Developing economies: Feeble silver lining in smog

With the passage of time the developing block has been experiencing newer challenges. In fact after the recent financial turmoil - recession is over in many biggies but the impact of recession remains very much alive - the fundamental challenge facing the developing world is how to consolidate the recovery with medium and long-term economic development.
Three quarters of the world's one billion extremely poor people live in rural areas and depend on agriculture and related activities for their livelihood. They are major food producers as well as users and custodians of natural resources. And simultaneously, these are the people who will be hardest hit by climate change. Big challenges loom large.  
There has been, of course, some silver lining. It is particularly mention worthy that Bangladesh - one of the largest poverty-prone nations in the world - has been coming out from its vulnerability through achieving around six per cent average economic growth over the last one decade. The income inequality or unequal wealth distribution has been coming down. The Bangladesh Bureau of Statistics in its Household Income and Expenditure Survey-2010 showed that Bangladesh's poverty rate has dropped to 31.5 per cent in 2010, an 8.5 percentage point decline in the last five years. The survey also showed that poverty alleviation in rural areas was speedier than in urban areas.
If the current trends are of any indication, it may be presumed reasonably that for the developing block as a whole the poverty cut would be gaining pace and year-on-year economic growth would be boosting, the wealth distribution would also be going on properly.
Though such economies will have to ensure more equal wealth distribution among the people, the falling Gini coefficient (a measure of the inequality of a wealth or income distribution) rate signals that number of economies like India, Bangladesh, Vietnam, among others, are on the right track. The situation in Bangladesh economy may be seen on this score.
However, any sort of complacency has no place since poverty situation as a whole is far from reaching the desired goal. Works are no doubt on, but it must be admitted that the challenge is a huge one and the globe has to walk many more miles before we reach a comfortable position.
No doubt, as in the case of Bangladesh, increased remittance flow, modern agricultural method, rich infrastructure in the rural areas and increasing public investment have played a key role in cutting the income inequality.
It has been the fact that non-farm economic activities coupled with the development of the infrastructure like road communications in rural areas helped in the slashing of poverty, and inequality. It augurs well that a number of economies are paying active attention on this score. Based on the perspective plan, a number of governments are framing strategies to achieve the targets of double-digit growth, develop the weak infrastructure, and cut hunger and eliminate disparity.
Ultimately the level of development must reach a higher stage. The ongoing difficult economic environment underscores the importance of not losing sight of long-term competitiveness. Planners and policymakers globally are regularly confronted with new economic management challenges. Especially, the recent global financial crisis hastened the action programmes of policymakers.
The reality is that growth has not been inclusive in nature, in the sense that it has not been accompanied by a just and equitable distribution of wealth among all sections of the population. This economic growth had been location-specific and sector-specific and as such it has not percolated to sectors where labour is intensive (agriculture) and in states where poverty is acute (Indian states of Bihar, Orissa, Madhya Pradesh, and UP). Though India had achieved the second highest growth rate in the world, its rank in terms of human development index (a measure of life expectancy, adult literacy and standard of living) had gone down to 128 among 177 countries in 2007 compared to 126 in 2006.
The recent financial inclusion drive in India is definitely a welcome move, but in the absence of coordination among the participating institutions, a little can be expected. Major problems loom large not only in India, but also in a number of such economies inflation has become a serious issue. This requires policymakers to try to slow the flows of capital rushing into their economies - steps that could sharply curb growth and demand for commodities if they are not implemented carefully. Betterment of standard of living calls for intensive drive and reasonable control over the happenings.
If we look forward, it is certain that the global food system will experience an unprecedented combination of pressures over the next 40 years. Global population size looks likely to increase from nearly seven billion today to over nine billion by 2050. Competition for land, water and energy will intensify, while the effects of climate change will become increasingly apparent.
Globalisation will continue exposing the food system to novel economic and political pressure. Decisive action needs to take place now. The considerable challenges ahead refer to balancing future demand and supply sustainably to ensure that food supplies are affordable and there remains adequate stability in supplies. There must be protective measures for the most vulnerable against the volatility that does occur; and producing and distributing enough food in the world so that everyone can be fed; and managing food system to the mitigation of climate change maintaining biodiversity and ecosystem services while feeding the world.
By basing rural development policies on an integral view of the countryside and agriculture, economic development and recovery can be promoted. Though the fact remains that such economies continue to rely on a handful of agricultural products as a stable source of export revenues, yet excessive reliance on a few exported agricultural commodities is not a sustainable strategy for economic development in the long run. Agro-food industry is a highly competitive sector with a tremendous potential for growth, but these opportunities are still largely unexplored.
It is clear that the road ahead is a challenging one and tinkering around the ongoing methods can at best lead to produce a feeble growth rate. However, there exists a potential for doing better if and only if economies are willing to take some forward looking actions.  While the G-20 central banks should signal their intentions clearly given the world's economic interdependence, there has to be enough co-operations between central bankers so that they are mindful of what the consequences will be, not just at home but elsewhere in the world where some volatility is being seen.  The happenings - economies including Argentina, India, Russia, South Africa and Turkey have suffered sharp losses to their currencies as a by-product of the Fed's "tapering". The IMF had rightly asked "the US authorities, particularly the Fed, to be mindful of what is happening elsewhere when you do what you have announced". Both the sides need to exercise caution aiming at revitalising the global economy. Yes, all need to get their houses in order.
Dr BK Mukhopadhyay is a noted Management Economist and Principal, International Institute of Management Sciences, Kolkata.
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