Jean Dreze and Amartya Sen : UNCERTAIN

GLORY, Integrating growth and

development

According to Jean and Sen, the growth rate achieved during

1950-1980 (called the Hindu growth rate) was commendable
since it was achieved after a colonially destroyed and stagnant
economy. The problems of the Indian economy were something
else. The need for rapid growth is far from over, since India,

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after two decades of rapid growth, is still one of the poorest
countries in the world. Out of the poorest 16 countries India tops
the GDP per capita ranking, but on health, welfare and education
indicators it pe f e bad . I dia ea i c e e head i
still lower than that of most countries outside sub-Saharan
Africa.
Adam smith thought that India in general, particularly
Bengal, was one of the most prosperous regions in the
world and he devoted some time to explaining the roots of
I dia c aai e e i i hi fa b k Wea h
of Nations (1776). The real wages of Indian workers in
some economically active areas were higher than those of
European workers.
Battle of Panipat 1526 fought between Babur and Lodi
Battle of Plassey 1757 fought in Bengal when East
India company entered India
Bengal famines caused in 1770 killed 10 million people
In India, under the British rule, the per capita real income
of India actually declined.
GDP growth rate from 1900-1947 was 0.9% and population
growth rate was only 0.8% reflecting the high mortality
rates during the British rule.
One thing that the communist countries from the USSR
and pre-reform China to Vietnam or Cuba were
committed to achieving, despite all political indoctrination
and dogmatism, was to ensure free and universal school
education without delay. Even Rabindranath Tagore

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admired the massive growth and progress in education of
the USSR when he visited it in 1930.
Did cia i I dia d he a e? NO! The e a a
massive neglect of primary education in India. The
i c ce i ha I dia a a cia i c a d ha
why it failed is a misconception that needs to be tackled.
The first 5-year plan was sympathetic to the need for
university education which it strongly supported but argued
against regular schooling at the elementary level. It favored
a ca ed ba ic ed ca i e b i he h ge
romantic and rather eccentric idea that children should
learn through self-financing handicraft. In India, getting
education reflected an upper class and upper caste bias
bias against the education of the masses. Primary education
which flourished in Vietnam, China, USSR and so on was
neglected deeply in India.
Most of the economy (with the exception of essential
services like water, railways and power) was firmly in the
private sector, and while government did intervene in many
ways, there was no sweeping nationalization of industries
let alone land reforms. The planning of that period was not
c i ,a di a a cce ei he . The ea
economic planning failed more completely in terms of
social infrastructure and tertiary industries than it did in the
fields of primary and secondary sectors. In fact, the growth
rates of the primary and secondary sectors (agriculture and
manufacturing) were slightly higher in the 15 years that
followed 1951 than in the 15 years that followed the

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reforms of 1991. In the mid-60s GDP growth turned
negative. There was an industrial crisis, food shortage,
draughts etc.
1962 Indo china war
1965 Indo Pak war
1971 Indo Pak war
1969 failing commercial banks were nationalized.
Import quotas and industrial licenses were used by Indira
Gandhi for the purpose of
e a di g e , i hi g opponents and winning
e he ce ai .
Acc di g Bi a Ja a , d i g I di a Ga dhi e,
things came to a point where even the most inconsequential
economic activity needed specific government approval.
1965-67 -- Green revolution took place
1980s was a time of growing fiscal deficits, trade deficits
and foreign debt. However, it also saw major poverty
reduction and unprecedented growth of 5% in agricultural
wages.
What did the reforms achieve, and who did they benefit?
The living standards of the top 20% (or the so-called
middle class) improved considerably. For underprivileged
ec i , he ef ee e ci i g. The a e age e
capita expenditure in rural areas (which still house 66% of
Indians) rose at a low rate of only 1% per year from 1990
to 2010. Similarly, after the reforms, agricultural wages
grew at only 2% down from 5% in the 1980s and grew at

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nearly 0% in the early 2000s.
2006- NREGA came into force and the growth of real
agricultural wages took place especially for women. Real
wages in china (manufacturing) grew at an astonishing 12%
compared to 2.5% in India.
How effective were the reforms in reducing poverty?
Density effect a lot of people are just slightly below the
poverty line so even increasing their wages by a meagre 10
or 20 rupees would bring them above the poverty line. The
global poverty line is $1.9 a day which is abysmally low.
The poverty line in India is even more abysmally low. The
rural poverty declined from 50% in 1990 to 34% in 2010.
Had the poverty line been doubled (please note that it
would still be abysmally low) the change would have been
from 86% in 1983 to 80% in 2005. This shows that poverty
reduction has been very slow, and in 20 years very little
change has occurred. Studies also show that no matter
where one draws the poverty line, the rate of poverty
decline has been much slower in India than in developing
countries as a whole in the last twenty years or so, in spite
of economic growth being much faster in India.
India has seen jobless growth and this jobless growth has
been converted into job loss growth in recent times. In deep
contrast to China, where the post-reform economic boom
happened first in agriculture and then in manufacturing,
I dia a id ec ic g h ha bee d i e ai by
services. There is growing evidence that a good deal of the
services sector has been heavily concentrated in skill-

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intensive sectors (such as software development and
finance), rather than more traditional labor-intensive
sectors. While it has enabled the more educated section of
the labor force to earn much higher salaries, the bulk of the
workforce is marooned in agriculture (44% of employment
comes from agriculture) and the informal sector. The
informal sector employs 90% of the workforce and wages
and productivity tend to stay very low in this sector.
The e ha bee e i e i e e i I dia
nutritional indicators during the last twenty years or so.
Nutrient intakes (protein, calories , micronutrients ) have all
decreased for reasons that are altogether not clear. Our per
capita availability of food grains was a mere 177.7 kg per
year as of 2015. India still has the highest proportion of
undernourished children in the world even after 30 years of
rapid economic growth.
Colonialism + Caste system + Mughal absolutism stopped
India from developing. Feudalism in Europe and a rising
merchant class enabled the functioning of markets more
easily. Colonialism completely destroyed our economy.
Japan after the Meiji restoration in 1868 did not get
colonized. It was free of colonizing forces and is one of the
most prosperous countries in Asia despite having relatively
very few resources.
Institutions enable accumulation of knowledge which in
turn enables increased productivity and fosters economic
g h. B h h ica a d h a ca i a i I dia ha e
de e ed f a d e i i i ae a aged

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efficiently.
Development of human capital + Necessary and efficient
institutions are extremely vital for economic growth.
India has seen a neglect of primary education and a neglect
of public goods. India has moved to private healthcare after
reforms very quickly without developing the solid rock
support of basic public health facilities. The support of
strong basic public healthcare has been the basis of almost
every successful health transition in the history of the world
Britain, Japan, China, Brazil, South Korea and so on.
Kerala transitioned into private healthcare very fast due to a
strong universal public coverage provided by the state.
Even someone as economically right wing as Hayek agrees
that the state must be the primary provider of healthcare.
License raj in 1990s increased corruption.
OECD average tax to GDP ratio is 34%. Tax to GDP ratio
in India is 12%. This shows how much control the
government has of the resources of a nation and it shows
how much taxes fuel the economy. It is extremely low in
India and is the reason along with low government
spending of the neglect of public goods.
Comparing India with the 16 poorest countries in the
world: India leads in GDP per capita but performs very
poorly in life expectancy, total fertility rate, access to
sanitization, undernourishment, child immunization rates,
literacy rates, maternal mortality and infant mortality rates.
It has the highest GDP per capita when comparing with the
16 poorest countries in the world, but on the above-

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mentioned selected indicators it performs way below
average.
Af e ibe a i a i (f 1990 2008) , I dia a a
wealth is estimated to have shrunk about 6% (30% on a per
capita basis). Also, environmental safeguards have been
systematically dismantled following liberalization.