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Generally, it is used to refer to sectors like education, health and nutrition, etc.
that are concerned with the provisioning of ‘merit goods’ which are socially
valuable but which may not always bring immediate or direct economic returns.
In the evolution of the concept of the social sector, two distinct but related
enhancing the quality of human capital which is generally defined as the “stock of
approach attracted attention during the 1960s when Schultz (1961) and Becker
(1962) highlighted the viewpoint that education, health and nutrition cannot be
the-job training, searching for information about job opportunities, migration, etc.
financial returns from such investments in future. That is, investment in these
will lead to higher earnings. Hence, according to this approach, social sector
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incorporates those sectors that contribute to an enhancement of human capital.
education, health, etc. It does not take into account issues like poverty,
basic attainments in education, health and nutrition, etc. as an end in itself rather
than as a means to higher productivity and higher earnings. In this approach, the
ultimate goal is to improve the quality of life of the people and measures such, as
education, health and nutrition are emphasized for their intrinsic value and for
their role in enhancing the basic capabilities of the people. Thus, in this approach,
social sector stands for those sectors that help in the building up of human
economists such as Sen (1981, 1985) who defined human well-being in terms of
education, health, etc. are considered as basic rights of the people and are
investments are low. Since access to education health, etc. are considered as
fundamental human rights, this approach assigns a key role to the state in
providing these rights. Hence, there is greater emphasis on the supply of public
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services. Here it should be noted that in the human development approach,
contrary to the human capital approach, the focus of attention is not merely on
workers who contribute to the production process but also the old and infirm who
India that are characterized by extensive poverty and social backwardness. In fact,
development.
sectors ‘as those providing social security’. Traditionally, the term social security
has been used by the International Labour Office (ILO) to refer to “the protection
which society provides for its members, through a series of measures against the
economic and social distress that otherwise would be caused by the stoppage or
injury, unemployment, invalidity, old age and death; the provision of medical
care, and the provision of subsidies for families with children” (as quoted in
Prabhu, 2001). However, Dreze and Sen (1989) have argued that such a definition
of social security is not appropriate for use in the context of developing countries
where the bulk of employment is in the informal sector. They view social security
narrowly defined set of particular strategies ...”. Economists have termed the
ILO-type measures as protective social security while it is argued that the “Dreze
and Sen” connotation includes both protective and promotional social security
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(Prabhu, 2001). Protective social security generally includes specific measures
(such as old age pensions) that provide relief from or protection against some kind
programmes, provision of basic needs and the public distribution system get
emphasizes that social security should be viewed in the wider sense, as perceived
by Dreze and Sen (1989), that includes both protective and promotional social
security. This not only helps in linking the concepts of social security and human
social sector. In feet, the study argues that the two routes to capability
that such a dichotomy in approach explains the poor achievement on both fronts
in countries like India. Hence, according to Prabhu (2001), the term social sector
We can, thus, say that social sector refers to all those sectors that are
essential for improving the quality of life of the people. It includes not only
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sectors like education, health and nutrition, but also those sectors that are
degradation, etc. also come under the purview of social sector development.
It is quite obvious from the definition of social sector that the level of
region However, the social sector can play a vital role in influencing the rate of
economic growth as well. As the social sector develops, quality of life improves,
leading to better quality human capital that leads to higher total factor
and related to that in social sector. This can be seen by comparing the cases of
India and China. Dreze and Sen (1995) have made a detailed study of the relative
positions of the two countries over time. They contend (on the basis of available
evidence) that in the late 1940s, living conditions in the two countries were
probably not very different from each other. Both countries were among the
poorest in the world and had high levels of mortality, under-nutrition and
illiteracy. However, they now stand quite far apart — both in terms of economic
economic reforms. Dreze and Sen (1995) argue that if we look at the relative
growth rates of per capita GNP in pre-reforms China and in India over the same
period, we do not get any definitive evidence that the Chinese rate of growth was
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substantially higher than that of India. That situation has, of course, changed since
the reforms of 1979, which have ushered in an era of sustained and rapid growth
of the Chinese economy. However, China’s real achievement during the pre
reforms period lies in the feet that it managed to do well in social sector
This was achieved through extensive state action including redistributive policies,
nutritional support and health care. China’s achievements in the field of health
during the pre-reforms period also include a dramatic reduction in infant and child
Development Report 1994, in the year 1960, estimated life expectancy at birth in
China was 47 years (compared to 44 years in India) and infant mortality rate was
around 150 deaths per 1,000 live births (compared to 165 in India). By 1981, the
(compared to 54 years in India) and infant mortality rate as low as 37 deaths per
thousand live births (compared to 110 in India). Progress in health and longevity
during the post-reforms period has been in the nature of a continuation of the pre
reforms trend rather that a new departure. China’s breakthrough in the field of
elementary education had also taken place in the pre-reforms period. For instance,
literacy rates in 1982 for the 15-19 age-group were already as high as 96% for
males and 85% for females while the corresponding figures for India at that time
were 66% and 43% respectively (Dreze and Sen, 1995). The post-reforms period
17
continued that progress and consolidated China’s lead, but the relative standings
of the two countries had been decisively established before the Chinese reforms.
advantage of the economic reforms and bring about rapid expansion of the
Chinese economy. Dreze and Sen (1995) find that the rates of economic growth in
post-reforms China have been outstandingly high. Between 1980 and 1992,
growth rate of China’s per capita GNP was as high as 7.6% per annum. Industrial
production has grown at more than 11% per annum and even agricultural
experienced an annual growth rate of 5.4% per annum. Thus, China’s good
performance with respect to social sector development not only helped it to attain
a desired level of human development but also a high rate of economic growth.
even with very little economic advancement. Kerala’s experience was, thus, held
up as a “model” for the developing world, and the so-called “Kerala model”
the model, some have been less enthusiastic about it. The sceptics have raised
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argued that lack of economic growth and persistently high unemployment in
Kerala would lead to a situation of “crisis” which would stop further progress in
human development. The state would fail to generate enough revenue to finance
and maintain its social sector expenditure, and the fiscal crisis we often see is
sectors of the economy. The Human Development Report 1996 also voiced the
development over the past 30 years shows that no country can follow a course of
lopsided development for such a long time — where economic growth is not
apprehensions, for a rather long time, Kerala had been living with “a course of
that during the period from the early 1960s to the end of the 1980s, in every sub
period the growth rate of Kerala’s NSDP was much below the all-India average.
While between 1970-71 and 1980-81, Kerala’s NSDP (at 1970-71 prices) grew at
2.27% per annum, between 1980-81 and 1987-88, the growth rate further came
down to a mere 1.16%, even though India’s NDP grew at 4.71% during the same
period (Kannan, 1990). Thus, for almost 30 years between the late 1950s and
affected its achievements in the social sector. That Kerala has not faltered on the
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economic progress is clear from the following quick review of its achievements
(as found in Chakraborty, 2005). At the beginning of the present century, Kerala’s
life expectancy at birth was 73.3 years, which compared well with Asian countries
like South Korea, Malaysia, China and Indonesia which, unlike Kerala, had
already achieved high levels of per capita income. Kerala’s female to male ratio,
which is 1.058, is similar to that of Europe and North America, and substantially
higher than the figures for China (0.94) or the rest of India (0.93). The infant
mortality rate is only 13 per thousand live births. Besides the fact that there is no
female disadvantage in any of the indicators related to health status, the relative
advantage seems to have increased over time. For instance, women in Kerala,
who were expected to live only 1 year longer than men in the 1950s, are expected
to live 5.5 years longer in the 1990s, whereas in India as a whole, women are
expected to live only 1.2 years longer than men. Kerala is much ahead of the other
major Indian states in achieving the goal of universal elementary education, which
is reflected in a literacy rate of over 90%, almost universal enrolment and very
low dropout rates at the primary and middle level. Moreover, there is hardly any
indicate that this narrative is now giving way to a newly emerging one. On the
economic front, Kerala can no longer be seen as a “relatively poor state” when
one compares its per capita income with the all-India average. Empirical
evidences (Jeromi, 2003; Chakraborty, 2005) show that Kerala has indeed been
experiencing fairly good growth since the end of the 1980s. For about the past 15
20
years or so, Kerala’s economy has been growing at a rate of 5.8% per annum on
human development in spite of the long period of slow economic progress in the
past. And second, growth has not eluded Kerala after all. For the past 15 years or
so, Kerala’s SDP has been growing at a rate that is very close to the all-India
average, and its per capita SDP has been growing even faster than the all-India
attainments in the social sector. Prabhu (2001) has compared the levels of social
sector development of Maharashtra and Tamil Nadu. The study, which covers the
period 1988-89 to 1995-96, finds that despite having different levels of per capita
income Maharashtra and Tamil Nadu had similar levels of attainment with respect
Tamil Nadu emphasized protective social security (like midday meal schemes). In
function of the level of income. On the other hand, Tamil Nadu exemplifies the
efforts of a middle-income state that has tried to enhance the level of human
programmes for the benefit of the poorer sections. The allocations to the social
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sectors was higher in Tamil Nadu compared to Maharashtra. This shows that it is
priority to social sector development have performed better with respect to human
development and have ultimately attained high rates of economic growth too. In
fact, there exists a strong nexus between economic growth and human
development. On the one hand, economic growth provides the resources to permit
the quality of the labour force are an important contributor to economic growth.
But there is now a growing consensus that where choice is necessary human
directly affect the level of human development of a country, this calls for giving
have classified country performances into four different categories based on their
relative positions with respect to economic growth (EG) and human development
(HD):
on;
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• the HD-lopsided case, i.e., lopsided with strong HD & weak EG; and
• the EG-lopsided case, i.e., lopsided with weak HD & strong EG.
The classification has been made for three decades — 1960-70, 1970-80
and 1980-92. The detailed table has been given in Appendix I. They find that
countries initially favouring economic growth lapse into the vicious category,
while those with good HD and poor EG sometimes move into the virtuous
category. On the basis of the original table, we have constructed two mobility
matrices (tables 2.1 and 2.2) to study the movement of the countries among
different categories over time. This would help in identifying the best possible
Virtuous 1 0 3 9 13
Total (1992) 38 3 16 10 67
Source: Calculated on the basis of the original table by Ranis et cd (2000)
mobility matrices.
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• During the first sub-period (1960-70 to 1970-80), the total number of
countries moved into the vicious category losing their better status on
category both upward and downward mobility are present in almost equal
strength.
• During the first sub-period, 5 countries dropped to vicious status from EG-
EG-lopsided while only two countries joined the vicious group from HD
lopsided.
virtuous category.
towards the virtuous category, in the case of EG-lopsidedness all the countries
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might not at all be possible to move to the virtuous category via the EG-lopsided
route that seems to be a dead end. Hence, they have suggested that countries need
to examine more closely the process leading to a movement from vicious to HD
lopsided to virtuous, or in the more unusual and difficult case, of taking the direct
route from vicious to virtuous. In the next section, we discuss what role public
development. Hence, the development of this sector is very crucial. The level of
the most important factor affecting the development of social sector is the
political commitment to this area that determines the level of public spending on
these sectors. The UNDP’s Human Development Report 1991 introduced four
expenditure-ratios that were considered necessary to design and monitor the level
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water supply and sanitation, and nutrition as human priority concerns);
and
The report also provides norms for the various ratios, the fulfillment of which
is expected to lead to higher levels of human development. The norms are based
efficient manner by keeping “the PER moderate (around 25%), allocate much of
this to the social sectors (more than 40%) and focus on the social priority areas
(1993) has statistically analyzed whether a country has higher or lower standard
of living than what is expected on the basis of its per capita income. He finds that
the growth rates of Jamaica and Sri Lanka have been comparatively low but they
stand out sharply as high achievers in longevity than most other countries at a
comparable income level. Other exceptionally good achievers are Israel, Costa
Rica and Barbados. Kakwani (1993) observes that the best achieving countries
identified here are also known for their excellent public welfare programmes
including the direct public provision of health, education and other vital
commodities. Sri Lanka has been known for a long time as a unique example of a
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developing country whose achievement in terms of basic needs has been
the issue of whether public spending on social sector has been the only factor
successful public action in the field of social sector development has enabled
these countries not only to achieve high levels of human development but also
high rates of economic growth. Dreze and Sen (1995) have compared the
development experience of India with that of the successful East Asian countries.
They argue that development of basic education was much more advanced in all
Even today, India’s literacy rate is much below what these countries had achieved
many years ago when they began their market-based economic transformation as
shown in the Table 2.3 (reproduced from Dreze and Sen, 1995).
economies, the state has played a major part in every case. An essential goal of
public policy has been to ensure that the bulk of the young population had the
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capacity to read, write, communicate and interact in a way that is quite essential
for modem industrial production. In India, by contrast, the govt, has played a very
limited role in ensuring widespread basic education. It is true that India has a large
body of people with higher education and there is scope for using their
according to Dreze and Sen (1995), sharp inequalities in education levels pose a
real barrier to widely sharing the fruits of economic progress in general, and of
industrialization in particular. On the other hand, economies like South Korea and
China have succeeded in flooding the world market with goods whose
and maintain quality standards. By contrast, even if India were to take over the
bulk of the world’s computer software industry, this would still leave its poor,
illiterate masses largely untouched. Dreze and Sen (1995) point out that it may be
much less glamorous to make simple pocket-knives and reliable alarm clocks than
to design state-of-the-art computer programmes, but the former gives the Chinese
poor a source of income that the latter does not provide — at least not directly —
to the Indian poor. It is in the making of these unglamorous products (the market
for which is very large across the world) that widespread basic education has
proved to be a major asset for China. On the other hand, low coverage and poor
quality of basic education in India has made it difficult to move on from a limited
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While the contrast in the field of basic education is perhaps the most
striking, there are also other areas in which supportive public policies in social
fields have helped these successful Asian economies in a way that has not
happened in India. For example, these economies have been able to reduce the
gender gap in basic education much more rapidly, and this achievement has
and increasing their opportunities in both economic and social fields. These
countries had also attained much better levels of health before their period of
rapid economic growth. Greater provision of medical facilities in the East Asian
explaining this contrast. In the case of China, the expansion of rural health care
has been one of the most remarkable achievements of the pre-reform period. This
is important not only for quality of life, but also for economic performance, since
Another area in which these countries have done much better than India is
that of land reform. Land reforms were carried out most extensively in many of
the East Asian countries, including Japan, South Korea, Taiwan, and of course,
China. Abolition of landlordism is not only desirable from the point of view of
equity, but it also contributes to the general incentive to expand production and
field of basic education), the surplus labour released from the agricultural sector
as a result of land reforms, could get easily absorbed in the industrial sector. On
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the other hand, in India, the overall performance with respect to land reforms has
been quite dismal, although some success has been achieved in West Bengal and
development, the surplus labour released from the agricultural sector could not
find gainful employment in the industrial sector or even in the rural non-form
sector. As a result, land reforms have not helped in easing the pressure on land.
We, therefore, observe that public action in various areas in general, and
in the field of basic education, preventive health care and land reforms in
the East Asian countries. In the following chapter (Chapter III), we take a look at
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Appendix I
31
Bolivia Vicious Vicious HD-lopsided
Brazil EG-lopsided EG-lopsided Vicious
Chile HD-lopsided HD-lopsided Virtuous
Columbia HD-lopsided Virtuous HD-lopsided
Costa Rica HD-lopsided HD-lopsided HDD-lopsided
Dominican Republic HD-lopsided EG-lopsided Vicious
El Salvador HD-lopsided 'Vicious HD-lopsided
Guatemala HD-lopsided EG-lopsided Vicious
Haiti Vicious Vicious Vicious
Honduras Vicious HD-lopsided HD-lopsided
Jamaica Virtuous Vicious Vicious
Mexico Virtuous Virtuous HD-lopsided
Nicaragua Virtuous Vicious HD-lopsided
Panama Virtuous Virtuous HD-lopsided
Paraguay Vicious EG-lopsided Vicious
Peru HD-lopsided Vicious HD-lopsided
Togo EG-lopsided Vicious Vicious
Trinidad & Tobago Vicious EG-lopsided HD-lopsided
Uruguay Vicious Vicious HD-lopsided
Venezuela HD-lopsided HD-lopsided Vicious
South Asia
India Vicious Vicious EG-lopsided
Nepal Vicious Vicious Vicious
Pakistan EG-lopsided Vicious EG-lopsided
Sri Lanka Vicious Virtuous Virtuous
Bangladesh Vicious Vicious Vicious
East Asia
China HD-lopsided Virtuous Virtuous
Hong Kong Virtuous Virtuous Virtuous
Indonesia HD-lopsided Virtuous Virtuous
Korea Republic Virtuous Virtuous Virtuous
Malaysia Virtuous Virtuous Virtuous
Myanmar HD-lopsided Vicious Vicious
Philippines HD-lopsided EG-lopsided Vicious
Singapore Virtuous Virtuous Virtuous
Thailand Virtuous Virtuous Virtuous
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Middle East
Nigeria Vicious HD-lopsided HD-lopsided
Egypt EG-lopsided EG-lopsided Vicious
Morocco Vicious EG-lopsided HD-lopsided
Turkey Virtuous HD-lopsided HD-lopsided
Source: Ranis et al (2000),
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