Neoliberal India needs a rural revolution

Kewal Raj Dawar

India's growth policy has been moving almost in tune with global policy. Looking back at the post-Independence development history, the system of planning was adopted with interlocking government controls. It was the vision of our first Prime Minister Jawaharlal Nehru, whose policies were aimed at setting up a socialist pattern of society in India. We were influenced by the success of the Soviet system of planning. Unlike Russia and China, there is coexistence of the public and the private sectors in India. The policy of state control, adopted in the form of protection and regulation, resulted in loss of industrial efficiency as well as to the state exchequer. The financial sector too could not keep pace with the market needs. 

The average GDP growth rate from the first Five-Year Plan to the fifth plan(1978) turned out to be 3.76 per cent. The incidence of poverty did not witness any downward trend. This average annual growth rate was less than that of the Organisation for Economic Cooperation and Development (OECD) countries, which attained 4.9 per cent during 1945-1973 (the Second Golden Age), the first being  during 1870-1914. With the collapse of the Soviet planning during 1986-90, India became cautious about  its  fallouts  and started twisting its policies towards neoliberalism by relaxing licensing and controls. This was a step towards the free market and integration with the global market. In the 1990s, India fell in line with the Western and Southern countries and adopted the policy of globalisation, which certainly proved to be beneficial with rising capital inflows (FDI), a higher GDP growth rate and export promotion.

The adverse effects of this policy are equally alarming, as shown by widening income disparities. As per the findings of Boston Consulting Group in its study, “Global Wealth: Winning the Growth Game”, 928 Indian ultra high net worth houses (with wealth over $100 million) were holding 20 per cent of the country's wealth  in 2014. Their share is likely to go up to 24 per cent in 2019. India ranks fourth among the countries with the largest number of ultra net worth households, after US (5201) and China (1037). 

About 95 Indians, with a combined worth of $295 billion, have appeared in the Forbes’ List of  Billionaires of 2015. They own approximately 10 per cent of the country's GDP. In another report submitted by the OECD, the earning inequalities in India have doubled over the past two decades. 

The top 10 per cent of wage-earners make 12 times more than the bottom 10 per cent, compared to six times 20 years ago. The country stands divided between the two sections — the rich Indians and the poor Indians. The former enjoy all luxuries of life, whereas the latter are not destined to satisfy even the bare minimum needs of food, clothing and housing. These socially dualistic tendencies are the outcome of the growth process, which has been further perpetuated by liberalisation and privatisation. One section is shining and  spending excessively, even squandering, where as the other is starving. A study conducted by the Centre for Consumer Studies, Indian Institute of Public Administration, Delhi, in 2011, reports excessive food wastage in social gatherings such as marriages, anniversaries and birthday celebrations which “have turned into extravagant show of flaunting social status, wealth and prestige”. The findings of  the Centre for Development Communications, Jaipur, 10-20 per cent of food is wasted in marriages, while the children of the poor die for want of nutrition. The former Prime Minister Manmohan Singh admitted that malnutrition was a “national shame.”  

The pro-urban and pro-corporate policies adopted in the post-reform era are the cause of the problem. In the glamour of globalisation, our agriculture and rural sector were subjected to neglect, proved by cuts in public investment and plan outlays. There is a mismatch between the economy's growth and resources allocated for rural development. The GDP during 1980-81 to 2014-2015 has increased 17 times. However, the rural development expenditure rose merely 3.6 times. 

At the time of adopting the LPG policy in 1991, it was implicit that in the pursuit of privatisation and disinvestment operations, funds would be diverted to the development of far-flung areas. There was only a marginal rise in the rural development expenditure, from 7 per cent in the pre-reform decade to 8 per cent in the post-globalised era. The benefits of this policy have been concentrated with the urban elite, while the rural masses and urban slum dwellers still wallow in poverty. 

The agricultural sector is paying a price for urban development in terms of shrinkage of the cultivable area, increasing debt burden due to increasing input prices and rising living expenses. Farmers' suicides have been estimated at three lakh since 1995. V. S. Vyas, Professor Emeritus, Indian Institute of Development Studies,  Jaipur, maintains that hardly any policy reform was initiated in agriculture in recent years, reflecting the apathy of the government. The exclusionary growth process has been duly acknowledged by the government and economists after the defeat of the NDA in 2004 elections. 

The rural sector badly needs infrastructural development in the shape of roads, power supply, education and health facilities so that its productivity and purchasing power may be augmented. It can act as a comparable alternative to its urban counterpart and can be relied upon in the time of financial instability, economic uncertainty and global recession. The country has successfully moved from white to green and then from internet to knowledge revolutions. It is now time for the Rural Revolution for economic vigour in terms of better integration, confident external transactions and internal stability. According to the United Nations Development Programme in 2014, investments in social security, jobs and laws that protect vulnerable populations are to be prioritised so that the widening income inequalities may be curbed. To this end, the state needs to redefine its role and enlarge its sphere of participation with an assurance of efficient and ethical governance.

The writer is Senior Faculty in Development Economics, Ethiopian Civil Service University, Addis Ababa