Despite the Covid pandemic dealing a sledgehammer blow, the Centre is still confident of making India a $5-trillion economy by 2025.
A $5-trillion economy translates into growth of 88 per cent from the present $2.65 trillion (₹195 lakh crore) and would make India the fourth largest behind the US, China and Japan. But what does this mean in the context of inclusive development?
Currently, India is ranked 131 out of 189 nations on the Human Development Index (HDI) scale which is not something to be proud of for a country that lays great emphasis on social equity and inclusion.
In 1990, before the onset of liberalisation when GDP was only $326 billion, India’s HDI rank was 114, and in 1995, at a GDP of $366 billion, it was 115. But, subsequently, despite the rapid economic growth, India’s ranking dropped to 135 in 2005 and 2010, and inched up marginally to 131 in 2019 which indicates that other developing countries have fared better on HDI despite having lower growth. Therefore, it would be pertinent to analyse the $5-trillion vision through the HDI lens.
The HDI is computed as the geometric mean of three indices — (a) life expectancy at birth; (b) educational achievement which is subdivided into (i) expected years of schooling for a child and (ii) mean education years of +25 year adults; and (c) average per capita gross national income on purchasing power parity (PPP) basis.
Despite being the third largest economy on PPP basis and the third largest producer of pharmaceuticals in the world, life expectancy in India is 69.7 years compared with 84.6/84.9 years for Japan/Hong Kong, 80-plus years for most of the developed nations, and 76.9 years for China. Significantly, we are below Asian neighbours like Sri Lanka (77) and Bangladesh (72.6).
About 17 per cent of the population spend above 10 per cent of household expenditure on healthcare and 5.5 crore are pushed into poverty annually because of healthcare expenses.
As a result of various health insurance coverage schemes introduced by States and the number of people lifted above BPL, life expectancy increased by 10.7 years from 1990 to 2015 but has since risen marginally by 0.9 years.
Educational achievement
The expected years of schooling (EYS) based on prevailing enrolment rates has risen from 7.6 in 1990 to 12.2 in 2019 in keeping with the gross enrolment ratio (GER) which has risen from 50 per cent to above 90 per cent for grades 1 to 5. But it is still lower than +13.4 in most of East Europe, parts of South America and Asia and +16.3 years in most of West Europe, the US, Canada and Korea.
The mean years of schooling (MYS) undergone by +25-year-old adults has risen from 4.1 in 1990 to 6.5 in 2019 but is way below the +8.5 of most of East Europe, parts of South America and Asia and +11.8 years of major countries of West Europe, the US, Canada, Korea and Japan.
India’s average GNI per capita (GNIPC) on PPP basis has risen from $1,732 in 1990 to $6,681 in 2019. However, India is still a lower middle income country and compares poorly with majority of the top 100 countries on HDI whose GNIPC is above $10,000.
To reach the $5-trillion level, India’s per capita income (on nominal basis) should increase from $2,620 (₹1.90 lakh) to $3,558 (₹2.58 lakh) with a corresponding GNIPC of about $10,000 after accounting for change in population and the PPP factor.
At this level and considering the growth of life expectancy, EYS and MYS between 2015 and 2019, the HDI would rise from 0.645 to 0.686. This could improve our HDI rank from 131 to 121 (assuming no change in other nations) currently occupied by Morocco. Thus, the $5-trillion goal and corresponding increase in GNIPC does not significantly elevate India’s HDI, implying low inclusivity of growth.
The Table maps the HDI with life expectancy, EYS, MYS and GNIPC. For India to attain the 99th rank, life expectancy should increase to 74 years and MYS and EYS respectively to nine and 14 years.
Interestingly, Sri Lanka with a GNIPC of $12,707 has a HDI of 0.78 and ranks 72 because of its highly respectable life expectancy of 77, EYS and MYS of 14.1 and 10.6 years. Kerala’s life expectancy of 76.4 years, EYS and MYS of 14.8 and 9.1 years, and a GNIPC of $11408, gives it a HDI of 0.763, just below Brazil at 84 but above China at 85.
The average HDI of 0.645 hides some of the underlying achievements and islands of excellence worth emulating. While India’s HDI places it in the medium development category, Kerala, Goa and Delhi fall in the high development category with HDI of 0.763, 0.721 and 0.692 respectively.
Hence, these States could be role models for laggards like Uttar Pradesh, Chhattisgarh, Bihar, and Assam. Kerala’s public health infrastructure, and Delhi’s recently strengthened government school education infrastructure are examples worth emulating.
States that have implemented the Ayushman Bharat scheme launched in 2018 have seen the proportion of households with health insurance increase by 54 per cent and infant mortality rates decline by 20 per cent, indicating increasing life expectancy
The Beti Bachao Beti Padhao scheme has enabled enrolment of girls at primary level to increase to 94.38 per cent as against 89.28 per cent for boys. To augment the EYS and MYS, the government should champion the cause of reintegrating the over 60 million school dropouts with appropriate slogans to exhort the rural population to 15-plus years of formal education.
A $5 trillion economy alone cannot significantly improve HDI. A concerted effort by laggard States to emulate Kerala and leverage the health and educational policies of the Centre backed by sustained measurement of HDI outcomes is called for to hasten India’s entry into the high human development club of nations.
Mony is Professor Emeritus, and Verma is Chairperson, School of Economics-NMIMS, Bengaluru