Whose side are you on? Jagdish Bhagwati or Amartya Sen? Growth or human development?

The growth-wallahs say: we are for human development, too, but you must have growth first to generate resources. The human development wallahs say: without human development you cannot have growth. Both want both. They dispute the causal relationships and, therefore, the order in which growth and human development should happen. The benefits of growth do trickle down. The problem is that there is increasing impatience with the pace of the trickle-down, caused by a combination of forces that have been gaining strength in the past two decades. One is increasing acceptance of many fundamental human rights, going beyond political rights. The second is an explosive access to information about haves and have-nots. People want to be included in the benefits of growth now, not later. They want more equity. Nobel laureate Michael Spence, while presenting the report of the World Banks growth commission that he chaired, admitted that though the commission had found the ingredients for high growth, they had not discovered how to accelerate inclusion with growth, which was becoming an increasing demand everywhere. India is a very proud democracy, with a very strong human rights movement and a very active media. Equity and inclusion in growth are demands that policymakers cannot escape in India. Therefore, they have to develop a formula to convert the either-or debate between growth and inclusion to a both-and solution. The 12th Plans goal is more inclusive, more sustainable, and faster growth. While the mainstream planning process carried on, a diverse group of citizens came together on the side to explore a new way. It included civil society organizations in the vanguard of the rights-based approach to development, business executives, environmentalists and economists. Using techniques of scenario planning, they began by mapping the system. Their map included not just the forces that economists models are limited to, but also forces such as citizens trust in institutions and citizens aspirations for better governance and justice, not only more material goods. Such forces have a very powerful influence on the formation of public policies and their implementation. Therefore, to project what the growth of the economy will be, these powerful, though non-quantifiable, forces must be included in the analysis. The analysis produced three scenarios of India over the next 10-15 years, which were called The Flotilla Advances, Muddling Along and Falling Apart (available here). The analysis of the forces resulting in these scenarios was given to the National Council of Applied Economic Research, which added economic rigour and ran the scenarios on their computers. They computed what the growth of the economy, the rate of poverty reduction, and the fiscal deficit would be in the three scenarios over the next five years. The Flotilla Advances produces the fastest GDP growth along with the fastest rate of poverty reduction, as well as the fastest reduction in the fiscal deficit.

Three mutually reinforcing strategiesone regarding inclusion, another regarding governance, and the third regarding environmentproduce the very desirable outcomes of the Flotilla Advances scenario. The other scenarios fail to adopt these strategies adequately and thus produce worse results in growth, poverty reduction and the fiscal deficit. The strategy regarding inclusion is germane to how to accelerate inclusion and growth together. Handouts for food and fuel, and even handouts of jobs (as in the Mahatma Gandhi National Rural Employment Guarantee Act) compensate for the consequences of poverty. The cause of poverty is inadequate incomes from sustainable jobs. Therefore, the approach to inclusion must shift from handouts to more rapid growth of productive enterprises and jobs. Not only is inclusion by this strategy more sustainable, it is also more respectable. For too long the political and policy debate has been stuck in contention between those who want more subsidies to compensate the poor and those who root for more GDP growth. Only lately has attention begun to shift to the pace of job creation, and to facilitating the growth of small and medium enterprises (who create the most jobs), and the stimulation of the countrys manufacturing sector, which has not been doing well and must now create 100 million jobs in the next 10-15 years. Through better jobs and livelihoods, the country will get inclusion along with growth