Saturday, April 23, 2011
India Nears Double Digit Growth, but Debate Continues Over Who Benefits
WSJ India Blog: Is India’s Economic Growth Socially Sustainable?
Next month India will release its new five-year social and economic plan. The government seeks a target of 9 to 9.5% GDP growth per year from 2012 to 2017 while continuing to manage inflation that currently stands at 9%. The government’s three key policy targets include attracting more foreign investment, removing barriers to entry in the retail and infrastructure sectors, and building a competitive manufacturing sector.
Private sector economists estimate that India can achieve 10 percent growth per year, but maintaining such a high rate would require tremendous structural reforms that may not be socially sustainable. For example, the Chairman of the Planning Commission has cutting the fiscal deficit as a top priority while others wish the government to improve social programs. Nobel Laureate Amartya Sen is among those who have accused the Indian government of being fixated on GDP numbers while largely ignoring social development issues like female illiteracy and child mortality.
Last year India’s economy grew at 8.6%. So far India’s economy has continued to pick up speed despite rising energy prices and interest rates. India is one of the few large economies that continued its growth during the global financial crisis. Over the past decade India has developed a strong service sector, particularly in IT and consulting, and has major conglomerates like TATA and Mahindra. But despite India’s rapid growth over the past decade, 50% of its population still lives in poverty.
A key concern of Prime Minister Manmohan Singh is that all social classes benefit from India’s increased wealth. Specifically, Singh seeks to improve India’s schools, reduce gender gaps in education and health, and improve data collection to help policy advisors make more timely decisions. Lately, the government has been alarmed by rising food prices, but it has pushed to minimize food price spikes by attempting to dramatically increase agricultural productivity.