ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Why Human Development Should Precede Economic Growth in the States

Why Human Development Should Precede Economic Growth in the States

This paper presents a conceptual model of the relationship between human development and growth and between them and poverty. It then empirically tests the model. It is argued that to sustain economic growth, improvement in human development and income poverty reduction should be given the topmost priority in Indian states.

 

Though the Indian economy has grown at a much faster rate than ever before since 2002–03, at an average of about 7% per annum, until the COVID-19 pandemic struck hard, interstate disparity in term of economic growth has widened considerably. States like Kerala, Delhi, Tamil Nadu, Maharashtra, Punjab, Karnataka, Gujarat, etc, which could sustain high gross state domestic product (GSDP) growth (close to double digits) were also relatively advanced in terms of the human development (HD). In contrast, the relatively backward states (in term of HD rankings) like Jharkhand, Chhattisgarh, Bihar, Madhya Pradesh, Odisha, Uttar Pradesh and Rajasthan have registered under 5% per annum (on an average) economic growth (EG). These are the states where incidence of poverty, malnutrition and infant mortality rates (IMR) are very high (Chauhan et al 2016; Mohanty et al 2016). The mean years of schooling (MYS) in these backward states also remained low, which did not improve much during last two decades.

Mainstream economists tend to suggest that “economic growth typically does promote human development, and a strong positive relationship is evident from the line of best fit (the ‘regression’)” (Ravallion 1997; also see World Bank 2001). When growth and poverty or growth and enhancement of functioning’s indicators are modelled, it is usually argued that it is growth that influences health indicators or poverty, and rarely the other way around. “Economic growth typically promotes human development” is usually the hypothesis, which is proven by the use of regressions, where the regression line is (by its construction) the expected effect of growth on a human development indicator or on poverty. Where growth failed to deliver income gains to the poor, or promote non-income dimensions of welfare (for example, access to schooling and healthcare), such cases are called “quite untypical” (Ravallion 1997). It is acknowledged that “there are deviations (the ‘residuals’) around this line; these are cases with unusually low, or unusually high, performance in human development at a given level of income” (Ravallion 1997). It is also argued that the human development approach, which we espouse, devotes “more attention to residuals” and “the regression line is ignored.” Indeed, orthodox policy analysis has traditionally placed faith in the outcomes of cross-country (or inter-temporal) regression analysis, rather than explaining the reasons why some countries divert from these average trends and are “outliners.” To us, the outliers demonstrate that it is possible for countries to relieve the non-income dimensions of poverty and achieve social indicators comparable to those of industrialised countries regardless of the level of income (Mehrotra and Jolly 2000).

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Updated On : 20th Sep, 2021

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