New Zealand well-being budget isn’t a new idea, India’s been there and done that already
Opinion

New Zealand well-being budget isn’t a new idea, India’s been there and done that already

Excellent marketing apart, there's nothing new in Jacinda Ardern's government prioritising social welfare spending.

Indian national flags fly outside the North Block, which houses the Ministries of Finance and Home Affairs, in New Delhi | Anindito Mukherjee/Bloomberg

Indian national flags fly outside the North Block, which houses the Ministries of Finance and Home Affairs, in New Delhi | Anindito Mukherjee/Bloomberg

New Zealand announced a “well-being budget” last week and a lot of people around the world are applauding as if it were a new or extraordinary idea. If a budget aimed at the well-being of citizens is a novel idea in 2019, we should wonder what the budgets of liberal democracies and welfare states around the world were all about.

Sure, the New Zealand government has developed a well-thought-out framework to track well-being and aims to direct public funding on improving those indicators. To what extent these indicators capture something as subjective as well-being of millions of individuals is for New Zealanders to determine but, the excellent marketing apart, there’s nothing new in a government prioritising social welfare spending. It can easily be argued that every Indian budget is a “well-being budget” given the money allocated for welfare and development.

One reason New Zealand’s budget caught people’s attention is that it rejects GDP growth as the only indicator and instead adopts a wider set of social indicators. Somehow dissing GDP is very popular in the global public discourse. If you argue “GDP growth is important”, you are a heartless neoliberal economist devoid of sympathy for the needy. But if you declare that GDP doesn’t capture a lot of things like human development, social harmony and how much dogs love their owners, you are held up as a sensitive intellectual who has the right answers for the troubled times we live in.


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The truth is that no serious economist or policy analyst will argue that GDP growth is the ultimate objective of policy. It is a very useful indicator to measure how well a country is doing on the economic front. There are a lot of dials on the dashboard of your car but the speedometer is the one we use most frequently. Blood pressure doesn’t tell the doctor everything about your health, but tells her some important things quickly.

GDP is also relatively easy to calculate. In theory and more or less in practice, you can add up money spent by government, consumers, investors and traders and arrive at a grand total. Other things can’t be added up as easily. How do you add up people’s happiness, peace of mind, perception of safety and trust in each other? You can come up with numbers and weights, but as anyone who has done a performance appraisal will know, you are only trying to pass off subjective judgements as objective figures.

GDP is not the only measure of well-being, any more than life satisfaction is, but it is a measure, and an important one.


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I always worry about Western policy fads because of our tendency to adopt them in India unthinkingly. A few years ago, when Thomas Piketty raised the alarm about inequality and called for higher taxes to finance redistribution, Indian commentators were quick to import it to our policy discourse. Few stopped to consider that Piketty’s solutions pertained to the situation in the rich, advanced economies of the West and might not be similarly relevant to a low-income country like India that had yet to reach its growth potential. It does not make sense to try to keep up with European fashions at Indian incomes.

India needs a few decades of sustained economic growth. At this stage of our journey, it is not only sensible for the government to target GDP growth, it is imperative. By my rule of thumb, every percentage point increase in GDP growth lifts around 2 million or 20 lakh people out of poverty. Since we still have around 200 million or 20 crore people living below the poverty line, there is a very long way to go. For the same reason, we can’t afford wild goose chases.

As I’ve argued, economic growth alone is not enough, but it is still the necessary condition for India’s development.

There are signs that the Indian economy might be slowing down to around 6.8 per cent in the current financial year. Getting this back into the 8 per cent range ought to be the government’s biggest policy priority. The 2019 election campaign threw up few ideas on how parties will promote growth, and a lot on how it will be redistributed. So, unlike in 2014, the second Modi government is starting its second term with few commitments on what it will do to promote growth.


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There are already some murmurs, coming from the BJP and its supporters, that all that is needed are measures to make existing regulations streamlined and more efficient. This is baffling. You can’t create 20 million jobs per year by making labour laws a little more efficient. You can’t solve agrarian distress by tweaking procurement, MSPs and making farm loan disbursement more efficient. Just because structural reforms have been pending for over 15 years doesn’t mean they are not necessary. Narendra Modi’s massive mandate enjoins his government to attempt difficult changes that would have been impossible for weaker prime ministers.

A budget that promotes growth is one that promotes well-being. It’s important that we don’t take our eyes off the ball.

The author is the director of the Takshashila Institution, an independent centre for research and education in public policy. Views are personal.