Rapid Growth Shrinks Poverty
INDIA used to suffer from what economists termed the ``Hindu rate of growth.'' National output rose a modest 3.5 percent per year, not much in excess of population growth. No more, says Shankarrao Chavan, India's finance minister. During the 1980s, India's economy has been growing on average 5 percent a year.Skip to next paragraph
Subscribe Today to the Monitor
Indeed, last year growth ran almost 9 percent, and Mr. Chavan anticipates output this year to increase another 5 percent.
With such rapid growth, the per capita annual income of India has jumped in constant dollars from $180 in 1978 to $330 in 1988, according to World Bank statistics. India remains a poor nation. But because food and other basic needs are relatively cheap in India, the simple foreign exchange translation from rupees into dollars used by the World Bank exaggerates the degree of poverty.
Chavan noted that the proportion of the Indian population suffering from poverty, by his government's measure, has dropped from 52 percent in 1976 to around 30 to 32 percent now.
``By the end of the century, we hope for an 8 percent poverty rate,'' the Congress Party politician said in an interview in an incense-filled room. He was here to attend the joint annual meeting of the World Bank and International Monetary Fund last week.
The higher living standards are particularly visible in some rural areas, such as the Punjab or Kerala, the minister said. ``There has been a tremendous change.''
The goal for India's next and eighth five-year plan, beginning next April, will be a 6 percent annual growth rate.
Thinking of the large amounts of capital needed to finance such growth, Chavan said, smiling: ``This is a great burden on me.''
India's economic growth rate stepped up when government policy began focusing more on efficiency, productivity, and competitiveness. This was clearly articulated in the seventh plan (1985-90). It called for a greater role for the private sector and promised to provide incentives to encourage private industrial investment. It eased licensing requirements for industrial expansion and for imports. It gave high priority to the completion of various irrigation projects.
Noted a report by World Bank economists: ``Over the past 10 years or so, there has been a gradual but steady pragmatic evolution in India's development priorities and strategies.''
Chavan predicted that this greater openness of the economy would continue because the country has benefited so much from it. The government, under Prime Minister Rajiv Gandhi, is expected to call parliamentary elections soon. It could be in December or January, according to Chavan.
He expressed confidence in the Congress Party returning to power, and a recent poll indicates that unless the opposition unites, it will.
To maintain the continued growth in farm output needed to feed India's 800 million people, the government is attempting to spread the Green Revolution, with its high-yielding seeds, fertilizer, and irrigation, to some 200 districts where progress has been slower.
India's population growth rate has shrunk from 2.3 percent a year in the years 1965-80 to 2.1 percent a year in this decade.
``We have not done very well in this area,'' says Chavan. ``Two percent is quite high.''
During his visit here Chavan discussed the problem with Barber Conable, president of the World Bank.
Mr. Conable has promised to increase bank spending on population control by three times, and Chavan clearly hoped that India would obtain some of those new funds.
To bring down the birth rate, Chavan saw the need for greater education of women - ``which is very important to me.''
Because of its poverty, India has lacked any social-welfare programs. People in need had to rely on their families for help. In the 1989-90 budget, however, the government introduced a program for providing at least one member of each poor family up to 100 days of paid work a year on irrigation, reforestation, roads, or other public works projects.
This was paid for by a special tax on the well-to-do.
``There will be a tremendous social change as a result, and that is what we want,'' said Chavan.
India's major economic problems are trade and budget deficits, the finance minister said.