Meet finds China growth sustainable, India146;s possible

Panel discussions on developments in the Asian economy featured George Schultz, former US treasury secretary and ex-secretary of state; Xiang Huaicheng, former finance minister of China; Ishrat Hussein, former governor of the State Bank of Pakistan; and Kapil Sibal, Minister for Science and Technology of India. Participants of other panels included Rakesh Mohan, Deputy Governor, Reserve Bank of India; Wu Xiaoling, First Deputy Governor of the People8217;s Bank of China; Takatoshi Ito, former deputy vice-minister of finance for international affairs, Japan; and Ramalinga Raju, Chairman and Founder, Satyam Computers.

In the session on energy and environment, Nobel Laureate Kenneth Arrow and Larry Goulder presented a very stimulating paper on the sustainability of the growth in China. The authors defined sustainable development as a growth path in which each generation leaves the next one with the capacity to enjoy the same or higher quality of life. The indicator for per capita well-being is a measure of per capita wealth that includes a wide range of productive assets8212;reproducible physical capital, various forms of natural or environmental capital, and human capital, including health.

The focus of the analysis is national, not global, sustainability, so that if the foreign share of the national capital base is increasing, as in the case of the US, it detracts from sustainability. The wealth measure of well-being is the entire stream of future goods and services that can be delivered by current assets, rather than the current flow of income. Consequently, any rise in the future cost of a good or services, for example of fossil fuels because of depletion of stocks, is taken into account. Also, a future increase in prices of resources that are primarily owned by foreigners detracts from national sustainability.

Applying this framework to the data from China and the US, the authors conclude that both nations are experiencing sustainable growth, although their true growth rates are lower than their reported rates. In the US increases in human and to a lesser extent physical capital outweigh the adverse wealth effects from natural resource depletion and high oil prices. In China, investments in reproducible capital after all China invests nearly half its GDP! contribute the most to increases in wealth, although increases in human capital and technological progress also play a significant role. Nevertheless, in contrast to conventional GDP growth rates of 4.44 per cent and 7.38 per cent in the US and China during 1995-2000, the growth rates of comprehensive wealth were considerably lower at 1.43 per cent and 3.24 respectively in the two countries.

Kirit Parikh8217;s paper on India took a very different approach. The paper projected total requirements of commercial and non-commercial energy for sustaining a rate of growth of GDP at 8 per cent between 2006-07 and 2031-32. Eleven energy supply scenarios were considered, including a very optimistic scenario for nuclear power generation. It found that, at 8 per cent sustained annual growth, the Indian economy can easily generate the investment resources for meeting its projected energy requirements.

Environmental sustainability was assessed on the basis of the costs of abating the environmental damages. These costs were estimated as a modest 3.5-4.9 per cent of GDP during 1994-1997. While recognising that these estimates are partial and that the social costs of environmental degradation are likely to be higher, Parikh concluded that these costs are not large enough as to negate the benefits of growth.

In the discussion that followed, attention was drawn to his optimistic cost and technology development assumptions and the lack of a fully integrated framework on assessing sustainability. Still, it was viewed as a good start on analysing a complex issue.

Alan Garber of Stanford and his co-authors examined the challenges to China8217;s public health system regarding control of infectious diseases. Experts believe that an influenza pandemic is overdue and that it most likely will strike first in China. Effective containment of the pandemic requires a timely and effective response in China. The authors note that the SARS epidemic served a useful function in that it forced China8217;s leaders to reassess their system for preventing and controlling infectious diseases.

China recognises the importance of investing in public health, and has taken action to strengthen its disease control system. But challenges remain. One problem is inadequate funding to improve disease control at front lines. Another challenge is to improve the efficiency of governments, particularly local governments in rural areas, in monitoring health. The authors find that support from international organisations is also critical for China.

Amita Gupta8217;s paper with Robert Bollinger was on combating HIV/AIDS in India. At the outset she observes that although sound indicators of health such as life expectancy and birth, infant and child mortality have improved considerably since Independence, still a high proportion of the Indian population suffers and dies from preventable causes.

Since India8217;s first reported case in 1986, HIV/AIDS has spread rapidly. Globally India is second to South Africa, with an estimated 5.21 million living with HIV in December 2005. Unless arrested, the disease could wipe out the economic and social progress made since Independence and could place future prospects of development in serious doubt. The authors argue that the private sector must be effectively engaged for the successful management of curative services for outpatients.

N K Singh will resume his column on July 23, T N Srinivasan 038; Roger Noll