We became a nation 63 years ago. But large tracts still do not subscribe to the idea of India or have a stake in its growing wealth and confidence. For many who do, serving the nation is just a way to get rich quick.
India is prospering, Indians are not
Mani Shankar Aiyar
MP and former Union minister
As our 64th Independence Day arrives, so does the doleful news from the Oxford Poverty Institute and the United Nations Development Fund that the same India with the second highest growth rate in the world is also just about the worst performer on their newly devised Multi-Dimensional Poverty Index. Mesmerised as we are over our imminent Great Power status, the revelation that India in 2007 had the same position on the UN Human Development Index as it did in 1994, and the extraordinary reaction of the Government that at least we have risen from position 138 in 1997, has fallen virtually on deaf ears.
Sixty-five per cent of our population depends for their livelihood on a sector — agriculture and allied activities — that accounts for a mere 18 per cent of our GDP, a share that has been alarmingly declining over the past two decades. In the same year, 2009-10, that saw our GDP grow at over 7 per cent, agricultural output registered a rise of just 0.21 per cent.
Parliament is informed with insouciance that the Union budget for agriculture amounts to a mere 0.37 per cent of GDP. Whatever happened to Jawaharlal Nehru’s dictum, “Everything can wait, but not agriculture”? That seems to have changed to, “Nothing can wait, but agriculture” as we hurtle towards a situation in which the services sector — principally IT and IT-related services — which employs less than 1 per cent of our population, accounts for 57 per cent of our national income.
Manufacture leaps ahead in double-digit figures — but the share of our workforce in the organised sector stagnates at 8 per cent, the same as it was 20 years ago, because almost all growth in manufacturing is driven by capital-intensive technology at the expense of the labour-intensive small and medium enterprises.
National savings, rising so impressively that they now account for nearly a third of national income, are deliberately channeled to the stock market, where that tiny sliver of the population that plays the stock market makes unbelievable fortunes while agriculture and irrigation are starved of public investment on the specious argument that rural savings will find their way into private capital formation in the rural sector. They have not. In consequence, our average growth rate in agricultural output has staggered along at 1 per cent to 2 per cent while GDP has zoomed to just short of the 10 per cent mark.
Inevitably, 77 per cent of Indians in shining India live on under Rs 20 a day. To understand what that means, please note that under the Mahatma Gandhi National Rural Employment Guarantee Programme, the minimum prescribed wage is Rs 100 per day, but as only person per family is allowed to seek work on any given day, if that person belongs to a family of five (a gross underestimate for rural India) then the per capita income for that household comes to Rs 20 on the day one member of that family secures NREGA work.
In other words, 77 per cent of Indians live every day on less than what they would earn if they picked mud under NREGA the whole year round.
Income and wealth inequalities are growing so alarmingly in our society that instead of being obsessed with the wholly misleading impression of progress indicated by statistics of GDP growth (and per capita income derived from that figure), we need to recognise the more profound truth cached behind Oxford’s Multi-Dimensional Poverty Index and the UN Human Development Index — that 9 out of ten pregnant women in our country are anaemic; that in consequence nearly half our children under five are estimated to be from moderately to severely malnourished; that we have amongst the highest infant and maternal mortality rates in the world; that every year we add more hungry people to our population than the rest of the world put together; that foodgrain availability per capita is today, after 20 years of accelerated growth, less than it was 20 years ago; that the worst of this is that the output of coarse cereals — bajra, jowar, ragi, etc, which are the staple of the desperately poor — has actually declined while the economy booms; that the gap between demand and supply for pulses — the standard dal-roti of folklore — has widened; that in stark contrast to the Green Revolution in oilseeds in the 1980s, which saw output double in a mere 10 years, there has been negligible progress in un-irrigated rain-fed areas, which make up the bulk of the land from which the Indian kisan and khet mazdoor eke out a bare living.
Please tell me what should we be celebrating — that we have the fourth largest number of dollar billionaires in the world or Fortune India’s report that the wealth of the 100 richest Indians equals a quarter of our Gross Domestic Product?
Prof Pranab Bardhan of Stanford argued exactly a year ago in one of our pink papers that since we are the only country that measures poverty on the basis of consumption rather than income, we have so underestimated growing inequality in our economy that in actual fact, India’s Gini coefficient for rural incomes shows the skewing of income and wealth in India to be worse even than China’s.
Is it then surprising that we now face a huge contradiction between accelerated growth and inclusive growth? GDP measures the acceleration for a few; the Gini coefficient measures the exclusion of more than three-quarters of our people from that acceleration. That is the ugly reality at the root of the conflict in Dantewada and all of Dandakaranya: Is nature’s bounty for the benefit of POSCO and Vedanta and Arcelor, Essar and Tata — or for the people who live there?
One estimate has it that of the 1 lakh families dispossessed and displaced by the bauxite mining operations of one private sector giant, a total of 400 have received Class IV employment in the enterprise. As for the remaining 94,600, kaun jane? Is it then a surprise that 158 districts, according to the Home Ministry’s most recent estimate, are spinning out of the control of the central and state governments, districts that are in the heart of India, far, far removed from the machinations of Pakistan or China.
We must go back to Mahatma Gandhi — or all our dreams of becoming a Great Power might well turn to ashes. We see a stark contrast between democracy and development because as Dr B.R. Ambedkar so shrewdly foresaw at the very moment he reached the apogee of his lifework — the proclamation of the Constitution of our free Republic — from January 26, 1950, we became a society where in political terms we each became equal with a vote that held the same value, but we did not become an equal society in any other sense of the term. Hence the injunctions of the Directive Principles of State Policy in the Constitution — observed principally in the breach. Accelerated growth has accelerated inequalities.
To address this conundrum, Gandhiji gave us the mantra of Panchayat Raj. Nehru, initially un-persuaded, saw the vital need of that within a decade of Independence; Rajiv Gandhi gave the concept constitutional shape; over the 18 years that have passed since the elected local bodies were recognised in the Constitution, nearly 3 lakh “institutions of local self-government” (to quote the Constitution) have been elected. And then left to wither on the vine, the worst con game in history.
We have the shell, not the substance, and apparently lack the political will to bring about the same acceleration in grassroots governance that we have brought about in accelerated growth for the rich and the comfortable.
Which is why the people of India ask India at 64, as the Beatles did:
‘Will you still need me, Will you still feed me, When I’m sixty-four?’
Are we a chronically corrupt nation?
The black economy, about 50% of GDP, leads to ineffectiveness of schemes targeted at the poor, such as NREGA and mid-day meals
On Independence Day, let us reflect on some ills affecting our nation. Apart from the festering insurgencies in various parts of the country, not to mention the Maoist movement — which the prime minister perceives as the greatest internal threat — widespread corruption is gnawing at the soul of the nation.
Major scams routinely grab the nation’s attention. But the minor ones hardly draw public attention, even though they affect citizens every day. Among the recent scams that made headlines are the Commonwealth Games, illegal mining at Bellary, the IPL manipulations, the Medical Council of India fraud, the Sukna land scam and the allotment of 2G spectrum.
Of course, the Bofors and the Quattrochi files are on the verge of being closed, for obvious reasons. The Amit Shah case in Gujarat was the latest even as cases against Lalu, Mulayam, Mayawati and other former chief ministers have been put on the backburner.
The sustainability of the path that the nation is on is questionable. Growing disparities between the rich and the poor and large-scale displacement of the latter are leading to social tensions. Promises remain unkept because of policy failure and lack of governance. All these are linked to the growing black economy.
The problems in Kashmir, the north-east and the tribal regions can all be traced back to corruption. In many of these regions, the local leadership has been co-opted through corruption. Massive resources have been siphoned off, leading to inequity and disenchantment with government. The state is perceived to be insincere, so that the issue moves from economic to political and social. Everything that can go wrong does and the leadership is left firefighting.
The black economy is now about 50 per cent of GDP or roughly Rs 30 lakh crore annually. Three per cent of Indians, the elite, get most of it and the rest end up paying for it. This leads to a shortage of resources for development and ineffectiveness of schemes targeted at the poor, such as NREGA and mid-day meals.
The black economy leads to waste. Roads are repeatedly repaired because of poor quality construction so that money for new roads is inadequate. By my estimate, the country has been losing 5 per cent on its rate of growth since the ’70s. We could have been at $6,000 per capita instead of the current $1,000. But for the black economy, India could have been a middle-income country and not one of the poorest in the world.
Many Indians live with bad sanitary conditions, polluted water and lack of toilets. This isn’t due to a lack of resources. Resources are siphoned out through flight of capital to tax havens — 77 of them, of which Switzerland is the best known.
The growth of the black economy is fuelled by the impunity with which we violate the law — from jumping traffic lights to breaking industry and environment laws. It is a by-product of the public and the private sectors, involving a triad comprising businessmen, politicians and the executive (bureaucrats, the police and the judiciary). Criminals have entered the triad as either businessmen or politicians, resulting in growing criminalisation.
Many policymakers who should control the malaise are party to it. Even those who are financially honest accept it to survive. A disc containing the names of Indians holding illegal bank accounts in Liechtenstein was offered free to India by the German government but was not accepted for two years — perhaps to enable the corrupt to escape.
Controls such as the Foreign Exchange Regulation Act and licensing have been either diluted or eliminated. Direct tax rates have been slashed. Despite the voluntary disclosure scheme, the black economy continues to thrive. Why? Because it involves illegality and such income cannot be declared, whatever the tax rate.
Colonialists like Churchill said India cannot govern itself. Our elite is bent upon proving them correct.
(The author is a professor at Jawaharlal Nehru University’s Centre for Economic Studies and Planning. He has written on issues relating to public finance and policy for close to three decades and has authored a book, The Black Economy in India, published by Penguin)