Themes > Current Issues
05.02.2004
India Shining, India Declining
The hoardings greet you everywhere:
uplifting images of happy, smiling (mostly middle class)
Indians enjoying material consumption beyond their
wildest expectations, striding confidently into the
future and proudly looking back on recent achievements.
On the television screens, the ad campaigns are about as
blatant as a ruling government can dare to be just
before national elections. Apparently, there has never
been a better time to be an Indian; we have never had it
so good.
Not only are we internationally mobile global citizens with access to the best consumer goods in the world as well as oodles of consumer credit with which to buy them; we are now getting international recognition because of our prowess in new sectors like IT. In fact, we are full of such self-confidence that even our national team can (occasionally) beat the Australians at cricket!
All this has happened, or so the ruling party would have us believe, because of the excellent economic and political management of the NDA government in the past five years. According to this vision, India is on the verge of achieving economic superpower greatness and is riding the crest of material success.
But just step outside these glorious images for a moment, and look into the fringes of the picture, which actually make up the background. A very different reality emerges. Rural India is in the grip of an agrarian crisis that is unprecedented in its spread and severity, in these past fifty years. Many once flourishing urban industrial centres, especially in the north and east, are now in terminal decline. Even in the smarter and dynamic metros, look beyond the wide streets to the by-lanes of the slums, and you will see scenes of despair, tension and even violence because of joblessness and material insecurity.
The recent past has witnessed the slowest rate of employment growth in post-independence history, agrarian crisis and worsening food security for the poor across the country. There are daily reports of starvation deaths and increasing numbers of suicides by indebted farmers unable to cope with the strain. Small producers are being wiped out in many sectors. Traditional moneylenders, who had been marginalised by decades of efforts to bring institutional banking to the rural areas, are making a comeback, emboldened by the financial liberalisation measures that have undermined the spread of banking to the poor. The availability of public services and access to them have deteriorated for most people, especially - but not only - in the rural areas. The majority of India’s citizens live in more fragile, vulnerable and insecure material circumstances than before.
Most of all, the youth face bleak and shaky futures, with little hope of secure employment, as job opportunities have simply not kept pace with the growth of the labour force. This collapse in employment generation is starkest in the rural areas, where the rate of increase of all forms of work (including casual, part-time and subsidiary jobs) has been less than 0.6 per cent per year – that is only around one-third the rate of growth of the labour force. But it is even noticeable in most urban areas.
This was cruelly evident some months ago, when around 30,000 petty but secure jobs in the Railways, with the required qualification of Class 8 pass and paying Rs. 6,000 per month, attracted more than 7 lakh applicants, most of whom were heavily over-qualified with graduate and post-graduate degrees. The examinations for these jobs were surrounded by rioting which claimed many lives in some states, reflecting the growing desperation of ordinary young people.
So whose India is shining? The ruling powers harp on India’s large foreign exchange reserves (which are really a sign of slack in the economy) the recent mini-boom in the stock market and in IT-related sectors, the availability of easy consumer loans and new consumer goods and other supposed positive indications of prosperity. The reason that they, or indeed anyone else, can even begin to think that this represents the real face of the country, is because of the dramatic increase in income inequalities in the recent past.
This has meant that India is indeed shining for a small minority of the population, around 10 per cent of the people (mostly the rich and middle classes in large cities) who are benefiting from the highly unequal pattern of growth of the past decade. Indeed, this minority has probably never had it so good. The economic strategy followed by the government has not simply meant the withdrawal of the government from its basic responsibilities in providing a range of goods and services. It has also entailed systematic tax cuts in favour of the rich (especially large capital) and other incentives designed to boost their income and consumption. Along with this, global integration has increased the job opportunities for this favoured group, as financial and other services and IT-enabled activities have expanded.
While all this affects a relatively small proportion of the population, it is this section whose interests dominate the media and increasingly, the policies of the central government. And the NDA government has now confused this small group with the Indian people as a whole, with disastrous consequences.
What else can explain the extraordinary set of measures (amounting to a virtual mini-budget) that was announced by the Finance Minister in the first half of January this year, apparently in anticipation of elections? In blatant violation of Parliamentary norms and procedures, the Finance Minister declared a wide range of tax concessions and expenditures intentions, as pre-election sops.
The harsh joke is that these measures will positively affect only a very small proportion of the electorate, even as they cost the state exchequer huge amounts that will have to be paid for later. Most of these measures will benefit the already rich. The most wide-ranging cuts relate to customs duty. The peak rate for non-agricultural goods has been reduced to 20 per cent from 25 per cent; customs duty on cellular telephones has been further cut while laptop computers can be freely brought in as baggage; customs duty on coal and some equipment and components has been brought down.
Inland travel tax and foreign travel tax have been abolished and excise duty on aviation fuel has been halved, in completely unnecessary measures that will reduce the price of air travel, which is only indulged in by the rich and middle classes. The amount of liquor that can be imported duty-free has been doubled.
These measures imply a huge loss of revenue: the estimates are that the government will lose more than Rs. 9,000 crore, and possibly up to Rs. 11,000 crore, in the rest of this fiscal year alone, just two and a half months! Of course this means that someone will have to pay later for this unjustified generosity to the rich now. This temporary largesse only adds to the consumption boom of the rich without improving material conditions for the vast majority of Indians.
But apart from that, just think what could have been done with this amount of money. It could have been used for productive employment generation schemes in the rural areas, which would have increased rural employment and provided much-needed infrastructure. It could have provided better basic infrastructure to our schools and health centres across the country, a significant proportion of which still lack even the basic buildings. Ironically, these measures would probably have done far more to improve the government’s popularity and given it a better pre-election boost, than the tax cuts in favour of the rich and middle classes.
The other measures which are supposedly to provide for agriculture and rural infrastructure, are so minor as to be laughable. The Finance Minister announced grand plans for a Rs. 50,000 crore infrastructure and manufacturing fund, an agricultural infrastructure fund of Rs. 50,000 crore and a small and medium industry fund. These may sound impressive, but the total budgetary allocation for all of these funds amounts to only Rs. 2,200 over an entire fiscal year. This is one more example of a grand scheme being announced, without any real resource commitment on the part of the Central Government. It also means that effectively there is no relief for cultivators or for small units and the people employed by them, or for the millions of jobless people.
All in all, therefore, the purportedly "populist" measures of the central government before the elections, are likely to be popular only among a tiny section of the electorate, and provide no relief to the vast majority. The very fact that the government can even think that these measures will help it electorally, is a sign of how much it has lost its grip on reality.
It is not surprising that the current government – and the political parties that are part of it – are trying to put the best possible gloss on what is at best a very mixed economic picture, and at worst, a story of stagnation, decline, neglect and even deterioration for a substantial part of India's population. What is surprising, however, is the fact that at least parts of the government seem to have fallen for their own spin, and therefore have lost a basic sense of the ground realities. When rulers start to believe their own lies, it may be the beginning of the end for their rule.
Not only are we internationally mobile global citizens with access to the best consumer goods in the world as well as oodles of consumer credit with which to buy them; we are now getting international recognition because of our prowess in new sectors like IT. In fact, we are full of such self-confidence that even our national team can (occasionally) beat the Australians at cricket!
All this has happened, or so the ruling party would have us believe, because of the excellent economic and political management of the NDA government in the past five years. According to this vision, India is on the verge of achieving economic superpower greatness and is riding the crest of material success.
But just step outside these glorious images for a moment, and look into the fringes of the picture, which actually make up the background. A very different reality emerges. Rural India is in the grip of an agrarian crisis that is unprecedented in its spread and severity, in these past fifty years. Many once flourishing urban industrial centres, especially in the north and east, are now in terminal decline. Even in the smarter and dynamic metros, look beyond the wide streets to the by-lanes of the slums, and you will see scenes of despair, tension and even violence because of joblessness and material insecurity.
The recent past has witnessed the slowest rate of employment growth in post-independence history, agrarian crisis and worsening food security for the poor across the country. There are daily reports of starvation deaths and increasing numbers of suicides by indebted farmers unable to cope with the strain. Small producers are being wiped out in many sectors. Traditional moneylenders, who had been marginalised by decades of efforts to bring institutional banking to the rural areas, are making a comeback, emboldened by the financial liberalisation measures that have undermined the spread of banking to the poor. The availability of public services and access to them have deteriorated for most people, especially - but not only - in the rural areas. The majority of India’s citizens live in more fragile, vulnerable and insecure material circumstances than before.
Most of all, the youth face bleak and shaky futures, with little hope of secure employment, as job opportunities have simply not kept pace with the growth of the labour force. This collapse in employment generation is starkest in the rural areas, where the rate of increase of all forms of work (including casual, part-time and subsidiary jobs) has been less than 0.6 per cent per year – that is only around one-third the rate of growth of the labour force. But it is even noticeable in most urban areas.
This was cruelly evident some months ago, when around 30,000 petty but secure jobs in the Railways, with the required qualification of Class 8 pass and paying Rs. 6,000 per month, attracted more than 7 lakh applicants, most of whom were heavily over-qualified with graduate and post-graduate degrees. The examinations for these jobs were surrounded by rioting which claimed many lives in some states, reflecting the growing desperation of ordinary young people.
So whose India is shining? The ruling powers harp on India’s large foreign exchange reserves (which are really a sign of slack in the economy) the recent mini-boom in the stock market and in IT-related sectors, the availability of easy consumer loans and new consumer goods and other supposed positive indications of prosperity. The reason that they, or indeed anyone else, can even begin to think that this represents the real face of the country, is because of the dramatic increase in income inequalities in the recent past.
This has meant that India is indeed shining for a small minority of the population, around 10 per cent of the people (mostly the rich and middle classes in large cities) who are benefiting from the highly unequal pattern of growth of the past decade. Indeed, this minority has probably never had it so good. The economic strategy followed by the government has not simply meant the withdrawal of the government from its basic responsibilities in providing a range of goods and services. It has also entailed systematic tax cuts in favour of the rich (especially large capital) and other incentives designed to boost their income and consumption. Along with this, global integration has increased the job opportunities for this favoured group, as financial and other services and IT-enabled activities have expanded.
While all this affects a relatively small proportion of the population, it is this section whose interests dominate the media and increasingly, the policies of the central government. And the NDA government has now confused this small group with the Indian people as a whole, with disastrous consequences.
What else can explain the extraordinary set of measures (amounting to a virtual mini-budget) that was announced by the Finance Minister in the first half of January this year, apparently in anticipation of elections? In blatant violation of Parliamentary norms and procedures, the Finance Minister declared a wide range of tax concessions and expenditures intentions, as pre-election sops.
The harsh joke is that these measures will positively affect only a very small proportion of the electorate, even as they cost the state exchequer huge amounts that will have to be paid for later. Most of these measures will benefit the already rich. The most wide-ranging cuts relate to customs duty. The peak rate for non-agricultural goods has been reduced to 20 per cent from 25 per cent; customs duty on cellular telephones has been further cut while laptop computers can be freely brought in as baggage; customs duty on coal and some equipment and components has been brought down.
Inland travel tax and foreign travel tax have been abolished and excise duty on aviation fuel has been halved, in completely unnecessary measures that will reduce the price of air travel, which is only indulged in by the rich and middle classes. The amount of liquor that can be imported duty-free has been doubled.
These measures imply a huge loss of revenue: the estimates are that the government will lose more than Rs. 9,000 crore, and possibly up to Rs. 11,000 crore, in the rest of this fiscal year alone, just two and a half months! Of course this means that someone will have to pay later for this unjustified generosity to the rich now. This temporary largesse only adds to the consumption boom of the rich without improving material conditions for the vast majority of Indians.
But apart from that, just think what could have been done with this amount of money. It could have been used for productive employment generation schemes in the rural areas, which would have increased rural employment and provided much-needed infrastructure. It could have provided better basic infrastructure to our schools and health centres across the country, a significant proportion of which still lack even the basic buildings. Ironically, these measures would probably have done far more to improve the government’s popularity and given it a better pre-election boost, than the tax cuts in favour of the rich and middle classes.
The other measures which are supposedly to provide for agriculture and rural infrastructure, are so minor as to be laughable. The Finance Minister announced grand plans for a Rs. 50,000 crore infrastructure and manufacturing fund, an agricultural infrastructure fund of Rs. 50,000 crore and a small and medium industry fund. These may sound impressive, but the total budgetary allocation for all of these funds amounts to only Rs. 2,200 over an entire fiscal year. This is one more example of a grand scheme being announced, without any real resource commitment on the part of the Central Government. It also means that effectively there is no relief for cultivators or for small units and the people employed by them, or for the millions of jobless people.
All in all, therefore, the purportedly "populist" measures of the central government before the elections, are likely to be popular only among a tiny section of the electorate, and provide no relief to the vast majority. The very fact that the government can even think that these measures will help it electorally, is a sign of how much it has lost its grip on reality.
It is not surprising that the current government – and the political parties that are part of it – are trying to put the best possible gloss on what is at best a very mixed economic picture, and at worst, a story of stagnation, decline, neglect and even deterioration for a substantial part of India's population. What is surprising, however, is the fact that at least parts of the government seem to have fallen for their own spin, and therefore have lost a basic sense of the ground realities. When rulers start to believe their own lies, it may be the beginning of the end for their rule.
© MACROSCAN 2004