Ganga down the drain

The average level of incidence of poverty is still estimated in the range of 30-40 per cent, the highest in the country (with the current national level of estimated 27 per cent). Even their planned investments have fallen sharply in the last five years, which has further jeopardised their prospects for economic growth. In the years 1991-92 through 1999-2001, the shortfall in achieving annual plan outlays has been increasing from year to year. For instance, Bihar’s shortfall in annual plan outlays increased from 30 per cent in 1990-91 to 80 per cent in 1999-2001.

As a result of economic reforms, the flow of both domestic and foreign investment is directed more towards the better performing regions (the west and south). The Hindi region received only 20 per cent of commercial bank credit and 30 per cent of credit from Indian financial institutions. The result of low growth in the vast Hindi region could ultimately halt the growth prospects of the better performing regions due to limitations of the market. At present, the Hindi region is a major market for products emanating from the better performing regions. India’s sustainable economic growth would very much depend not only on export demand, but also on domestic demand, which would be largely influenced by the Hindi region.

Recent Asian experience has provided new models for sustained economic growth including aspects of equity. For the Hindi region, development strategies need drastic modification. The major thrust has to be on human capital development (ie, education, health, and nutrition), agricultural modernisation and rural industrialisation. In order to introduce and expand growth centres in rural areas, infrastructure in transport and communication should have the highest priority. For agricultural modernisation, there is a need to enhance both public and private sector investments, particularly in irrigation development. Statistics reveal that those states which have continuously increased investment in irrigation have increased their agricultural productivity. Consequently, the level of employment has gone up and the incidence of poverty has declined. The reverse is the case with the poor performing Hindi region, which has reduced the level of investment in the agricultural sector. Ironically, even the expenditure under plan outlays (Ninth and Tenth Plan) has significantly declined in recent years, which has further constrained growth prospects.

The role of state intervention is crucial in creating resources for basic infrastructure and human capital development. Subsequently, the market would start playing its role. Once market forces become active, private sector participation would grow. This did not happen in the past due to state and bureaucratic interference in each aspect of development. Even after the onset of economic reforms (1991), the flow of resources, both domestic and foreign, has not been dynamic so far.

One of the major tasks for the state would be to bring significant improvements in the organisation of economic institutions at various levels. This should be done to encourage the participation of the private sector. Enterprise development and the increased level of productivity growth in the high performing region depended on the introduction of decentralised planning — something that has been particularly true in states like Gujarat, Maharashtra and Karnataka. This helped in promoting the use of local development and entrepreneurial skills and accelerated the pace of development. Such a trajectory has been absent in the Hindi region. Future strategy would require the promotion of decentralised planning at the local level and detailed assessment of local resources.

The state leadership would have to bring vision and innovativeness, while setting priorities for quicker development in certain key sectors and locations having reliable resource endowment. Investment in infrastructure development could be selective to support high growth potential sectors and locations. It is in the overall interest of the states in the poor performing region to realise the urgency of faster economic growth to avoid possible serious socio-political turmoil, which would jeopardise prospects for growth.

With the growing incidence of poverty, unemployment and criminalisation of politics, there is a persistent growth of naxalite elements. If this trend continues and economic growth momentum remains dim, not only would there be wide regional imbalance, but there would provide a major threat to both India’s socio-political stability and its democracy. Thus the task of saving India’s democracy lies not only with the leaders of the Hindi region but with national leaders. No country in the world has been able to sustain democracy with a major part of the population remaining impoverished.

(The writer is a former director and chief economist, Asian Development Bank)