KLNMurthy wrote:Not that knowledgeable about economic theory, but intuitively it seems to me that there is a tradeoff between "distribution" vs. "rate of growth". I mean, if you didn't care (for the moment at least) about spreading the benefits to lower strata, you could probably achieve a higher rate of growth. OTOH, when you spend billions on building toilets, gas connections, small business loans etc. and also in enforcement measures such as demonetization, and finance infrastruture changes such as GST, you are probably taking something away from investment and, also imposing a short-term overhead cost on business, all of which will reduce growth rate.
I think the carping about lowered growth rate misses the point, and comes from people who are not really serious about the fruits of growth reaching the poor immediately, versus on some "tomorrow" that never comes.
Distribution is a rather bad word to use to describe the changes at the bottom of the economic pyramid in the past five years. Most of these are fixed asset investments - roads, electricity lines to every village, gas cylinder distribution under Ujjwala, toilet building under Swacch Bharat, and the PMAY-R rural home building.
The process of building all this doesn't move the needle of GDP growth dramatically - it's outlay from government revenues being spent on all this, that would have been spent somehow. Gains are more likely to be immediately visible in HDI parameters, but will also contribute to GDP growth by priming the pump for greater economic activity, given access to roads, electricity, fuel, sanitation that frees up time and give people more potential to do more with their time.
Another factor - something I mentioned 3 weeks back, is that at least 2 of these new efforts are dealing with an issue we typically never face - SEBs are under fiscal pressure because not everyone can afford the electricity, and billing mechanisms have not been updated to handle all the new coverage areas. Similarly, Ujjwala is somewhat affected by people having to pay for cylinders upfront and get a subsidy paid back later. The situation here is unique in the sense that supply of basic public goods and utilities has now overtaken demand - with >95% coverage of most of these, there are now more people covered by basic goods and utilities than people able to pay for them. For pretty much all of India's economic history, it has been the reverse - delivery was so poor that people were always chafing at the lack of efficient delivery, which shows up as 'anti incumbency'.
In my opinion, this election was completely uncharacteristic of any past Indian election ever (highest turnout ever, effectively the highest voteshare in any competitive GE, 55-70% voteshare across approximately 20 states) because of a massive pro-incumbency sentiment driven by an enormous improvement in the quality of life at the bottom of the pyramid. It's not something the YoYas of the world notice - rather funny considering he passes himself off as a 'Lohia-ite socialist' . Lohia would probably slap him with his chappal for making such a claim - a Lohiaite socialist of all people would have noticed the gains at the bottom of the economic pyramid.
My only concern regarding this election was how well the effort would translate to votes. As it turned out, spectacularly so. Indian economic policy has often suffered from lack of transmission of reform to voteshare gains, probably because most reform measures were top down and only trickled down to the masses (this was true under ABV too - it was far too early for them to claim 'India Shining') but Modi was shrewd - he basically ignored the whole theory and focused on the bottom, right from the beginning in his 2014 inauguration and I-Day speeches.
Demonstrably, reforms that give priority towards ensuring that the bottom of the pyramid has a dignified basic lifestyle, makes it easier to translate reforms to votes . Even as late as 2014, we had 55-60% percent of rural India lacking a village road, electricity, or a place to go to pakistan. This election is an example of what the population says when someone focuses directly on improving that .
