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"Jobs can offset the disadvantages of caste"

Martin Rama, Chief Economist of World Bank for South Asia region, interacts with The Hindu in New Delhi on Tuesday. Photo: Prashant Nakwe

Martin Rama, Chief Economist of World Bank for South Asia region, interacts with The Hindu in New Delhi on Tuesday. Photo: Prashant Nakwe   | Photo Credit: Prashant Nakwe

Before the launch of a key World Bank report on inequality in South Asia, Martin Rama, the World Bank’s Chief Economist for the South Asia region, spoke exclusively to The Hindu.

The report finds that through jobs and urbanisation, substantial, even US-levels of social mobility exist in India. Is this something that public discourse usually acknowledges?

As a fascinated observer of India, I found some of it in the literature, and through stories. I have not seen much of it in economic analysis and economic discourse. And I think it is an important distinction because the same level of inequality has very different implications depending on whether there is mobility over time or not. A high level of inequality may be tolerable if you are not stuck forever where you are born, while a relatively low level of inequality may be a problem if you are where your parents were.

I think the recognition of mobility is also important from a policy perspective. When we look at it more closely, we see it is very much associated with jobs and urbanisation. When we have been talking about inequality, what immediately comes to mind, and is important, is education, health, social problems. Looking at mobility gives us a broader perspective about bigger things that can upset these advantages. Even if you didn’t have good education, even if you didn’t have the best in terms of health because of where you were born and who you were parents were, skilled jobs give you an avenue.

So just as there is the popular notion of the American dream, the numbers seem to indicate that there is an Indian dream too, where social mobility between generations or even within one generation is possible.

We were impressed by the comparison between India and Bangaldesh, two countries where we could conduct this survey, and the United States and Vietnam, which we chose as two countries that are seen in some ways as lands of opportunity, and with two very different models – one is a communist country, one is a purely capitalist country. So in that respect, the levels of social mobility in India is very encouraging.

But there are also nuances; while the rates of moving out of poverty across the four countries is strictly comparable, in terms of moving into the middle class, the United States and Vietnam still do better, and the risk of falling into or falling back into poverty is also substantially higher in South Asia. That raises the question – what kinds of jobs will increase this resilience, that you get out of poverty, and get out of poverty for good.

Additionally, the report finds that social mobility was greater for backward castes.

When we looked at the role of caste and tribe, first is in terms of opportunity – whether being from a backward caste or tribe matters for your access to education and health. The answer is yes, but it’s not the only factor – gender matters a lot, whether you’re rural or urban matters a lot, the education of your parents matters a lot. So it’s not the only factor. But certainly if you look at opportunity, these people are at a disadvantage.

Then when we look at mobility part, the news is mixed but generally positive. We look at mobility in two ways; one is your occupation compared to the occupation of your father, and the other is your consumption over time. On occupation, in a mobile society, it should be uncorrelated; what you are is not determined by who your father was. And for younger generations in India, that is increasingly true. For older generations, people from lower castes and tribes, tended to have lower mobility than other groups; in recent years they have slightly more mobility than other groups, and that is encouraging news.

On the consumption side, they have slightly less mobility than other groups, but still substantial mobility. This is not to say that jobs fully trump caste, but it is one of the few things that can really upset disadvantages. Skilled jobs are an opportunity to offset the disadvantages of caste and tribe.

Given the centrality of jobs and urbanisation to mobility, what can India do better?

We see that mobility is higher in urban areas, so we look at which kind of jobs it is associated with. What we find is that the jobs that seem to take people into the middle class are salaried jobs and not casual employment. And then, jobs are created by the private sector, but ultimately cities create jobs. Cities that have vibrant private sectors are on top. We see very strong connections between patterns of urbanisation and the types of jobs.

On urbanisation, we see that there is no rural/ urban divide; there is a rural urban gradation. The structure of jobs changes with that gradation. Certain jobs like farming start disappearing at 5,000 people, but wage employment only picks up at 100,000 people. So you have this transition in a way in India that is not necessarily as it is in other places. In other places, people migrate to cities. In India, cities migrate to you; places become more densified, start changing, now there’s a market, now there’s a road. In that transition, through the gradation, the structure of jobs changes in ways that have many implications. So we think that at a time when India is talking about 100 smart cities, that is a very important discussion.

You’ve talked of the problems with redistributive measures, especially subsidies. Given that India is re-evaluating its food, fertiliser and fuel subsidies, what is your message on what works?

On the big picture, there is an approach to inequality that one could summarise as tax and redistribution. Much of the debate in industrialised countries goes in that direction – tax the 1 per cent and give to the others.

When you look at developing countries, that approach has many difficulties to be implemented and may end up in some ways creating more problems than it solves. One of the things that characterises South Asia is low tax revenue and that’s not because taxes are structured differently – it’s because there is a lot of evasion, a lot of avoidance.

And then a lot of the tax revenue goes into subsidies. Based on our findings, you would think education, health, urbanisation should be the priorities, but a lot goes into subsidies. So the first point in want to make is the tax and redistribute approach to inequality is a partial solution.

The second point I want to make is South Asia has remarkable social protection programmes – one should not throw the baby out with the bath water. If I think of the secondary school stipend programme of Bangladesh, it has been a precursor of things that now Latin America – where I am from – claims to have invented, but it was invented by South Asia. So there are very good programmes in South Asia and India.

But the issue is that in the name of inequality or poverty alleviation, some subsidies are regressive by design. So if you think of the electricity subsidy and think that 30 per cent of people are not connected to the grid, then you know for sure that poor people will not be benefitting from it. Or, there are leakages. Again this doesn’t mean that subsidies should be abolished – they should be well-targeted, they should be structured with Aadhaar cards or other mechanisms that can minimise leakage. But the >report certainly calls for a hard look at these issues.

Like the Bangladesh stipend, the report also looks at India’s rural employment guarantee scheme. Given that this scheme too is being re-evaluated, what do you think needs reform?

The questions about NREGA [that it does not create assets, that it leads to labour shortages] are valid, but at the same time it has worked as an insurance mechanism for poor households. When the drought happened in 2009, distress land sale was much less than in other droughts. Certainly, it’s a programme of a scale and design that really makes it a good programme in principle with issues in implementation. My sense is that the implementation has improved, but also it has some way to go.

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