It’s a debate that has been going on for ages. What does India need more: Growth or redistribution of wealth? That’s the reason why every upbeat story about India’s growing economic clout seems to be inevitably accompanied by sad string chords bemoaning the abysmal state of India’s social indicators. The overall consensus among economists seems to be that while growth is necessary for poverty alleviation or improvements in social indicators, the poor need access to human capital, the key inputs to which are education and health, in order to take advantage of growth opportunities. There are also those who say that some inequality is needed to propel growth. Without the carrot of large financial rewards, risky entrepreneurship and innovation would grind to a halt. In 1975, Arthur Okun, an American economist, argued that societies cannot have both perfect equality and perfect efficiency and must choose how much of one to sacrifice for the other.
The debate, however, has been taken to an absurd level in this election season by the Congress and the Bharatiya Janata Party. The Congress manifesto says nothing about redistribution and talks only about a nationwide caste census that will reveal an accurate picture of the socioeconomic position of communities across the country. But Rahul Gandhi has steadily ratcheted up the rhetoric, framing the caste census not just as a means but as an end. Prime Minister Narendra Modi has seized the opportunity to make allegations that the Congress wants to grab the wealth of the growing middle class and give it away to those with “a lot of children”. India certainly deserves a better-quality debate on such a sensitive issue.
It’s a fact that governments all over the world face the difficult task of balancing fiscal prudence, welfare spending, and economic growth. The Modi government, despite its heavy spending on welfare, thinks India should pay more attention to economic growth as a primary means of decreasing poverty rather than expending more resources on curtailing inequality as redistribution will be better achieved if the size of the pie increases. In an essay titled “Perspectives on the Inequality Debate in India”, Chief Economic Advisor V Anantha Nageswaran says that for a developing country like India, where the growth potential is high and the scope for poverty reduction is significant, the focus needs to remain on rapidly growing the size of the economic pie. But detractors argue that the process of growth — whether it enriches crony capitalists more or the masses — is as important as the growth number itself.
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It’s obvious that shorn of politicking, both sides have valid arguments. The fact is even those who seek greater social sector expenditure do not argue against growth, nor are those who argue for growth against redistributive transfer. But the problem with those who argue for growth is that they see this as the end in itself, while, for those who argue for greater redistributive transfer, growth is only a means of achieving a larger objective. Growth in itself is a meaningless objective if it is not accompanied by improvements in incomes for the majority. Nobody in his/her right mind would object to growth if the process of growth is also accompanied by redistribution of resources among classes of households. The short point is growth and redistribution are not mutually exclusive to each other. That’s not only good economics, but also good politics.
(Views are personal)
It’s a debate that has been going on for ages. What does India need more: Growth or redistribution of wealth? That’s the reason why every upbeat story about India’s growing economic clout seems to be inevitably accompanied by sad string chords bemoaning the abysmal state of India’s social indicators. The overall consensus among economists seems to be that while growth is necessary for poverty alleviation or improvements in social indicators, the poor need access to human capital, the key inputs to which are education and health, in order to take advantage of growth opportunities. There are also those who say that some inequality is needed to propel growth. Without the carrot of large financial rewards, risky entrepreneurship and innovation would grind to a halt. In 1975, Arthur Okun, an American economist, argued that societies cannot have both perfect equality and perfect efficiency and must choose how much of one to sacrifice for the other.
The debate, however, has been taken to an absurd level in this election season by the Congress and the Bharatiya Janata Party. The Congress manifesto says nothing about redistribution and talks only about a nationwide caste census that will reveal an accurate picture of the socioeconomic position of communities across the country. But Rahul Gandhi has steadily ratcheted up the rhetoric, framing the caste census not just as a means but as an end. Prime Minister Narendra Modi has seized the opportunity to make allegations that the Congress wants to grab the wealth of the growing middle class and give it away to those with “a lot of children”. India certainly deserves a better-quality debate on such a sensitive issue.
It’s a fact that governments all over the world face the difficult task of balancing fiscal prudence, welfare spending, and economic growth. The Modi government, despite its heavy spending on welfare, thinks India should pay more attention to economic growth as a primary means of decreasing poverty rather than expending more resources on curtailing inequality as redistribution will be better achieved if the size of the pie increases. In an essay titled “Perspectives on the Inequality Debate in India”, Chief Economic Advisor V Anantha Nageswaran says that for a developing country like India, where the growth potential is high and the scope for poverty reduction is significant, the focus needs to remain on rapidly growing the size of the economic pie. But detractors argue that the process of growth — whether it enriches crony capitalists more or the masses — is as important as the growth number itself.
It’s obvious that shorn of politicking, both sides have valid arguments. The fact is even those who seek greater social sector expenditure do not argue against growth, nor are those who argue for growth against redistributive transfer. But the problem with those who argue for growth is that they see this as the end in itself, while, for those who argue for greater redistributive transfer, growth is only a means of achieving a larger objective. Growth in itself is a meaningless objective if it is not accompanied by improvements in incomes for the majority. Nobody in his/her right mind would object to growth if the process of growth is also accompanied by redistribution of resources among classes of households. The short point is growth and redistribution are not mutually exclusive to each other. That’s not only good economics, but also good politics.
(Views are personal)
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Growth & redistribution: They’re not mutually exclusive for developed nations like India
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07.05.2024
It’s a debate that has been going on for ages. What does India need more: Growth or redistribution of wealth? That’s the reason why every upbeat story about India’s growing economic clout seems to be inevitably accompanied by sad string chords bemoaning the abysmal state of India’s social indicators. The overall consensus among economists seems to be that while growth is necessary for poverty alleviation or improvements in social indicators, the poor need access to human capital, the key inputs to which are education and health, in order to take advantage of growth opportunities. There are also those who say that some inequality is needed to propel growth. Without the carrot of large financial rewards, risky entrepreneurship and innovation would grind to a halt. In 1975, Arthur Okun, an American economist, argued that societies cannot have both perfect equality and perfect efficiency and must choose how much of one to sacrifice for the other.
The debate, however, has been taken to an absurd level in this election season by the Congress and the Bharatiya Janata Party. The Congress manifesto says nothing about redistribution and talks only about a nationwide caste census that will reveal an accurate picture of the socioeconomic position of communities across the country. But Rahul Gandhi has steadily ratcheted up the rhetoric, framing the caste census not just as a means but as an end. Prime Minister Narendra Modi has seized the opportunity to make allegations that the Congress wants to grab the wealth of the growing middle class and give it away to those with “a lot of children”. India certainly deserves a better-quality debate on such a sensitive issue.
It’s a fact that governments all over the world face the difficult task of balancing fiscal prudence, welfare spending, and economic growth. The Modi government, despite its heavy spending on welfare, thinks India........
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