How to ensure freedom from future shock

1: Charting the course of inclusive growth

The engine of the Indian economy has been chugging along very well. In the seven years since the beginning of the decade, the country has achieved an impressive transformation. But the larger question is whether the pace of change is quick enough to lift more and more people out of mind-numbing poverty. The Strategic Foresight Group had conducted a study called ‘Rethinking India’s Future’ in 2002. The results were startling, demonstrating clearly why the motto of inclusive growth can’t remain just another fancy slogan.

We relied on a new format for categorising parts of the economy. Instead of income factors, we divided the economy into three kinds based on consumption: the business class, bike class and bullock-cart class. Business class includes people who have cars, computers, washing machines, credit cards and who occasionally travel by plane. The bike class are the people who have proper housing, television and telephone, can travel by train, but can’t yet afford personal computers or fly by plane. Typically, they ride on motorbikes. And then there is the bullock cart class, comprising people who are effectively outside the market for consumer durables and most modern facilities.

Between 2001 and 2007, about 100 million people have moved up from the bullock cart economy to bike class and even to business. The lowest strata declined from 83% to 76% of the population. The good news is that this is among the highest rates of transformation globally. The bad news: it may not still be good enough. In the same period, the country’s population jumped by 120 million. The net result: the proportion of people in the bullock cart economy remained more or less the same at about 850 million. It doesn’t take much to explain why the number of districts under the influence of Naxalism increased from 60 in 1996 to 160 now.

Fast forward to 2025. By then, India’s population could reach as much as 1.35 billion. Even if we achieve a growth rate of 7%-9% every year, 60% of the people will still remain in the bullock cart economy. That is about 800 million poor people. But it is not merely a question of poverty. It would be an open invitation for people to embrace Naxalism, separatism, crime and terrorism.

However impressed the world might be, a transformation rate of 100 million in six years is not adequate for India. We need to double the rate to 200 million. This will make it possible for almost a billion people to belong to the business and bike economy by 2025. It will change the scenario of despair into a picture of hope, dissuading the remaining 350 million bullock carters from choosing destructive options.

But the transformation is real hard business, especially if two critical social development indicators — health and education — defy resolution. Now, half the children below the age of five suffer from malnourishment. When these children become workers in 2025, half of India’s labour force will be unhealthy.

Now consider the dismal statistics on education. While primary school enrolment rate is expected to touch 100% in the next 5 to 10 years, the problem lies in the ensuing high drop-out rate. Today, only 35% of those who enroll at the primary level complete secondary school or equivalent.

This means 65% of those joining the labour force are not even matriculates. So while economic growth will throw up opportunities, large masses of people will be unable to exploit them. The problem of providing employment to a labour force of 600 million, with half of them in poor health and two-thirds without higher secondary school education, is going to be daunting in 2025.