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Mainstream, Vol. XLVIII, No 33, August 7, 2010

Are we Missing the ‘Moral’ of the Economy?

Monday 9 August 2010, by Shyam Singh

There is a common but important debate among the development practicenors and academicians about which ideological baggage is conducive to development in Third World economies like India. In such debates we always find a majority which principally favours democracy as the best political system and a way of governance to achieve the developmental goals with a higher rate of equity and equality. This abstract position has been practically shaped either by the idea of ‘state socialism’ or with the advocacy of the ‘market economy’. India has gone through both models of the development, but the results have been dissatisfactory with an establishing suspicion that both models have missed the ‘moral’ of economics. Economics as a discipline strongly suggests that the fundamentals of the discipline are cemented on premises like equity and equality, not merely on market development. But, the developmental geography of the country, since independence till now, reflects that these disciplinary promises have been missing in the outcomes of economic development.

India, right after the independence, adopted ‘state socialism’ as a guiding idea of the development in the country under the umbrella of Nehru’s liberal thinking of development. The Nehruvian model of development was a model which argued for industrial development along with equal focus on agricultural development and social welfare. The Nehruvian model of the development also concentrated on the redistribution of the fruits of development. ‘Five Year Plans’ were chosen as a potential tool to achieve these goals. But, the model has failed in two respects. One, it could not fulfil the aspiration of a high economic growth rate and centred consistently around the Hindu rate of economic growth with an average of 3.5 per cent, unlike the contemporary Asian Tigers which were riding on higher economic growth at the time. Secondly, the model could not sustain an effective distribution system which was one of the main attributes of ‘state socialism’, on which basis this model was constructed.

In the nineties, India moved towards the open market system of economy. It has been able to register higher economic growth, and thus it is considered that the country is developing faster. But the question of equity and equality remains at the centre of criticism, even more severe than the Nehruvian model had faced. The critics argue that even after realisation of the rapid pace of economic growth in the country the poor remains poor and have even became poorer. The mounting economic growth rate and increasing per capita income are hiding the real poor behind their fascinating presence.

THE treatment of poverty from the government side has been accompanied by technical and implementational loopholes. The estimation of poverty upon which all social welfare policies are formulated, has become a matter of confusion. For instance, the Indian Government (Planning Commission) claims that not more than 26 per cent of the total Indian population is poor. But, in contrast, the N.C. Saxena Committee report says more than 50 per cent of country’s population comes within the category of the ‘poor’. This calculation could have been considered as an exaggerated estimation. But, very recently, Prof Suresh Tendulkar’s report indicates that India’s poverty is more than 41 per cent. Now, three different estimations on poverty raise a very serious question on the validity and effectiveness of the public policies and programmes that are being delivered for the poor. The main dilemma is: which poverty estimation should be considered as the real calculation? If the estimations of the Saxena and Tendulkar Committees are correct, then how can the Indian Government make such a big mistake by preparing plans and programmes targeting only the 26 per cent poor? It means a huge chunk of the poor is still out of the benefits that are entitled to them.

The high economic growth rate has also not helped in the growth of the primary sector, that is, agriculture. The reasons are two fold. One, Indian agriculture does not contain a mercantile character and it still remains a principal source of subsistence; hence there is no direct connectivity of agriculture with the global market. Therefore, spilling of the high economic growth does not happen in the agricultural sector. Secondly, the market economy system prevents policy-makers to provide subsidies or remedies to the agricultural sector as that is against the basic premise of the liberal economic model. It can be noted that the expected growth rate of the GDP for 2009-10, according to an estimation of the National Statistical Survey Organisation (NSSO), was 7.2 per cent along with more than nine per cent of industrial growth. But the growth rate of agriculture was expected to be negative. Though, it must be acknowledged that if India could escape from the recent attack of global recession it is only because of the agricultural economy; besides, due credit must be given to the public banking system. Half the population depends on agriculture which has no direct connectivity with the factors responsible for global recession. Therefore, the impact of recession has not been felt severely in India.

We have examples of the Asian tigers who could sustain development not only in terms of higher economic growth rate but also higher rates of social development. Then, what has gone wrong with India? The answer is the missing of the ‘moral’ of the economy. The developmental needs of the country could not match with the needs of its inhabitants. The major reason for this mismatch is that development has been perceived in India as an uncompromising issue, because of the country’s urgent need to develop to remove the colonial impacts of economic exploitation. Hence, the negotiations about the coverage and outcome of development have largely been less-significant. Let us put it in
this way: development has been preferred to those for whom development is meant for. Therefore, this premise is contradictory for both: democracy which equals all unequal people and economics which does not exist without its morality.

The author is a Ph.D Fellow at the Institute for Social and Economic Change, Bangalore.

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