THE REAL CHALLENGE IS INEQUALITY, NOT GROWTH

[  This article was published in THE NEW INDIAN EXPRESS ON 7.3.2018 under the title " The Real Challenge is Inequality." ]

                       

   There are signs that the economy is picking up again, but the ugly underbelly of this growth is not being addressed or even acknowledged, going by the Government’s insistence that selling “pakodas” amounts to gainful self-employment. I refer to the monstrous inequality that is making a mockery of our so-called growth story. The paradoxes in the Indian economy are getting more pronounced every day. The economy has been growing at about 7% for the last decade but unemployment continues to rise- according to one estimate the country has been losing 550 jobs every day for the last four years whereas 35000 join the labour force daily; 10% of youths between 18 and 25 years, numbering 51 million, are unemployed. India has the third highest number of billionaires but 80% of the population earn less than US$ 10 per day ( 200 million subsist on US$2 per day); agriculture provides only 17.5 % of GDP but “employs” 50% of the labour force.

   Development has become skewed in favour of the rich and super-rich resulting in vast inequity, which is reflected in the social indicators. WEF’s Inclusive Development Index ranks India at 62 of 77 countries, below even Nepal, Bangladesh and Sri Lanka. This has a spin-off effect on our Human Development record, according to which index we are ranked 130 out of 188 countries. This, in turn, is a reflection of our pathetic performance in areas such as child mortality , child-sex ratio, maternal mortality, mean years of schooling, life expectancy, to mention just a few. Any improvement in “ Ease of Doing Business” certainly cannot compensate for this, though it may add another billionaire every two months to the existing list of 101.

    The rich are getting richer. 1% of Indians own 58% of its wealth: they have appropriated one third of the total revenue gains of the country since the 1980’s and 73% of the wealth generated in 2016. Apart from 101 dollar billionaires India also has 200,000 millionaires and 137,100 UHNIs i.e those with a net worth of more than Rs. 25 crores, growing at 30% p.a. The poor, on the other hand, remain where they are, and the vaunted middle class is slowly disappearing: HSBC may rave about the business potential of a middle class it estimates at about 300 million, but according to the noted economist Thomas Picketty and the Paris School of Economics who analysed data generated by our own National Council of Applied Economic Research, the actual number is closer to just 78 million !

   The country appears to have entered into a vicious cycle of inequity post 1991.  As the rich aggregate more and more of the country’s wealth the poor and lower middle classes ( 80% of the population) become increasingly marginalised. This is extremely unsettling and even dangerous for a democracy: as the 2015 winner of the Nobel Prize for Economics, Angus Deaton, ominously observes: “ …the rich capture more than their  share of political power, so that the state stops serving the majority of the people.” We can see evidence of this every day in the manner in which governments are more concerned about the Sensex than rural distress, the doling out of tens of thousands of crores for Smart cities but nothing for the 600,000 villages, the manipulation- if not loot- of the banking system by big capital resulting in NPAs of more than ten trillion rupees. This is the same money- the tax payers’ money- which, if distributed more equitably, could have uplifted the lives of tens of millions of families. Instead, most of it now seems to be headed for greener pastures abroad, legitimately or otherwise.

   The sorry state of affairs today is the accumulated result of years of misdirected emphasis on financial capital, instead of human and natural capital, and neglect of the core  social sectors- health, education, and agriculture. The health and education spend as a percentage of GDP have been stagnating below 3% and 2%, respectively, for decades: the consequent mal-nourished, stunted children with no skills or real education can only provide an unproductive work force which is good for nothing except selling Mr. Shah’s infamous pakodas. Under-employment, which the govt. will not admit to, is a bigger problem than unemployment. Agriculture, which was doing quite well till a few years ago, has been crushed with faulty MSP and export/import policies and tens of millions of farmers have been rendered destitute. The existing problem has now been exacerbated by the present govt’s regulatory over-drive. A social and economic structure as complex and diverse as India’s cannot be reformed overnight or in one term of a government: a modern super structure cannot be placed on a creaking, dated infrastructure without first preparing the latter for the change. Instead of the delicate fine-tuning required, the BJP’s muscular shove has further excluded tens of millions more from the benefits of economic growth. Both demonetisation and GST have made a bad situation even worse. Aadhar has multiplied the woes. In just one state- Uttarakhand- according to a December 2017 report,  about 10% of beneficiaries of old age, disabled and widow pensions have now been deprived of this dole because of Aadhar related issues. Irrefutable evidence is now available that millions have been dropped from MNREGA and the PDS system, and even school children from the Mid-Day Meal scheme for the same reason. By insisting on portraying these “missing” beneficiaries as ghost units the govt. is only reaffirming its callous and insensitive nature.

   Recent policies are only increasing the rich-poor divide in the country and accentuating the inequality. Policing and regulation have to be replaced by compassion and empathy. The govt.of the day has to support the farmer, unorganised retail, MSMEs which contribute to 90% of livelihoods, instead of regarding them as tax evaders and “entitlement” seekers; only then will GDP growth have any meaning for the overwhelming majority of the country. Democracy has to be both economic as well as political for it to be sustained.