Economic Growth vs Economic Development

 This is a debate which exists since pre independent India and continues to this day. There is a paradoxical feeling of clarity and confusion on this subject. Still I do not really feel that I need to have all the answers to this question as Nobel Laureates and economists are yet to settle these issues among themselves. 

A colonised nation which before British rule was a cradle of civilization and trade had been reduced to a poor agrarian economy with small villages. Poverty, small land holdings and a caste ridden society with exploitation by whimsical kings and who in turn were exploited by the British colonizers made India a country which needed to quickly get its act together and survive as a country. The fight against the colonizers was marked by almost a hundred years of struggle. The first war of independence was notionally led by many rulers notionally under the last Mughal Emperor Bahadur Shah Zaffer. This war unfortunately failed and led to a consolidation of the British Raj. The country was ravaged by rulers who made it a supplier of raw materials for the British industry and in turn it also was a market for finished goods. However, to maintain and perpetuate this rule the Britishers had to give India a rail and road network and unify the country to some extent. Also, to govern the country an education system was introduced to create English speaking babus or clerks referred to as Brown Sahibs. Besides, the British rule led to many Indians studying in the United Kingdom and some of them along with some native Britishers became sympathetic to the Indian people and formed the Indian National Congress in 1885. Leaders like Dadabhai Navroji, Gopal Krishna Gokhale, M. G. Ranade and M. A. Jinnah dominated the Congress landscape and with their education and erudition started demanding more rights under the British Raj, but they were creatures of privilege and at best demanded dominion status or just some concessions under British rule. The Economic condition of India was described in a book by Dadabhai Navroji even at that time.  From all this ferment there came a leader Mohandas Karamchand Gandhi who was very different from the others in both his upbringing and exposure to the world. Except for the tag of barrister and London educated which was same for most he was in many respects a politician who was spiritual and who by happenstance and serendipity discovered the weapons of passive resistance or satyagraha. This was unlike any struggle for emancipation which were by nature violent and marked by retaliation. His true outstanding quality was direct connection with the people and shared all their joys and sorrows by living and empathizing with them in their own villages. 

His book Hind Swaraj and his critique of modern civilisation led him to propound an economic model which was based on local village rule by panchayats where the villages tried to live life in harmony with nature producing locally, consuming locally and where needs were met but greed was not met. While the world is deeply complex and is made of multitudes, this vision was not shared by many and the ghost of mimetic desires and delusions of racial superiority made mankind lose their judgement and better sense and led to two World Wars and arms race which continues to this day. Amidst all this good men and nobility survived and Independent India tried to talk of welfare for the poor and industrial development and modern scientific progress in the same breath. This was epitomised by the economic policies of the first Prime Minister of India. While it is fashionable to blame Nehru for over centralization and Soviet Union style public sector development, he did only what was the only choice available to him as the private sector neither had the capital or capacity to mass-produce. JRD Tata, G D Birla, among many others in 1944-45 created Bombay plan of economic development where the primary role of the state was to invest in public sector and increase both the agriculture output and create industrial development. Large dams and irrigation projects and large scale use of pesticides and chemicals were touted as the solution to poverty and hunger which was widespread. So, Nehru did his bit by creating a democratic framework. He was inclined to support centralization and looked down on word profit. But Gandhiji had realised that the Socialism model was flawed too as it did not consider individual freedom and tended to create an autocratic regime where free enterprise was stifled and state became the owner of everything. Gandhi was a friend of industrialists even though he was anti machine. He felt machines and automation must be used to serve humanity and not replace humans. He said that mass production must not replace production by masses. These ideas were encapsulated in J C Kumarappa book Economy of permanence and Small is beautiful by E F Schumacher. 

Today I am not sure that in the complex world where civilisation is being threatened by AI and where the pace of change is very rapid the above views are really relevant. The issue is now weather free market driven economic growth as pursued by South east Asian countries and China has resulted in development and poverty alleviation at a faster rate than the socialist approach of Nehru? The answer seems obvious but as argued above Nehru did what was right initially but did not have the courage nor the experts to help him course correct at the end of his career. The liberalisation of Indian economy which came in 1991 out of compulsion could have come much more earlier had the advise of the likes of C. Rajagopalachari, Minoo Masani and JRD Tata been taken and acted upon. Later, his daughter Indira was in fact more guilty than Nehru as in her quest for power she did not put long term national interest over short term gain. 

Today after all this discussion as far as India is concerned two giant economists Amartya Sen and Jagdish Bhagwati are engaged in a debate which is engaging to people like me but polarizing to an extent. According to Bhagwati India has a lot of catching up to do and rapid growth as seen in the liberalisation aftermath will create the money and the rising GDP will create the demand and lead to trickling down of better opportunities for the poor. The resources available can then be directed more effectively to alleviate poverty. On the other hand the economic disparity and the rise inequality and jobless growth can potentially create frustration unrest and tendency to violent revolution amongst the youth. The post liberalization years has seen that India while pursuing GDP growth has neglected Healthcare, education and skill development. If these were pursued along with growth we would have been poised to reap the demographic dividend that we possess. I still feel that rather than have this divisive debate, let us have a model of economic growth along with judicious and well targeted spending on economic development. In this context I think the suggestions given in the book accelerating India development by Kartik Muralidharan give an effective answer to this debate. 

My vote is for Amartya Sen but I do not think Bhagwati is wrong either. It is a question of balance and what is important is to hit the middle ground like the Buddha says. In this day and age when GDP growth measurement is also controversial and tailored to suit the narrative of development, I would not like to not be too proud of this false illusion of economic growth. We are so obsessed with validation by the West of our economic growth story that we are willing to overlook the fact that we are very much in the bottom half when it comes to measures of human development indices and even while there are improvements in maternal and infant mortality rates these are not figures we can be proud of. While the survival of our democracy is something we can be happy about the fact that on freedom of press and judiciary we are deteriorating is a matter of great concern. I would like to end with Gandhi’s talisman to the rulers of free India which to my mind is still relevant. “I will give you a Talisman. Whenever you are In doubt, Or when the self becomes too much with you, Apply the following test: Recall the face of the poorest and the weakest man Whom you may have seen and ask yourself if the step you contemplate is going to be of any use to him.Will he gain anything by it ?

I think both Amartya Sen and Jagdish Bhagwati believe in this but they only feel that the means to achieve the same are development followed by growth in the case of Sen and vice versa in the case of Bhagwati. The answer as usual is that both must occur simultaneously and this will come by investing in state capacity and capability to make available the resources needed for both.  

Vispi Jokhi