Bastion of Free Speech
Mohan Guruswamy
Employment generation in the organized sector too suffered. It was growing at a modest 1.6% during 1981-91, just about keeping pace with the population growth rate. Since then the growth in jobs in the organized sector has halved to 0.8% while the population grew as before.
The power sector, which was a major source of concern at the beginning of the last decade, too did not show any great leap forward though the centerpiece of the liberalization policy was the opening up of the sector to foreign capital and ownership. As a part of liberalization we saw the worst examples of crony capitalism unfold. Promoters of power projects were not only assured an extraordinarily high rate of return, 16% p.a., but were given all sorts of other guarantees as well. They were protected against currency fluctuations, and payments and off-take were both guaranteed, thus insulating them against all risks giving the term risk capital an entirely new meaning.
It would seem that the huge sums of money that Enron showed in its books as having been expended on “educating” Indian opinion leaders, presumably people like Sharad Pawar and Pramod Mahajan, was well spent as our leaders showed no signs whatsoever about making any educated decisions. So blatant was the cronyism that Prof. Michael Porter of the Harvard Business School was forced to comment that such behavior was giving liberalization a bad name and with it ran the risk of the liberalization baby getting thrown out with the bath water. Even after this, after all the education and pockets well lined, the growth of Electricity Generation Capacity fell to 3.5% p.a. for 1991-99 as opposed to 12.4% for 1981-91. Electricity Generation growth fell from 17% to 7.8% for the corresponding periods (Table 2).
| 1981-91 | 1991-99 | |
|---|---|---|
| Capacity Growth p.a. | 12.4% | 3.5% |
| Production Growth p.a. | 17% | 7.8% |
The foreign trade picture too was to radically change as a result of liberalization. This it probably did. For imports, which were growing modestly at the rate of 4.5% p.a. during 1981-91, spurted to 7.97% p.a. during 1991-2000. But did it make a big difference to exports? Not really because the change was miniscule – from 8.28% to 8.41%. All the time we were being told that if imports grew so would exports. But that just did not happen. The trade deficits have been growing exponentially. In 1980-81 the adverse balance was Rs.5838 crores. In 1990-91 this was Rs.10645 crores. In 1998-99 it swelled to Rs.55478 crores. It would seem that besides devaluation, ostensibly to make exports more competitive, we have had no foreign trade policy worth the name. In 1981 the dollar was worth Rs.8. In 1991 this changed to Rs.18 and now to more than Rs.45.
The 1991 Census confirms that even after four and half decades of independence over 80% of all rural workers are employed by the agricultural sector. As many as 52% of the men, and 18% of the women living in rural India are farm workers. In many states the dependence on the agricultural sector for employment has increased. This continuous assured supply to the rural sector clearly has a depressive effect on the daily wages to agricultural and other rural workers. It is small wonder that they comprise of the bulk of the poorest among the poor. Over 85% of the daily income of these workers is spent on food articles. Clearly the brunt of the impact of the high rate of inflation that has been a characteristic of the entire period has been borne by this sector. The wholesale price index for food grains has gone up by 90%. Cereals have gone up by 63%. Pulses by 86.7%. Vegetables by over 100%. Sugar and gur by 87.4%. Thus the rate of effective inflation for this sector has been over 25% as opposed to the general annual rate of inflation of 10%.
The per capita income of people in this category is much below the national average of around Rs.7000 per year. It is estimated that the farm worker on an average is employed for less than 150 days a year. Even assuming a daily wage of Rs.40, this amounts to about Rs.6000 each year. If the wife is also working this could at best mean a family income of about Rs.12000 per year or a per capita income of Rs.2400 a year for a typical family of five. In reality this situation is even worse as the lower the income the larger the family size, which means not only more children but also more other dependents like aged parents. So the poor are really much worse off than the average figures would suggest. The average in a country such as ours with the prevalent high-income inequality is actually quite high when compared to the norm. More indicative than the average per capita income, which is, the GNP divided by the population, would be the distribution of incomes.
Surveys by the NCAER reveal that almost 59% of all households accounting for 526 million people have an annual income of less than Rs.12500. This means a monthly household income of about Rs.1000 or about Rs.200 per head. This by any yardstick is an abysmally low income and makes a better poverty line than the governments generally accepted poverty line. Households with incomes between Rs.12500 and Rs.40000 per year account for 331 million people. Only 4.1% accounting for 37 million have an income of over Rs.40000 a year. Even within this group it would seem that a few have got it all. The NCAER has also estimated that 1.4 million Indians have an annual income in excess of Rs.5 lakhs. It would seem that this is the group at whom all our economic reforms and the faculties of our “sarkari” economists seem focused upon.
By the Government of India’s own admission about 240 million people live below the poverty line. The poverty line is really the line of destitution. At this line people have just enough money to provide themselves with food converting to 2200 calories and with nothing else. No roof, no clothes, no security, no minimal comforts, let alone schools, medicine and any fruits of the industrial revolution, let alone any of the other techno-economic revolutions that have followed! It is not the consecutive devaluations of the rupee, or the unprecedented inflation, or the widening of the trade deficit, or the phenomenal increase of the foreign debt, but the increase in the incidence of poverty since 1991 that really indicts the successive regimes and the stunted process of liberalization that took root in India. Liberalization unfortunately came to become a kind of Suhartoism with the sons and sons-in-law making hay while the sun shines.
Copyright(c) Mohan Guruswamy, 2001. All rights reserved.