It’s time for a broad transition from quantity to quality

India’s below-average government spending on healthcare and haphazard service delivery result in poor access to preventive care.
India’s below-average government spending on healthcare and haphazard service delivery result in poor access to preventive care.

Summary

  • India's achievement of developed-country status will crucially hinge on improved basic services—especially healthcare and education—and on innovation.

India’s 18th Lok Sabha elections will be held in the first quarter of fiscal year 2024-25. One of the major campaign planks that the ruling Bharatiya Janata Party (BJP) has adopted is the aspiration of a “viksit" or developed India by 2047. A developed country is widely understood as one that is industrialized, has a high Gross National Income (GNI) per capita, scores well on human development indicators and has institutions of quality. The commonly used World Bank metric uses a GNI per capita of $13,845 (December 2022) to separate upper-middle-income and developed countries, and $4,465 to classify upper and lower middle-income countries apart.

By this definition, India is classified as a lower middle-income country with a GNI per capita of $2,390. While the arithmetic is a bit more complicated because of relative growth rates and exchange rate differentials, a simple extrapolation requires India’s GNI per capita to grow at a compound annual growth rate (CAGR) of 7.4% over the next quarter century. India’s peak growth rate for GNP per capita has been around 7% in the past 30 years and its annual average during that time has been between 5% and 6%. Beyond the quantitative stretch that is required, India must begin a qualitative transformation as well.

The growth rate that an economy may be expected to have, the so-called trend growth rate, is a function of increased labour and capital as well as the productivity of these basic inputs. Robert Solow, the Nobel Laureate who passed away earlier this year, had estimated a “Solow residual," which identifies productivity growth that is not explained by the amount of inputs used in production. This residual, called Total Factor Productivity (TFP), gets increasingly important as an economy matures and evolves towards being advanced. In semantic terms, you may think of TFP as growth that comes from quality enhancement or innovation. In the years ahead, India will have to rely more and more on TFP growth with a gradually decreasing proportional contribution from labour and capital.

Many middle-income countries have not been able to make this transition. Mexico, Malaysia and Thailand, for instance, grew rapidly to become upper middle-income countries, but have struggled to expand TFP consistently and break on through to the group of developed countries. China is in the midst of an epic battle to break its addiction to fixed asset formation and shift the quality of its growth to other drivers.

An under-appreciated reason for the East Asian miracle was a focus on the building blocks for a quality transition. The fundamental building blocks are primary education and universal access to preventive and basic health services. The Annual State of Education Report (ASER 2023) titled Beyond Basics paints both an optimistic and dismal picture. On one hand, over 80% of eligible students are enrolled in schools and 90% of these students have a smartphone in the household. A ‘quantity’ revolution for schools is substantially underway. On the other hand, only 25% of those surveyed in the 14–18-year age group could read a Standard II textbook in a regional language, and little more than half could read sentences in English. In this group, only 39% could measure distance using a scale if the starting point were not set to zero. Only 43% of Standard V students could read at or better than a Standard II level. Quality in school education has a long way to go still.

India’s below-average government spending on healthcare and haphazard service delivery result in poor access to preventive care.

Notwithstanding the widely broadcast success of covid vaccination delivery, templatized inoculations of children, regular health screenings and a system of layered escalation to tertiary hospitals are either unavailable or inconsistent. India’s disease burden for tuberculosis, hepatitis A and B and measles can be dramatically reduced with more consistent and widespread delivery of vaccines. While India’s calorie deficit has come down substantially, it has been replaced by a nutrition deficit with insufficient vitamins, protein and micronutrients in the diet of a large number of children in the country.

Basic health and education for everyone forms the bedrock of a developed country.

Beyond these foundational elements of quality, the pillars of a developed nation rest on innovation. This is not merely the clever application of ‘knowledge’ discovered elsewhere, but the ability to conduct the entire chain of value creation, all the way from basic and applied science to technology, adaptation and adoption. For this transformation to occur, we need to completely re-engineer how the government, academic institutions and corporations work together. The government will need to support basic science at a far greater level than it is doing today, and the structure of innovation will need to move out of Soviet-style research institutes to co-located spaces for companies and academia to come together.

Another aspect of the quality transformation we need is capacity building for services to be delivered. The executive, judiciary and legislature require a quality transformation to be able to deal with the increasingly complex issues that each domain now faces. A generalist approach that works reasonably well for a ‘quantity’ revolution could easily fail when specialization is required.

P.S: “It is the quality of our work which will please God not the quantity," said Mahatma Gandhi.

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