In a country where the overwhelming majority of the people are poor, the discourse on economic development is likely to be awkward even in good times. It has been this way since the mid-1980s when Rajiv Gandhi's government first began steering a course away from the License Raj and its shackles on entrepreneurship. Liberalization - and its newer avatar, globalization - were offered as tools by which to find economic gains, but with a caveat always appended: that these tools must be used in a 'humane' way. The language of that message solidified during the Narasimha Rao years, and remains at the heart of economic policy today.
But are the particular tools chosen for economic progress inherently inhuman, that they must be tempered to protect the well-being of hundreds of millions of lower-income citizens? If the road to prosperity lies along ever more open markets, why must we repeatedly hear cautious notes of social concern? Aren't freer markets themselves sufficient assurance of better times, even for the poorer classes?
By now, of course, most people - whether in rich nations or poor ones - can point to plenty of grief from globalizing markets. The loss of manufacturing jobs in the developed countries, and the recent migration of white-collar positions previously thought unexportable, have alerted huge sections of the populations of America and Europe to the downside in very personal terms. On the other side of the trading fence, in places like Mexico, Brazil, China, or India, while there is some celebration over the benefits of international trade, there is alongside tremendous skepticism that this is merely a scheme for the already privileged.
The lower-skilled, lower-wage citizens who form by far the majority of these states do not experience the 'feel-good' factor that now surrounds their wealthier brethren. The gap between haves and have-nots has widened in many places, and migration of lower-income groups across provincial and national boundaries appears endless. At an income of Rs.5000 a month, the median family of five in Bangalore cannot afford decent shelter, health or education, and all the optimism from market managers will not alter this for many years at least.
Yet, this is the heart of feel-good country.
These problems are difficult enough, but India suffers from a greater failure, one that is worse than the sum of the symptoms we note. At heart, the economic leadership of the nation in nearly all political parties is unable to articulate a vision of development and growth by which even the poor shall benefit. The vast majority of changes we observe are sops of the 'customs duty' category, from which only a tiny majority can accrue any immediate reward. The loosening of the License Raj's chains too is only at the top, where clearances for massive projects - often ones that have enormous social and economic consequences - are passed with little scrutiny, usually under the argument that rapid development is 'necessary'.
But necessary for what? The most common answer is that the policy-makers accept the shortcomings of their efforts vis-a-vis the poor, but insist that there is no alternative to the paths they offer. I.e., the poor will remain poor for the foreseeable future, and the nation cannot afford higher investments for their welfare. Instead, it is hoped that a great expansion of private enterprise will generate sufficient economic activity - and revenues for the government - that their needs can eventually be met from these new resources.
But optimism by itself isn't economics. Even a theory of trickle-down rewards must preserve at least the minimal standards that the poor already experience. If, in the short run, they are further impoverished or neglected to the point of death, their eventual upliftment must be seen as a promissory note that cannot be cashed. Along Gujarat's industrial corridor or Kerala's farmlands, for instance, improper management of chemicals used in various economic activities is poisoning the people. The continuing emphasis on large infrastructure projects has already displaced millions into the urban slums, and more such displacement is planned, nearly always without adequate scrutiny. How can the victims of such policies hope for eventual succour or prosperity? This question remains off the table.
This is the inevitable consequence of unimaginative policy which promises great things in the future but is woefully short on delivering much in the near term. I recall a conversation with Vijay Kelkar some months ago where he expressed happiness that all the political parties had come to agreement that the fiscal deficit would be erased by 2008. This, at a time, when the fiscal deficit is running in the neighbourhood of 10%, the kind of figure one typically associates with failing Latin American economies. My question to him then was this: can we expect to see that next year's budget will close a quarter of the gap, and a quarter more the following year, and so on? Or must we believe that continuing careless management of the economy will suddenly yield to prudence in 2008? His diplomatic answer is about to meet its first test in the next few weeks, with the budget looming.
In endless fear of stalling the engine they believe will pull the economy along, the nation's economic helmsmen have unhinged the carriages it is meant to pull. Naturally, therefore, they point to the towers of smoke billowing from their engine, and assure us that the power to re-engage the train is mounting. This assurance would be more credible if they had strategically disengaged the carriages themselves, and set precise measures by which to reconnect the derailed bogies. Unfortunately, this is not the case; instead, with a combination of shock and disregard, they merely find the carriages unexpectedly disengaged, and now insist that this is perfectly in line with their planning.
If freer markets are to be the underpinning of our hopes for the future, let us have an open dialogue about their merits. Why must we hope for investments in private enterprise to eventually yield gains for all, but cannot mandate state investments in schools and health centres that have immediate employment benefits as well as long-term competitive advantages for the nation? Why is economic freedom a thing to be celebrated in the media, if its arguments do not apply to New Delhi and the state capitals who stubbornly refuse to yield any economic authority to local panchayats? Why is the interest rate on capital projects more important than the usury that millions of small borrowers face?
On the trade front too, let us ask more self-serving questions. Let us ask why a nation like India - with an abundance of cheap labour - does not demand greater mobility for its people to other places? Why must it be ok for cotton grown in the Deccan to be spun in Coimbatore, packaged in Chennai, and shipped from Vishakapatnam to be sold by retailers in Brussels and Houston, but none of the participants in the creation of the product may themselves travel to those lands to wend their wares? Why must our agriculture - still the largest part of our economy - remain struck down by subsidies in rich nations, even as we open ever more industries to foreign enterprises? If the answers are political, let us confront them on those terms, rather than continue with the make-believe economics.
Our economic and political leaders do not have much faith in the free market, or in trickle-down economics, despite their apparent support for both. Their espousal of these remains limited to their potential for immediate political gains, and in economic terms alone is quite indefensible by them. As a result, therefore, what passes for economic planning begins by conceding that the rich must benefit first, and only thereafter can the rest hope to piggyback on their gains. Worse still, even the increased opportunities for investment by large business houses is not tied to proper regulation of their activities, or to welfare measures that protect the poor's current standards at least.
Hold your breath, or demand better. This can't last.
