The Gold Standard | Shooting straight – the Sainath version

Mr. Sainath has written an Op-Ed. in THE HINDU titled, ‘The gang that couldn’t shoot straight’. It is a well-meaning article but that alone is not enough. Ends do not justify means. The article adopts the wrong means to achieve its end of highlighting the importance of tackling inequality, getting economic policy straight and improving(or, shall we say, establishing) accountability in governance.

Some of the comments that the article has elicited are heartening. They have understood the limitations of Mr. Sainath’s arguments.

The ease with which many ‘erudite’ commentators in the country get away with blaming ‘neo-liberal’ economic policies – partially and half-heartedly introduced from the Eighties and accelerated somewhat in the early 1990s – without assigning any empirical facts to back up their case is astounding.

As some of the readers have correctly argued, when the doors of opportunities are thrown open in a hitherto tightly closed economy, those who are endowed with resources- money, good health, access to power, influence, good education – will initially benefit. Then, it is up to the government to use the larger tax revenues from the higher level of economic activity to provide access to opportunities to the people in the lower rungs of the ladder of ‘possibilities’ and prosperity.

If successive Governments in India had been genuinely interested in eliminating poverty, they would not have designed entitlement policies but empowerment policies for the poor.

Second, ‘neo-liberal’ economic policies have never been pursued by the Government of India – no matter who has been in the office. Liberal policies mean that the State does not take sides and, if it does, it takes the side of those who are not naturally empowered. Pre-1991 or post-1991, for the most part, Indian government servants have sought to enrich themselves personally and politically through the process of spreading the government largesse – money or licenses or approvals or exemptions. Their targets have changed. The sectors through which they aggrandize themselves might be different but the approach remains the same. It is the State in cahoots with private interests at the expense of the ‘market’ and that means poor.

Let us define ‘market economy’ (neo-liberal economics) one more time: an economy in which scores of buyers and sellers interacting, determine prices without any one of them being in a position to influence the price.This is liberal economics. A market economy is not one that favours private business interests. India has pursued the latter but let us be clear: business-friendly reforms are not the same as market-friendly reforms. Let us not blame the principle for the practice.

Wherever they have pursued truly liberal economic policies – mostly by accident and in some cases by design – the common lady has prospered. She pays very low for telephone tariffs, she finds a job in the IT-Enabled Industries and in the successful industrial clusters that have come up in some parts of the country.

Where corruption has bred and multiplied, it has been in areas where the government still wields considerable discretionary power. That is a legacy of the 1940s Industrial Planning and not that of the 1990s economic reforms.

Third, where is the honest assessment of the state of the nation, pre-1990s? What was the state of economic development, equity or growth? What were the opportunities for the poor, then?

Fourth, he repeats a gross exaggeration that he first used in a piece in Business Line some time ago. I had blogged on it here. That is plain wrong and yet he persists with it:

The last six budgets have gifted the corporates Rs.21 lakh crore in concessions on just direct corporate income tax, customs and excise duties. In the same period, food subsidies and agriculture have suffered cuts.

This is polemical, provocative and dangerous because the information is plainly incorrect. On the ‘gifts to the corporate sector’, pl. follow the link to my blog post of March 2011. On the ‘cuts’ in subsidies, let facts shine some light on the assertion:

Major subsidies were Rs. 44,480 crores in 2005-06. They rose to Rs. 123, 581 crores in 2008-09. In four years, there was a trebling of ‘major subsidies’.

The quantum of food subsidies was Rs. 9,200.00 crores in 1999-2000. It went up to Rs. 25,746.45 crores in 2004-05 and further to Rs. 58,242.45 crores in 2009-10. (Table 8.18, Economic Survey, p. 212, Economic Survey 2010-11).

(One crore = 10 million).

Let us savour this fact too:

The Ministry of Food and Consumer Affairs publishes monthly data on the offtake of wheat and rice under the public distribution system (PDS). The National Sample Survey (NSS) gives data based on random samples of the amount of PDS wheat and rice that are actually purchased by the households. The gap between the offtake and the amount actually reaching households gives a measure of pilferage or diversion from the target population. Using this method, Khera shows that in 2001-02 18.2 per cent of PDS rice and 67 per cent of PDS wheat was diverted. In other words, over 40 per cent of all grain targeted at the poor missed the poor. Jha and Ramaswamy, using the NSS expenditure survey of 2004-05, report an overall diversion of 55 per cent of the grain meant for the poor. No matter where the exact figure lies between 40 and 55 per cent, the fact of the matter is the leakage that currently takes place is far too high.

Source: Economic Survey 2010-11, Chapter 2, P. 38 (Box. 2.5)

I wrote a piece in MINT recently on how Economics has become a belief-system. Debates on poverty, inequality, economic reforms in India continue to take place in a ‘fact-free’ world populated by beliefs, ideologies aided by misrepresentations and selective presentation of facts.

What India’s opinion-makers are achieving by talking past each other and by playing to the gallery is to achieve neither quality economic growth nor economic equity but perpetuation of poverty.

DISCLAIMER: This is an archived post from the Indian National Interest blogroll. Views expressed are those of the blogger's and do not represent The Takshashila Institution’s view.