Growth and Inequality

Inclusive growth is when more and more Indians benefit from the growth of the economy, by way of better incomes and a better quality of life. Has this happened so far? The answer is yes, it has happened to a certain extent, but has not happened enough. To say that there has been no "trickle down" at all to the common man, of the benefits of economic growth is belied by all available statistics of income and consumption. Practically, everyone is earning more today than they were the previous year or the year before that, or even the generation before that. Yes, those who were at the top half of the income ladder to begin with, have had their incomes grow much more than those who were in the bottom half. But the rising tide has lifted the average income of the bottom 25% of Indians also.

But this unfortunately has not meant that there has been a significant improvement in the quality of life of those who are not the top half of the country by income. The truth is that income growth and consumption growth has happened to a far greater degree than improvement in quality of life, defined as access to basic amenities and services. The census data is as clear on this as is the macro economic data. Before my bureaucrat friends rush to challenge this, it is true that in geographical pockets, and in certain specific areas for certain specific initiatives, there has been improvement. But an improvement in electricity availability to the villages of Gujarat, or good results of the Sarva Shiksha Abhayan (enrolment has jumped but retention after class 5 has not) or the NREGS in Tamil Nadu or Andhra Pradesh is not enough. I think for some time now, many of us have confused consumption of consumer goods with quality of life improvement. Mobile phones have gone into many more pockets, but access to the banking system is denied for many of them. Colour TVs have gone into many more homes, shampoo in sachets and glucose biscuits of good quality are accessible to most people, but access to modern sanitation, electricity, decent education, health care and decent housing still lags far behind. We have built a vibrant consumer society not grounded in the widespread access to fundamental quality of life improvers. Isn't that what the Left has been saying? Perhaps, except that their solution is to cut out consumption as well, and turn the whole country into a welfare state, which we can hardly afford. That is an "after me, the deluge" view of the world. Generations that live long after us will forever be paying for it.

Inequality is not what we need to worry about. "Garibi Hatao" will not happen through "Amiri Hatao", the way Indira Gandhi felt it might. Income disparity per se' shouldn't worry us all that much. The rich can be as rich as the rich in America, but even the lowest income strata must have a decent basic quality of living - not the lap of luxury or even the knees of comfort, but enough access to roti, kapda, makaan, bijli, sadak and paani for us to say that economic growth has been inclusive.

I do believe that many of us in business have been thinking of inclusive growth in terms of the metrics of income growth and consumption growth (what was the amount of income / the amount of ownership of consumer durables that the bottom 20% of households ten years ago / five years ago versus and what is it today? Has it increased?); but what we need to also do is to look at it through the metric of amenities they have access to. This was brought home forcefully to me through the story of a young lady I know, who lived in Mumbai with her mother, brother and sister in one room plus toilet attached servants' quarter of a flat in a posh area. Her mother worked as a domestic help in the flat, her sister and she worked to supplement the income in low skill domestic and office helper jobs, and between all of them, they would qualify as lower middle income in any income survey, or as "aspirers" or even "seekers" in the McKinsey-NCAER reports, because their collective household income would be about Rs. 200,000 a year. I often marveled at how lovely and "in" her clothes were, thanks to incredibly low priced Chinese fabric and matching plastic accessories that are flooding our markets; and thanks to upper class women who bought new clothes incessantly and gave away fairly new clothes frequently and thanks to the great Indian Jugaad gene where tailors in back alleys can alter anything with style and finesse. She had her own cell phone, thanks to the lifetime connection deals that our telcos put together in order to increase their market shares and their valuations. She was very bright, learnt and picked up things through observing what people like us did in their offices and homes, was gadget savvy, picked up English after being sponsored for a short course, and there was no doubt in my mind that if this quality of mind had failed standard ten, it was because of terrible teaching at school, and an absence of help at home. Had she been born into any of our homes, she would have scored 80% quite easily. (As a comment on terrible teaching, I had a young boy peon in my office, who went to night school. When I asked him what he was studying he said "commer-ical maths". I racked my brains on what commer-ical maths was, and he showed me the text book the next day. It said commercial maths. Clearly even his teacher did not know that it was commercial and not "commer-ical"). To return to the young lady's story, one day she arrived totally distraught and explained to me that her mother had got chucked out of her job, following an argument with the lady of the house where she worked; and they had to vacate their one-room-shelter immediately. The entire family spent the next few nights on the stair case of the building, pleading with the security guards of the building to let them stay. I explored with her the options they had in terms of finding a small shanty or room in a chawl on rent - since finding more work to do was not a problem in a big city.

They represented what Kishore Biyani, my retailer friend, calls "India 2", the strong spine and support system which enables "India 1", or people like us to go out and earn more, mentally relaxed in the confidence that our household affairs are taken care of. "India 1" is always on the look out for all forms of domestic help, and retailers for sales assistants, and they were willing to pay premiums for smart workers. So conceptually, it made sense for them to liberate themselves from the room attached to the house where they worked, and go all out and work longer hours in more homes and earn more to pay for it. But I discovered that it was not so easy in practice. There was a well developed permanent shanty settlement (a sort of "upmarket slum") nearby where a room would be affordable, but with a family with no adult male and two beautiful young girls, they would be prey to a fate much worse. Another one not too far away required a deposit of Rs. 30,000. The family could have accessed that much money from various employers who would have been happy to lock them in for a while through this loan, and paid it back over time from their salaries, but the mother baulked at the burden of such a large debt. In a distant suburb, a room was far more affordable, but there was no electricity and water in the room, besides, it would take them about two hours each way of travel time to get to their places of work. None of the options, in any case, came with a single toilet - they were all community toilets shared by many people. Eventually the mother found another job nearby with a similar servants' quarter arrangement and the family moved - another lease of life, for who knows how long. Why didn't they go back to the village?, I asked. They had burnt all bridges there, and home was the big city now. They had nothing and no one left behind, and their relatives in the big city were all staying under similar arrangements, and could not offer shelter, though they could offer loans.

Another part time domestic I know earns about Rs. 7,500 per month working in various households in well heeled localities. Adding her husband's income, she will also be a part of what we count as the consumption driven economy or the aspiring class or the mass market. She dresses well, can read and write, is smart and socially confident, and wants a better future for her two little girls, both of whom go to school. Her family is nuclear, her husband good, and she has a loan that she is paying off on a room they have taken somewhere. Another example of economic growth, trickle down and India shining? Not quite. She leaves her 4 year old alone at home, who helps herself to food that is cooked and kept on a low shelf; she gets access to water from 2-3 a.m and hardly sleeps. And yes, that is the famous resilience and striving that we talk about. So these are the consumption and upward mobility stories that are borne out by the income and consumption statistics that I monitor to see whether there is inclusive growth or not. But the story looks different when you add the rest of the data to it - the quality of life and access to amenities data. And that's what we should also focus on when we talk of inclusive growth.

The solution space does not lie in policies like those that the present central government has followed, which lie rooted in the principle "don't fix anything until the gaadi starts rocking a bit too much for hanging in there". Subsidies and loan write offs have increased incomes, despite the leakages and the corruption, but massive improvements in infrastructure are needed to improve quality of living - even simple things that preserve dignity like more public toilets for women who live on the pavement. On consumer visits, I see that in states with better road connections and public transport, people living better, in villages and traveling to the nearest mandal town for work, business and schooling. We have an education minister and his team of bureaucrat helpers who have decided that the solution to the alarming school dropout rate is to run TV ads on the Sarva Shiksha Abhyan, and impose OBC reservation in the IIMs and IITs, rather than launching massive scholarship programs to enable more bright kids from under privileged backgrounds to get to a level where they can think about post graduate education. The number of lower income parents in urban areas who pull their kids out of government schools and send them to mom and pop "Lord Krishna convent" or "St Sai public school" is increasing. These private schools charge money but do not even want to train their teachers, lest they decamp to a neighbouring school for a bit more money. But still, they teach the kids something - something more than the government schools, as their parents will tell you.

At a recent meeting of development sector and NGO folks in Helsinki, someone asked me why I referred to and thought about people at the bottom of the pyramid as consumers, and not as citizens. It made me stop to think, and I figured that perhaps it was because that's how my world has thought about progress - the ability to consume. But an insightful European anthropologist said "maybe in your country, you have no real rights and privileges as a citizen; maybe you have them only as a consumer". Perhaps she is spot on. That's why, as Ramesh Ramanathan of Janagraha points out, how rich you are, in this country, is measured by how independent you become of the government to provide you living infrastructure. Have overhead sumps and buy water from tankers, live in gated communities with own generators, never use public transport, video-conference rather than drive to the suburbs. We need to find a way of offering the same market driven mechanism to enable the bottom half of India also to become consumers who are able to buy affordable quality of living related amenities. Perhaps the answer lies in moderating egos and learning from each other, rather than in searching for the Holy Grail. Amartya Sen says that India has much to learn from itself - some states do some things very well and some really badly. We have many pockets and arenas like health and education where this is working or successful models have been built and are ready to scale - thanks to Governments that work well, or social entrepreneurs or public private partnerships or several small entrepreneurs. But building on all this needs Government to act as venture capitalist and provide them with funding and mentoring amenities - not be in competition with them because some minister and his team want to be in control, or are feeling petty and competitive. The new central government, forward looking state governments and their advisors and partners need to accelerate work in providing inclusive access to amenities and for us in business, I think it is good to re visit the metrics of progress and inclusive growth that we currently use.