GROWTH AND POVERTY GROWTH AND POVERTY The Great Debate Pradeep S Mehta Bipul Chatterjee GROWTH AND POVERTY The Great Debate Published by D-217, Bhaskar Marg, Bani Park Jaipur 302016, India Tel: +91.141.228 2821, Fax: +91.141.228 2485 Email: [email protected] Web site: www.cuts-international.org ©CUTS International, 2011 First published: June 2011 The material in this publication may be reproduced in whole or in part and in any form for education or non-profit uses, without special permission from the copyright holders, provided acknowledgment of the source is made. The publishers would appreciate receiving a copy of any publication, which uses this publication as a source. No use of this publication may be made for resale or other commercial purposes without prior written permission of CUTS. The views expressed here are those of the commentators/authors and can therefore in no way be taken to reflect the positions of CUTS International and the institutions with which the commentators/authors are affiliated. ISBN: 978-81-8257-149-5 Printed in India by Jaipur Printers Private Limited, Jaipur #1106 Contents Acknowledgement ix Reflections xi Abbreviations xv Foreword xvii Simply not Debatable! xxi Part I: Professor Jagdish Bhagwatis Lecture to the Parliament of India Indian Reforms:Yesterday and Today 3 Part II: The Debate on Growth and Poverty Its a Myth that Reforms are not Helping the Poor 21 G Srinivasan Selected Reflections from the Debate 24 Abhijit Banerjee 24 Arvind Panagariya 25 R Vaidyanathan 27 Alok Ray 28 Basudeb Chaudhuri 29 Indira Rajaraman 30 Jagdish Bhagwati 31 S L Rao 32 Martin Wolf 33 Rajesh Shukla 34 Sumit Majumdar 35 Jagdish Bhagwati 36 vi GROWTH AND POVERTY: The Great Debate K A Badarinath 37 Nayanima Basu 39 Nitya Nanda 40 Jean-Pierre Lehmann 42 Jagdish Bhagwati 44 Raymond Saner 44 Jagdish Bhagwati 47 Madhav Mehra 48 Martin Wolf 51 KP Fabian 52 Martin Wolf 53 Jagdish Bhagwati 53 Economists Endorse Bhagwati Line for UPA 55 Kirtika Suneja, Subhomoy Bhattacharjee Some More Views on Growth and Poverty 59 Jagdish Bhagwati 59 M Govind Rao 60 Geza Feketekuty 61 Shantayanan Devarajan 66 G S Bhalla 67 Arif Waqif 68 Y Venugopal Reddy 68 Prasenjit Bose 68 Arvind Panagariya 69 Surjit S Bhalla 70 Leonard Ugbajah 72 Arne Melchior 74 Ravi Chaudhry 77 High Growth Fails to Feed Indias Hungry 85 James Lamont Growth vs. Caring: A Stupid and Nonsensical Debate! 88 Vivian Fernandes GROWTH AND POVERTY: The Great Debate vii Its a Social Spend Boom, Stupid 92 Swaminathan S Anklesaria Aiyar Part III: Some Relevant Writings of Scholars and Commentators Growth and Other Concerns 97 Amartya Sen I Beg to Differ, Prof Amartya Sen 104 Arvind Panagariya Sen versus Sense on Healthcare 107 Arvind Panagariya A Curzon Without an Empire 111 Pankaj Mishra Camerons Cuz is More the Curzon 119 Patrick French TWIN GOALS Growth and Social Welfare are not Conflicting Objectives 125 S L Rao Growth as Tool to Alleviate Poverty 130 Alok Ray High Growth in India and China Helps Eradicate Poverty: Report 134 The Financial Express, April 17, 2011 The Grand Illusion of Growth 136 Surjit S Bhalla Pro-poor Justice 140 Surjit S Bhalla A Distorted Poverty Debate 144 Mint, May 26, 2011 Equity and Growth in India 146 Natalie C F Gupta viii GROWTH AND POVERTY: The Great Debate Part IV: Selective Scholarly Writings on Growth and Poverty Poverty and Public Policy 151 Jagdish Bhagwati Poverty and Reforms: Friends or Foes? 191 Jagdish Bhagwati Growth is Not a Passive Trickle Down Strategy 208 Jagdish Bhagwati Growth, Inequality, and Poverty Reduction in Developing Countries: Recent Global Evidence 210 Augustin Kwasi Fosu Index 222 Acknowledgement agdish Bhagwati, Professor of Economics and Law, JColumbia University lucidly analysed the relationship between growth and poverty reduction in his lecture to the Indian Parliament on the 2nd of December, 2010. This triggered a very intense debate organised under the aegis of CUTS International. This collection of views on growth-poverty linkages of a number of eminent scholars from India and abroad makes a rich contribution towards understanding many important and contemporary issues of economic development. We express our gratitude to Professor Bhagwati and Shri T K Vishwanathan, Secretary General, Lok Sabha for granting us permission for the reproduction of this Lecture and to all eminent scholars/commentators for taking part in this debate. Our thanks are also due to Shri K Vijaykrishnan, Joint Secretary, Lok Sabha Secretariat; Brooks World Poverty Institute, University of Manchester; and Journal of International Affairs, Columbia University. Words alone cannot convey our gratitude to those who have contributed in every big and small way to this volume. We gratefully acknowledge the assistance of Joseph George, Madhuri Vasnani and Mukesh Tyagi. This volume contains copyrighted materials some of whose use has not been specifically authorised by the copyright owners. CUTS International is making those articles, etc available to a wider readership in our efforts to advance understanding on this subject. We believe that this constitutes x GROWTH AND POVERTY: The Great Debate a fair use of copyrighted materials as provided for in Article 10 of the Berne Convention for the Protection of Literary and Artistic Works (the Paris Text of 1971) and in Section 107 of the US Copyright Law. If anybody wishes to use materials from this volume for purposes that go beyond fair use, s/he must obtain permission from the copyright owner. CUTS International will not draw any profit from this volume, since it is solely for informative and educational purposes. Suggested contribution has been sought from the public for printing and postage costs only. Pradeep S Mehta Bipul Chatterjee Reflections There is a case for land reforms that make the conversion of land into industrial use less fraught; there is a case wide-ranging educational reform which makes it easier for the poor to access quality education; and there is a case for revamping primary healthcare to make it much more functional. Abhijit Banerjee Department of Economics Massachsetts Institute of Technology, USA When I began hearing about the East Asian miracle economies, my reaction was: miracle? what miracle?. It was then (80s) I started looking more closely at India. I found myself more struck by how Indian policy makers managed to screw things up than how East Asians concocted an alleged miracle. So while India has achieved the status of a major global economic power and it has recorded among the worlds highest growth rates, it is still by some distance the country in the G20 with the worst scores in the Human Development Index (HDI). Jean-Pierre Lehmann Emeritus Professor of International Political Economy & Founding Director, The Evian Group at IMD, Lausanne, Switzerland I believe that the differences between Sen and Bhagwati are less substantive than what is popularly made out to be. On a variety of important policy matters, they use different languages but say very similar things. My only worry is that even on this Sen and Bhagwati will agree that I am wrong. Kaushik Basu Chief Economic Adviser, Ministry of Finance Government of India xii GROWTH AND POVERTY: The Great Debate Obviously, higher incomes are a necessary condition for better state- funded welfare, better jobs and so forth. This is simply not debatable. Indeed, only in India, do serious intellectuals dream of debating these issues. Martin Wolf Chief Economics Commentator, Financial Times Growth is important not merely to generate the resources for anti- poverty interventions and human development but essentially, it is growth that should provide sustainable and productive employment opportunities to the poor. If our growth has not produced sufficient jobs, the fault does not lie with growth but with our policies which have anti-labour bias. Employment intensive growth requires us to question our policies creating structural rigidities. Examples include the need to rethink on our labour laws and equally important, whether we should continue to prevent foreign investment in activities such as retail trade. M Govind Rao Director, National Institute of Public Finance and Policy, India There is no way of reducing rural poverty in India without reducing the number of people actively engaged in farming, and providing alternative employment opportunities for the rest of the rural population. Since you do not want all these people to flock to the already overcrowded cities, you need to create new jobs in the country side. Geza Feketekuty Special Adviser to the President, Overseas Private Investment Corporation, USA Kerala has the highest rank in Human Sector Development in India. Girls education has imparted a unique dignity to women. Thanks to its investment in education and health, it has the lowest mortality rate, and one of the highest sex ratio. G S Bhalla Professor Emeritus, Centre for the Study of Regional Development, India GROWTH AND POVERTY: The Great Debate xiii Should not those interested in poverty alleviation focus on growth of what the poor need remunerative and stable work, food, minimum needs etc (ala Malcolm Adiseshaiah, Vakil and others)? That is, focus on the pro-poor composition of growth? For instance, the extraordinary growth in cars compared to that in public transport, bicycles cannot by any stretch of imagination be said to be pro-poor. Arif Waqif Professor and Founder-Dean (Retd) University of Hyderabad, India Governments tax, and have taxed for centuries, primarily to redistribute.