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Nature of Economic Development

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  1. Nature of Economic Development How Development Differs from Growth indiresan@gmail.com

  2. At present growth rate, by 2020We should become four times richer • Will our residences be four times better? • Will there be four times fewer slums? • Will there be four times less congestion? • Will personal safety be four times better? • Will the environment be four times better? • Will quality of life be four times better?

  3. Scientific Survey According to a survey conducted on 1637 people 2742 said NO to all six questions (Some people must have raised both hands!)

  4. ISSUES • Rural-urban disparity is spreading Naxalism and retarding business development. • Differential rural-urban growth rate is making matters worse. • Unemployment among educated youth is both the cause and the result of rural-urban disparity • Current rural development schemes do not generate educated employment in rural areas.

  5. Poverty- A Lifelong Curse “impoverished conditions early in life could have dramatic affects on the brain's development and function. Children who grow up in environments with family stress, negative social and environmental characteristics, and little cognitive stimulation may not fully develop brain areas critical for learning, memory, and language abilities” – American Association for the Advancement of Science. Feb 15, 2008

  6. Measuring Poverty That is why Indian standard measure for poverty Is based on the quantum of food consumed; the idea “Below Poverty Line” dominates development debate However, “man does not live by food alone”! Poverty is more than hunger Every kind of under-development is Poverty

  7. Nature of Development? Q. What is Development? • Fulfilment of human needs • What are human needs? • Possibly Maslow Needs Maslow postulated his needs for individuals We assume they apply also to society at large

  8. Need Physical Security Status Autonomy Ecology* Self-actualisation Description Daily consumption Life-long assets Fancy goods, Perquisites Freedom to choose Freedom from harm* Doing what comes naturally Maslow Needs * Not in the original list of Maslow

  9. Growth Vs Development • Growth refers to quantity • Development pertains to quality • Growth is uni-dimensional • Development is multi-dimensional • Growth is physical change • Development is biological transformation

  10. Development as Biological Transformation Growth is reversible • Development is cyclic but not reversible

  11. Growth Vs Development   Growth  Development 

  12. Measuring Prosperity • Prosperity is often measured by GDP • GDP = Price of “good”s + “bad”s + “anti-bad”s e.g.: Price of food + tobacco + cancer treatment • Prosperity = Priceof “good”s minus Price of “bad”s • GDPmisleads the true level of prosperity Q. What happens to GDP if you marry your cook?

  13. Measuring Development Q. How do we measure development? • As a complex vector of its components • How can we represent those components? A. A Radar Map may be used

  14. Wealth Wealth Connectivity Connectivity Income Income Choice Choice Quality Quality Leisure Leisure Radar Map of Maslow Needs Ideal Typical Urban   Typical Rural Area of the Radar Map Indicates Poverty Level

  15. Transport Internet Market Desired Actual Energy Healthcare Recreation Education Water Public services Housing Administrative Inputs of Development

  16. Hierarchy of Consumer demand

  17. Goals of Economic Development Every family with a dwelling provided with • Protected water supply, reliable electricity • Within walking distance of public transport • Connecting to a choice of • Schools, hospitals, markets • Set in a clean, spacious habitat • Endowed with a variety of recreation spaces (Play grounds, gardens, theatres) Plus income safety net for the helpless

  18. Urban Expansion Option • Can cities offer affordable housing for all? • Can they offer clean environment? • Can they relieve congestion? • Can they avoid long hours of commuting? • Can they increase quality time for family? Answer: Resounding “No!” to all questions That is why we need an alternative

  19. How Cities Develop Cancer • Congestion • Long hours of commuting to work • Little open space • High real estate prices • Large rich-poor disparity • Insecurity, needs gated communities • Little quality time for family • Multi-dimensional pollution • Physical, psychological, social stress

  20. Increased Demand Price Normal Demand  P  Supply Quantity Q Cities Block Prosperity • Citizens of Mumbai earn high wages • Yet they live in dehumanised slums • A classic instance of Supply Side poverty Cities have little land Limited space, high prices Diminishing quality too

  21. The Village: Pros and Cons • Pro: • Large spaces at low prices • Superior social ambience • Better ecology • Expandable • Con: • Market size too small to offer choice • Few or no basic services • Few jobs, particularly for the educated • Agriculture saturated, income very low

  22. DEPENDENCY SUBSIDY Rural development is based on subsidies Subsidies lead to dependency; dependence seeks more subsidies Same way a dog chases its own tail

  23. Rural Limitations Tiny, unviable market size Few and poor services Unattractive to the rich Subsidy dependent Poor connectivity Sluggish growth No jobs for the educated Urban Failings Congested markets Astronomical land prices Perpetual poverty Exploitation driven Wasteful commuting Unregulated growth Shrinking Value of Money Why Both Cities and Villages Fail Both Increase Rich-Poor Disparity

  24. Expand Existing City Advantages A useful base exists Willing entrepreneurs Public popularity Disadvantages Space is expensive Little scope for the poor High, escalating costs High pollution Relocate in Rural Area Advantages Plenty space at low cost Scope for inclusive growth Scope for optimum design Disadvantages Zero base Risk of local opposition High start-up costs Limited size Urbanisation: Two Options Urban malaise incurable; rural problems manageable

  25. Normal Development Low wage jobs For the poor, unskilled only Farm-based economy State Subsidised Low technology Government controlled Rurban Transformation High wage employment For all, including the educated Amenities-based economy Profit oriented High technology Public Private Partnership Rurbanisation = Rural Transformation

  26. Rurbanisation • Cities are expensive; • villages are inexpensive. • Cities attract capital - financial and human • villages virtually repel both. • Cities offer choice of services • Villages provide practically no services • City growth is cancerous • Villages have ample scope to expand. Solution = RURBANISATION = urban amenities + rural ambience

  27. Components of Rurbanisation • Rural ambience • Open space • Clean environment • Little or no commuting time • Family quality time • Low prices • Plus Urban amenities • Connectivity • Choice of social, economic services • High incomes, jobs for the educated

  28. Why Rurbanisation?  Indian Slum with Palatial buildings In the background 0.3% of the country’s area will suffice to provide as much as 200 sq m space for each slum family in the country. Affordable space available only in rural areas Rurbanisation only option for Inclusive Development