Growth pangs

Advocates of economic growth who are in position of importance are ironically critical of the same polity that brought them to power

Kamal Nayan Kabra Delhi

The last few months have resounded with Indian policymakers trumpeting a seven per cent growth rate in the economy. These jubilations are timed to the budget session and the preparations for the eleventh five year plan. Such stalled performance serves a series of controversial "reform" or liberalisation measures such as foreign direct investment (FDI) in retail trade and "labour reforms" to weaken job security in order to enhance profitability. The prime minister (PM) has suggested, perhaps in this context, that a growth rate of 10 per cent in two-three years is "eminently feasible" and is "certainly within the realm of possibility". However, another policy-planner has scaled down the possible rate to eight per cent blaming it on the compulsions of coalition politics.

The lament of the pro-growth forces is that they lack popular mandate to give free play to their growth games and, of course, to that of the external players. This is reflected in the position taken at the highest level that there are no external constraints to India's growth, as these are only internal. These internal constraints, according to the PM, are the ones imposed by India’s polity along with "our social structures, our regional imbalances, our inability to handle inequity, and our inability to take hard but essential decisions".

It is ironic indeed that those who have been placed in their present policy-making positions by the Indian polity belittle the same polity as a constraint. This is the polity that allowed people like them, whose decision-making authority has never been democratically endorsed directly by the electorate, to occupy such powerful positions. By logical extension, it could be assumed that their deprecation of the polity implies that they are answerable to, speak for and uphold some pro-growth forces, processes and ideologies outside the Indian polity. How else can one explain the conduct of economic planners who find themselves fully in sync with the forces not decisive enough in the polity that are wedded to market-determined growth of gross domestic product (GDP)? These policies are known to help the already better-off sections and produce, on balance, negative externalities like unemployment, inflation, drain of resources, ecological imbalance, inequalities and resulting social tensions for the general populace. Is it that the politically unconstrained techno-economic decisions they consider  essential for a 10 per cent growth of GDP per annum represents the real, supreme national interest, which the follies of the democratic polity or of the people do not seem to recognise?

Growth crusaders accept that India has regional imbalances, growing inequity and social structures that prompt coalition governments, all of which are not conducive to high growth regimes. The "ability to take hard but essential decisions" needs a brush over historical and structural factors. A strong hand is needed to silence the opposition of the bulk of the electorate which stands to lose livelihoods, money value and self-esteem. The ten per cent growth rate achieved by such undemocratic means would increase the profits of only large and organised domestic and foreign capital that is about a hundred large business houses and a handful of multinational corporations (FDI is allowed only in three sectors).

No more than 20 per cent of India's population has the capacity to save, interest, innovate, raise finance, detect and grab economic opportunities, have access to infrastructure, organise and manage economic activity needed for attaining a 10 per cent growth, and that too, provided the government takes "hard but essential" decisions. If growth is good, why are these decisions hard? Obviously, the faster growth of the past 15 years has produced no such beneficial effects, as shown by the rejection of the shining India rhetoric by the people. It is the existing structure of the economy that makes the largest livelihood sector, agriculture, fall behind the sectors catering to the elite. That pulls the economy down. Growth within this ill-disposed structure would only compound social distress. Naturally the polity would take to task the perpetrators of such inequalities, and threaten growth.

The electorate includes the 80 per cent that loses out and is made to pay for the processes of unequal and externally-oriented growth, indicated by the absence of external constraints on growth, even while external debt is galloping and trade and current account deficit are ballooning. It includes the organised sector workers, down to about six per cent of the workforce. 

Unfortunately for the growth crusaders the electorate is acutely aware that the promised trickle-down and pull-up routes of extending benefits of growth are a chimera.

The author is former professor of Economics, Institute of Economic Growth, Delhi