MACROECONOMICS

Can we put social development ahead of economic growth?

ANIKET RAHUL MISHRA FT161014CHANDAN FT161030MANIK SUDAN FT161048POORVA DUBEY FT161065SHASHIRAJ R FT161082TUSHAR DANDRIYAL FT161098ADITYA SARIN FT164009DIVYAPRAKASH PANDA FT164027

The debate of social development versus economic growth is a perennial one. Although there is an understanding that social development should go hand in hand with growth, there is often a lot of confusion regarding which model is the best?   Growth is helpful in achieving development, but only when there are proper policies. The case uses 2 models – Gujarat and Kerala to explain these concepts.

Gujarat is highly industrialised. It  has attracted high levels of FDI. This model is a perfect ecosystem for agriculture and industries which creates employment for the educated masses. Gujarat has shown impressive progress over the years. When one observes the data over a period of time; rather than making static comparisons it clearly shows that growth has led to many social developments.

Kerala on the other hand has been less successful in attracting FDI. This model aims at improving quality of life. Efficient and systemic investments in the field of education and healthcare have played a crucial role. Achievements such as low levels of infant mortality, population growth and high levels of literacy, life expectancy have been considered the constituting elements of this model.

There is a stark difference in the outlook of Gujaratis and Keralites. Gujaratis are more inclined to be entrepreneurs whereas Kerala masses are the service class. Hence, majority of educated people of Kerala go for out-of-state employment opportunities. As a result unemployment increases over the long run. Then, how is it possible to continue social development without growth? Gujarat is more growth centric model and feasible over the long run. Hence, Growth is the most important instrument of poverty reduction.

Growth and social development are both equally important and cannot be seen in isolation to each other.  Thus, in a developed country the Kerala model is more suitable. But to attain sustainable growth in a developing nation, Gujarat model is the answer. So, India needs to accelerate growth which will reduce poverty and increase incomes which in turn can improve social development.