(hyun-joon Huh · il-rae Kang)

□ The India became independent from British Colonial rule

after a mostly  non-violent epic anti-colonial struggle

under the ideology of nationalism in 1947.

□ Indian nationalism had to be forged from a bewildering diversity(religion, language, ethnicity)

○ Religion

- Hindus(80.5%)

- Muslims(11%)

- Christians(2.3%)

- Sikhs(1.9%)

- Buddhists(0.8%)

- Jains(0.4%)

※ Hindus are stratified by a "caste system". It still remains one of

the biggest source of injustice in India.

○ Language

- India has some sixteen major language, often with

different

scripts, and over five hundred major dialects. ※ India chose the numerically dominant Hindi language as

the

language of the Indian state. India continues rely on

English

as the all-India link language for administrative

communication.

In turn, this has created a linguistic divide and inequality of

opportunities between those who know and those who do

not

know English.

□ India is huge country has managed to consolidate itself

increasingly as a nation state focus of an anti-colonial

struggle acted as a binding force.     

○ The hopes of a better economic and freer political life

which independence from  foreign rule brought with it

acted as a further catalyst in this process.

□ India ; vast and poor country has managed to consolid-

ate ate gradually its democratic system over the last six

decades.

○ Countries of western Europe, the U.S, and Japan started 

functioning at a minimum per capita income level of

roughly speaking  US dollar2500, compared to Indias less

than  dollar100.

□ India's many problems

○ Mass poverty and destitution

- The largest number of illiterates, millions of children crippled

or blinded due to mal nourishment.

- Roughly 1/4 of Indias population under the so-called 'poverty

line' (nearly 200 million are in rural areas and the rest in

urban areas) - 1/3 Indians live in abject poverty, spending less than 1US

dollar in terms of purchasing power parity. 

○ Failure of system

- India had the low rank of 127 among 175 countries on the

Human Development Index of the United Nations. Compared to

the rank of 95 in terms of per capita income in purchasing

power parity, this even lower rank of 27 suggests that

compared to income, access to health and education is

probably even worse for the poor in India. ※ India chose the numerically dominant Hindi language as the

language of the Indian state. India continues rely on English

as the all-India link language for administrative communication.

In turn, this has created a linguistic divide and inequality of

opportunities between those who know and those who do not

know English.

□ India is huge country has managed to consolidate

itself

increasingly as a nation state focus of an anti-colonial

struggle acted as a binding force.○ Doubling of the growth rate in per capita income has

not made a corresponding dent on mass poverty.

○ Capita income is only about 1/3 the world average

incomes in terms of PPP. As already mentioned, India

has a low rank of 95 among the nations of the world in

terms of PPP calculation.

○ Irrespective of the unit in which it is measured,

average

or per capita income is hardly an appropriate measure

of the well being of citizens of a nation.

□ We need to need to know how total income or gross domestic product (GDP) is distributed.

○ To dramatize the point , consider two societies

with extreme distribution.

○ The first has complete equality of income at say 23,000

rupees per person, and a population of 100.

Per capita income is a perfect measure of an average

person's income in this case.

○ Consider the second case of a slave society where 99

Slaves have an income of only 100 rupees each, and the

rest goes to a single slave owner.

○ slave owner's income : (100 × 23000) - (99×100) =

2,290,100 rupees

○ So that slave owner's income turns out to be  2,290,100

rupees , that is 22.9 thousand times higher than that

of a slave.

○ In the salve society example , we have an important

lesson to learn.

○ It shows that average income in this case hides more than it reveals.

○ It obscures both the extreme poverty of slaves as well as the vulgar richness of the slave owner.

○ Although somewhat more complex, these considerations remain essentially the same in a high growth rate of GDP that dose not alter the situation for poor.

○ To continue with the example, consider a 10 percent growth in GDP yielding, (1.1)×(100×23000) while the 99 slaves continue to get exactly the same income of rupees 100 each.

○ Only the owner is now even better off with an increased income of something like 2,520,100—25.2 thousand times higher than that of a slave.

○ All the gains of economic growth go in this example only to the slave owner, but none to the slaves.

○ This type of growth increases the relative disparity in the distribution of income or relative poverty, because the slaves are now even poorer relative to the owner.

○ The above example is meant to illustrate the point that growth alone need not be answer, especially in a country with a lot of poor people. We have to know in addition how the benefits of growth are being distributed.

○ Broadly speaking, at the overall growth rate of say 10% growth would be pro-rich if income rate the rich increases by more than 10%, while that of the poor by less than 10%. In this case the rich are certainly getting richer but poor are getting poorer only in relative but not necessarily in absolute terms.

○ In a poor country like India this result in increasing relative, but not necessarily absolute poverty. For that to happen, the growth rate of income of the poor has to turn negative, it has to decrease.

○ In contrast, growth can also be pro-poor if their income increases faster than that of the rich during the process of economic growth. This would mean a reduction in both absolute and relative poverty decreasing.

○ In India with so many poor people on the verge of subsistence level, we always need to be especially sensitive to the distributional implications of the growth process. The reason is simple. Growth that worsens the distribution for the poor will push them below subsistence.

○ A rate of growth, however high , is not good enough, unless we also know how it affects the majority of the population who are poor.

○ What is more, even our democratic political system in which the poor have a voice, though only at the time of election, seems to provide only a partial answer.

○ This is vividly illustrated by the recent Indian general election (2004) results.

○ A booming stock market, and a richer and expanding urban middle class made the BJP-led coalition government in power to believe that the whole country was doing well.

○ One should not forget that even the previous Congress- led coalition government, which also took great pride in liberalising the economy, and ushering in a higher growth regime, had a similar fate in the 1996 election.

○ It should be clear that there is a serious disconnection somewhere between our economic and political system. High growth dose not deliver what most poor Indian expect it to, but they can register their dissatisfaction only at the time of election with negative votes.

○ Our democratic polity has not shown us how to go farther through policies that improve rapidly the conditions of the poor. This is the challenge : how to remove the disconnection between our economy and our polity. India can no longer avoid facing squarely this challenge.○ One might ask in this context whether unequal distribution of income alone can explain this sorry state of affairs. The question can be partially answered in relative terms, by comparing our situation with those of other developing countries.

○ According to the same Human Developing Report (2004) quoted earlier, India has a pattern of income distribution which is unequal, but not extremely so by the standards of other developing countries.

○ In our democratic set-up growth has to proceed along with improving continuously the distribution of income in favor of the poor, and access to basic health and education. In short, high growth has to be pro-poor in its thrust.

Richest 20% Poorest 20%

India : 42% 9%

China : 50% 5%

Vietnam: 45% 8%

Brazil: 64% 2%

Mexico: 59% 3%

Zimbabwe: 56% 5%

Nigeria: 56% 4%

○ First, India needs to grow as fast as possible. India remains a poor country with a low per capita income. Since the size of the bread itself is small, unevenness in distribution of income affects even more adversely the poor.

□ India have three problems to solve

○ Second, the process of growth itself must have an in-built mechanism to improve rapidly the distribution of income through the process of growth itself. Viewed from this angle, we must cease to separate the growth rate of GDP from its distributional implication for the poor; instead we must learn to treat the two as processes, which reinforce one another in formulating our economic policies.

○ Finally, this interweaving of distribution and growth can`t be effective in Indian context without facing the problems of various structural inequalities rooted in caste, gender, and religious discrimination. These social problems are barriers especially to any process of pro-poor economic growth.

○ It has to be viewed from a different perspective altogether in which growth and distribution are integrated into the very same process, while breaking systematically the social barriers of discrimination and prejudices based on gender, caste, language, religion or ethnicity.○ This is what 'Development with Dignity' must mean for us in India. This is not Utopia. It is the only reasonable economics that this country can pursue with the support of majority of its citizens who are poor to varying degrees. And, economic policies supported by the people lie in the realm of feasible politics.

(ji-eun Sun · hyang-sung chung)

political democracy : one-adult-one vote

market system : purchasing power

⇒the rich have more votes than the poor Economy : purchasing power ⇒the poor have a feeble voice     Politics: numerical strength ⇒ they have a stronger political voice.

※ hiatus is open up between economy and politics.

○ India could achieve considerably higher growth, only if we allowed the market forces to take over more fully.

□ wrong thinking on the economic growth

○ The right : we are not moving towards the market system fast enough

□ Democracy in our market economy with widespread poverty seems to behave like a two headed animal

○ The left : the state is not paying attention to distributive justice in the name of efficiency

1. what is the purpose of economy growth?

2. The possibility the what kind of member of the society receiving the benefit of growth mainly it is?

○ Higher growth earns a poor nation greater international respect, and on that count it must be considered desirable

○ From it pays what kind of price and must pursue an altitude economic growth

⇒ according to gandhi dictum, the purpose of economy growth is the greater well being of a lager number of people.

※ gandhi : higher growth is not worth much, unless it improves at the same time the lot of the poor in india.

ex) many jobs and livelihoods are lost, and few are gained during the process of growth, and poverty becomes increasingly wide spread => This would mean more people are losers, and few are gainers.

⇒ The losers become almost voiceless, and marginalised from the market due to their diminished purchasing power

○ In short, there is a fundamental problem with the market

in an economy with widespread poverty.

- The market driven composition of domestic output need not

correspond to what the poor need and could afford.

ex) bottled drinking water

private hospital

4. producing mostly is non-essential goods from the point of view

of

the majority of its citizens.

3. Does market allocate the productive resources optimally and

produces efficiently?

⇒ Privatisation of basic and essential goods cannot be left to the

mercy of the market in a country within our democratic

system to increase its accountability, but privatisation is no

solution. and this raises the wider issue regarding what a

market solution can or cannot achieve.

○ This highlights a common error in economic thinking

greater efficiency alone is not a solution to this problem

unless the essential goods being produced correspond to

the requirements of the poor citizens that is why, certain

essential goods like basic health, education, and housing

for the must be provided for by the state.

○ The main feature of market solution, it is efficient in terms of production, but at the same time it is totally unconcerned with distribution of income.

But with after words same economic problem occurs from here.

⇒ It can be shown that the 'perfect competition' market would provide some sort of a solution.

□ This raises the wider issue regarding what a market solution can or cannot achieve.

○ Even more strikingly, there is nothing in this branch of economic theory to specify how long it might take for even the perfectly competitive market to reach that efficient solution, if it reaches that at all.

② Investigation in this second step are directed to find out whether the system would reach such a solution, if the market starts with some arbitrary set of prices.

ⓛ whether such an efficient and optimal market solution exists at all.

next comes the 'stability property' of the market solution.

□ Theoretical economists usually consider the problem in three analytically distinct steps.

③ we need to know the speed with which the market solution would be reached. The main stream economic theory confronts but hereupon and neither any information is giving.

□ The market can always hold out a promise without

actually delivering.

○ hitch : Politicians are accountable for their performance by the time of the next election. Look for workable solution that might combine the market with state action to meet the requirement. however, our politicians and their economic advisors seldom do that these days to pose it misleadingly as an issue of the market versus the stats, naturally it is convenient for a politician if can make the abstract institution called 'the market' responsible for sorting out our difficult economic problems. ○ However, because the politicians remain accountable for their economic performance.

□ Focus problem of India economic : The core issue

instead is have to market the market system compatible

with the functioning of our political democracy. Instead

attempts should be made to devise policies through

which both these institutions of the state and the

market might reinforce one another for bringing our

political and economic democracy closer.

⇒ This is also the essence of following the path of

economic development with dignity for all our citizens,

and the real challenge to economic policy of our time.

② The second reason is the speed with which a solution has to be found.

ⓛ The pattern of demand is generated by a particular distribution of income.

□ The main attraction of the market system is that it has built into it a degree of self-correction. however, although this advantage of the market system must be maintained to avoid the errors of bureaucratic central planning, the advantage must not be exaggerated to an extent where it becomes counterproductive.

They are usually wrong in their diagnosis ;

the economy doing well does not mean that the

people are also doing well.