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Answering Dilemma: Which Way to GO ?

India has played a pivotal role in sculpting global history since the ancient epoch.  Being endowed with worthy resources, it still is a source of aspiration for the world. After the Structural & Stabilization reforms of 1991, the growth rate of physical output accelerated and soon transmogrified India into one of the influential global economic Superpowers but the recent slump in economic indicators offers a dismal picture of future projections. Soaring poverty, skyrocketing prices & burgeoning income disparities have all made it necessary to bring reforms on war footings to regain former growth rates and ensure the development of our motherland.

According to Sen & Dreze “One way of enumerating development is in expression of real freedom that citizens enjoy”. So, development means enlarging the number of choices, individuals can avail and to corroborate this there is a need for a rapid rise in real GDP which depicts economic welfare together with ameliorating the HDI index indicating civic well-being. In other words, there must be both social & economic growth. Now the primary focus of this article shall be on two distinct approaches to escalating development & how can we utilize both simultaneously to maximize social advantages & minimizing their flaws?

Kerala has been exemplary for other states of the Indian subcontinent due to its remarkable performance in enhancing the standard of living by focusing on social sectors like health & education. Similarly, “Gujarat Model” of Narendra Modi got renowned owing to the unprecedented rise in the GDP of the state. Both are distinct case studies as the model followed differs significantly but the ultimate result of both the models was adding prosperity to human lives. Kerala Model has also been named as “Bottom-up Approach” which emphasizes on bringing changes at the grass-root level of society i.e., providing the best possible healthcare, education & other social security benefits to individuals. Thus, focusing more on HDI indicators to drive higher GDP while the Gujarat Model also known as the “Top-Bottom Approach” accentuated Economic indicators i.e., it envisages that by bringing higher GNP with governmental support, a better standard of living can be easily attained. Both the models are being supported by some great economists, while the former fetched support from Nobel laureate Amartya Sen who received Bharat Ratna while the latter model is being backed by Prof. Jagdish Bhagwati. Now let’s elaborate on both these models through a cyclic explanation. Amartya Sen suggests that India must heavily invest in the social sector (health & education) which shall result in increased welfare, enhanced productivity, ability & willingness to work and it shall ultimately lead to increased production. Thus, increased income & enhanced expenditure and shall result in a virtuous cycle. Dr Bhagwati on the other hand advised that more focus shall be placed on economic infrastructure like rail, road, power generation etc. to lure more investment leading to higher output, income & expenditure. Thus, with increased income, people shall be able to raise their material standard of living, and more money shall be spent on the health & education sector. While the former dilutes income disparities, it is not very effective as it is time-consuming, results shall be attained after a long span of time and the other model, raise income disparities but provide faster results.

The tussle between economists continues as both the ideas possess respective pros & cons and these are not actually comparable. The question of national importance that arise here is which Model will suit the need of India in the 21st century? What should be done to overcome this slump in the economy? there is an ancient “the path to desirable outcomes lies midway through two extremes” let’s endeavor to identify this midway that shall maximize the socio-economic welfare of Indians. Due to the federal characteristic of our constitution, planning is done at three levels- centre, state & local. As local self-government does not hold much jurisdiction while there is a clear demarcation of work areas in the constitution of India for the above two. Now the best possible way to get desired dreams fulfilled is to peruse distinct models at different levels for effective governance. Another question arises here which model should be persuaded at which level? Geoff Crowther remarked, “India is not a country, but a continent” after visiting India and being mesmerized by the prevalence of such diversity. As described above our nation is the land of diversity and thus each state & UTs has its own needs & priorities and thus, the centre may never be able to accommodate such diverse needs in its single policy package but the state shall be in a much better position in this aspect being familiar with the situation at the grass-root level. This shows that states can better adhere to the “Kerala Model” while the Centre must continue with the “Gujarat model”. This suggestion will help our country to reap the fruits of both.

Empirical evidence can be cited to advocate the above suggestion. Kerala had recently stood first in NITI AAYOG analysis and it has always been ahead of other states while as the trade regime liberalized and the impetus given to businesses by both centre and state, an unexpected rise in GDP is observed. As described above, the Constitution of India has clearly demarcated the responsibilities by enlisting distinct spheres in 3 different lists namely Union, State & concurrent lists. It is fascinating that State list consists of subjects like Agriculture, Animal husbandry, Health, Public order, Water & Sanitation etc while Union List comprises of Banking, Highways, Foreign & inter-state trade, insurance, Currency etc. it is hereby clear that subjects of state list are more related to social sector while Union list is the subjects which directly affects the economic infrastructure. So, being at the topmost position, they must take up projects benefits which shall trickle down to the bottom segment of society. Coming to the states, being at a lower level, their governance measures must target the lowest segment of society.

How to implement this model?  Bringing major changes has always been a herculean task requiring firm determination on part of both union & provincial governments as constitutional amendments are needed to alter existing relations to enforce a new model to attain the zenith of success in all spheres. As every year Finance Commission formulates policy regarding apportionment of resources between Union & State but allocations made are never satisfactory from states’ point of view & what is mind-boggling is the fact that many major schemes of Centre are being implemented by states due to the reasons described above. So, it’s important that States must be empowered as they are being assigned a greater role in the implementation of the policy regime and thus decentralization is requisite altogether with assigning states new resources to finance their expenditures.

It is thus concluded that to combat bigger problems, path-breaking changes are needed which might be cumbersome but shall definitely be beneficial and as the situation is getting terrific with each passing day, there is a need to reform practices being followed for the betterment of the nation.

About the Author – Shreyansh Jain is a student of Ramjas College, University of Delhi. He is currently pursuing BA (Hons) Economics. He works at Historical India, a community-based wiki platform stimulating an exclusive discourse on Indian history.

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