This Project has been submitted by

Mr. Himanshu Meena

ID No: 217026

Section - A

On Economics - II

During the Winter Semester (2018-19)

 Paradigms of Development: The Sen – Bhagwati Debate

SYNOPSIS

Objective of the Paper:

This paper assesses and examines the financial models propounded by Professor Jagdish
Bhagwati and Dr. Amartya Sen. The author would endeavor to show both the side of contentions
and their application on the economy of Modern India. Dr. Sen centers after creating human
capacities and Professor Bhagwati stresses on monetary development. The manner in which I
would approach the discussion is through the technique for looking into the perspectives of two
of the most conspicuous Indian economy analysts of our occasions. In this way, the object of the
paper is to give the perusers a right understanding into the conceivable points and conclusions of
each issue progressed by both the sides, which is additionally upheld with records of direct
involvement and other solid narrative raw numbers

Nature and Scope:

This exploration venture intends to plot the main issue of the Sen-Bhagwati debate. The author
displays the hypothesis of development of a nation progressed by the two most commended
market analysts of India. Different issues on both the sides will be contacted upon in the paper.
The foundation of the two financial experts is clarified alongside the establishments of the
discussion between them. Brief History of Economic growth of post-autonomous India is broke
down. The two most discussed and prevalent models of development in our nation for example
the Gujarat model of development and the Kerala model of development, have been clarified
with ongoing information and figures from solid sources.

Methodology:

The methodology adopted in the present paper is research, study of economic development
theories, research paper, publications, opinions and analysis of various articles and interpretation
of concepts. I also consulted books, journals and downloaded articles from the Internet.
Limitation:

This paper does not look at the in-depth analyses of the model of development followed by other
states in India. Also the comparison of the Kerala model of development is with respect to only
Gujarat’s model of development.

AMARTYA SEN’S MODEL OF DEVELOPMENT

Amartya Sen accentuates on the requirement for improvement as particular from monetary
development. Sen sees that development is required to simply because it enables individuals to
have better existences. Development itself as the article rather than the higher accomplishment of
human improvement is something that does not fill any need in itself1. Further as per Sen, not
having a solid and educated population is awful for the general prosperity of the nation. It isn't
reasonable for a long-run financial improvement.

Sen shows the case of Japan as an example of overcoming adversity of human ability
advancement in task. As indicated by Sen, the Japanese experience demonstrates that a solid and
instructed workforce is profoundly profitable. Also, financial and social advancement depends at
last on the profitability and abilities of the workforce2. Dr. Sen restricts summarisation of
financial development and contends that there is no acknowledgment of such sort of a model
anyplace on the planet. There is no case of an undesirable, uneducated workforce creating high
development rates.

Development in itself is useless if the human ability as far as salary, medicinal services and
essential and advanced education stays in poor state. Further, this sort of development is
advanced in India, the reason being in spite of having monetary development India is still at the
fag end of records positioning human abilities, the most conspicuous being the Human
Development Index which Dr. Sen himself helped to establish. Dr. Amartya Sen wrutes that

1
J. Derbyshire, Prospect interviews Amartya Sen (The full transcript), Prospect (18/07/2013), available at
http://www.prospectmagazine.co.uk/magazine/prospect-interviews-amartya-sen-the-full-transcript-jonathan-
derbyshire#.UepPaPJ5pXS
2
Ibid
"Individuals are the recipients of advancement as well as 'the essential methods for all creation",
in this way human improvement is basic for financial improvement3.

• Importance of Legally Enforceable Rights

Amartya Sen weights on the significance of legitimately enforceable rights and the centrality of
components as the instrumental way in which the state or its organizations can straightforwardly
convey the substance of qualifications to residents. He proposes a privilege based methodology
where making of right is the initial step to guarantee that the final products is accomplished. For
example, the administration as indicated by Dr. Sen should make an arrangement for Right to
sustenance, training for the natives which has been guaranteed by the Government of India by
passing Food Security Bill and Right to Education Act. He trusts that the initial step to guarantee
that the poor are getting sustenance time to time and as indicated by the need is by
accommodating Right to Food, just as a proficient Public Distribution System (PDS).

He emphatically underscores that State ought to put resources into social framework like
wellbeing, training and open administrations. Such administrations stay with the poor for their
lifetime and they at that point consequently guarantee their development and the nation's
development. His inquiry is simple and straight-forward, with respect to why India regardless of
indicating financial development has not demonstrated an expansion in wages and pay for the
least fortunate areas of the general public4.

• Requirement of Vital Public Services

The other vital of concern is the accessibility, quality and availability of open administrations. In
this book, "An Uncertain Glory : India and its Contradictions" co-composed by Jean Dreze5, One
of the most integral assets to improve the efficiency of the general population and personal
satisfaction is training. With training the general population will likewise win more and their
livelihoods add to the development of the economy. Dr. Sen sets up a nexus between the worries
referenced over that is absence of reasonable human services, great essential and auxiliary

3
Amartya Sen ,Development As Capability Expansion (OUP , 2003) 41, available at
http://morgana.unimore.it/Picchio_Antonella/Sviluppo%20umano/svilupp%20umano/Sen%20development.pdf
4
Dreze, Jean, and Amartya Sen, Integrating Growth and Development, An Uncertain Glory: India and Its
Contradictions, 39(1st edition, 2013)
5
Ibid
training. This postures as a snag to individuals from entering producing employments. Further,
Dr. Sen firmly trusts that organizations are essential in guaranteeing, verifying and empowering
financial development of the nation. Social hindrances and absence of administration can thwart
advancement of such great organizations. They should remember that the extension of human
capital and instruction is associated with monetary development. Dissemination of pay and
appropriate utilization of open income (created by monetary development of the nation) have
two principle consequences for the lives of Indian residents. Residents expect great and solid
human services, and without open area social insurance they go to private division medicinal
services. The private medicinal services isn't moderate that is it is costly and also, the overall
population has no information on the genuineness of specialists in private division.

The market and the Government are dependent on each other for the previous' activities impact
the last6 , consequently in instances of public goods (education, medicinal services and so forth)
it has been said there ought to be state intercession and financing particularly when the market
instrument driven by benefit rationale has made colossal hopelessness a great many individuals
in Africa. In spite of the fact that this does not mean full oversight of Government and
prohibition of the private division, numerous welfare states, for example, Norway permit tuition
based schools to the detriment of the Government yet with regulation. Sen's examination of India
GDP development since 1991 demonstrates that the development has been driven by the service
sector mainly and by a skilled workforce, i.e., skill intensive sector like information technology,
software development and other budgetary administrations. Presently the issue lies here, that
majority of India’s workforce is uneducated and employed in informal sector like agricultural
sector, construction occupations, and so on and is paid low wages. In this manner, greater part of
India's workforce have no task to carry out in the monetary development. This is the motivation
behind why Dr. Sen underlines on advancement of human abilities first.

JAGDISH BHAGWATI’S MODEL OF DEVELOPMENT

The model of improvement proposed by Prof. Bhagwati and Arvind Panagariya tries to underline
the significance of development and the requirement for the state to make a helpful situation to

6
Jean Dreze & Amartya Sen, India: Development and Participation, 46 ( 2002 , OUP)
increment and encourage development. When such a domain is made, way of life of the general
population would consequently improve7. Their attention on the technique for development is in
opposition to the strategy for development propounded by Dr. Sen. Prof. Bhagwati weights on
the significance of presenting changes in the work and land markets, which thusly would
development comprehensive. The state needs to concentrate its speculation on financial
development and not on social sector.

As per this model of improvement, economic development goes before spending on medical
services and education as just development will create the income which is have to back the
social-sector advancement8. Prof Bhagwati composes that attention on development won't just
work towards pulling individuals over the poverty line, but it will likewise give the additional
advantage of creating income that could be utilized for the purpose of re-distribution of assets9.
The reforms can be separated into two (2) tracks :

• 1. Track I reforms

• 2. Track II reforms

Both these reforms are to facilitate the predicament of the most ruined and dismissed individuals
of our general public. Track I reforms are those that create development in the nation in this
manner expanding the GDP. Track II reforms then again spread social welfare software
engineers which is made conceivable by allocating expanded income to medical services,
education, and ensuring work in rural area10. Accordingly, Track I reforms are the base of Track
II reforms, without the previous that is without Track I reforms, the fund of the last that is Track
II is beyond the realm of imagination. Henceforth, Bhagwati's model does not challenge or
contradict the need of social spending. It anyway organizes the financial development and
enables social spending to take a rearward sitting arrangement. Consequently development must
go before human improvement as indicated by this school of thought and reliable high
7
B Bhaskar, Looking beyond the Sen-Bhagwati debate, The Hindu Business Line (26/07/2013), available at
http://www.thehindubusinessline.com/blogs/blog-bbaskar/looking-beyond-the-senbhagwati-
debate/article4956255.ece
8
Council on Foreign Relations, Jagdish Bhagwati and Arvind Panagariya on How to Replicate India’s Growth in
Other Developing Countries, in New CFR Book, available at http://www.cfr.org/india/jagdish-bhagwati-arvind-
panagariya-replicate-indias-growth-other-developing-countries-new-cfr-book/p31796
9
Jagdish Bhagwati, Why Amartya Sen is wrong, LiveMint (23/07/2013), available at
http://www.livemint.com/Opinion/9Qzg05zypjEUbioqK9N1UM/Why-Amartya-Sen-is-wrong.html
10
Jagdish Bhagwati and Arvind Panagariya, Why Growth Matters, Public Affairs US (2014)
development will "trickledown" and advantage the general population, this is known as the
"trickle down impact11."

As indicated by the market analysts Bhagwati and Panagariya, Progression in Track I reforms
would result in the fall in the poverty dimensions of the more unfortunate segments of the
society. It would all the while approve and license the families to get to great quality education,
nourishment and essential medical facilities12. In any case, the most imperative issue which
emerges here is that how is that to be finished. They react by saying that the development should
be subjective with the end goal that low-skilled laborers as of now utilized in the casual ventures
or for farming purposes approach tremendous number of generously compensated formal
employments13. The key regions in India that should be looked as a piece of Track I reforms are
to lift assembling industry, infrastructural advancement, urban and rural improvement,
resuscitating farming utilizing cutting edge innovation. All these will quicken the financial
development process and our country comparable to China and Brazil and other like nations,
Track II reforms would guarantee that the attention on social spending on six noteworthy
regions, for example, electrification, education, medical services, nourishment and sustenance,
every single climate street from village to urban communities and capitals and work to all.
Indeed, even as for essential social insurance framework this model plans to expand the
obtaining intensity of the people to get to routine health care services. The author trusts that to
accomplish Track I and Track II reforms at the same time, it is significant to revise and achieve
an impressive change in the land market of our nation14.

To outline Prof. Jagdish Bhagwati's contention, the continuation of what was started in 1991 in
India, which are liberalizing trade, opening up the retail sector and so on, known as "stage 1
reforms", though activities like public financing of education, medical care are "stage 2 reforms."
Bhagwati contends that "stage 1 reforms" must go before "stage 2 reforms", in light of the fact

11
Philippe Aghion and Patrick Bolton, A Theory of Trickle-Down Growth and Development, 64 (1997), The Review
Of Economic Studies, 151, available at
https://www0.gsb.columbia.edu/faculty/pbolton/PDFS/A_Theory%20of%20Trickle%20Down.pdf
12
Arvind Panagariya, A Reform Agenda for India's New Government, C D Deshmukh Memorial Lecture (2014),
available at
http://demo.ncaer.org/popuppages/EventDetails/Feb_11_2014/CD_Deshmukh_Lecture_Note_Feb_11_2014.pdf
13
Ibid
that the previous makes the income to make the last conceivable15. Senior market analyst Martin
Wolf had once expressed "Clearly, higher wages are a fundamental condition for better state
supported welfare, better employments, etc." "This is essentially not questionable16."

KERALA MODEL OF DEVELOPMENT

Hypothesis of those financial analysts who proliferate that human development can be
accomplished through high social consumption and that high development isn't important to go
before human development can be reflected in Kerala's prosperity or the "Kerala Model". This
model of development has been characterized as "A set of high material personal satisfaction
pointers harmonizing with low per capita earnings17." Kerala positions in best 3 in most social
development markers of our nation. Human Development Index is 1, Infant Mortality Rate is 10
in contrast with the national normal of 50, life expectancy of females is 77 years and though the
national average is 67 years. Infact, Kerala is the main state where the sex proportion is positive
which implies there are increasingly more number of females per one thousand males. The
literacy rate is an amazing 93 percent18. All the above accomplishments of Kerala is without high
development or heavy industrialization.

Kerala is among the few states where the public sector medical services grew way ahead before
the private institutions could create completely. This depends basically on redistribution and
state driven social sector development. While the old model of improvement of Kerala empower
education, energize and inspired individuals with an awareness of other's expectations and
beliefs, the new model (present day display) is increasingly founded on base to top

15
Jagdish Bhagwati , The 3rd Prof Hiren Mukherjee Memorial Annual Parliamentary Lecture, (Parliament , New
Delhi, 2/12/2012), available at

http://www.columbia.edu/~jb38/speeches/pdf/Lok%20Sabha%20Lecture%20Transcript.FFE.v.12.14.pdf
16
ibid
17
Richard Franke and Babara Chasin, ‘Is the Kerala Model Sustainable: Lessons From The Past: Prospects for the
Future” in M.A Oommen (ed) Rethinking Development: Kerala's Development Experience (Institute Of Social
Sciences , 1999) 119, available at

https://msuweb.montclair.edu/~franker/KeralaPapers/ParayilBookdecconf.pdf
18
Govt of Kerala, Social Indicators: Emerging Kerala, ( Emerging Kerala )
http://www.emerging.kerala.gov.in/social-indicators.php
comprehensive participatory methodology19. The present day demonstrate incorporates goes for
accomplishing for complete literacy, choose town committees covering each region, and setting
up an asset map program20.

Development history of Kerala has not been motivating. In the period 1960-61 to 1974-75, the
development of SDP was 3.28 percent as it were. Furthermore, from the period 1974-75 to 1989-
90, the development of SDP was 1.96 percent. The development in the primary sector was
negative21. Abnormal state of un-employment was there because of absence of interest in
ventures and the poor work culture in the primary sector. In any case, despite the fact that the
development rate was poor and inadequate in the mid 1970s, poverty began to decay because of
state's mediation in hailing off poverty lightening plans. Usage of land reforms was one of the
primary fields of equity, reasonable and straightforward arrangement of dissemination of land
gave security to the poor worker of the state. The Public Distribution System in Kerala secured
nearly 90 percent of the population. Social Welfare Schemes, high spending plan for education
sector, expenditure on medical services and education sector improved the general social
structure circumstance of the State22.

Critics of the Kerala Model of Development indicates out the way that Kerala is a beneficiary to
high measure of settlements from Gulf Nations, where countless dwell and gain a living. Infact,
in 2004 alone Kerala got 18,465 crores of rupees by means of settlement from Gulf Regions 23.
This established almost 22 percent of its Net Domestic State Product. In 2014 it got 1,10,000
crores of rupees by means of settlements from non-occupant Keralites24.

Critics additionally indicate out the way that the State has turned to deficiency financing to
monetarily bolster its high social expenditure without enabling development to go before it. In
the event that the monetary circumstance keeps on intensifying, at that point it will be not able

19
H.K. Nandeesha, Mapping Kerala Model of Development, Abhyudaya 2 (April 2014), available at http://www.uni-
mysore.ac.in/sites/default/files/content/ABHUDAYA%20Newsletter%20of%20UGC-
UPE%20Focus%20Area%20II%20volume%202%20Issue-4.pdf
20
ibid
21
K.P Kannan , Declining Incidence of Rural Poverty in Kerala, EPW (1995) Vol XXX No.41-42, available at
https://www.jstor.org/stable/4403338?seq=1#page_scan_tab_contents
22
ibid
23
Dr K.N Nair, Kerala Development Report (Planning Commission Of India,2008) 384, available at
http://planningcommission.nic.in/plans/stateplan/sdr_pdf/shdr_kerala05.pdf
24
B Viju, Remittances by NRIs to Kerala, Available at http://timesofindia.indiatimes.com/nri/other-
news/Remittances-by-NRIs-to-Kerala-cross-Rs-1-lakh-crore/articleshow/47570226.cms
store its significant social welfare consumptions. Indeed the income use will quickly develop on
the grounds that the life expectancy rate in Kerala is at an abnormal state, so social welfare
installments covering medical services, pensions will rise25. The absence of development in
Industry has likewise prompted an expansion in joblessness. In 2004, 38 lakh individuals had
enlisted as jobless, out of which 7 lakhs had finished their school course and 2.5 lakh were
graduates. Almost 3,000 medicinal graduates were additionally jobless. In this manner poor
development and high consumption has lead to the "Kerala Crisis."

It has likewise been said that other than social use Kerala profited by other recorded elements
like dynamic western education granted by teachers , gainful rulers and matriarchal networks
which didn't exist in different parts of India. Kerala's model of development features how
monetary development and way of life are identified with one another. The quintessence of
Kerala's model of development is that it is significant and important to receive and empower
such a development model which improves human lives and individual flexibility, along these
lines encouraging all round improvement. In the meantime, it is basic to acknowledge how
development of a nation relies on the headway of human abilities and the productive job a state
can play in improving the wellbeing, education and different sector.

GUJARAT MODEL OF DEVELOPMENT

Professor Bhagwati and Economist Arvind Panagariya unequivocally support of the Gujarat
model of monetary development and improvement. It demonstrates economic development just
as a noteworthy change in its social pointers. Truth be told, Bhagwati attracts references to the
comparability in Vaishnav and Jain customs and inclinations of the Gujarati individuals to
collect riches and use it for social great, and not simply self – liberality26. Consequently they
observe the layout to be perfect. On contrasting Gujarat and Kerala, it very well may be called
attention to that the history and foundation of the both the states were extraordinary and Kerala
had an additional favorable position inferable from its history of illuminated maharajas and

25
Equations , Kerala: Exploring Future Frontiers in Tourism Development , (Department of Tourism , Kerala
Government, July 2000) 97, available at http://www.equitabletourism.org/files/fileDocuments818_uid13.pdf
26
Supra note 21
houses of worship which put vigorously in education and healthcare27, and subsequently,
equitably taking a gander at Gujarat amid the colonial rule and post – colonial, post – reform, the
dimension of growth is very excellent. Furthermore, Bhagwati, in a meeting28 , underpins the
way that a generally high for each capita pay alongside a moderately high rate of development
will keep on producing large amounts of income, which when joined with great administration
guarantees proceeded and all round advancement29. "Keeping up objectivity in examining the
Gujarat model of economic growth and development has been emphatically repeated by Prof.
Bhagwati", when he makes reference to that Kerala topping the Human Development Index 2011
has got nothing to do with Gujarat30.

Be that as it may, the Gujarat model of development has been seriously reprimanded by
31
numerous researchers. Nussbaum , for example, observes the Gujarat model to be totally
centered around economic development. It doesn't mull over the nature of human life that isn't
great corresponded with development. Key aspects, for example, healthcare, education, death
rates, hunger, security of ladies and so on are not thought about by any stretch of the
imagination. As far as the development worldview, Gujarat has fared well, with a GDP of 8.2%,
in contrast with states like Kerala with a GDP of 7.0 % and Tamil Nadu with a GDP of 7.8%32.
In any case, regardless of excellent financial execution, the joined poverty of Gujarat is a lot
higher than a considerable lot of alternate states in India with not such outstanding monetary
exhibitions. Their dimensions of joined poverty are far not as much as Gujarat. Think about other
social division parameters, for example, life expectancy, sex proportion, education and level of
hunger. The life expectancy, for example, is 64.9 (males) and 69.0 (females) in Gujarat. Kerala,

27
Lalita Panicker, Two States: Kerala, Gujarat and Their Development, The Hindustan Times (21/04/17), available
at http://www.hindustantimes.com/india/two-states-kerala-gujarat-and-their-development/story-
WWtRLqkO2nTNKucyVETfEM.html
28
NP Ullekh, Gujarat promises continued, accelerated and all-around progress: Jagdish Bhagwati & Arvind
Panagariya, The Economic Times (20/06/13), available at
http://economictimes.indiatimes.com/opinion/interviews/gujarat-promises-continued-accelerated-and-all-around-
progress-jagdish-bhagwati-arvind-panagariya/articleshow/17849401.cms
29
ibid
30
ibid
31
Martha C. Nussbaum, Development Is More than Growth, The Hindu Centre for Politics and Public Policy
(08/05/2014), available at http://www.thehinducentre.com/verdict/commentary/article5985379.ece
32
Government of India, Open Government Data Platform, Available at https://data.gov.in/resources/major-socio-
economic-indicators-kerala-and-all-india-2011-01082014/
then again, demonstrates life expectancy to be 76.9 (males) and 71.5 (females)33. The literacy
rate (of individuals above age 7) in Gujarat is 70.7 percent (females), 87.2 percent (males); in
Kerala the figures are 92 and 96 percent respectively. Kerala's model of development admissions
in all the social monetary improvement markers when contrasted with the Gujarat Model of
development. The statistical data points represent themselves.

CONCLUSION

The discussion between Dr. Amartya Sen and Professor Jagdish Bhagwati is of significant value
in the economic history of our nation. Both the hypotheses have been propounded with a reason,
regardless of whether it is the monetary development driven financial aspects of Prof. Bhagwati
or the improvement of human capacity approach of the Dr. Sen. Kerala's high social expenditure
did not convert into high development and accordingly the state is attempting to clear its dues
and debts. This is the reason high income must go before high social spending as per the school
of thought of Professor Bhagwati. In the event that high debts accumulate because of absence of
development and income and overabundance consumption, it will in the end lead to the nations
eliminating social expenditure and this is an issue emerging in Latin America. In any case, even
in Market economies like in the US, it is seen that a lot of public income is spent on social
consumption. A nation like Netherlands spends almost 35-40% on social consumption. One of
the real accomplishments among nations focussing on increment in social consumption is the
idea of "Universalization" of health, education and different services, along these lines the
Government need not target groupa and subsequently nobody is barred. Notwithstanding
developing nations like Cuba and pre reforn china had the capacity to accomplish that. Indeed,
even an investigation of with respect to why China has performed superior to anything India as
far as monetary development has been on the grounds that China put resources into education
and medical facilites which impelled development by making solid human capital and quality
labour. In any case, once more, there are economic analysts who are of the view that the nation
can develop first and later put resources into medical facilities and education. For a nation like
India, which is a sub-continent in itself, any one model of growth may not work to its fullest
33
Government of India, Open Government Data Platform, Available at https://data.gov.in/resources/major-socio-
economic-indicators-gujrat-and-all-india-2011-01082014/download
capacity. We need a blend of both the hypothesis. A few states in India indicates great financial
status like Kerala, Goa, Delhi, Tamil Nadu while a few states like UP, West Bengal, Bihar and
Odisha demonstrates low appraisals on financial status. In general improvement of the states
would naturally mean development and flourishing of India.