GLOBAL FINANCE CAPITAL AND YOJANA BHAVAN
Review of the book ‘Getting India Back On Track’
Edited by Bibek Debroy, Ashley J. Tellis and Reece Trever,
Published by Vintage Books, Random House India, April 2014
Published just before India’s sixteenth Loksabha elections, the 314 page book ‘Getting India Back on Track: An Action Agenda for Reform’ has a forwarding note by Ratan Tata, the icon of Indian capitalism. Such icons have disappeared from USA and most other developed countries, long ago. In India they survive, thanks to its backwardness and the English speaking elite classes with their vast media power.
State monopoly capitalism has taken over the economies of most OECD countries: They jointly try to enforce a new imperial order, with the support of a global financial market, presently regulated by IMF-WB-WTO combine. According to Ratan Tata, Getting India Back on Track was brought together by some of the ‘most incisive policy minds working on India, who are experts, commentators, and practitioners….’ .It is a product of the Carnegie Endowment for International Peace-CEIP (1), a Global NGO sponsored by French Government: The book is, naturally, consistent with its founding objective of providing professional help to developing countries in the building of capitalism.
Tata himself is a trustee of this unique NGO network or think tank of policy research centers operating from Russia, China, Europe, the Middle East, and the United States. Its mission, as stated in the website, is to “advance the cause of peace through analysis and development of fresh policy ideas and direct engagement and collaboration with decision makers in government, business, and civil society… Working together, our centers bring the inestimable benefit of multiple national viewpoints to bilateral, regional, and global issues.”. It provides policy inputs to not only World Bank and IMF but also to NATO for helping to hold the world together under their hegemony.
‘Getting India Back on Track’ means putting back on rails, the reforms and economic restructuring programs that were getting derailed, thanks to numerous political expediencies, global as well as local. Introductory chapter of the book by its general editor, Ashley J. Tellis, Senior Associate of CEIP and a senior bureaucrat in US Government, is titled “Completing Unfinished Tasks”, gives fairly detailed instructions for returning the country to a path of high growth, when a new Government assumes power after Loksabha elections.
The 28 page introductory essay by Tellis paints the so-called Indian socialism of yesteryears as a disaster, reviews the ongoing reforms with great enthusiasm, and concludes with a highly diplomatic warning: “Neither India nor the world-and especially its partners such as the United States-can afford to watch fortune elude New Delhi for another five years.” However, the last article, ‘Rejuvenating Foreign Policy’ by C Raja Mohan, a well known defense analyst and columnist in Indian Express does not reveal any such diplomatic sensibilities, when he simply insists: “revitalizing strategic partnership with United States must be the foundation on which the new government pursues its great power relationships”. Between these two articles are sandwiched, some sixteen chapters contributed by those, who are considered as experts on Indian development.
2. Perceptions at macroeconomic level.
First chapter, by the young Indian economist Ila Patnaik repeat the well known World Bank sermon on the virtues of maintaining macroeconomic balance in a national economy. The second Chapter titled Dismantling the Welfare State is by Surjit Bhalla, a seasoned investment analyst and a board member of NCAER, considered as the think tank of Indian reforms; it simply ridicules the welfare policies of Indian State. This chapter examines the efficacy of redistribution in Indian economy and tend to conclude that, “re-distributive politics have made India a welfare state before its time. Bhalla seems to forget that vast majority of the Indian workforce are employed, even today, in the informal sector and are denied the benefits of even permanent employment (2).
Those who enjoy the benefits of minimal social security are less than ten percent of Indian workforce, just the reverse of the situation in developed societies. Bhalla have not looked at the real problems of India’s welfare politics at the national and state level or from the broader perspective of Human Resources Development and Management, needed for a nation building. He simply pleads to improve the effectiveness of PDS and MGNREG schemes by preventing leakages through the Adhar route, initiated by UPA Government with lot of fanfare and then kept under suspended animation.
Bhalla, like the Adhar experts, looks at ICT as a tool for tightening of administrative controls from top and not as a tool for expanding and deepening of the democratic process. Evidently, he does not know about, what large sections of the working class in the informal sector of Kerala, could achieve by way of minimal social security with the help of tripartite labor boards and welfare fund schemes starting from the grass root level, even before the enactment of MGNREA. Even in implementing MGNREGA, left governments were far better than the others, with Tripura judged as the best performer among all states. It is not surprising that there is widespread opposition from state governments against the move to dilute the act.
3. Managing, natural resources energy and environment
Four chapters are dedicated to the use of resources; land (Chapter 10), water (Ch-11), energy (Ch-12) and environment (Ch-13). Barun S. Mitra and Madhumita D. Mitra, who have jointly authored the chapter on land, appear to be social activists with very little exposure on the ground realities related to India’s land resources. They want land to be an easily trade-able commodity with minimal of regulation and transaction costs. They simply share the impatience of big investors, especially the foreign ones, in matters related to land acquisition and management. They lament on the extremely slow pace of implementing the Land Acquisition Rehabilitation and Resettlement (LARR) Act of 2005 that entitles state governments to short-circuit several land related statutes for the speedy implementation of Special Economic Zones. In the name of deepening democracy, the authors even suggest settling of land and environmental issues directly with local governments, bypassing the authority of State Governments.
Tushaar Shah and Shilp Verma who have jointly authored the Chapter on water management are well known experts in ground water management. Both are Fellows of Integrated Water Systems and Governance Group of UNESCO-IHE, a UN institution operating from Netherlands and they were involved in the rehabilitation of irrigation systems in India as well as abroad. The chapter praises the great achievements in the management of irrigation pumping systems in Gujarat by investing Rs.1200 Crore in separate irrigation feeders with the objective of preventing theft.
Neglect of management improvements, governance reforms and institutional innovations are identified as the root cause for the poor management of India’s water resources. The article explores different models for the integrated ground water management in Eastern India consisting of UP, Bihar, West Bengal and Odisha and projects including a solar version of the same. The need for strengthening of Central Water Commission (CWC) is rightly emphasized for pursuing such adventurous ideas but, the authors fail to see the even more pressing need for capacity building at the state level by creating its subsidiaries at the state level and federating them into a central body.
The chapter on energy, by Sunjoy Joshi, a former IAS officer and climate change enthusiast, highlights the rapidly increasing energy dependence on imports. He points out that energy import constitutes a quarter of India’s current accounts deficits and puts the blame for the deteriorating situation on the so called half-dismantled planned economy. He makes some casual remarks on the problems of power sector which has turned extremely inefficient under the impact of quarter century of reforms dictated on from outside (3). He has nothing much of a solution other than leaving everything to the global market players and market forces.
In sharp contrast to the energy chapter, Chapter on “Manging the Environment” by Ligia Noronha of TERI has made several positive suggestions. She briefly reviews the prevailing unsatisfactory ecosystem management practices related our rivers, forests and coasts and then suggests a five point agenda for the next five years. She is of the view that, “the central government needs to apply the principle of subsidiary to the case of environmental management in India to ensure that different levels of government take responsibility for those dimensions of environmental quality within their jurisdictional boundaries, leading to better environmental management across the board….
….This would also allow for greater public voice in the design of programs, enable feedback for the fine-tuning of policies, and reduce the number of layers of bureaucracy, thus making clear jurisdictional responsibilities for enforcement and service,.”. These recommendations are sound, perfectly rational and scientific but calls for capacity building at various layers of Government and also democratic decentralization of administration as in socialist societies but, unlikely to be accepted by a bourgeoisie society dominated by big monopoly capital.
4. Burden of agriculture and poverty of Indian peasantry
Indian capitalists and their professional advisers look at the Indian peasantry as a burden and liability. The chapter titled, Revamping Agriculture and the Public Distribution System is the contribution of Ashok Gulati, who had held positions like Chairman of the Commission for Agricultural Costs and Prices. He looks at Indian agriculture mainly from the point of view of its capacity to contribute to GDP and comments with a sort of wry satisfaction: “With all these positive signs -overall production, trade, grain stocks, and investments in agriculture -the picture seems reasonably optimistic, and even rosy at times. But at the same time, one also hears about farmers’ suicides and farmers complaining about returns in agriculture not being good enough to keep them in agriculture.” Gulati takes a summary view that ‘considering the size of the country and and its diverse agriculture’, this ‘could also be true in some pockets.’
It is surprising that, eminent Indian economists like Ashok Gulati and others refuse to look at the common Indian peasantry as a deprived class under the bourgeoisie landlord regime that look at Indian agriculture mainly as a resource for earning foreign exchange needed for its own comfort and expansion. They oppose the subsidized supply of irrigation, power and fertilizer to farmers and insist on the immediate switch over to direct transfer system for subsidies, through the Adhar, an untested high cost system based on imported computer hardware and software.
Mounting inefficiencies and anomalies that have developed in the administration of the support systems, including technology development and R&D, mostly managed by Central Government, with very little role or participation of state and lower level governments and farmer collectives, are hardly of any concern for these experts (4). The article makes a casual reference to the greatly successful Amul cooperative model in Gujarat but does not even mention on the success of cane sugar cultivation in Maharshtra on a cooperative basis. There is no mention on the prospects of repeatability of these models to other crops and regions.
The chapter have failed to take a view on resisting the imminent threat of WTO treaty on farm products. Despite the advice and media campaigns by India’s bourgeoisie experts, the new BJP Government of Prime Minister Modi have so far refrained from signing the WTO treaty on farm products, which would have opened the flood-gates of cheap farm exports from OECD countries, supported and subsidized by their well organized R&D and technology inputs provided at the national level. (5)
5. Urban development and the transport sector
Somik Lall and Tara Vishwanth who have authored the chapter on Managing Urbanization are experts from the World Bank, who have studied extensively the urbanization problems of third world countries. This chapter has made a realistic assessment of urban development in the country and examines the present situation, based on the performance of the $24 billion Jawaharlal Nehru National Urban Renewal Mission (JNNURM), launched in 2005.
JNNURM, with massive inputs from multilateral agencies and touted as the panacea for our urban development problem, is now facing a serious crisis according to these World Bank experts: “The lack of municipal capacity, allowing only a minimal role for local bodies in preparing city development plans or detailed project reports, was noted” by the latest appraisal report in May 2011 (6). There is an urgent need of large capacity building and augmenting of manpower resources at various levels in order to overcome these problems..
Obviously this could not be done because of the overriding conditions on cutting down the size of Government and reducing staff strength and staff expenses by state governments. Most of the JNNURM investments like its KSRTC experiment in Kerala have failed to achieve their basic objectives. JNNURM assuming the responsibility of centralized bus purchases and similar reforms make little sense. Authors suggest more detailed studies on the failures of JNNURM in achieving its declared objectives. The basic problem appears to be the absence of appropriate state level organizations to work with the JNNURM of Central Government.. .
Lopsided policies in the transport sector, have further worsened the slum situation in towns and cities. Rajiv Lall, noted columnist in business journals and Ritu Anand who was the Chief Economist of IDFC have written the chapter on Modernizing of Transport Infrastructure. It argues for the speedy expansion of National Highways and Indian Railways through the PPP route with little or no involvement of lower level governments. Experiments with the PPP route were a failure all over the world and India is no different. Contractual and regulation problems faced by the PPP route in the country are discussed in some detail in this chapter and it appears there are too many of them for which there are no easy solutions. Roads other than NH, waterways, coastal shipping, ports and shipping are outside the scope of this chapter.
6. Crisis in the manufacturing sector
Chapter-4, titled Revisiting Manufacturing Policy is authored by Rajiv Kumar, well known Indian economist and author of several books on Indian economy: It has not attempted any sector-wise or sub-sector wise analysis of the totally disappointing performance of India’s manufacturing industries, under the quarter century old reforms. To quote from its opening page:”With a gross value addition of $226 billion, India’s manufacturing sector looks tiny when compared with China’s at $1.9 trillion. Consequently, its share of global manufacturing is a mere 2.2 percent, compared with China’s 18.9 percent. Employment in absolute terms has declined in the formal manufacturing sector from 55 million in 2004-05 (12.2 percent of India’s total workforce) to 50 million in 2010 (10.5 percent). Share of manufactured exports in India’s total exports has also declined from 74 percent in 1991 to about 61 percent in 2011-12.”
This is not surprising: Reforms had removed, at one stroke, all quantitative restrictions on the import of industrial goods and technology: Instead, a calibrated tariff regime was put in place, aimed at, (a) liberal import of technology and capital goods at very low customs duty, (b) easy import of intermediate goods and components at fairly low tariff and, (c) discouraging import of consumer goods and consumer durables, by enforcing very stiff import duties. This sort of import regime was desired by our big capitalists and their associations and it was progressively implemented during the nineties.(7)
Impact of this calibrated liberalization on Indian industry has not been fully studied yet, as revealed by Rajiv’s article. Public Sector Units like BHEL, SAIL, MAMC, HEC, HMT, ITI, BEL, Shipyards and others serving the capital goods sector were the first hit by the new regime. Highly skilled employees were offered VRS or simply retrenched. Reforms blocked or delayed their expansion-diversification schemes. Tens of thousands of small and medium entrepreneurs who had built the capability to serve the capital goods industry sector closed shops.
R&D institutions like the CSIR, ICAR, ICMR and others which were already underutilized due to their foot-lose relationship with agricultural, health, defense and infrastructure sectors were pushed into irrelevance. The budding electronics manufacture was simply wiped out. Industries manufacturing consumer goods and consumer durables having technology collaboration with leading foreign companies had a big boost initially but, collapsed as their principals decided to push their own brands and products in the vast Indian market.
Reasons for the crisis in manufacturing industry are far more basic and fundamental and the measures suggested by Rajiv Kumar, such as diluting labor laws, improving administrative efficiency etc are unlikely to bring any results. Screw driver technology has virtually taken over several sectors of Indian industry, and that is why India does not have a healthy automobile industry, even though its roads are flooded with cars and bikes of all makes and brands.
China presents a different picture because, its industry was encouraged to serve the national economy and develop itself by serving the domestic needs of modernizing its own agriculture and basic infrastructure like electric power, railways, shipping, telecoms etc including national defense and security. The so called investment and export led growth, forced on our country by global advisors and blindly practiced by it for the last quarter century, has proved to be disastrous and destructive for Indian manufacture. Instead of telling this real story, Rajiv Kumar goes round and round repeating the need for developing a vibrant manufacturing industry for the country!
7. Health education and employment
India presents a confusing picture on the health front. True, the best and world’s most expensive health care is available in India provided one has the purchasing power. In Chapter 7, Confronting Health Challenges, AK Shiva Kumar makes some international comparisons between India and other countries, including SARC countries: “We find that health outcomes in India are far from equitable. Differences in morbidity, mortality, and nutritional status linked to differences in socioeconomic status caste, class, gender, and geography persist ….. It is a little-known and sad fact that health conditions in India are similar in some respects, and even worse in others, to those prevailing in sub-Saharan Africa….Close to 43 percent of children under five in India are moderately or severely underweight; the proportion sub-Saharan Africa is 21 percent…India’s health performance is particularly disappointing because it has fallen behind Bangladesh and Nepal on many health indicators, despite a higher per capita income and two decades of rapid economic growth.” (8)
It is clear that building super specialty hospitals with five star facilities in the corporate sector is not the solution to overcome this backwardness: Their contribution to improving public health care is marginal and consume bulk of the critical resources by way of expertise and manpower. Moving towards a system of universal health care is the only solution and Shiva Kumar points out that; “Almost every country in the world that has achieved universal health coverage or is working toward it has done so through the public assurance of comprehensive quality public health care for all. Though treatment is nearly free in India, only 22 percent of the population in rural areas and 19 percent in urban areas access government facilities for outpatient care.” (9)
Improving the quality of public health-care system and winning over the confidence of people is seen as a near term possibility by Shiva Kumar: He pleads for an attitudinal or cultural change as the first step for moving toward a system of universal health coverage: “Indian society, including both the central and state governments as well as the influential middle class, should more firmly embrace the concept of universal health coverage.” (10). The influential middle class as well as the English speaking intellectuals may not get enthused by such counsellings: However, he has put forward valuable suggestions for a joint initiative of Central and State Governments for building up a credible public health care system for the country, that need serious consideration by the working class movement as well.
Lavish Bhandari who has done extensive work on inequality and socio-economic performance at the level of states, districts and cities of India is not a specialist in education by theory or practice. He leads “Indicus Anlytics, India’s economics research firm” and has Phd from Boston University in economics.
After a detailed review of India’s educational system as it emerged after independence, he concludes Chapter 6 titled, “expanding education and skills”, with a totally pessimistic note: “The absence of an overall vision is the primary flaw of the education regime in India today….At the primary and upper primary levels, improved quality can best be achieved though greater community participation and parental involvement in overseeing delivery and content. At the secondary and tertiary levels also he suggests fundamental revolutionary changes and believes that it could be done through action by the central government, and none requires any changes in the laws” (11).
This is a simplistic approach, considering the cultural and linguistic diversity of India. Central Board for Secondary Education (CBSE) in Delhi, directly administered by Central Government, was responsible for the policy distortions that have accumulated in India’s education system, during the past few decades: English speaking elite classes have used CBSE for the virtual shift-over to English medium special schools from the traditional system of neighborhood schools. This was a silent counter revolution that has simply redefined education in our country as a passport for migration in search of foreign jobs. Takeover of university and professional education by the corporate sector with the help of the English speaking intelligentsia was the next logical step. Brain drain and skill drain have increased; a major impediment to economic progress. (12).
Chapter 5 by Omkar Goswamy is on job losses in the national economy and the future manpower requirements for supporting specified GDP growth rates. He is a manpower consultant operating from Delhi, and Chairman of CERG Advisory, a corporate consulting firm.
Goswamy’s comments on the so called labor market flexibility in the Indian context is rather interesting: “Despite the existence that prevent unfettered entry and exit of labor in the organized sector, the fact of the matter is that India has a reasonable labor market flexibility. For one, the vast unorganized sector, which account for more than 90 percent of India’s 470 million workers or there abouts, has absolutely no entry or exit barriers Moreover, the legal right that allegedly prevent extra hiring in the organized sector such as sections 25(N) and 25(O) of the ID Act 1947 or provisions of the Contract Labor Act 1970-are often overstated.” (13)
In the projections for future employment scenario in the country, no shift whatsoever, from unorganized sector to organized sector seems to take place. And, Goswamy even concludes that if the average growth rate hovers around 4.5 to 5.0 percent per annum, India will never generate a demand for labor even vaguely in line with its future supply. Tables, he had created and presented, illustrate that the additional job creation needed by Indian economy for a 7 to 7.5 percent GDP growth will be only an insignificant fraction of the total workforce. (14)
It means, around 90 percent of Indian workforce will continue to work in the unorganized sector as of now and there is little scope of reversing this ratio and getting on par with the developed countries even by 2040. This raises the most fundamental question: how, from where and for whom Indian reforms should begin?
8. Rule of law and quality of governance
Chapter 14 and Chapter 15 are attempts to evaluate the status of rule of law in the country and the quality of governance by Indian state: The first one titled “Strengthening Rule of Law”, was jointly authored by Devesh Kapur a Chemical Engineer from Banaras Hindu University tuned expert on Indian diaspora and Milan Vaishnav, an associate in the South Asia Program at the Carnegie Endowment. The next one, Correcting the Administrative Deficit, is by Bibek Debroy, Professor at the Center for Policy Research New Delhi and co-editor of the book under review.
The chapter on rule of law points out the numerous basic deficiencies in India’s legal system, starting with its antique statutes and ending with lack of autonomy and accountability. Indian courts hardly follow modern management systems and according to the authors, “the clogged, dilapidated plumbing of Indian courts has led to multiple efforts to create alternative systems”. India with 1225 police officers per million population is one of the least policed country in the world. They take note of the cultural gap between a tiny, very selective Indian Police Service (IPS) and a large, ill-trained constabulary under the state governments and stress the urgent need for organizational and structural changes.
The chapter on administrative deficit has repeated the need for decentralization and transforming of India’s highly centralized administration into a federal entity, expressed in most other chapters of the book, barring the one on education, where it was needed most. Debroy argues that, unwarranted decision-making has concentrated in New Delhi, leading to widespread corruption and scams, and this can be brought down only through decentralization of the administration. According to him, neither the attraction of big pay scales nor the threats by way of vigilance inquiries have discouraged the corrupt bureaucrats and ministers. The need for central authority is conceded but it appears that India is excessively centralized even compared with China.
Debroy argues that consultations at the time of national planning or inter-ministerial meeting etc are no substitute for “decentralized governance which consists of political decentralization, administrative decentralization, fiscal decentralization and economic decentralization. Decentralized governance could also extend to the efficient provision of goods and services and optimal levels of governance …… Decentralization also implies the devolution of authority within individual states and the empowerment of the third, more local tier of governance ; we will focus on central-state relations.”. (15)
Debroy had concluded that management of central-state relations should be one of the most important agenda items for the new government. Toward the end of the chapter, he recalls briefly the outcome of past debates on central-state relations and argues that these could be the long term goals because implementing them may call for constitutional amendments (16). Thus, after building up a fierce argument in support of decentralization and federalism, he settles down for a fairer deal by the current finance commission.
9. In conclusion
Not only Debroy but also most other chapter writers have pleaded for decentralizing of administration and or reorganization of the Indian state on federal lines. Central Government had amassed too much of unwarranted power during the early years of planning, as explained by Debroy.
JP movement of the seventies had challenged this trend, demanding a harmonious blend of jana-sakti and raj-sakti. Left had looked at India as a multinational country: A federal Government at the Center, decentralized administration and more autonomy for State Governments were the core part of their political ideology. Federalism was the very backbone of regional parties. Rajiv Gandhi had even amended Indian constitution for creating a three tier Panchayati raj, which could not take off. BJP has explicitly admitted in its latest election manifesto, the urgent need for revamping of central-state relations: It has, now, topped up this with a promise of cooperative federalism in the Presidential speech (17).
However, there are the vested interests, who are scared of upsetting the apple cart: The big business in India, supported by global finance and large sections of our intellectual classes, especially the English speaking intelligentsia, who are quite comfortable with most of the powers, financial, economic and political, concentrated around Delhi and the national parliament.
The book, Getting Back On Track, hardly gives any direction for the modernization of India’s agriculture, for the development of its industry and infrastructure or building up a system of governance that suits the country of continental dimensions. Its sponsors are the agents of global finance capital, who have chosen Ratan Tata as a collaborator, in order to wean away the people of India from the Gandhi-Nehru tradition of Swaraj and Socialism and a development model based on technological self-reliance. They occupy several important tables in the Yojana Bhavan but would love to have it demolished or demobilized at the earliest.
And fortunately, compared to the years of freedom struggle, Indian working class and their trade unions are far better equipped today, intellectually as well as organizationally: They are sure to see through the book and its contents and use them for advancing their own struggles against the tyranny of global capital.
Notes and references
1. See web site http://www.ciep.fr/sites/default/files/atoms/files/plaquette-ciep-en.pdf
2. This is based on the ‘Report on conditions of work and promotion of livelihood in unorganized sector brought out in 2008, by the National Commission for small enterprises in the unorganized sector’. This report is an eyeopener on the so called Welfare State theories about India. Five Year Plans, Planning Commission and Public Sector Enterprises were meant as instruments for protecting the national economy from neocolonialism and not for building welfare capitalism or socialism. .
3. World Bank Report June 2014 by: Sheoli Pargal and Sudeshna Ghosh Banerjee http://dx.doi.org/10.1596/978-1-4648-0233-1
4. For a detailed analysis of this mismatch, see my article “Indian Agriculture: Search for Patriotic Alternatives”, in Perestroika Glasnost and Socialism, published by Partridge India, 2013
5. Now there is a India-US understanding to defer the issue indefinitely
6. See p-168 of the book under review
7. My article ‘The Public Sector in India’ published in the Marxist of Dec 1988 had pointed out the thrust and direction of India’s public sector investments. They were addressed to the core sector and served as the technology generators of the nation and helped to retain its economic independence in good measure. The reforms instead of further building on this skilled manpower and expertise resorted to its wanton destruction through VRS and closures. Big capitalists had preferred the consumer goods and consumer durable sector with foreign collaboration which were far less risky and enjoyed a highly protected market.
8. See p-123
9. See p-128
10. Page 129
12 See my blog: CBSE for equity and excellence? : https://kvijaya40.wordpress.com/
14. Tables 2and 3 on page-94 of the book
17. Blog: Cooperative federalism of Modi Government https://kvijaya40.wordpress.com/