The secret sauce behind Asia’s growth miracles4 min read . Updated: 01 Aug 2020, 09:45 AM IST
Investments in social infrastructure, such as education and public health systems, are critical for sustainable growth but do not get the attention they deserve
It is well-recognized today that India’s infrastructure deficit needs to be fixed. From erratic power supply to clogged ports, India’s strained infrastructure drags down productivity and hurts growth. Unsurprisingly, the Reserve Bank of India Governor Shaktikanta Das called for a big infra push to revive India’s growth engines at a Confederation of Indian Industries (CII) event a few days ago.
What is less well recognized is the role of India’s social infrastructure deficits --- in education, skills, health and nutrition --- that have stifled India’s growth potential. A Mint analysis of a broad range of economic indicators suggests that India’s deficits in social infra may be harder to bridge than its deficits in physical infra.
Only countries with gross domestic product above 2 trillion (PPP, current international dollars) and with per-capita incomes at most 3 times India’s current levels have been considered for this analysis. There are four such countries in the world: China, Indonesia, Mexico, and Brazil. The analysis considers the gap between India and each of these countries in terms of the number of years separating them by examining when each peer was at the same level as India is right now, on various parameters.
On some infra indicators, such as mobile and internet connectivity, India is less than a decade behind its peers. But it is several decades behind most peers on all social indicators.
About three-fourths of adults in India are literate today. China reached the same level of literacy in 1988, Indonesia reached that milestone in 1985. Brazil and Mexico reached the same levels of literacy even earlier.
The gap in life expectancy is narrower than the gap in literacy but still very large. In 2018, India reached a life expectancy of 69.4. China reached the same levels in 1992, 26 years before India. Mexico reached the same levels in 1987, 31 years before India. Brazil reached the same level in 1998, 20 years before India. India’s life expectancy gap with Indonesia is relatively smaller, with Indonesia reaching India’s current level only in 2011.
While China’s lead over India in terms of its impressive physical infrastructure is widely commented upon, China’s early efforts in providing education and healthcare to masses elude attention. China’s early investments in social infra during the Mao era provided a solid launch pad for its growth take-off in the post-Mao era, wrote Pranab Bardhan, emeritus professor of economics at the University of California Berkeley, in his 2011 book, Awakening Giants, Feet of Clay: Assessing the Economic Rise of China and India. Deng Xiaoping, who took charge of the Chinese communist party in 1978, unshackled many of the Mao-era socialist controls to usher an era of unprecedented prosperity. But the Maoist legacy of heavy investments in broad-based education, healthcare, and rural electrification also helped Deng’s cause, Bardhan argued.
The World Bank’s first study on the Chinese economy published in 1983 noted that despite low per capita consumption levels, China’s ‘most remarkable achievement has been to make low-income groups far better off in terms of basic needs than their counterparts in most other poor countries’.
The story of the Asian tigers is broadly similar to China in this respect. All four of the so-called Asian tigers—Hong Kong, Singapore, Taiwan, and South Korea—which made the transition from being underdeveloped countries to developed economies in less than half a century, embraced wide-ranging state interventions including heavy investments in education and health.
During the first half of the twentieth century, Japan’s rule over Korea and Taiwan left both countries with ‘a major accumulation of human and physical capital’, wrote the American economist Henry J. Bruton in a 1998 review of the experiences of fast-growing emerging economies.
Most colonial rulers saw their colonies as markets for their own factories. In contrast, Japan used its colonies as production hubs as it prepared for war. The Japanese also borrowed from the best European practices to create a world-class health infrastructure in these colonies.
Although access to schooling in India has improved over the past two decades, learning outcomes continue to be poor. In the last international comparison of learning outcomes that India participated in 2009, India ranked 72nd out of 73 countries, outranking only Kyrgyzstan.
India’s meagre investments in health have been even more lop-sided, with greater investments in curative facilities than in preventive public health initiatives such as disease surveillance and waste management. Among curative care facilities, tertiary medical centres have received far more attention than primary health centres. The upshot: India has always ranked among the countries with the highest toll from contagious diseases, much before the novel coronavirus landed on our shores.
The legacy of poor investments in education and health shows up in poor productivity numbers. The lack of quality education and healthcare also make it difficult for the less privileged to take part in India’s growth process. As these pages have pointed out earlier, the premium on higher education has climbed steeply in India’s job market since the turn of the century. With greater digitization and automation in the post-covid world, such returns are likely to increase even further. Unless educational opportunities are equalized, existing inequalities will only widen in the years ahead. It will become even more difficult to sustain growth in the face of such inequities.
The key to the ‘East Asian miracle’ lay in the ability of their political leadership to make ‘shared growth credible’, wrote the researchers Hilton L. Root and Jose Edgardo Campos in a 1996 Brookings Institution report.
That’s a challenge Indian leaders have perennially struggled with.
This is the third of a four-part series on India’s growth challenge. The first part examined how three decades of rapid growth have transformed the country , and the second part examined India's growth measurement challenge.