RE: “Reforms” versus “Populi sm”: the manufactured myths Now that the golden boy of the Sangh Parivar, Narendra Modi, has outlined what economic programmes a government led by him would pursue, a clearer idea emerges of who would benefit the most under his rule. When combined with the decade-long economic agenda followed in Gujarat, his policy of nurturing the rich and neglecting the disadvantaged becomes evident. On the face of it, Mr Modi’s economic programme seems just a rejig of current programmes of investment for higher growth. Mr Modi’s vision, as revealed to a huge gathering of BJP cadres last Sunday, includes the creation of 100 new, so-called “smart cities”, job creation, interlinking rivers, bringing back money stashed in Swiss banks, and the introduction of bullet trains and modernisation of the Railways. He wants to have premier educational institutions like the IITs, IIMs and AIIMS in every state and claims he wants to empower women and dalits. The Gujarat model of “high growth” is far from satisfactory. Under his watch every effort has been made to promote big industry. Small and medium enterprises that provide more employment per unit of investment got poor treatment. The state has spent 10 times as much to attract industrial investments as it has on agriculture and on food subsidies, and just sales tax subsidies to medium- and large-scale industries between 1999-2000 and 2006-07 constituted nearly three-fourth of the sales tax revenue of the state. In addition, the subsidies to industry increases with size, starting with subsidy for units for capital investment of Rs 5 crore, going higher for industry with investment over RS 100 crore and even more for “mega industrial projects” investing Rs 1,000 crore or more. According to one analysis of official data, subsidy and incentives to large industry and infrastructure projects total 40 per cent of the total state budget. Besides this, land is given at throwaway prices and drinking water from the Narmada canal system is diverted from the thirsty people of Kutch to industry. The concentration of large-scale industry in Gujarat because of subsidies leads to a highly capital-intensive industrial sector with high income and low employment despite high pushing growth, while small and medium industry stagnates. So while Gujarat’s GDP growth was 10.8 per cent during the past decade, compared to the all-India average of 7.7 per cent, the state’s traditional small and medium sector (which provides employment) did not prosper and wages stagnated. It has been a development led by the Reliance, Essar and Adani groups, with many other large industrial houses like the Tatas waiting to join the game. One outcome of the rush to welcome big industry is that society has suffered. The quality of primary education has deteriorated and schools have a high dropout rate, so much so that the state shows a declining rank in literacy among major states. Several studies have shown that the public distribution system, mid-day meal and integrated child development services (particularly for pregnant women and mothers) are not working well in the state. Data from the Reserve Bank of India shows per capita expenditure on health, education and other social sectors have fallen to abysmal levels in the last decade, with Gujarat’s rank in 2012 declining to among the lowest in the major 20 states. Such are the gains and losses of crony capitalism. Given this brief background it becomes easier to understand the implications of NaMo’s “vision” and its possible consequences. Take the idea of high-speed railway corridors. What the country needs is faster movement of freight trains with a more rapid turnaround of wagons. Passenger service could also be better, but having high-speed bullet trains is not only a waste of resources but will also mean transfer of public railway property into private hands. This will be the beginning of the end of the country’s largest employer as its valuable assets built up over 150 years are passed on to private hands. The building of 100 new cities is of a different category. India’s urban population is bound to grow over the next decades, and people will flow from the rural hinterland into urban sprawls, either existing or new ones. If new ones are needed, their location and plan, if known in advance to a favoured few, would be an opportunity for profitable speculation: a boon for the parivar and its friends. Job creation is vital for the country. While currently small industry provides most of the manufacturing jobs, it is inhibited from growing by labour laws that become applicable once you cross a certain size. A rapidly modernising small-scale sector, along with agro-industry, gives more employment than do large, high-tech units. But that is not the constituency Mr Modi depends on or nurtures, and it is difficult to see him changing. The linking of rivers by a garland of canals and tunnels is one of those ideas that come up from time to time but cannot be sustained because the cost and difficulty are immense and the benefits uncertain. The project is a huge white elephant and is prohibitively expensive. Any banker will tell Mr Modi that bringing tax evaded money stas-hed away in foreign banks has been happening for several years — FII money, which comes via the Mauritius route, gives an idea of the flow. The big industrial barons are quite familiar with it, as they are with over-invoicing imports and under-invoicing exports to move their money out. As for having the IITs, IIMs and AIIMS in every state, Mr Modi obviously hasn’t done his homework. Gone are the days when there were just three IIMs and five IITs. We now have 16 IIMs and 16 IITs, almost one for every major state. The writer is a Mumbai-based freelance journalist deccanchronicle/140125/commentary-dc-comment/commentary/big-better-modinomics
Posted on: Sun, 26 Jan 2014 09:01:53 +0000
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