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Mainstream, Vol XLVIII, No 41, October 2, 2010

Economic Ideology of the Congress: Empowering the Poor

Wednesday 6 October 2010, by Arjun Sengupta



Dr Arjun Sengupta, 73, whom C. Rangarajan, the Chairman of the PM’s Economic Advisory Council, described as a “career bureaucrat” having a “good understanding of social problems” and “deeply touched and involved in finding solutions for people at the bottom of the population pile”, passed away at New Delhi’s All India Institute of Medical Sciences on September 26 evening after stoically fighting cancer for quite sometime. What was most remarkable was that he never spoke about the incurable disease which had afflicted him nor let it in any way affect his activities till almost the very end.

A renowned developmental economist who was Special Secretary (Economic Advisor) to PM Indira Gandhi (1981-84) and India’s Ambassador to the European Union (1990-93) besides serving as the Executive Director of the International Monetary Fund (1985-90), Dr Sengupta was born in Kolkata on June 10, 1937 and graduated from Presidency College before doing his Master’s in Economics from the University of Calcutta. He also obtained a doctorate in Economics from the Massachusetts Institute of Technology. He was elected to the Rajya Sabha in August 2005 from West Bengal having the rare distinction of being supported by both the ruling Left Front and the Opposition Congress. The last few years of his life were most fruitful because of the contribution he was able to make to the struggle for inclusive development in the face of heavy odds.

He was appointed Chairman of the National Commission for Enterprises in the Unorganised Sector which produced, in 2007, an invaluable report on the work conditions in the unorganised sector. This voluminous report, based on detailed analyses of the National Sample Survey data, pointed out that 836 million Indians still remained marginalised; 77 per cent of the country’s population constituted the “poor and vulnerable group”—that is, those surviving on an average daily consumption below Rs 20 per capita—and as many as 79 per cent of the unorganised workers, 88 per cent of the SC/STs, 80 per cent of the OBCs and 84 per cent of the Muslims belonged to this category. Elucidating the findings of the Commission, Dr Senguta wrote in an article “Unorganised Sector—A Reality Check” (included in a volume of articles published to felicitate Swami Agnivesh on his 70th birthday and entitled The Other India; Realities of an Emerging Power last year):
What is more significant, especially from the point of view of political economy of our development, is the high congruence of the income poor, consumption deprived population, and the socially vulnerable groups of our country with the unorganised sector workers… Contrary to the trend in the number of people below the official poverty line of roughly Rs 12 in 2004-05, which has come down steadily over this period, the segment of our population of the poor and vulnerable consuming less than Rs 20 per day per capita has steadily increased over these years… Anything that is done to improve the welfare of the unorganised workers will also improve the welfare of our Dalits, OBCs and Muslims who constitute most of this group.
He further underscored that maximisation of profits should not be the sole objective of economic growth—something that was ingrained in India’s economic policy perspective during the days of Jawaharlal Nehru and Indira Gandhi.
It is to the credit of Dr Sengupta that the recommendations on social security in the report of the Commission he chaired were instrumental in the realisation of the Unorganised Workers Social Security Act, 2008.

Mourning his death Vice-President M. Hamid Ansari said: “His dedication, sense of public service and honesty serve as an inspiration to all.”

Dr Sengupta was cremated at the Capital’s Lodi Crematorium on September 27. He has left behind his wife Jayshree and daughter Madhura (Mitu).

N.C. was close to him during his lifetime. Others enjoying his close association included Mohit Sen and Boudhayan Chattopadhyay. All of them have now passed into history marking the end of an era that witnessed concerted efforts at national regeneration through initiation of radical steps and measures shaped by the productive cooperation between the Congress and the Left both within and outside the premier national organisation.

As a token of our tribute to his memory we are reproducing the following article written by him.

It appeared in Congress Sandesh first and was then published in Mainstream (May 2, 2009) with the author’s consent. —Editor)]

It was Gandhiji who first gave the economic ideology of the Congress a concrete formulation, to bring “Swaraj for the hungry and the starving millions”. “Swaraj” is nothing but “empowerment” for the poor to gain control over their own life and destiny. For Nehru, the objective was the same, clearly formulated on the midnight of Indian independence, as “the ending of poverty and ignorance and disease and inequality of opportunity to bring freedom and opportunity to the common man”.

That empowerment required modernisation of the Indian economy, rapid industrialisation and employment, transforming the market economy, favouring those who did not have the market power, through planning of coordinated intervention, and use of the public sector as instruments of change or the ‘commanding heights’. It came into open conflict with the vested interests. Outside the Congress, they were led by ‘Swatantra Party’, and inside spearheaded by the conservative Congress leaders. When Indira Gandhi became the Prime Minister, they pushed for a Right-wing shift in economic policy. In response she decided to adopt policies directly empowering the poor, identifying herself completely with them.

Indira Gandhi’s Policy of Empowerment

INDIRA GANDHI’S ‘Garibi Hatao’ slogan was basically concerned with raising the capability of the poor to change their destiny, confronting the rich and the powerful. For example, the nationlisation of the banks would allow India’s poor access to credit and finance. Her Green Revolution was meant to transform Indian agriculture, where most of the Indian poor worked and lived. Her 20-point programme was meant to expand their employment and employability. To this, she added measures which were openly against the rich and the powerful, such as the anti-monopoly policy or the abolition of ‘privy purse’ and also controlling industrial concentration and the network of distribution.

The Fifth Plan of the early seventies gave these policies of employment a solid foundation, changing the distribution of income and resources in favour of the poor, a direct concern of economic planning, through programmes of production and distribution to be carried out integrally with the programmes of expanding investment and employment.

The approach and achievements of these policies of empowerment were deliberately distorted by the vested interests. The canard that these policies resulted in low rates of growth is contradicted by the attached Table.


Decadal Growth Rates of GDP and Per Capital Income

Growth Rate (%)

Decades GDP Population Per capita

1920-47 1.18 1.20* -0.03
1950-60 3.91 1.96 1.95
1960-70 3.70 2.22 1.48
1970-80 3.08 2.20 0.88
1980-90 5.38 2.14 3.24
1990-2000 5.58 1.93 3.65
2000-05 5.99 1.70 4.29

Note: 1. GDP growth rate during 1920-47 is based on 1949 prices. 2. GDP growth rates in other decades are based on 1999-2000 prices. 3. Population growth rate of 1.2 per cent is for the period 1921-51. Source: NAS, CSO for GDP and Statistical Abstract (2003), CSO for Population Data. Figures for 1920-47 are from Sivasubramaniam (2000).

India was very underdeveloped at the time of independence. But in the first 20 years, Indian economic growth was two-and-a-half times higher then the previous three decades. The average growth rates came down in the 1970s, the years that saw the Bangladesh war and the 1970s petroleum crisis. In spite of that economic growth was quite high in four years out of ten, showing the potential of the economy. It is just not true that these were the years of lost economic growth. This was not reflected in rapid increase in per-capita income because of high population growth, until the eighties. But during that period India became a major industrial power, with a reservoir of skills and technology, and productive capacity.

There were, of course, mistakes. In the anxiety to bring about rapid economic transformation, and changing the balance of market power, unnecessary controls and licenses were introduced, affecting efficiency. The first person to recognise that was Mrs Gandhi herself, who in 1981 signed an agreement with the IMF to introduce reforms liberalising the license-permit raj step-by-step. But she was very careful not to deviate from her pro-poor policies or compromise her image of independence. She returned the IMF money as soon as our conditions improved. After her, Rajiv Gandhi pursued the same policies with greater vigour. The Panchayati Raj system that he brought about, was the best method of delivering social programmes for the poor. In the 1980s economic growth picked up significantly as reforms started yielding results.

In the 1990s, however, the Indian economic policy made a sharp break from the past with accelerated liberalisation that was accompanied by a fall in public investment and push towards ‘a minimal government’, a notion associated with the World Bank’s Washington Consensus. The government tried to restore the pro-poor stance of policy by pushing up social expenditure, even at the cost of increasing fiscal deficit. Subsequently, the non-Congress governments, following similar policies, pushed the rate of growth even further.

A visible effect of this policy was a sharp increase in the disparities. The rich became extremely rich, while almost 77 per cent of the people lived below Rs 20 per capita consumption a day. Most of our deprived and discriminated social groups belonged to that 77 per cent, the Muslims, the Dalits and the OBCs. Most of them were unemployed or working poor, earning less than the minimum wages, without any job and social security and working in most miserable conditions. The India that was shining was surrounded by a vast ocean of deprivation and poverty.

It was then that Sonia Gandhi offered a new interpretation to the notion of empowerment of the poor, and brought back our economic policy to the mainstream of the Congress’ economic ideology. It focused on empowering the poor, but without giving up the high rate of economic growth and the economic reforms that produced it. We must maintain the macro-economic balance, raise the rate of investment and allow the market incentives to push up production. But side-by-side as an integral policy of reforms and high growth of GDP, there must be effective and implementable programmes targeted towards the poorest of the poor and funded by increased revenues generated by accelerated growth.

Growth for Empowerment

THE full implications of Sonia Gandhi’s policy for empowering the poor in a rapidly growing economy have not yet been properly appreciated, even among the Indian policy-makers. Economic reforms and the consequent economic growth are not ends in themselves. These are instruments for improving people’s welfare. While other social groups can adjust their behaviour and respond to the market incentives, the poorest of the poor especially when they also include the socially deprived, inadequately educated, suffering from malnutrition and ill health, cannot use the markets to improve their position. They are bypassed by the process of growth and very quickly pushed to the brink of destitution. So the new policy concentrates on targeting directly these people, providing them jobs and skills, social security, health care and education. These become the primary concern of economic planning.

For this, first, we must substantially increase financing social expenditure, directly borne by the government from its revenues which increase with economic growth. Second, identify well-designed and targeted programmes, to benefit the poor and the vulnerable directly. Third, have a transparent mechanism of monitoring and review of these programmes and their social audit to pin-point the responsibilities with the participation of the beneficiaries who would consider the enjoyment of these services as their legal entitlement of rights. Fourthly, formulate a legal system of ensuring the right to information so that everybody can know who is responsible for not fulfilling the obligations and what measures have been taken to rectify the failure.

Again Sonia Gandhi should be given the full credit of initiating some of the major schemes along these lines through her National Advisory Council. The Right to Information Act was formulated by this Council. The National Rural Employment Guarantee Scheme is an example of well-designed targeted programme. The Unorganised Sector Social Security Bill owes its origin to the deliberations of this Council. Together with these there are several other programmes that were meant to empower the poor directly. The Debt Waiver Programme for agriculture was the first step towards empowering poor farmers. But that needed to be expanded with additional programmes for providing new loans to the small and marginal farmers Eightyfour per cent of our farmer population hold less than five acres and they receive very little credit or any other assistance from our banking or cooperative system. Similarly, the Common Minimum Programme talked about a National Fund for the Unorganised Sector—58 million enterprises of less than 10 workers produce 40 per cent of the GDP and employ 30 per cent of total workforce but secure less than two per cent of the total bank credit. NAFUS was supported to help them with finance marketing and technology support just as NABARD does to agriculture. Add to them programmes like rural roads, sanitation and rural housing plus spreading primary health care and minimal education throughout the country—all meant for the poor and the vulnerable.

During the five years of the UPA Government, some major advances were made in implementing this new economic policy. First, there was a phenomenal increase in the financial allocation for social expenditure that can be seen in the graph above.

The break from the past is very obvious. The other programmes were started sometimes with full vigouir and sometimes rather hesitatingly because of the lack of experience or absence of institutions. That also reflected the deep-seated bias against the principles of empowerment.

Some Gandhi’s policy of using growth for empowerment is a social revolution, which cannot be achieved overnight. The Congress party has to reinvent itself through out the country as the ‘Aam Admi Ke Sipahi’ helping the people to exercise their rights. Only then the official economic policy will reflect fully its mainstream ideology.

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