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India, other developing nations drive global economic growth: UN -Arlene Chang
-First Post

While the average Human Development Index (HDI) for the region is 0.558, below the world average of 0.693, South Asia saw the highest growth in the index between 2000 and 2012, according to the United Nations Human Development Report 2013. The region registered an annual growth of 1.43 percent in HDI, the highest compared to other regions.

It also said that the developing countries as a whole are driving the global economic growth. By 2030, the countries of the global South will account for 80 percent of the world’s middle class and 70 percent of the consumption expenditure.

The fasted HDI growth was in Afghanistan, 3.9 percent, followed by Pakistan with 1.7 percent and India, 1.5 percent. While historically, Sri Lanka has a high HDI and is ranked 92, it registered the lowest growth.

The 2013 Human Development Report — The Rise of the South: Human Progress in a Diverse World — analyses more than 40 developing countries that have made striking human development gains in recent years. The report cites rapid human development progress in India, Bangladesh and other South Asian nations as helping drive a shift in global dynamics, pulling millions of people out of poverty and expand the global middle class.

The report attributes their achievements to strong national commitments: better public health and education services, innovative poverty eradication programs and strategic engagement with the world economy.

“The South as a whole is driving global economic growth and societal change for the first time in centuries,” writes UNDP Administrator Helen Clark in the Report’s foreword.

The Report estimates that by 2020, the combined economic output of three leading developing countries alone—Brazil, China and India—will surpass the aggregate production of Canada, France, Germany, Italy, the United Kingdom and the United States. These countries have succeeded by tapping into global trade and harnessing smart social programmes, the Report says. “On the one hand, they set aside a number of collectivist, centrally managed precepts; on the other hand, they diverge from the unfettered liberalisation espoused by the Washington Consensus,” it states.

India’s policies show the complexities of these choices. Investing in world-class tertiary education, building human capabilities and opening up to trade and investment allowed India to capitalise on its stock of skilled workers in technology. By 2011–2012 these industries were generating $70 billion in export earnings. Similar tales can be told for India’s pharmaceuticals, automobile, chemical and service industries, now vigorously competing in world markets.

In 2010, India’s trade to output ratio was 46.3 percent, up from only 15.7 percent in 1990. Foreign direct investment also reached a peak of 3.6 percent of gross domestic product (GDP) in 2008, up from less than 0.1 percent in 1990. In 2011, eight of the world’s biggest corporations on the Fortune 500 list were Indian. Though India is the biggest and best-known example of progress, other countries in South Asia also demonstrate great success, the Report says.

Bangladesh, with much slower economic growth and half India’s per capita income, does nearly as good as its neighbour, and better in some indicators. It has sustained growth by increasing the rate of public investment and achieving great success in textiles. By 2010, Bangladesh’s share of world apparel exports had increased to about 4.8 percent, from about 0.8 percent in 1990.

Through South-South trade, India has been able to offer other developing countries access to affordable capital goods that are more appropriate to their needs than goods from richer countries. For instance, Indian firms are supplying affordable medicines, medical equipment and information and communications technology products and services to many countries in Africa.

“New ideas and entrepreneurship are coming from the South and will be the defining movers of the 21st century,” says Ajay Chhibber, UNDP Regional Director for Asia and the Pacific. “In our changing world, solutions are moving across the South, not just from the North to the South.”

The new middle class in the South is driving economic, social and political expectations. Increasingly, the most important engine of growth for developing countries is their domestic market. By 2025, annual consumption in emerging markets is estimated to rise to $30 trillion. By then, the South will account for three-fifths of the one billion households earning more than $20,000 a year, creating a new global middle class.

However, while developing countries have reduced the proportion of the population living on less than $1.25 a day from 61 percent in 1981 to 36 percent in 2008, more than half a billion people still remained extremely poor.

Looking at India, the report says it has averaged nearly 5 percent income growth every year, over 1990–2012, but per capita income is still around $3,400 in 2012. To improve living standards, India will need further growth and its performance in accelerating human development is less impressive than its growth performance.

Along with its HDI, the UNDP also released its Multidimensional Poverty Index – an alternative to income-based poverty estimates – which shows the proportion of the population living in multidimensional poverty is high throughout South Asia, with the highest rates in Bangladesh (58 percent), India (54 percent), Pakistan (49 percent) and Nepal (44 percent).

The report’s Gender Inequality Index shows that high gender disparities persist in South Asia, second only to those in sub-Saharan Africa. The region shows low female representation in parliament, gender imbalances in educational achievement and low labour force participation.

The region also faces a long-term threat from environmental hazards. South Asia’s average HDI achievements would fall by 22 percent by 2050, effectively halting decades of human development progress, if there is a failure to slow global warming and related environmental phenomena, the Report warns.