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Mainstream, Vol XLV No 25

Inhuman Economics of the ’Human Face’

Saturday 9 June 2007, by Bharat Jhunjhunwala


The Congress party is rightly agitated with its defeat in Uttarakhand, Punjab and Delhi and the latest lacklustre performance in UP. The Left parties and many Congress workers feel this is due to the adverse impact of the economic policies being implemented by Dr Manmohan Singh on the common man. On the other hand the Prime Minister and Finance Minister repeatedly harp on the eight per cent-plus growth rate that has been achieved and suggest that the defeats have more to do with organisational weaknesses.

The economic growth rate has unques-tionably accelerated. The question is: whether this has impacted the common man in a favourable way. Let us not forget that the BJP’s ‘India Shining’ slogan was also woven around high growth rates towards the end of that party’s rule but the Congress, under the able leadership of Sonia Gandhi, was able to expose its hollowness as far as the common man was concerned. The same logic could apply to the Congress’ claim of high growth rates now.

Under ordinary conditions it is assumed that all sections stand to benefit from high rates of growth. Digging of a tubewell by the landlord increases the employment opportunities for the agricultural labour. Establishment of a car factory creates opportunities for shopkeepers and taxi owners. But this is only the directly visible impact. The overall impact can be opposite.

Take the example of production of cars. Higher production of cars leads to the rickshaw pullers losing their livelihood. Fewer people ride bicycles and less employment is generated in production of the same. Roads are made by automatic bitumen layers and excavators and only a few jobs are generated here. It is possible that these negative impacts may be more.

Take another example. A dam is made on a river. People get employment in its construction. Industries are set up with the electricity that is generated. On the flip side, however, local people are deprived of grazing from the submerged lands. They can no longer lift sand and stone from the river bed. Houses crack and sink along the rim of the reservoir. Industries that are set up with the electricity use automatic machines and create few jobs. The temperature of the submergence area declines and there is higher burden of disease. The people have to spend more time in crossing the river and they cannot reach vegetables to the market. These negative impacts can be deeper.

These examples show that higher rate of growth is not a guarantee that the common man will be benefited. We have available many indicators that such is indeed happening. The Corporate Income Tax paid by big companies is rising fast while personal income tax paid by individual taxpayers is relatively sluggish. The BJP Government had experimented with a one-sixth scheme under which a person owning a car, credit card or mobile phone was required to file Income Tax return. This did not lead to much increase in revenue while the administrative workload on the Department increased manifold. The implication is that profits of companies like Maruti and NHPC that are making cars and dams are increasing while the incomes of the common man are not. Another indicator is that property prices are rising in the big cities, particularly in the newly constructed malls but there are no takers for unirrigated agricultural lands in the rural areas. Yet another indicator is that salaries of graduates from IIMs are hitting the roof with Rs one crore per year offered to the best candidates but the rickshaw puller makes nearly the same amount as previously. It seems that the growth that is showcased by the Prime Minister has benefited the rich more and the poor either marginally or even negatively. This is the link between the defeat of the Congress in the recent elections and the economic policies.

THE arguments put forth by the ‘growth brigade’ of the Congress should be assessed in this backdrop. The first argument is that the defeat is not due to inflation but due to the failure of the party to educate the people about the benefits of economic reforms. This flies in the face of the evidence from the last general elections. The BJP had given the slogan of ‘India Shining’. Sonia Gandhi argued that India was shining only for a few and not the masses. Sonia’s argument had merit; hence she single-handedly brought that message successfully to the people. The party did not contribute much to taking this message to the people then. The same Sonia Gandhi is present before the people today. She is now unable to garner votes even though her government is in power at the Centre. Pray, why is she unable to get the message across today? The reason is that the message itself is flawed. The policies of the Congress are the same as those of the BJP and have impacted the common man adversely. Remember that schemes like Sarva Siksha Abhiyan and Rural Health Mission benefit government employees more than the people. Thus the Congress has drawn a blank.

The second argument is that there has been a 2.4 per cent growth in employment in the unorganised sector in 2004-06. The problem is that population is rising yet faster—at about 3.5 per cent in the same period. In other words one of every three persons entering the work force is joining the ranks of the unemployed. There is no respite for the backlog of unemployment either. Furthermore, the real wages in the unorganised sector are declining. The income of the rickshaw puller in Delhi has risen from Rs 70 per day ten years ago to Rs 100 today. But the price of wheat flour has risen from Rs 8 per kilo to Rs 15 in the same period. In consequence he gets only seven kilo wheat for a day’s labour now against nine kilo previously. The increase in such low paying jobs is really a shame.

The third line of argument is that a study by McKinsey shows that more than two crore persons in India will be earning more than Rs 10 lakhs per year within 15 years. This, however, does not tell us about the income of the common man who controls the votes. His income can well decline, courtesy McKinsey.

The fourth defence is that the government is giving special attention to sectors such as textiles, food processing and leather which are small enterprise driven. This is providing benefits to the common man. But the Reserve Bank of India data tells us that the share of Gross Bank Credit to the Small Industries is declining sharply. That means that the growth, if any, in these designated sectors is inadequate to compensate for the loss in other sectors.

The Congress leaders are living in a false world about the positive impact of economic policies on the common man. The proof will come in the next general elections.

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