Development and Sustainability

This book deals with the emerging Indian economic map materializing in the backdrop of the phenomena of globalization and sustainability following two decades of liberalization policies. Globalization and sustainability are our chosen entry points which allow us to organize our story in a manner that is able to highlight the essential ideas, events, breaks, problems, as also the rise of new kinds of institutions, relationships, and engagements that are connected to the epochal transition of the Indian economy. Our intervention is as much on method as it is on substance which is indicated by a variety of new methodological approaches, corpus of concepts, and style of reasoning that move beyond the conventional system and known territories of coverage. The story of the Indian economy that emerges from our foray is of a new Order of Things punctuated with novel problems, crises, and modes of intervention by the state that are not comparable to what existed during the planning era.

Financial crises, in one form or the other, have been ravaging the world economy from time to time. The great depression of 1929 was perhaps the most significant financial crisis in the economic history of the world in terms of its geographical spread and deep impact. Commentators are unanimous at crediting the global financial crisis of 2008 as the second-most significant crisis (Hall 2010). In between several crises of smaller dimension-like Mexican crisis, Latin American debt crisis and Asian crisis have frequented us. All these crises had played havoc with the rhythm of economic lives of the people of the affected countries. But at the same time, they made the people understand the importance of exercising prudence and caution in economic policy-making.

Starting from the “Tulip Mania’ in the seventeenth century, financial sector crises have come in waves and in many different guises. While some of these remained confined to the regional boundaries, some acquired global dimension with the ultimate devastating impact on the real economy. The fact that the global economy has collapsed many a time following a financial panic has instigated the researchers, particularly after the recent global financial melt down, to explore the dynamics of global financial markets: the old issue of ‘finance-growth nexus’ is resurrected once again. The traditional school of the literature, however, is bifurcated on the issue. While one school perceives finance to be a ‘side show’ of growth, others believe in the considerable control that financial markets exercise on the real sector. The true nature and direction of the causality, however, is yet to be exposed. More recently, a parallel school of thought has developed that concentrate on the endogenous factors that generate dynamics within the stock market independent of the real sector. This growing body of the literature conjectures the global financial markets to be mostly deterministic, and in some cases, chaotic in nature. The markets are characterized by nonperiodic cycles and trends where volatility and fluctuations generate endogenously. The global markets, thus, are supposed to be inherently instable, or at best, stable on knife edge. Cycles and crashes are manifestations of this inherent instability. There is no determinate equilibrium in the market and no external shocks would be required to gear financial crises at regular interval. The implications of these are tremendous. A chaotic financial market puts efficient market hypothesis on trial, renders traditional asset pricing models useless, and makes long-term forecasting less reliable. The most devastating implication of the fact that the financial markets implode from within is perhaps for the developing markets as it makes government intervention ineffective. Hence, an introspection of financial market dynamics following this rather offbeat line of thought could be a researcher’s delight. The results obtained might lead to a reframing of old ideas and beliefs regarding financial market dynamics, boom and bust cycle, and predictability of financial crashes.

In recent times, both income inequality and the level of globalisation have been rising rapidly across most parts of the world. The obvious question to ask is: is this pure coincidence or are the two causally related? To answer this question one needs three things: A theoretical argument that links the two observations, a methodology for empirically implementing the theoretical argument and of course reliable data. This chapter is about the ways in which existing research has attempted to implement these steps in order to answer the above question.

Agriculture was the predominant sector of the Indian economy at the time of the independence. About 55 % of GDP came from agriculture and about 70 % of the workforce was engaged in this sector at that time. So the planners and policy-makers emphasized on improving the performance of the agriculture sector in the initial Five-Year Plans as they realized that overall development of vast majority of the people in the country and achievements of developmental goals such as reduction of unemployment, poverty, malnutrition, and so on could not be fulfilled without it.

Pursuit of subsistence living has become one of the major struggles of Indian farmers. This struggle is largely dictated by the monsoon on one side and functioning of the markets (land, labour, factor and product) and ‘governed’ prices on the other. Current market centric economic reforms in the form of liberalisation and globalisation were introduced and agricultural sector as always was taken for granted. In this entire process, beneficial participation of the sector in the markets was presumed.

In the wake of liberalization in India inclusiveness of the development process has become a major concern. Among other disadvantaged groups, it is felt that women lack the opportunity to participate in the growth process or reap its benefits. Meanwhile, the approach to agricultural development broadened towards diversification and value addition and towards integrating agriculture with mainstream industry and market. This paper argues that agroprocessing needs to be partly embedded in agriculture, exploiting the indigenous skills, modern training facilities, and entrepreneurial abilities of women in farm households in order to strengthen the linkage between growth and human resource development.

Till the early 1990s, the general understanding that guided economic policy framework and planning in India hinged on the paradigm that the Government is mostly responsible for the provision of public goods/services which are by nature indivisible and non-excludable and thus cannot be priced by the market mechanism. The liberalization and globalization process that was initiated in the early 1990s catalyzed a paradigm shift in this perception. Rapid growth brought forth a manifold increase in demand for social/civil infrastructure. The Government’s financial status and delivery capabilities were grossly inadequate to meet this demand. Moreover, the delivery mechanism itself was functioning quite inefficiently in the hand of the public sector authorities. So, from the demand side there was sudden expansion in scale and from the supply side the prevailing institutional arrangement was proved to be insufficient. It was in this backdrop that the government invited private participation in the public domain of social infrastructure. The financial as well as circumstantial rationale extended to justify such a change in paradigm in India has basically hinged on three crucial premises: (i) given the limited wherewithal of the Government in the face of burgeoning budget deficits, the rapid demand for social/civil infrastructure of a growing economy can only be met through active investment and participation of the private sector; (ii) with the involvement of private capital under global influences there would be constant monitoring of sovereign credit worthiness by international financial institutions and global credit rating agencies; and (iii) PPP model would raise efficiency of both resource usage as well as the speed of delivery helping the economy to sustain rapid growth. The optimism regarding this arrangement derived support from the successful adoption of this model in Europe in the 1960s, in Latin America in the mid-1980s, and more recently in Africa and East Asia.

One plausible way to assess empirically the impact of reforms in globalization on an industry is by evaluation of its performance under these reforms in the input–output framework.

Globalization opens up possibilities for gains in efficiency through international exchange based on the principle of comparative advantage. These gains are very significantly augmented with the development of communications system that reduces cost of negotiations, monitoring, and coordination. The advent of telegraph as a communication device in 1839 in Britain marked a signal change in this scenario of cost of communication.

Crucial to the development of any modern economy, steel is a product of large and technologically complex industry having strong forward and backward linkages in terms of material flow and income generation. All major industrial economies are characterized by the existence of strong steel industry and the growth of many of these economies has been largely shaped by the strength of the steel industries in their initial stages of development. So being at the center of attraction, in a situation of high growth of world economy, the steel industry is likely to have a bright prospect

The integration of the Indian economy with the global economic system from the 1990s created substantial employment opportunities at the high ends of the formal sector. The Information Technology (IT) sector was one of the fastest growing of these sectors.

In the initial stage of globalization the competitiveness of developing countries is often grounded in inefficiency-driven factors like cheap labor, weak environmental norms, etc.

Ever since gender issues entered into the domain of policy analysis, efforts have been made to monitor the progress of interventions through two major indices suggested by UNDP, viz., the gender-related development index (GDI) and the gender empowerment measure (GEM).

This chapter is a review of the research done over the past two decades or so on the role of credit supply in sustainable poverty reduction. Naturally, it is credit to the poor that will be the focus of our attention. We shall review both theoretical and empirical research. We shall also suggest possible lines of further research (which do not find mention in other reviews) and make a few policy recommendations (which, again, do not seem to appear in the existing literature) with reference to the Indian economy.

There is now a general consensus in the literature that the post reform period in India is characterized by higher GDP growth rate compared to the Hindu rate of growth in the pre-1991 period (Panagariya 2011; Dutta et al. 2012; Datt and Ravallion 2010; Kotwal et al. 2011). There are also compelling evidences that high GDP growth rate of the order of 6–8 % on an average has resulted in decline of poverty (Bhalla 2011; Datt and Ravallion 2010) both in the rural and urban areas.

The rhetoric of inclusive growth has no doubt caught the imaginations of development planners and policy makers almost everywhere in the world. Recent policy and research documents from various institutions, ministries, individual researchers are abound with mention of inclusive as the most important ingredient for development. In India, the country which has observed sustained high growth of GDP for almost a decade now, every recent policy document has a reference to the target of making the growth pro-poor and inclusive. This continuing fascination about inclusive growth on the part of the researchers and policy-makers indicates that the economics community now recognizes the fact that the market-driven growth in some developing countries is not enough for development. In fact, there are now several evidences from individual countries which show that growth elasticity of poverty reduction decreases with high growth. Moreover, that higher income inequality reduces the poverty impact of growth is also well-documented. So inequality enhancing high growth not only may lead to adverse poverty impacts, but also has the potential to reduce the poverty impact of future growth.

Individuals make decisions embedded in a social context and their attitudes affect their decisions. Based on this argument, there is a long history of empirical research in social sciences (beyond economics), that elicits subjective testimony on feelings, beliefs, values, expectations, plans, attitudes, and behavior. This body of empirics was excluded from the neoclassical economic analysis on the assumption that individual preferences remain unchanged, despite the fact that economic theorizing often includes reference to attitudes, beliefs and the like. An important example is the data on stakeholder attitudes toward environment (Infield 1988). Its importance has been documented recently (Agrawal 2006) and pro-environmental attitudes studies have started to catch the attention of economists.

Air pollution causes more than 3 million premature deaths worldwide every year (WHO factsheet 2011). Studies show that there is a strong association between poor quality of air and the human mortality and morbidity. Among five environmental risks explaining DALY, indoor smoke is the second most important factor and it affects mostly the low and middle income countries. The indoor pollution is more aggressive because the same amount of air pollutant released indoors, produces roughly thousand times more exposure-impact than it would do outdoors (Smith 2008). Sub Saharan Africa and South East Asian countries, especially Indian subcontinent, are the major bearer of the risk from indoor pollution from solid fuels. The concentration of indoor pollutants, particularly SPM and RPM, is alarming in India. It sometimes ranges between 2,000 and 18,000 μg/m³ against the safe level of 100 μg/m³ recommended by NAAQM standard (Smith, 1996).

India’s leather industry occupies a prominent place in the export market, generating scope for foreign exchange earning as well as large-scale employment. The export potential of this industry was recognized by the Government of India in the mid-1970s when it evolved a policy package consisting of a ban on export of raw hides and skins and providing fiscal and other incentives to stimulate the export of finished leather and leather products. Much of the economic benefits derived from leather production and trade; however, have come at a considerable cost to the environment and human health, which should be attended simultaneously to enjoy sustainable benefits from the industry. This poses a serious challenge before the sector and a number of strategies have been contemplated since early the 1990s to give the industry a cleaner shape.

India’s growth performance has been impressive by any international standard even if we ignore the recent downturn. However, this high growth has failed consistently to effect transformation in the of the majority of the masses as indicated by the tardy improvement in the social indicators.

HIV Epidemic is one of the deadliest health problems that has unleashed in the developing countries. Truly a harbinger of the global public health debacle after the globalization process, the disease has called for an unprecedented global response in the form of international aid on one hand and politico-economic anecdotes in pharmaceutical market on the other. This disease and its retort have brought in certain issues in economics like the fund allotment in prevention and cure, prevalence elasticity of private demand for prevention, the access to Anti Retrovial Therapy (ART) to the people living with HIV AIDS, the production and marketing processes of ART drugs in generic forms and above all the inefficiency of health systems in these countries. The paper analyses the global policy matrix to find that in the face of industrial capabilities and global politics, the huge international aid for this disease bypassed the need for care and treatment while concentrating on awareness generation among high risk groups leaving out the general population at large. The Indian policy contour is no different from this trend which neglects the basic principles of economics and medico-social setting of the country.

This chapter looks at the political economy of mental health in the context of the transition of the Indian state from 'welfare medicine' to 'developmental medicine' to 'neo-liberal medicine' and the transition of the 'discourse on unreason' from unreason being seen as primarily a 'moral problem' to primarily a 'political problem' (where unreason is threat to both self and society) to primarily an 'economic problem' (where unreason leads to loss of productivity and efficiency). The chapter also sees how the political economy of mental health remains torn between 'incitement to discourse' around questions of mental health within the expanding 'circuits of global capital' and acute lack of resources, stigmatization, and ghettoization of unreason outside the circuits. The chapter works at the overdetermination of the axes of the ‘patient’ (which includes experience and suffering), the ‘professional’ (which includes listening, diagnosis, cure, care, and medical education), the ‘service provider’ (which includes public institutions with tertiary, secondary, and primary care delivery systems as also private clinics), and 'industry’ (which includes, on the one hand, circuits of global capital and global markets and, on the other, circuits of local capital and local markets).