We should not be hypnotised by the myth of averages and tracking human development by looking at our GDP growth is like looking at a distorted mirror, says
A SINGLE-minded focus on creation of shareholder wealth has engendered flawed governance and leadership in many businesses. Today, well-run and sustainable businesses measure their results with a balanced scorecard. No doubt, creation of wealth for the shareholders is still an important part of the scorecard, but is not the be-all and end-all. Care of customers and employees, respect for the environment, fairness to business partners like vendors and compliance with laws and regulations are among the important pieces of the puzzle.
It should be no different for a nation. An obsession with one number: The percentage growth in gross domestic product (GDP) can create the risk of walking down the path of growth at all costs, hoping that the invisible hand of the market will do the rest. The magic number of 8 per cent or 9 per cent GDP growth means little, unless we view it through the lens of human development.The single data point of high GDP growth may actually obfuscate the real picture.
On January 23, the cofounder and chairman of Infosys delivered the Netaji Oration at the Netaji Research Bureau, (http://www.netaji.org), where he chose to speak on the provocative topic of: "If only Netaji had participated in postindependent India building."
In his remarkable speech, he suggested that if: First, we had followed sound industrial and agricultural strategies without being mired in the "licence/permit raj", and secondly, a combination of Netaji, Jawaharlal Nehru, Rajaji, Sardar Patel and Shyamaprasad Mukherjee had provided collective thought leadership and support to Gandhiji, then India would have been where China is today. We legitimately debate what might have been, not to lament missed opportunities.
We want to draw lessons and avoid past mistakes. Most of the debate that is taking place is similar to four blindfolded individuals feeling different parts of an elephant and describing it. Each one of them is describing four different parts of India.
The first part is "India Shining". We have gleaming, new airports bursting at the seams, luxury cars of every description on the roads, consumer products of every global brand, the finest restaurants and hotels, expensive homes, stock exchanges on fire and large Indian corporations making acquisitions abroad. We have a world-class IT industry. It is triggering the creation of a rhetoric of friction between Buffalo and Bangalore, ignoring how complementary the two economies of the US and India have become in IT.
We have another India Â-"India in Shadows" -the kingdom of the Prince of Darkness. This India is also rich but has not learnt to play by the rules. According to Global Financial Integrity (GFI), (http://www.gfip.org), at least $500 billion of Indian wealth has been, over the years, siphoned off and stashed away in banks abroad. For context, this is twice the amount of our official foreign currency reserves and is just under half of our annual GDP . The Supreme Court has made the following poignant remark, "It is pure and simple theft of national money. We are talking about mind-boggling crime." India's underground economy is estimated at more than $600 billion. If you added this amount to the GDP of our official economy, then it is almost a third of our combined GDP .Perhaps, we are under-reporting our GDP growth.
Who are involved in this huge underground economy?
There are at least three stakeholders in the shadow economy. First, the large black sheep segment of business in India that has learnt to bend rules, evade tax laws and succeed by managing the environment.
Their core competence lies in misallocating scarce national resources. The second consists of criminals, drug traffickers, money launderers and owners of illegal businesses. And the third constitutes corrupt politicians and bureaucrats.
We have then to look at "Struggling India". Our farmers, who account for 55 per cent of our population, contribute only 18 per cent to our GDP and are abysmally poor.Of course, we need manufacturing and labour-intensive, low-technology exports like China to divert at least 100 million of our people to manufacturing in short order. But in any growth scenario, the farm sector will be the source of livelihood for a large part of our population in the foreseeable future. Thus, as we clean up our act in schemes like NREGA -we must invest heavily in Green Revolution 2.0, which is sustainable and ecologically friendly.
We also have the "Marginalised India". Almost 9 per cent of Indians are adivasis (the original inhabitants). They have no access to the basic ingredients of livelihood: Nutrition, clean water, basic healthcare and literacy. Much of our mineral wealth lies beneath forests where our advasis have been living for centuries. They are Indian citizens. They cannot be thoughtlessly uprooted without dialogue and fair rehabilitation.
Tracking our human development by looking at GDP growth is like looking at a distorted mirror. Let us not be hypnotised by the myth of averages.
The goal of "inclusive growth" is indeed a noble one. But in business, as in the life of a nation, only what is measured gets done. We need a fresh, new balanced scorecard for our nation that eschews a laser focus on GDP growth.
We must look at how development is touching the lives of citizens in regions and population segments. We must look at well-defined metrics of human development in rural and tribal India. We justly take pride in our diversity and pluralism. We must provide a fair share of voice to every segment of India to build a strategy of growth and human development that is truly inclusive. And in order to execute this strategy, we must create a balanced scorecard that measures with rigour, the progress of each segment of our society.
(The writer is managing director of Deloitte Consulting, India. These are his personal views)
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