India’s development programme has been hijacked

HAS India’s United Progressive Alliance leadership decided to learn nothing from its unsuccessful past attempts, like in the BHEL disinvestment case, to impose policies on its allies which run counter to its own National Common Minimum Programme?



By Praful Bidwai

Published: Sat 5 Aug 2006, 9:46 AM

Last updated: Sat 4 Apr 2015, 5:35 PM

Going by its now-abandoned recent decision to divest equity in Neyveli Lignite Corporation, and repeated efforts to facilitate the hiring and firing of workers by drastically amending labour laws, the answer would seem to be ‘yes.’ The divestment decision was reversed after the DMK threatened withdrawal from the UPA. But the government is still keen to promote workers’ hiring and firing-through the Special Economic Zones’ backdoor.

And now, Planning Commission Deputy Chairman Montek Singh Ahluwalia is giving the 11th Five-Year Plan a distinctly free-market or neoliberal thrust, which is incompatible with the NCMP. He has revised the Approach Paper to its Plan after a consensus was reached on it in the Commission.

Ahluwalia offered to "polish up" the original text and unethically introduced substantial changes into it. The Paper has thus been robbed of authority and legitimacy. This lapse is serious. The Planning Commission derives its importance from its moral authority, not the Constitution.

Ahluwalia’s blatant spin-doctoring of the Approach Paper has provoked protests from his colleagues in the Commission. Some are "disturbed", in particular, at the smuggling-in of a new section, which "endorses further liberalisation of banking, insurance and pension funds" in other "free market" recommendations too, such as capital account convertibility.

Discontent with the Paper’s new avatar isn’t confined to the Commission’s members. Senior Cabinet ministers Arjun Singh and Mani Shankar Aiyar have sharply criticised it. The Paper received flak from economists, Chief Ministers, state Planning Board members and NGOs in recent consultative meetings held in Mumbai, Delhi, Shillong, Kolkata and Thiruvananthapuram.

Comparison of the Approach Paper with its classified original draft (which this writer has seen) is revealing. Far from "tightening" the original text, Ahluwalia has lengthened it by one-fifth. He has added "Conclusions", a new chapter, which harps on Paper’s "trickle-down" assumptions: "India’s economic fundamentals have improved to the point where we now have the capacity to make a decisive impact on the quality of life of the mass of our people..." The Paper calls for 8.5 per cent growth.

However, India’s experience shows that faster GDP growth does not lead to higher employment or incomes, leave alone a better life for the masses. The latest statistics show that the rate of decline of poverty has recently decreased. Clearly, what’s needed is a change of growth strategy. The Paper bypasses this.

The Paper is entitled "For Faster and More Inclusive Growth." But the obsession is growth, not equity. It denies the reality, noted in the original draft, "that development has not bridged [economic] divides...; it may even have sharpened some of them." It reduces these divides to mere "perceptions", some of them "exaggerated..."

The Paper assumes that India can boost growth by raising investment from 29.1 to 35.1 per cent. These investment rates are much lower than China’s, but they’re supposed to produce Chinese-level GDP growth! This is wishful thinking. The revised Paper is weak on reviving agriculture, India’s highest priority. It targets a doubling of agricultural growth, but has no strategy. The recommendations repeat past approaches, which led to 100,000 farmers’ suicide in a decade.

The Paper is equally weak on strategies to boost industrial growth from 8 to 10 per cent-plus. It doesn’t discuss how barriers to growth such as "absence of world-class infrastructure and shortage of skilled manpower" will be overcome.

The revised version promotes the WTO agenda of the developed countries, by recommending further "reduction of tariffs on non-agricultural products." But India wants to make this conditional upon a reduction in Western farm subsidies.

The original draft says: "A political consensus [should be] built on ...greater flexibility in some of [our] labour laws [and] progressive reduction of long-standing entry barriers in sugar, petroleum refining, fertiliser and drug industry." The revised Paper recommends "greater flexibility" in labour laws as "a key issue". It wants to allow the hiring and firing of workers and employment of contract labour. This will remove elementary protection for workers.

The Paper also says: “de-reservation” of small-scale production has reduced the SSI list "from about 800 to 326. This policy should continue... at an accelerated pace." This runs counter to the NCMP’s pro-SSI promises.

Even more objectionable are the Paper’s recommendations for "an increased role for foreign financial institutions in the domestic market and a ...calibrated opening ...to international capital markets". Capital account convertibility has been rejected by various official committees. The East Asian crisis of the 1990s exposed its risks. Malaysia alone resisted such pressures and came out relatively unscathed.

Similarly, the revised Paper calls for weakening environmental protection by raising a false alarm against "a new licence-permit raj." It also fudges the issue of rehabilitation of those displaced in the name of development.

The revised Paper’s macro-economic assumptions leave tax and public spending ratios unchanged. They fail to transform public enterprises from being net savers to net investors in the infrastructure and services. This conservatism derives from an obsession with the Fiscal Responsibility and Budget Management Act, which imposes artificial constraints on public expenditure.

The Paper’s fatal drawback is its "trickle-down" growth and its failure to focus on employment and improving welfare.

Arjun Singh and Aiyar have raised several pertinent points regarding their portfolios, including access to education, panchayat raj (local government) and skill development, as well as broader issues like agrarian distress, energy security, food distribution, etc. Similar concerns were voiced in the five state-level consultations by a number of Chief Ministers, social scientists and rehabilitation NGOs.

The question now is whether Ahluwalia will take these on board and honestly incorporate them into the Approach Paper —as he should, unless he wants to make a mockery of the planning process. If the 11th Plan is to be owned by all official agencies as a consensual document, Ahluwalia must abandon his unethical ways and radically revise the Paper.

Praful Bidwai is a veteran Indian journalist and commentator. He can be reached at praful@bol.net.in


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