Way to grow: A look at trickle-down effect
Reviewed by Khushwant S.  Gill

Emerging: The Reality Checks
by Veena Jha
Academic Foundation. Pages 374. Rs 399

Trickle down, or trickle up? That is the question. Is it better for a nation to focus on rapid economic growth and allow the benefits of this growth to “trickle down” to the disadvantaged? Or is it more pragmatic to concentrate first on elevating socio-economic indicators like health, education, gender equality and access to equal opportunity, to enable the resultant benefits of a more equitable society to “trickle up” to the economy at large?
Amartya Sen (left) favours growth that will trickle up from the base, while Jagdish Bhagwati is in favour of the trickle-down effect on growth
Amartya Sen (left) favours growth that will trickle up from the base, while Jagdish Bhagwati is in favour of the trickle-down effect on growth 

In India, this debate seems to have semi-crystallised around two eminent economists — Dr Amartya Sen and Prof Jagdish Bhagwati, with Sen leaning towards “trickle up” and Bhagwati towards “trickle down”. Is this debate as black and white as we are led to believe? Probably not so, as Veena Jha elucidates in her concise work, India Emerging. Jha favours the trickle-down effect, but with some strong and clearly laid-out caveats.

The author is an economist who is currently engaged in working on issues related to inclusive growth, trade, climate change and food security. As she says, “While the book argues that poverty has reduced because of high growth rates, it is still stark and glaring inequalities are evident in several sections of society.” Her work is a well-researched journey through modern India, with stops along the way on fundamental topics such as “Inter-state migration and the trickle-down effect”, the role of the informal sector in trickle-down, asset formation and trickle-up, gender parity and trickle up, philanthropy, and “Governance issues and public policy in trickle-down”.

Notes are penned at the bottom of the pages and the references are at each chapter end. Tables and figures are plentiful and the whole reading experience of the book recommends itself to economists and laypersons alike. Looking at the growth of the Indian economy over the past two decades, Jha shows that the IT/ITES sector has accounted for “nearly one-third to half of the total growth of the economy.” In addition, the Information and Communications Technology (ICT) and mobile sectors account for over 10 per cent of India’s GDP and over 30 per cent of its exports. However, she goes on to say that as the employment potential of this sector is limited, the spread effects of the growth have been limited too.

But she doesn't stop there and reveals that the “intangible” benefits of this sector have been immense. “While IT is largely export oriented, a growing share is now being directed to domestic needs. Mobiles are almost exclusively domestically oriented. The multiplier effects of both are high...(and) when both start being used widely for improving the productivity of the economy, its trickle-down will accelerate.”

The author examines, in the same vein, various ways in which trickle-down and trickle-up can be productively achieved. The roles of the informal sector, philanthropy, NGOs and the government is examined in detail. She sums up the argument succinctly: “The process of reform must continue in India in an effective framework of good governance. India has to find dynamic ways of public-private partnerships in the delivery of social services... Inclusive growth is not automatic but small incremental changes and building on success cases of administrative and political reform may be the way forward.”