Why India won't feel like celebrating this Independence Day

Last Updated: Sun, Aug 14, 2011 17:43 hrs
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This Independence Day has been preceded in much of the mainstream Indian media by content of an unusual kind: advertising blitzes that have emphasised the new freedom of the "unshackled Indian consumer" to buy.

Shopping malls and other retailers across the major metros and many other cities and towns have chosen to mark this day by apparently providing discounts for various kinds of purchases.

Many other ads are screaming out "freedom to choose" as the great additional liberty that has been generated by the process of economic liberalisation, one which is supposed to make us prouder than ever to be Indians.

Yet the twentieth anniversary of the economic policy package that has enabled this massively increased consumer choice – the strategy of economic liberalisation, privatisation of many government assets and functions and greater external integration through trade and finance – passed by a few weeks earlier with very little fanfare.

This was particularly surprising since the Congress Party that was in power at the centre then is once again still in power, and the man who is widely seen as the architect of the reform package as the then Finance Minister, Dr Manmohan Singh, is now the Prime Minister.

Rarely has such a major economic landmark been so little celebrated by its perpetrators.

Why was this? Why is it that the UPA government chose not to make a big deal about two decades of economic liberalisation, despite their original "ownership", in a sense, of the overall process?

Part of this is probably because the general sense of euphoria that had pervaded India's middle classes after the first decade of economic liberalisation has faded quite significantly.

It is not only those who have been generally excluded from the benefits of the past growth who are finding reason to complain.

Increasingly, even the beneficiaries of economic expansion – not those at the top of the economic heap, but the middle classes – are disquieted by the evidence of significant increases in corruption that has transferred public resources to a few privileged hands.

There is also a growing and unwelcome realisation that at least some of the recent growth is probably based on a bubble that is unsustainable and is in any case putting asset prices (such as in real estate) out of the reach of even middle-class purchasers.

But a more dispassionate assessment requires a balanced look at the achievements and failures of this strategy within the context of an overall development trajectory.

Taking a long view, there are some clear achievements of the Indian economy in the past couple of decades, which must be granted.

The past twenty years have also witnessed rates of aggregate GDP growth that are high compared to the past and also compared with several other parts of the developing world.

Significantly, this higher aggregate growth has thus far been accompanied by macroeconomic stability, with the absence of extreme volatility in the form of financial crises such as have been evident in several other emerging markets.

There has also been some reduction (although not very rapid) in income poverty.

The emergence of a reasonably diversified economy with an industrial base during the years of Nehruvian planning has to some extent been cemented during these years, contrary to the more pessimistic prediction that all domestic industry would be destroyed by international competition.

However, there are also some clear failures of this growth process even from a long-run perspective.

An important failure, which is insufficiently noticed even by policy makers, is the worrying absence of structural change, in terms of the ability to shift the labour force out of low productivity activities, especially in agriculture, to higher productivity and better remunerated activities.

Agriculture continues to account for around half of the work force even though its share of GDP is now less than 15 per cent.

In the past two decades, agrarian crises across many parts of the country has impacted adversely on the livelihood of both cultivators and rural workers, yet the generation of more productive employment outside this sector remains woefully inadequate.

The failure of output growth to create good-quality jobs in sufficient number is probably the single most worrying feature of the economic strategy that has been chosen.

Other major failures, which are directly reflective of the still poor status of human development in most parts of the country, are in many ways related to this fundamental failure.

These include: the persistence of widespread poverty; the absence of basic food security for a significant proportion of the population, and the recent increase in food insecurity because of dramatic increases in food prices; the inability to ensure basic needs of housing, sanitation, adequate health care to the population as a whole; the continuing inability to ensure universal education and the poor quality of much school education; the sluggish expansion of access to education and employment across different social groups and for women in particular.

In addition there are problems caused by the very pattern of economic growth: aggravated regional imbalances; greater inequalities in the control over assets and in access to incomes; dispossession and displacement without adequate compensation and rehabilitation.

Seen in this light, it becomes apparent that a basic feature of the process of economic development thus far has been exclusion: exclusion from control over assets; exclusion from the benefits of economic growth; exclusion from the impact of physical and social infrastructure expansion; exclusion from education and from income-generating opportunities.

This exclusion has been along class or income lines, by geographical location, by caste and community, and by gender.

However, exclusion from these benefits has not meant exclusion from the system as such – rather, those who are supposedly marginalised or excluded have been affected precisely because they have been incorporated into market systems.

We therefore have a process of exclusion through incorporation, a process that has actually been typical of capitalist accumulation across the world, especially in its more dynamic phases.

Thus, peasants facing a crisis of viability of cultivation have been integrated into a market system that has made them more reliant on purchasing inputs (fertiliser, equipment etc) in deregulated markets. This at a time when they are becoming ever more dependent upon volatile output markets (where they end up selling their produce for abysmally low prices) in which state protection is completely inadequate. 

The growing army of "self-employed" workers, who now account for more than half of our work force, have been excluded from paid employment because of the sheer difficulty of finding jobs, but are nevertheless heavily involved in commercial activity and exposed to market uncertainties in the search for livelihood.

Those who have been displaced by developmental projects or other processes, and subsequently have not found adequate livelihood in other activities, are also victims of the same process of economic integration, though excluded from the benefits.

These problems are certainly recognised, even in official circles, at least to some extent. This is why even within government the talk is about more "inclusive growth".

Unfortunately, this remains mostly talk without real action or change in policy direction.

Despite some clearly progressive measures that were instituted during the UPA-I government, such as the National Rural Employment Guarantee Act, the economic strategy of the government remains one in which the basic source of growth is seen to be private corporate investment and therefore the policies are designed to encourage more investor confidence and deliver greater profitability to corporate activities.

This is furthered by a continued obsession with GDP growth rather than the quality of growth, in terms of better jobs for most workers, improved standards of living for ordinary people, enhanced quality of life and human development, and most of all, dignity for all citizens.

Until that changes, the country as a whole will still not feel like celebrating.

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Renowned economist Jayati Ghosh is the Professor of Economics at the Jawaharlal Nehru University in New Delhi. She is also a member of the National Knowledge Commission set up by the Indian Prime Minister.

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