Indian economic reform from the bottom up

Author: Madhu Purnima Kishwar, CSDS

‘Development’ and ‘underdevelopment’ are politically loaded terms.

Most ‘underdeveloped’ societies have a colonial past in which their people and resources were economically exploited and their social, cultural and political institutions were wrecked. These terms are designed to create amnesia about the politics of colonialism and convince people in these societies that their poverty is due to their own ‘backwardness’. Whenever we see people trapped in poverty, instead of seeing them as objects of charity it is best to find out who is using what power to prevent people from earning a dignified living.

An important reason for the continuity of wide-scale poverty despite the growing wealth of the Indian elite is that India’s economic reforms have been confined to the corporate sector, which employs no more than 3 per cent of the country’s working population, compared to the 92 per cent of workers in the unorganised or informal sectors. The vast majority remain poor because they are the victims of bureaucratic controls. They include farmers, who yield enough crops to make the country self-sufficient, and whose produce — wheat, basmati rice, long staple cotton, and a whole range of exotic fruits and spices — has ready buyers in the national and international markets; and traditional craftspeople and artisans, including ironsmiths, goldsmiths, a range of metal workers, and those who make exquisite art objects and icons.

Poverty in the self-organised sectors continues due to the unwillingness of successive governments to incorporate these workers into the national agenda of economic reforms, as they yield enormous bribes and kickbacks. But just as large sections of India’s corporate sector have become globally competitive within the last 15 years of half-hearted liberalisation, those in India’s informal sectors also have the capacity to become generators of wealth if the government would stop creating needless hurdles and siphoning off a good part of workers’ incomes through bribes.

While the Indian corporate sector was not quite ready for liberalisation, farmers’ organisations in India have been fighting since the 1970s to get rid of statist controls. But the government has resisted economic reform in the farming sector and continues its war against Indian farmers through many different means.

For example, the colonial-minded Land Acquisition Act has uprooted 60 million farmers since independence and is yet to be repealed. Recently proposed reforms retain the colonial principle of eminent domain and do not give farmers the right to decide whether or not they want to sell their land. This enables land sharks to buy agricultural land at low prices.

Further, the draconian Essential Commodities Act enables the government to impose restrictions on farmers accessing national and international markets through a ban on interstate movement of food grains, and by obstructing private-sector purchases of food grains through direct and indirect means. The unrealistically high minimum export price (MEP) for farm produce makes Indian farmers internationally uncompetitive. For example, the Indian government fixed the MEP for onions at US$475 per tonne in 2011, while Pakistan and China were exporting at US$225-250 per tonne.

Farmers also face restrictions on the processing of produce; compulsory levies on sugar and rice (up to 75 per cent in some states); low investment in irrigation, which leads to frequent crop failures; little effort to prevent floods which destroy not only crops but also homes and assets; poor road connectivity and access to markets; inadequate power supply; an absence of crop insurance; poor rural infrastructure; and bureaucratic hurdles in setting up agro-processing industries.

Not surprisingly, millions are abandoning farming and migrating to cities as economic refugees. But property and land prices are so artificially inflated due to the government’s land monopoly that almost all of them end up living in slums as illegal encroachers — even while paying disproportionately high rents and protection money. Most are at the bottom of the employment ladder because the traditional skills they carry are not valued in the modern economy. The few who try to access the world of enterprise find the entry points blocked by statist controls. For example, street vending and cycle rickshaw-pulling attract impoverished migrants because they offer relatively greater opportunity for upward mobility than menial jobs. But city-government licensing policies make it virtually impossible for these workers to operate legally, and as a result they become easy victims of extortionist mafia.

Similarly, millions of highly skilled craftspeople, artisans and performing artists are abandoning their traditional occupations for unskilled, low-paying occupations. This process began during British colonial rule as part of a deliberate policy to de-industrialise India and create a market for British goods. It has continued unabated in independent India. To add insult to injury, all these productive and highly skilled social and economic groups are also termed ‘backward’ or India’s ‘most-backward castes’, with the government reserving small quotas for them in educational institutions and government jobs as a pretence at affirmative action.

So how should the government act to help these unorganised sectors?

First, farmers do not need free food — they need remunerative prices for their crops. This can happen only if farmers have free access to national and international markets. The government must also provide assured irrigation and a regular power supply to protect against crop losses and to increase productivity. Quality seeds, pesticides and other inputs are also badly needed — currently almost all improvements in seeds and farm technology come from the private sector. Further, farmers need improved connectivity to urban centres, better storage facilities for their crops, and affordable credit and crop insurance.

Similarly, the poverty of India’s traditional artisans and technologists cannot be eradicated by treating them as ‘backward’, while roping them into government jobs as clerks and peons as a panacea. They need access to national and international markets without exploitative intermediaries. In addition, they should be welcome in appropriate institutions of higher learning such as textile engineering, departments of metallurgy and schools of architecture, as well as in institutions for training artists and performers — both as teachers and students — so that they are able to build on their traditional skills.

The poor need no subsidies, no special concessions. All they need is freedom from needless bureaucratic controls that prevent them from earning a dignified living through their own entrepreneurialism and productive capacity. As Mahatma Gandhi said: ‘The pressure from the top crushes those at the bottom. All that is necessary is to get off their backs’.

Madhu Purnima Kishwar is Senior Fellow at the Centre for the Study of Developing Societies, Delhi, and Director at the Indic Studies Project based at the CSDS.

This article appeared in the most recent edition of the East Asia Forum Quarterly, Ideas from India’.

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Indian economic reform from the bottom up

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