The decline, especially
after the mid-nineties is quite drastic. Public expenditure is an
important source of employment generation in rural India. A number of
well-meaning commentators, seeing that the bulk of public expenditure,
including even the expenditure which is meant to benefit the rural poor,
gets into the hands of the rural rich, often come to the conclusion that
the curtailment of such expenditure would have little adverse effect on
the rural poor. This is erroneous. No matter to whom the expenditure
accrues in the first instance (and of course it is an exaggeration to say
that all of it gets into the hands of the rural rich), its multiplier
effects do generate jobs for the rural poor. The cessation of such
expenditure therefore negatively affects them. And this is exactly what
has happened. Perhaps the most important source of injection of purchasing
power into rural areas has dried up under the impact of the neo-liberal
economic 'reforms' that have brought in their train acute fiscal crisis of
the state. In the miasma of confusion that constitutes the so-called
'State versus Market' debate (as if the pro-market reforms entail a
'withdrawal of the State' as opposed to a harnessing of the State for
their own benefit by international finance capital and its local allies),
what is particularly striking is the fact that the role of public
expenditure in generating employment, especially in rural areas, scarcely
ever figures. But that is symptomatic of an even deeper malaise, namely
that rural India, especially the rural poor, have completely disappeared
from the official economic discourse these days, except in the tendentious
statistics about decline in poverty!
The decline in rural development expenditure by the government affects
rural employment in two very distinct ways: the first, mentioned earlier,
is through its immediate multiplier effects; an injection of purchasing
power from outside dries up and this fact has a cumulative effect on
employment via an overall reduction of purchasing power that is many times
the initial reduction. Additionally however, there is another effect that
operates over time. The reduction in public development expenditure has an
adverse effect on rural infrastructure, on the availability of irrigation
and extension facilities, on the availability of cheap inputs, and so on.
All these affect the growth rate of agricultural output, and, through this
mechanism, the employment situation. (And if the decline in public
development expenditure is accompanied by a drying up of rural credit and
a reduction in input subsidies whose impact is borne by the producers,
then the effect on agricultural growth rate and employment is even more.)
Table 5 gives figures for gross capital formation in agriculture as
percentage of GDP. The first point to note is the abysmally low share of
investment in agriculture as a percentage of GDP. Since agriculture
accounts for roughly a quarter of the GDP and since GCF accounts for
roughly a quarter of the GDP, if GCF in agriculture was to be in
accordance with this sector's overall weight, then it should have been
6.25 per cent (a quarter of a quarter). In contrast we find a figure that
is no more than a mere 1.6 per cent. What is more, even this has been
declining through the 1990s. Within investment moreover, the share of the
public sector has declined quite sharply. Now, much of private investment
goes into high value crops that have a lower employment intensity than the
more commonplace agricultural crops, notably foodgrains, that benefit from
public investment on irrigation, infrastructure and such like. It follows
that the decline in public investment has had an adverse impact on
agricultural employment via lowering growth rate not only of agriculture,
but also of the employment-intensive crops within it. This is quite
separate from its immediate demand-side effects.
Table 5 >>
The confirmation for a reduction in the growth rate of
the more common crops, including foodgrains, is provided by Table 6.
Table 6 >>
Not only has there been a remarkable decline in the rate of growth of
agricultural output, but this rate of growth, whether of agriculture as a
whole or of foodgrains, has fallen well below the rate of growth of
population in the 1990s while it had exceeded the rate of growth of
population in the 1980s. The 1990s were indeed the first decade since
independence when per capita foodgrain output in the country declined in
absolute terms. The fact that despite this decline the country still faced
a massive accumulation of surplus foodgrain stocks shows the extent of the
squeeze on rural purchasing power, a squeeze arising from both decline in
growth rate itself and from the reduction in the injection of purchasing
power from outside.
Direct evidence on employment is provided in Table 7. While the growth
rate of employment has declined in both urban and rural India in the
1990s, the magnitude of decline is much sharper in rural India. What is
more, the absolute level of the growth rate of employment in rural India
is an abysmal 0.58 percent, which is so far below the rate of growth of
rural population that one can safely infer a substantial increase in the
rural unemployment rate.
Table 7 >>
Table 8>>
Table 8, taken from the Government's own Economic Survey, shows
another startling phenomenon, namely an absolute decline in the employment
in agriculture. The NSS figures for the same period show a slightly
different picture, namely a 0.18 per cent increase in agricultural
employment, but even this is so minuscule an increase that we can conclude
quite safely that agricultural employment in the 1990s scarcely grew at
all.
The picture of an absolute stagnation in agricultural employment and a
near stagnation in total rural employment sum up the situation of acute
distress in rural India, precisely during the 1990s when the
government-controlled media and economists on the pay-roll of the Bretton
Woods institutions celebrated the 'achievements of liberalization’.
But it was not just unemployment that plagued rural, especially
agricultural, India. In addition there was a drastic fall in prices of
cash crop, which was imported from the world market under the new
dispensation of 'liberal trade’. The price-fall in the world market in
turn was the result of the stagnation and recession in world capitalism,
which arose because, among other things, of the ascendancy of a new form
of international finance capital. This made a continuation of Keynesian
demand management of the post-war years impossible, and favoured the
imposition of deflationary measures, which are always much liked by
finance, all over the world. The price declines did not for long remain
confined to cash crops alone; even foodgrain producers have seen declining
prices in the recent years.
The drought has come on top of all this. Its effect would be a further
squeeze in the purchasing power of the rural poor leading to acute
distress. The fact of drought affecting the demand side even more sharply
than it affects the supply side would appear incredible to anyone familiar
with the history of the post-independence Indian economy. In the past, a
drought always entailed a rise in prices, affecting the rural (and urban)
workers adversely through a price inflation relative to their money wages
(or what is called a profit inflation). But now the picture is altogether
different. The effect of the drought is much greater on the demand side
than on the supply side, as a result of which while the drought brings
great hardships these are no longer reflected in the figures of inflation.
Most observers have not yet become accustomed to this phenomenon of income
deflation, which has the same effect on the living conditions of the group
whose income is being deflated as a profit inflation has, but which is a
more silent killer. A person's real earnings can be halved either through
a doubling of prices or through a halving of the money earnings. The
effect in either case is exactly the same but the former attracts greater
notice than the latter. Just a few days ago when the rate of increase of
the index of wholesale prices, which is quite low at this moment (though
that fact is of little consolation since income deflation is being imposed
upon the rural population) climbed up by a couple of decimal points
there was a hue and cry that inflation was rearing its ugly head once
again! But the much more persistent and drastic income deflation that has
been imposed on the rural working people throughout the 1990s, ever since
the programme of 'liberalization' was launched, has scarcely been noticed
at all.
Whenever this overwhelming evidence, drawn from the government's own
statistics, on rural distress is presented, the typical reaction, when all
other arguments attempting to refute it fail, is: 'If things are so bad,
why aren't people rising up?’ There are to be sure the signs of that
peculiar involuted resistance that the peasantry alone is capable of,
namely suicides, which now occur on a large scale. In addition however it
must be borne in mind that distress also saps the capacity to rise up.
Manik Bandyopadhyay in a classic Bengali short story, 'Why didn't they
snatch and eat?’, set in the context of the Bengal famine, had pointed to
this very fact. The reason why people died of starvation in millions,
often in full sight of shops and restaurants full of food, was because
they were too weak to snatch and eat. Something of the sort may well be
happening in rural India today. It is therefore the duty of the
progressive forces to instil hope, anger and the will to resist among the
distressed people of rural India.