The artificial classifications of the World Bank and IMF at best serve their limited institutional purposes ~ to determine for eligibility of poorer developing countries for concessional loans, favourable trade terms etc., and for phasing these countries in or out of aid windows. They may provide a framework for organising global macroeconomic data but suffer from many serious flaws. They ignore inequality ~ the USA has a high per capita income of $84000, but is a highly unequal country where the richest 1 per cent of households own almost 30 per cent of the nation’s total wealth, while the bottom 50 per cent hold only about 3 per cent.

The top 10% own more than two-thirds of total wealth, and this share has increased steadily over the decades. In contrast, Japan, also an advanced economy, has low inequality. In our dream of Viksit Bharat, do we want an unequal society where a million billionaires account for 80 per cent of the nation’s GDP? The classifications also ignore social outcomes ~ South Africa and Vietnam have similar income levels but vastly different inequality and employment structures. They ignore human development and economic structures, and cannot distinguish between a diversified modern manufacturing economy with a high skill base like China, an upper middle-income country, from Saudi Arabia, a high-income rentier state that is dependent on a single commodity, oil, and has very narrow domestic skill base.

Advertisement

A singly-commodity export dependent country has very different development prospects from a diversified economy, even though both may be at the same income levels. There are many such examples ~ South Korea vs. Kuwait, Norway vs. Qatar ~ all high-income countries yet vastly different in diversification and skill. Nobody would advocate an economic structure like that of Saudi Arabia, Kuwait or Qatar for a Viksit Bharat. Vulnerability to external shocks, productivity growth and income and employment are all structural features invisible in income averages. They also ignore the capacity of the states to deliver public goods such as access to quality healthcare, education, social protection, etc. that depend not just on income but on state capacity and policy choices, which often lag income growth.

Advertisement

This brings us to the fundamental question, what exactly is development and what kind of development do we want for Viksit Bharat? True development must be multidimensional,........

© The Statesman