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Punjab economy done in by politics

Punjab's slide to the bottom, that began nearly 25 years ago, has "hit the bull's eye", with its economy clocking in a rate of growth of 5.8% during 2011-12, according to recent data released by the union ministry of statistics and programme implementation. KR Lakhanpal writes.

chandigarh Updated: Jun 19, 2012 18:01 IST

Punjab's slide to the bottom, that began nearly 25 years ago, has "hit the bull's eye", with its economy clocking in a rate of growth of 5.8% during 2011-12, according to recent data released by the union ministry of statistics and programme implementation.


The growth in per-capita terms is even less at 4.3% for the same financial year. Sadly, both in terms of overall growth and per-capita income growth, the state has the dubious distinction of being among the laggards in the country, the others being Andaman and Nicobar Islands, Arunachal Pradesh, Nagaland and Uttar Pradesh.

The contrast is even starker when compared to Bihar's rate of growth of 13.1% and Chhattisgarh's 11.2%. Bihar's economy is now bigger than Punjab's, and Haryana's Annual Plan 2012-13 is nearly double that of Punjab. Another noteworthy feature of the growth pattern of states is that it's not only fast-growing states such as Maharashtra, Gujarat and Tamil Nadu that have grown above the national average, but also erstwhile slow-growing ones such as Madhya Pradesh, Rajasthan and Odisha have recorded a sterling performance three years in a row and lifted the sagging national growth. Even Uttar Pradesh has grown at a rate nearly double than its trend rate of growth. It is the erstwhile stars such as Punjab that are weighing down the national growth.

One can visualise Punjab from the late 1960s to the mid-1980s as a rich state with a rich government from the mid-1980s to mid-1990s as a rich state with a poor government and in the run-up to the second decade of the 21st century as a poor state with an even poorer government.

What explains this big churning in the pattern and prospects of growth in different states? Paradoxically, for Punjab, the downslide has coincided with two decades of economic reforms that have been undertaken in the country, resulting in its breakout from the Hindu rate of growth.

Conventional wisdom will have us believe that the slowdown in Punjab is due to stagnant agriculture, the state's inability to attract big-ticket industrial investment due to its locational disadvantages, prolonged period of militancy and even downright discrimination by the union government against the state.

Most of it is a near-alibi for inaction. As far as stagnation in agriculture and locational disadvantages of the state are concerned, the government could have very well overcome them with a conducive policy framework and timely actions. Instead, positive gains from the consolidation of holdings and early ushering in of the Green Revolution, the state's leadership in small and medium enterprises (SMEs), road connectivity and electrification have been frittered away rather than being used as stepping stones for a launch into a higher growth trajectory.

Therefore, the search for the cause of the state's socio-economic decline and remedies thereof need to focus elsewhere. For this to happen, the political class ought to strongly stirrup its soul and look within for answers. I am beseeching the political class, not because I hold them singularly responsible for the current woes, but because they are the ones who are at the helm and are alone capable of making the difference. Everything else will, then, fall in place.

'Why Nations Fail: the Origins of Power, Prosperity and Poverty' by Daron Acemoglu and James A Robinson is the latest work on the subject of why some nations fail while other prosper. What distinguishes this volume from others on the subject is the belief that, above all, it's politics that rules the roost.

"While economic institutions are critical for determining whether the country is poor or prosperous, it is politics and political institutions that determine what economic institutions a country has." The authors further argue that it is not too difficult to figure out what is right.
What is difficult to comprehend is why some regimes follow a perverse path to economic ruin. The answer, according to Acemoglu and Robinson, is politics. "The poor countries are poor because those who have power make choices that create poverty. They get it wrong not by mistake or ignorance, but on purpose." This leads to the creation of what the authors call "extractive", as contrasted to "inclusive", institutions. Such decisions get taken because of the desire of the ruling political formations, not only to perpetuate themselves in power but also to keep out competing political formations. An extractive political economy "does not enforce property rights, create a level playing field and encourage investments in new technologies and skills that are more conducive to economic growth."

Over the past two decades, Punjab's, as indeed India's, political economy has become increasingly extractive. It has become stridently populist, acutely competitive, dangerously confrontationist and sharply divided amid an institutional collapse. The perpetual challenge to the modern Indian political imagination has been aptly captured by Sunil Khilnani in our ability "to turn conflict into conversation, dissent into debate and difference into diversity". And, of course, in building and nurturing inclusive institutions, for, as Jean Monet, post-war architect of European unity, once wrote, "Nothing is possible without men, but nothing is lasting without institutions." Is anybody listening? Punjab has been done in by its politics, not by its people, who remain ever so enterprising.

The writer, a former chief secretary, Punjab, can be contacted at krlakhanpal@gmail.com