Rohingya refugees – a plea to China

Adil Khan,  a Professor at the University of Queensland, and a former senior UN official, who worked in Myanmar for an extended period of time, wrote this open letter to to the President of the People’s Republic of China. Professor Khan offers a powerful indictment of China’s official position on the terrible plight of the Rohingya refugees.

Worth reading….

 

India’s growth slowdown: Reflections of the Reserve Bank

India’s recent growth slowdown has elicited a lively national discussion – see here, for example. It was reinforced by a scathing op-ed by Yashwant Sinha, BJP member and a former finance minister. Sinha also engaged in a vituperative and personal attack on the current finance minister Arun Jaitley and held him responsible for the ‘current mess’ that the Indian economy presumably is in. He highlighted what he considered to be a disturbing case of self-censorship and an atmosphere of fear and intimidation that silence the voices of critics within the BJP.

Of course, other members of the government rose to the defence of Jaitley and the government at large. Prime Minister Modi himself broke his silence, blaming his critics for spreading despair when it is not justified. Yes, growth has faltered. It has done so quite often in the past, but it will bounce back because the government is determined to ensure that appropriate policies and long-term reforms are in place to sustain India’s growth momentum. The current World Bank president offered solace and support proclaiming that the growth slowdown in India is an ‘aberration’.

Beyond the political noise and rhetoric, and the suitably diplomatic intervention of the World Bank, what is the analytical and evidence-based reflection from the government on India’s current growth and prospects for the future? I reached for the latest Monetary Policy Report (MPR) of the Reserve Bank of India (RBI) to find out both for what it says and does not say.  This is what the MPR offered:

‘…real GDP growth fell below 6 per cent in Q1:2017-18 for the first time in thirteen quarters’. RBI attributed this to a variety of factors. These include: (a) ‘a distinct slowdown in exports’, (b) ‘ loss of momentum in agriculture and (c) a sharp decline in industrial production that hit a ‘20-quarter low’ in Q1:2017-2018’. The MPR highlights a ‘collapse in GFCF (gross fixed capital formation)’, while private consumption expenditure slumped as well. The only glimmer of hope lies in the services sector which has remained resilient so far.

What also stands out in the MPR is the potency of fiscal action. As the report notes, ‘…excluding the support from the robust growth of government final consumption expenditure (GFCE), real GDP growth would have slumped to a mere 4 per cent in Q4:2016-2017 and 4.3 per cent in Q1: 2017-2018’ (italics added). Yet, it is also wary about further fiscal loosening because of concerns that such an act would be inflationary.

Despite compelling evidence that shows that the current growth slowdown in India is broad-based, the Reserve Bank is optimistic and projects a return to growth in excess of 7 per cent in 2018-2019. There is no clearly specified framework or countervailing policy actions that can satisfactorily explain the reversal of the growth slowdown.

The MPR is also notable for what it leaves unsaid. Apart from a reference to the disruptive roll-out of the GST and its adverse impact on growth, the MPR has little to offer on either the short-run or long-run effects of demonetisation that took place last November (other than suggesting that it is a beneficial development). There is little or no analysis on the impact of the growth slowdown on the labour market. Others are more forthcoming. The Centre for Monitoring Indian Economy (CMIE), for example, claims that demonetisation has led to a noticeable decline in India’s already low labour force participation. This, if it persists, does not augur well for future economic prospects.

The MPR reflects a standard feature of policy discourse in India which might be called ‘growth fetishism’. All it seems to care about is rapid growth in a non-inflationary environment. Growing in excess of 7 per cent seems to be the holy grail of the current Indian government and its key stakeholders. Certainly, 7 per cent plus growth, if sustained over time, would be a commendable achievement, but it is not sufficient to ensure that the fruits of such growth will be widely shared.

Comparing development indicators: Revisiting the Sen-Dreze thesis of India’s ‘uncertain glory’

In 2013, Nobel Laureate Amartya Sen and his co-author Jean Dreze published their treatise on India’s ‘uncertain glory’. They acknowledged that the ‘…picture of a new and dramatically changed India is both accurate and important’. Yet, they are keen to ensure that one is not seduced by the ‘…increasingly used rhetoric which suggests that India is well on its way to becoming an economic power’. This, they claim, ‘…is far from the real picture’. They then proceed to devote a section of their book in documenting ‘India’s decline in South Asia’.

Well, where does one begin? The authors believe that ‘…the comparison between Bangladesh and India is a good place to start’. There is a certain irony in making such a comparison because of the nature of the Bangladesh-India relationship. As London School of Economics Professor David Lewis puts it:

‘Since the Liberation War of 1971, when India’s intervention made Bangladesh’s secession from Pakistan possible, relations have been characterised by periodic tension and distrust. Bangladeshis have developed something of a love-hate relationship with India: grateful for its support in 1971 and mindful of a common culture and shared history, but resentful of the ways that India throws its weight around as the regional superpower.’

Sen and Dreze note that, although in terms of per capita income, India is significantly richer than Bangladesh, ‘…(it) has overtaken India in terms of a wide range of basic social indicators’ (italics in original). For example, in 1990, India’s per capita GDP (in purchasing power parity terms) was 1.3 times that of Bangladesh. By 2010 that gap has widen to 1.6.

Has the Sen-Dreze thesis withstood the test of time? Has the really rapid growth of the mid-2000s in India reversed its unflattering comparison with Bangladesh? Sen and Dreze derive their conclusions by drawing on data from the World Bank’s ‘world development indicators’. Their latest data is of 2011 vintage. I use information from the latest available year (2016).  To start with, the income gap persists, with India’s per capita now 1.7 times higher than Bangladesh. Yet, it still remains true that Bangladesh does better than India in terms of a broad array of social indictors as recorded in 2016. Indian life expectancy was recorded as 68 years, while in Bangladesh, it turned out to be 72 years. Infant mortality (in terms of 1000 live births) was 38 in Bangladesh vis-à-vis 48 in India. Access to improved sanitation facilities (% of the population) was 61 in Bangladesh, while it was a strikingly low 40 in India.

There is one specific indicator of lack of sanitation facilities that has attracted attention in recent years and has been the source of much anguish and embarrassment in India. This pertains to the act of ‘open defecation’ where men and women, both and young old, respond to the call of nature in open spaces. It is well known that open defecation poses a major public health risk. India has the unenviable distinction of being way behind Bangladesh in this regard. While the latter is poised to eliminate open defecation entirely  – an achievement that has occurred within the space of ten years – more than 500 million (or about 38 per cent of the population) still engages in open defecation in India.  Not surprisingly, eliminating open defecation by 2019, the year that coincides with the 150th anniversary of Gandhi’s birth, is one of the primary goals of the current government’s Swachh Bharat Abhiyan movement in India. The latter, it seems, has a lot to learn from Bangladesh in this particular sphere of public health, so claims both a leading global periodical and a leading Indian daily. The Sen-Dreze thesis of India’s ‘uncertain glory’ appears to be vindicated, at least in terms of an aspiring economic power being a laggard in terms of social indicators, despite rapid growth and rising income. Certainly, ‘growth matters’, but it is not the only thing that matters.