Is gdp growth the answer?
By Dhurjati Mukherjee
India’s consumption growth has experienced nothing short of an explosion over the last two-three decades according to reports. Importantly, the steady rise in the country’s national income over the period 2006-2012 at a compound annual growth rate of 13% clearly had a primary role in driving annum growth in the private final consumption expenditure over this period.
Besides, even after the national income growth slowed down during 2012- 2017 to 12.4%, consumption growth recorded at an average of 13.6% over the period. Reports also indicate that despite a slowdown on income growth, employment growth as well as networks’ growth, consumption growth remained strong.
It is no secret that employment growth came to a standstill and is a subject of intense debate as since 2012 there is lack of expansion in the industrial sector, increase in automation and subdued tendency in sectors like construction.
Obviously, the question arises that if income growth, employment growth and network growth remain compressed over the next few years, then can consumption growth remain unaffected?
Given that there is a widening disparity between incomes of the upper and lower segments of society which has been increasing over the years. In fact, a recent paper by Lucas Chancel and Thomas Piketty rightly concluded that income growth of the top 10% grew at a much faster rate than the average, while income growth of the balance 90% fell below average.
Moreover, the increasing wealth concentration among the rich has been corroborated by Credit Suisse Global Wealth Report 2016 wherein it revealed that the top 1% which owned 36.8% of the country’s wealth in 2000; now owns close to 58% of it. The global average is just 50%. An Oxfam 2017 report showed that 57 Indian billionaires own as much as the bottom 70% of the population.
Thus, it can be easily be concluded that consumption uptrend that is witnessed is mainly due to the increase in expenditure of the upper sections who mostly reside in metros and big cities. Apart from this class, a certain section of the middle income groups, who work in the formal sector in Government and private sectors or have their own business are quite well off and capable of increasing their consumption expenditure.
Moreover, current studies clearly indicate that the economically weaker sections and even the lower class are not capable enough to increase their expenditure except for essentials of livelihood. Pertinently, it would not be out of turn to say that there are two India’s within the country — one comprising 5-6% or a little more — who are well off and increase their consumption expenditure on various fronts and the other 80-85 % who are just making both ends meet. Within the latter group, 50% are indeed struggling for existence.
Though former Prime Minister Manmohan Singh recently maintained that the principle one-person-one-vote has put unprecedented political power in the hands of a hitherto marginalized 90% of the country’s population is absolutely incorrect. This section votes without knowing the political agenda of the Party and has little knowledge of the candidate.
Further, as true decentralization has not come into practice, the grass-root organizations have little power to finalize and carry out projects that may be beneficial to the masses.
The other point made by him was that the Planning Commission now Niti Aayog was destined to ensure that inequality did not increase with growth in the economy. But it is well known that the Commission failed to achieve its objective, as various studies undertaken from time to time have revealed.
It is indeed surprising that a respected politician like Manmohan Singh would make such theoretical propositions without outlining the causes of the failure of development planning in the country.
Undeniably, economic growth has benefitted the rich and middle income sections as everything has been planned to suit their interests. They have such a high purchasing power that even foreign manufacturers and traders want to enter India to sell their consumer products. One may mention here that in metros and big cities, most people have at least two mobiles, both costing above Rs 10,000 or higher.
Scandalously, most of the measures the Government has been taking are not aimed at uplifting the conditions of the poor and marginalized sections. Modernizations of airports, bullet trains and various sops to corporates or even helping the private sector by giving land etc. at cheap rates to set up schools and nursing homes, where charges are very high, even beyond the capacity of the lower middle income groups, are certainly not in the interest of the poor.
Any wonder, there is a clamour for reducing the GST rates in some sectors. Sadly, there is no organized force for helping small farmers and landless farm labourers.
Clearly, real consumption of the masses is imperative which can increase if the earning capacity of the impoverished sections goes up. For this to happen, the whole plan and prgoramme towards rejuvenation of the rural sector has to change and this can only happen if our politicians and planners have a genuine concern and grass-root approach.
Notably, our system of governance, real dedication and sincerity towards increasing consumption levels for a healthy living has to be ensured. A plan has to be evolved in this regard so that there is a steady increase in incomes in the next two-three years.
In sum, unless real incomes of the rural population increase, poverty would continue to haunt villages. Hence, our leaders should focus more attention on trying to remove farmers’ distress by doing what is necessary at this juncture along-with strict monitoring of welfare schemes.
To ensure good governance, retired Government officials, specially from the armed forces, academics and senior activists could be directed to review various welfare programmes at the district and sub-divisional levels, if necessary and the block levels as well.
They need to review the benefits received by stakeholders and try to address their problems. This could improve performance and give a new direction to effective implementation and might help in boosting consumption of the bottom 20% of the population. —— INFA