India’s Economic Development and Position

Answer

India’s Economic Development and Position

Economic reforms that started immediately after India’s independence have significantly transformed India’s economy. What used to be a slow-growing, poor country currently has the world’s third-largest GDP with reference to purchasing power parity (after China which ranked 1^st and the U.S. which ranked 2^nd) and she is forecasted to be the fastest-growing major economy globally in time to come. However, the country’s economy has been tarnished in a number of ways. It is on this backdrop that this paper discusses the elite classes that have affected India’s economic development and how India has fared in the recent years in measures of social wellbeing. 

The Elite Classes and their Influence on India’s Economic Development

Poverty in its different kinds has continued to occupy the minds and attention of the international community in the last decades. Summit after summit have made dedications to drastically minimize the mystery from which several people suffer. Such commitments and attentions are in their selves a motivating step going forward, yet actual progress is still painfully slow, notwithstanding the fact that measures that have been taken to better the livelihoods of the poor are affordable (Clapp 11). As such, food insecurity and hunger, the most severe forms of punishing poverty, have become global priorities. An example of countries suffering the effects of poverty and hunger is India.

After independence, India’s stated economic goal was to end hunger and poverty, which has been in vain. Bardhan, in his work The Political Economy of Development in India, attributes some of the country’s failures to the pressure of three classes for resources: the rich farmers, the "professionals, and the industrial capitalist class. According to Marxian analysis, these are the people who own the means of production within Indian. Despite the fact these three elite classes may cumulatively contribute only to about 20% of the Indian population, they are numerically a large segment besides being the most powerful groups of the population. Each Indian belonging to any of these groups is keen on safeguarding as well as promoting their individual interests (Sridharan 408) notes that a comparatively small percentage holds much influence and authority, despite the fact that in recent years the country’s democratic expansion has begun to loosen the elites’ control grip.

Sridharan reasons that public policy in India is propelled by coalition of these dominant propriety classes, each of which is capable of defending their individual interests but not to change the economy’s status quo in manners that could raise India’s share at the advantage ad expense of the country’s other groups (408). This has been shown to result in a bias against the country’s policy change along with a tendency towards protection, subsidies, overregulation, as well as a bloated public industry.  Alamgir adds that within Bardhan’s framework, India’s public enterprises are employed in the distribution of patronage (like jobs and contracts), raising political finance, as well as being generally subjected to rent-seeking initiatives (159).

India’s wealth distribution has been shown to be highly unequal. The National Sample Survey data of 1991 indicated that whereas above 50% of India’s households had below Rs.50, 000 in assets (physical, including financial and land), only approximately 10% of the country’s rural families and 14% of her urban households had assets above Rs. 2.5 lakhs (Kerrissey and Schuhrke 199). However, the inequality in the country’s human capital (education for instance) is much more than financial or physical capital. Through their ability to own the country’s human capita in the form of skills and education, these groups have great influence of how the Indian economy functions, and mostly to their advantage.

Regarding occupation classifications, according to Aiyar, salary-earners, businessmen, and professionals constituted the heads of more than 22% of families in 1998-1999 (n.p). Owing to the fact that the vast majority of India’s manual labourers are unorganized, they hold comparatively little political influences and powers as labourers.  Wang notes that this vast majority are often mobilised as social groups (that are divided on community, caste, religion lines, or regional lines) which offer them certain recurrent shared/collective electoral power (n.p). Maripally and Bridwell add that even when economic and social interest groups (who belong to India’s top-two-deciles of the country’s population) are influencing, the impact and influence is somehow dissipated by extreme disintegration (329).

With regard to economic and social divisions, the Indian elites have been more fragmented amongst themselves compared to other countries’ elite groups. This gave rise to what is politically referred to as ‘collective action’ challenge, where the elites themselves have found it challenging and difficult to get their actions together. The elite classes have found it hard to agree on common goals, and even when they have agreed on certain goals, it has been difficult for them to coordinate their acts to attain that shared goal (Panagariya and Bhagwati n.p). This, as Liu et al. point out, has become a predominantly acute economic-political challenge when it comes to matters of long-term public investment such as infrastructure (66). Jha explains that when interest groups are economically and socially fragmented, pulling in diverse directions with no one of them dominating the whole show, policies of a state get buffeted around, and any paces towards economic improvement are mostly stopped and uncertain (n.p). However, such fragmentations can as well give the state some level of autonomy, since the state may not have to move in the tune of a particular dominant interest group, and a shred political leadership can play off a group against another to some extent and earn its individual rent in special privileges and power forms.

How India Has Fared In Recent Years in Measures of Social Well-Being

India has made significant achievements in measures of social well-being. Yearly, United Nations Sustainable Development Solutions Network (UNSDSN) releases The World Happiness Report that ranks 156 countries, taking into consideration GDP per capita, social support, life expectancy, and freedom to make choices regarding life (PR Newswire n.p). According to UNSDSN’s report, the Scandinavian countries were shown to dominate the top five list: Denmark (1), Switzerland (2), Iceland (2), Norway (3), and Finland (5) (Bhattacharyya et al. 27). However, India was shown to have performed poorly, ranking 118 of the 156 countries (Alamgir 161). Worse still happened in 2015 when it ranked 117^th. More worrying is that among 10 countries that realized a fall, India registered the steepest falls in happiness levels between 2005 and 2007 and 2013 and 2015 according to the report. The latest report showed that India’s economic freedom scored 55.2, making it rank as the 129^th freest according to the 2019 Index. Its general score has risen by 0.7 points, with a robust rise in the score for judicial effectiveness outperforming a fall in monetary freedom. Similarly, the country is ranked 31^st out of 43 countries within the Asia-Pacific region, and its general score as at now is below the world and regional averages (Clifton n.p).

This dip in happiness quotient occurred in India even after India had made significant economic progress. For instance, India’s GDP rose by more than three times to Rs 32.53 lakh crore in 2005-2006 to Rs 113.50 lakh crore during 2015-20116 notwithstanding the fact that its per capita income increased by more than three times from Rs 25701 to Rs 77,437 respectively within the period (De Neve and Ward 7). India also registered a 4405 score, below the worldwide average of 5382. The toper, Denmark scored 7526 and Burundi which came last in the list scored 2905 (Kerrissey and Schuhrke 201). India ranked behind even nations like Pakistan (92^nd), Somalia (76^th), and Bangladesh (110^th). Among BRICs, India and Brazil (17^th) were the only countries that registered a fall yet India was the worst performer.

The question behind this poor performance is, ‘Why does India perform so poorly on happiness index (HI) even when her economic prosperity at nearly every level has risen over the last decades?’ Three reasons have been advanced. First, Growth with equity has gotten away from India. In both China and India, the Gini coefficient has increased in the last decades. India’s score rose from 1990’s 45 to 2013’s 51 as a result of the growth in the country’s urban-urban and urban-rural income inequality. Whereas in absolute terms, most Indians have better their individual economic well-being, Alamgir reasons that in relative terms, the gulf between those who have and those who do not have continued to widen (178). India is a home to one of the largest number of billionaires in the world (Bhattacharyya et al. 28). According to Knight Frank Global Wealth Report of 2016, the total number of billionaires in India increased by more than 330% over the past few decades, outpacing the world’s growth average of 68% and the report indicated that the country’s momentum is likely to continue in coming decades.

Second, a majority of Indian employees work in pitiful and tragic conditions within the country’s informal industry. According to an International Labour Organization (ILO) report that was based upon proportion of workers in informal employment, India was found to be the worst (Alamgir 163). The report showed that while Brazil’s percentage stood at 42.2%, China’s at 32.6%, and South Africa’s at 32.7%, India’s was as high as 83.6%. This is attributed that the Indian government has significantly failed in mandating or enforcing even fundamental statutory benefits that Indian employees ought to have access to Aiyar (n.p). For instance, a great majority of employees in India at Alang do back-breaking works in perilous and hazardous settings and live in very miserable conditions with considerably little access to even basic statutory employee benefits like provident fund mandated by the Indian government (Alamgir 191).

Three, the blame should be placed upon the rising urbanization. From one viewpoint, urbanization is desirable and important to for India to move its great majority of working age population to non-farm employments (Maripally and Bridwell 329). However, this migration is disrupting the country’s social fabric. Worth noting is that urbanization is not just nuclearization of households. High costs of living in big towns and cities imply that most of these migrant employees move to towns and cities solo, abandoning their households behind in their various villages (Wang n.p). Out of the 50,000 to 100,000 employees at Alang, for instance, more than 89% have abandoned their families behind and at most travel to their villages two times a year (Clifton n.p).

Conclusion

As such, whereas the Indian government is closely monitoring its per capita, GDP, and other crucial economic indicators for purposes of benchmarking the country’s nation’s progress, there is a need that it evolves an extra rounded view of its inhabitants’ wellbeing as well as monitor them to help build a happier country. Therefore, while it may be argued that growth matters and that globalization, trade openness, and economic reform have contributed to economic growth in India, the development of a middle class as well as minimized poverty, there are continued problems in India as a result of such developments.