Thoughts on the Indian Economy

Thinking about assorted economic issues in India.

Friday, March 17, 2006

Competition for Scarce Resources

In his blog, Atanu Dey conjectures, "that the per capita availability of resources has something to do with the killing sprees that last decades in Burundi, with the Tutsi and Hutus slaughtering each other. It could be nature’s way of redressing the imbalance between people and resources."

Although in India, the low per capita availibility of natural and economic resources has not resulted in conflicts as grave as those in Africa, high population density is taking toll on the environment and infrastructure. Population growth can be a very good thing for the economy providing a young and dynamic workforce. However, a lack of environmental protection and the inability of infrastructure to keep up with a burgeoning population leads to unsustainable growth due to an unhealthy workforce and a declining capital/worker ratio.

A recent Supreme Court ruling which opened up 600 acres of old textile mill land for development in Mumbai, a vibrant city but a city which is ripping at its seams. The development of the NTC land poses a dilemma. By protecting that area for environmental reasons (what the Bombay Environment Action Group petitioned the High Court for and initially won and now lost), the city of Mumbai would have had some much needed open-space, clean air and greenery for its citizens. I believe quality of life and health plays an important role in a country's economic success and prosperity. As Amartya Sen stresses, a successful economy is not always judged on GDP but other social indicators like life expectancy and infant mortality. However, in a city where rapid growth has put incredible pressure on real estate prices (a 20% appreciation last year) and resources, freeing up land for development may lower financial and resource stress on the city. So, although this would not be the environmentally optimal path to take, in terms of per capita availibility of resources and capital, this is a wise decision.

Freeing up all this land in the heart of Mumbai for commercial purposes is a good idea. But development must proceed in a very deliberate and well-planned manner. Most importantly, the infrastructure of the city must be expanded to keep up with the pace of development. Sewage, pipelines, trash disposal, telephone lines, wireless lines, roads and commuter accessibility must all be developed with a well-defined pattern instead of haphazard building which the crumbling infrastructure of the city cannot support. And even though, the whole space cannot be reserved for parks and free space, environmentally-friendly policies must be a high priority on the development agenda.


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