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Shake your moneymakers

Economic growth ensures that more resources can be harnessed through direct and indirect taxes by the Govt for public health, education, writes Manoj Joshi.

india Updated: May 30, 2007 01:31 IST

Mohammed Akram Khan’s 86 per cent marks in his Class 12 Board exams may not strike you as being unique. But everything else about him is. First, he is a student of an Urdu-medium school, of a kind that routinely underperforms at the Boards. Second, he is the son of a semi-skilled labourer. Third, he is a Muslim, now accepted as a socially and economically deprived community in the country. But one thing that marks this young man as part of a growing majority in the country is that his role model is steel tycoon L.N. Mittal. Khan’s aspirations do not have much of a political voice in the country where the wealth creators have just been told

by their Prime Minister to curb conspicuous consumption, avoid ostentatious expenditure and display of vulgar wealth, and check executive compensation. In our populist democracy, where Oxbridge-educated socialists-turned-Marxists like Mani Shankar Aiyar determine the discourse, Khan is not ‘aam aadmi’. He is probably a misguided neo-liberal or, worse, a neo-conservative.

Manmohan Singh’s reversion to the sterile rhetoric of the era of faux socialism at the annual summit of the Confederation of Indian Industry last week took the assembled captains of industry by surprise. That wealth creation is at the heart of wealth redistribution is on spectacular display everyday in China, a party ruled by an orthodox Marxist-Leninist party.

The proposition is really quite simple. High economic growth rates mean the generation of more wealth. High growth comes from high savings and investment and is manifested by the magic of compound arithmetic. An annual growth rate of 3.9 per cent, as we had in the 1970s, doubled our per capita income once in 18 years, whereas an average annual growth rate of 8.5 will do the same thing in about nine years. For philosophers, ideologues and the well-off, that difference does not matter. But for the young and the poor like Akram, it does.

Economic growth ensures that more resources can be harnessed through direct and indirect taxes by the government for public health, education, employment generation and even outright subsidies to aid the poor. Low-growth rates mean that you have less and are unable to create that critical mass of assets — physical and intellectual — for the poor to break the cycle of poverty. The battle between the concept of wealth creation and redistribution has long been over. The collapse of the self-consciously distributive State, the Soviet Union, coincided with the other much more egalitarian-minded revolutionaries, the Chinese, changing direction almost 180 degrees.

The hero of the war was Deng Xiaoping who confronted the issue of the bankruptcy of Marxist ideas by declaring that “socialism does not mean shared poverty” and that “to get rich is glorious”. China not only stood that Marxist-Leninist dictum on its head, but also threw out the Maoist notion of self-reliance and mastered the dynamics of export-led growth.

What is actually striking is the fact that in the past three years, the UPA has done remarkably well, in policies of wealth creation, resource generation as well as distribution. Tax revenues have been buoyantand figures show that in the last three years, government spending on agriculture has gone up from Rs 3,262 crore to Rs 8,090 crore; educational spending from Rs 7,024 crore to a staggering Rs 28,684 crore; healthcare from Rs 6,000 crore to Rs 14,000 crore; rural development from Rs 11,320 crore to Rs 29,020 crore and grants from Rs 18,269 crore to Rs 38,403 crore. These are large numbers, but look at them carefully and you can see the plot.

When the UPA came to power in 2004, it made a self-conscious effort to push what are called policies of ‘inclusive growth’. This meant not only greater investment in the social sector, but also efforts to push controversial social engineering legislation such as quotas in higher education for the OBCs and Muslims. But even while pressing these policies and expenditures, the PM clearly articulated a belief that economic growth was central to the UPA’s policies and that the economic growth path “if sustained for a decade or so, will enable us to eradicate the ancient scourges of mass poverty, ignorance and disease to a very substantial extent”.

Bashing the rich used to once make electoral sense. That age is — or should be — gone and the Congress has not quite grasped that one of the consequences of rapid growth is that it has created an aspirational surge of people for more, rather than less consumption.

Since it was a celebratory week — that of the UPA’s third year — the government did not face really hard questions about its own record of failures, first among these being the inability to move on reforming agriculture. Sunil Mittal, a businessman and currently CII President, is particularly miffed at the government’s failure to harness industry to the cause of agricultural change. Agriculture remains an insulated area, a votebank of backwardness and poverty that the political class drools over. Yet, the suffering and pain from its stagnation are manifest all over.

Perhaps a bigger failure has been the inability to get the administrative machinery to ensure that the money the government pours into a project will yield results on the ground. The most spectacular failure is that of the Sarva Shiksha Abhiyan, especially in the northern states where the enrolment ratio remains less than 50 per cent. Despite a huge increase in outlay, governments have been unable to deliver. “A child is enrolled but there is no classroom. If there is no teacher and there is no teaching, why do you blame growth?” Finance Minister P. Chidambaram asked.

Chidambaram also provided a perspective on the PM’s statement that corruption was growing like cancer in the road construction sector. Between 2000 and 2006, the government released Rs 22,527 crore for the rural roads programme. The amount that was actually spent,

Rs 21,025 crore (93 per cent), was for 220,956 kms of road, whereas only 120,577 kms (roughly 55 per cent) have been completed. The minister clarified that the difference had not all gone into someone’s pocket. It also represented half-finished roads, unused road-building material and so on. In short, managerial and governmental failure.

India stands at the cusp of history in terms of its own transformation. Losing political nerve in the face of elections and persistent incapacity of the government delivery systems will delay the process of ending those “ancient scourges” of mass poverty, disease and ignorance. They will also be a hindrance to India’s emergence as any kind of a regional or global power. India’s military power, though considerable, plays less of a role here than understood because of the country’s historical inclination against exporting it. It is economic growth that will provide India a central strategic role in Asia and the world.


manojjoshi@hindustantimes.com

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