India's Boom and NGO Sector

Jayeshbhai, founder of ProPoor, shares this insightful article from India Today:

Economist Prabhat Patnaik discusses the dark side of India's economic growth with Senior Editor Suman Guha Mozumder

India's economy may be booming, its industries thriving, its middle class heady with the promise of a great future. But Prabhat Patnaik, a professor of economics at Jawaharlal Nehru University, worries what the changes augur for the rest of the nation. Patnaik was in New York last month to take part in a public conversation on 'An Emergent India: Problems and Prospects' along with Nobel Laureate and Columbia's economics Professor Joseph Stiglitz. In an interview with INDIA ABROAD after the discussion, Patnaik, who is also vice-chairman of the Kerala State Planning Board, talked about his concerns about modern India.

Q. There were concerns, especially during the rule of the governmentled by the Bharatiya Janata Party earlier that while India was shining -- a slogan coined by the BJP -- it was not shining on all its population. Have things changed under the Manmohan Singh government?

A.I think they are continuing pretty much the same way. But one of two things that have happened is of some importance. One is the passing of the Employment Guarantee Act, which promises every rural household 100 days of guaranteed employment. It was initially launched only in 200 districts but it's understood that it will be extended to the whole country.

A lot of campaigning was done to getthis through. This act differs from every other previous employment program as it actually makes it a right [to be employed]. But the only problem with it is the state machinery is so enmeshed in neo-liberalism that I do not think that even though it is rights based -- even though it is the case that anybody who demands employment and does not get it can take the government to court -- much might happen. The problems of non-implementation are to be found almost everywhere.Poor and unemployed people do not take the government to court. They just cannot. But, at the same time, I think this is something that gives us a handle, at least when public and political organizations take the cause of the poor and fight on their behalf. So it is a very enabling thing to do. The basic directions of neo-liberal policies have not changed, but because of intensive campaigning, this act has been passed, which is of potential significance.

Q. If the basic policies have not changed and, as youmentioned, poverty is actually increasing in India despite the growth...

A. I would not even say that poverty is increasingdespite the growth. I would say that the kind of growth we are experiencing in India is actually based on an exacerbation of antagonism. As a result it is growth where to expect a trickle-down effect would be absurd. In fact, the higher the growth, the greater the antagonism. Suppose you have higher growth. Then there will be even more demand for, let us say, a Wal-Martto be opened. Therfore, there will be an even greater dispossessionas far as petty and retail traders are concerned.

So, it is a kind of growth where it is not that higher growth would pull everybody up, but on the contraryhigher growth would actually make things worse for a whole lot of people at the bottom.

Q. Could you elaborate?

A. When you have higher growth, there is more income at the upper level. Because of the kind of growth, which inequalizes growth any way, there will be more demands, let's say, for a golf course, or luxury apartments and therefore agricultural land will be taken away and there will be more dispossession of the peasants. So, it is not just that higher growth is associated with greater poverty, but actually this is a kind of growth where it is part of the intrinsic nature of the growth itself.

Q. So you mean this kind of higher growth would spell out displacemement from traditional occupations like agriculture and, in turn, lead to poverty?

A. Yes. That is the kind of situation I am talking about.[The result can be]unemployment, dispossession and displacement of petty producers and peasants, and a greater agrarian crisis etc. Suppose you have an even higher growth rate, there will be more people demanding that an airport be constructed. If there are more people demanding such things, investments will go there and not to social sectors or to the rural infrastructure development. So, in that sense, the increasing growth on one side and the increasing poverty on the other side are in fact interlinked.

Q. So, as they say,the rising tidewill not lift all the boats.

A. Exactly. It's futile to expect that higher growth will actually have a trickle-down effect. Even now, higher growth has not touched the poor; if we still have even higher growth, it is not going to touch the poor. That is not going to happen.

Q. Tell me then, how does one go about industrializing a country like India? Obviously, you need to acquire land. Given the resistance against acquisitionthese days, what is the way out?

A. The point is, the peasants whoare displaced must themselves have an interest in the industry that is being createdfor them. They should be employed. Also, you need to give them equity. Let them get compensation.

If you look at the case of Orissa, the tribals were given compensation, but within two years, their land value has gone up 10 times. Now they feel cheated. Therefore, for the foregone capital gain they would have made, you have to give them an equity share. You have to work a whole package, not just make promises, before taking their land, [ensure] they are compensatedfor the land, compensated for the loss of employment and for the capital gains foregone and share equity.

Q. Recently, a member of India's Commerce Ministry's Parliamentary Consultative Committee said in New York that the government is considering giving them equity and will announce that very soon. Do you think once that is done, the problems relating to land acquisition will be resolved?

A. My fundamental point is that these issues have to be settled through social consultations and negotiations. These are not issues about which you can just impose [a solution] on the peasants. In other words, legally, it is true that the government has the right to take land [after providing] adequate compensation for building something there for the public good. But here, we are talking about building industry by the private sector, so you cannot use the old principle or the law. It has to be negotiated properly with the peasants. It has to be done on the basis of democratic consultations.

Gone are the days when you could just tell peasants that you are taking their land and just give them some money in lieu. In a way they [protests] are good. It is a case of assertion by ordinary people, assertion of peoples' democratic rights and expression of a voice of people who are marginalized.

I welcome it, in fact, because normally such people would be brushed aside in the name of development. But if somebody stands up and says 'sorry, I'm not interested in giving you land,' then you have to negotiate with him. Now that is basically the assertion of a democratic right.

Q. Although this is not for a special economic zone, the Left Front government in West Bengal has taken land in Singur apparently with the consent of the farmers. Despite this, one is seeing protests and resistance building up there and elsewhere almost daily. Do you think it is a case of peasants being frustrated by the Left's turnaround after fighting farmers' rights and for the equitable distribution of land?

A. Actually, if you look at the details of the land acquisition, the West Bengal government's terms were probably better than many other states. In Orissa, I know those who were agitating against land acquisition used to demand the same terms as those of Bengal. There are two problems. One of course, is that many peasants who had given their land to the government for reasonable money, believed at the time of the sale that there was no option. Later, they found out the truth and began harboring second thoughts. The other thing is there is a problem with land acquired in West Bengal. Some of the unrecorded sharecroppers there have to be compensated.

The West Bengal government arranged for compensation for those who are recorded tenants. But, apparently, there were some unrecorded sharecroppers in the Singur area. This is not official as yet, but the government is going to compensate them as well. This is something being worked out. The issue is not just whether the West Bengal terms are good or bad, the issue is different. What is happening now is that various states in India are engaged in cutthroat competition to attract private investment.

The logic of capitalism is that capitalists compete against one another. But here, the capitalists have a monopoly and these governments are ruthlessly competing against each other to attract investments.This isabsurd and West Bengal is caught in the same trap. I think the states and the [federal government] should get together. I think what is more worrying is that public exchequers are being used by the various state governments to subsidize capitalists.

Q. I remember you talked about the dwindling social sector expenditure by the government. Do you think the present unrest, incidents like peasants' suicides, etc. have something to do with the decrease in the social sector expenditure, especially in the farm sector?

A. Without a doubt. What many people do not understand is that obviously, when the peasants' prices fall or the costs rise, peasants' income dwindles and when that happens, if the peasants have access to a whole lot of things like free education, free healthcare, they have some security. They feel that while their income has dwindled, there are other areas from where they can have some security.

But, simultaneously [along with income decrease], if you find that your social sector expenditure is also dwindling, you have a situation that, when your father falls ill, you are forced to go to a money lender to be able to take him to hospital. At that point of time, you are not thinking about the fall in your income.

But if you had a proper government-funded medical service, some of these problems would not arise. The peasantry is driven to desperation because of reduced income that has been accompanied by reduced social security. The two together has actually made it impossible, which is why most of them are indebted to money lenders. The health expenditure, in fact, is a very important cause of debt to money lenders.

Q. Do you find it ironic that, somehow, the decline in social sector expenditure has coincided with the rising growth story of India?

A. That is quite correct. [Economist] Amartya Sen started this idea of the Kerala model. It was a wonderful case of social sector expenditure, covering all levels of human development, but when that was happening you found that growth was very little. On the other hand, in more recent years, growth has picked up, and social sector expenditure has dwindled. So it is a very clear example of how growth does not really enable you to have larger social sector expenditure. In fact, social sector expenditure requires a degree of commitment by the government.

Q. It is often felt that, in India there has been over emphasis on tertiary education and under emphasis on primary education. How do you link this to development?

A. I reject that view. I think it is not a question of one versus the other. In fact, the education sector as a whole has been neglected. Our total expenditure on education as a proportion of GDP is less than what the South African government used to spend on blacks during the apartheid era. So, India's expenditure on education as a proportion to GDP has been meager. It has to be raised; unfortunately, we had this idea for a long time of raising education expenditure to 6% of GDP, but we have come nowhere near it and are way below it even today.

How can you run a modern economy without ideas generated? Ideas are generated in universities. I think freedom of a country depends on having independent ideas. You can't borrow other countries' ideas and then expect to remain free. That being the case, this idea in some quarters that somehow India is spending too much on education is wrong. In fact, we have to spend more on education, both primary and tertiary.

Q. But there has been opposition from the Left to the entry of foreign universities in India.

A. That is right. It services no purpose.You have to strengthen your own universities because this whole business of foreign universities does not work. Our problems are different; our societies are different. In other words, education is not something like a supermarket. It must address itself to societal needs and, for that to happen, you cannot just have a little branch of Harvard or Columbia. It has to be specific to the country and society.

Q. Do you see any fundamental change coming in the 11th five-year plan?

A. Not really. I think the original approach paper was very conservative. There is a lot of criticism. It is pretty much going along the old way. I do not see any significant change in the five year plan.

Q. Where is India going, as far as development is concerned?

A. Let me put it this way. If the notion of development consists of becoming a big power, a major player in international arena and so on, then India has taken it seriously. But that is not my notion of development. Development is an improvement in the living condition of the people, and if that is the notion of development, I believe India is not doing well at all. To me, big-power status is irrelevant. What is relevant to me, as Mahatma Gandhi once said, is wiping away the tears from the eyes of every India. That is what we have to do.

Posted by Nipun Mehta at April 22, 2007 06:28 PM

Posted by: VM on April 24, 2007 11:35 AM
Interesting article ...
Post a comment

Remember personal info?

Ensure you're human. :) Enter the security code you see below.