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Business News/ Opinion / Prosperity’s strong link with high income
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Prosperity’s strong link with high income

The new Human Development report has truths that cannot be ignored

Illustration: Shyamal Banerjee/MintPremium
Illustration: Shyamal Banerjee/Mint

The new global ranking of human development once again underlines a stark truth: a country with higher average income is more likely to have an educated, healthy, secure and happy citizenry. There are undoubtedly exceptions to this rule. Equatorial Guinea has an average income that is 10 times that of Nepal but is only one notch above the Himalayan country in the human development rankings. Georgia has a modest average income of $6,890 in purchasing parity but it is in the select category of countries that have high levels of human development. Morocco is 50 notches lower despite having a level of income that is similar to Georgia. Or, countries such as Tajikistan, Nicaragua, Honduras and Vietnam have lower income levels but higher levels of human development than India does.

There are two broad lessons here. First, the best way to improve the lives of people is by increasing their incomes. The way China has shot up in the human development ranking in recent years is largely explained by its splendid economic growth. Second, countries can achieve higher levels of human development than what should be anticipated by their income levels alone. One chart in the new human development report released by the United Nations Development Programme last week shows how several countries as diverse as Denmark, Costa Rica and South Korea began to build social programmes when their income levels were below those in South Asia today.

The massive decline in Indian poverty over the past decade because of rapid economic growth does not seem to have had a symmetric influence on human development in India.

The average annual growth in India’s human development index in 2000-13 is lower than what it was in the 1980s though higher than the growth rate in the 1990s.

Too much should not be read into this once one considers how the human development index is calculated. Its maximum value is one, so the pace at which countries approach this absolute limit will inevitably slow down; in more technical terms, countries will approach the highest score only asymptotically.

The past decade has seen policy debates in India muddled by the false dichotomy between economic growth and human development; some of the more extreme opponents of economic reforms even argued that rapid growth harms the poor.

The economic ignorance and political opportunism of the cabal around Congress chief Sonia Gandhi damaged the chances of the poor to advance out of poverty. The Indian Left had once held up Julius Nyerere of Tanzania as the prophet of human development rather than Deng Xiaoping of China. Twenty five years later, it is not hard to guess which leader got it right.

The world has seen significant victories against mass poverty in recent decades. It has not done too badly on the human development front either. It is not our case that rapid economic growth automatically translates into better levels of human development; the tragically high level of child malnutrition is an obvious example.

Nor is it our case that societies should not offer help to those who have been left behind or felled by financial shocks beyond their control; even the libertarian social thinker F.A. Hayek had argued for social insurance against such risks. But it is a grand tradition in India to somehow leap from here to the conclusion that economic growth is essentially a sideshow in the entire drama of human advancement.

That is just not true.

India may advance a few notches in the global human development rankings with well-designed social programmes; but it is hard to see how it can advance from its current lowly position to the ranks of those countries with high levels of human development unless it steps on the growth accelerator. For that to happen, the politics of the next decade should be radically different from the politics of the preceding decade.

What do India’s poor need: Government dole or higher incomes? Tell us at views@livemint.com

Follow Mint Opinion on Twitter at https://twitter.com/Mint_Opinion

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Published: 27 Jul 2014, 06:37 PM IST
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