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News of Jan
6, 2007
India, China Growth
Not Too Pro-poor: World Bank
by Arun Kumar
Washington, Jan 6
The post-reform economic growth in Asia's two "awakening giants"
India and China has not been balanced across regions or sectors, nor
has it been particularly pro-poor in either country, according to a
World Bank study.
In both countries, there has been a marked geographic unevenness in
the growth process, with numerous lagging regions, including some of
those that started off among the poorest, say Bank's Shubham
Chaudhuri and Martin Ravallion in their paper on "Partially Awakened
Giants: Uneven Growth in China and India".
In China, growth in the primary sector (primarily agriculture) did
more to reduce poverty and inequality than growth in either the
secondary or tertiary sectors, say the authors in the paper written
for a new World Bank report, "Dancing with Giants: China, India, and
the Global Economy."
On the other hand, in India, with higher initial inequality in
access to land than China, agricultural growth was less important
than tertiary sector growth.
Income inequality is rising, although India has not yet experienced
the same trend increase in inequality that China has seen. Poverty
in both countries is not becoming any more responsive to aggregate
economic growth and is becoming more responsive to rising
inequality.
India's poor did not start the reform period with the same
advantages as China's poor, in terms of access to land and
education, Chaudhuri and Ravallion said.
Persistent inequalities in human resource development and access to
essential infrastructure within both countries, but probably more so
in India, are impeding the prospects for poor people to share in the
aggregate economic gains spurred by reforms. The geographic
dimensions of their inequalities and the associated disparities in
fiscal resources and governmental capabilities loom large as policy
concerns for the future in both countries, they said.
In the future, it will be harder for either country to maintain its
past rate of progress against poverty without addressing the problem
of high and rising inequality. However, it is not particularly
useful to talk about "inequality" as a homogeneous entity in this
context, the authors said.
Policy needs to focus on the specific dimensions of inequality that
create or preserve unequal opportunities for participating in the
gains from future economic growth, they suggested.
Arguably both countries are seeing a rise in these bad inequalities
over time as the good inequalities (conducive to efficient growth)
turn into bad ones, and the bad inequalities drive out the good
ones.
"While both countries need to be concerned about the "bad
inequalities" we have pointed to, we suspect that it is China where
the near-term risk that rising inequality will jeopardize growth is
greater," the authors said.
Arguably, the Chinese authorities have been able to compensate for
rising inequality by achieving high growth rates; by this view, it
is the rising inequality that fuels growth in China, through the
political economy of maintaining "social stability," they said.
The "Catch 22" is that the emerging bad inequalities in China will
make it harder to promote the growth that will be needed to
compensate for those inequalities. Maintaining sufficient growth
will require even greater efficacy of the policy levers used to
promote growth.
Whether or not the problem of rising inequality is successfully
addressed, there are likely to be implications for the rest of the
world. If the problem is not addressed, then there is a risk that
the high growth rates will not be maintained, with spillover effects
for trade and growth elsewhere.
"If it is addressed, and depending on exactly how this is done,
there may be some short-term costs to growth, although (as we have
argued) redressing the bad inequalities would actually be good for
growth. There may also be consequences for the pattern of trade,
such as through a change in the sectoral composition of growth," the
authors said.
For example, in both countries there appears to be potential for
cash crop expansion, which would attenuate one important source of
concern about rising inequality, and it can be expected that a
non-negligible share of this expansion in domestic cash-crop output
would be exported.
The new initiatives underway in both countries are probably steps in
the right direction, although continuous evaluative research will be
needed on the efficacy of these approaches relative to alternatives,
they said.
There are important but poorly resolved issues concerning the
appropriate balance between types of interventions. But an even
harder challenge remains, namely to improve governance-capacity,
accountability and responsiveness-notably (but not only) at the
local level. If this challenge is left unmet, the ultimate efficacy
of any of these initiatives will be in doubt, the paper concluded.
IANS
News of Jan
6, 2007
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