More People not the Problem
August 6, 2003
Following soon after expressing its distress over the absence of a Common Civil Code, the Supreme Court has dropped another bomb. Now it has upheld the legality of the Haryana government's order to restrict candidature in its local elections to only those with no more than two children. Since Parliament is otherwise preoccupied, as it invariably is, the matter was debated on Barkha Dutt's talk show "We the People". Though it may be more apt to call the show, a true parliament of New Delhi's English speaking elite, "The 'We' Show", it does discuss matters that the elected Parliament fails to do so, for so many reasons.
Though the discussion was specifically about the Supreme Courts verdict, little effort was expended on examining the correctness of the Supreme Court's verdict. The verdict seems to be trampling on several rights, a point which the lawyer Rajeev Dhawan tried to make but found no discussants. The discussion instead was more focused on the perceived need to curb the growth of India's population, which was seen by most participants as the country's single major and most urgent problem. The vehemence with which some participants expressed their points of view, mostly pointed with little view, would have made Sanjay Gandhi smile down with approval. It was at this stage that Shabana Azmi rather pointedly suggested that a particularly insistent participant seemed worried about the rate "they", meaning the teeming masses, were growing, while "we" the subsidy fattened saab log were flagging in fecundity. With her eyes blazing, she dazzled.
This "they" vs. "we" formulation of the population problem is fashionable among our intellectually limited upper classes. It is true that if the numbers of the poor and wretched were contained, India would be economically much better off. But there is no by law or by administrative fiat solution to this. According to Sir Arthur Lewis, the West Indian economist who was awarded the Nobel Prize in 1979, the only way to it is "through the process of capital accumulation by which the surplus labor is absorbed into the more productive capitalist sector, and the low productivity traditional sector withers away" (Theory of Economic Growth, 1955). Lewis formulated that "labor is in surplus supply in an underdeveloped economy, and the prime task is to absorb this labor into more productive employment." That is turning them into the middle class or turning "them" into "us". This worked but only up to a point. Even by 1974 it seemed that things were not working according to theory. That year Hollis Chenery, Vice President at the World Bank introduced "Redistribution and Wealth" writing: "It is now clear that more than a decade of rapid growth in underdeveloped countries has been of little or no benefit to perhaps a third of their population."
A decade after liberalization not much has changed in India. About a third of our 1033 millions live below the poverty line. And mind you the Indian poverty line, because of its emphasis on daily caloric intake is really the hunger line and not a poverty line that takes into account basic human needs. The GNP of India in 2000-1 was Rs.1, 895,843 crores growing from Rs.8979 crores in 1950-51. This phenomenal growth also saw the share of Agriculture decline from 55.8% to 27.3%, while Industry grew from 15.2% to 24.6% and Services grew from 29.0% to 48.2%, causing many to crack that we seem to be shaping up like a post industrial society without having really industrialized!
We know from experience that redistribution policies do not work well in practice. In 1994, almost a full quarter century after Garibi Hatao became the leitmotif of our economic policies, the Gini coefficient, which is the measure of income inequality remained almost the same as in 1971 for, both, rural (0.345) and urban (0.285) populations. These inequalities have now deteriorated. Not only is the divide between the haves and have-nots worsening, it is becoming more apparent between the urban and rural populations. The inequality of the regions is alarming. There is a very clear divide apparent now in India with the Hindi and eastern states quite visibly left behind.
Their population is also growing at a much faster pace. The growth of population of the four southern states is a third to half that of the four BIMARU states. (Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh and hence bimaru). True, the populations of Punjab, Haryana, Gujarat and Maharashtra are also growing at rates comparable with the bimaru four, but their growth in per capita income is comparable with that of the southern four. Don't jump to conclusions that if the population growth were to have slowed down, their per capita income growths could have been quite spectacular? On the face of it that may appear so, but it doesn't work that way. I will discuss this now.
At a macro-level, both, China and India have had a phenomenal expansion of populations combined with economic growth. Quite clearly population growth is not necessarily a brake on economic growth. On the other hand there is much to suggest that population growth contributes much to economic growth. The critical factor here is the dependency ratio, which is the ratio of population aged 0-14 and 65plus against per thousand people in the 15- 64 years age group. Simply put, this is a ratio of the dependent persons and productive persons in an economy. The lower the dependency ratio the better. China currently has a more favorable dependency ratio of 450/1000 while that of India is closer to 650/1000. It is only in about 2020 that the Indian dependency ratio becomes the lowest in Asia, giving it the first real opportunity of bettering the performance of today's high fliers.
Japan now is in the most difficult stage of its demographic transition. By 2020, the biggest segments of Japanese population will be in the above 65 years age group, with close to 15 million persons in just the above 80 age group making it the largest segment. The productive 15-65 years segments and the high consumption 15-35 years segments will have shrunk considerably. To compound matters Japan's population will begin contracting. Even if it fights its way out of its many economic malaises, the long-term economic outlook for Japan cannot be considered very good. Much of Europe will face similar problems. By 2050 Russia will contract from 145 million now to about 90 million, whereas Italy will shrink to less than 40 million from 58 million now. It seems that among the major developed economies, only the USA will continue to have favorable demographics. But by then the USA will be a nation where the Hispanics, Blacks and Asians will constitute the overwhelming majority, which might even make it a better country?
In 2020 India will have more than 270 million people in the 15-35 age segments, when productivity and economic contribution is the highest. If savings rates hold and with productive potential at its peak in 2020 and we will have a great window of opportunity to make it as a developed and prosperous economy by 2050. If we blow that chance, it will be a very long time again when our demographics reach a similarly favorable constellation. But now is the time to create the conditions to exploit this. It's just too bad our leaders are pre-occupied with their own constellations, but not about the nations.
There is no magic wand solution for population growth. I am not even sure that more people is our problem. It is more people with less that is the real problem. If the majority of our productive age segments continue to be illiterate, unskilled and unhealthy, it will be just as bad as having them in the dependent age segments where they have to be fed and cared for by the productive segments. How serious we are about this is evidenced by the appropriations on Health, Education and Welfare, which have now cumulatively dipped to about 6% of our GNP, dropping from 6.4% in the previous year. We have just earmarked Rs.75, 389 crores for education (center and state governments) which at 2.9% of GDP represents a contraction from the previous years actual expenditure of 3.1%. The total amount spent by the central and state governments on healthcare is Rs.33, 915 crores or just 1.3% of the GDP.
This point never came up in Barkha Dutt's debate. How will it? The subsidy fattened elite, which benefits most from the state's largesse, largely views any expenditure of the development of the silent and wretched majority as an extravagance and luxury we can ill afford. Consider this, if we de-subsidize just milk and domestic gas, it will fund the health care and education of many millions who do not get anything from the state now. If we just do away with the so-called fertilizer subsidy of Rs.7000 crores, which really is a gift to the high cost domestic fertilizer industry, we will in effect double what we spend of irrigation at present. This will create millions of new jobs in the rainfed areas where the majority of Indians below the poverty/hunger line live. Similarly if food subsidies totaling about Rs.21, 000 crores, which actually are subsidies to middle and large farmers, mostly in Punjab, Haryana, coastal AP and western UP, India's infrastructure will look entirely different in just a few years. But will Parliament ever be able to discuss this seriously, given its class composition and pre-occupations? Till then we are condemned to believing that more people is the problem, when it is people with less that is the real problem.