MacroScan (Printable Version) - On the Economic Survey 2003-04

The Chairperson of the UPA, Mrs. Sonia Gandhi, and the government that she helped to create, appear to inhabit two very different countries. The India Mrs. Gandhi lives in and travelled through widely during the election campaign is a country in the throes of economic crisis, especially in the countryside. It was the people of this country that she recognised and addressed, in all the speeches she gave about the problems faced by farmers, the lack of jobs for the people, the inadequacy and poor quality of the most basic public services, the hunger and despair that affect backward regions, the growing inequality.

It was the voters of this country who, in response to such recognition, created the dramatic and decisive popular unseating of the previous government, and by implication, the rejection of the policies and processes that it had set in motion. And it was to the people of this country that promises were made by the new UPA government, in the form of a Common Minimum Programme that pledged to rectify all these unfortunate consequences.

But the new government - or at least some influential elements of it - seems to exist in a completely different country, where apparently none of the problems mentioned above are significant or even particularly evident. Instead, this section apparently is in a country that is shining in much the same way that the previous government had tried to claim, in which the problems highlighted by the Congress and its allies before the elections simply do not exist.

The Economic Survey, released by the Finance Ministry just before the presentation of the delayed Annual Budget, is supposed to be an accurate portrayal of the state of the economy in the previous year. Instead, it reads like paean to the supposed material and policy successes of the NDA, even when these claims of success are (and have been shown to be) demonstrably false.

Consider the economic review of developments in the very first chapter. Much is made of the high rate of GDP growth (in excess of 8 per cent per annum) which has been achieved only three times earlier in independent India. While it is briefly mentioned that this represents a recovery from the slump of the previous year, the point that even then, total agricultural production did not reach the level of two years ago is not mentioned. Similarly, that most of the growth occurred nonetheless in agriculture (from a very depressed base) and in hard-to-measure services, and not manufacturing, is glossed over.

But the real dishonesty lies in the assessment of government policies over this period and their impact. The Survey accepts in toto the (largely false or exaggerated) claims made by the previous NDA government. For example, the Survey says that ''the Budget for 2003-04 undertook to provide a major thrust to infrastructure, principally to roads, railways, airports and seaports, through innovative funding mechanisms. The total cost of these projects was estimated at about Rs. 60,000 crore.'' It also claims that ''implementation on these schemes has made substantial progress''. What it does not mention is that hardly any of the tall claims made were realised, that barely Rs. 2,000 crore was spent from the public exchequer, that most of this went to high-publicity road projects along the Golden Quadrilateral which have been associated with massive corruption and the killing of whistle blowers, and that the actual implementation was nowhere near the promises made.

Similarly, the Survey claims that ''the softening of interest rates … has provided a climate conducive to investment growth'' but does not mention that such investment growth did not occur. Instead, it chooses to focus on ''the improvement in stock market valuation and the flurry of activity in primary markets'' as justifying optimism about investment, even though the evidence points to continued slack in the economy. The Survey also lists various programmes and legislation passed by the government as major achievements, although there was no visible positive economic impact over the concerned period.

One of the most mendacious claims relates to the decline in the extent of poverty. The Survey claims that ''it is well known that there was a significant decline in poverty from 36 per cent in 1993-94 to 26.1 per cent in 1999-2000.'' It does not mention the less publicised fact that even the Planning Commission has admitted that the estimates for these points in time are not comparable. Actually, the consensus among independent scholars now is that the rate of decline of poverty slowed down appreciably over this period. Instead of providing the information on average calorie consumption, which shows a disturbing decline, the Survey only cites improbable estimates of subjective hunger to claim that just 0.5 per cent of rural households and 0.1 per cent of urban households are chronically hungry.

On the other crucial issue of jobs, the Survey barely touches upon the decline in aggregate employment generation and the collapse in formal sector employment. Instead, it uses the thin samples of NSS (which are notoriously unreliable) to repeat the claim made in the BJP’s election propaganda, that 84 lakh new jobs were created every year in 2000-02.

Even in terms of issues and priorities, the Survey appears to belong to the previous government rather than the current one. There is no mention of the six major gaols of the UPA as stated in its Common Minimum Programme. (Incidentally, two of these are: to ensure that the economy grows in a sustained manner over a decade and more and in a manner that generates employment so that each family is assured of a safe and viable livelihood; and to enhance the welfare and well-being of farmers, farm labour and workers particularly those in the unorganised sector and assure a secure future for their families in every respect.)

Instead, the Survey mentions the following challenges: achieving an annual growth rate of 7-8 per cent in next five years; containing annual inflation to single digit levels; boosting agricultural growth through diversification and agro-processing; expanding industry by at least 10 per cent per year; effecting fiscal consolidation and eliminating the revenue deficit. This is very much the standard hackneyed stuff, which focuses on variables that would please the markets rather than address the needs of the people, and completely ignores the most pressing problems of employment and insecurity of livelihoods that are currently facing the populace.

The most charitable explanation of how this extraordinary - and misleading - document has come to be released by the UPA government, is that it was already written as a pre-election advertisement by the policy hacks of the previous government, and those in charge were simply too lazy or too callous to bother to change much. A harsher explanation would suggest that there are deeper and perhaps less forgivable motivations on the part of those who have produced this document.

Essentially, the economic policies of the past decade, while they have produced greater insecurity for most of the people, have been enormously beneficial to a small minority. It was this minority for whom India was shining, and it is this minority that still retains substantial control over the levers of economic policy making.

The temptation to brush aside or ignore the mandate of the people must be very great, especially if that mandate requires some changes in or reversals of policies that have so clearly delivered disproportionate benefits to the rich. But how can there be ''business as usual'' if it is admitted that these policies did harm most of the people? So much simpler just to pretend that actually everything has been wonderful for everyone all along, and that all those who feel that their economic conditions have worsened are simply imagining things. This will allow the old policies to continue, and maybe if people are told often enough that they are actually much better off, the lie will become true through sheer repetition.

Or could it be that even deeper processes are at work? It does not take much insight to realise that one of the greatest failings of the previous government was that it believed its own lies, and thereby became completely disconnected from the people. Perhaps there are some inside the present government who want to encourage it to go the same way, not for its own good or the good of the people, but for a more insidious reason. The Congress Party and its allies would do well to examine more carefully the people they are allowing to run loose in government, and see whose interests they really serve. Callousness to issues that the elections raised and pandering to illusions of ''shining'' may be necessary to continue with ''reforms as usual'', but this is also a prescription for expulsion from power.



Themes > Current Issues	10.07.2004


On the Economic Survey 2003-04

Jayati Ghosh

The Chairperson of the UPA, Mrs. Sonia Gandhi, and the government that she helped to create, appear to inhabit two very different countries. The India Mrs. Gandhi lives in and travelled through widely during the election campaign is a country in the throes of economic crisis, especially in the countryside. It was the people of this country that she recognised and addressed, in all the speeches she gave about the problems faced by farmers, the lack of jobs for the people, the inadequacy and poor quality of the most basic public services, the hunger and despair that affect backward regions, the growing inequality. It was the voters of this country who, in response to such recognition, created the dramatic and decisive popular unseating of the previous government, and by implication, the rejection of the policies and processes that it had set in motion. And it was to the people of this country that promises were made by the new UPA government, in the form of a Common Minimum Programme that pledged to rectify all these unfortunate consequences. But the new government - or at least some influential elements of it - seems to exist in a completely different country, where apparently none of the problems mentioned above are significant or even particularly evident. Instead, this section apparently is in a country that is shining in much the same way that the previous government had tried to claim, in which the problems highlighted by the Congress and its allies before the elections simply do not exist. The Economic Survey, released by the Finance Ministry just before the presentation of the delayed Annual Budget, is supposed to be an accurate portrayal of the state of the economy in the previous year. Instead, it reads like paean to the supposed material and policy successes of the NDA, even when these claims of success are (and have been shown to be) demonstrably false. Consider the economic review of developments in the very first chapter. Much is made of the high rate of GDP growth (in excess of 8 per cent per annum) which has been achieved only three times earlier in independent India. While it is briefly mentioned that this represents a recovery from the slump of the previous year, the point that even then, total agricultural production did not reach the level of two years ago is not mentioned. Similarly, that most of the growth occurred nonetheless in agriculture (from a very depressed base) and in hard-to-measure services, and not manufacturing, is glossed over. But the real dishonesty lies in the assessment of government policies over this period and their impact. The Survey accepts in toto the (largely false or exaggerated) claims made by the previous NDA government. For example, the Survey says that ''the Budget for 2003-04 undertook to provide a major thrust to infrastructure, principally to roads, railways, airports and seaports, through innovative funding mechanisms. The total cost of these projects was estimated at about Rs. 60,000 crore.'' It also claims that ''implementation on these schemes has made substantial progress''. What it does not mention is that hardly any of the tall claims made were realised, that barely Rs. 2,000 crore was spent from the public exchequer, that most of this went to high-publicity road projects along the Golden Quadrilateral which have been associated with massive corruption and the killing of whistle blowers, and that the actual implementation was nowhere near the promises made. Similarly, the Survey claims that ''the softening of interest rates … has provided a climate conducive to investment growth'' but does not mention that such investment growth did not occur. Instead, it chooses to focus on ''the improvement in stock market valuation and the flurry of activity in primary markets'' as justifying optimism about investment, even though the evidence points to continued slack in the economy. The Survey also lists various programmes and legislation passed by the government as major achievements, although there was no visible positive economic impact over the concerned period. One of the most mendacious claims relates to the decline in the extent of poverty. The Survey claims that ''it is well known that there was a significant decline in poverty from 36 per cent in 1993-94 to 26.1 per cent in 1999-2000.'' It does not mention the less publicised fact that even the Planning Commission has admitted that the estimates for these points in time are not comparable. Actually, the consensus among independent scholars now is that the rate of decline of poverty slowed down appreciably over this period. Instead of providing the information on average calorie consumption, which shows a disturbing decline, the Survey only cites improbable estimates of subjective hunger to claim that just 0.5 per cent of rural households and 0.1 per cent of urban households are chronically hungry. On the other crucial issue of jobs, the Survey barely touches upon the decline in aggregate employment generation and the collapse in formal sector employment. Instead, it uses the thin samples of NSS (which are notoriously unreliable) to repeat the claim made in the BJP’s election propaganda, that 84 lakh new jobs were created every year in 2000-02. Even in terms of issues and priorities, the Survey appears to belong to the previous government rather than the current one. There is no mention of the six major gaols of the UPA as stated in its Common Minimum Programme. (Incidentally, two of these are: to ensure that the economy grows in a sustained manner over a decade and more and in a manner that generates employment so that each family is assured of a safe and viable livelihood; and to enhance the welfare and well-being of farmers, farm labour and workers particularly those in the unorganised sector and assure a secure future for their families in every respect.) Instead, the Survey mentions the following challenges: achieving an annual growth rate of 7-8 per cent in next five years; containing annual inflation to single digit levels; boosting agricultural growth through diversification and agro-processing; expanding industry by at least 10 per cent per year; effecting fiscal consolidation and eliminating the revenue deficit. This is very much the standard hackneyed stuff, which focuses on variables that would please the markets rather than address the needs of the people, and completely ignores the most pressing problems of employment and insecurity of livelihoods that are currently facing the populace. The most charitable explanation of how this extraordinary - and misleading - document has come to be released by the UPA government, is that it was already written as a pre-election advertisement by the policy hacks of the previous government, and those in charge were simply too lazy or too callous to bother to change much. A harsher explanation would suggest that there are deeper and perhaps less forgivable motivations on the part of those who have produced this document. Essentially, the economic policies of the past decade, while they have produced greater insecurity for most of the people, have been enormously beneficial to a small minority. It was this minority for whom India was shining, and it is this minority that still retains substantial control over the levers of economic policy making. The temptation to brush aside or ignore the mandate of the people must be very great, especially if that mandate requires some changes in or reversals of policies that have so clearly delivered disproportionate benefits to the rich. But how can there be ''business as usual'' if it is admitted that these policies did harm most of the people? So much simpler just to pretend that actually everything has been wonderful for everyone all along, and that all those who feel that their economic conditions have worsened are simply imagining things. This will allow the old policies to continue, and maybe if people are told often enough that they are actually much better off, the lie will become true through sheer repetition. Or could it be that even deeper processes are at work? It does not take much insight to realise that one of the greatest failings of the previous government was that it believed its own lies, and thereby became completely disconnected from the people. Perhaps there are some inside the present government who want to encourage it to go the same way, not for its own good or the good of the people, but for a more insidious reason. The Congress Party and its allies would do well to examine more carefully the people they are allowing to run loose in government, and see whose interests they really serve. Callousness to issues that the elections raised and pandering to illusions of ''shining'' may be necessary to continue with ''reforms as usual'', but this is also a prescription for expulsion from power.



© MACROSCAN 2004