Terms of Trade | What explains the disconnect between economic inequality and politics in India? - Hindustan Times

Terms of Trade | What explains the disconnect between economic inequality and politics in India?

Mar 29, 2024 04:17 PM IST

The World Inequality Lab's report on India's inequality has stirred debate. But a more interesting question is the muting of inequality as a factor in politics.

The Paris-based World Inequality Lab recently published a paper which claims that economic inequality in India is the highest it has ever been since the British Raj. Like every other empirical study on the Indian economy, this one has also created a debate on the merits, or lack of it, of both the data and the methodology. The Chief Economic Advisor himself has written an article in Mint criticising the findings of the paper. Such debates, to be sure, are neither the first nor the last we have or will see on the Indian economy. Unless the government decides to publish granular and regular data on consumption and inequality-related topics, a lot of these debates will be of the kind of one economist's word and assumptions against another rather than objective and data-driven.

The interplay of inequality with politics is very different from the dialectic between poverty and politics in India (CES) (AP) PREMIUM
The interplay of inequality with politics is very different from the dialectic between poverty and politics in India (CES) (AP)

These debates, however, are not the concern of this column, as was the case when it spoke about a renewed interest in India’s poverty levels after the publication of the 2022-23 Household Consumer Expenditure Survey (HCES). The point that the poverty column made was simple. While there is a widespread agreement about the fact that poverty has been falling in India in the post-reform period, politicians and government have been spending more rather than less money on fighting poverty in India, it argued.

The interplay of inequality with politics is very different from the dialectic between poverty and politics in India. Even the most vocal supporters of the government or those who criticise the likes of World Inequality Lab paper authors (this also includes Thomas Piketty, one of the most influential voices on inequality in today’s world) will not argue that inequality has been eradicated like extreme poverty in India. The debate between the two camps, at most, is about minor changes in the direction of inequality rather than its existence per se.

This broad intellectual consensus, however, has had a completely opposite political reaction. Almost every major political party in India has pretty much given up on the idea of politically weaponising inequality and is more than happy to throw palliatives at the (as ironic as it sounds, statistically) non-existent poverty problem. In fact, one can very well argue that there has been a bipartisan consensus over following policies which have added to economic inequality (along with growth) in the post-reform period in India. Tax holidays to investors, reduction in corporation tax rates, abolition of wealth tax, and dilution of labour laws are some such examples.

What explains this asymmetry between the political and economic takes on poverty and inequality in India? The question can have multiple answers and it is very likely that almost all of them are right.

The first could be that, unlike many emerging market economies in Southeast Asia and Latin America, the Indian economy has never had a financial or economic meltdown. This has basically meant that a very large majority of the proverbial middle class has never faced an economic shock which inflicts a significant deterioration in income and wealth levels. The Indian deep state, or at least its economic component, can rightly claim credit for having steered the economic ship clear of such a disaster. To come back to political perception, it also means that the middle classes do not really see the ruling class and their super-rich allies as somebody who has accumulated their fortunes at the cost of the non-rich. In fact, one could very well argue that a large number of Indians see success stories of super-rich capitalists in the post-reform period as their own success stories because of the jobs they have landed in the modern service sector.

The second part of the story is about the people who were foot soldiers in the fight against inequality in the immediate aftermath of Independence. Land ownership in large parts of India was extremely concentrated during the British Raj and the dominance of landed interests within the Congress party ensured that there was no substantive change in the situation after 1947. This generated a lot of tailwinds for radical redistributive politics in rural India. While the Communists were the primary beneficiaries of this politics, this assertion also played a role in the evolution of backward caste politics against (primarily) upper-caste feudal interests in large parts of the country. What did this politics stall in the post-reform period? The simplest answer to this question is that the site of class struggle collapsed, which also made rewards from this kind of class politics completely redundant. This is what the systemic viability crisis of agriculture has done to the rural class struggle and redistributive politics in India. The fact that India never put restrictions on rural-to-urban migration unlike countries such as China has also played a role in bringing down class temperatures in rural areas. What we see in the name of farmers’ movements today is more a struggle by relatively well-off farmers to keep the terms of trade in their favour rather than militant class politics.

The third explanation could be that the fight against inequality has been sidetracked in a direction which makes the right criticism about the historical roots of inequality but lacks the vision to build a broad-based fight against it in the present. This is the continuing dominance of social identities over their class counterpart in the political discourse over inequality in India. This process has led to the proliferation of a bunch of regional political outfits, which are led by politicians who treat these as their family enterprises and have amassed vast fortunes compared to the masses they claim to represent.

Will these three in-built roadblocks against a wider and forward-looking political struggle against inequality change in the near term? It would be nihilistic to wish for the disappearance of the first roadblock. A motivated class struggle in India’s farms is more in the realm of the romantic rather than realpolitik. Caste-based politics, even if it does not give economic redistribution, does offer other community and network services to its followers. This, when read with continuing social prejudice, will ensure that caste continues to play an important role in driving politics at the grassroots level in India.

Does this make politics against inequality a lost cause in India? One should never say never in politics and there is one factor which is yet to test its political salience. What if the mass upward mobility potential of reforms is beginning to taper off for India at a time when aspirations and expectations are growing exponentially? We will see the interplay of this dialectic in the next decade or so.

Roshan Kishore, HT's Data and Political Economy Editor, writes a weekly column on the state of the country's economy and its political fall out, and vice-versa

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    Roshan Kishore is the Data and Political Economy Editor at Hindustan Times. His weekly column for HT Premium Terms of Trade appears every Friday.

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