Liberalisation is not a panacea.

As this article by MP Gurudas Das Gupta says, the miracle of the Indian economic growth hides deep rooted ills and problems which have not been addressed.

Reckless liberalisation playing havoc

By GURUDAS DAS GUPTA
As Mr P Chidambaram blithely inaugurates one conference after another, buoyed by continuing stunning corporate results, corporate acquisitions and the so-called surveys of the consumer sentiment which find Indians consistently topping the charts, he most gleefully declares: “I cannot see any abrupt or dramatic slowdown of the consumption growth.”
His pronouncements sound even more exalted after the Central Statistical Organisation released figures declaring that the Indian economy has almost caught up with China’s pace of economic development. Incidentally, the government boasts of India’s economic growth as most sustainable; being second only to China’s. Symptoms of their claimed prosperity are virtually omnipresent ~ in the sale of cars, the boom in the real-estate business as also the ring of five million mobile connections sold every month never mind whether or not the fast-track “economic development” has improved the human fundamentals of the masses comprising a billion people of India.
As per the government’s appraisal, there are unmistakable signs of unparalleled upward swing in the economy. Taking this story further, leading corporates in India have succeeded in mobilising nearly Rs 2,34,903 crore from the primary market in 2006. The corporate sector has made overseas acquisitions worth of $8 billion in 146 transactions across the world. The prolific growth in corporate performance is further corroborated by increased exports and inflow of private equity. At least four Indian corporate tycoons have virtually taken the corporate world by storm, innovating, improving, strategising, and transforming dreams into a billion-dollar reality. In one weekend in October 2006, corporate jets of three Indian captains of industry were parked at London as they bid for enterprises worth over $12 billion, almost Rs 53,234 crore. In fact, the financial assets of one such billionaire are assessed to be around Rs 1,27,000 crore.
The story of government-backed corporate success goes even further: between 2003 and 2006, corporate India’s net profit had doubled from Rs 55,716 crore to 1,23,173 crore. It has possibly risen to Rs 1,50,00 crore as companies clock 30 per cent profit. The trend of unusual expansion of Indian corporates is further confirmed by analyses of the performances of individual corporate houses. A giant corporate having 23 million mobile subscribers had launched a joint venture for insurance and mutual funds and significantly hooked up with a global giant to foray into retail trade in India. By the end of the decade the revenue of the group is likely to soar up to Rs 67,000 crore.
This vulgar concentration of corporate wealth and increase in prosperity is exclusively derived from lopsided economic growth. The Finance Minister and the Planning Commission pretend to be ignorant of the hard reality. A closer look at the present economic scenario leads to the evidence of a wild spree of spending on conspicuous and wasteful consumption. The booty from the loot of the Indian economy is virtually thrown to the winds to meet the wild fancies of the consuming classes. Of late, there is a frenzy to purchase expensive foreign aircraft by the corporate entities costing millions with goodies and exotic, luxurious comforts thrown in. Even the birthday parties and matrimonial functions organised by the elite of society involve many a crore. While the source of the funds is rarely looked into, the government is happy; the wedding industry has become a burgeoning industry estimated to be $11 billion a year, growing annually at 25 per cent. This does not, of course, include jewellery sales growing at seven per cent annually and projected to reach $250 million by 2015.
The big fat wedding is the worst global export of India. It is obscene and vulgar. One Bollywood superstar reportedly charges Rs 1 crore for a wedding “event”. A government committed to liberalisation has conveniently freed itself from all forms of social and moral obligations. Therefore, it is not considered necessary to ponder on the evil impact of this spending spree of the super rich of the community even as the majority is denied access to elementary amenities of life.
It is easy to become a billionaire in India today but it is difficult to reduce the level of Indian poverty. The glare of five-star economic growth cannot hide the gloom of those living in the backyard of the economy. Unbridled market economy is playing hell with their lives. The Indian model of high economic growth trajectory, as is abundantly clear today, does not create jobs and even fails to alleviate human distress. While unemployment rises atrociously, the marginal job creation comprises only “distress jobs’, having little or no impact on the poor living condition of the working masses: 10 hours daily work on a monthly pay packet of not more than Rs 1,000 without any elementary statutory benefits. While output per worker has increased, managerial remuneration and profit are reaching new heights, the average real wage has stagnated and even declined. Obviously, the increase in productivity has resulted in accentuating gross income inequality instead of augmenting the wage level.
The majority of the jobless who have no alternative are compelled to fall back on jobs where minimum wage is denied and working conditions remain too poor to improve the living conditions of the employed. The growing divergence between output and employment can be crucially linked to liberalisation, especially to open trade. Since advanced capitalist countries are equipped with modern technology associated with higher productivity, developing countries find it difficult to stand the strain of unequal competition. They, therefore, seek to cut labour costs, adopt improved technology and reduce manpower, employ low-cost labour that is overburdened with an unbearable workload. There is not only an anomaly between output and employment, there is also divergence between productivity and wage level. This is no growth with equity; it is growth with grave inequality generating intense social tension.
If growth is to be inclusive, its benefits much reach the poor. Even after 60 years of freedom, an overwhelming majority of the population of the country, may be as much as 70 per cent, remains outside the periphery of economic development. Such growth does not lead to economic empowerment, nor does it increase purchasing power. The additional wealth that is generated due to high growth is obviously cornered by a minuscule minority. If the additional purchasing power is not generated for a larger number of people and people do not earn enough to take care of minimum basic needs, the growth is obviously not of an inclusive nature. Under an inclusive growth model, economic empowerment and particularly employment would most certainly occupy centre-stage.
Unfortunately, in India, economic growth is largely jobless and the gain of development is not sought to be redistributed among the masses of the people by active state intervention, and, therefore denial and marginalisation are the concomitants of the present economic system. The government does not have the political will to adopt an appropriate fiscal policy and there is hardly any move in that direction to ameliorate distress and deprivation of the masses.
The National Sample Survey conducted every five years indicates in its latest report that the ratio of the national level of poverty is at 27 per cent; even the data prepared by the 61st Round appears to be an understatement. If the non-availability of safe drinking water, absence of educational facilities, medical care, and easy communication are also taken into consideration, the level of poverty naturally assumes a dangerous proportion.
Now comes the crucial question of employment. According to the current Economic Survey, between 1991 and 2004 the number of people employed in the organised private sector grew by a meagre 0.6 million, while it remained largely unchanged in the manufacturing sector. Employment has declined in the organised sector as well. While employment stagnated over the first decade-and-a-half since the economic reform began, the real output of the non-agricultural part of the economy increased by a factor of four, the same number of workers produced four times as much from earlier output, thanks to the introduction of automated systems.
The fact that the reduced manpower is producing much larger output is further corroborated statistically by the data obtained from different enterprises. The largest private steel industry of the country had augmented production five times with half of the earlier workforce. In an engineering factory near Pune, a worker mans 27 machines, of course, with the help of the computer, if the informal sector had produced 10 times the job created by the organised sector, only six million jobs would have been created in a decade-and-a-half, while the annual addition to India’s workforce is between eight million and 14 million. This is a short profile of the jobless character of the economic growth of the country.
The nature of the “unemployment explosion” that India is likely to experience as estimated by Team Lease Services: The current unemployment figure of 13 million is likely to undergo a 15-fold rise and reach the level of 200 million, constituting 30 per cent of the population in 2020. The trend of joblessness has set in with the onset of reforms in the last decade. The aggregate figure of employment decline is 0.6 per cent despite the booming service sector. While the service sector contributes 55 per cent of the country’s GDP, only two per cent ~ less than 0.5 per cent of the country’s 400 million labour force ~ is employed in the sector.
Due to low productivity and unstable growth, even periodic decline of production, agriculture no longer provides viable livelihood to the rural population. In the rural sector, the number of employed every one thousand people has declined from 403.5 in 1992-93 to 399 in 2004-05.
If economic growth has lost its capacity to create jobs, it has clearly not succeeded in mitigating poverty. Agricultural production has declined, the country has lost its food security and even has to live on foreign imports. The Public Distribution System has almost collapsed; it is all a blank ration card. The Employment Guarantee Scheme has not taken off; while 130 districts have been added, the additional budgetary allocation increased only by six per cent of the earlier allotment. The political system has utterly failed to develop the needed social infrastructure even after 60 years of freedom to improve the human fundamentals of the nation. The higher rate of growth the economy has attained does not provide better quality of human life; rather it benefits the millionaires and billionaires at the cost of the poor and lower middle class.

(The author is a CPI member of Parliament)