Ramesh Singh Summary: Growth, Development & Happiness- 1 | Indian Economy for UPSC CSE PDF Download

Introduction

Historically, economists, akin to seers and philosophers, have contributed to humanity's pursuit of a brighter future. Various concepts have emerged in economics literature, ranging from simple terms like 'progress' to more technical ones such as 'development', 'growth', and 'human development'.

• During the post-war era, there was a significant emphasis on the 'economic man', leading to substantial wealth creation.
• In the 1980s, social scientists delved deeper into studying human actions, challenging the notion of the 'rational man' and prompting reflections on humanity's existence on Earth.
• Simultaneously, the world grappled with the complex issue of climate change.
• Today, thanks to the United Nations Organization (UNO), we have access to resources like the World Happiness Report.

Progress

• Progress is a term commonly used by experts to signify improvement in various aspects.

In economics, progress historically indicated positive changes in people's lives and the economy, encompassing both quantitative and qualitative dimensions.

• Over time, economists began using progress, growth, and development almost interchangeably, until the 1960s, 1970s, and 1980s when distinct meanings for these terms emerged.
• While 'progress' became a broad term lacking specific economic connotations, growth and development obtained clearer definitions.

Economic Growth

An increase in economic variables over a period of time is economic growth. The term can be used in an individual case or in the case of an economy or for the whole world. The most important aspect of growth is its quantifiability, i.e., one can measure it in absolute terms.
 

Economic Developments

Economic development is the growth of the standard of living of a nation's people from a low-income (poor) economy to a high-income (rich) economy. When the local quality of life is improved, there is more economic development.

➢ Measuring Development
The idea of developing a formula/method to measure the development was basically facing two kinds of difficulties :

• At one level it was difficult to define as to what constitutes development. Factors which could show development might be many, such as levels of income/consumption, quality of consumption, healthcare, nutrition, safe drinking water, literacy and education, social security, peaceful community life, availability of social prestige, entertainment, pollution-free environment, etc. It has been a realty difficult task to achieve consensus among the experts on these determinants of development.
• At the second level, it looked highly difficult to quantify a concept as development constitutes quantitative as well as qualitative aspects. It is easy to compare qualitative aspects such as beauty, taste, etc., but to measure them we don't have any measuring scale.

➢ Human Development Index

• A human development index (HDI) which was the first attempt to define and measure the level of development of economies. The HDR measures development by combining three indicators— Health, Education and Standard of Living— converted into a composite human development index, the HDI. 
• The creation of a single statistic in HDI was a real breakthrough which was to serve as a frame of reference for both 'social' and 'economic' development.
• The scores for the three HDI dimension indices are then aggregated into a composite index

  using geometric mean. The HDI facilitates instructive comparisons of the experiences within and

  between different countries.

  The UNDP ranked the economies in accordance of their achievements on the above-given

  three parameters on the scale of one (i.e., 0.000–1.000). As per their achievements the countries

  were broadly classified into three categories with a range of points on the index:

  (i) High Human Development Countries: 0.800–1.000 points on the index.

  (ii) Medium Human Development Countries: 0.500–0.799 points on the index.

  (iii) Low Human Development Countries: 0.000–0.499 points on the index.

➢ Introspecting Development

• As the western world came to be regarded as developed, having top twenty ranks on the HDI, social scientists started evaluating the conditions of life in these economies. Most of such studies concluded that life in the developed world is anything but happy. 
• Crime, corruption, burglaries, extortion, drug trafficking, flesh trade, rape, homicide, moral degradation, sexual perversion, etc — all kinds of the so-called vices— were thriving in the developed world. It means development had failed to deliver them happiness, peace of mind, general well-being and a feeling of being in a good state.
• Gross National Happiness: Bhutan, a small Himalayan kingdom and an economic non-entity,

  developed a new concept of assessing development in the early 1970s—the Gross National

  Happiness (GNH). Without rejecting the idea of human development propounded by UNDP, the

  kingdom has been officially following the targets set by the GNH. Bhutan has been following the

  GNH since 1972 which has the following parameters to attain happiness/development:

  (i) Higher real per capita income

  (ii) Good governance

  (iii) Environmental protection

  (iv) Cultural promotion (i.e., inculcation of ethical and spiritual values in life without which,

  it says, progress may become a curse rather than a blessing)

A recent study by a senior economist from the UNDP on the Bhutanese development

experience under the GNH has vindicated the idea of ‘gross happiness’ which development must

result into. As per the study, the period 1984–98 has been spectacular in terms of development

with life expectancy increasing by a hopping 19 years, gross school enrolment reaching 72 per

cent and literacy touching 47.5 per cent (from just 17 per cent).

Happiness

The World Happiness Report 2020 was released on 20th March 2020 (the International Day of

Happiness). The 156-nation report (though, only 153 nations have been ranked), 8th in the series

(no report was published in 2014), ranks nations on the basis of ‘reported happiness’ by their

citizens. Aimed at ‘guiding public policy’ of the nations, the report measures and ranks the

nations on the basis of the following six variables:

(i) GDP per capita (at PPP)

(ii) Social support (someone to count on)

(iii) Healthy life expectancy at birth

(iv) Freedom to make life choices

(v) Generosity

(vi) Perception of corruption

India-specific Highlights:

■ India is ranked 144th (4 ranks lower than the report of 2019). India has lost ranks almost

every year since the report is published—from 111th in 2013 to 117th in 2015, 118th in

2016, 122nd in 2017, 133rd in 2018, 140 in 2019. For that matter fall in ranks has been

seen in case of several developed countries also (notably, not caused by economic but

‘social’ reasons).

■ India ranks lower than all of its neighbours—Pakistan (66), Nepal (92), Bangladesh (107)

and Sri Lanka (130). All nations in BRICS are better ranked than India—Brazil (32),

Russia (73), China (94), S. Africa (109).

■ India is ranked with the least happy nations in the world with—Afghanistan, South

Sudan, Zimbabwe, Rwanda, Central African Republic, Tanzania, Botswana, Yemen and

Malawi.

■ India is among world’s 5 nations where the largest drops in ranks have been seen since

2008–2012 (other 4 nations are Venezuela, Afghanistan, Lesotho and Zambia). Life

evaluations have been sharply declining in case of India.

■ While in case of ‘current life evaluation’ Delhi is ranked 180th, in case of ‘future life

evaluation’ it is ranked 182nd—out of a total of 186 cities taken from the world. Some

other peer cities are ranked in case of ‘current life evaluation’ are—Karachi (117th),

Lahore (122nd), Beijing (134th), Colombo (170th), Baghdad (163rd), Myanmar (165th),

and Kabul (186th)

Insights into Human Development

The World Bank in its report (World Development Report 2015: Mind, Society, and Behaviour)

said that development policies become more effective when combined with insights into human

behaviour.

It sites some examples from India in the areas of healthcare and education:

■ Open defecation dropped 11 per cent from very high levels after a Community-Led Total

Sanitation (CLTS) programme was combined in some chosen villages with the standard

approach of subsidies for toilet construction and information on the transmission of

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diseases.

■ The likelihood of default on loans became three times less with a simple change in the

periodicity of meetings between microfinance clients and their repayment groups to

weekly rather than monthly.

■ Research showed that boys from backward classes were just as good at solving puzzles as

boys from the upper castes when caste identity was not revealed. However, in mixedcaste groups, revealing the boys’ castes before puzzle-solving sessions created a

significant “caste gap” in achievement with the boys from backward classes

underperforming by 23 per cent (making caste salient to the test takers invoked identities,

which in turn affected performance, as per the report).

Value Economics

There is research in psychology and evolutionary biology which shows that morality, altruism,

and other-regarding values are an innate part of the human mind, even though the social setting

in which a person lives can nurture or stunt these traits. However, the recognition that these

human and moral qualities can have a large impact on economic development came relatively

late to economics. Hence, the literature on this is relatively recent and brief. In fact, recent

research shows that having a few ‘good’ human beings in society can give rise to dynamics

through which we end up with an overall better society. There is also evidence that social norms

and habits that at first sight seem ingrained in a society can change over short periods of time. By

this argument it is possible for a country to nurture and develop the kinds of social norms that

enable a more vibrant economy.

Economic development is not only dependent on fiscal policy, monetary policy and taxation but is also rooted in human psychology, sociology, culture and norms. In economics, there has been a bit of resistance in emphasising other aspects of development, because it is thought of giving ground to the neighbouring disciplines.

Nudge & Public Policy

• Behavioural economics provides insights to nudge people towards desirable behaviour. By now, nudge has been successfully used in India as an instrument of public policy (in the Swachh Bharat Mission (SBM) and Beti Bachao Beti Padhao (BBBP) campaigns).
• It can be further used to aim even higher goals such as:
  (i) From BBBP to BADLAV (Beti Aapki Dhan Lakshmi Aur Vijay Lakshmi).
  (ii) From Swachh Bharat to Sundar Bharat.
  (iii) From 'Give it up'(for the LPG subsidy) to 'Think about the Subsidy'.
  (iv) From tax evasion to tax compliance.