Why Delhi needs to step back

Jun 30 2014, 16:32 IST
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SummaryMost of the dynamism of the Indian economy comes from its states. They must be given more room to chart their growth trajectories

In the euphoria surrounding the election results, it is tempting to avoid facing up to the harsh realities of making development happen. Even for those who characterise the election as “the dawn after the dusk”, in the new light of day, India’s development challenges remain essentially the same. These challenges were not overcome by an election, nor can be overcome by doing more of the same, even if effectively, but only by doing things differently.

There are, and have been for some time, three central tensions of India’s development experience. The first tension is to sustain a development model which generates rapid economic growth but also creates jobs and produces equitably shared benefits. The second tension is to deliver effective governance with a “flailing state”. The third tension is to manage national cohesion in a vast and diverse country — where there are as many ‘Indias’ as there are Indians. None of these three existential tensions of modern India have changed with the electoral results. Let’s examine each.

India needs a dynamic growth strategy, one that goes beyond unproductive dichotomies that pit growth against redistribution, rural against urban and small against big. It is far from alone in having gone through this debate. In its initial World Development Reports (WDRs), the World Bank proposed a “two-and-half legged stool” strategy for economic growth — policies for the creation of productive labour demand supported by those for development of human capital, and underpinned by a system of “half-a-leg” of a basic safety net. However, with time, the WDRs and the global discourse have gravitated towards a single-leg strategy of redistribution, revolving around social transfers, best exemplified by the Latin American conditional cash transfer (CCT) programmes.

India, especially over the past decade, has been an enthusiastic adopter of this single-legged stool strategy. The employment guarantee programme and food security legislation are totemic illustrations. In this context, it is important to bear in mind that even in Latin America, as in East Asia, the vast majority of people emerged out of poverty not through transfers but through earned incomes from productive jobs created.

We therefore argue in favour of a development strategy that combines economic growth with productivity. This requires the replacement of the prevailing model of static redistribution of products that revolves around handing out dole with the redistribution of productivity, which creates the conditions for increased economic growth. This redistribution would equip all Indians, especially the

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