Tenth Plan: some priority areas

The priority of good governance is to ensure the well-being of the poor. Employment, empowerment and human development of the poor should be the basic thrust of growth strategy and market reforms so that benefits therefrom are equitably distributed, says R. Thamarajakshi

The Planning Commission has set a GDP growth target of 8 per cent in its draft approach paper to the Tenth Plan (2002-07); the current rate for the Ninth Plan is lower at 6 per cent as against a targeted growth of 7 per cent. This deceleration is rather depressing for more than one reason. First, the economy had achieved growth rates of 6 per cent and 6.8 per cent during the Seventh and Eighth Plans that were higher than the then targeted rates. Second, rapid economic growth is a minimum condition for poverty reduction. Third, this deceleration is associated with a decline in growth rate of foodgrains and non-foodgrains production in the 1990s compared to the 1980s from 3.5 per cent to 1.8 per cent and from 4 per cent to 3.2 per cent respectively.

With real growth rates of GDP from agriculture during 1997-98, 1998-99, 1999-2000 and 2000-01 estimated at (minus) 1.9 per cent, 6.5 per cent, 0.7 per cent and 0.9 per cent respectively, average growth in the first four years of the Ninth Plan is 1.6 per cent; the targeted growth in the Plan period for agriculture was 4.5 per cent for the economy to grow at 7 per cent and for generation of productive employment and reduction of poverty. Consequently, during 1993-2000, employment growth was lower at 1.3 per cent per annum compared to 2.9 per cent during 1987-94 and elasticity of employment to GDP declined from 0.43 in the latter period to 0.16 in the former period.

Employment

Employment in agriculture and allied sectors has registered an overall increase of only 2.5 per cent during 1993-2000. This has had repercussions on absolute and relative incomes in agriculture. The per worker value added in agriculture at 1993-94 prices is just around Rs. 12,200 compared to Rs. 57,559 in non- agriculture in 1999-2000, the respective figures for 1993-94 being Rs. 10,416 and Rs. 42,040. Thus, the relative per worker value added has gone adverse to agriculture in this period whereas barter terms of trade have improved in favour of agriculture. Employment in the private organised sector, which increased up to 1996, plateaued thereafter with public sector employment remaining almost unchanged.

The Economic Survey 2000-01 is circumspect in its discussion on trends in employment; 'Higher economic growth in the recent past, if it has been more capital intensive, may have resulted in lower employment intensity. However, there is reason to believe this may be more than compensated by new and expanded opportunities in the services sector, much of which would also be in the unreported unorganised sector'.

Poverty reduction

The Mid-Term Appraisal of the Ninth Plan has observed that projections on the reduction in poverty have not materialised in the first two years of the Plan. Poverty reduction which was conspicuous during the 1970s and the 1980s up to 1990-91 has weakened in subsequent years. (As of now, there is an ongoing discussion on the methodology underlying the estimates of poverty for 1999-2000 put out in the latest Economic Survey. It appears that the Planning Commission is also not quite convinced with these figures; the Approach Paper notes that while only a quarter of population may be below the official poverty line, there are at least another 25 per cent people who consider themselves as poor.

According to the latest World Development Report of the World Bank, 44.2 per cent of the country's population in 1997 were below the international poverty line of one dollar a day. Though the bank has observed that "there is no certainty that an international poverty line measures the same degree of need or deprivation across countries," it is glaring that India's percentage is the highest among the countries in Asia. The slackening in poverty reduction is due mainly to sluggish agricultural growth and the long term decline in public investment in agriculture which provides livelihood for bulk of the poor.

Indian agriculture is now experiencing a paradox of sorts - declining yield rates, droughts in some States leading to increased underemployment, mounting stocks of cereals and lower offtake from the PDS. During 1993-2000, foodgrain prices rose by 76 per cent compared to 37 per cent in the prices of manufactured articles, partly due to international competition; the poor have been confronted with adverse relative price of foodgrains. The TPDS did not seem to be working in the poorest north and northeastern States.

Among the reasons for poor offtake by BPL families are the reported poor quality of foodgrains and the difficulty in mobilising ready cash by these families to purchase all the 20 kg at a time. In effect, in spite of huge stocks, food access to the vulnerable poor has not materialised. In the context of opening up of agriculture to world markets under the WTO discipline and the problems likely to be faced by small and marginal farmers in sustaining their production, food security to the poor should be the centrepiece of pro-poor growth strategy.

Structural change

Since the early 1990s, India has been going through a process of structural change and globalisation. Inadequate attention to sequencing the reform policies and lack of due regard to concerns such as dislocation of the poor, their vulnerability to rise in food prices and increase in distributional inequality, not to mention lack of demand for unskilled labour in emerging activities in the non-agricultural sector, can negate the objective of securing the well being of the poor.

According to the World Employment Report for 1996, since the capacity in many developing countries to design and implement programmes to compensate for the negative effects of economic reforms is weak, it is imperative to strengthen this prior to the adoption of drastic programmes of economic reforms. Experience of different countries has shown that speedy economic growth is not possible without human resource development.

The Korean miracle was possible because human resource development preceded physical capital formation. In India, however, the bulk of human resources is poor and suffers from multiple deprivation, that is, of income, health and education. After a decade, the World Bank has once again returned to the strategy for attacking poverty; one of its findings is that in contrast to what was expected and needed, the pattern of growth in developing countries in the 1990s is not necessarily intensive in unskilled labour. The shedding off of redundant labour in the process of structural change leads to intra-urban shifts of labour from the formal to the informal sector, with the status of labour in the unorganised sector, specially females, whose incomes are not indexed for price rises becoming vulnerable.

The latest Human Development Index of United national Development Programme (UNDP) shows India's rank in the achievement in basic capabilities as 128 out of 174 countries of the world. Often, the importance attached to human development is indicated with figures on expenditures/outlays in (Plan and non-Plan) on 'social sectors' as per cent of GDP and total expenditure. However, 'social sector spending', shown in the budget or Plan documents, with the exception of rural development, basic minimum services and certain special employment programmes, consists of broad categories whose impact on human development of the poor cannot be identified.

Out of approximately 200 million children in the age group 6-14, only 120 million are stated to be in schools and net attendance at the primary level is just 66 per cent of enrolment. Also, survey data in 12 countries including India have found that more than half the 15-19 year olds in the poorest 40 per cent of households had zero years of schooling. In this context, though the 2001 census has given encouraging results of improvement in literacy rates, there are inter State disparities in development of human capabilities in education, skill formation and health status with some States in the North suffering from severe deprivation.

There is need for speedy economic growth, especially, agricultural growth which is widespread to cover areas where the poor are concentrated. Seventyfive per cent of the country's population are in the rural areas and hilly terrain, and 60-70 per cent of GDP from agriculture comes from subsistence agriculture. While inter-State disparities in agricultural yields indicate the potential for increase in production, this would become possible only if the declining trend in public investment in agriculture is reversed.

More investment is needed in rural infrastructure, especially irrigation and rural roads, and in skill development and improvement of health status of agricultural labourers, marginal and small farmers, rural artisans and assetless farmers. While it is true that government spends on subsidies for food, fertilizer, water and electricity; this should not, however, lead to lesser resources for physical and human capital formation in the rural sector especially when the rural poor are not proportionate beneficiaries of these subsidised inputs.

Success of growth strategy in reducing poverty depends on the initial conditions of income distribution and the pattern of growth. When incomes are distributed relatively evenly, growth tends to be more effective in reducing poverty over time. If accompanied by improvements in income distribution itself, as occurred in East Asian countries, broad based growth can lead to dramatic reductions in poverty. But where incomes are distributed unequally, moderate growth may be unable to do much on the poverty front, especially if the population is growing. In practice, a general development strategy creates unequal opportunities. Macro economic policies should, therefore, be supplemented by income raising interventions and social development interventions at the grassroots level targeted at the poor.

The various poverty alleviation and special employment programmes now in operation can succeed only when macro economic policies are designed to reduce poverty and market reforms are targeted at the poor also. Further, there should be a clear cut gender sensitisation of special programmes and safety nets, since during periods of economic reforms, a process of feminisation of poverty takes place due to their vulnerable position in the labour market concentrated as they are in the lowest remunerated jobs.

The priority of good governance is to ensure the well-being of the poor who are not only income-poor but are also severely deprived of basic services. This calls for rapid and sustainable agricultural growth, employment intensive non-agricultural growth, relative stability of food prices, a sound system of food security and human resource development. Employment, empowerment and human development of the poor should be the basic thrust of growth strategy and market reforms in the coming years so that benefits there from are equitably distributed.

The author is former Secretary, Govt. of India.

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