Bloomberg News

India Needs More Public Spending for Inclusive Growth, Sen Says

July 19, 2011

July 20 (Bloomberg) -- India needs to spend more on basic health care and education if economic growth is to benefit all members of society, according to Amartya Sen, the first Indian to win the Nobel Prize for economics.

Higher public spending must also be part of Prime Minister Manmohan Singh’s efforts to restore public confidence following a corruption scandal involving the sale of mobile-phone licences, Sen, 77, said in an interview in Edinburgh on July 18.

Economic reforms to boost investment have been stymied as Singh’s allies block changes in protests against government corruption and food-price inflation that averaged 18 percent last year.

“The reform process has not stopped, it has halted and it will start again if the government survives,” Sen said. “It will also have to make the growth much more inclusive. Education and health-care expansion are the biggest part of that because an illiterate laborer with very indifferent health is not in a great position to seize the opportunities that globalized economic relations provide today.”

India’s democratic agenda is increasingly concerned with narrower issues such as corruption and inflation, said Sen, who was giving a lecture at a conference in Edinburgh to mark the 300th anniversary of the birth of philosopher David Hume.

“There isn’t enough voice in India about the totally urgent need for expansion of basic education and basic healthcare, particularly basic health care, much further than has happened,” said Sen, who won the Nobel Prize in 1998 for his work on welfare economics.

Corruption

The increasing exposure of corruption in the economy, which had been present for a long time, would have caught whichever government had been in power, Sen said.

“So the first priority is to ride out the present crisis, to generate confidence in his government,” Sen said. “There is no question that if the government had acted quicker it would have saved a lot of embarrassment today. I don’t doubt it is very clear to him he should have acted earlier.”

Economies of countries such as India, China and Brazil won’t be much affected by the sovereign debt crisis because of their focus on economic growth, Sen said.

“In the case of India they are running a deficit at a level that would put Greece to shame but they don’t have a payment problem because the country is growing at 8 percent a year,” he said.

Greek Prime Minister George Papandreou last month won parliamentary approval for a new 78 billion-euro ($109.5 billion) five-year package of budget cuts and state asset sales to secure further international aid from the European Union and the International Monetary Fund in an attempt to avoid defaulting on its debts.

Top Indian news: TOP IN <GO> Indian government stories: TNI IN POL <GO> For India’s General News: TNI INDIA GEN BN <GO> Stories on India’s wireless market: TNI INDIA WRLS <GO> India GDP growth: INQGGDPY <INDEX> HP <GO>

--Editors: Peter Branton, Sara Marley.

To contact the reporter on this story: Peter Woodifield in Edinburgh at pwoodifield@bloomberg.net.

To contact the editor responsible for this story: Colin Keatinge at ckeatinge@bloomberg.net.


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