September 25, 2020
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'India's Obscene Inequalities'

More money and more public investment in health, education and rural infrastructure is not a stand-alone strategy. Progress at the scale required is not possible without greater democracy and accountability. Public investment needs governance reform.

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'India's Obscene Inequalities'
'India's Obscene Inequalities'
Behind the very well-written and bold 15th HDR is its new director and lead author, Kevin Watkins, economist and former Oxfam head. Watkins sets great store by the new employment guarantee scheme and other rural development plans taken up by India, while expressing confidence in India's effective handling of trade negotiations at Doha. Excerpts from an interview:

India has improved its HDI value, no doubt, but it's running faster to stay at the same place for some time. What do you think is the reason?

India is improving its HDI value. But interestingly, there is a growing gap between India's global wealth ranking and its HDI ranking, which is now 9 places lower. This highlights the importance of converting wealth creation into social progress. Rising average incomes clearly create opportunities for accelerated human development, but seizing those opportunities requires a strong focus on public policies to tackle India's obscene inequalities based on gender, income, caste and other determinants of disadvantage.

India has a well-articulated policy on external aid--we discourage and refuse it. But Jeffrey Sachs and now HDR are seeking more aid for India. Is aid really necessary or can we resolve at least the problems of health, education and child mortality on our own?

We don't actually argue for increased aid to India (though there are some areas in which aid could help). In fact, we identify India as a model for how to manage donors and enforce coordination and harmonisation behind government priorities. This is an area in which sub-Saharan Africa in particular has much to learn from India, though some countries--Tanzania for example--are working with donors to improve country-ownership.

Your report is very optimistic of India due to the amount of money it plans to invest in rural infrastructure, health and education. But most people feel such expenditures for the past half-century have led to little actual development on the ground, and even the poor have become cynical of the government's intentions. What makes you think it will be different this time around? 

I take your point. Clearly, more money and more public investment in health, education and rural infrastructure is not a stand-alone strategy. Without greater democracy and accountability on the part of service providers and state authorities, India is unlikely to register progress at the scale required. Surely this is a case for stressing that public investment and governance reform have to go hand-in-hand. States such as Himachel Pradesh and (in education) Rajasthan have shown that rapid progress is possible when governments are responsive to community needs.

You favour interventionist measures like income transfer schemes. The National Rural Employment Guarantee Programme (based on the Maharahstra EGS, though modified) is one such. Will this work, despite many independent observers having found largescale tampering of muster rolls? Do you think direct transfer schemes like food stamps are better?

I'm not an expert on this. However, I am persuaded by the arguments of Jean Dreze on the potential benefits of the EGS. That said, an important challenge is to introduce such scehemes in such a way as they become catalysts for governance reforms. This implies active campaigns to inform citizens of their rights, strict auditing, and public information on expenditure allocations.

How have the sharp fall in commodity prices affected India? What should it do to guard its farmers?

India has been affected by declining commodity prices, in particular for tea and edible oils (though Chinese demand has led to a price recovery in recent years). In some areas, India is directly affected by Northern government export subsidies. For example, Indian rice competes with heavily subsidized US rice (around $2bn a year in support) and subsidized EU sugar. That is why India's role in the G20 at the WTO is important: it provides an example of how developing countries can cooperate to tackle shared problems.

You have talked about trade and globalisation not having the desired or declared effect. Since India has such a small share of world trade and is still closed in many areas, going even slow in tariff cuts, do you think the real (harsh) impact of globalisation is still to come?

India has reaped considerable economic benefits from globalisation. However, the impact of wealth creation on poverty and human development has been constrained by the weak link between economic growth and employment creation, the continued stagnation in many areas of agriculture, and of course, deep- rooted inequalities based on location, caste, income and gender. Clearly, greater openness to trade could entail adjustment costs. That is why trade liberalisation needs to be carefully designed and sequenced. It is also why government institutions need to provide people affected by adjustment, whether in the form of unemployment or low wages, with support.

I realise that there is a considerable debate over the merits and drawbacks of import liberalisation in India. We argue in the report that this debate has to be addressed in a pragmatic way within a policy framework geared towards well- defined poverty goals. In some cases, import liberalisation makes a lot of sense. Indian firms need access to the new technologies that will enable them to compete in world markets, and to increase productivity and employment. Conversely, there are some areas--like agriculture--where there are strong grounds, like food security, for proceeding with caution. This is why WTO negotiations should focus on rich country subsidies and not poor country liberalisation.

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