India Shining or Dimming? Saffron Spin vs Reality

Daily Star, Dhaka
http://www.thedailystar.net
January 27, 2004

Editorial

Praful Bidwai writes from New Delhi
(Praful Bidwai is an eminent Indian columnist)

Sensex tops 6000! Agriculture is booming! Kisans are smiling! IT is expanding! Growth touches 8 percent! Shopping malls are gleaming! India is shining!

BJP Sultans of Spin have never before translated their irrational euphoria into a multi-billion-rupee ad campaign like this. Nor has a ruling party so blatantly used public money to promote its narrow agenda. Never before have we witnessed a personality cult built through hundreds of complimentary advertisements (congratulating Mr Vajpayee on his birthday) mostly paid for by cash-rich public companies.

Is India really shining? The claim is based on GDP growth of 8 percent in July-September, and a metropolitan consumer boom, in which sales of cars, mobile telephones, household gadgets, etc, have reached double-digit growth.

Both facts are incontrovertible. (This Column discussed the consumer boom in November.) The 8 percent quarterly growth is attributable to an excellent monsoon --after a drought year in which kharif output fell by 19 percent.

Is this a massive "achievement", as BJP spin-doctors claim? In truth, the last three years have seen the lowest growth in a decade -- an average of 4.8 percent.

Even if this year ends up with 8 percent, the average for the NDA's five years would be 5.5 percent. This would be lower than the average recorded during the 1980s and much less than the 6.7 percent between 1992-93 and 1996-97.

Eight percent growth in one year isn't unprecedented. We clocked 8 percent-plus in 1967-68, 1975-76 and 1988-89 and very nearly in 1996-97. In the consecutive three years preceding the NDA, India registered 7 percent-plus.

Mere GDP growth has never made a society "shine" or boosted public confidence. Nor has it catapulted parties to power.

Yet, the top 10, at most 15, percent of India's people have never had it so good: industrialists, traders, executives, people working in services like telecom, IT, insurance, even higher echelons of government. This is a minute minority, concentrated in about one-quarter of India's 35 states, which absorb two-thirds of all investment.

There are some positive macro-economic indicators like the much tom-tommed $100 billion foreign exchange reserves, low inflation and interest rates. But beneath the facade, there are disturbing trends.

The Centre's fiscal deficit is running at 5.5 percent of GDP. The combined deficits of the Centre and States are 10 percent. Even worse is the Centre's 3 percent-plus revenue deficit.

Put simply, the government is going bankrupt; it's less and less capable of providing public services.

Today, the ratio of government debt to GDP is nearly 80 percent, up from 60. At this rate, roughly 5 percent of GDP is spent annually on interest payments alone. A Central government that collects about 10 percent of GDP as tax and spends half of it on interest and the rest on itself can do no good to the people!

Forex reserves have burgeoned largely because of interest-rate differentials between the US and India, which may not last. The reserves are held mainly in US government bonds, with interest of under 2 percent. India is borrowing at 8-to-10 percent to maintain them!

The investment momentum has slowed. Gross capital formation, 27 percent of GDP in the mid-1990s, is down at 23 percent. Banks are flush with funds: industry isn't borrowing.

Greater foreign investment hasn't made Indian industry competitive. Research and development expenditure in relation to GDP has declined by 20 percent! Such weak foundations can't sustain high industrial growth.

India's worst economic reality is the agrarian crisis, which affects 700 million people. The post-1996 period has seen a decline in returns from agriculture -- to the point that cultivation has become commercially unviable in many parts of India. Behind the suicides of thousands of farmers are rising input costs, stagnant crop prices, and physical collapse.

Yields of all major crops have stagnated -- reversing a 30 year-long trend. Costs of water, fertiliser, pesticide, seeds and power have risen. With declining public agricultural research, the farmer has become dependent on costly private seeds.

Higher cultivation costs aren't offset by support prices. "Such prices benefit a small minority in traditionally food-surplus states like Punjab", says Professor Abhijit Sen, former chairman of the Commission on Agricultural Costs and Prices. "The FCI rarely procures grain from Bihar or Karnataka. Non-procurement squeezes the bulk of farmers in cruel ways. They exploit their own family labour harder: they have no choice."

Where farmers have a choice, they quit agriculture as an occupation. "Contract farming" is growing in Punjab, Haryana and Andhra. The farmer is passing on his losses to even poorer peasants!

The farmer's plight has worsened because falling returns have coincided with imports of agricultural products whose global prices fell in the 1990s. This is a double whammy. The farmer's paying heavily for the dismantling of quantitative restrictions on 1,400 items before President Clinton's 2000 visit -- a concession to the US farm lobby.

To compound matters, rural unemployment is mounting. Ten years ago, a 10 percent increase in agricultural output would produce 7 percent more employment. This has fallen to just one percent.

India creates only about 30 lakh jobs a year. But labour-market entrants are five times higher.

This is India dimming, not shining! Even more shocking is the trend towards social retrogression in the "progressive" (high-growth) states. Female foeticide has sent the 0-6 age sex-ratio plummeting to 800 (girls per thousand boys).

There is growing sex slavery and dowry-taking. Child labour is rampant. Economic servitude is growing. Communalism and intolerance are on the rise. And casteism is persistent. The other day, Dalits were denied entry into Rajasthan's Nathdwara temple.

This doesn't speak of a society on the move towards modernisation, equality or progress. It speaks of sickness and disease. The BJP should be made to pay heavily for celebrating the sickness as "good governance".

http://www.thedailystar.net/2004/01/27/d40127020429.htm