ON the same day the Sensex vaulted to 20,000 index, landless poor walked to Delhi from different parts of the country under a non-political banner to demand protection to their livelihood. Between jubilant investors with dollar flows that have begun to embarrass the government and the landless and small farmers who fear development projects eating into their little niches, the two Indias seemed to stand in sharp contrast in the capital of the newly emerged trillion dollar plus economy in the ?world'ssecond most populous country?.
On October 30, 2007 business dailies went into overdrive. Sensex took 20 years to reach the 10,000 level but just 20 months to double to 20,000 roared the Economic Times. Next day the stock market regulator Sebi put brakes on the inflow of speculative dollars by investors from abroad using what are known as participatory notes. The regulator felt that the last few weeks? heady drive up at Dalal Street was primarily funneled by these speculative funds. RBI also came out against the dollar inflow mainly to protect the rupee from rising further and upsetting the applecart of exporters, especially textile exporters.
As finance minister in 1991 Dr. Manmohan Singh uncoupled the economy from the command and control bandwagon and ushered in the economy of freedom and enterprise. As Prime Minister the same Dr. Singh finds himself as Prof. Pratap Bhanu Mehta wrote with regret: ?displaying the curious powerlessness of power?.
The shower of optimism from the stock exchanges is stated to reflect the inflexion point the economy has reached over the decade and a half of reform that brought forward the most daring enterprise among old and new entrepreneurs, from Ratan Tata and Aditya Birla to Narayanamurthy, Sunil Mittal and the two Ambani brothers. Indian enterprise battled the world to capture the Corus Steel and Videocon'sV. N. Dhoot bought up electronic factories in Italy, France and South Korea, to give just two examples out of many. In the wake of Dr. Singh'sreforms as finance minister, many Indian business houses , Tatas, Ambanis, Mittals, Jindals, Baba Kalyani, Dhoots, and others have become multi-nationals. From making only a few thousand old model cars, India has become the most attractive automobile manufacturing location with global auto companies selecting it for small car making and exporting hubs. ?India is now welcome at the high table of world finance and industry? says V. N. Dhoot, ASSOCHAM president. ?Five years ago it was not so? he adds. The Sensex vault reflects the confidence of the investing community in the emerging India.
To be fair in evaluating the growth story, credit must go equally to the six years of the NDA that accelerated the reform momentum. Despite two years of global economic recession, the last year of NDA rule saw 8.5 per cent growth and new projects in infrastructure ? communication, power, roads, ports, civil aviation etc. benefit of which has powered the further growth impulse that we see today. The great success story in telecom began with the critical decision that as prime minister Atal Bihari Vajpayee took to shift the new telecom licencees from upfront charges to revenue share. The huge national roads plans like the Golden Quadrilateral and the eight-lane National Highways plan would be a national tribute to his vision. The financial reforms of the NDA laid down a roadmap for regulating government expenditures in future. The passing of the insurance regulatory legislation and the Electricity Act 2003 with a bipartisan support, marked the acme of political leadership. One of the several indices of economic health, the foreign exchange reserve vaulted from less than 30 billion dollars to over 100 billion dollars during the six year NDA rule.
The flip side of the economy remains as challenging to any government as the other side is encouraging. The roar of the sensex is matched by the cry of the poor. Even as the Sensex shoots beyond the glass ceiling of 20,000, the World Bank reports that 80 per cent of Indians live on less than two dollars a day ( roughly Rs. 80) ?that is, more than one-third of world'spoor live in our country. Even if one dollar a day is taken as the poverty line divider, one in three Indians are in this category of extremely poor. Out of some 200 million households, 54 million households are in the category of the poor, 43 million out of which are in rural area. That means rural poverty is still a striking factor of the Indian growth story. The only line of hope is that population of those with incomes below one dollar a day has come down from 41.8 per cent in 1993 to 34.3 per cent by 2004, as per the recent UN figures on the achievement of millennium goals.
The big picture of confident India marching into the global economy as a major economic power has to be moderated by the UN report that the country is unlikely to achieve the millennium goal of halving the proportion of people living below the poverty line by 2015. More disturbing is the Planning Commission'sown draft of the 11th Plan (2007-12). It says that in five states, UP, Bihar, Maharashtra, Uttarkhand and Orissa, the number of poor people has risen even though the overall poverty line has dipped from 44 per cent in 1983 to 27.5 per cent in 2004. For instance, the poor in UP has risen from 5.5 o 5.9 crores in that period, in Orissa from 1.54 crores to 1.78 crores. Most disturbing is the growth of the poor in the industrially forward state like Maharashtra. The growth there is from 2.9 crores to 3.17 crores. The impact of caste on poverty is evident from the fact that 73 per cent of the poor in Orissa are from backward castes and tribes, 55 per cent in Bihar and 57 per cent in MP.
This is not to paint a picture of hopelessness but locate the fault lines of development planning. The economists tell us that the growth rate could be pushed to over 10 per cent in which case poverty line would dip precipitately down. Industry analysts Lehman Brothers said in their report ?India: everything to play for?: ? We judge that India could grow even faster? but ?this judgment is contingent on India continuing to actively pursue structural economic reforms?. The listed reforms are in financial sector, pensions and insurance that alone would add 1.5 per cent to the GDP. OECD said earlier that better transport and power networks and labour reforms could together spur the economy. After all it was the economic reforms that saw the significant plunge in poverty ratio from 36 per cent in 1993-94 to 27.5 per cent in 2004-05, as per Planning Commission report last March ( significantly six out of that ten year period constituted the NDA rule. OECD has also conceded that the proportion of the absolute poor fell between 1999 and 2004 due mainly to economic reforms.)
The reformer finance minister who is now leader of the Government claims that his policies now are to make growth ?more inclusive? but so far the impact of many of these policies of inclusion is rather disappointing amounting to squandering of public money that could have been better spent. Taking the UPA'sshowcase project of National Rural Employment Guarantee Programme (NREGP), on which Rs. 20,000 crores are planned to be spent in 2008-09, out of the 330 districts where the programme has been in operation for the last three years, even half of the 100 days work supposed to be guaranteed, has not been achieved. The poorer the states, the worse is the performance. ?The programme has been unable to provide 100 days work to even a single household in 23 out of the 38 districts in Bihar?, says the report. Even in advanced state like Maharashtra that has a long history of employment guarantee works earlier, ? only 278 households of a total of 1,62,242 households that were provided work only 278 got it for 100 days?. Maharashtra is a Congress ruled state and should have been more dedicated to what is touted as the Congress? grand inclusion scheme. In another Congress ruled state Assam, out of 5.39 lakh households that got jobs under the scheme, only 6,977 got the guaranteed 100 days of work. ?Waste and corruption in the scheme is mounting? wrote a commentator Andy Mukherjee in a commentary distributed by Bloomberg, calling the scheme a ?costly joke?. As has already been seen in other such schemes like food for work and even fair price shops, the benefits hardly touch the target group.
The Government seems to go by fiat from one source. The NREGP was to be spread across the country by 2010 building on the experience gained at the grass roots level. But despite the evident fault lines, the moment the new Congress General Secretary Rahul Gandhi said that the scheme would be implemented this year in all districts, the Government directs that it be so. No discussion at Cabinet level, no evaluation, no financial estimates. Yet, the Prime Minister insists that ?we have to ensure that resources are used efficiently?. (address to McKinsey board in October this year). Then he emphasizes on productivity of resource utilization. And then he calls for a ?judicious mix of equity and efficiency considerations?. Is the extension of this scheme proven to be of doubtful value this ?judicious mix?? And if it is not, is the head of the Government powerless to block such diversion of resources, a diversion that he himself condemns?
Obviously the father of reforms need not be advised on what reforms are needed further to take accelerate growth and there by create more employment and reduce pressure of population on agriculture as the sole livelihood. The reforms in the power sector, implementation of the 2003 Electricity Act, are stalled due to the Left parties opposing it. Same is the case with insurance reforms, with financial reforms that would free the PSU banks from government control. Not different is the story on pensions. And the entire retail store revolution that could link farmers with urban consumers through huge networks of supply chains, is in tatters?compare what ITC'se-Choupal has done for the soybean farmers of Madhya Pradesh, for instance. But Dr. Singh confesses: ?However, given the nature of competitive politics and the much fractured mandates given to governments, it has become difficult sometimes for us to do what is manifestly obvious.? (Speech to McKinsey board).
The Prime Minister calls for greater Public-Private partnership for the ?successful implementation of our social and human development initiatives?. His Finance Minister Palniyappan Chidambaram almost admits futility of entrusting every institution to Government. He even asked at the ET Corporate awards function that each industrial unit adopt one ITI, one primary school and one public health centre. Given the huge absenteeism of teachers at primary schools (even in Delhi), the state of neglect in primary health centres and the skeleton service in power that most villages get ( despite Dr. Singh'sBharat Nirman promising power to all villages) Chidambaram'ssuggestion has a ring of honesty in it. But put it to the Left that keeps this Government in power. And what you would get is a ?neti, neti?.
No wonder analysts are beginning to compare how Atal bihari Vajpayee ran a 23-party coalition and still achieve in reforms in telecom, power, ports and banking and also launch a massive infrastructure in road building project and the alibis that emanate now from the present ruling coalition at the Centre. Of course the difference is in the structure. Atalji led the coalition from the front; the present coalition is remote controlled both in the largest party, the Congress and the Left that holds the lever to the drawbridge.
(The writer is a senior journalist)
The roar of the Sensex is matched by the cry of the poor. Even as the Sensex shoots beyond the glass ceiling of 20,000, the World Bank reports that 80 per cent of Indians live on less than two dollars a day (roughly Rs. 80)?that is, more than one-third of world'spoor live in our country. Even if one dollar a day is taken as the poverty line divider, one in three Indians are in this category of extremely poor.
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