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Good economics, good politics

By Mihir Shah

Public investment with employment potential can set in motion a cycle of growth that will also provide the bedrock for industrial development.

CYNICAL INTERPRETERS of Verdict 2004 believe that good economics makes for bad politics. Economic reforms, it is said, do not make a party popular. The reformer politicians have all lost. But perhaps we need to question the priorities of these privatisation-obsessed reforms. What the electorate has decisively rejected is a reform agenda undertaken as if the vast majority of Indians do not matter. The hungry and marginalised have spoken in decisive terms — India, they say, is not shining.

More than 80 per cent of Indians earn less than two dollars a day. Nearly 200 million people still do not have access to safe drinking water and more than 700 million people lack proper sanitation facilities. India has the highest percentage of anaemic pregnant women in the world. According to the FAO, the number of hungry people in India increased by 19 million between 1997 and 2001. Nearly half our children remain chronically malnourished.

What is the daily-lived experience of people in this Other India? The long and painful walk to collect drinking water, absence of even the most basic medical facilities, the endless wait for the ration shop to open, inaccessibility of government programmes to the deserving but powerless, awesome fear of a repressive state machinery and absolute lack of hope of getting justice from a corrupt legal system. The list is endless. How else do you expect these people to vote but for change?

The direction and scope of reforms must be decisively redefined to centrally address these issues. Indeed, such reforms would be both good economics and good politics. This agenda should begin with reform of rural governance. A concerted effort has to be made to end corruption that becomes more pervasive by the day. Corruption hurts the poor and powerless the most. For it destroys their last chance to redress the inequities they already suffer. Corrupt bureaucrats have not updated land titles in thousands of Adivasi villages for generations. This deprives farmers of access to electricity, bank loans and government welfare schemes.

The delivery systems of government, be they primary health centres or schools are all virtually non-functional, especially in the backward States of north India. The Public Distribution System has been decimated through hamhanded attempts at targeting and remains a hotbed of corruption. The great desire of policy makers, most welcome in itself, to liberalise procedures and make them transparent and accountable for corporate India, must be extended urgently to the rural poor.

How can our reformers forget that the Asian Tiger countries they so admire took care of their rural areas first? That their subsequent high rates of growth owed in no small measure to prior massive state investments in human resource development? Why then is India's government expenditure on education and health still among the lowest in the world? Should economic reforms mean more or less public investment in these vital sectors?

A new agenda for economic reforms in India must also correct the long-standing neglect of agriculture. Probably the single most important, yet underemphasised, macroeconomic statistic of the Indian economy is that although the contribution of agriculture to national income has fallen from 54 per cent in 1951 to 25 per cent today, nearly two-thirds of the workforce still remains dependent on it, a figure that has hardly changed over the last 30 years. Every attempt needs to be made to address this anomaly. Agricultural productivity has to be raised, especially in the drylands, if the economy is to achieve impressive rates of growth. Minimum support price operations also need to be greatly diversified to include regions and to favour crops that have suffered historical neglect — regions inhabited by and crops grown and eaten by the poorest people in India.

The fall in the rate of growth of Indian agriculture in the 1990s to its lowest level since Independence was fuelled by a fall in public investment. Policy makers continue to overlook the close complementarity between public and private investment. In our own work spread over half a million acres across 50 districts of Madhya Pradesh, Chhattisgarh, Jharkhand, Bihar and Rajasthan, we have shown that even the smallest increment in public investment in local water conservation, leads to a dramatic rise in agricultural productivity and employment. What is more, it catalyses successive rounds of private investment by farmers, once they are freed from the endless cycle of debt.

Policy-makers have failed to recognise that a vast majority of agricultural labourers in India are poor and marginal farmers, the productivity of whose land has been so degraded that it is no longer able to support their families. Our work has made it possible for these farmers to return to their land, whose fertility has been restored through a carefully worked out strategy of dryland bio-farming. Such public investment, with massive employment potential, can set into motion a virtuous cycle of growth that would also provide the necessary bedrock for industrial development and ensure a sustained upward curve for the Indian economy.

(The writer leads Samaj Pragati Sahayog, a non-government initiative for water and food security in India' tribal drylands.)

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