Understanding India's Socio Economic Progress

Should we go for
- Pro Poor, Pro Economic Growth?
OR
- Pro Economic Growth?
I cannot teach anybody anything,
I can only make them think.
- Socrates

By Araf Karsh Hamid – August, 2013

1

WORLD : From 1960 to 2011
• Education, Health, Living Standards,
• World Economic Factors

2

INDIA
• GDP: 1951-2013, Population, GDP and Food Grain production
• Population and Poverty, Education, HDI 1980 – 2012

3

STATE OF STATES
• HDI: 1980 – 2001, MPI 2007, MPI 2007
• GSDP for All States: 1981 – 2012

4

ANALYZING GUJARAT’S SOCIO ECONOMIC PROGRESS
• HDR1980 – 2000, 2005 National Family Health Survey,
• MPI 2007, HDI 2008, GSDP 1981-2012,
• Education, Health, Poverty, IMR, State Debt, Employment, Investments

5

COMPARING DIFFERENT ECONOMIC MODELS
• Mixed Economy, Welfare States, Neoliberalism, Laissez-faire
• Human Development Approach Vs. Neoliberalism

6

KERALA
• Understanding Caste System & Socio Economic Background
• Kerala Development Model: Old and New

This section focuses on
how the world
progressed in the last
50 years, looking at the
societal well being.
(Source: World Bank)

Understanding the
progress made by other
countries will help us to
set our own goals.

What Economic Model
should we follow?
Pro Poor, Pro Growth
Economy
OR
Pro Economic Growth?

Human development, as
an approach, is concerned
with what I take to be the
basic development idea:
namely, advancing the
richness of human life,
rather than the richness of
the economy in which
human beings live, which
is only a part of it.

GDP is not a barometer to measure
Societal well being.
http://www.youtube.com/watch?v=QUaJMNtW6GA

Joseph E Stiglitz
Amartya Sen
Professor of Economics,
Harvard University
Nobel Laureate in Economics, 1998
http://hdr.undp.org/en/humandev/

Professor of Economics,
Columbia University
Nobel Laureate in Economics, 2001
In 2011 Time Magazine named him as
one of the most 100 influential person
in the world.

Concept

Past Approaches

New Approaches

Individual Interests / Income /
Advantage / WellConsumption /
being
Utility (i.e.,
Individual
Happiness and/or
desire fulfillment)

Human Capabilities
and opportunities –
with an explicit role
for freedom, agency
and rights

Food Security

National Food
availability

The food entitlements
of individuals and
groups.

Deprivation in
income /
consumption /
expenditure

Deprivation in human
capabilities such as
knowledge, longevity,
and living standards
(e.g., access to water,
and services) – more
emphasis on self
reporting, self esteem,
participation and
empowerment.

Poverty

Blind growth model is 1980s neoliberalism and a very narrow approach, an
approach which can result in huge disparity in various forms, and potentially lead
developing nations into polarization of wealth and extreme poverty.

Market outcome and
Government actions
should be judged in
terms of valuable Human
ends.
To understand the
Economy what matters
most is NOT GDP per
capita but Individual
entitlements, capabilities
and freedoms and rights.
We will get into the
economical models after
we go through the state
of World, India, and
Indian States on Human
Developmental aspects.
Next:
Capability Approach

Examples

Source: Stanford University

Aristotle
384-322 BC

Adam Smith
1723-90

Karl Marx
1818-83

Amartya Sen
1933 –

Martha Nussbaum
1947 –

Core Ideas
Functioning
Beings
•
•
•
•
•

Healthy
Educated
Illiterate
Under Nourished
Being depressed

Conversion
Factors

Capabilities
Doings

•
•
•
•
•

Travelling
Caring for child
Voting in an election
Taking part in a debate
Donating money to charity

Capabilities are a
person’s real freedoms or
opportunities to achieve
functionings.
Thus while travelling is
functioning, real
opportunity to travel is
the corresponding
capability.

Another important idea in Capability Approach is the Conversion
Factors.
It’s the usability of a product to enhance the functioning. For E.g.,
a bicycle can enhance the mobility of a person to move around.

Capability Approach is a
theoretical framework
about
• Well being
• Development
• Justice
Roots of this framework
can be traced back to
Karl Marx to Adam
Smith to Aristotle.
However, Economist
Philosopher Amartya
Sen pioneered the
approach and
Philosopher Martha
Nussbaum & others
enhanced it further.

3

Categories of Conversion Factors
It’s the usability of a product to enhance the functioning.
For E.g., a bicycle can enhance the mobility of a person to move around.

Personal
These are internal to a
person, such as
metabolism, physical
condition, sex, reading
skills or intelligence.
If a person is disabled, is
in bad physical condition,
or has never learned to
cycle, then the bicycle
will be of limited help in
enabling the function of
mobility.

Social

Environmental

These are factors
from the society in
which one lives,
such as public
places, social norms,
practices that
unfairly discriminate,
societal hierarchies,
or power relations to
class, gender, race or
caste.

These factors emerge from the
physical or built environment in
which the person lives.
Among aspects one’s
geographical location are
•
•
•
•

Climate
Pollution
Proneness to earthquakes
Presence or absence of seas
and oceans.

Source: Stanford University

Conversion Factors

Amartya Sen, uses
“Capability” not to refer
exclusively to a person’s
abilities or other
internal powers but to
refer to an opportunity
made feasible, and
constrained by both

Built Environment are
How much a bicycle contributes to a person’s mobility
depends on that persons:
• Physical Condition (Personal Factor)
• Whether socially allowed to ride a bicycle (Social)
• Availability of decent roads (Environmental)

Human Development Initiative
Multidimensional Poverty Index

• Stability of Buildings
• Roads & Bridges
• Means of transportation &
communication

Both these models were derived
from the Capability Approach.
We will be using these models to
evaluate the performance of Indian
States.

• Internal (personal)
• External (social &
environmental)
conversion factors.
Next: Organization of
this presentation

Organization of this presentation
World

1.
2.
3.
4.
5.

World
India
States
Specific States
Kerala

From the highest
vantage points to the
reality in Kerala.
Kerala’s socio
economic background
will be analyzed using
the Capability
Approach Framework.
So that, we will get a
better understanding
of Kerala’s ranking in
Human Development
Initiative.
Kerala
Next: World 1960-2011

1

•
•
•
•

Education
Health
Living Standards
Other Economic Factors

1
India is worse than most of the African countries

That’s 526
million life

7.5

1
Child

Mortality Rate of
USA (under 5 years
/ 1000)

Compare these world stats with Gujarat, Tamil Nadu & Kerala

12.0

Child

Mortality rate of
Kerala

Mortality Rate

With a population
double the size of
Kerala, Tamil Nadu
did a good job in
the Health
segment.

62.7

Child

Mortality rate of
India
Source: World Bank

1

3.9%


Malnutrition (too
short for age) USA

21%
Malnutrition Kerala

Too Short for Age

Malnutrition

With a population
double the size of
Kerala, Tamil Nadu
did a good job in
the Health
segment.

48%
Malnutrition India
Source: World Bank

100%

1

Improved Sanitation
(% of population with
access) USA


96.4%
Improved Sanitation
Kerala

71%

Tamil

Nadu

Sanitation

64%

Gujarat

34%
Improved Sanitation
India Source: World Bank

1

99%


Improved Water
source (% of
population with
access) USA

95%

Tamil

Nadu

92%
Water

92%
90%

Kerala

India

Gujarat

Source: World Bank

100%

1

Literacy Rate: South
Korea


94%
80%

Kerala

Tamil

Nadu

Literacy

79%
74%

Gujarat

India

Overall Tamil Nadu
did an excellent job
in Education and
Health sectors in
comparison to
Gujarat.
Source: World Bank

1

Expenditure (% of GDP) on Education & Health, GNI Per Capita, Poverty Head count
Source: World Bank

1
Malnutrition Prevalence, weight for age
(% of children under 5)
Country
•

Guinea

20.80

•

Central African Republic

21.80

•

Burkina Faso

26.00

•

Nigeria

26.70

•

Mali

27.90

•

Congo

28.20

•

Sudan

31.70

•

Somalia

32.80

•

Chad

33.90

•

Ethiopia

34.69

•

Niger

39.90

•

Pakistan

31.30

•

Afghanistan

32.90

•

Bangladesh

41.30

•

•

South Africa

•

• We are worst than most African countries on Child
Malnutrition !?! And we expect to be an Economic
Power in 2020 or 2030?

• Now it’s time to look deep into each Indian state and
do an analysis on state of the states!

Africa
•

• Progress is not measured by how many billionaires
produced by the country. It’s measured by the quality
of life for the common man.

• What we need:
• ZERO Corruption + Lokpal
• Good quality Education
• Skill development programs in sync with Industry
• Health Care System
• Improving the Living Standards
• Automating & Streamlining the agriculture sector.

%

India

43.50

8.70

Asia

Source: World Bank 2006

Many people, especially ignorant
people, want to punish you for
speaking the truth, for being
correct, for being you.

2

Never apologize for being correct
or for being years ahead of your
time.
If you are right, you know it, speak
your mind. Even if you are minority
of one, the truth is still the truth.
- Mahatma Gandhi

2

2.1

GDP, LABOR FORCE & ECONOMY
• GDP: 1951 – 2012
• India, China and USA – GDP, Labor Force & Economy Comparison
• Labor Force mismatch
• Agriculture & Industry – 2011
• Summary on GDP

2.2

POPULATION, RURAL & URBAN, POVERTY
• Rural, Urban distribution – 1951 to 2011
• Urban India 1951 – 2011
• Population, GDP and Food grain Production
• GDP of 100 large cities
• Poverty: 1950 – 2013

2.3

EDUCATION
• Top 400 Universities in the World
• PISA 2010 High School Ranking
• Education: High School Math and Science Ranking (1995 – 2007)
• World’s most educated countries
• Education Summary

2.4

HUMAN DEVELOPMENT INDEX
• HDI: 1980 - 2012
• INDIA Population (Rural Urban Growth in 2031)
• Summary (India & South Korea Comparison)

Key Areas
•
•
•

GDP
Labor Force Mismatch
Economy

•

Population Rural &
Urban
Poverty

•
•

Health of Education
System in the Country

•

Human Development
Index

2.1

Economic
Reforms
1991

Sharp spikes & dips from 1950-90s
is reduced after Economic reforms.

2.1

• Compare the
contributions of
Service Industry to
the overall GDP.
• The almost
negligible % of
Agriculture Growth
(towards GDP) in
the last 5 years is
alarming.
• We will understand
this in the next few
slides, Why is it
alarming?

Source : http://mospi.nic.in/Mospi_New/upload/India_in_Figure_2013_28jun13.pdf

2.1

INDIA

$4.78
Trillion GDP PPP
Public Debt
④ Public Debt – The cumulative total of all government borrowings less
repayments that is denominated in a country's home currency. It should not be
confused with external debt, which reflects the foreign currency liabilities of
both the private and public sector and must be financed out of foreign
exchange earnings.

51.9% of GDP

⑤ GDP Per Capita - GDP Per Capita on a Purchasing Power Parity basis divided by
population.

capita Income

⑥ GDP PPP – GDP based on Purchasing Power Parity.
⑦ GDP OER – GDP based on Official Exchange Rate
⑧ GDP RGR – Real Growth Rate - GDP growth on an annual basis adjusted for
inflation and expressed as a percent
Source: CIA Web Site, USA

$3900 per

9.9%
Unemployment

6.5% GDP
Growth Rate

2.1

Compare the Labor Force
distribution of US with India
and China.

15%

- China reduced

their Agriculture labor force.

8%

- China increased

their Industrial Labor force
compared to their 2004
figures. Now compare that
with India you will get a
shock!
US Labor Force and GDP is
proportionate. This is the
case with every developed
countries. Proportionate
GDP and Labor Force.

China is slowly catching up
to that ratio.
So, What’s happening with
India?

2.1

90%

of China’s

GDP is equally distributed
across Industry and Services
and resulting from

65% of Labor force.

83%

of India’s

GDP is heavily focused on
Services and resulting from

47% of Labor force.

53% of
Agricultural Labor
Force which accounts
for 270 million people
is the key for the
country.

2.1

Checkout the
disparity between the
Labor force and GDP
for Service and
Agriculture.

65%

of the

GDP is produced by
Services sector which
is only 28% of Labor
Force.

17%

of the

GDP is produced by
Agriculture sector
which is a whopping
53% of Labor Force.

2.1

• Compare the growth, hardly any growth in Agriculture and
checkout the Labor Force in Agriculture.
• 53% Agriculture Labor Force is around 270million people.
•

To reduce the poverty and improve health we
need to transfer atleast 150 million from
Agriculture (out of 270 million) to Industry /
Manufacturing and automate & streamline (the
goods transit to market) the agriculture sector.

•

To do that we need Good Quality Education
system, skill development in sync with Industry.

2012

GDP

Labor

Agriculture

17%

53%

Industry

18%

19%

Services

65%

28%

In the previous slide we saw that China
reduced their labor force, still they lead
in Agriculture production.

Central Statistics Office (CSO)
Ministry of Statistics and Program Implementation India
•

Agriculture accounts for nearly 17% of GDP, about 11% of
exports and supports about half of the country’s population
as its principal source of income.

•

During 2011-12 there was a record production of food grains
at 259.32 million tones.

•

However, the Kharif production during 2012-13 declined
about 5% due to late onset of monsoon and deficient rainfall
in several states.

•

Significant improvement in rainfall during August-September
2012 has somewhat compensated by improving the
prospects for Rabi crops.

•

China beats us in every category. In Rice and Coarse Grains
China and United States is far ahead of us.

•

The key question is how can we improve the production to
2-3 times of the current output using latest technologies (in
house), and move ¾ of the Agriculture labor force into other
Industries.

•

This will give us a huge man power in manufacturing and
other Industries.

2.1

Source: http://mospi.gov.in

2.1

Central Statistics Office (CSO)
Ministry of Statistics and Program Implementation India

Source: http://mospi.gov.in

2.1



We have seen the issues with our Labor force. It’s very critical to understand
that more than half of the Labor force is dependent on Agriculture and more
than 500 million people is dependent on Agriculture.



Cost of the Vegetables, Rice, Wheat is going up. However, does that mean
Farmers are getting rich? If the cost of iPhone or Samsung Galaxy S4 goes up,
Apple and Samsung makes profit.



However over here, food prices are climbing and farmers are still in poverty!
Why is that?



This is where we need to clean up our system. Just because the GDP is going
up doesn’t mean that as a nation we are doing great.



To understand the problem in depth, we need to understand how the GDP
has played in the Urban and Rural population. Lets have look at that in the
next few slides – Population (Urban and Rural), GDP, Poverty and Education.

2.2

Source: Census India 2011

Population Density

2.2
Urban Area: All statutory places with a municipality, corporation, cantonment board or notified town area committee. A
place satisfying the following three criteria simultaneously: A minimum population of 5000; at least 75% of male working
population engaged in non-agricultural pursuits; and a density of population of at least 400 per sq. km. Census 2011.

Source: IIHS 2012

India 1951 | 361 Million

2.2

India 2011 | 1.21 Billion

Source: IIHS 2012

•

•
•

There were only 5 Indian cities
with a population greater than 1
million and only 41 cities greater
than 0.1 million population.

•

Much of India effectively lived in
0.56 million villages

•

So, that’s at the max 10 million
people living in Urban Area.

•

There are 3 cities with
population greater than 10
million and 53 cities with
population greater 1 million.
Over 833 million Indians live in
0.64 million villages.
377 million live in about 8000
Urban centres.

Source: http://www.iihs.co.in/wp-content/themes/education/resources/IUC-Book.pdf

833
Million people in
villages.
Don’t you think the
growth MUST start
from the villages?

2.2

From 1950, the
population went up 3.3
times, while the food
grain production went
up by 4.3 times.
GDP went up by a
whopping 20 times
especially the
exponential growth
from 1991 onwards.
Does this exponential
growth in GDP resulted
in accumulation of
wealth in few areas or
benefitted the whole
country?

2.2
GDP Large Cities – 2013
Source: IIHS 2012

16%
41%

of the

population contributes to

of the

GDP

Rest of the 84%
predominantly in
agriculture produce 59%
of GDP .

104

million in

slums by 2017
Now is this inclusive
growth?

2.2

Source: Planning Commission, 2013

We still have more poor
people compared to
1951.
Even with 21% poverty
line in 2013 we still
have

269

million

under poverty (216
million in 1951).

216

million in

Rural Area

52

million in

Urban Area.
Next: Education

2.3

111

Universities

for USA

48
25 for Germany
15
7
6
3
for UK

for China

for Taiwan

for South Korea
for India

#50 Highest ranking
for South Korea

Source: http://www.timeshighereducation.co.uk/world-university-rankings/2012-13/world-ranking

#226 for India

2.3

0

Why no Indian Institutes in top 200?
•

IIT Delhi Rank #218

54

Universities for

USA

30
12 for Germany
12
11
5
0
for UK

Are we poorer than these countries?
• Taiwan - #87
• Malaysia - #167
• Mexico - #169
• Brazil
- #169
• Thailand - #171
Competing neighbors
• Singapore - #28
• South Korea - #42
• China
- #186
Population
• Singapore
• South Korea
• Gujarat
• Tamil Nadu
• Kerala

for China

for Japan

for South Korea
for India

– 4 Million
– 50 Million
– 60 Million
– 72 Million
– 33 Million

Source: http://www.usnews.com/education/worlds-best-universities-rankings/top-400-universities-in-the-world

#42 Highest ranking
for South Korea

#218 for India

2.3

PISA Test 2010
India Ranks 72nd, SECOND LAST!!!!

Finland
•
•
•
•
•
•

Finnish children don’t start school until they are 7
They rarely take exams or do homework until they are well into
their teens.
There is just one standardized test when the kids reach 16
The children are not measured at all for the first 6 years of their
education. Its about being ready to learn and finding your
passion.
They are the topers in International test (OECD) for Math, Science
and Language and India stands Second Last (72nd Rank).
Teachers are selected from the top 10%

INDIA
•
•

The average 15-year-old Indian is over 200 points behind the
global topper.
Comparing scores, experts estimate that an Indian eighth grader
is at the level of a South Korean third grader in math abilities or a
second-year student from Shanghai when it comes to reading
skills.
Source: Finland :

2.3

We have very few
universities in top
400.
We are not doing
good in High School
Education.
We rank very low in
Math & Science in
School.
Look at South Korea,
they are at the top.
Source: Wikipedia: http://en.wikipedia.org/wiki/Trends_in_International_Mathematics_and_Science_Study

Country

1

Canada

51%

$39,050

6.1%

2

Israel

46%

$26,531

7.2%

3

Japan

45%

$33,785

5.2%

#1

4

USA

42%

$46,548

7.3%

less on GDP still no.1

5

New Zealand

41%

$29,711

NA

6

South Korea

40%

$28,797

8.0%

7

UK

38%

$35,756

NA

8

Finland

38%

$36,307

6.4%

9

Australia

38%

$40,790

NA

10

Ireland

37%

$40,478

NA

•
•
•
•

% of Population with
tertiary education

GDP Per
Capita

2.3

Rank

Public spending on
Education % of GDP

Canada is the only nation where more than half of all adults had a tertiary
(college) education in 2010. This was up from 40% of the adult population in
2000, when the country also ranked as the world’s most educated.
Canada has managed to become a world leader in education without being a
leader in education spending, which totaled just 6.1% of GDP in 2009, or less
than the 6.3% average for the OECD.
A large amount of its spending went towards tertiary education, on which the
country spent 2.5% of GDP, trailing only the United States and South Korea.
One of the few areas Canada did not perform well in was attracting international
students, who made up just 6.6% of all tertiary students — lower than the
OECD’s 8% average

Source: http://newsfeed.time.com/2012/09/27/and-the-worlds-most-educated-country-is/
http://247wallst.com/special-report/2012/09/21/the-most-educated-countries-in-the-world/3/

Source: Time & Wall St.

#6

Canada spends

South Korea has

a spectacular growth in
Education in the last 4
decades.

120 million in US
has college degree,
that’s the combined
population of Gujarat
and Karnataka.
How long will it take us
to reach within the top
10?

LAST

ONLY

We can definitely do better than this…. Provided we accept that we got a sub standard
education system. However, I don’t hear any politician talking about these issues.

1
2



Only one University (IISC, Bangalore) in the top 500 as
per the Academic Ranking of World Universities 2013








ONLY

3

http://www.shanghairanking.com/ARWU2013.html

2nd last in the PISA high school
test (2010) for Language,
Science and Math.




China, South 2.3
Korea, Finland,
Singapore leads
in 2010 PISA Test

http://www.oecd.org/pisa/46643496.pdf
http://www.acer.edu.au/media/acer-releases-results-of-pisa-2009participant-economies/
https://mypisa.acer.edu.au/images/mypisadoc/acer_pisa%202009
%2B%20international.pdf

Only 3 Universities in the top
400 (IIT Kharagpur, Mumbai
and Delhi) as per the Ranking
of Times Higher Education
2013.


http://www.timeshighereducation.co.uk/world-universityrankings/2012-13/world-ranking

2.4

India need to do a lot
to catch up with
medium human
development.
However, when we
dive deep into state of
states, we will find
that some states HDI
are at par with
developed nations.
Then the key is, what
can we learn from
those states to
improve Education,
Health & Societal well
being.
Source: HDR 2013, UNDP

2.4

Source: IIHS 2012

• In 2031, it is projected that there will
be 6 cities with a population greater
than 10 million.
• In 2013, 100 large cities produce 41%
of the GDP and that involves just 16%
of the population. Now if you
extrapolate that to 2031 what will be
the scenario? 24% of the population
will contribute to 65% of GDP?
• Now is that really an inclusive growth?

1951

Look at the series of cities
popping up in Kerala. End
to end the entire state will
become a big city.

2031

2.4

Its time we realize our potential !



.554 1.21 4.7 21% 53%
HDI 2012

Billion population

Trillion US$ - GDP PPP
3rd Largest Economy

Below Poverty (2013)

Depends on Agriculture

.909 0.05 1.6 16% 6%
HDI 2012

Billion population

Trillion US$ - GDP PPP Below Poverty (2011)
12th Largest Economy


In Population South Korea (50 Million) is smaller
than Tamil Nadu (70 Million) and Gujarat (60
Million). Still they have an economy 1/3 of
Indian Economy!
We can definitely do better than everyone,
provided we understand what’s wrong with our
system.  I don’t think that’s rocket science!!
(btw we are good with rockets!)

3

1950 – 2013, Study based on
Planning Commission, World
Bank, UN Development Program

3
State
Uttar Pradesh

HUMAN DEVELOPMENT INDEX
• HDI: 1980 - 2005
• MPI: 2007
• MPI: Across Hindu Caste and Tribe
• HDI: 2008

Population
(Million)
199

3.2

Tamil Nadu

72

Karnataka

61

Gujarat

60
33

Punjab

EDUCATION & HEALTH
• All States 2008 (HDI)
• Changes in Education: 1998 – 2008

84

Kerala

3.1

Andhra Pradesh

27

Key Areas

3.4

POVERTY
• Percentage of Poor people based on various studies
• Summary

•

Human Development
across all the states

•

3.3

GROSS STATE DOMESTIC PRODUCT
• All States: 1981 – 2013 (Planning Commission)
• GSDP Growth Rate: 1981 – 2013

Education

•

GSDP

•

Poverty

3.1

Human Development Index

Its interesting to note
that Andhra Pradesh,
Karnataka and Tamil
Nadu were at par
with most of the
Northern states, while
Gujarat is far better
than these Southern
states in 1980s.
•

Human Development Index is based on averages of 3 indices in
different dimensions:
•
•
•

•

Health Index
Education Index
Income Index

All the states in the country are measured on these different
dimensions to measure the societal well being. Light color shows the
states in good overall health (Health, Education, Income).

The entire progress in
Southern states
where much faster
than the northern
states.
Kerala kept the No.1
ranking for the past 3
decades.

3.1

Human Development Report 1980 -1990s Planning Commission
(Government of India)

#1

Kerala

maintained the No.1
Rank from 1981 to
2001

#6

Gujarat

Ranked No. 4 in 1980
and fell down to 6th
Rank in 2001

#3
• Maharashtra the Business capital of India ranked No. 3 in 1981
and fell down to 4th Rank in 2001
Source : http://planningcommission.nic.in/reports/genrep/index.php?repts=nhdcont.htm

Tamil Nadu

Improved its rank from
No. 7 in 1981 to No. 3
in 2001

Multidimensional Poverty across Indian States
MPI
Rank

States

Population
(million)
2007

MPI

Proportion
of poor

Average
intensity

Contribution
to overall
poverty

Number of MPI
poor (million)

1

Kerala

35

0.065

15.9%

40.9%

0.6%

5.6

2

Goa

1.6

0.094

21.7%

43.4%

0.0%

0.4

3

Punjab

27.1

0.120

26.2%

46.0%

1.0%

7.1

4

Himachal Pradesh

6.7

0.131

31.0%

42.3%

0.3%

2.1

5

Tamil Nadu

68

0.141

32.4%

43.6%

2.6%

22.0

6

Uttaranchal

9.6

0.189

40.3%

46.9%

0.5%

3.9

7

Maharashtra

108.7

0.193

40.1%

48.1%

6.0%

43.6

8

Haryana

24.1

0.199

41.6%

47.9%

1.3%

10.0

9

Gujarat

57.3

0.205

41.5%

49.2%

3.4%

All States
Multidimensional
Poverty Index:

23.8

10

Jammu and Kashmir

12.2

0.209

43.8%

47.7%

0.7%

5.4

11

Andhra Pradesh

83.9

0.211

44.7%

47.1%

5.1%

37.5

12

Karnataka

58.6

0.223

46.1%

48.3%

4.2%

27.0

13

Eastern Indian States

44.2

0.303

57.6%

52.5%

4.0%

25.5

14

West Bengal

89.5

0.317

58.3%

54.3%

8.5%

Orissa

40.7

0.345

64.0%

54.0%

4.3%

26.0

16

Rajasthan

65.4

0.351

64.2%

54.7%

7.0%

41.9

17

Uttar Pradesh

192.6

0.386

69.9%

55.2%

21.3%

134.7

18

Chhattisgarh

23.9

0.387

71.9%

53.9%

2.9%

Madhya Pradesh

70

0.389

69.5%

56.0%

8.5%

48.6

20

Jharkhand

30.5

0.463

77.0%

60.2%

4.2%

23.5

21

Bihar

95

0.499

81.4%

61.3%

13.5%

77.3

1,164.70

0.296

55.4%

53.5%

-

645.0

poor in Kerala and
holds #1 rank in the
MPI.

26.2% MPI

17.2

19

15.9% MPI

52.2

15

2007 MPI

India

Source: http://www.ophi.org.uk/policy/multidimensional-poverty-index/

poor in Punjab.

32.4% MPI
Poor in Tamil Nadu

41.5% MPI
Poor in Gujarat and
holds #9 Rank.

3.1

3.1

Breakdown of Multidimensional Poverty across Hindu Castes
and Tribes
States

MPI

Percentage of
MPI Poor

Average
Intensity

Scheduled Caste

0.361

65.80%

54.80%

Scheduled Tribe

0.482

81.40%

59.20%

Other Backward
Class

0.305

58.30%

52.30%

General

0.157

33.30%

47.20%

60%

• There are more MPI poor in eight Indian states (421 million in
Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa,
Rajasthan, Uttar Pradesh, Maharashtra, Gujarat, and West
Bengal) than in the 26 poorest African countries combined
(410 million).
•

Multidimensional poverty is lowest for Kerala.

• The top five states have only 4.5% of the poor.
• The five poorest states have more than 50% of the poor.

of the

population comprises
of OBC, SC and ST.

81%

are multi

dimensionally poor in
Bihar.

134.7 million The largest number
of poor people (in
India) live in Uttar
Pradesh.

3.1

Source: Indian Human Development Report 2011,
Planning Commission (GOI)

Kerala’s HDI value is better than Russia

3.2
Source: Indian Human Development Report 2011, Planning Commission (GOI)

•

•

It is commendable that even in the
relatively poorer states like Assam,
Chhattisgarh, Orissa, Madhya
Pradesh, and Uttarakhand the
Education Index is above 0.5.

The north-eastern states have been
good performers despite low levels
of income.

•

•

The demographic transition of
Kerala is widely acclaimed because
its mortality and fertility levels have
reached those of the developed
countries.

•

Income Index is calculated based
on consumption expenditure.

•

With the best public health system
in the country Kerala has the
highest life expectancy at birth.

Only three relatively more affluent
states — Tamil Nadu, Karnataka,
and Kerala have registered an
improvement in the Income Index
higher than the national average.

75%

change for

3.2

Jharkhand from 1999-2008 in
HDI Education Index, while
Poor States and North eastern states

50%
12%

for Bihar &
for Gujarat

Its surprising to see that one of
the Rich state that lags in
education has the least amount
of changes in improving
education. The poor states
from North eastern part of the
country did a much better job.
This clearly shows you don’t
need a huge economic growth
to improve the education level
of the people.
Source: IHDR 2011, Planning
Commission

3.3
Source: 2013 Planning Commission of India

#1

is Gujarat

among the big states
in GSDP. Other states
lags way behind in
terms investments
when you compare
them with Gujarat.

#5

for Tamil

Nadu.

#7

for Andhra

Pradesh

#10
Karnataka

for

3.3
2013 Planning Commission of India

is Gujarat’s Economic Progress being reflected Societal well being?
We will find that out that in the State of States!

3.4

%

Studies

21.5%

Planning Commission of India
http://planningcommission.nic.in/news/pre_pov2307.pdf

29.0%

World Bank

$1.25. At PPP Rs 21.6 a day urban and Rs 14.3 rural.

Suresh Tendulkar

37.0%
37.2%

Overall 37.2%, with 41.8% rural (below Rs 13.8 per day, Rs 446.68 per
month) and 25.7% urban (Rs 578.80 per month). Expert Group on
Methodology for Estimation of Poverty, Chair Prof. Suresh D.
Tendulkar; http://www.planningcommission.gov.in/eg_poverty.htm
UN Development Program
http://www.in.undp.org/content/india/en/home/countryinfo/

Arjun Sengupta

41.0%

41% below Rs 14.6 per day. Extremely Poor (6.4%, Rs 8.9), Poor
(15.4%, Rs 11.6) Marginally Poor (19.0%, Rs 14.6). Vulnerable (36%,
Rs 20) Total 77%, 836 million people, below Rs 20 per day.
http://nceus.gov.in/Condition_of_workers_sep_2007.pdf

55.4%

Multidimensional Poverty Index (MPI) Oxford University

4
State comparison based on
- 1980 – 2000 National Human Development Report 2001 Planning Commission (GOI)
- 2005 National Family Health Survey (Government of India)
- 2007 Multidimensional Poverty Index (Oxford University)
- 2008 Human Development Index (United Nations Development Program – UNDP)
- 2011 Census data (Government of India)
- 2012 NSSO data (Government of India)

4
State

Population
(Million)

Uttar Pradesh

NATIONAL HUMAN DEVELOPMENT REPORT: 1980 – 2001
• Gujarat Vs. Kerala : 1980 - 2001
• Other Rich States
• Southern States & Other States
• Summary: Gujarat Analysis HDI 1980 – 2000

199

4.2

NATIONAL FAMILY HEALTH SURVEY: 1990 – 2005
• Gujarat Vs. Tamil Nadu & Kerala : Health
• Summary Gujarat Vs. Tamil Nadu and Kerala
• Kerala Vs. Southern States & Northern States
• Summary: Comparing Kerala in 1990s with Other States in 2005

4.3

MULTIDIMENSIONAL POVERTY INDEX: 2007 (OXFORD)
• Gujarat Vs. Punjab & Tamil Nadu (Poverty, Education, Health, Living
Standards)
• Infant Mortality Rate: 1961 – 2008
• Poverty: 1973 – 2013
• Summary: Gujarat Analysis with HDI 2008

4.4

ECONOMY
• Investor Friendly States & Gujarat Investments: 2003 – 2011
• Employment: 2005 – 2010
• Monthly Per Capita Expenditure
• Gujarat Vs. Tamil Nadu & Kerala – GSDP
• State Debt: 2002 – 2009
• Summary: Gujarat Analysis

84

Tamil Nadu

72

Karnataka

61

Gujarat

60

Kerala

4.1

Andhra Pradesh

33

Punjab

27

Key Areas
•

Human Development
focusing on Gujarat,
Tamil Nadu, Punjab
and Kerala

•

Economy
• GSDP
• Investments
• State Debt
• Employment

4.1
Scale
5 = Best Achievement
0 = Least Achievement
Source: National Human Development Report 2001, Planning Commission (GOI)
Check out the disparity
between the Rural and the
Urban areas in Gujarat.
Let us see if this disparity
changes after economic
reforms in Gujarat!

Kerala has already
demonstrated that Quality of
life can be improved even
before the economic reforms.
Most important, there is NO
disparity in the development
of Rural and Urban areas in
Kerala.
Compare 1980s and 1990s
Radar of Kerala

4.1
Scale

Punjab and Haryana are
two Economical well off
state compared to
other states in India.
However, when you
compare 1980s and
1990s, you will find that
the focus on Education
and Health care is very
low.
The growth of Rural and
Urban population is
different.

4.1
Scale

•

Tamil Nadu and Karnataka are two Economic power house of South.

•

However, when you compare 1980s and 1990s, you will find that the focus on Education and Health
care is very low.

•

The growth of Rural and Urban population is different.

4.1
Scale


4.1
Source: National Human Development Report
2001, Planning Commission (GOI)

#3

Tamil Nadu did a remarkable job in

jumping from 7th rank in 1981 to 3rd in 2001.

#1 & #2

Kerala and Punjab

maintained their respective 1st and 2nd rank
consistently for 2 decades.

#6

Gujarat slipped two ranks from

1981.
One of the remarkable achievement of Kerala
is the symmetric growth of both Urban and
Rural areas. While most of the other states
development is happening predominantly in
the Urban areas. This further increases the
disparity between the rural population and
the Urban population.

In Kerala rural households own private wells, however the census survey doesn’t
recognize that for source of safe water. Even today (2013) when people buy land for
house, the first priority is if there is water for a well.

In the next section we will focus on National
Family Health Survey (Government of India)
from 1990 to 2005.

4.2

Post Reforms of 1991 – National Family Health Survey 1990 – 2005 (15 years)

4.2

Source: National Family Health Survey 2005 – Household Profile Comparison

4.2

Post Reforms of 1991 – National Family Health Survey 1990 – 2005 (15 years)

• Comparing the data from 1991
to 2005 clearly shows that Tamil
Nadu and Kerala did a far
superior job in Education,
Health and Living Standards.
• Based on the per capita Income
Punjab and Haryana is well
ahead of Kerala.
• However, Kerala still able to
reduce poverty substantially
compared to the rest of the
states.
• Now its time to compare the
progress of Kerala with respect
to other states.

4.2

Few Development Indicators to compare
•

Kerala
1990

Gujarat
2005

Maharashtra
2005

Punjab
2005

Tamil Nadu
2005

Health
•

Infant Mortality Rate

24

50

38

42

31

•

Trends in Institutional Deliveries (%)

89

55

66

53

90

•

Trends in Any Antenatal Care (%)

98

87

93

91

99

•

Trends in Children’s Nutritional Status (in %, less is good)
•

25

42

38

28

25

•

Too thin for height

13

17

15

9

22

•
•

Too Short for age

Underweight

27

47

40

27

33

90

75

76

71

78

Education
•

Literacy Rate

Most of the states are catching up with the standard Kerala achieved in the year 1990!

Now let us analyze the states using Multidimensional Poverty Index (developed by Oxford
University), which is much more elaborate than Human Development Index.

4.3


4.3

#

%

1

Delhi

12.44

2

Kerala

12.66

5

Punjab

24.55

7

Tamil Nadu

30.46

14

Gujarat

41.04

15

Karnataka

43.20

29

Source : http://www.ophi.org.uk/wp-content/uploads/MPI2013/India/web/StatPlanet.html

State

Bihar

79.34

4.3

#
1

Kerala

2.07

6

Tamil Nadu

8.74

7

Punjab

9.00

14

Gujarat

18.46

16

Karnataka

18.66

29


State

%

Bihar

53.54

4.3

#

State

%

1

Kerala

3.54

6

Punjab

19.35

8

Tamil Nadu

29.10

15

Gujarat

35.62

17

Karnataka

39.66

29

Bihar

72.83

The household’s sanitation
facility is not improved or it
is improved but shared with
other households.


4.3

#

State

%

1

Punjab

0.78

2

Delhi

3.31

3

Bihar

4.44

4

Tamil Nadu

5.01

5

Andhra Pradesh

6.18

9

Kerala

7.62

15

Gujarat

10.09

29

Jharkhand

41.58

The household does not have
access to clean drinking water or
clean drinking water is more than
30 minutes walk from home.


Privately owned wells by most of households in
rural Kerala is not accounted in Indian Census
for clean drinking water.

4.3

#

State

%

1

Delhi

5.11

2

Kerala

12.37

6

Punjab

21.05

8

Tamil Nadu

28.68

15

Gujarat

36.12

20

Karnataka

40.04

21

Andhra Pradesh

41.61

29

Bihar

77.28

The household cooks with dung,
wood or charcoal.


4.3

#

State

%

2

Delhi

1.78

3

Kerala

3.11

5

Tamil Nadu

11.91

7

Punjab

15.49

8

Karnataka

18.28

11

Andhra Pradesh

19.53

14

Gujarat

24.11

29

Bihar

68.59

The household has dirt, sand or
dung floor.


4.3

#

State

%

1

Delhi

0.26

4

Punjab

2.48

5

Kerala

4.34

9

Tamil Nadu

7.09

11 Karnataka

7.87

12 Andhra Pradesh

8.44

13 Gujarat

8.87

29 Bihar

64.08

The household has no electricity.


4.3

#

State

%

1

Delhi

5.61

2

Kerala

9.58

3

Punjab

11.09

8

Tamil Nadu

23.46

14

Gujarat

28.98

15

Karnataka

30.96

16

Andhra Pradesh

34.85

29

Bihar

64.08

The house hold does not own more
than one of: radio, TV, Telephone,
bike, motorbike, or refrigerator, and
does not own a car or truck.


4.3

#

State

%

1

Kerala

3.51

7

Punjab

9.15

8

Tamil Nadu

10.49

9

Maharashtra

13.40

15

Andhra Pradesh

15.50

16

Karnataka

16.40

17

Gujarat

17.03

28

Bihar

34.73

Any child has died in the family.


4.3

#

State

%

1

Delhi

7.64

2

Kerala

9.90

6

Punjab

15.87

7

Tamil Nadu

20.25

12

Andhra Pradesh

28.49

16

Karnataka

30.82

18

Gujarat

32.35

29

Bihar

60.23

Any adult or child for whom there is
nutritional information is
malnourished.


4.3

#

State

%

1

Kerala

1.30

8

Maharashtra

8.04

11

Punjab

8.25

12

Tamil Nadu

8.60

13

Gujarat

11.77

21

Rajasthan

20.62

29

Bihar

34.86

No household member has
completed five years of
schooling.


4.3

#

State

%

1

Kerala

2.36

2

Tamil Nadu

3.58

7

Punjab

10.35

8

Maharashtra

10.57

10

Gujarat

11.40

11

Andhra Pradesh

12.10

12

Karnataka

15.00

29

Bihar

42.86

Any school aged child is not
attending school in years 1 to
8.


4.3

1961 to 2008 :
Economic Survey 2009-10

76.92%

Kerala

reduced (the Infant
Mortality Rate) in the last
47 years.

54.65%

by

Tamil Nadu

40.47%

by

Gujarat
To reduce the infant mortality
rate what we require is a good
health care system especially
for the rural area.
Now how do you define
inclusive growth if you don’t
have good health care system?

4.3

80.83%

of

poverty is reduced by Andhra
Pradesh in the last 40 years
compare to

65.41%

for

Gujarat and

79.49%

for Tamil

Nadu

88.33%

for

Kerala

What’s happening to those investments? Is it NOT translating into
improving the basic necessities for the poor people?

One factor which is consistent
in these stats is the
performance of Tamil Nadu &
Kerala over Gujarat, you need
to compare this with the heavy
investments happened & still
happening in Gujarat.

4.3
Source: Planning Commission – 1973 – 2012 (40 Years of development)

4.3

21.92%

people

under poverty in India. There is a
controversy surrounding this %
saying it should be more. That
ONLY makes Gujarat’s Growth
Model case even worse.

16.63%

of

people in Gujarat is under
poverty resulting in 102.23 lakhs
of people.

7.05%

of people

in Kerala under poverty resulting
in 23.95 lakh people.

3

times more poor people in

rural area compare to Gujarat’s
Urban population. Which means
Growth is not trickling down to
the Rural population.

4.3

#1 Kerala continued the
No.1 position from 1980s.
Punjab and Tamil Nadu
consistently performed far
better than Gujarat.

#5 Punjab
#8 Tamil Nadu

#11 Gujarat moved
down

7 places and ranked

No. 11 in 2008 compared to
1981 (Rank No. 4)
How do you explain this
drop (7 places) in rankings
for Gujarat?
Source: Indian Human Development Report 2011
Planning Commission, Government of India & Oxford University

What caused it?

4.4

Source: Assocham, 2009

#1

Gujarat

consistently topped
the investment chart
for more than two
decades.

Punjab is in the worst
performers list in
terms Investment
plans of India Inc.
Except Kerala all the
other 3 states (from
South) are in the front
runner for
investments.

4.4
Source: Socio Economic Review 2011-12, Government of Gujarat
http://gujecostat.gujarat.gov.in/wp-content/uploads/Publication/ser1112e.pdf
#

Vibrant Gujarat
Global
Investors meet

Projects Proposed
MOU’s Signed /
Announced

No. of
project

Implemented

Investment
Rs. In Crores

No. of
Project

Investment
Rs. In Crores

Under Implementation
No. of
Project

Investment
Rs. In Crores

1

2011

8380

8380

2,083,047.30

248

29,813.58

659

249,054.78

2

2009

8660

8888

1,239,562.00

1342

104,590.45

872

281,620.41

3

2007

363

454

465,309.80

160

107,897.34

152

184,245.06

4

2005

226

227

106,160.41

115

37,939.94

22

27,931.80

5

2003

76

80

66,086.50

42

37,746.00

5

10,710.00

Total

17705

18029 3,960,166.01

•

That’s a total of Rs. 1,071,549.36 crore from
2003 to 2011. Far more than any other state
achieved in the last 10 years.

•

When will the we see the fruits of all these
investments?

•

Now, if these investments in the last 9 years is
atleast 50% (definitely more than that) more
than a state in comparable population size,
shouldn’t we see a drastic rise in employment?
So, Lets look at the employment scenario in
2005 to 2010.

1907

317,987.31

1710

753,562.05

4.4

Source: Census 2013

Isn’t it surprising (or shocking), after all the pro growth investments and marketing blitz
Gujarat lags in employment!

4.4

21

Years (1991-2012) of Pro Growth Economic Reforms in Gujarat.

Why is Gujarat at the bottom?
Where is the inclusive Growth?

4.4
2013 Planning Commission of India

• Comparison of Growth between Gujarat, Tamil Nadu & Kerala clearly shows Gujarat had a
better growth rate compared to Tamil Nadu & Kerala for the last 32 years.
• However, on societal well being Gujarat lags far behind Kerala & Tamil Nadu and most of the
other states.
• So, as per Jagdish Bhagwati, if blind growth improves everything, then how do we explain
the Education, Health & Living Standards disparity of Gujarat with others states?

4.4

Source: Ministry of Finance (GOI)

Even after improving the
Education and Health,
Tamil Nadu’s debt is far
below Gujarat.

States
1. Andhra Pradesh
2. Arunachal Pradesh
3. Assam
4. Bihar*
5. Chattisgarh
6. Goa
7. Gujarat
8. Haryana
9. Himachal Pradesh
10. Jammu & Kashmir
11. Jharkhand
12. Karnataka
13. Kerala
14. Madhya Pradesh*
15. Maharashtra
16. Manipur
17. Meghalaya
18. Mizoram
19. Nagaland
20. Orissa
21. Punjab
22. Rajasthan
23. Sikkim
24. Tamil Nadu
25. Tripura
26. Uttar Pradesh*
27. Uttarakhand
28. West Bengal
All States

2002-03
54831
1267
13759
35249
8910
3335
52572
19227
12393
12269
8923
37234
33777
29993
85209
2225
1827
2090
2708
30735
38315
45871
888
43915
3156
102485
6003
77543
766707

2003-04
64550
1525
15089
37453
11144
3838
62876
22194
14437
13027
10569
41967
39227
37772
103419
2300
1952
2389
2515
34014
43197
53361
966
49445
3590
119240
8030
89388
889476

2004-05
74288
1778
17545
42484
12227
4350
71083
24255
16533
14188
13512
46940
43692
44235
119725
3082
2173
2711
2802
36093
47403
60134
1107
55144
4181
131401
9909
104334
1007311

2005-06
79549
2488
18628
46495
13273
5018
81367
27023
17432
16790
17360
52236
47832
49150
140673
3905
2566
2953
3174
38468
51364
66407
1351
62310
4418
131239
11714
112386
1107569

2006-07 RE
87474
2668
20171
50476
14404
5707
87686
28433
18710
18221
22000
56472
54950
53326
155222
4050
2788
3229
3542
39531
55294
71039
1551
67491
4669
143997
12824
121753
1207678

2006-07 Pre-Act.

2007-08 RE

86622
2336
19853
49089
14113
5694
87971
28616
18071
18591
19019
57278
52161
53280
154522
4187
2762
3096
3557
39466
51035
71146
1484
66095
4605 NA
144528
13034
120892
1193102

2008-09 BE

96126
2733
21187
51395
15644
6371
94591
29477
19426
21150 NA
23073
60182
58499
58001
156957
4345
2914
3027
3858
40483
55717
77089
1750
73098
NA
153682
14430
131897
1277101

105918
3049
22405
54669
17506
7170
101482
31932
21358
24606
67142
64638
62864
171663
4586
3107
3201
4048
43330
60150
82858
2125
83144
168035
15482
143716
1370182

Tamil Nadu has 10
million more in
population compare to
Gujarat.
So, What exactly is
happening in Gujarat?
•
•
•
•
•

High GDP
High Debt
Poor in Education
Poor in Health Care
Poor in Living Standards

4.4
Source: Ministry of Finance (GOI)

#1 Maharashtra
has the highest debt

#2 Uttar Pradesh
#3 West Bengal
#4 Andhra Pradesh

#5 Gujarat in debt
Tamil Nadu did well in
Education, Health and
improving Living
standards and still has
a lower debt compare
to Gujarat.

Per Person debt is: State Debt divided by the population of the State.

Kerala has the highest
per person debt
among the big states.

4.4

•
•

•

•

Tamil Nadu state government has taken strong measures to ensure
the effectiveness of the public health system and its health policies.
The Dravidian movement, which began in Tamil Nadu, aimed at
providing opportunities to all, irrespective of the caste. With the
dual objective of educating all and eradicating superstition, the
movement proved to be one of the biggest achievements of the
state government.
This was one of the main reasons for higher enrolment rates for SC
and OBC children in the state. Thus, the real explanation for the
better than average health, education, and nutritional status of the
populace lies in the social movements and technical interventions
initiated by the Government of Tamil Nadu.
The Dravidian movement in the state provided socio-political and
cultural space for even the deprived sections, making the process of
development more inclusive. (Mehrotra 2006 / Page 30 IHDR 2011,
Planning Commission)

4.4

•

What are the reasons for Kerala’s High standard of Living?

•

What happened to the Investments in Gujarat post 1990
reforms?

•
•

What kind of Economic Model should we follow?
Do we understand Economic Crisis in US in 1929 and
2008?
How do we address the Inequality in a growing Economy?

•
•

Should we follow Free market capitalism or Pro Poor Pro
Growth Economy ?

4.4

•

The enactment of the Constitutional 73rd
Amendment Bill, 1992 has paved the way for
the creation of statutory institutional
structures for realizing the goals of selfgovernance under the Panchayath Raj
system.

•

The explicit objective of this initiative for
democratic decentralization of governance is
to accelerate the socio-economic
development of the rural areas within a
participatory framework at the grass-root
level.

•

The amendment has given statutory
recognition to a three-tier system of
governance with
•
•
•

Panchayath Raj Institutions (PRIs) at the District (Zilla Parishad)
Intermediary (Mandal Panchayats)
Village levels (Gram Sabha / Panchayats).

4.4

It’s not just Kerala which went
beyond Gujarat, Punjab and
Tamil Nadu were far ahead of
Gujarat apart from that, other
states also went beyond
Gujarat in improving the
quality of people’s life.

Mortality Rate is
very High in Madhya Pradesh
and Uttar Pradesh.

GDP shows good for
Maharashtra and Gujarat.

Even in the post reform period of 21 years Kerala (and other states) went far beyond Gujarat in
the following areas
• Education, Health care, Living Standards

So, What is this Angel like Gujarat model of Economy?
It’s time we look for different models of Economy, like mixed economy, free market capitalism,
welfare based Economy.

Education &
Health Tamil Nadu,
Kerala, Punjab and surprisingly
even the poor North Eastern
states also did a better job
compared to Gujarat.

5
•
•
•
•

Mixed Economy
Welfare state
Neoliberalism
Laissez-faire

• Income Inequality in USA
• Taxation in USA
• Comparing Human Development Approach
Vs. Neoliberalism

5

5.1

ECONOMIC MODELS
• Mixed Economy and Welfare States
• Neoliberalism and Laissez-faire
• Human Development Approach Vs. Neoliberalism

Key Areas

5.2

5.3

CONCLUSION
• Issues we need to work on
• Summary on Indian State Analysis
• Highlighting the Key Issues

Economic Models

•
INEQUALITY
• Income Inequality of USA
• Taxation in USA
• Summary on Economic Models

•

Income Inequality

•

Issues the country is
facing today.

5.1



Means of production mainly under Private
Ownership



Profit-seeking enterprises and the
accumulation of capital remain the
fundamental driving force behind economic
activity.



Unlike a free-market economy, the
government would wield considerable
indirect influence over the economy through
fiscal and monetary policies designed to
counteract economic downturns and
capitalism's tendency toward financial crises
and unemployment.



Government in which the state plays a key role in
the protection and promotion of the economic and
social well-being of its citizens.



The welfare state is funded through redistributionist
taxation and is often referred to as a type of "mixed
economy”. Such taxation usually includes a larger
income tax for people with higher incomes, called a
progressive tax.



It is based on the principles of equality of
opportunity, equitable distribution of wealth, and
public responsibility for those unable to avail
themselves of the minimal provisions for a good life.



The welfare state involves a transfer of funds from
the state, to the services provided (i.e. healthcare,
education) as well as directly to individuals
("benefits").







Iceland, Sweden, Norway, Denmark,
Finland

Government will play a key role in social
welfare.

Japan

Neoliberalism








5.1

Laissez-faire

An Economic Philosophy emerged  An Economic philosophy which
among European scholars in the
creates an economic
1930s as the third or middle way
environment in which
between the conflicting
transactions between private
philosophies of classical liberalism
parties are free from
and collectivist central planning.
government restrictions, tariffs
and subsidies with only enough
As a policy framework, it’s a
restrictions to protect property
major shift from Keynesian
rights.
welfarism towards a political
agenda favoring the relatively
 The phrase laissez-faire is
unfettered operation of markets.
French & literally means “let
(them) do”, but it broadly
Neoliberalism suggests that
implies “let it be”.
governments reduce deficit
spending, limit subsidies, reform
 The doctrine of Laissez-faire
tax law to broaden the tax base,
became an integral part of 19th
remove fixed exchange rates,
century European liberalism.
open up markets to trade by
limiting protectionism, privatize
 The most notable critics of
state-run businesses, allow
Laissez-faire are Adam Smith,
private property and back
John Maynard Keynes
deregulation.
(Keynesian Welfarism) Friedrich
Hayek.
New Zealand

6

generations of

Walton family’s
wealth is more than
the combined wealth
of bottom 40% of
Americans.
The single most
comprehensive
counter argument to
both neoliberalism
and laissez-faire
theories by Nobel
(2001) Laureate
Joseph E Stiglitz.

5.1
Source: The Human Development Paradigm: Operationalizing Sen’s ideas on Capabilities By Sakiko Fakuda-Parr
Human Development

Neoliberalism

Basic Needs

Normative assumptions

Explicit

Implicit

Not fully specified

Concept of Well-being

Functioning's & Capabilities

Utility

Meeting basic needs

Leading criterion for
evaluating development
progress

Human capabilities, equality of
outcome, fairness and justice in
institutional arrangements

Economic well-being, economic
growth, efficiency

Poverty reduction in terms of
income, access to basic social
services

Measurement tools
favored

Human outcomes, deprivational and
distributional measures

Economic activity and condition,
averages and aggregate measures

Access to material means,
derivational measures

People in development as
ends and/or means

Ends: Beneficiaries
Means: Agents

Means: Human resources for
economic activity

Ends: Beneficiaries

Mobilizing Agency

Individual action and collective action

Individual action

Concern with political will
and political base

Key Operational Goals

Expanding People’s choices
(Social, Economic, Political)

Economic growth

Expanding basic social
activities

Distribution of benefits
and costs

Emphasis on equality and on the human
rights of all individuals

Concern with poverty

Concern with poverty

Links between
development and human
rights and freedom

Human rights and freedom have
intrinsic value and are development
objectives. Current research on their
instrumental role through links to
economic and social progress

No explicit connection. Current
search for a link between political
and civil freedoms and economic
growth

No Explicit connection

Philosophical Underpinnings

Evaluative Aspect

Agency Aspect

Development Strategy

5.2

#1

Norway

ranks no.1 in Human
Development Index
and has the lowest
Income Inequality in
the world.
Capital gain taxation
in US is reduced in
the last 30 years
starting from 1970s.
Capital gain taxation
in India is one of the
lowest in the world.

5.2

Low capital gain
taxation results in Rich
getting richer and poor
remains poor
generations after
generations.

$1.9

trillion –

Wealth of world’s 100
richest people. Just a
little less than the
entire output of the
UK. (Guardian, UK)



We need to have a model where lot
of emphasis is given on Good
Quality affordable Education and
Health Care system.



To build a nation we need an
Educated and a healthy society.



After analyzing different models,
what looks more promising is the
model where:
 Human Development has the highest

value.
 Participation of citizens in decision
making process – Decentralization.
 All these points to a Pro Poor, Pro
Growth Economy!

5.2

5.3

1

GOOD GOVERNANCE
• Effective delivery system
• Transparency and Accountability
• Implement Lokpal Bill without pruning it to benefit the ruling class
• Implement Decentralization (Panchayat Raj)
PROBLEMS
• Accountability of the Politicians – there is no link between the votes
and services (such as Quality Education, Health Care system,
Infrastructure etc.) expected out of the political class.
• Majority of the citizens don’t fight for better services. Organizational
capabilities of citizens in Kerala is an exemption to this.
• The role of the state is blurred in most cases in tune with services
rendered and as a service provided.

2

EDUCATION
• Affordable Good Quality Primary Education is a fundamental right
• Increase Quantity and Quality of the Universities with good focus on
research
PROBLEMS
• Today Primary Schooling (12yrs) is all about Quantity instead of
Quality. Conceptual learning is more important and more choice for
students to opt for the subjects they like.
• Professional colleges are all about Engineering or Medicine and
without any research focus.
• For students to be interested in research, we need to have more
research based study even in Primary Schools (Projects).

Key Areas
•

ZERO Corruption

•

Economic growth will
stagnate without
good Governance
and streamlining the
regulations.

•

We need more
Ph.D.'s coming out of
our Universities.

•

We can use
technology (invented
by us) to streamline
and solve lot of issues
across the country.
For that research is
the mantra.

5.3

3

HEALTH CARE SYSTEM
• Affordable Health Care for all
PROBLEMS
• Overall India Health Index if far below even compared to African
countries.

4

•

ZERO Corruption

•

stagnate without
good Governance
regulations.

•

We need to have
more Ph.D’s coming
out of our
Universities.

•

We can use
across the country.
the mantra.

AGRICULTURE SECTOR
• Automate and streamline the agriculture sector
• Increase production and we should strive for a major exporter of
food products.
PROBLEMS
• 53% of the population depends on Agriculture for their livelihood.
• Goods movements from Farmers to Families must be completely
streamlined. Today middlemen decides the price and controls the
supply chain, which is inefficient and increase the cost of
production.

5

Key Areas

ENVIRONMENT
• We need to protect our Environment
PROBLEMS
• Lack of awareness of Environmental issues among the common
public. An exception to this will be Kerala (where it goes overboard
sometimes).
• Today environmental issues are ONLY brought up by intellectuals.

5.3

6

INFRASTRUCTURE
• Need excellent Road Network, High Speed trains across major and
minor metros, Metro Network for city commute
• Easy access to Quality Electricity, Drinking water and Cooking gas
• Plan for the future.

Key Areas
•

ZERO Corruption

•

stagnate without
good Governance
regulations.

•

We need to have
more Ph.D’s coming
out of our
Universities.

•

We can use
across the country.
the mantra.

PROBLEMS
• Delays in Understanding the problem (itself), to design and
implementation.
• By the time the solution is ready, it is not enough to solve the
problem as the intensity of the problem has gone up exponentially.

7

ECONOMY
• Credible Fiscal Policy (by not denying the rights of the poor people)
• Increase trade with neighbors and focus on exports
• Economic growth should start from villages
• Create an Investment Environment suitable for each state.
• We need to be a Agriculture, Manufacturing and export power
house for atleast two decades.
PROBLEMS
• Lack of focus in Agriculture and Industrial sectors
• Corruption and bad governance is destroying our capability to
extract the best out of the natural resources (E.g., Coal). Even we
import Coal from Indonesia.
• Always on firefighting mode rather than planning ahead of the
curve.

• Punjab, Tamil Nadu, Himachal Pradesh
etc., done exceedingly well compared to
Gujarat.
• North Eastern States (excluding Assam)
has done a tremendous job in Education
and improved the standard of living.
These states are considered poor.
• Stats, policies like Land Reforms Act,
Decentralization (Panchayath Raj) and
other factors shows that Kerala went with
Pro Poor Pro Growth Economic strategy
where emphasis on Human Development
(approach) was at the top along with
Economic growth compared to a Pro
Growth Economic strategy.

5.3

.554

What we need:
•

HDI 2012

4.7
Trillion US$ - GDP PPP
3rd Largest Economy

21%
Below Poverty (2013)

53%

• Most of the East Asian countries like
Japan, South Korea, Taiwan all went with
Pro Poor Pro Growth Strategy.
• Question we need to ask (especially when we have the largest
population in the world under poverty) is:
• What kind of economic model should we follow? – You be the
judge! 

ZERO Corruption +
Lokpal Bill

• Good Quality &
affordable Education
•

Skill development in
sync with Industry
requirements

•

Affordable Health Care
System
Improving Living
Standards

•
•

•

Automating &
Streamlining the
Agriculture segment
(goods transit to
market)
Investment friendly
environment based on
socio-geographical
background of the
state.

5.3

Your decision matters

Pro Poor, Pro Growth Economy
OR
Pro Growth Economy

Automation and Skill
development for 120 Million
in Agriculture Sector

Labor force – 500 Million

1.21
Billion
150 Million Labor force in Agriculture
Sector need to be transferred to
Industry and they need skill
development for Industry Sector

6
Population Density

Work in progress

6

Understanding Kerala’s Socio Economic Background
• India’s Caste System
• Constraints on the Lower Castes in Kerala
• Understanding the Class Structure in Kerala
• Fight against discrimination and Untouchability : 1850 – 1950
• Literacy in Kerala – Cochin and Travancore 1901 – 2011
• Quality of Life Indicators – 1980s
• Basic Services in villages – 1970s

Key Areas

6.2

KERALA DEVELOPMENT MODEL
• Land Reforms Act
• Decentralization
• Focus on Social Welfare

6.3

CHALLENGES AHEAD
• Focus on Economic Development
• How Global Economy affects Kerala

Understanding
Kerala’s Socio
Economic scenario
prior to
Independence

•

6.1

•

Kerala Development
Model

•

Challenges Ahead



Caste System determines










6.1

Whom you can marry
What kind of work you do
What religious rituals you can perform
Which God(s) you worship
To which people you owe special duties
How others will treat you and think of you
Even how your body will be dealt with after death

The Untouchables

Major Functions
•

Sort people into
wealth and status in
a highly unequal way.

•

Provide social and
religious justification
for inequality.



Lived in extreme poverty
 They had no political rights
 Were considered disgusting and immoral in their behavior by
the higher castes


Kerala


Kerala had the most elaborate and rigid caste system compared
to all regions in India
 Swami Vivekananda in the 19th Century called Kerala “a mad
house of caste”
 Enforcement of caste privileges went further than anywhere
else in India.

6.1

Caste Rules for the Avarna Class
They were tied or bonded to particular high castes households for whom they were
always on call as laborers or servants.
They lived on land owned by the master households and could be evicted at will if
they displease them.
The were forbidden entry into the main Hindu temples
They were not allowed to bathe in the temple ponds.
They were not allowed in the public markets.
They were not allowed to put gate houses at the entrance to their plots.
They were not allowed to have tile roofs on their houses.
Neither men nor women were allowed to wear shirts, blouses or a covering cloth
above the waist.
They were forbidden to come physically within the prescribed distances of higher
caste members and could be punished by death for violating this taboo. This
“distance pollution” was more developed in Kerala than in any other part of India.

They had to use extremely self-debasing forms of speech when talking to
members of castes above them.
They could not take water from wells belonging to other castes.

These issues persisted
even after Indian
independence and
Kerala formation in
1957.
However, consistent
protests by the public
& some outstanding
leaders fought against
these caste atrocities
and eliminated these
discriminations.
Caste

In ft.

Source: Kerala: Development through radical reforms by Richard W Franke, Barbara H Chasin, Page 93
Redistribution as a Development Strategy in Nadur village, Kerala By Richard W Franke, Page 71

24

Ezhavas
These data on traditional caste behaviors were derived from Fuller 1976, Krishna
Iyer 1909, Mathew 1986, Mencher 1980 and Unni 1959.

Mukkuvan &
Kammalan

32

Pulayas

64

Nayadis

72

Source: Mencher 1965:167, Fuller 1976:35

Occupation

Brahmins

Priests, Landlords

Nambhudhiris
Tamil Brahmins

Soldiers, Administrators

Upper Nairs

2.00

Kammalan

7.00

Christians

21.00

Muslims

19.00

Cultivators, Servants

Lower Nairs

14.00

Coconut Tree Climbers

Ezhavas

22.00

Untouchable
s

Farm and menial
workers

Pulayas
Cherumas

Tribal people

Farmers, workers

Vaisyas

Sudras

Avarna
Class

6.1

2.00

Kshatriyas

Savarna
Class

Artisans,
Traders

Kerala
Names

Population %
1968

Caste
Categories

Percent of population data (1968) as estimated in the Kerala government sponsored
Nettoor commission. The 4% not accounted for above are various other castes.

8.00
1.00

45%

•

We need to look at the Educational and Health care achievements of Kerala with
this caste backdrop to understand exactly how bad was the situation in the first
half of the 20th century.

•

Jagdish Bhagwati in his book “Why Growth Matters” says Kerala had a head start
in 1950s on Education. However, he does not mention that, from 1901 to 1950s
Kerala’s socio background was worst in the country and in 1901 Kerala was at par
with India and rest of the states on Literacy.

Source: Kerala development through radical reforms by Richard W Franke, Barbara H Chasin – Page 91

50%

were

considered as Avarna
class

40%
comprises of Christians
and Muslims where
mostly traders and
artisans

5%

population

held majority of the
land.

The Shannar revolt refers to incidents surrounding the rebellion by Nadar climber
women asserting their right to wear upper-body clothes against the caste
restrictions sanctioned by the Travancore kingdom, a part of present day Kerala,
India.

In Travancore, Cochin and Malabar, no female was allowed to cover their upper part
of the body in front of Upper castes of Kerala until the 19th century. Under the
support of Ayya Vaikundar, some communities fought for their right to wear upper
clothes and the upper class resorted to attacking them in 1818.

In 1819, the Rani of Travancore announced that the lower castes including the
Nadar climber women have no right to wear upper clothes like most lower nonBrahmin castes of Kerala.

Violence against Nadar climber women who revolted against this continued and
reached its peak in 1858 across the kingdom, notably in southern taluks of
Neyyattinkara and Neyyur.

On 26 July 1859, under pressure from the Madras Governor, the king of Travancore
issued a proclamation announcing the right of Nadar climber women to wear upper
clothes but on condition that they should not imitate the style of clothing worn by
upper class women.
References
A Survey of Kerala History, p 314, By A Sreedhara Menon
The Nadars of Tamil Nadu, By Robert Hardgrave
The Spirituality of Basic Ecclesial Communities in the Socio-religious context of Trivandrum/Kerala, India, Silvester Ponnumuthan, p 108–110

6.1

6.1

Swamikal

EMS Nambhoodhiripad
1909-1998

• A Hindu Sage and a social reformer.
• He denounced the orthodox interpretation of Hindu texts citing sources from Vedas.
• Along with Sri Narayana Guru, strived to reform the heavily ritualistic and caste ridden
Hindu society of the late 19th century Kerala.
• He believed that different religions are different paths leading to the same place.

Narayana Guru

Ayyankali
1863-1941

• Born in an Ezhava family, at that time considered as Avarna.
• Led reform movement in Kerala, revolted against casteism and worked on propagating new
values of freedom in spirituality and of social equality.
• He stressed the need for spiritual and social upliftment of the downtrodden by their own
efforts through educational institutions.

Ayyankali

Sri Narayana Guru
1854-1928

• A Dalit & leader, pioneered many reforms to improve the lives of the Dalit's.
• In 1937 Mahatma Gandhi praised him when he visited Venganoor, Ayyankali’s home town.
• Dalits were not allowed to walk along public roads, and Dalit women were not allowed to
cover their breasts in public. Ayyankali organized Dalits against these discriminations.
• He was in forefront of movements against Manusmrithi color system and casteism.
• He passed through the public roads (Venganoor) on a Bullock cart which was not allowed.
• He demanded right for Children to study in school.

EMS

Chattambi Swamikal
1853-1924

• Born to aristocratic upper caste Brahmin family, was the leader of the first democratically
elected communist government in the world (1957 Kerala Chief Minister).
• He fought for the rights of the downtrodden and pioneered the Land Reforms and
Educational reforms in the state, which is followed in other states after 60 years.

100

years of

fight against caste
discrimination.

st democratically
1
elected communist
government in the
world. Kerala
Velur Lakshmikutty
Amma
(1911-2013).
At the forefront of
the agitation in 1952
at Velur in the district
where landlords traditionally insisted
that women of lower caste should
participate in 'Vela' (a festival) at a
temple without their chests covered.

6.1

Source: Census (GOI)

Year

Kerala %

India %

General Literacy

1901

11.00

5.00

General Literacy

1951

47.18

18.13

General Literacy

1971

69.75

34.45

General Literacy

1981

75.00

47.00

•

Rural Literacy

1981

69.00

30.00

•

Female Literacy

1981

66.00

25.00

•

SC Literacy

1981

56.00

21.00

General Literacy

1991

89.86

52.21

General Literacy

2001

90.36

64.84

General Literacy

2011

93.91

74.04

One of the fundamental
principles of Capability
Approach is defining
equality and freedom.

Do you expect teenage girls from Avarna Class will go to a school
without having a upper body cloth?

Some Historian says
Aristocrat rulers of
Travancore and Cochin
started the Education
initiatives in the late
1880s.
However, how can that
be objectively succeed,
when you have the
worst form of caste
atrocities drenched
deep inside the society?

Indicator

Physical Quality of Life Indicators: 1981-82
Distribution Across various social groups.
Kerala

6.1
India

Percent Literate (all ages)
• Males

75

47

• Females

66

25

• Urban

76

57

• Rural

69

30

• Lower Caste

56

21

• Tribal Groups

32

16

Life Expectancy in Years
• Male

64

57

• Female

68

56

• Urban

34

65

• Rural

41

124

• Infant Mortality Rate (per 1000)

Source: Redistribution as a development Strategy in Nadur Village, Kerala, By Richard W Franke, Page 4

There is hardly any
disparity between Rural
and Urban areas in
Kerala.
The whole Kerala is
developing rather than
the city focused
development model in
the rest of the country.
The line between Rural
and Urban division is
vanishing in Kerala

Feature

Rank

Kerala

6.1

India

Within 2 Kilometers
•

All weather roads

1

98

46

•

Bus Stops

1

98

40

•

Post Offices

1

100

53

•

Primary Schools

1

100

90

•

Secondary Schools

1

99

44

•

Fair Price (Ration) Shops

1

99

35

•

Health Dispensaries

1

91

25

•

Health Centers

1

47

12

• Higher Education Facilities

1

97

21

• Hospitals

1

78

35

• Fertilizer depots

1

93

44

• Water Pump Repair Shops

1

65

19

• Veterinary Dispensaries

1

82

45

• Credit Cooperative Banks

1

96

61

• Other Banks

1

96

40

• Seed Stores

2

63

40

• Storage Warehouses

4

34

21

• Railway Stations

8

23

18

• Drinking Water

5

96

93

• Electricity

5

97

33

Within 5 Kilometers

In the Villages

Source: Kannan 1988:18-21, based on
surveys of the Government of India,
Central Statistical Organization

Even before the
reforms of 1990s
Kerala was able to
establish a good
governance and
improve the basic
services of the citizens.

This clearly shows that
even with moderate
growth rate a state can
drastically improve the
quality of life.

I cannot teach anybody anything,
I can only make them think.
- Socrates

Now its time for everyone to go through the references section. You will find some
awesome books, good videos on various topics by top Professors across the world.



World Bank






University of Oxford – Multidimensional Poverty Index







Data : http://hdr.undp.org/en/statistics/
World Map : http://hdr.undp.org/en/data/map/
India : http://www.in.undp.org/content/india/en/home/countryinfo/
HDI Calculator: http://hdr.undp.org/en/statistics/data/calculator/

OECD




Home : http://www.ophi.org.uk/policy/multidimensional-poverty-index/
Indian States Map – http://www.ophi.org.uk/wpcontent/uploads/MPI2013/India/web/StatPlanet.html
Understanding MPI : http://www.ophi.org.uk/wp-content/uploads/ophi-wp38.pdf?7ff332
MPI Formula : http://www.ophi.org.uk/wp-content/uploads/MPI_2011_Methodology_Note_4-112011_1500.pdf?7ff332

United Nations Development Program







Data : http://data.worldbank.org/
India : http://data.worldbank.org/country/india
World Map : http://datatopics.worldbank.org/hnp/HNP_Map/DVMap.html

http://www.oecd.org/economy/indiaeconomicforecastsummary.htm

Government of India


Ministry of Statistics and Programme Implementation:
http://mospi.nic.in/Mospi_New/site/home.aspx



NSSO – http://mospi.nic.in/Mospi_New/upload/KI-68th-HCE.pdf




Planning Commission of India – http://planningcommission.nic.in/index.php
Planning Commission of India –
http://planningcommission.nic.in/plans/stateplan/sdr_pdf/shdr_kerala05.pdf
Planning Commission of India – http://planningcommission.nic.in/data/datatable/0904/tab_169.pdf
Census India – http://censusindia.gov.in/ |
http://www.censusindia.gov.in/2011census/hlo/pca/pca_data.html
Census India – http://www.censusindia.gov.in/2011-prov-results/prov_results_paper1_india.html
Data Portal – http://data.gov.in/
Reserve Bank of India – http://www.rbi.org.in/home.aspx
Literacy Rate : 1950 – 2001 : http://data.gov.in/dataset/state-wise-literacy-rates-1951-2001
http://cpsindia.org/dl/religious/ppt-eng.pdf
Assocham: http://www.assocham.org/arb/aim/Investment_StudyJan09-Dec09.pdf










7.1



Gujarat Government







http://gujaratindia.com/
http://gujaratindia.com/state-profile/socio-eco-review.htm
Census India : http://censusgujarat.gov.in/Census2001Data.htm
Census India :
http://www.censusindia.gov.in/2011census/hlo/District_Tables/HLO_Distt_Table_Gujarat.ht
ml

Kerala Government









http://www.spb.kerala.gov.in/images/pdf/er12/index.html
http://www.kerala.gov.in/index.php?option=com_content&view=article&id=2853&Itemid=2
559
http://www.spb.kerala.gov.in/images/pdf/er12/Chapter3/chapter03.html
Stats : http://www.spb.kerala.gov.in/old/html/eco_2008/2008_ap_11.1,2.pdf
Stats : http://spb.kerala.gov.in/~spbuser/images/pdf/er2011/pdf/Chapter14.pdf
NSSO : http://www.ecostat.kerala.gov.in/index.php/national-sample-survey.html
NSSO : http://www.ecostat.kerala.gov.in/docs/pdf/reports/nss/nss64.pdf
NSSO :
http://www.ecostat.kerala.gov.in/docs/pdf/reports/nss/nss65%20housing%20condtion.pdf

7.1

Health, Education & Food

7.2

On GDP and Societal Well being

•

http://www.youtube.com/watch?v=TxuuWbrwLuc

Joseph E Stiglitz on GDP
Dr. Jeni Klugman on
Human Development
Report

•

Human Development Report

http://www.youtube.com/watch?v=QUaJMNtW6G
A

•
•

http://www.youtube.com/watch?v=cV-xMg5qzh4

Prof. Amartya Sen on
Health, Education, Food
and Water

Prof. Martha Nussbaum
(Harvard University) on
GDP and Capabilities
Approach & Kerala
Development.

Capability Approach

http://www.youtube.com/watch?v=AoD-cjduM40

7.3

Authors:
•
•
•
•
•
•
•
•

Amartya Sen
John Rawls
Joseph E Stiglitz
Richard W Franke
Arundhati Roy
Martha Nussbaum
EMS Nambhoodhiripad
John Kenneth Galbraith

7.4

GDP – Gross Domestic Product is the standard way of measuring the economic
progress of a country, in the case of state its known as GSDP – Gross State
Domestic Product. However, as per most of the economists GDP doesn’t reflect
the well being of the society - Nobel Prize-winning economist Joseph Stiglitz
clearly articulates this in his articles and speech.
GDP is the economic indicator, which measures the country’s total output,
which includes everything produced by all the people and all the companies in
the country. The components of GDP are
C = Personal consumption expenditures
I = Business Investments
G = Government Spending
X = Exports
M = Imports

Standard formula: GDP = C + I + G + (X-M)

7.4

Purchasing power parity is used in many situations. The most common is to adjust for the price differences
between countries. For example, China produced $8.25 trillion in goods and services in 2012. The U.S.
produced $15.66 trillion. However, you cannot compare the two without taking into account the fact that the
cost of living in China is much lower than in the U.S. For example, a McDonald's Big Mac costs $4.37. In
China, you can get the same thing for only $2.57. People in China don't need as much income because it
costs less to live.
That's because China artificially sets the value of its currency to be lower than the U.S. dollar. It intentionally
wants its cost of living to be lower, so it can pay its workers less. As a result, its exports cost less, making it
more competitive on the global market.
Purchasing power parity solves the problem of comparing countries with different standards of living. It
recalculates the value of a country's goods and services as if they were being sold at U.S. prices. Under PPP, a
Chinese Big Mac costs $4.37, the same as it does in the U.S. As a result, China's GDP is $12.38 trillion, which
makes it the world's third largest economy, after the U.S. and the EU. That's why the CIA provides GDP
estimates on both an official exchange rate and a purchasing power parity basis.

Similar methods are applied to convert India’s GDP Official Exchange Rate of $1.947 Trillion to $4.784 Trillion
making India the world’s fourth largest economy after EU, USA and China.
Without purchasing power parity, China's GDP per capita would only be $6,297, lower than the standard of
living in Ukraine, Algeria or Kosovo. With PPP, each of the 1.3 trillion people will receive (on average) the
benefit of $9,100 in economic production. This is better, but still only on the level of Jamaica and worse than
Cuba. It's far less than the U.S. GDP per capita of $47,400. That's because the U.S. can divide its GDP among
only 330 million people.

7.4


3 Dimensions
 Education (2 Indicators, each weighted 1/6)
 Health (2 Indicators, each weighted 1/6)
 Standard of Living (6 Indicators, each weighted 1/18)



Equal weight to 3 Dimensions (1/3)

Oxford University

7.4



A Household is Multi – Dimensionally Poor if
 Weighted sum exceeds 30% of deprivations (a

score of 3/10 or more)
 Can be in any combination of Indicators


Half of the world’s poor as measure by the
MPI live in South Asia (51%, 844 million)



Quarter in Africa (28%, 458 million)

7.4



Simple Yes / No can be self administered



Reflects both
 The Incidence of Poverty
 The Average Intensity of their deprivation



Reveals the combination of deprivations suffered



Makes focused intervention possible in terms of:
 Policies
 Programs

Understanding India's Socio Economic Progress

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