Frontline Gist: Issue
August 5, 2016
The myth of Growth
(Related Article: The myth of growth, by C.P. Chadershekhar, page no. 4)
• Liberalization has been riding on the credit bubble and Indian growth has not been an equal growth on all fronts.
• A turn towards neo-liberalism with the end of license raj i.e. 1991 when India faced financial crisis, India had no other options other than accepting IMF conditions.
Yardstick used by advocates to proclaim success of reforms:
• Economic growth: Rise in GDP, growth rate, PPP
• Increase in FDI’s
• Increased standard of living
• Emergence of neo-middle class
• High expenditure limits
• Increased incomes in various sectors
• Rise of India as hub of service sector
• Rise in poverty, deprivation, inequalities at all spheres.
• It implicitly assumes that industry will be lading sector in growth process.
• There will be shift away from inward oriented nature of economic activity in the interventionist years to a more outward oriented regime.
• India’s manufacturing sector in GDP share falls short of its counterparts like China, Indonesia.
• India has also failed to increase export share & commodity diversification.
• The exposure of banking system to global scenarios has created bubble like situations.
Impact of reforms on politics:
(Related Article: Dangerous brew, by Venkitesh Ramakrishnan, page no. 9)
• The sociopolitical concoction of few parties has brewed with fundamental extremism and corporate control of the political process has crippling effect on the country.
• The conflict has risen between the globalised politics and the welfare conceptions of state wherin the rights o0f vulnerable sections like ethnic minorities, tribal’s are ignored for the interest of corporate class.
• The biggest and most notable political economy manifestation of 25 years of LPG has been the ousting of state from the position of the primary player in socio economic development.
Impact of reforms on manufacturing:
(Related Article: Malfunctioning Hub, by V. Sridhar, page no. 13)
Liberalization wave rested on three key aspects of policy to take India to brave new world
a) Commitment to reduce tariffs on a whole range of manufactured goods.
b) Aspect of policy regime that had a bearing on manufacturing concerned FDI. It was argued that FDI in manufacturing would enable Indian companies to attain global standards of efficiency, access technologies & reach markets that had hitherto been inaccessible.
c) Aspect of finance. It was argued that state run banks, which had been in development finance made for long were no longer the main option for companies. Large industrial houses lapped.
Role of manufacturing & issues:
• Sectors value as “engine of growth.”
• To absorb excess workforce
• The fact that agriculture has languished or that the services sector accounts for a significant portion it does not address the key issue.
• The services sector is characterized by low pay & productivity.
• The ability of manufacturing industry to absorb labor has diminished.
• Real wages in manufacturing increased by mere 1.4% per annum between 2005-06 & 2010-11, even through labor productivity.
• The dismantling of tariff walls, domestic production in range of industries has been impacted.
• FDI has been the key pillar of these reforms but most FDI follow scandalous route i.e. tax heavens.
• FDI inflows, however inaccurately captured inspirit by official statistics is industry; manufacturing has received very low investments.
• 60% of FDI in manufacturing was channeled in 4 sectors: pharmaceuticals, automobile, chemicals & metallurgy industry.
a) Growth story of this sector signifies success of reforms
b) Establishment of ECIL & it’s near monopoly powers in India were among measures undertaken by Indian government.
c) Software technology parks, IT parks, virtually tax free status
Impact of reforms on agriculture:
(Related Articles: Reaping Distress, by Jayati Ghosh, page no. 17; Lost Variety, by Kunal Shankar, page no. 22; Price is the rub, by R. Krishnakumar, page no. 26)
• The inability to resolve pressing problems with respect to the production, distribution & availability of food is one important failures of the entire economic reform process.
• In initial sector the reform package did not include any policy specific for agriculture.
• There were 4 important policy areas that had effects on agriculture, many of which were adverse for first decade and had to be addressed in next decade: public expenditure; food management; access to institutional finance; trade liberalization.
• Lifting of restrictions from agricultural import and zero tariffs.
• Agriculture was increasingly exposed to global competition even as protections they had in terms of support prices, input assistance & public extension services were gradually being reduced or withdrawn.
• Indian agriculture faced international competitiveness & its departure grew world price
• Led to peculiar combination of low prices & output volatility for cash crops.
• The biggest increase is apparent in horticulture activity, through production of fruits & vegetables.
• Fall of white gold (cotton) due to high costs with failed crops for multiple years.
• India is the only country that uses hybrid quality cotton seeds and has high input costs but government has gradually withdrawn support.
• Rubber cultivation also face multiple issues
a) Crude oil prices
b) Weakening currencies of rubber exporting countries.
c) Slump in demand for natural rubber
d) Indiscriminate imports of commodity
e) Changing business strategies of tyre comopanies.
f) Govt reduced tariff for imported rubber.
Impact of reforms on employment:
(Related Articles: False Promises, by T.K. Rajalakshmi, page no. 32 & A raw deal, by T.K. Rajlakshmi, page no. 36)
• Shrinking government jobs
• Outsourcing of labor
• Reduced government investments
• Contractual workforce
• After agriculture transport has maximum employment but with advent of private transport public transport is in loss
• Migrant labors
• Shrinking small industries
• Dilution of labor laws in the name of “ease of doing business.”
• New industrial zone including export oriented zones opened employers were not obliged to comply with labor laws
• Employment grew in unorganized sector
• The biggest & most important change took place is in the relation between worker and employer as traders associations have been reduced been to almost negligible.
Impact of reforms on social impact:
(Related Article: Uneven Development, by Seshadri Kumar, page no. 45)
Reckless & unplanned process of liberalization without insufficient oversight by government has led to:
• asymmetric growth
• excessive concentration of industries in few select pockets
• resulting in highly skewed population
• overcrowded cities
• mushrooming of slums
• rise in cost of urban housing to unaffordable levels
• pressure on land
• Serious quality life issues like sanitation, water etc.
Impact of reforms on Human Development:
(Related Article: Growth of inequality, by S. Subramaniam, page no. 53)
• Inequalities in the distribution of consumption expenditure & household wealth have shown a systematic secular increase.
• Main ingredients of subsequent “liberalization” programme ushered in by the government are by now well known: trade liberalization, greater openness to foreign investment, financial deregulation, privatization, public sector disinvestment, marketisation.
• No exact definition of poverty
• Reference year or base year concept of poverty
• The observed calorific intake at the official poverty line keeps decreasing phenomenon known as “calorie drift”.
• Questionable measurement protocols have again played a major role in propagating the view that while economic inequality has increased to an extent in urban areas.
• Relative inequality among society
• Interpersonal & inter group inequality
Impact of reforms on environment:
(Related Article: Paradigm Shift, by S. Gopikrishana Warrier, page no. 56)
• After 1991 the difference between state & private entity diminished & it became difficult for citizens to pit their moral entity against amorphous entity.
• New way to protest was formulated in India copying Western counterparts like signature campaigns, media orientations, PIL etc.
• Growth of middle class with thought of consumer as a king. This brought middle class into act earlier where capitalists and rural peasents existed.
• Environmentalism became a profession
Impact of reforms on judiciary:
(Related Article: Justice for all?, by V. Venkatesan, page no. 61)
• Shift from legal to socio-economic issues.
• SC has only reinforced the opinion of poor litigants who have no means of advancing the listing date by making huge deposits.
• Justice delivery systems & perspectives gained new dimensions.
• In 2003, SC held that government employees have no fundamental right to go on strike.
• SC has also given verdict against contractual laborers which gave view that in era of globalization the courts are no longer sympathetic to plight of industrial and unorganized workers.
• View of SC & other judicial bodies have been favor of neo liberal projections.
Impact of reforms on media:
(Related Article: All in the name of news, by Sashi Kumar, page no. 64)
• Increasing strata of private channels
• In the transformation ‘public opinion’ shifts from rational consensus emerging from debate, discussion & reflection to manufactured opinion of polls or media experts.
• Manufactured public opinion
• Rampant growth of media monopolies.
• No option of small & medium players as entrepreneurship is restricted only to internet
• Greater & greater private media means that they are alienated from public interest.
• Paid news & political inclination
Impact of reforms on Public Health:
(Related Article: Medicine market, by R. Ramachandran, page no. 145)
• Effect of health reforms has been both direct in terms of declining public investment in health care infrastructure & medical education following WTO trade regimes.
• In era of globalization era of WHO died, World Bank emerged as major player.
• Increasing share of private sector
• Rolling back of government’s role in health governance & passing on responsibility to local communities, NGO’s
• Absence of PHC’s & SHC’s resulting in near total abandonment of primary health care in rural areas, increasing urban-rural divide.
• Out of pocket expenditure
• Clear indication in new policies of moving away from publicly funded healthcare to a system in which private player would provide health services and government would be a manager.
Impact of reforms on foreign policy:
(Related Article: Lost moorings, by John Cherian, page no. 150)
• Shift from policy towards USA
• Frmation of policies like “Look West” & “Look East”.
• Downfall of NAM
• Relations with Palestine on decline and open acceptance of partnership with Israel.
• Emerging of USA, France, Israel etc as major defence partners rather than Russia.
• Ups and downs with China, Pakistan
• Reduction of importance to relationship with Africa.
• Rise of groupings like BRICS, BIMSTEC etc
• Succumbing to vote in favor of west in voting against SL, Iran etc.