The Telegraph
Since 1st March, 1999
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- Competition to project GDP growth is becoming a rat race

It is the 'in' thing currently. About everybody in the creamy layer is forecasting the rate of growth of India's gross domestic product: the International Monetary Fund, cabinet ministers, their minions in the civil service, the high-flying set belonging to India Incorporated. Competition to project growth in GDP is assuming the dimensions of a rat race. If somebody says GDP growth in 2004-05 will be 6.5 per cent, somebody else will immediately scale it down to 6 per cent, and a third party will jack it up to 7 or 7.5 per cent, and yet others, generosity flooding their bosom, will go on to suggest that, no point in being vague, India has the potential to grow at 10 per cent per annum.

Such hawking of possible percentage rates of growth mostly takes place at a superficial level; few take the trouble to go into details and mention the components of the projected growth. Silence reigns over what the rate of growth in the individual sectors such as agriculture, industry or the services will be. The implications for those dependant for their living on the different sectors of the economy will be altogether different, depending on the rates of growth in these sectors. The Central Statistical Organisation would have us believe that, of India's total GDP, a little more than one-half originates in the services sector, while agriculture and allied activities account for a shade more than a quarter of the GDP, and the industrial sector just a little less than a quarter.

It is therefore perfectly possible to have an annual rate of growth of, say, 7.5 per cent in aggregate GDP, even if there is zero growth in both agriculture and industry, should the services sector grow at 15 per cent. The same rate of overall growth is, of course, achievable if each of the component sectors grew at 7.5 per cent. It is, in fact, possible to play around with endless arithmetic exercises of the silliest kind and project one specific rate of overall growth in GDP while the sector-wise rates of growth are vastly different. Would it be unfair to suggest that those who project 6,7,8 or 10 per cent GDP growth at beautifully structured press conferences owe it to the nation to enrich their clairvoyance a bit further by adding some insights on the internal composition of the overall rate of growth'

Growth in production, it is often forgotten, also means growth in income. The pattern of sector-wise rates of growth in production sets the pattern for growth of income of those engaged in gainful work in these sectors. Even though agriculture accounts for only a little more than a quarter of India's GDP, more than three-fifths of the nation's total working force earn their livelihood from agriculture. An overall rate of growth for the economy of 8 or 10 per cent will have little significance to the bulk of the people who subsist on agriculture if, in the relevant period, farm production happens to be stagnant. Of the estimated 400 million constituting India's working population, close to 250 million continue to depend on agriculture for their living. They and their dependants by far make up the nation's majority; dizzily high rates of GDP growth, sparked, for instance, by massive growth in the services sector, will still leave these millions cold.

On to an even more uncomfortable theme. Those weaving dreams around information technology and what it can do to their near and dear ones will perhaps not be interested in such crude facts as that the total number engaged in IT activities ' roughly one million ' constitutes a bare 0.4 per cent of the country's aggregate working force. Even supposing employment in the IT sector doubled over the next five years, aggregate employment provided by the sector would still be less than one per cent of the nation's total working force. India Inc. is within its class rights to brush aside this rude reality; it is not their immediate headache.

What about the Centre and the state governments though' The mystique of the relationship between overall GDP growth and growth in employment is not always easily ravelled. But to pretend to ignore it on that score can have dangerous consequences. A recent publication from the Reserve Bank of India, Handbook of Statistics on the Indian Economy, furnishes some daunting data on the state of employment in the country in this high noon of globalized economic development. During the five-year period, 1996-97 to 2001-02, employment in the public sector actually declined from 19.56 million to 18.77 million. In the organized private sector, the corresponding decline was from 8.69 million to 8.43 million. Roughly, therefore, the drop in employment in the sectors for which records are available is almost to the extent of a million.

Consider alongside this the other piece of information: the number of registrations with the employment exchanges during these years has wobbled around 41 million, close to 10 per cent of the aggregate working force. With all the flaws that vitiate the employment registers, it is still a frightening picture. And it leaves out happenings in the countryside that is reeling from the onslaught of the unbridled import of farm products, or, for the matter, in the so-called informal sectors covering small-scale industry and trade.

Reality clashes with reality. At one end is the reality of a booming IT sector: a gleam in the eye of those associated with this sector, particularly hopeful entrants from the middle class. George W. Bush has won the election, outsourcing is there to stay, there should now be no stopping of the boomtime at call centres in Bangalore. Hyderabad, Mumbai, Calcutta, Noida and Gurgaon. Contrast this with the other reality: every expansion of the IT sector contributes to a shrinkage of employment in not only other service sectors such as banking, railways, retail trade, higher education and so on, but also in agriculture and industry.

There is no question that the expansion of IT will lead to extra employment within the sector; maybe in the course of the next five years another one million will be absorbed in this sector over and above the existing base of one million employment. But can anyone vouchsafe that such additional employment in the IT sector will not be accompanied by a loss of work opportunities to the extent of as many as 10 million in the rest of the economy'

True, given the disorganized nature of basic statistics for the small-scale sector, including in the sphere of informal trading, precise estimates of job losses resulting from the spread of IT are hard to come by. Facts which, for some reason or other, are not concretely presentable, nonetheless do not cease to be facts. These have a way of registering their existence via reports of suicide, starvation deaths, sudden civil uprisings often even assuming the form of the outbreak of communal or ethnic passion.

Those in charge of shaping the political and economic destiny of the country are embarrassed by such events. As if the issue of an appropriate technology is long dead, they dare not proceed against the tide of IT. The list of names entered into employment registers however keeps lengthening. Ruling politicians, looking for escape hatches, seek solace in the hope that prosperity spawned by the IT revolution would be so immense that its spread effects are bound to benefit the entire economy.

On the other hand, a large part of the gains accruing from IT either belongs to foreigners who take away their profits overseas, or is spent on lavish living with an exceedingly high import content. The spread effects, so-called, play hooky. Wishes can be horses, but idle wishes can be the forerunner of insurrectionary situations too.

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