Poor economics

It was July 24, 1991, when former finance minister Manmohan Singh presented his first budget. It’s widely hailed as a landmark event that has irreversibly and positively changed India. This euphoria is accompanied by cries for a new generation of reformsWhat these reforms are and how they can impact the people is something we shall return to later. The 1991 budget speech alone was not the harbinger of the neo-liberal economic policy trajectory. The Indian rupee had been devalued twice before the budget. Former Prime Minister Rajiv Gandhi’s call to take India into the 21st century led to a huge profligacy in imports that led to the foreign exchange reserve crisis, the pretext for ushering in the reforms. Two decades later, one thing is certain: we have succeeded in creating two Indias. If the quality of life of everybody has substantially improved, then growing income inequalities would be seen as an index of relative poverty and not absolute poverty. However, the widespread agrarian distress, suicides by farmers and the drastic reduction in the per capita availability of foodgrains and pulses show the rise of absolute poverty among certain sections of people. The luminosity of ‘Shining India’ is, therefore, directly proportional to the deprivation of ‘suffering India’.

While Singh continues to be hailed, unfortunately, due credit is seldom given to former PM PV Narasimha Rao who chose Singh to head the finance ministry. In fact, as his government entered its last year, Rao, in a candid admission, said that the reform process did not guarantee the people basic “rights to food, work, shelter, education, health and information through national determination”.

Speaking at the World Summit for Social Development in Copenhagen in 1995, Rao said: “Today, the world stands at the crossroads of history even as it struggles to free itself from the attitudes of the Cold War era. We are at the crossroads because we know that certain paradigms of development, which placed the State alone at the Centre, did not succeed. There is now a swing to the other side, namely the tendency to put an untrammelled Market alone at the Centre. While the new enthusiasm sweeps over the countries, one cannot help the uneasy feeling that what is needed really is a certain Market Plus; otherwise, the poor and the weak are likely to suffer exclusion due to the imperfections of the Market. The inadequacy in both these approaches stems from the failure to place the people at the Centre. This centrality of the people is extremely important. We have to empower the people themselves as the central strategy to social and economic development to sustain human progress.”

Is it possible to achieve such economic and social empowerment of the people under the neo-liberal dispensation? The elusive objective of “inclusive growth” can only be achieved if there is a radical departure from such a trajectory. This requires a new set of reforms that will provide food security, health and education to our people. It also requires the need to protect our people from increased dispossession, like it has happened with the process of land acquisition. One of the hallmarks of neo-liberalism is the opening of newer avenues for capital accumulation. One such is the acquisition of land from farmers at throwaway prices for super profits. Such “accumulation by dispossession”, as an American intellectual defines, is nothing new in the history of capitalist development. Remember how over 50 million dispossessed people in Europe moved to the then ‘free world’ (the US, Australia etc)? But today’s dispossessed have no such avenues and are thus condemned to misery.

The Left has been seeking a new land acquisition law to replace the anachronistic 1894 law. This law must ensure that apart from adequate compensation and future employment, the dispossessed must also have a share in the rise in the value of the land post-acquisition. Further, these people must be legally protected so that they can defend themselves against land and real estate mafias.

The government’s constant refrain, however, is that it doesn’t have enough resources to implement a comprehensive food security legislation or the right to education law. This is not only absurd but is a lie given the mega scams that this neo-liberal trajectory has facilitated. There is no dearth of resources; there is a dearth of political will to take on the corrupt politician-bureaucrat-businessmen nexus that is looting these resources.

Instead of focusing on such real reforms, there is a clamour for what is fashionably termed as ‘Gen Next’ reforms like the permission for 100% foreign investment in retail trade. This would ruin thousands of people who are today engaged in such trade. Far from the socio-economic empowerment that we have been speaking of, such reforms will only lead to greater deprivation. There is also a clamour for financial reforms: privatisation of the pension funds; increasing foreign investment levels in the insurance sector; banking reforms etc.

If India managed to protect itself from the devastating impact of the global finance crisis, it is because the Left parties had stopped the UPA 1 government from undertaking these reforms. It would be disastrous for India to undertake such reforms today. Proper attention must be paid to the reforms that are required for providing better livelihood to our people.