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Mainstream, VOL XLIX, No 34, August 13, 2011 - INDEPENDENCE DAY SPECIAL

Dilemma of Democracy and Development in India


Saturday 20 August 2011, by Mani Shankar Aiyar


For anyone of my generation, V.K. Krishna Menon was an iconic figure. His image suffered a body blow with the military disaster of October-November 1962 but any fair evaluation of the man and his contribution to the freedom struggle and post-Independence nation-building in the years that went before the hubris and then the closing years of his life must conclude with a tribute to his soaring patriotism, his determined defence of our right to an independent voice in a world unused to such assertion of independence, his frugality and probity, his eloquence and wit, not to mention his acerbic tongue, as well as the courage of his convictions, and, above all, his compassion and concern for the poor and the oppressed.

It also happens that you have chosen the 45th anniversary of the passing away of Pandit Jawaharlal Nehru, Krishna Menon’s friend and mentor, for me to deliver this lecture. That is why I have chosen today to speak in memory of both Panditji and Krishna Menon on the continuing, indeed, imperative need to privilege the alleviation of poverty over the pursuit of prosperity if we are to safeguard our democracy and sustain our development.

Yes, we are a democracy. And, yes, our GDP growth rate is surging towards double-digit figures. Is this reason for complacency that as we have done so well, we can only do better? Or are there threats to democracy and development, indeed threats to democracy from development, that we can ignore only at our peril? That is the theme I propose exploring with you this evening.

Democracy is indisputably our greatest achievement since Independence. Of the hundred or more countries that came to liberation of one kind or the other in the years following 1947, ours has been the only one to have translated Independence for our country into freedom for our people. We are also the first country in world history to have established a full-fledged democracy before even embarking on the path of development.

Yet, there is widespread dissatisfaction with our democracy, aggravated by widespread dissatisfaction with the inequalities engendered by accelerated growth not translating into inclusive growth.

Accelerating disparities are the price we are paying for accelerated growth. One stark figure should suffice to illustrate this. While our GDP is growing at over eight per cent per annum, our poverty alleviation rate is averaging under 0.8 per cent per annum. Another is that the annual average growth rate of human development values, as calculated by the UNDP, is about 1.5 per cent, barely higher than the GDP growth rate in the colonial period.

The hard facts are that after six decades of development, India adds more hungry people to the world’s population than the rest of the world put together; that 47 per cent of our children under five are severely to moderately malnourished, largely because nine out of 10 pregnant women are anaemic; that we suffer among the highest rates of maternal and infant mortality in the world; and that the most populous States of the Union tend to have human development values lower than much of Africa south of the Sahara. Of course, in absolute terms there has been progress. Also, of course, progress in poverty alleviation has in recent years been faster than in the past. But the stark reality is much more one of pervasive poverty than of widespread prosperity.

Moreover, the growth process is leading to such sharp concentration of income and wealth that Forbes India has estimated the combined wealth of the hundred richest Indians as equal to a fourth of our Gross Domestic Product. And the National Council of Applied Economic Research has estimated that the top 0.001 per cent of our population have an annual income of $ 4,50,000 per capita compared to under $ 200 per annum for the bottom 60 per cent-80 per cent.
So, while the nation as whole is zooming into the 21st century, the vast majority of our people are stagnating at the colonial rates of growth. The annual average GDP growth rates, however impressive, are something of a notional figure: the income of the successful Indian is growing at a rate much higher than eight per cent but that of the unsuccessful Indian at a rate very much lower. The trajectory of the average GDP growth is high and rising, but the bulk of our people are nowhere near that trajectory and a substantial number are in fact falling off it.

We also have to accept that there is little chance of an equitable increase in incomes for the unsuccessful Indian. As the worst affected by inflation, much of any incremental increase in money incomes of the poor are swallowed in price rises, especially of the wage goods on which they survive; so the increase in real incomes tends to be derisory, and becomes increasingly derisory the more one descends down the income ladder. Thus, as economist Jean Dreze recently demonstrated on television, even if the money income has increased by 50 per cent for the poor, from Rs 20 per day to Rs 30 per day over the last seven years, the basket of food items that can be purchased today with Rs 30 remains the same as it was seven years ago for Rs 20.

Accelerated growth in the Indian economy has primarily been in the services sector, which now accounts for 57 per cent of the GDP, the primary beneficiaries being the IT and IT-related enterprises and government servants. Manufacture has been the next beneficiary but hardly labour because the share of labour in the organised manufacturing sector remains frozen at eight per cent while the rate of growth of manufacturing zooms to double digits and beyond, showing that much of the increase in manufacture comes from economies of scale secured through de-reservation for the employment-intensive small sector, and technological advance based on high capital intensity. Growth in the manufacturing sector has not increased the organised sector employment or resulted in any significant increase in real wages even for the organised labour, let alone the 92 per cent share of our labour force which is in the unorganised sector. Meanwhile, the share of our work force employed in agriculture and allied activities stubbornly persists at about 65 per cent but the GDP share of this sector has shrunk from over half at Independence to a mere 14.6 per cent now. It is, therefore, clear as crystal that accelerated GDP growth on its own is not going to translate into inclusive growth. I am glad the distinguished Deputy Chairman of the Planning Commission has been the first to admit that our single biggest failure has been our signal failure to attain the overarching objective of the Eleventh Plan which was and remains “Inclusive Growth”.

If, therefore, inclusive growth is not going to come through real incomes of wage earners and the poor rising at a rate anywhere near commen-surate with the GDP growth, the only way of reaching inclusive growth to the deprived is by making available to them public goods and services gratis or at subsidised affordable prices. Low income does not have to translate into grinding poverty if the poor are ensured ready, easy and affordable access to food security; potable drinking water; basic housing; elementary sanitation; primary education; primary health services; village infrastructure; extension services for agriculture, fisheries, animal husbandry and village industry; financial inclusion and employment guarantees at a living wage when employment is otherwise hard to come by.

Yet, in the triumphalism of having churned a couple of hundred million into the market, we tend to ignore at our peril those many more hundreds of million—I estimate their number at about a billion—who are either on the periphery of the market or right out of it. In other words, even if a couple of hundred million Indians are consumers with a bit of spare money in their pockets, there are hundreds of million more citizens in desperate need of sustenance.

THE social tensions generated by such growing inequalities, and the demand for land for industrialisation and infrastructure, are to be seen everywhere around the country—NOIDA on the fringes of the national Capital is but the latest example—but perhaps most acutely in forest lands inhabited by the tribal people. The tragedy of displacement to promote someone else’s wealth is best captured in the words of Annie Zaidi, a young Mumbai-based journalist, who has travelled deep into forest areas, in her little book, Known Turf:

Displacement is about losing a river, losing access to clean, safe drinking water. Losing water for the fields. Losing land that is watered richly. Losing the fields that gave you grain. Losing the grass that your herds grazed on. Losing your cattle. Losing the milk that came from the cattle. Losing the meat the goats gave. Losing the sheep that gave you wool. Losing access to mud and wood with which you built your house. Losing firewood. Losing the birds and the bees. Losing honey and herbs. Losing hygiene. Losing legality. Losing the right to protest when somebody in a uniform and a jeep shows up to set fire to your home. What else was left to lose?

The Home Ministry estimates that 464 Police Station jurisdictions in 95 districts spread over 11 States are seriously infected with LWE—Left-Wing Extremism. Of these 95 LWE districts, 35 have virtually spun out of governmental control. If we add partially LWE-affected districts, the number doubles to just under 200 in 20 States. In other words, in nearly a third of the country, dissatisfaction with governance is so widespread that extremist violence is manifest.

Unsurprisingly, there is considerable correlation between extreme poverty and Left-wing extremism, the bulk of the LWE-affected districts falling in Fifth Schedule areas, that is, tribally dominated districts of States comprising both tribal and non-tribal areas, and Sixth Schedule States, that is, States with a majority tribal population—the most marginalised section of Indian society. Not only do they comprise the economic segments least touched by the growth process, their assertiveness derives largely from the fact that a significant element of accelerated economic growth is driven by resources lying above and below the tribal land, in particular, major and minor minerals as well as major and minor forest produce.

Minor forest produce is valued at around Rs 50, 000 crores a year. Of this, Rs 45,000 crores goes to the private sector; State governments get a share of about Rs 5000 crores. A small proportion of this is later channelled to tribal communities through a bureaucracy which regards them with contempt, blatantly takes what it can out of the kitty and reluctantly lets what remains trickle down to those they are supposed to serve. Such exploitation is detailed in the 2008 report on “Development Challenges in Extremism Affected Areas”, commissioned by the Planning Commission but apparently gathering dust since then, as the focus has been more on security measures than meeting the development challenges in the manner prescribed by the Bandyopadhyay Committee report.

Thus, for example, the share of budgetary resources earmarked for tribal communities is about 3.5 per cent compared with the eight per cent share of tribals in our total population. Even this meagre amount is spread across nearly 25 Central Government departments. Therefore, tracking what reaches the tribal communities and what gets absorbed by the delivery system on the way is virtually impossible to tell. More-over, instead of ensuring that these resources are made available directly to tribal communities for community decisions on spending in accordance with the provisions of the Panchayats (Extension to Scheduled Areas) Act [PESA], 1996, a separate Integrated Action Plan budgeted at a mere Rs 1600 crores has been prepared for expenditure in the LWE districts by exactly the same exploitative politico-bureaucratic nexus that has failed so spectacularly to deliver development to these tribal areas. With the Union Government declining to use the powers vested in it by paragraph 3 of the Fifth Schedule to issue “directions” to State governments to strictly abide by PESA for the implementation of the IAP, let alone other tribal entitlements, the money budgeted for tribal communities may have marginally increased but the money actually reaching them remains as derisory as before.

The usurpation of tribal land to access the economic resources of tribal lands is the single most important cause of tribal disaffection. In effect, the tribals are challenging the fundamental axiom that development is desirable. They are saying that such development, far from being desirable, is, at least for them, only disruptive. It is this perspective that provides fertile ground for the spread of Left-wing extremism. It would be foolhardy to wait for such LWE to start licking at the edges of our urban centres before waking up to the danger.

THUS, at one end of the political spectrum, we have dissatisfaction with non-inclusive growth being expressed in Left-wing extremism and, at the other end, in anti-incumbency voting behaviour. Here lies the heart of the dilemma between democracy and development. Are we capable of meeting the seething demands of the seething masses before they start losing faith in the system?

Before we attempt an answer to that question, let us consider for a moment the justification given for the growth model we have adopted. According to Prof S. Tendulkar, not the cricketer but the head of the Prime Minister’s Economic Advisory Council, our growth model derives from the Presidential Address that the world’s greatest-ever authority on GDP growth patterns, Prof Simon Kuznets, delivered to the American Economics Association on December 29, 1954, in which he argued that all growth leads to growing inequalities but this does not amount to any
lack of equity for, over time, the growth process eventually benefits everyone.

I caution against such complacency. The process of moving to a large measure of social justice and equity took centuries in the developed democracies. Moreover, they all became developed economies before they became full-fledged democracies. We, on the other hand, are the first country in world history to have become a full-fledged democracy even when we were under-developed, let alone developing. Six decades of democracy and numerous elections at all levels have taught all Indians to demand what they regard as their rightful due—and to turn out those who do not meet those demands. The point, therefore, is: with no more than a five-year window of opportunity, does Indian democracy have the leisure to wait several generations for equity to make itself felt or does a highly awakened democracy—the only one in history to have put democracy before development—need social justice now as much as it needs growth now?

Two arguments are generally put forward in support of the thesis that there is no need to panic and that all is, in fact, well.

One is that growth is the necessary precondition for the generation of the financial resources required for poverty alleviation; that the higher the level of national prosperity, the greater the availability of resources to deal with stubborn poverty; and that without more finances, social justice amounts to no more than the redistribution of poverty. However, while growth is indeed the necessary condition of poverty alleviation, it is not the sufficient condition. For while growth may indeed be a tide that raises all boats, more likely it is a tsunami that raises all yachts while lapping but gently at the oars of more low-lying rafts.

The second argument in favour of accelerated growth as the road to inclusive growth is that faster growth and lower taxes have so stimulated government revenues that there has been an exponential increase in both nominal and real terms in budgetary funds flowing towards social sector and poverty alleviation schemes. This year’s allocation stands at over Rs 1,60,000 crores. My own tentative calculations show that between 1994 and 2011, Central Budget outlays on such socially-oriented programmes rose by a factor of about 17 over 17 years, unmatched perhaps by any other country in the world. Yet, the UNDP’s Human Development Index reports that while India’s position on the global league table was 134 in 1994, fifteen years later, in 2009, it still remained at 134. Like Alice in Wonderland, we have been running ever faster to remain at the same place. The latest UN HDR 2010, configured on the most challenging innovation in poverty studies in recent years, the Oxford Poverty and Human Development Initiative, gives no comfort. The UNDP indicates that as between the previous year and the latest one there has been no change in India’s relative position on the index.

WHY are outcomes so hopelessly out of sync with outlays? Why has grassroots democracy not translated into grassroots development? I repeat: Are we capable of meeting the seething expectations of our seething masses before they start losing faith in the system?

My answer is, “Yes.” Fortunately, we have at hand the means for addressing this central concern: the constitutional provisions enacted in 1992 to move away from development delivered from above to a system where the intended beneficiaries secure their entitlements of public goods and services as matter of right and by dint of the powers vested in the beneficiaries themselves.

Unfortunately, political priorities lie elsewhere. The politics of our poverty is reflected in the poverty of our politics. The urgent is always overtaking the important. The transient immediate rather than the immanent is what takes up almost all the attention of Parliament and public opinion as expressed in the media. Scams, scandals and sordid stories of corruption are what obsess us. The enduring issues of inclusive governance for inclusive growth command little sustained attention.

This was not always so; indeed, quite to the contrary, it was precisely on questions of poverty that Mahatma Gandhi wished to focus the entire effort at nation-building. Intuitively, he saw that the first pre-requisite of poverty alleviation is the empowerment of the poor to effectively address issues of their own poverty instead of relying upon an impersonal government machinery to spring them from the trap of poverty. Asked about his “dream” for independent India, Gandhiji replied:

I shall work for an India in which the poorest shall feel that it is their country, in whose making they have an effective voice.

What has happened instead is that it is the middle class rather than the poor who have been empowered. This in turn has vastly increased the access of the middle class to their entitlements of education, health, housing, and social and economic infrastructure, in consequence of which they have, within a couple of generations, become the arrow-head of India’s growth, but leaving the un-empowered far behind, and increasingly further behind, in the race to development.

If, therefore, the same process were pursued of political empowerment at the grassroots leading to assured access to entitlements at the grassroots, thus eventually resulting in relative enrichment at the grassroots, we might yet succeed in ensuring grassroots development through grassroots democracy. It is in our widespread network of democratically elected local government institutions—Panchayat Raj—that we have at hand the instrument to bring about this consummation devoutly to be wished. What is needed is the political will to ensure prioritisation to the complex issues that stand in the way of the effective devolution of functions, finances and functionaries to the institutions of local self-government.

Not heeding Gandhiji’s advice, our Constitution first established democratic institutions at the top, in Delhi and the State capitals. So democracy, instead of organically evolving bottom-up as in the developed democracies, is facing fierce institutional resistance to devolution from the top to the bottom. Pushing past such institutional resistance to secure effective devolution to ensure that the poor can rely on themselves rather on a bureaucracy that has clearly failed to deliver the goods is, I think, the only way we can preserve our democracy and sustain our development.

The problem is that the very political forces on whom we have to depend to push through these major reforms in governance are the very ones who have the most to lose—or believe they have the most to lose—if we were to secure effective devolution. For the very substantial financial resources being set aside for multi-dimensional poverty alleviation are the very sources of immense political patronage. It facilitates the exercise of executive power by those elected to perform legislative duties. Self-governance, however, takes away from those who currently exercise authority the discretionary powers that distinguish the powerful politician from the impotent. To this is added the fear of the dominant and domineering bureaucracy of being similarly marginalised. The combination of the two constitutes the rearguard of the battle against devolution.

SINCE Indian democracy is essentially federal in nature and the issue of the day is rarely the same in more than one State, the actual progress towards inclusive governance for inclusive growth is heavily dependent on the political understanding of the State Government. The pattern of effective devolution to institutions of local self-government is, therefore, very uneven in different States and regions of the country. Broadly speaking, the south and the west of the country have progressed further down the road to devolution than other parts of the country. Where devolution has been more effective, human development indicators also tend to be more reassuring. Equally, State GDP performance also tends to be superior.

The Central Government, therefore, needs to incentivise the processes of devolution instead of merely washing their hands off the problem, as is the tendency at the moment. They can do so through the over one hundred Centrally Sponsored Schemes (CCS) which provide between 50 per cent and 90 per cent of the finances for social sector and anti-poverty programmes. CCS are delivered through nearly a hundred mutually insulated administrative silos that absorb up to 85 per cent of the budgeted funds in administrative expenses. If the Centre were to bring the delivery mechanism for CSS in salience with the constitutional scheme of making the panchayats and nagarpalikas the instruments of self-delivery of at least those public goods and services provided under the 29 subjects listed in the Eleventh and Twelfth Schedules of the Constitution for planning and implementation by the institutions of local self-government, we would have such a sea-change in the system of governance that outcomes would become far more commensurate with outlays. The benefits of high growth would thus percolate almost simultaneously in real time to the people instead of being absorbed by high-cost, top-heavy administrative system that at present swallows up to 85 paise in the rupee, as Rajiv Gandhi pointed out a quarter century ago.

This was the intuitive conclusion reached by Mahatma Gandhi before Independence. A decade later, it was subscribed to by Jawaharlal Nehru who, in his last seven years, after perusing the Balwantrai Mehta Study Group report in 1957, became the pioneer and crusader for grassroots development through grassroots democracy. It was the cause then passionately espoused by Rajiv Gandhi, who was responsible for according constitutional sanction, sanctity and safeguards for local self-government. Thanks to those consti-tutional amendments, Panchayat Raj has now become ineluctable, irremovable and irreversible. We now have a nationwide network of 2,50,000 institutions of local self-government, comprising 32 lakhs democratically elected representatives, 12 lakhs of whom are women, who are responsible to their respective village communities through constitutionally mandated Gram Sabhas and Ward Sabhas in which every single voter has the automatic right to be represented and who are entitled to hold to account the elected panch and sarpanch and local bureaucrat.

Tragically, the third tier of governance, at the interface of democracy and development, is languishing for want of effective devolution of functions, finances and functionaries. The Central Government and Planning Commission have the constitutional authority and constitutional duty, as also the financial clout, to incentivise and promote Panchayat Raj as the principal instrument of inclusive growth. But they are not exercising this authority. They are leaving it almost entirely to State governments to deter-mine the pace and pattern of Panchayat Raj.

The Twelfth Plan offers a golden opportunity to galvanise the panchayats and nagarpalikas to soar towards not just accelerated growth, as in the Tenth and Eleventh Plans, but also towards inclusive growth by recasting the guidelines for Centrally Sponsored Schemes to promote devolution for community self-governance in rural villages and urban slums.

Such vibrant Panchayat Raj is the only way of ending the present alienation of the people from the growth process, the only way, therefore, of resolving the dilemma of democracy and development. Self-governance, not bureaucratic delivery systems, constitutes the key to aligning outcomes with outlays, thereby making the vast majority of Indians, who are poor and vulnerable in terms of income and consumption, poverty, active participatory stakeholders and beneficiaries in the processes of accelerated growth translating into inclusive growth. We must give “an effective voice in the making of the nation”, as Gandhiji called it, to the submerged Indian in emerging India. The destiny of the poor must be determined by the poor.

V.K. Krishna Menon, in whose name we are here together gathered, well understood this. In a speech on Republic Day, 1971, he said:
India fought for freedom not only to throw away the British yoke but also to fulfil the aspirations of its masses for a life of dignity and happiness. It was obvious even during the days of the freedom struggle that these aspirations could be fulfilled only in a democratic, socialist, secular, united India. The Constitution of India therefore enshrined these principles in itself.

And then follows the key sentence:

The building of a modern India needs the purposeful channelisation of the entire energies of her people to these well-defined goals.

His words continue to reverberate in our hearts.

Thank you.

[Text of the author’s Eleventh V.K. Krishna Menon Memorial Lecture, Indian Society of International Law, New Delhi, May 27, 2011]

The author, a Rajya Sabha Member, is a former Union Minister of Panchayati Raj (2004-09) and an erstwhile member of the Indian Foreign Service. He was also the Joint Secretary to PM Rajiv Gandhi (1985-89).

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