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Sen-Bhagwati Debate: The missing link in the two-way effect of growth and development

growth vs developmentThe recent debate on growth-development dynamics between two economists Amartya Sen and Jagdish Bhagwati has created much interest in the world of Development Economics.  At the heart of the debate lies the question whether growth is a pre-requisite for development or whether development must precede growth.Growth often refers to sustained increase in per capita income of a country, while development is a structural concept encompassing improvement in the overall standard of living, health, nutrition, education levels of a country.

In Sen’s terminology ‘Capability Development’ refers to enabling people to attain freedoms to achieve goals which they have a reason to value.Sen firmly believes that state-led human development welfare measures must be given precedence over pro-market growth reforms and that growth will be an inevitable outcome of improved human development indicators such as literacy, life expectancy etc. Eradicating poverty which Sen defines as a ‘Capability Deprivation’ through state-led welfare programmes should be given priority over pro-market growth reforms. This implies once poverty is eradicated and a country has well-educated healthy and productive citizens, growth would follow. On the other hand, Bhagwati is of the view that growth is indispensable to achieve better human development indicators and must precede development. This means growth is necessary, particularly for poorer countries, for attaining resources to spend on welfare programs.

India has somewhat followed Bhagwati’s model since the 1960s when it moved away from policy of import substitution to export promotion. The priority for the government was at that time to build fiscal resources through improved growth and later on spend those resources on welfare programmes. In India several state led reforms have been initiated in recent times, such as MGNERGA, Mid-Day meals Scheme, ICDS, PDS,Right to Education, with an aim to improve the abysmal levels of human development. However very little has been achieved so far. India ranks very poor in global hunger Index and fares worse than many sub-saharan African countries in several other indicators of development. This means that there has been flaw somewhere in India’s growth story. The growth effect has not trickled down to the poor. In other words growth has not translated into development as Bhagwati would have expected. Also state led welfare programs have not yielded any positive results for the growth as Sen would have expected. These welfare programs have added more to the fiscal deficit than contributing to the growth. For example, despite enabling better access to education, unemployment levels are still quite high, particularly among urban youth in India. Hence it would be inept to hold polarized viewpoints in this debate as the reality suggests.

Unlike what Sen believes, growth itself is not to be blamed for the failed results and unlike what Bhagwati believes growth need not always translate to development. There are issues much deeper and intrinsic to the system such as corruption, bureaucratic bottlenecks,market rigidities and  lack of transparency in Governance. These structural factors are specific to an economy and cannot be sidelined in the debate. Hence the conclusions also need to be contextual. One cannot arrive at a policy prescription for all developing countries based on general perception unless one examines the root cause behind failure of delivery mechanisms inherent in the structure of an economy. Unless the root cause is attacked neither growth will lead to development and neither development can bring growth.