Fact-checking India's growth story under Modi government
In the recently concluded Assembly elections, the BJP won a majority share in almost all its contending states, leading several to question whether these victories are foretelling of the 2019 general elections.
But how much has Modi’s reign really favoured the country’s growth?
While 2016 was a year of reforms, it was also a year when reformist claims were disputed.
Predominantly, it was asked whether there were any tangible modifications, or whether it was just the prime minister’s speeches that talked about them.
Further, it was increasingly seen that the people who supported Modi and his party were maintaining the narrative that reforms were abound, while the other faction was arguing the opposite.
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The 2017 Economic Survey and Annual Budget forecast a 6.75-7.5 per cent GDP growth rate for the forthcoming fiscal year. This growth rate appears to be high, but why is it that India falls short on a number of development parameters?
To assess the situation, we try to look at areas in which the country has grown in the past year and those in which it might require a reallocation of resources.
We compare India to its neighbours in 2016 and to itself by looking the Corruption Perceptions Index, the Human Development Index, and the Inclusivity Index.
Corruption
The incumbent prime minister has taken on the plot against corruption at different levels. Some anecdotes and reports suggest corruption is being dealt with an iron hand, while others suggest otherwise. However, the Corruption Perceptions Index (CPI) seems to favour the former.
India ranks 79 out of 176 countries on the 2016 CPI published by Transparency International. In the subcontinent, we’re doing pretty well. Sri Lanka is ranked 95, Pakistan is at 116, Nepal at 131, Myanmar at 136, and Bangladesh at 145. At 79, China comes closest to India with the same rank, while Bhutan is placed well above at 27.
So, from the looks of it, India seems to be the least corrupt of all its surrounding countries, barring Bhutan.
The fight against corruption has taken centrestage in the past few years. In 2012 and 2013, India ranked 94 with a score of 36, with no improvement between the two years.
In 2014, India moved up to 85, and, in 2015, it further improved to be placed at 76.
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The 2016 rank is lower, but in the same year, India’s score went up by two points (to 40).
This discrepancy comes from the addition of eight more countries to the 2016 Index, which impacts the ranking in its real sense. Hence despite the negative perception in the ranking, India has marginally improved its position.
Clearly, there is some walking the talk. Demonetisation is a story of its own. But, this may not enough in itself. As much as we are the least corrupt nation-state regionally, at a global level, India still ranks below 79 countries on corruption.
The consolation is that we’ve moved 20 ranks up from 2012. Whether that is enough or not is anybody’s guess. On the colour-coded map, however, it is still recognised as one of the "highly corrupt" countries.
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| Source: CPI 2016 |
Human Development
Taking cue from Nobel Laureate Amartya Sen’s remark, “Economic growth without investment in human development is unsustainable and unethical”, we look at the UNDP Human Development Report that evaluates countries on the basis of the Human Development Index (HDI).
Industrial forecasts, job opportunities, and social services are fundamentally designed to make policymakers more informed about ways in which they can improve the lives of the people, much like everything else that is measured.
An objective judgment of this progress is given by the HDI which maps out Education, Health, and Income using the following proxies: expected years of schooling for kids and average years of schooling for adults for Education; life expectancy at birth for Health; and gross national income for Income. The geometric mean of the normalised indices is then used to rank each country.
India currently stands 130 of 188 countries under the category "Medium HDI".
Bhutan is at 132 while Bangladesh is at 142. Sri Lanka and China have "Very High HDI", being ranked at 73 and 90 respectively. Nepal at 145 and Pakistan at 147 are "Low HDI" countries.
India is far from being an example in human development. Sanitation and healthcare services require attention. And although the government has mobilised schemes to this end, in terms of the outcome, it hasn’t made much of a difference.
While education enrolments are increasing, the annual ASER report portrays that learning outcomes are still lacking, even in primary class students.
Clearly, more interventions and deliberations are required to make education work in India. Income levels are extremely low too. In fact, more than 90 per cent of the workforce isn’t even on the tax grid, leading to a strong black economy that doesn’t take employee benefits vis-a-vis insurance or provident fund into account.
The top 5 countries on the Index are European, with the exception of Australia. There are some specific policies that these countries implement which gives them the edge.
One such example is that of "flexicurity" in Denmark, defined as the “coexistence of flexibility, in the form of low adjustment costs for employers and employees, and security”.
It is aimed at promoting employment security over job security. So, the labour force is flexible, which helps employers have the cushion of a social safety net.
India too needs to make such adjustments to its labour laws in order to climb up the HDI ladder.
Inclusive development
The Inclusive Development Index, published by the World Economic Forum (WEF) is quite a holistic measure of the progress a country is making.
It uses 12 development parameters under three broad pillars: Growth and Development, Inclusion, and Intergenerational Equity and Sustainability.
The rankings are divided into advanced (30 countries) and developing countries (79 countries). India ranks 60 of the 79 developing countries.
Here, most of its neighbours are ahead. Bangladesh is at 36, Nepal at 27, Pakistan at 52, and Sri Lanka at 39.
The report specifically emphasises India’s rising Debt to GDP ratio, questioning the fiscal spending of the country. It points out that educational enrolment rates are relatively low across all levels, consequently translating into low formal labour force participation.
It also points out that the tax system could be made more progressive in order to develop infrastructure, which is currently inhibiting new business creation. Another reason for a lack of environment to do business in India includes corruption and a large administrative burden.
Among the top-ranked developing economies are countries like Lithuania, Azerbaijan and Hungary, and the ones that showed the most-improved 5-year trend were Lesotho, Nepal and Georgia.
Where do we go from here?
While India is performing relatively better than its neighbours, it needs to buck up if it going to earnestly compete in the global market.
As seen through the above three indices, clearly, the gaps between robust economic growth and sluggish human/social development need to be addressed and bridged.
Employing new policies in terms of allocation of resources is key for progress.
For instance, corruption needs to be kept in check as evident from the CPI. Education, Healthcare and Food will need a boost, as the HDI numbers suggest. There is also a case for enhancing businesses in India, particularly Small and Medium Enterprises (SMEs), which carry the potential to thrive.
Everyone knows these solutions. Where policy falls short is implementation. Thus, execution will be instrumental in outlining the priorities of the current government in its endeavours, while paving the way for leadership (whoever that might be) in the 2019 elections.
Only when these forces work in tandem, propelling the economy at the same time raising standards of living, can India really grow.