Inequality of opportunity is the worst in India

Pranab Bardhan is professor of economics at the University of California, Berkeley, and has undertaken rigorous field research on rural institutions in poor countries, on political economy of development policies, and on international trade. In New Delhi recently, he spoke to Mint on the political economy of a new India and the attendant challenges.
What according to you is the new political economy in India, especially now when India is nearly a $2 trillion economy?
The political economy in India, in some sense, has changed; in some other sense it has not. When I originally worked on it, I was mentioning that there are certain groups, which seem to dominate policies. Now the composition of that group has changed somewhat, yet the nature of what I called the dominant coalition has not fundamentally changed. Major change that has happened is that the corporate private capital sector is now much more important compared to some other elements of the coalition compared to say mid-1970s. The corporate coalition, particularly after economic reforms, has become (both) more prosperous and also more powerful, whereas the big farmer part of the coalition is somewhat less important—and sometimes it is also difficult to distinguish the big farmers and corporate interest because many of the big farmer families have now started businesses.
The other element of the coalition is the bureaucrat (class) that is weaker now, in the sense that because of reform we have fewer regulations, so bureaucrats have less power. On the other hand, the political class has not become less important. Over time, if anything, they have become much more important—the relation between the political class and corporates is much tighter now; all the stories about corruption and crony capitalism show that the relation is becoming much tighter than it used to be in the mid-70s.
However, since then, the other part that has become important, which I think is a healthy thing, is that resistance has also become stronger. For example, the NGO movement, which was not very strong in the mid-70s say, is now much stronger. The media is also quite active, particularly electronic media, but not always for the good because quite often they sensationalize, but I think a lot more protests are now given voice through the media as well.
Isn’t it counter-intuitive that liberalization has not succeeded in disturbing this dominant coalition?
I don’t think reform’s objective was to dismantle the coalition; it was to facilitate deregulation. On this the business coalition was divided. One section wanted reforms, the other was opposed to it; if you think about the Bombay club and others, they were not very enthusiastic about the opening up of the economy, etc. But over time, I think, the whole of the business sector has realized that India can take on the whole world. So the confidence of the business sector is much more today than it used to be 30 years back. (Economic) reforms can’t change the power structure. It deregulated (the economy) so that the bureaucracy’s control over licences and permits has declined, but the corporate sector is more powerful. So the dominant coalition has not changed, but, of course, there is some rearrangement as I mentioned.
The other thing is over time as the economy has grown, certain resources became much more important than before. (For example) land, mines, minerals and telecom spectrum. Why are they so important?  These are sectors (where there is a) lot of money to be made. So there is a scramble for getting control over them. So you are talking about the mining mafia, land acquisition (conflicts); of course we (already) know all about the scandals regarding telecom. These are sectors in which there have not been enough reforms; they largely focused on trade policy and industrial policy. For example, there have not been much reforms on the way in which the mineral rights are allocated, telecom (spectrum) and land rights are allocated. Since land involves a very large number of people, that’s why you hear the big protests.
The other data, which came out last Friday, shows that inequality, has actually gone up. Isn’t this a matter of concern and why is it happening?
I think, in general, inequality is growing. Since poor people are not having enough jobs, but the economy is growing, what does it mean? Those who are not poor are seeing their income growing and that is an obvious way of saying how inequality is growing. Agriculture productivity is low so those who are left in agriculture, their income is not growing fast. And others, who are not in the agriculture sector, say informal sectors like manufacturing or services, they are not having enough jobs, good jobs. Sometimes employment is not a good indicator, because after all I cannot afford to be unemployed quite often, I have to get something, so I scrounge around in low productivity jobs. We don’t have good jobs.
The NSSO employment data shows that the workforce is getting casualized.
I somehow think, and my view is shared by many now, NSSO (National Sample Survey Office), while it is a very good source of data, does not represent the rich adequately. This is the problem in all countries and India also; this under-representation of the rich is increasing, so I personally think NSSO data is not capturing the rise in inequality.
You have, in the past, talked about the inequality of opportunity. Doesn’t that worsen consumption inequality, particularly in a rapidly growing economy like India?
 What does inequality of opportunity mean? If you are a girl born in anAdivasi family, look at your life chances and look at ours—completely different, so inequality of opportunity is extreme. Now in a country like ours, inequality of opportunity depends on three things primarily: One, inequality in distribution of land—how much land I have inherited by my family determines my future if you are in agriculture sector.
Second, inequality of education, because for good jobs, I need education. Third, the inequality of social status, so an Adivasi or Dalit compared to high caste or dominant caste, that’s different.
In all these three respects, India is much more unequal than most countries of the world. Social inequality is very high, most people agree, so let me not go into that. Land inequality is extremely high, much higher than China. The other thing that surprised me, when I looked into the data, is how unequal is an opportunity to education. I looked into some data collected by World Bank for more than 100 countries, so they computed the inequality in number of years of schooling and I was shocked. I always thought Latin America is one of the world’s (most) unequal regions.
Inequality in education is much more in India. So, even if you don’t have land, if you are not of high caste, the way to climb out of poverty is education; but if that is being blocked for so many people, no wonder, if you ask me, that India is one of the most unequal in terms of opportunity in the whole world.
Can the present growth trajectory be sustained then?
The issue is political sustainability. When inequality grows like this, unrest, political troubles, corruption scandals will go on. But the problem is, when we protest, the alternative that we suggest is quite often populist. So whether in Gandhi caps (Anna Hazare) or red robes (Baba Ramdev), we are protesting (against) corruption, but giving populist suggestions. People like populist things, but quite often in the long run, it does not help. The problem with democracy is, it also encourages populism, which ultimately hurts the poor. I am worried about that aspect.