[Marxism] The present state of the Indian economy

Louis Proyect lnp3 at panix.com
Wed Mar 1 08:01:55 MST 2006

ZNet | India

The Present State of India's Economy
by Girish Mishra; February 28, 2006

     Notwithstanding a rosy picture of the Indian economy now and in the 
years to come painted by the just released Economic Survey: 2005-2006, 
there are a number perturbing aspects, glossed over by the media. The 
government seems euphoric about the overall economic growth rate of 8.1 per 
cent to be achieved in the current financial year and the chances of 
raising it to 10 per cent in the years ahead. This is obvious from what is 
stated on the very first page: "The growth trend for the last three years 
appears to indicate the beginning of a new phase of cyclical upswing in the 
economy from 2003-04." It emerges that the government is more concerned 
about creating favourable conditions for greater and greater inflow of 
foreign direct investment (FDI) in almost all sectors of the economy than 
ensuring that the fruits of economic growth are redistributed in such a way 
that regional disparities and economic inequalities in the society are 
reduced. This becomes crystal clear after a perusal of the facts presented 
in the Survey.

     To begin with, let us look at what the global Human Development Report 
(HDR) of the UNDP says. According to it, from the point of view of human 
development index (HDI) India ranked 124 among 177 countries of the world 
in 2000, but by 2003 it slipped to 127. Since May 2004, the UPA-led by the 
Congress has been ruling the country and vigorously pursuing the path of 
economic reforms, informed by the Washington consensus and opening the 
doors of the economy for massive inflows of MNCs and their FDI, yet, the 
ranking does not show any indication of improvement. As is known, this is a 
composite index and more reliable than the rate of growth of the economy to 
show the well being of the people at large. The strife-torn Sri Lanka and 
China have much higher ranks. It is pathetic to read this admission by the 
Survey that "Between 2000 and 2003, while the absolute values of HDI and 
Gender Development Index (GDI) consistently improved for India, its ranking 
remained invariant at 127 consecutively for three years in a row. On the 
other hand, some of India's neighbours not only improved their HDI and GDI 
values, but also improved their relative ranks."

     Ever since the beginning of economic reforms, leading to 
liberalisation, privatization and globalisation, the two objectives of 
India's freedom movement, which were underlined time and again by the 
governments of Jawaharlal Nehru and Indira Gandhi have been jettisoned. 
They are: reduction in regional disparities and lessening of economic 
inequalities. It was quite often emphasized that without striving for these 
objectives neither national unity nor social harmony could be maintained. 
The present government talks of fighting separatist tendencies and 
communalism, yet the outcome of its policies will go in the opposite 
direction. The Survey admits: "Progress of social development has varied 
across States. While Kerala stood apart from the rest and achieved high 
levels of human development comparable to the rich developed countries, the 
so-called 'BIMARU' states (viz. Bihar Madhya Pradesh, Rajasthan and Uttar 
Pradesh) fared particularly badly." The Survey pins great hopes on National 
Rural Employment Guarantee Scheme, launched on February 2, 2006, in spite 
of great opposition from certain powerful quarters, to provide livelihood 
security to the rural poor. One has to keep one's fingers crossed to the 
effectiveness of the scheme in the absence of other measures. To give just 
a few facts, expenditure on social sectors as a proportion of total 
expenditure was 22.3 per cent in 2000-01 and, by the time the BJP-led NDA 
government was ousted it had declined to 19.7 per cent. Under the 
Congress-led UPA government it has been increasing, but at a very slow 
pace. According to the government estimate, it is, at best,  going to be 
just 20.9 per cent. Similarly, the expenditure on education will be only 
10.1 per cent in 2005-06 as compared to 9.7 per cent in 2003-04. In the 
case of health sector too, the expenditure will be marginally higher at 4.9 
per cent in 2005-06 as compared to 4.4 per cent in 2003-04.

     The data presented by the Survey do not support the official 
contention that "The ongoing reforms attach great importance to removal of 
poverty, and addressing specifically the wide variations across States and 
the rural-urban divide." Let us now listen to the Survey, which states in 
the very next paragraph: "As part of the annual series in the 60th round of 
the NSSO, an all-India survey on the situation of employment and 
unemployment was conducted in January to June, 2004 with a moderately large 
sample of households. The survey points out the large rural-urban and 
male-female divide in not only literacy, but also in employment and wages."

     It needs to be noted that almost 72 per cent of households live in 
rural areas. They account for 75 per cent of the population of the country. 
In other words, only 25 per cent people live in urban areas. The 
urban-rural gap has been increasing because most of the attention of the 
government and of the media is concentrated largely on the cities and 
towns. Watch electronic media or read the so-called national dailies, you 
will seldom find any reference to the plight of Kalahandi, Bastar or Palamu 
while there is ample focus on the models, actors and actresses and fashion 
shows. The Survey testifies that the literacy rate is much lower in rural 
areas. To cite the data, male literacy is 62 per cent in rural areas as 
against 80 per cent in urban areas. The situation is much worse in the 
matter of female literacy. Only 43 per cent women are literate in villages 
while in towns and cities 68 per cent females are literate.

     The callousness of successive governments may be highlighted by 
referring to another instance. As early as 1986 when Rajiv Gandhi was in 
power, the National Policy on Education (NPE) was formulated, which was 
modified in 1992. It laid stress on universalisation of elementary 
education. To quote the Survey, it specifically said three things, namely, 
"universal access and enrolment, universal retention of children up to 14 
years of age, and a substantial improvement in the quality of education to 
enable all children to achieve essential levels of learning."

     Notwithstanding all the lip service to the positive role that 
education is supposed to play and reiteration of commitment to NPE, no 
government has achieved the target of spending 6 per cent of the GDP. To 
quote the Survey, "As against this target, the combined total expenditure 
on education by Central and State Governments was 3.49 per cent of GDP in 
2004-05 (BE)." Even this figure of 3.49 per cent is likely to go down 
because it is based on budget estimate, which is seldom reached in this 
country. Dropout rate at the elementary school level is more than 31 per 
cent. If one investigates, one is sure to find that the actual dropout rate 
is far higher.

     So far as the health sector is concerned, a comparison with 
neighbouring countries reveals the shameful state of affairs in India. Life 
expectancy at birth in India is 63 years as against 71 years in China and 
74 years in Sri Lanka. In other words, an average Chinese or Sri Lankan 
hopes to live much longer than an average Indian. Similarly, in the matter 
of infant mortality rate India is far behind these two neighbours. 
Under-five mortality rate per 1,000 live births is 87 in India as against 
37 in China, 15 in Sri Lanka, 69 in Bangladesh and 82 in Nepal. We talk of 
the empowerment of women and giving them 33 per cent reservation in the 
legislature, but we seldom worry about the high maternal mortality ratio. 
In 2005, it was 540 per 100,000 live births in India as against 56 in 
China, 500 in Pakistan, 92 in Sri Lanka and 380 in Bangladesh.

     About 75 per cent of the population lives in villages and more than 60 
per cent of labour force is directly dependent on agriculture, but 
agriculture accounts for only 25 per cent of the GDP. It is obvious that 
the distribution of the national cake is highly inequitable. Had the burden 
of population on agriculture declined as happened in most countries of the 
world when they embarked on industrialization, the plight of the rural 
population would have improved. For years, in spite of all the glib talk, 
the growth of agricultural production has been quite dismal. In 2004-05 it 
was negative. Food grains production declined by 4.2 per cent. This year, 
it is hoped to increase by 2.3 per cent. Even if this expectation comes 
true, it is not going to make any difference in view of the decline last 
year. It will not even make up for the loss of output last year. The 
incidence of suicides by farmers, especially in the advanced states, has 
been on the increase. Strangely enough the Economic Survey has completely 
ignored this. One of the factors responsible for this is the growing 
dependence on farmers on non-institutional sources of credit and stringent 
terms and conditions that go with them. Between 2004-05 and 2005-06 the 
flow of institutional credit is to increase marginally from Rs 1,15,2430 
million to Rs 1,17,8990 million if every thing goes well. The shares of 
cooperative banks and regional rural banks are to decline. The government 
is directly responsible for the present pitiable plight of agriculture and 
the people dependent on it. The Survey admits that there has been a fall in 
agricultural sector's capital formation in GDP from 2.2 per cent in the 
late 1990s to 1.7 per cent in 2004-05. "The declining share was mainly due 
to the stagnation or fall in public investment in irrigation, particularly 
since the mid-1990s."

     From the Survey, it is amply clear that the government is banking on 
FDI for lifting up the rate of economic growth and realizing the dream of 
making India a 'superpower' as early as possible. To attract FDI, it is 
ready to bring out all the policy and procedural changes demanded by the 
MNCs and their patrons. Mining and retail sectors are to be opened for them 
as early as possible. The idea of 'contract farming' is very much there. 
One does not know why the leader of the UPA, i.e., the Indian National 
Congress, has discarded Nehru-Mahalanobis model. The country expects an 
official explanation, and, if possible, a debate. The big question needs to 
be answered is: What is the purpose of economic growth and for whose 
benefit it is to be undertaken? There are ample hints that the government 
intends to wash its hands of minimum support prices for agricultural 
products and discontinue public procurement, the banks are to look at 
credit to small and medium enterprises and agriculture as an opportunity 
for profit rather than social obligation under directed subsidized credit, 
and wide-ranging labour reforms are to make it explicit that aam adami 
(common man) does not figure in this reckoning. Obviously, people indulging 
in this thinking forget that aam adami is powerful enough to pull down the 
government at the polls and cannot be easily duped.



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