expenditure (below Togo and Cameroon).

According to UNICEF statistics, infant mortality remains high (63 deaths per 1000 live births). Babies and children continue to die of treatable respiratory infections, diarrhoea and other illnesses that could be prevented with the availability of clean water, nutritious food, immunization and basic drugs.

Almost 50% of children are underweight and malnourished and 50% of Indian women are anaemic. Less than 50% of children are fully immunized.

The National Rural Health Mission introduced by the Indian Government in 2005 with the aim of making health care more accessible in the rural areas has achieved some measure of success (particularly in antenatal check ups). However, figures for 2008-09 show a negative trend for important indicators such as immunisation, maternal health and family planning.

Hospitalisation rates among the well-off are up to six times higher than rates among the poor. Despite the fact that India’s large drug industry exports medicines across the globe, about two-thirds of the population lack access to essential drugs.

It is clear that there is an urgent need for the Indian Government to increase its spending on health considerably and to ensure an equal provision throughout the country. At the same time there is a need for the weakest sectors of society to be aware of their rights to adequate health care. Indian civil society has an important role to play here, both in lobbying the government for better health provision for all its citizens and in awareness creation to ensure that the weakest members of society know what facilities are available to them.

India is caught up in a social and religious system which impedes its development: true or false?

A strong social stratification system has existed in India for thousands of years. Although all citizens have been considered equal in the eyes of the State since the country’s independence, the system is still present in society. People from superior castes and sub-castes still struggle in their coexistence with people of no caste or “untouchables” as well as with other “backward” castes who are given the most menial and arduous jobs.

For these ostracised populations, there is a real link between social status and the hardship of their existence : poverty, rights violated, poor access to education and other development opportunities.

India’s future depends on the inclusion of these sectors of society, so it is critical to restore their dignity by providing them with opportunities to improve their lives20 : an

20 See, from the winner of the Nobel Prize for Economics, Amartya Sen, Development as Freedom, Oxford University Press, 2001.18Frontline, Vol. 14 : No. 16 :: Aug. 9-22, 1997. 19http://www.indexmundi.com/india/life_expectancy_at_birth.html

Myth n°4 :

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important task carried out by the State and civil society and one that is crucial to support.However, there is also progress. For instance, a certain percentage of the seats in universities and the jobs in the government administration are reserved for people from lower castes, Dalit, adivasis .and other deprived minorities.

Change is possible, and some examples are impressive: Ambedkar, a Dalit, wrote the Indian Constitution and K. R. Narayanan, another Dalit, was President of the Republic from 1997 to 2002.

India can hardly achieve development with its high population growth: true or false ?

India is home to 1.17 billion people22 or 17.5% of the world’s population, but has only 2.4% of the world’s surface area. Demographic projections indicate that it could surpass China as the most populous country in the world by 2030 and the population could rise to between 1.5 to 1.8 billion people by 205023.

It is a challenge for India to cope with the increasing demands its population places on food, water (it has only 4% of the world’s water resources) and other natural resources24.

Jawaharlal Nehru, the first prime minister of independent India said the following: “You can tell the condition of a nation by looking at the status of its women”.

In India women traditionally bear the main responsibility for the well-being of their families, yet they are systematically denied access to the resources they need to fulfil this responsibility, such as education, health-care services, empowered social status, access to income generating activities and access and freedom to use family planning services.

Inclusive development (development for all sectors of society, including the poor) will help

21Source : http://upload.wikimedia.org/wikipedia/commons/9/9b/Caste_and_Community_of_Profile_People_below_povertyline_ in_India.PNG22India’s current population (1.17 billion): Wikipedia Demographics of India http://en.wikipedia.org/wiki/Demographics_of_India23Projected population in 2050 (1.5-1.8 billion): About.com: India’s Population http://geography.about.com/od/obtainpopulationdata/a/indiapopulation.htm. 24World economic forum 2006, India @risk : a briefing. Confederation of Indian Industry

Myth n°5 :

Castes & Community Groups

Rural Urban

Scheduled Tribes 45.8% 35.6%

Scheduled Castes 35.9% 38.3%Other Backward Castes 27.0% 29.5%Muslim Upper Castes 26.8% 34.2%Hindu Upper Castes 11.7% 09.9%Christian Upper Castes 09.6% 05.4%Upper castes Sikhs 00.0% 04.9%Other Upper Castes 16.0% 02.7%

All group 27.0% 23.4%

Figures for 1999-200021

For this period the poverty threshold was defined as Rs. 327 ($US 8)

for the rural areas and Rs. 454 (US$ 11.3) for the urban areas.

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India to cope with the burden of population growth.

Inclusive development must include women’s empowerment, address the social and economic position of the poor, improve and expands education to the poor, provide access to adequate health and family welfare services, and generate opportunities to earn a decent income.

When India gained its independence, the fertility rate was approximately 6 (on average, a woman gave birth to six children).

Today it has come down to around 2.7-2.8 for the whole of India, and in nine Indian States it is already equal to or lower than the replacement level of 2.1 25.

If the benefits of India’s economic growth reach the poor, and if Indian social policy really focuses on the poor, the fertility of India’s population India as a whole will reach the replacement rate of 2.1 children per woman before the expected date of 2050.

Thus inclusive development and declining fertility rates are mutually reinforcing social forces, and a reduction of the Indian population growth can only be achieved through an adequate development policy focused on the social needs of the poorer groups of Indian society26 .

Being a net exporter of food, India has sufficient food for its population : true or false ?

According to official statistics, more than 40% of children below the age of five are underweight in India, that is to say four out of ten children born in India do not reach normal weight before the age of five years because they suffer from malnutrition. An estimated 129 million children under five in the developing world are underweight for their age. Of these, close to 54 million are children in India27. How can it be that 42% of the hungry children worldwide live in India, even though India is a member of the G-20, the group of the economically most powerful countries in the world?

India claims to be self-sufficient in food production, and indeed, India is a net exporter of food.

However, India only looks self-sufficient because food intake is abysmally low, not only in terms of quantity, but also in terms of quality. Low food production is not the real

Nearly 50 percent of the world’s hungry livein India, a low-income, food-deficit country.

Around 35 percent of India’s population - 350 million are considered food-insecure, consuming less than 80 percent of minimum energy requirements. Nutritional and health indicators are extremely low. Nearly nine out of 10 pregnant women aged between 15 and 49 years suffer from malnutrition and anaemia. Anaemia in pregnant women causes 20 percent of infant mortality. More than half of the children under five are moderately or severely malnourished, or suffer from stunting.

(source : world food programme

http://www.wfp.org/countries/india)

25Falling fertility rates: Wikipedia; Indian States ranking by fertility rate http://en.wikipedia.org/wiki/Indian_states_ranking_by_fertility_rate. 26Further reading: United Nations Population Fund: State of the World Population 200927Frontline, volume 27, n°08, April 10 2010, cover story : stunted India, http://www.frontlineonnet.com/

Myth n°6 :

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problem, and food production itself would increase if there were enough resources among the masses. The major issue is people’s inability to obtain those things which are essential for their life (health and well-being). This includes food, but it also extends to clean water, health care, sanitation, basic education and child-care.

Undernourishment, starvation and famine are influenced by all aspects of the entire economy and society – not just food production.

In India, hunger and malnutrition are related to unequal development rather than the unavailability of resources. The Government, as well as the NGOs, help deprived segments of the population to fight for their rights, and to improve their social situation.

Picture reproduced from Frontline, volume 27, n°08, April 10 2010, cover story : stunted India, http://www.frontlineonnet.com/)

As can be seen in the graph below, 42% of all the children worldwide under five years of age who are underweight because on poor nutrition live in India.

India’s contribution to global underweight statistics Under fives

The fact is that the country is engulfed in an agrarian crisis that has now reached worrying proportions. In contrast to the high growth rate of the Indian economy as a whole, measured by the Gross National Product, the growth in the agricultural sector reached barely 1.8% in the last couple of years, down from 4.9% in the Eighth Plan period (1992-1997). The other manifestation of the crisis is the continuing suicides of farmers, with the epicentre now shifting to Vidarbha in Maharashtra, which currently records an average of around 3 suicides a day. Suicides also continue unabated in other parts of the country, including Punjab, Karnataka and Andhra Pradesh. There have been 166, 304 suicides of peasants over the period 1997-2006, which is an appalling average of 16,000 a year29 .

28See also Amarthya Sen, development as freedom, chapter 7, famines and other crises29Farmers’Suicides in India: Magnitude, Trends and Spatial Patterns, K. Nagaraj, Madras Institute of Development Studies, March 2008

Source UNICEF

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When a country has enough food to be able to export it, there should be no hunger in that country28.

Pakistan 5% Bangladesh 5% Nigeria 5%

India 42%Other developingcountries 43%

India is a democracy. This guaranties a quality of governance and assures the promotion of development for all : true or false ?

Is good governance30 an issue for concern in India, the biggest democracy in the world?

The former UN Secretary General Kofi Annan once stated that, “Good governance is perhaps the single most important factor in eradicating poverty and promoting development”.

In India, there exists a high level of freedom of expression, the freedom of association is real, political debate is open and the military accepts its subordination to civilian government. But although democracy formally exists, many problems can be observed in practice.

The criminalization of Indian politics is a reality. In 2008 The Washington Post reported that nearly a quarter of the 540 members of the Indian Parliament faced criminal charges, «including human trafficking, immigration rackets, rape and even murder”. At state level, things are often worse. In the Uttar Pradesh Assembly elections of 2002, candidates with criminal records won the most seats.

Communal, feudal, caste and regional tensions continue to haunt Indian politics. As a result, policy-making is too often out of touch with

30Source: Assessing and Analysing Governance in India: Evidence from a New Survey, Julius Court

Myth n°7 :

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the interests of the people and the preferences of the population. For many people, public institutions are simply inaccessible. Civil society organizations are doing what is needed ; they demand rights, they mobilize, they educate, they call for accountability. And they achieve a lot. But nevertheless many people are still not benefiting from the developments taking place in today’s India.

Government support schemes often fail to reach the poor.

A 2005 study done by Transparency International (TI) in India found that more than 50% of people had first-hand experience of paying bribes to get a job done in a public office. India ranked 84th out of 180 countries in TI’s Corruption Perceptions Index. Corruption has become a pervasive aspect of Indian politics and bureaucracy.

What is needed? Empowerment of the rural population, the disadvantaged and poor masses in India, to give them easier access to opportunities - such as education and work, but also to ensure that they participate, demand their rights, and call for accountability ; tasks that the Indian ONGs, but equally the authorities, try to accomplish.

If they manage to find their way through the jungle of government services in order to apply for support, then corruption is the next problem they face.

AIAE

Editing : The Luxembourg National Platform for Development Cooperation – October 2010Photo credits : Member NGOs of the Luxembourg National Platform for Development CooperationCover photo : Marc ErpeldingDesign and layout : Carolina Favre - (Carolina.Favre@megaplanet.org)All rights reserved. Reproduction of this document is authorised, provided the source is acknowledged.This document is available in three languages (English, French, German).An electronic version can be found at the following address : http://www.ongd.lu