The Elephant that became a Tiger
;Page A19
business churn that indicates healthy competition. Prime Minister Manmohan Singh
has said of the new entrepreneurs, ‘These
are not the children of the wealthy. They are
the children of liberalization.’
; India is currently reaping a demographic dividend — a rising share of workers and
falling share of dependents in the population. The western and southern states
adopted birth control first and reaped a
demographic dividend from the 1980s
onwards. The backward northern and central states are starting to do the same now
In the last decade, the number of children
aged 0–6 years declined by 3.08 percent for
the first time since independence, with the
sharpest declines occurring in poor, backward states. A recent paper by two IMF
economists, Shekhar S Aiyar and Ashoka
Mody estimates that the demographic dividend may explain 40 percent of additional
GDP growth since 1980. They estimate the
incremental growth at 1.74 percent of GDP
in the 2000s, and project it at around 2 percent in the next two decades before tailing
off. China reaped its demographic dividend
much earlier thanks to Mao’s one-child policy, but that is about to end as the country
starts aging. This is one reason why analysts
like Goldman Sachs expect India to overtake China in GDP growth in the next
decade.
How reforms benefited the poorer half
There has been widespread criticism that
the reforms of the last 20 years have
bypassed poor regions; have bypassed poor
sections of the population like dalits (
formerly called untouchables); that poor people have in desperation taken to Maoism,
which now affects almost a quarter of all
districts; and that social and poverty indicators have not improved fast enough. These
criticisms are mostly exaggerations or falsehoods.
Poor regions. Many critics assert that
poor regions have been bypassed by fast-growing GDP. For instance, James Lamont
wrote a news story in the Financial Times
headlined ‘High Growth Fails to Feed
India’s Hungry.’ This is false. The proportion of people claiming to be hungry in
some or all months has fallen from 17.3 percent in 1983 to 2.5 percent in 2004–05. Six
poor, backward states accounting for half of
India’s population — Uttar Pradesh, Bihar,
Madhya Pradesh, Orissa, Chhattisgarh, and
Jharkhand — have grown exceptionally fast
in recent years, many faster than the national average. India’s western and southern
states have historically been dynamos, with
the northern and central ones lagging far
behind. But in the five years from 2004 to
2009, the mean growth rate surged in the
poor northern and central states (see Table
3) —Bihar (12.4 percent), Chhattisgarh (9.7
percent), Jharkhand (8.5 percent), Madhya
Pradesh (6.6 percent), Orissa (10.2 percent), and Uttar Pradesh (6.7 percent).
Critics have asked rhetorically, ‘When will
growth trickle down to the poor regions?’
The question is meaningless in the Indian
Girls on their way to a government school in Bihar
ARCHANA MASIH/REDIFF. COM
Table 3: GDP Growth acceleration in poor states
Mean growth 2000 –04
Mean growth 2004 –09
Bihar 4.5 12.4
Chhattisgarh 6.1 9.7
Jharkhand 1.9 8.5
Madhya Pradesh 1.9 6.6
Orissa 4.8 10.2
Uttar Pradesh 3.3 6.7
All India 5.6 8.5
Source: Calculated f rom data from Central Statistical Organisation
context. In some small mineral-rich
nations, income is concentrated in a few
hands, so mineral-based fast growth can
bypass the bulk of the population. This is
not possible in a large, diversified country
like India with a relatively egalitarian Gini
coefficient of 0.37 (this coefficient is a meas-
ure of income inequality, and ranges from 0
for complete equality to 1 for complete
inequality). Growth of 8.5 percent in such a
country is possible only if the bulk of the
population improves its productivity, as is
the case in India. This fast growth of poor
states trickled up to create record GDP
growth at the national level. India is mainly
a case of trickle up, not trickle down, though
of course fast national growth also produced
more revenue that was shared with the
states.
