Context—The Budget Trailer
At the fag end of their tenure, the ruling class in Delhi have made these startling discoveries: there is a huge middle-class in the country who need crumbs from the government; there are 30-40 crore workers employed in unorganised sector who are poor and need to be empowered; there are 12 crore small and marginal farmers who need state’s largesse to survive, and there are 130 crore citizens whose efforts to realise the goal of a New India needs to be boosted. And so, the interim Finance Minister presented an interim Budget on February 1, which, according to the Prime Minister, was “just a trailer” of India’s path to prosperity after the Lok Sabha elections of 2019.
The ‘trailer’ has handouts for middle-class, informal employees and farmers middle-class transferring small money into their pockets in varying ways. This hierarchical budget has sought to make amends for all the wrongs of almost five years of the present government at the Centre. For example, the debilitating impact of demonetisation on the informal sector that employs nearly 90 per cent of the workforce had long been suspected on the basis of anecdotal evidence. The findings of the National Sample Survey Office’s surveys—leaked after they were approved by the National Statistical Commission—show that unemployment rose to a 45-year high in the demonetisation year. The note ban, these findings suggest, has caused severe distress.
To reach out to this worst-hit segment, the Interim Budget announced the Pradhan Mantri Shram Yogi Mandhan for unorganised sector workers with monthly incomes of less than Rs. 15,000. With a token allocation of Rs. 500 crores, a direct benefit transfer of Rs. 3,000 a month as old-age pension has been proposed. Pensioners will receive the payments once they attain the age of 60. To be eligible, workers will have to start contributing Rs. 55 every month from the age of 18. Those over 29 will have to contribute Rs. 100 every month. The government will match these contributions. The scheme targets workers in sectors such as leather, handloom and construction which took a body blow from demonetisation. A possible inference can be that the ruling dispensation does not expect—nor is it promising—upward mobility for this class to better quality jobs over the span of their working lives.
The NDA government’s tenure has been marked by acute rural distress. The minimum support prices and procurement policies it followed have been ineffective. In fact, these policies reversed some of the corrections made by the previous UPA government in terms of trade for agriculture. The present government has also failed to respond adequately to the back-to-back droughts of 2014 and 2015. The import-export policy errors it made added to the gluts caused by bumper harvests in 2017 and 2018, which further depressed market prices and increased farmer losses. Farmers all over the country have been revolting. Therefore, the Interim Budget provides for income support of Rs. 6,000 a year, or Rs. 500 a month, financed fully by the Central government. The Pradhan Mantri Kisan Samman Nidhi (PM-KISAN) targets only landed farmers who own up to two hectares while bypassing the landless, the most vulnerable class in the farming sector.
Even so, the Interim Budget leaves no doubt about which class of voters Modi is most eager to please. The gifts showered on the middle class outstrip those to the poorer sections who have borne the brunt of demonetisation and an incompetently designed GST. The income-tax rebate for individuals drawing incomes of up to Rs. 5 lakhs will leave nearly Rs. 1,000 a month more in their wallets. This is twice the amount farmers will receive from the PM-KISAN scheme. And, middle class Indians will not, unlike unorganised sector workers, have to wait till they are 60 to receive the rebate or the other tax benefits announced, such as on fixed deposits and two self-owned houses. Just weeks earlier this class was bestowed with the bonanza of 10 per cent reservation in jobs and studies by amending the Constitution of India!
The non-functional Tamil Nadu government has followed suit by announcing a dole of Rs. 2,000 for six million ‘poor people’ to improve their living standards. A couple of weeks ago, it gifted Rs. 1,000 to ration-card holders to enable them to celebrate Pongal with all gaiety!
All this largesse just weeks before the general election tantamount to freebies in the political party manifestos which are prohibited in Election Commission’s Model Code of Conduct-2014 (MCC) framed on the orders of Supreme Court. This MCC directs Political Parties and Candidates to “avoid making those promises which are likely to vitiate the purity of the election process or exert undue influence on the voters in exercising their franchise.” Also, in the interest of transparency, level playing field and credibility of promises, manifestos should “reflect the rationale for the promises and broadly indicate the ways and means to meet the financial requirements for it”. Violation of this code gives power to the Election Commission to suspend or withdraw recognition of the political parties concerned under Section 16A of The Election Symbols (Reservation and Allotment) Order, 1968 as amended. The Commission may not be able to exercise this power because the ruling parties have played fraud on the budgetary/planning conventions by making it a government-sponsored “freebie durbar”!
Reality—The Main Film Playing Out
Indeed, as announced by the Prime Minister, the interim budget for doling small money to the poor and the middle was only a ‘trailer’ since the ‘main film’ of transferring big money to the rich and super-rich is already playing out and would continue to play in the future.
How is it so? Let us look at the Global Wealth Report-2018 of Credit Suisse Group AG released in October last. As per this report, the richest 10 per cent of Indians own 77.4 per cent of the country’s wealth and the bottom 60 per cent own just 4.7 per cent. The one per cent super-rich own 51.5 per cent of the wealth. Credit Suisse is not a bleeding-heart NGO but a blue-blooded Swiss bank. Here is the chart:
Estimating wealth is not quantum physics and year-to-year changes in wealth shares are dependent upon asset prices and exchange rates. What is important is that, in a democracy, the top one per cent has been able to keep its share so very high, while the majority meekly accept destitution. The fact that India is among the most inequitable country in the world (top three) is borne from the chart below:
Then Oxfam comes out with its India inequality report in January 2019. According to it, the wealth of Indian billionaires rose by Rs 2,200 crore a day last year, with the top one per cent of the country’s richest getting richer by 39 per cent as against a three per cent increase in wealth for the bottom-half of the population. The document, released before the start of the five-day World Economic Forum (WEF) in Switzerland’s Davos, said 13.6 crore Indians, who make up the poorest 10 per cent of the country, have remained in debt since 2004.
Oxfam International Executive Director Winnie Byanyima said it is “morally outrageous” that a few wealthy individuals are collecting a growing share of India’s wealth, while the poor are struggling to find their next meal or pay for medicines. “If this obscene inequality between the top 1% and the rest of India continues, it will lead to a complete collapse of the social and democratic structure of this country,” said Byanyima.
The Oxfam study showed that India’s top 10 per cent holds 77.4 per cent of the total national wealth, while the top one per cent holds 51.53 per cent. A massive chunk of the population—the bottom 60 per cent—holds only 4.8 per cent of the national wealth. “The wealth of the top nine billionaires is equivalent to the wealth of the bottom 50 per cent of the population,” it said. India now has a total of 119 billionaires, having added 18 new ones last year. Their total wealth crossed the $400 billion, around Rs 28 lakh crore, mark for the first time. The country is also expected to produce 70 new dollar millionaires every day between 2018 and 2022, the study added.
As for the international ranking of inequality, India is at 62 out of 74 emerging economies on a metric focussed on the living standards of people and the future-proofing of economies by WEF. This Inclusive Development Index (IDI) has been developed as a new metric of national economic performance as an alternative to GDP. The WEF study said, “Designed as an alternative to GDP, the IDI reflects more closely the criteria by which people evaluate their countries’ economic progress.” Of the three pillars that make up the index, India ranks 72nd for inclusion, 66th for growth and development, and 44th for inter-generational equity, meaning the most non-inclusive.
Instead of the normal GDP growth, this index takes into account the “living standards, environmental sustainability, and protection of future generations from further indebtedness”. For WEF, to measure inclusive growth, reliance on GDP as a measure of economic achievement is fuelling short-termism and inequality. The countries ranked better than India in the IDI include China, Pakistan, Sri Lanka, Bangladesh, Nepal, Mali, Uganda, Rwanda, Burundi, Ghana, Ukraine, Serbia, Philippines, Indonesia, Iran, Macedonia, Mexico, Thailand and Malaysia.
WEF found that decades of prioritising economic growth over social equity has led to historically high levels of wealth and income inequality and caused governments to miss out on a virtuous circle in which growth is strengthened by being shared more widely and generated without unduly straining the environment or burdening future generations.
Excessive reliance by economists and policy-makers on GDP as the primary metric of national economic performance is part of the problem, the WEF said. The GDP measures the current production of goods and services rather than the extent to which it contributes to broad socio-economic progress as manifested in median household income, employment opportunity, economic security, and quality of life, it added.
The WEF also said that rich and poor countries alike are struggling to protect future generations, as it cautioned political and business leaders against expecting higher growth to be a panacea for the social frustrations, including those of younger generations who have shaken the politics of many countries in recent years.
In the midst of all these, the interim budget ‘trailer’ throws just some crumbs at the 60 per cent population who barely own five per cent of the nation’s wealth. Though the ‘film’ for the rich and super-rich has been playing out for quite some time, it will become a ‘blockbuster’ once the New India agenda is unleashed in full.
New India @ 75
Prime Minister Narendra Modi’s governance agenda was unveiled by the President in his address to Parliament on June 9, 2014 giving prime position to pro-poor development: “My Government is dedicated to the poor. Poverty has no religion, hunger has no creed, and despair has no geography. The greatest challenge before us is to end the curse of poverty in India. My government will not be satisfied with mere ‘poverty alleviation, and commits itself to the goal of ‘poverty elimination’. With a firm belief that the first claim on development belongs to the poor; the government will focus its attention on those who need the basic necessities of life most urgently. It will take necessary steps to provide security in its entirety to all citizens; through empathy, support and empowerment.” The clarion was “sabke saath sabka vikas” (participatory-inclusive development). The rank hypocrisy of the pro-poor claim and the clarion stand ruthlessly exposed as this government is reaching its final moments!
It took nearly four-and-a-half years for the Government to come out with a ‘Development Agenda’ to fulfil the “sabke saath sabka vikas” clarion. And this came in November, 2018 from the National Institution for Transforming India (NITI Aayog), the multi-tiered government think-tank with the title ‘Strategy for New India @ 75’.
The strategy paper says that India is on the cusp of a major transformation and that change has been in the making over the last four years. The economy is finally moving out of the negative legacies of the past, specially the reckless credit expansion. India has regained its position as the fastest growing large economy in the world. This is highly commendable. However, to meet the rising aspirations of our young population, India needs to achieve and sustain a high rate of GDP growth for the next three decades. There will be several milestones in this long and arduous journey. The first of these will be in 2022 when India celebrates the 75th anniversary of its independence. In this platinum jubilee year, the government’s goal is for India to be a USD 4.0 trillion economy. In another five years (2027), it will be a USD 10.0 trillion economy.
It cites Prime Minister’s call for establishing a New India by 2022 and captures his three key messages. First, development must become a mass movement in which every Indian recognises her role and also experiences the tangible benefits accruing to her in the form of better ease of living. Collective effort and resolve will ensure that we achieve a New India by 2022 just like independence was achieved within five years of Mahatma Gandhi giving his call of Quit India in 1942. The direct implication of ensuring rapid growth with inclusion is that policymaking will have to be rooted in Indian ground realities and emphasise the welfare of all in both design and implementation.
Second, development strategy should help achieve broad-based economic growth to ensure balanced development across all regions and states and across sectors. This implies embracing new technologies fostering innovation and upskilling. India will have to focus on the necessary modernisation of agriculture and mainstreaming of regions such as the North East, hilly states and the 115 Aspirational Districts. The direct outcome of this will be improved regional and inter-personal equity and elimination of dualism that has so far characterised our economy. We will put in place an economy that is predominantly formal, rule-driven, and facilitates investment and innovation.
Third, the strategy when implemented will bridge the gap between public and private sector performance. The Prime Minister has focused on putting in place a ‘development state’ in place of the ‘soft state’ that this government had inherited. In this context, the government has focused on the efficient delivery of public services, rooting out corruption and the black economy, formalising the economy and expanding the tax base, improving the ease of doing business, nursing the stressed commercial banking sector back to a healthy state, and stopping leakages through direct benefit transfers and widespread use of the JAM (Jan Dhan, Aadhaar, Mobile) trinity.
‘Strategy for New India @ 75’ has identified 41 different fields that require either a sharper focus on implementing the flagship schemes already in place or a new design and initiative to achieve India’s true potential. The strategy paper identifies the drivers, infrastructure priorities, inclusion areas and governance that need to be concentrated upon.
For NITI Ayog, preparing the strategy is only the first step towards India’s economic transformation. As outlined in this Strategy Document, successfully completing our economic transition will enable us to achieve freedom from squalor, illiteracy, corruption, poverty, malnutrition, and poor connectivity for the common Indian. This will see per capita incomes rising from about USD 1,900 in 2017-18 to around USD 3,000 in 2022-23.
By 2022, New India will provide a solid foundation for clean, inclusive, sustained and sustainable growth for the next three decades. The ‘Strategy for New India @ 75’ reflects India’s preparedness to make this transition which will usher a growth rate of nine per cent in order to generate enough jobs and achieve universal prosperity: “This will raise the economy’s size in real terms from $2.7 trillion in 2017-18 to nearly $4 trillion by 2022-23.”
Significantly, NITI Aayog—the great champion of ‘digital disruption’ and predatory development—is silent as to whose pockets this $4 trillion will go to. Obviously, at the present rate of wealth distribution, 52 per cent will go to the super-rich one per cent, 25 per cent to the rich 10 per cent, 18 per cent to the middle 29 per cent, and five per cent to the poor 60 per cent. This is the typical ‘trickle-down’ and is in line with the present trend of ‘development’ induced distributive injustice. As of now Gini coefficient is one way of measuring inequality, with a reading of 100 per cent denoting perfect inequality and zero indicating perfect equality. According to Credit Suisse, the Gini wealth coefficient in India has gone up from 81.3 per cent in 2013 to 85.4 per cent in 2018. With the $4 trillion distributed as above, India would soon be heading towards perfect inequality which would be devastating.
New India Vs Real India
While NITI’s is the ecstatic vision of ‘New India’, the real India is a picture of impoverishment and inequity. The massive mobilisation of land, water-bodies and forests over the past two decades has turned India rapidly into a rent-seeking economy, where profits are high and quick as opposed to genuinely productive sectors where they are low and slow. The fact is directly related to the growing phenomenon of political entrepreneurship in multiple forms, explaining the growing hundreds of dollar millionaires, both in and outside Parliament. Inequality is the natural outcome of this process of “predatory growth”. What India has been experiencing is inequality-driven exclusive growth.
This has accelerated in the past five years or so due to the blatant corporate profit-maximisation agenda being pursued by the Central Government. Almost every project designed and pushed is big and mega—‘Demonetisation’ and ‘Aadhaar’ to generate huge business and profit for digital companies; massive defence purchases; petro-chemicals, gas and hydro-carbon projects for the favourites; Sagarmala (costing Rs. 16 lakh crores) to capture the coast and build massive ports, Coastal Economic Zones and other infrastructure; Bharatmala (Rs. 6 lakh crore) to grab land and build huge expressways and corridors to nowhere; bullet-trains costing billions that will run near empty. These ‘infrastructure’ projects would put billions and millions in the pockets of the top one per cent and 10 per cent respectively through lucrative contracts and cash transfers via the Viability Gap Funding (VGF) route which has become a major fraud means of transferring wealth Towards this end, thousands of hectares are being acquired all over the country by National Highway Authority of India (NHAI) adopting Stalinist highly arbitrary methods!
To understand the arbitrariness of land acquisition we need to look at the Framework and Procedures adopted by NHAI under the National Highway Authority Act-1956.
Under Section 3 of the Act, in Stage I The Central Government stating that a particular land is needed for a ‘public purpose’ issues a preliminary notification also known as the ‘intention notification’. Any land that is required by NHAI for maintenance, management or operation of a National Highway or any other ancillary purposes like construction of buildings is deemed ‘public purpose’. This essentially connotes that all acquisition under the NHA are for ‘public purpose’. It is common these days that ‘private profit’ is often mixed-up with ‘public purpose’!
In Stage II any ‘person interested’ in any land that is notified, may within 21 days from the date of publication of the notification, object to the acquisition of the land. The objections are given in writing to the ‘competent authority’ which is normally the Special Land Acquisition Collector (SLAO) appointed for the purpose. After hearing the objections SLAO has to decide the objections and record the reasons for the decision. The decision of the ‘competent authority’ on these objections is final. Most of this process is perfunctory and always in favour of the Government/NHAI since decision is already taken to acquire the land.
In Stage III central Government makes a formal declaration of the intended acquisition. On such declaration, the land vests with the Central Government and any person can enter the land to carry out various operations connected with the national highway. Only compensation issue survives and that drags on for years. NHAI goes ahead and contracts are awarded for projects that include construction and hand over of land for ‘purposes connected thereto’. How NHAI is misusing these powers can be seen from the pages of lengthy advertisements appearing daily in almost all newspapers notifying acquisition of thousands of hectares of land under Section 3 of the NHAI Act.
Added to this is the ongoing Great Bank Robbery and ultra-mega deals like Rafale. There are two aspects to the Great Bank Robbery—advancing loan to the corporates and writing off their loans. As per Basic Statistical Returns (BSR) of Scheduled Commercial Banks available with the Reserve Bank of India as on 31 March, 2018, loan accounts of over Rs. 100 crores number just 13,142, which is a meagre 0.006 per cent of the number of accounts totalling 1,969,77,100. However, this meagre percentage has about Rs. 2.60 lakh crore outstanding, which is 30 per cent of the total outstandings! Now we know where our bank deposits are going! What is worse, in the last four years, about Rs. 4 lakh crores of corporate bank loans have been written off. Now we know where our money is going!
It is obvious that the present government has transferred lakhs of crores of rupees of public funds into corporate coffers, in the name of corporate tax concessions, corporate loan waivers, transferring the country’s land and mineral wealth to them at very low royalty rates, giving them huge subsidies in their investments in the country’s infrastructural sector in the name of public–private–partnership, selling off the country’s public sector corporations to them at throwaway prices, and so on. It is because of these huge transfers of public money that the number of billionaires in India has more than doubled during the first four years of this Government, going up from 56 in 2014 to 121 in 2018. In 2018, the wealth of India’s richie-rich increased by a whopping 39 per cent, because of which the richest one per cent in the country today hold more than half the country’s wealth, and the richest 10 per cent own 77.4 per cent.
In the event, massive amounts of money have been moving from public exchequer to private pockets. No wonder in 2018 alone wealth of Indian billionaires rose by Rs 2,200 crore a day ( https://scroll.in/latest/910224/oxfam-inequality-report-indias-richest-1-grew-by-39-in-2018-bottom-half-by-3 ) which is over Rupees 8 lakh crore in just one year. As a case study, let us look at just one of the devious ways of transferring massive amount of wealth to the select few in the name of ‘development’ and creating jobs. This comes in the garb of road and port infrastructure for which a staggering Rs. 22 lakh crores have been earmarked. This is being sought to be done by integrating two massive infrastructure blockbusters—Sagarmala and Bharatmala.
Sagarmala (sea-garland) project is a humungous Rs. 16 lakh crore port-led-prosperity investment initiative of the Government of India (GoI) entailing the setting up/modernisation of 14 ultra-mega ports along with Coastal Economic Zones (CEZ) and at least 29 Coastal Economic Units (CEU), development of mines, industrial corridors, rail, road, and airport linkages with these water ports. Sagarmala Project was originally mooted by the NDA Government in 2003 as waterway equivalent to the Golden Quadrilateral in roadways. The project is aimed at driving industrial development and prosperity by harnessing India’s 7,500-km-long coastline and 14,500-km of navigable waterways. Under the later UPA governments (I and II), the project received much lesser attention.
But on March 25, 2015, the Union Cabinet gave approval for this project to develop 12 new ports and also 1,208 Islands, most of which will be unnecessary and unviable. A National Sagarmala Apex Committee will provide policy direction and guidance for the initiative’s implementation and review the progress. A Sagarmala Development Company has been set up with an initial authorised share capital of Rs 1,000 crore and subscribed share capital of Rs 90 crore. In April 2016, the Sagarmala National Perspective Plan was released with details on Project Plan and Implementation. Under this, initially, 415 projects, at an estimated investment of approximately ₹8 lakh crores, have been identified across port modernisation & new port development, port connectivity enhancement, port-linked coastal economic zone industrialisation, and coastal community development for phase wise implementation.
Fourteen CEZs are part of Sagarmala scheme with the investment of ₹6.5 lakh crores centered around ports. Each CEZ with the area of 2,000 to 3,000 km2 (200,000 to 300,000 hectares) will have several Coastal Economic Units (CEU) and, in turn, each CEU will have several Port-Linked Industrial Clusters (PLIC). The CEUs serve as nodes within CEZ, each CEU being an industrial estate with multiple industries. Each PLIC within CEU will have several manufacturing units. Along with 14 CEZ planned, the land grab would be a mind-boggling 40,00,000 hectares!
Bharatmala (land-garland) project is a centrally-sponsored and funded road and highways project of the Government of India. The total investment for 83,677 km committed new highways is estimated at ₹6 lakh crore making it the single largest outlay for a government road construction scheme (as of December 2017). The project will build long and wide highways throughout the length and breadth of the country whether needed or not. Bharatmala will connect 550 district headquarters (from current 300) to minimum four-lane highway by raising the number of corridors to 50 (from current 6). The project would also include 12- and eight-lane highways which are rare even in rich, vast and expansive countries like USA. These super-highways would pass through ecologically and environmentally sensitive jungles, forests, wildlife hotspots, waterbodies, and coasts ripping them apart, polluting and destroying them.
All projects under Sagarmala and Bharatmala would be implemented through the Public-Private Participatory (PPP) mode that has a provision for VGF. As they are structured today, PPP and VGF are just tools to funnel public money into private hands as these fancy projects are invariably unviable. This funnelling could be as much as 40 per cent of the project cost i.e. around Rs. 9 lakh crores, most of which would go to the super rich one per cent. Furthermore, land needed for Bharatmata projects would be 84,000 km-long and, on an average, 100 metres wide. This means the land required would be a staggering 8,40,000 hectares which are being acquired forcibly under the draconian provisions of National Highway Authority Act, 1956 only to be handed over to the tycoons to do whatever they want. Crumbs like a few thousand jobs will be thrown at the 60 per cent while lakhs of farmers and fisher-folk would lose their land and livelihood. The tragedy is that while the money and the land would stand transferred to the rich and super-rich, the humongous infrastructure, even if it gets built, would remain unused or under-used! What is equally bad is the endless collection of usurious tolls by the contractors even on so called ‘National Highways’ riddled with potholes, road blocks and cattle-herds!
Viability Gap Funding (VGF) means a grant one-time or deferred, provided to support infrastructure projects that are economically justified but fall short of financial viability. The lack of financial viability usually arises from long gestation periods and the inability to increase user charges to commercial levels. Infrastructure projects also involve externalities that are not adequately captured in direct financial returns to the project sponsor. Through the provision of a catalytic grant assistance of the capital costs, several projects may become bankable and help mobilise private investment in infrastructure.
Government of India has notified a scheme for Viability Gap Funding to infrastructure projects that are to be undertaken through Public Private Partnerships. It will be a Plan Scheme to be administered by the Ministry of Finance with suitable budgetary provisions to be made in the Annual Plans on a year-to-year basis.
The quantum of VGF provided under this scheme is in the form of a capital grant at the stage of project construction. The amount of VGF will be equivalent to the lowest bid for capital subsidy, but subject to a maximum of 20 per cent of the total project cost. In case the sponsoring Ministry/State Government/ statutory entity propose to provide any assistance over and above the said VGF, it will be restricted to a further 20 per cent of the total project cost.
Support under this scheme is available only for infrastructure projects where private sector sponsors are selected through a process of competitive bidding. While in theory VGF is disbursed only after the private sector company has subscribed and expended the equity contribution required for the project, in practice contracting companies do not put down any money of their own as equity because even before statutory approval of projects government releases substantial portion of VGF to these companies!
This is one side of the ‘development’ story of those at the top one per cent or 10 per cent. The other side is of those at the bottom. Here, the government’s policies have led to appalling levels of unemployment, a huge worsening of the crisis gripping the agricultural sector on which more than half the population depends for its livelihoods, and massive increase in poverty and destitution. As if this was not enough, the Modi Government has also made huge cuts in the government’s already low social sector expenditures, further worsening the conditions of the people. The state of affairs has been lucidly described by Dr. P. Sainath in his seminal Book “Everybody loves a Good Drought” (Penguin-2017):
“After over four decades of ‘development’, these facts remain: one out of every three persons in the world lacking safe and adequate drinking water is an Indian. Nearly one in every two illiterates in the world is a citizen of the country. Nearly one of every three children outside schools in the planet is an Indian… The largest number of absolute poor live in this country. So, do the largest number of those with inadequate housing. Indians have among the lowest per capita consumption of textiles in the world. There are more job seekers registered at the employment exchanges of India than there are jobless in all the 24 nations of the OECD put together. Yet this nation has over 44 million child labourers, the largest contingent in the world… Every third leprosy patient in the world is an Indian. So is every fourth being in the planet dying of waterborne or water-related diseases. Over three-fourths of all the tuberculosis cases that exist at any time worldwide are in this country. No nation has more people suffering from blindness. Tens of millions of Indians suffer from acute malnutrition….”
This tragic contradiction is brutally captured through the metaphor of “the drunken stunted dog” (‘Churning the Earth’-Penguin-2012): “Imagine a puppy which is fed a special kind of diet which distorts his growth so that one of his legs grows astonishingly fast, while the other three get stunted to various degrees. Now imagine that the puppy grows into a dog of sorts, gets drunk and begin to spin around the house in ecstasy—the hangover and the diseases lying in wait….” In today’s context the special diet is the project packages of billions of rupees specially designed and delivered to the corporate carpetbaggers who are already filthy rich and the drunkenness refers to the delirious contractors and stock market and the hangover and diseases will follow the economic crash which is already staring at the nation! Extreme inequity would be the end result. And this is going to be the “New India.”
Schemes for the poor, Money for the rich
Among its vast agenda, NITI Ayog has identified a few schemes for farmers and the health of the citizens, especially the poorer among them. Most of these are being sought to be achieved through the ‘Insurance’ route rather than direct government intervention. And these insurance schemes are turning out to be scams. According to P. Sainath, the Pradhan Mantri Fasal Bima Yojana (PMFBY) will end up being a bigger scam than the Rafale deal in terms of free handouts to corporations. Already, since 2016, the central and state governments have together allocated over Rs. 66,000 crores to crop insurance schemes. These three years have also seen serious farmer distress and crop failure in several regions. In the ‘compensations’ paid out to farmers, it is hard to spot any funds that have come out of the pockets of the insurance companies (mainly private, but also including public entities like the LIC). The pay-outs have come from the premiums given by the farmer, and by state and central governments—and account for only a fraction of even those premiums, leaving over huge sums of public money for the insurers. And the first claimant on any ‘compensation’ is the bank that gave the farmer the loan he or she is unable to repay.
PMFBY, the flagship programme launched by Modi government with much fanfare, has turned out to be, at best, a profit earning scheme for private insurance companies. There is certainly no business as profitable as crop insurance. In the crop year 2016-17, when the monsoon rains had returned to normal after a back-to-back drought for two consecutive years, a total of Rs 22,437 crore was paid to the insurance companies, according to RTI responses received by the Indian Express. Against such a huge premium, the crop loss claims finalised by the insurance companies, including 11 companies in the private sector, came to Rs 8,088 crore leaving the insurance companies with a staggering profit of Rs 14,349 crore.
Instead of paying Rs 14,349 crore as profit to the insurance companies, government could have used the entire amount as disaster relief for farmers. This was not done because the PMFBY is basically designed to help private companies. The government either did not visualise the serious problems in its implementation and the way the scheme was designed, or probably had too much of faith in private insurance companies. The CAG has already pointed to several faults in the scheme.
The biggest fault, of course, lies in the way the average loss is worked out. In the past, the average loss computed in a block or taluka was considered while assessing the crop loss suffered by a farmer. In the PMFBY too, a village or a village panchayat has been taken as the unit of insurance. It means that irrespective of the loss, when an individual farmer suffers—say from a hailstorm or strong winds—the compensation she will get will be based on the average loss in crop production in a village. This is primarily the reason why farmers were never enthused to take up crop insurance.
PMFBY has turned out to be a goldmine for ten private insurance companies in just two years, with huge difference between premiums received and compensation paid. The scheme also failed to enthuse farmers. In just four BJP-ruled states, over 84 lakh farmers exited the scheme after just a year. While the number of farmers covered under the scheme decreased, the profit of the insurance companies increased greatly. The scheme is a big flop. Instead of allowing the insurance companies to make huge profits, the Centre should have devised mechanisms to compensate the farmers directly as these would have benefited them more. But for this ‘Vikas’ obsessed government farmer’s benefit is not the concern, but that of corporate carpetbaggers!
Same is with the insurance route adopted for ‘healthcare’, conflating it with ‘Medicare’ that has led to maximisation of the need for elaborate—often unnecessary—diagnostic ‘tests’, pushing patients towards newer and more expensive interventions even when cheaper options exist, and exponentially increasing the consumption of medicines. The purpose of healthcare, ideally, should be to create and maintain conditions under which one can lead a healthy life without having to depend on doctors and hospitals and consuming expensive medicines.
But, the much-trumpeted health insurance Ayushman Bharat has turned this cardinal principle on its head. Free insurance cover of the kind envisaged under the scheme will certainly accentuate the trend towards super speciality care even if treatment is available at primary or secondary levels. No one wants to settle for a lower end product when a higher one is available and becomes affordable through insurance. When health becomes more a business than a public service, the push towards services (whether public or private) offering more revenue and higher margins is inevitable.
Insurance adds to the purchasing power for these services and expands the market for ‘Medicare’ massively. One of the features of Medicare infrastructure in India in the last few decades has been the disproportionate growth of tertiary services compared to primary and secondary, and of the private sector in comparison to public. Many see this as cause for alarm in the belief that despite their poor management, hospitals in the public sector are primarily driven by considerations of selfless service and people’s welfare and those in the ‘private sector’ by the pursuit of greed.
Nevertheless, the problem lies not in the binary of public versus private treatment centres but in the way public policy priorities get distorted by seeing health in ‘medicalised’ terms, as an exclusive sector of policy independent of the physical and social environment we live in. We forget that the water we drink, the air we breathe, the food we eat, the civic infrastructure we have, and the environmental conditions in which we live, the education we get – all have a direct bearing on our health. In a situation where these conditions continue to deteriorate rapidly and where even in affluent areas the degradation is alarming, checking this degradation has to precede and take priority over expanding access to expensive treatment.
A telling example is that of Gorakhpur in Uttar Pradesh where, year-on-year, over 600 infants are lost to encephalitis and scrub typhus. The recurrence of the disease is directly related to degraded civic conditions. A concentrated effort to ensure appropriate sanitation infrastructure, waste management, clean water supply and sewerage and drainage, for example, can have a dramatic impact on reducing the incidence of disease. But this is barely ever given any attention and instead high priority is given to setting up a super speciality, advanced research and treatment centre which will perversely need the disease to persist in order to justify the heavy investment in its establishment. This seem to be the objective of Ayushman Bharat which aims at fattening the pharma and Medicare giants without much concern for genuine healthcare.
Is Farming part of Development?
Here is the CHARTER OF INDIAN FARMERS adopted by an assembly representing the farmers of India on the occasion of the historic Kisan Mukti March at Delhi organised by the All India Kisan Sangharsh Coordination Committee on 29-30 November, 2018:
WE, THE FARMERS OF INDIA,
The producers of primary agricultural commodities;
Including Women, dalit, nomadic and adivasi farmers;
Landowners, tenants, sharecroppers, agricultural labourers and plantation workers;
Fishworkers, milk producers, poultry farmers, livestock rearers, pastoralists, and collectors of minor forest produce; and,
Everyone engaged in crop cultivation, shifting cultivation, sericulture, vermiculture, and agro-forestry;
Well-being of farmers is not just about economic survival of a majority of Indian households, it is about retaining our national dignity and our civilizational heritage; and, that
Farmers are not just a residue from our past; farmers, agriculture and village India are integral to the future of India and the world;
RECOGNISING OUR RESPONSIBILITY
As honest hard workers who face numerous odds;
As bearers of historic knowledge, skills and culture;
As agents of food safety, security and sovereignty; and
As guardians of biodiversity and ecological sustainability;
RECALLING THE PRINCIPLES OF
Social justice and equity,
YET ALARMED AT
Economic, ecological, social and existential crisis of Indian agriculture;
Persistent state neglect of agriculture and discrimination against farming communities;
Increasing vulnerability of farmers to extortion by village powerful and government officials;
Deepening penetration of large, predatory and profit hungry corporations;
Spate of farmers’ suicide across the country and unbearable burden of indebtedness; and
Widening disparities between farmers and other sectors in our society,
SOLEMNLY AFFIRM OUR RIGHT TO
Land for agriculture;
Commons and other natural resources;
Income sufficient to cover dignified life;
Protection against natural and other calamities;
Social security; and
THEREFORE, CALL UPON THE PARLIAMENT OF INDIA TO
Immediately hold a Special Session to pass and enact the two Kisan Mukti Bills that are of, by and for the farmers of India and await its consideration, namely,
- The Farmers’ Freedom from Indebtedness Bill, 2018; and
- The Farmers’ Right to Guaranteed Remunerative Minimum Support Prices for Agricultural Commodities Bill, 2018,
And to hold a special discussion on the grave and unprecedented agrarian crisis in our country and its related aspects.
AND DEMAND THAT THE GOVERNMENT OF INDIA MUST IMMEDIATELY:
- Increase the number of guaranteed employment days under MGNREGS to 200 days per family, ensure wage payment at par with legal minimum wages for unskilled farm labour and extend this scheme to urban areas;
- Reduce the cost of inputs including seeds, fertilisers, pesticides, water, diesel and electricity for farmers;
- Provide comprehensive social security for all farm households, including pension @ at least Rs. 5,000 per month per farmer above the age of 60 and health coverage;
- Universalize the Public Distribution System with cereals, pulses, oils and sugar and stop its linkage with Aadhaar and the biometric system;
- Address the menace of stray animals by removing all legal and vigilante-imposed restrictions on cattle trade, compensating farmers for destruction of crops by wild and stray animals and supporting animal shelters;
- Stop land acquisition without informed consent, acquisition of agricultural land for commercial land development and the bypassing or dilution of The Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 at all levels;
- Make payment of cane dues mandatory within 15 days of opening of the mill, maintain recovery rate at 9.5 per cent; and introduce SAP for cane throughout the country;
- Withdraw pesticides that have been banned elsewhere and not approve GM seeds without a comprehensive needs, alternatives and impact assessment;
- Disallow Foreign Direct Investment in agriculture and foods processing, and remove agriculture from Free Trade Agreements, including the proposed Regional Comprehensive Economic Partnership (RCEP);
- Require identification and registration of all real cultivators including tenant farmers, sharecroppers, women farmers, lessee cultivators etc. for purposes of accessing benefits of all government schemes; and
13.. Stop uprooting Adivasi farmers in the name of afforestation, ensure strict implementation of Panchayat (Extension to Scheduled Areas) Act and prevent dilution of Forests Rights Act, 2006, while at the same time ensuring its stringent implementation all over the country;
AND, FURTHER, URGE THE GOVERNMENT TO EVOLVE POLICIES TO
- Provide land and livelihood rights to the landless, including on agricultural land, water for fishing, mining of minor minerals etc.;
- Implement a comprehensive crop insurance scheme to cover all types of risks for all crops and for all farmers, with farm as the unit of damage assessment; such a scheme should benefit the farmers and not the corporate insurance companies;
- Build assured protective irrigation through sustainable means for farmers, especially in the rainfed areas;
- Ensure remunerative guaranteed prices for milk and its procurement for dairies and to supplement nutritional security through Mid-Day Meal Scheme and Integrated Child Development Scheme etc;
- Waive off all outstanding agricultural loans of farmers from suicide affected families and provide special opportunities to children of such families;
- Protect the farmers from corporate plunder in the name of contract farming;
- Invest on farmers’ collectives to create Farmer Producer Organisations and Peasant Cooperatives instead of corporatisation of agriculture and takeover by MNCs; and
- Promote an agro-ecology paradigm that is based on suitable cropping patterns and local seed diversity revival, so as to build economic viability, ecologically sustainable, autonomous and climate resilient agriculture.
Despite the pompous “sabke saath sabka vikas” rhetoric and the promise of doubling farmers’ income, none of the above basic needs of farmers have been attended to in the last five years. In fact, during this period, terms of trade have been turning adverse to farmers with the drop in minimum support prices (MSPs) leading to the negative ratio of “prices received” by farmers to “prices paid out” for inputs.
Demonetisation upset some systemic features of agricultural markets. Use of cash has always dominated mandi trade. Traders regularly rolled over cash across commodities, other traders, markets, farmers and retailers. The success of traders was not decided by what they bought and sold, but by how best they kept the cash rolling. Payments between wholesalers and retailers were not always immediately realised. Many traders would play around with part payments and delayed payments. When cash was not immediately available, traders would borrow from informal sources and repay when cash arrived. In other words, cash was the lubricant that made mandis work smoothly.
All this came to a standstill after demonetisation. As cash was sucked out, the practice of rolling over cash became difficult. The basic rhythm of the market was upset. Many small traders exited the business. A few began to use cheques to delay payments, but few were ready to accept them. Banks were rarely approached for credit lines, as traders feared getting tracked by the authorities. But even when adequate cash was available, traders were circumspect about rolling over large amounts of cash after demonetisation. As a result, the vibrancy of mandi trade was undermined. Prices fell precipitously in most commodities.
Loan waiver is another area where central government has messed up. Enough has been written on the subject. “PM-KISAN” is a targeted schemes prone to a number of errors of exclusion and inclusion. Households that should be beneficiaries are left out, and those that should not be beneficiaries are listed in. Tenants cultivate land but are excluded as they do not own the land. Agricultural labourers are left out because they neither own nor operate land.
This brings to mind the famous pastoral poem of ‘The Deserted Village’ by Oliver Goldsmith:
“Ill fares the land, to hastening ills a prey.
Where wealth accumulates, and men decay;
Princes and lords may flourish, or may fade;
A breath can make them, as a breath has made.
But a bold peasantry, their country’s pride,
When once destroyed, can never be supplied.”
Written 250 years ago in 1770, this reality is glaring at our face even today. Perhaps what Goldsmith has written may be the intention of the Davos directed rulers of this parched nation of ours. Hence the deliberate destruction of the farming economy!
To be fair to the present government at the centre, such inequity and disregard for farming did not commence in the last five years, it only got accelerated. Over the last two decades or so, India has been growing at a rate considerably higher than the world average. In recent years, the growth rate of national product of India is approximately two times that of the world average. Successive governments have been serenading this. There was a time not long ago when India’s then Finance Minister Palaniappan Chidambaram would not go to sleep without extolling the GDP growth crossing eight per cent, nine per cent and even crossing the magical 10 per cent. Such was his obsession. Successive governments also wanted Agriculture share to be less than 10 per cent of the economy and farming could be released for more ‘productive and profit-making’ purposes!
But no matter how powerful this united campaign for predatory development by the rich corporations, the media, and the politicians is, even their combined power remains defenceless against the actual life experiences of the poor. If this process of growth continues for long, it would produce its own demons. No society, not even our malfunctioning democratic system, can withstand beyond a point the increasing inequality that nurtures this high growth. The rising dissent of the poor must either be suppressed with increasing state violence flouting every norm of democracy, and violence will be met with counter-violence to engulf the whole society. Or, an alternative path to inclusive development that depends on deepening our democracy with popular participation has to be found. The return to ‘grassroots democracy and development’ therefore, has become an imperative.
Grassroots Democracy and Development
Economy of a populous, agrarian, and poor country like India should be akin to a tree with deep roots (agriculture), strong trunk/branches (manufacturing-large and small), and spread-out canopy (services). But under the predatory ‘development’ model that is being pursued, roots have lost their depth, trunk has become weak, branches have withered and the economy has been ‘growing’ upside-down! Profusely sprinkled with ‘reform tonic’, only the canopy has been growing thick and green at the expense of the roots, trunk, and branches. Obviously, this was done to facilitate MNCs and FDI tycoons to come into India and earn fortunes by picking low-hanging fruits! This needs to be reversed if India is to prosper in a balanced and equitable manner.
Basics are provided in the Constitution itself, which is India’s charter of Governance. The Preamble calls for justice, social economic and political; liberty of thought, expression, belief, faith and worship; equality of status and of opportunity and fraternity assuring the dignity of the individual and the unity and integrity of the Nation.
The Directive Principles of State Policy aim at promoting the welfare of the people by securing and protecting a social order in which justice, social, economic, and political, shall inform all the institutions of the national life. The State shall, in particular, strive to minimise the inequalities in income, and endeavour to eliminate inequalities in status, facilities, and opportunities, not only amongst individuals but also amongst groups of people residing in different areas or engaged in different vocations.
The state is mandated to direct its policy towards securing—(a) that the citizens, men and women equally, have the right to an adequate means of livelihood; (b) that the ownership and control of the material resources of the community are so distributed as best to subserve the common good; (c) that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment; (d) that there is equal pay for equal work for both men and women.
The state shall take steps to organise village panchayats and endow them with such powers and authority as may be necessary to enable them to function as units of self-Government.
The state shall endeavour to organise agriculture and animal husbandry on modern and scientific lines and shall, in particular, take steps for preserving and improving the breeds, and prohibiting the slaughter, of cows and calves and other milch and draught cattle.
The state shall endeavour to protect and improve the environment and to safeguard the forests and wild life of the country.
The Idea of India-political and economic
Borne of the preamble and directive principles of state policy are the two ideas of the Republic—political and economic. The ‘political idea’ is contained in the ‘Objectives Resolution’ moved by Jawaharlal Nehru in 1948, seeking a Republic “wherein all power and authority of the Sovereign Independent India, its constituent parts and organs of government, are derived from the people”. As early as 1922, Mahatma Gandhi had described Swaraj as merely a “courteous ratification of the declared wish of the people of India”. The visions of these two founding fathers had envisaged people-based governance with a bottom-up decision-making process that would give everyone ‘a place in the sun’.
Structurally, India’s democracy was to rise storey by storey from the foundation, consisting of self-governing, self-sufficient, agro-industrial, urbo-rural local communities at the grassroots—gram sabha, panchayat samiti and zilla parishad—that would form the foundation of Vidhan Sabhas and the Lok Sabha. These politico-economic institutions will control and regulate the use of natural resources for the good of the community/nation.
Built on this foundation is the ‘economic idea’ of equity envisaging independent India as sui generis, a society unlike any other, in a class of its own that would not follow the Western pattern of mega industrialisation, urbanisation, and individuation. India’s would be a people’s economy that would chart out a distinct course in economic growth, which would be need-based, human-scale, balanced development while conserving nature and livelihoods. In a self-respecting nation, every citizen should get the strength, resource, opportunity and level-playing-field to stand on their feet and earn his/her livelihood with honour instead of endlessly depending on corporate trickle-downs and government charity. Nature-given resources—land, water, jungle and minerals—belong to the people and these must be managed as such. Only then there would be human security and dignity.
While material sufficiency lies at the core of human security, the concept also encompasses the non-material dimension to form a qualitative whole. Human security is oriented towards an active and substantive notion of democracy, and is directly engaged with discussions of democracy at all levels, from the local to the global. This is fresh and positive thinking, harnessing four vital elements—material sufficiency, human dignity, democracy and participatory governance—that constitute the core of a civilised human society. One without the other is incomplete and unsustainable.
What is Development?
Development process in India should harness the vital elements—material sufficiency, human dignity, democracy and participatory governance—of human security. Such development would involve equitable change in the community, especially in how resources are used, the functioning of institutions, and the distribution of resources in the community. Balanced development could lead to prosperity & equity.
There were three pre-requisites for deciding on the development model of a country or a region. One, availability of domestic capital to start and sustain the model. Two, technology to optimise and augment production. And three, a market with purchasing capacity to consume the products. India’s economic situation at the dawn of independence was grim with few manufacturing industries, low-level technology, very little income, hardly any national savings and, consequently, very little capital investment.
India at that time did not meet the requirements of a capital intensive, technology-driven and big-ticket economy. But it had all the requisites for a ‘small-is-beautiful’, agro-based economy model. Limited capital for upgrading agriculture along with value addition activities through micro/small industries could have been found from domestic savings. Labour-intensive appropriate technologies could have been developed with this capital. And with a large population there was always a market for agricultural and food-related products.
It is on these the sui generis concept was conceived. This was the “Third way of Development” on the principle of ‘Small is Beautiful’ advocated by eminent thinkers like E.F. Schumacher and stalwarts like Jayaprakash Narayan (JP). This alternative model of development avoided the pitfalls of colonialism, capitalism and communism. This model is rooted on the traditional rural culture of India and not on any imported ‘civilisation’. Accordingly, India was to develop an independent economic system, an appropriate technology of self-help, a pattern of trade and political institutions that answer best to its own specific requirements and committed to pluralism and decentralised decision-making.
The best development model for India is diversified and value-added agriculture as the root, manufacturing small/medium industries as trunk and branches and widespread service sector as canopy. India needs to develop on its own, to invest in its traditional concepts with new meanings, instead of slavishly accepting the standards of industrial countries whether of the West or of the East. The almost universal tendency for a centralised political, economic, and social system that is associated with both of them should be abandoned. This in effect means India will have to develop an independent economic system, an appropriate technology of self-help, a pattern of trade and political institutions that answer best to their own specific requirements. They should be committed to pluralism and decentralised decision-making.
The types of societies that will emerge from the adoption of these strategies and techniques will be a conglomeration of stable, self-regulating, self-sufficient and self-financing, small-scale human societies, completely different from the present centralised and bureaucratic ones. The greatest need is a process of mental decolonisation, since neither common sense nor sound economics or their own past experience informs the present practice.
Development should be Democratic, Decentralised and Distributed (D3)
‘Development’ agenda should shift from pro-corporate to pro-people, particularly the subalterns. They are the ones who are deprived of ‘basic necessities and security’ by the predatory model of development being pursued during the last over two decades.
Subaltern model of ‘development’ has to be sustainable if it is to have any meaning. The basic concept of sustainable development is one where livelihood activities can be carried on for any length of time, because no resources are being consumed for life-support systems other than those which can be replaced.
Once society perceives that sustainability means conservation of life-support systems, people will demand it on the grounds of welfare, equity or economics. This demand will arise from the poor and the low-income groups who suffer the most from pollution and the high costs associated with resource depletion (land, forests, rivers, ocean, lakes, ecosystems, air, water) without in any manner gaining from scarcities created thereof.
Subaltern approach to Sustainable Development has five main components:
- Right to inclusive and equitable economic growth
- Right to a corruption-free society
- Right to a clean, green and safe environment
- Access to information and public participation in decision-making
- Promoting and defending the protection of the environment and human rights
For D3 to work, democracy should be strong. Mahatma Gandhi put his concept of India’s democracy in plain and simple words:
“…There are seven hundred thousand villages in India each of which would be organised according to the will of the citizens, all of them voting. Then there would be seven hundred thousand votes. Each village, in other words, would have one vote. The villagers would elect the district administration; the district administrations would elect the provincial administration and these in turn would elect the President who is the head of the executive…”
But what we got through the Constitution instead was something just opposite, an upside down structure—an all-powerful Parliament and Central Government; a limited power State government and Legislature and no-power Panchayats and Urban Local Bodies. There was no trace of Swarajya. In short, the Constitution did not provide for democracy or governance at the grassroots level thereby depriving people any say in the day-to-day management of their affairs. All natural resources stood centralised and subjected to arbitrary allocation. Only in 1993, establishment and election of Panchayats and Municipalities respectively were facilitated through 73rd and 74th constitutional amendments. But even to this day, these entities are unable to exercise most of the powers and functions so ‘benevolently’ given to them by the Government! This is the most basic flaw of India’s democracy and development and needs to be remedied expeditiously.
On the development side, the best way is to adopt and promote local resource-based Micro/Small/Medium enterprises charting distinct course in economic growth, which would be need-based, human-scale, spread-out and balanced. Decision making would be democratic and decentralised. Local Resource Based Development (LRBD) would lead to efficient/optimal use of local resources and reduce community’s dependency on foreign/external resources and decision making. It creates a better system of managing services to satisfy local (societal) needs. Decisions are made at local level, where relationships between economic development, environment and social needs are most visible. LRBD would open up entrepreneurial, self-employment and job opportunities across the country for the work-force of all skills. Bonus would be the halt to the ever spreading and unhealthy urban sprawl.
Gandhiji, the ‘Development Economist’
This was the model for India envisioned by Mahatma Gandhi. His visions of Gram Swaraj left him immediately at odds with many in the Indian National Congress and outside who sought to develop India as a ‘modern’ industrial nation state. To Gandhi, political freedom was merely the first step towards attainment of real independence which entailed achieving social, moral and economic freedom for seven hundred thousand villages. ‘If the villages perish India will perish’ he had said. But the majority of academically-trained, so-called modern economists called his vision ‘retrograde’. Some extremists even described it as ‘reactionary’ or ‘counter-revolutionary’ which aimed to put the clock back.
Many of those who admired his skill in leading the struggle for national liberation reluctantly tolerated his views as the price to pay for his political leadership. They were sold on the concept of large-scale urban-industrialisation, mass production and economics of scale. They failed to understand Gandhi’s economic insight and criticised him by saying ‘Whatever Gandhi’s merit as “Father of the Nation”, he simply does not understand economics.’
Yet, almost a quarter of a century after his assassination, Dr E F Schumacher, when delivering the Gandhi Memorial Lecture at the Gandhian Institute of Studies at Varanasi (India) in 1973, described Gandhi as the greatest ‘people’s economist.’
Schumacher identified Gandhi as the people’s economist whose economic thinking was compatible with spirituality as opposed to materialism. He said: ‘Gandhi refused to treat economics as if people did not matter.’ Gandhi had his finger on the pulse of the masses and therefore when someone put it to him that no religion was any good that did not make sense in terms of economics, Gandhi countered that no economics was any good that did not make sense in terms of morality and the poor masses. Schumacher therefore interpreted Gandhian economics as people’s economics and explained the difference between economic reasoning based on ‘people’ as against ‘goods’, as was the case with materialistic economic thinking.
Schumacher explained that economic reasoning based on ‘goods’ would be solely concerned with increasing the supply of goods by means of advanced technology scientific knowledge and modern equipment. Based on this line of thinking, industries should be large scale, highly sophisticated, capital intensive and labour saving, even to the point of total automation. From the ‘goods’ point of view, human beings were not ideal agents of mass production because they tended to make mistakes, were unpunctual, argued back and joined trade unions. The ideal therefore was to eliminate the ‘human factor’.
However, if the economic means of development was based on people, as with Gandhian thinking, one had to direct attention to people in need and start asking why are they poor; if it was because their productivity was zero, how then could this he raised?
With this line of reasoning eradication of worklessness was of paramount importance. The most disturbing aspect of most developing countries, Schumacher thought, was the fact that millions and millions of people were without work or at such a low level of productivity that it was negligible.
How could these people be helped to help themselves? It was in order to address this issue that Gandhi gave a call for ‘production by the masses’ instead of ‘mass production’. While giving his prescription to the nation, he said that ‘the salvation of India is impossible without the salvation of the villages and their poor inhabitants.’
The Gandhian Prescription
When asked how Gandhi, were he alive today, would view India’s present situation after three decades of independence, Schumacher pointed out that the number of rich, even very rich, people in India had increased as had the number of desperately poor people. He added that the situation in India reflected the situation of the world as a whole and Gandhi would undoubtedly consider this a sign of grievous failure. The obvious question, Schumacher asked, was ‘Why has it not been possible to help millions of unemployed and underemployed people to help themselves out of poverty?’
The answer, Schumacher added, was that an approach to economic problems which started from ‘goods’ and therefore aimed to eliminate the human factor from the productive process could not possibly lead to constructive job provision. Gandhi would not have found it difficult to understand this. Schumacher prophesied that if the next twenty-five years in India produced a continuation of the trends of development based on the Western model established since independence, the outlook for the mass of poor people was grim, even hopeless.
Schumacher summed up Gandhi’s prescription for the salvation of India as follows:
- Start all economic reasoning from the genuine needs of the people and help the poor to help themselves out of poverty.
- Revitalise and foster not only agriculture as such but also all possible productive, non-agricultural activities in the rural areas such as cottage industries for potters, weavers, shoemakers, carpenters, blacksmiths etc.
- Resist the further concentration of the growing population in large cities by reversing the trend of migration from rural to urban areas.
- Develop systematic policies, based on the best available knowledge for the mobilisation of all productive resources, the greatest of which is the population itself.
Only by following the above mentioned prescription, Schumacher thought, would developing countries such as India hope to feed, clothe, house and provide the bare necessities of life for their teeming millions.
He then went on to identify some cores of Gandhian economic thinking: Simple; Small, Capital Saving, and Rural Based.
Schumacher said that all real human needs were essentially simple, therefore only frivolities and extravagances like supersonic transport were inevitably complex. Complexity had to be seen not as a sign of progress but as a mark of failure. It entailed the need for extreme specialisation so that men became ‘fragmentary’, too specialised to be able to obtain wisdom. Schumacher maintained that the essence of the message of all the prophets and philosophers born in the East was a simple lifestyle.
In an attempt to emphasise this point Schumacher added that in the area of economics, modern civilisation was moving at ever-increasing speed towards immense complexity and high capital intensity with the sole object of increasing gross national product, growth rate and per capita income.
Referring to his book ‘Small is Beautiful’, Schumacher said that when Gandhi said ‘Not mass production but production by masses,’ or when he talked about ‘decentralised rural based self-reliant economy,’ or when he demanded that ‘production and consumption must be reunited,’ he was talking the language of ‘Small is Beautiful’.
‘Man is small and man is—or ought to be—beautiful and as such only the human scale economy of Gandhi’s dream is appropriate’, said Schumacher. The greater the size of the production unit, the greater the separation of production from consumption. Reuniting production and consumption units was only possible if production units were small. It would be easy to manage and adaptable to local conditions. One of the enormous advantages of small-scale production, reunited with small-scale consumption, was the minimisation of transport. Mass production entailed increased transport which added to the cost but never added anything to the real value of goods.
One of the pillars of Gandhian economic thinking was capital saving. Tragically, Schumacher pointed out, the world was moving at ever-increasing speed into large-scale, immense complexity, high capital intensity, and elimination of the human factor: which was leading mankind into a crisis of survival. One of the reasons for Gandhi’s opposition to capital intensive and complex machinery was the fact that it turned a large number of people into ‘machine minders’. This did nothing to develop their personalities and merely robbed them of their creative power. Schumacher supporting Gandhi said that, in addition, highly capitalised modern, complex and gigantic technology had proved monstrously inefficient in solving the problems of the world.
Admiring Gandhi’s sureness of touch, Schumacher said: ‘Gandhi knew that a capital-intensive economy could never solve India’s unemployment problem. It, therefore, followed that constructive job provision was only possible if one followed the Gandhian prescription, namely to design work to develop modes of production which fitted into the actually existing conditions in terms of capital availability relative to labour availability. In other words: systematic development of technologies cheap enough in terms of capital to give the chance of work to everybody.
Sarvodaya (Welfare of All) was at the core of Gandhiji’s development agenda. According to Schumacher despite the fact that almost 80 per cent of the Indian people lived in the villages, no proper attention was given to improving the quality of life and creating employment opportunities in rural areas. As a result, there was a large migration of people in search of employment from the rural areas to the cities where they only swelled the ranks of the slum dwellers. The only way to reverse this trend and save the villages of India from perishing was to create small village industries with the help of appropriate technology, thought Schumacher.
Big city-based industries and mass production methods destroyed the productive capacity of the rural inhabitants and robbed them of their means of livelihood. Citing an example of how villages had been deprived of their employment opportunity, Schumacher said: ‘Once the paddy grown in the village was hand pounded in the village itself and consumed by the villagers, the surplus being sent to the nearest town or area where there was a shortage. Now all the paddy grown is taken by improved means of transport to the rice mills in a large city where it is pounded and sent back to the villages infected with all kinds of diseases. The village workers have lost their jobs and the net result remains the same, if not worse. What ought to have been done is to introduce improved paddy threshing equipment in the village itself. Unless we put all the able-bodied young men and women to productive use in the villages it would not be possible to pull India out of the massive poverty in which it finds itself,’ said Schumacher and quoted Gandhi as follows:
‘If we tap all our resources, I am quite sure, we can again be rich, which we were I suppose at one time. We can repeat the phenomenon if we profitably occupy the idle hours of the millions.’
E.F. Schumacher is a German-born British economist who developed the concepts of “intermediate technology” and “small is beautiful”. As a German Rhodes scholar in the early 1930s, Schumacher studied at the University of Oxford and Columbia University. During World War II, he helped develop theories behind full-employment policies and, under William Henry Beveridge, the chief economic adviser to the government, worked on plans for Britain’s post-war welfare state. From 1950 to 1970, he was also an adviser to Britain’s nationalized coal industry.
After studying some under-developed economies, Schumacher concluded that poor countries might realise advances in productivity by adopting advanced technologies, but that those advances would do little to increase employment. What was needed, he maintained, was an intermediate technology adapted to the unique needs of each developing country. Moreover, he questioned the presumed necessity of ever-increasing growth, urging instead the development of a non-capital-intensive, non-energy-intensive society. In his book Small Is Beautiful (1973), he argued that capitalism brought higher living standards at the cost of deteriorating culture. His belief that natural resources should be conserved led him to conclude that bigness—in particular, large industries and large cities—would lead to the depletion of those resources.
Schumacher was a close friend of Jayaprakash Narayan (JP). In 1973, at the request of Indira Gandhi he had invited Schumacher who came and had discussions with DP Dhar, then union planning minister and Mrs. Gandhi. Both were impressed by Schumacher’s views and ideas. At their request Schumacher had given a note to PM containing his advise of sustainable development. Nothing came of it since no one including Mrs. Gandhi had clarity or sincerity as to what is to be done to remove the abject poverty under which the nation was reeling.
‘Development’ is Dividing India
A ‘development’ agenda that divides people is a strong indicator of failed governance. As we have seen when the tenure of this government commenced in 2014, “Governance with inclusive Development” was the guiding mantra. For this, two phrases were coined- “Minimum Government, Maximum Governance” and ‘Sabka Saath, Sabka Vikas.’ At the core of this agenda was to provide a proactive, people-oriented government and governance putting people at the centre of development process.
This called for a proper understanding of government and governance. Presently in the upper echelons of decision making there is complete mix up of government and governance as if both are the same. It is not. Governance is not just government, its bureaucracy, laws, rules, policies, programmes, processes and procedures. It is far more than that. Governance in reality is a joint venture between government and the people and every stakeholder—government, farmer, industry/business and voluntary sector—is partner in the venture. Only such a joint venture can deliver “inclusive development”.
In a democracy like India, governance should be “society-centered”. It should include the government, which is its dominant part, but transcend it by taking in the private (farming/business/industry) and voluntary (NGO) sectors. All three are critical for sustaining human, economic and social development. Governments create a conducive political, administrative, legal and living environment. Private sector promotes enterprise and generates jobs and income. Voluntary sector educates and mobilises citizen groups to participate in economic, social and political activities and resolve conflicts. Because each has weaknesses and strengths, governance is brought about through constructive interaction among all three. In short, while government is a politico-bureaucratic entity, governance is a joint venture encompassing all. The difference is huge.
Being a joint venture, governance should adhere to the basic functional norm of involving stakeholders in the decision-making and implementation process. In total contrast, Modi government’s style has been one of intimidation, coercion and fear-mongering. It made a false start from day one by terrorising the voluntary sector through various deceitful and devious means including raids, freezing of bank accounts and suppressing dissent by arresting and letting lose violence on the dissenters.
As to farmers, they are treated more as mendicants than partners. The elitist vision of BJP and its leader is replete with bullet trains, state-of-the-art highways, smart cities, insulated industrial corridors and a digital India, which is far removed from the deprived lives of the majority of Indians. Agriculture, which accounts for 60 per cent of India’s population, and from where the poorest draw sustenance, is only an add-on in the scheme of things. In fact, it is worse as would be seen from the Ordinance amending the Land Acquisition Act 2013 giving money-bags a free run over land—even the most fertile ones—which is a precious asset of the farmers. It is a different matter that the Ordinance failed.
In business/industry, it is ‘big is beautiful’ and they are the real partners and smaller ones can at best expect some crumbs. This was demonstrated during Prime Minister Modi’s high-profile visit to Japan, USA, France and Australia in the company of big industrialists/businessmen seeking big-ticket investments. As we have seen the main agenda of this government is to transfer major chunk of country’s wealth into the pockets of the country’s wealthy 10 per cent!
As for government under Modi, it is highly centralised with the PMO functioning as a monolith dictating things and ordering everyone around. The Prime Minister himself is vigorously promoting this “centralising culture” by telling the people to reach out to him or his office with grievances and suggestions. This extreme concentration of power and decision-making has led to the massive Rafale scam, which while draining the public exchequer has severely compromised national security.
In the event, Modi’s governance style, instead of bringing government, private (farming/business/industry) and voluntary (NGO) sectors together, has ripped them apart leading to growing tension and alienation between these sectors and the people at large.
Former RBI governor Raghuram Rajan puts it in a different perspective. He talks about the troika-state, markets and community that support society and how the right balance among them should be restored so that society prospers. According to him, local community government acts as a shield against the policies of the federal government, thus protecting minorities against a possible tyranny of the majority, and serving as a check on federal power. This is precisely what Mahatma Gandhi and Lok Nayak Jayaprakash Narayan (JP) ardently advocated.
For Raghuram Rajan, it is community-based movements against corruption and cronyism that time and again prevent the leviathan of the state from getting too comfortable with the behemoth of big business, he says, adding healthy communities are essential for sustaining vibrant market democracies. He argues that many of the economic and political concerns today across the world, including the rise of populist nationalism, can be traced to the diminution of the community. The state and markets have expanded their powers and reach in tandem, and left the community relatively powerless.
Rajan’s point is that India’s economy is not based on just two struts—markets and governments—but instead on a neglected third: the local community. “Neglecting social issues is not just myopic, it is dangerous,” he says and calls for a return to empowering local communities as an antidote to growing despair and unrest caused by a ‘Vikas’ charade which is neither sabka nor sabke saath!
But there is one place where Modi’s market-driven ‘New India’ is toasted and celebrated. It is in Davos in Switzerland where in the month of January every year a representative group of world’s one per cent elite meet at the World Economic Summit to deliberate as to how to enrich themselves more and more. In January, 2018, Modi led a big government and business delegation to the summit and showcased the ‘New India’ as a fast-growing economic power and a potential driver of global growth. The big-ticket and market-worshipping super-elite just loved it and keep singing halleluiah and serenading the ‘New India’.
Be that as it may, cumulative outcome of all this discourse is that India is a country deeply divided. The societal divides of caste, community, religion and language have been manifesting for centuries and state cannot be totally held responsible for originating or sustaining these. But the new breed of economic divide—one per cent, 10 per cent, 29 per cent and 60 per cent—on the basis of income and wealth is state sponsored and supported, through the predatory ‘development’ model that is being pursued vigorously. This divide is the worst form of apartheid which is most tragic, lethal and poisonous that could be explosive and has the potential of destabilising the nation. The destruction of nature and ecology is already looming large. Unless reversed fast this ‘destructive-development’ path could lead to doom for the majority while being boom to the minority. That will indeed be a Shakespearean tragedy.