Editorial 1: An economy more future ready: A roadmap to eliminate poverty in India
Recent Context:
- India needs to plan its future strategy of growth in order to alleviate poverty
- In order to achieve this, the broad objective must be to raise the per capita income, estimated in 2022-23 at $2,379, by almost six times over the next 25 years.
- It will enable people to have a higher standard of living and eliminate poverty.
- However, The critical question now is to identify the challenges that the country will face in reaching this goal and the actions it needs to take to overcome them.
ICRO is significant factor for Economic growth and development:
- There is need for continuous growth of 7 per cent for the next 25 years.
- While considering optimum n incremental capital-output ratio (ICOR) of 4
- this will require a Gross Fixed Capital Formation rate of 28 per cent.
- However, the ratio of 4, which is often assumed, is on the basis of improved efficiency in the use of capital.
- As During the high-growth period in the early years of this century, the ratio was low. It has subsequently increased. Excluding two outlier years namely, 2019-20 and 2020-21, the average ICOR over five years from 2016-17 to 2022-23 is estimated to be 4.65
Factors that effects ICOR:
- ICOR is the result of many factors, including technology.
- The required investment rate in the next 25 years may be in the range of 30-32 per cent of GDP.
- Therefore, there is need to work towards I and it will not be difficult since we have achieved this level earlier.
- According to the latest release of NSO, the Gross Fixed Capital Formation rate in current prices for 2022-23 is 29.2 per cent of GDP.
- While recognising that public investment has picked up, it is necessary to emphasise that the investments by the business sector, both corporate and non-corporate, must increase. The composition of investment is also relevant.
- Investment must flow into sectors and segments which are crucial to promote growth and employment generation.
- While foreign direct investment must be welcomed, particularly in the newly emerging technological sectors, bulk of the investment must come from within
Global opportunities and threats related to economic growth:
- The climate for peace is necessary for growth.
- It has deteriorated after the Ukraine-Russia conflict.
- If this tension continues, it will be a strong negative factor for growth.
- Supply disruptions of critical imports like oil can cause a severe setback not only to developing countries but also to developed countries.
- Another concern globally is the attitude of some countries towards global trade.
- World Trade Organisation (WTO) was set up to create an environment of low tariffs and restrictions.
- But rich countries that earlier preached to the developing countries to adopt a free trade model, are backing out for one reason or another and putting restrictions on imports.
- This is happening at a time when developing countries like India are reaching the stage of being able to compete in the world market.
- Therefore, Developed countries need to look at the domestic factors for their current plight like the increased unemployment rate
There is need to adopt multidimensional strategy:
- Coming to the domestic situation, the key question is the strategy of development.
- India broke with its past in 1991 when it moved to a more market-oriented economy. Several countries most notably South Korea earlier and China more recently achieved high growth over several decades by focusing on exports.
- This export-led growth strategy may not work for India, particularly in the context of changed global trade situation.
- There is need for multi-dimensional strategy. The emphasis should be on
- agriculture and related activities,
- manufacturing and exports.
- India has emerged strongly in the services area. We need to preserve it and move forward.
- There is need to adopt new technologies.
- India will have much less difficulty in absorbing Artificial Intelligence (AI) and its ramifications.
- But that will have an impact on the industrial structure and, perhaps, employment.
- The impact of AI is being studied. Unlike the earlier ones, it is suspected that AI can result in increasing productivity and output but not necessarily jobs.
- That is bad news for populous countries like India.
- therefore, It is needed is to reorient our educational system to enable students to acquire the required skills
- Equally important is to identify labour-intensive economic activities. We have to reckon with a lower employment elasticity with respect to output.
- The strategy of development must also include a provision for basic income.
- There are many issues connected with basic income which need to be resolved. The level of basic income and the coverage of beneficiaries have to be determined taking into account certain normative considerations and the capability of the fisc.
- With basic income, India need to prepare to cut down most subsidies other than those on food. In an uncertain world, the need for the provision of basic income becomes even more urgent.
Development should be carried out while considering of environment protection:
- Another concern is the impact on output because of environmental considerations. Bringing down pollution, including the level of carbon, can have an output effect.
- Developing countries are right to argue that the burden of pollution reduction must be borne primarily by developed economies that have exploited natural resources significantly in the last century and a half.
- Nevertheless, India will have to bear part of the burden. In this context, a high annual growth rate of 8 per cent may have to be ruled out.
- As a result, India will be able to meet our multiple objectives including reducing inequality and poverty within the framework of an annual growth of 6 to 7 per cent.
Conclusion:
- In the past 75 years, India has built a reasonably strong and diversified economy. Though India is today the fifth largest economy, which is an achievement, in per capita terms, it is ranked (2022) 149 out of 194 countries. Thus, India have a long way to go
- Growth is important to lift the economy up and India has the potential. As of now, the external situation is not encouraging but a 6 to 7 per cent growth continuously is still possible if the strategy is correct and if we can create an appropriate investment climate which will help in economic growth, deployment and employment.
Editorial 2: Why one in seven Indians continues to be bracketed as ‘multidimensionally poor
Recent Context:
- Recently, NITI Ayog released second edition of ‘National Multidimensional Poverty Index: A Progress Review 2023'.
- According to the report, India has registered a decline in the number of “multidimensionally poor” individuals, from 24.85 per cent in 2015-16 to 14.96 per cent in 2019-2021
- In absolute terms, approximately 13.5 crore Indians escaped poverty between the five-year time period, courtesy of improvements in indicators like access to cooking fuel, sanitation, drinking water, and bank accounts, among others
- The report highlighted that the indicators like nutrition and access to education, the improvement has only been marginal, as these parameters contributed the most in keeping one in seven Indians multidimensionally poor.
- While there continues to be a major disparity between the number of people in poverty in rural and urban areas, the former witnessed the fastest decline in poverty from 32.59 per cent to 19.28 per cent, owing to improvements in states like Bihar, Uttar Pradesh, Madhya Pradesh, Odisha, and Rajasthan.
What is multidimensional poverty?
- This is the second edition of Niti Aayog’s report on the Multidimensional Poverty Index (MPI).
- It captures overlapping deprivations in health, education and living standards and other broader qualitative aspects of life, like child mortality, housing conditions, and other basic services such as water and sanitation to ascertain multidimensional poverty.
- The primary data source to arrive at these figures was National Family Health Survey-5 (NFHS-5).
- Under the three broad indicators of health, education and living standards, Niti Aayog assigns specific dimensions – such as nutrition and child adolescent mortality under health, years of schooling under education, and access to cooking fuel, electricity, bank accounts etc. under quality of living.
- Each of these specific parameters are assigned a value to calculate what is called a ‘deprivation score’.
- The deprivation score is the sum of the weighted status of all the indicators for an individual – if it is more than 0.33, only then an individual is considered multidimensionally poor.
What is keeping Indians multidimensionally poor? (Major outcomes of the Report)
- Even as there has been a significant reduction in the number of multidimensionally poor individuals, it is worth noting that one in seven Indians continue to fall under that category
- primarily because poverty reduction is not equally represented in the three main indicators of standard of living, health, and education.
- Within the health category, three sub-indicators nutrition, child and adolescent mortality, and maternal health showed only moderate improvement, the report showed.
- Nutrition deprivation decreased from 37 per cent to 31 per cent, maternal health deprivation improved from 22.5 per cent to 19.17 per cent, and child and adolescent mortality deprivation declined from 2.69 per cent to 2.06 per cent.
- Lack of proper nutrition contributed close to 30 per cent the highest in the overall calculation of India’s multidimensional poverty index.
- “Contributing to nearly one-third of the multidimensional poverty in India, nutrition is arguably one of the most important indicators in India’s national MPI,” the report said.
- A household is considered nutritionally deprived if any child between the ages of 0 to 59 months, or woman between the ages of 15 to 49 years, or man between the ages of 15 to 54 years – for whom nutritional information is available – is found to be undernourished.
- Other indicators that did not record a significant decline and aided the most in keeping Indians poor include lack of years of schooling (16.65%), inadequate access to maternal health services (11.73%), and less-than-desired school attendance (9.10%), among others
- there has been a significant improvement in access to cooking fuel, it is worth noting that close to 44 per cent of India’s population is still deprived of it. Similarly, while sanitation numbers have improved, more than 30 per cent of the population is deprived when it comes to sanitation services.
- Access to housing also remained to be an indicator where the improvement was only marginal. In 2015-16, close to 46 per cent of the population did not have such access, and in 2019-21, more than 41 per cent Indians still did not have access to housing.
Conclusion:
- The findings from the second edition of the National MPI will serve as a valuable resource for States and Union Territories to identify and amplify actions that have triggered progress since the findings of the Baseline Report, right upto the district level.
- It will also enable them to track the progress of the vulnerable hotspots and pinpoint areas that require further targeted policy interventions and programmatic action.