Economic & Political Weekly, book review on "Growth, Inequality and Social Development in India: Is Inclusive Growth Possible?", edited by R. Nagaraj.

At a time when establishing the highest possible growth rate is seen as the key to eliminating poverty and bringing about rapid and cumulative improvements in social development, this book edited by R Nagaraj, with chapter contributions by other scholars, stands out as an important corrective to this dominant and misleading discourse. It is not often that edited books have an overall coherence. This one does, even as there is a certain division of labour in this collective effort. Together, the authors offer a historical overview of why India, despite having had positive annual growth rates over the last 65 years, has performed so badly comparatively and absolutely when it comes to social development, as measured by standard indicators of health, education, inequalities, steady wages and other forms of social security and protection.

Over the course of three policy regimes (whose rough periodisation is common to all the contributors) – 1950-65, 1966-80, 1980 onwards – there has been some variation in the rate at which poverty declined. At the same time, the performance of different states varies considerably across geographies. But these variations tend to rebut rather than confirm the neo-liberal claim that high growth rates in gross domestic product (GDP) are the most vital element for bringing about rapid poverty decline and general social development. The latest version of this mantra is not so much “trickle-down theory”, as the view that high growth rates greatly enhance state coffers, thereby enabling greater social welfare spending.

Even though social sector spending by the centre and state governments more than doubled from Rs 1,41,740 crore in 2002-03 to Rs 2,94,312 crore in 2007-08, this figure was lower than either Brazil, Russia or China or other BRIC members. As is well known, Indian expenditure on education and health as a percentage of GDP is way down on the global rankings. What is more, the quantitative emphasis on the growth outcomes from state funds serves to divert attention from the quantitative and qualitative aspects of the neo-liberal growth processes themselves, whether rising inequalities of all kinds or growing privatisation of welfare provision.

Empirically Rich

The first five chapters are empirically rich descriptive-analytical pieces about the Indian situation, the thrust and impact of the three policy regimes and what should be done to reduce inequalities and generate social development. The last two chapters by Vivek Chibber and Atul Kohli are theoretical-analytical pieces seeking to explain more fundamental reasons for the Indian state’s failure. In a reversal of the book’s layout, the review starts with the last two chapters.

Chibber’s central argument is lucid and persuasive. Operating in a capitalist setting, the Indian state must prioritise the interests and profitable investment of private asset owners (rural and urban), thereby enabling the capitalist economy to continuously grow and provide the steady flow of taxes for the state to financially reproduce itself and maintain or expand its functions. There is and has to be a structural bias reflected in state policies. Moreover, these dominant classes are also relatively stronger and more organised than other social layers below them and lobby the government more effectively. Social welfare policies for the masses of poor are a secondary matter and influenced by the prevailing ideology held by state managers, which changes and adapts depending on the “social balance of forces” internally and externally in a given conjuncture. “India was never not pro-rich”, says Chibber (p 185). He reminds us that even in the Nehruvian years of statism or state capitalism (decked up as socialism), the public sector was always kept in bounds acceptable to business houses with “every major body set up to design policy and new state institutions…dominated by business leaders” (p 174).

In the organised sector, the tripartite system of industrial relations, with government arbitration of disputes, worked against collective bargaining and meant inordinate delays in arriving at settlements. This favoured employers with greater capacities to wait out conflicts with labour. Limited land reforms created a new layer of rich peasants. Agrarian policy sought to raise supply rather than wage demands for basic consumption goods. In the 1970s, the Indira Gandhi years saw some positive anti-poverty schemes like the public distribution system (PDS) and Integrated Rural Development Programme (IRDP), and bank nationalisations with credit expansion to smaller capitals. The reasons could be traced to the break-up of the Congress and growing inter-elite competition, rather than great popular pressure. But Indira Gandhi’s last years, and the Rajiv Gandhi era, witnessed the beginnings of the liberalisation programme. The groundwork for the 1991 reforms were laid down by the rise of new business houses more keen on liberalisation, largely coalescing around the Confederation of Indian Industry (CII) to counter Federation of Indian Chambers of Commerce and Industry (FICCI), which was controlled by the older established big business houses.

Kohli’s chapter complements Chibber’s. Yes, the social character of the Indian state is the main reason for the policy priorities set or ignored by it. But Indian democracy has at times and in places provided a partial counterweight. Kohli suggests that where

effective governmental power rests on a broad political base...rulers have minimised the hold of upper classes on the state, successfully organised the middle and lower strata into an effective power bloc and then used this power to channel resources to the poor (p 211).

So thanks to the anti-brahmin movements, southern state governments have had a broader base and have performed better at poverty alleviation. The other key factor in preventing better welfare service delivery, according to Kohli, is that the lower bureaucracy is much less professional than the upper echelons and all too often subordinated to local power elites. The panchayati raj institutions (PRIs), with exceptions, have not performed well. But since state governments are closer and more receptive to pressures from below than a centre that is in hock to corporate interests, the growing regionalisation of the Indian polity may improve matters.

Poverty Trends

Nagaraj, in his two chapters, points out that though poverty levels have declined, nutrition levels remain poor, especially for women and children; per capita intakes have not improved. Germane to this finding, though not mentioned in the book, is that everywhere in the world, a rise in per capita incomes is associated with a rise in per capita calorie intakes. The Indian anomaly has been argued away by neo-liberal devotees as reflecting better protein-based diets and health. In fact, Nagaraj is clearly right to explain these trends by reference to the terrible state of public health with poor sanitation and lack of access to decent drinking water.

After the mid-20th century discovery of antibiotics, India went in for an elitist curative approach, not the preventive and hygiene route partly, as V Shanker and M Shah point out in their chapter on “Rethinking Reform”, because of upper caste contempt for those below. Shankar and Shah point out that government data on expanding water availability via handpump installations and extended piping is deeply misleading because it ignores the issue of water quality. Nearly 20% of existing toilets are non-functioning and practices of waste disposal and management in so many villages are absent or abysmal.

As Gita Sen and D Rajasekhar state in their contribution on “Social Protection Policies, Experiences and Challenges”, today over 80% of all healthcare is provided privately, 75% of hospital beds and 70% of hospitals are urban-based, but 40% of all hospitalised treatment is in public hospitals since the poorest strata depend on this. Leaving aside matters of how well-stocked the Primary Health Centres (PHCs) are in terms of medicines and personnel, their numbers are far from adequate. In Kerala, there is one PHC for two villages, in Tamil Nadu (TN) one for 14 villages, in Madhya Pradesh (MP) one for 48, in Odisha, one for 73 and Jharkhand one for 99 villages. Yet the dominant trend today is for further privatisation in public health provisioning. Government plans for a universal health insurance scheme initiated in 2004 ignore the need to greatly improve the public health system.

Both Nagaraj, and Shanker and Shah highlight educational inequality as well as the dismal state, quality-wise, of elementary schooling, which is overwhelmingly the responsibility of governments, municipalities and local authorities. Again, is it caste elitism that best explains this historic disregard? Two-thirds of out-of-school children are in Uttar Pradesh (UP), Bihar, MP and West Bengal; 22% of scheduled tribes and scheduled castes, and 20% of Muslim children do not attend. The growing reliance on para-teachers means giving up on quality instruction, while other problems of overcrowding, single teacher schools, lack of space, substandard facilities are well-known to subsist. The suggestion to concentrate reform not on districts, but on the 1,000 (out of the total 3,000) blocks in the country is well taken but surprisingly there is no reference to what other studies have shown – that land reform and educational reform go hand-in-hand because the key lies in breaking existing caste and power relations in the poorest parts of rural India.

These authors refer to important work such as the Dreze-Sen distinction between “growth-led” and “support-led” human development. Applied to examine cross-country and intra-country comparisons, the latter has shown considerable successes in inclusivity when there is low growth, because of equitable distribution of assets and incomes (and therefore of power) and more effective welfare provisioning by governments. The claim that a high GDP growth rate (as distinct from agricultural growth) is the single most important input into poverty reduction and social development, has simply no merit. Faster growing states like Maharashtra and Gujarat do not fare better in social development than slower growing ones like Kerala, West Bengal, TN, or Andhra Pradesh (AP).

The chapter by M H Suryanarayana on “Economic Development and Inequalities” confirms through a wealth of data analysis that in the post-liberalisation period, inequalities of all kinds have grown. In fact, the poorest deciles of the population have seen a decline in their proportional consumption share while the top decile in rural and urban India have seen a rise in their proportionate share of consumption. Family subdivision of plots in rural India has promoted more concentration and greater landlessness. Operational landholdings rose from 51 million in 1960-61 to 101 million in 2002-03, while the average area operated fell from 2.63 hectare to 1.06 hectare. Unsurprisingly, Suryanarayana calls for governmental support to small entrepreneurs and physical regulation to curb concentration of assets.

Policy on Social Evolution

One of the more interesting parallels drawn by Sen and Rajasekhar is between Latin America and India vis-à-vis their policy evolution on social protection through four phases. In Latin America, the first phase focused on organised workers and import substitution. The second in the 1970s saw anti-poverty schemes. The third in the 1980s and 1990s saw neo-liberal cost-cutting and targeting. In the current fourth phase, there is the emergence in certain countries of strong rights-based and universal solidarity approaches to welfare provision. In India, in the 2000s, alongside the neo-liberal thrust, there emerged partial and universal rights-based approaches – right to information (RTI), right to education (RTE), food security legislation and the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

The book does not really take up these recent developments or discuss where they might be heading. But there is the recognition that the Latin American experience of using conditional cash transfers if applied in India will not have as positive an impact. The per capita income is much lower in India and its proportion of the poor is much larger. Some rights-based schemes are meant to be targeted, not universal. Cash transfers are more likely to be used as a substitute rather than as a complement to wider public welfare provision. At the very least, full social protection of all kinds should be extended to all families dependent on the 92% of the workforce in the unorganised sector. Adopting cash transfers and recusing itself further from public provision is the likely direction the Indian state is going to take no matter who its political overseers will be after the next general elections – this reality is not really registered in this study.

Finally, a few of the chapters seem to suggest that one saving grace that can promote social development in the future is the “deepening” of Indian democracy. This is to mistake the durability of a proceduralist system of liberal democracy (which will have some substantive pay-offs) for its deepening. This is a category mistake abetted by the discourse of a “second democratic upsurge” and the more general liberal discourse that despite criticisms, essentially celebrates the “great virtues” of Indian democracy. In fact, the centre of gravity of the polity and society has over the last two decades and more, shifted firmly to the right, making this Indian state more authoritarian and less substantive in its democratic character. Not acknowledging this reality tends to promote the belief that it is still possible to establish a more humane, social democratic version of Indian capitalism. Is it perhaps time to think more radically?

Reviewed by Achin Vanaik (achin.vanaik@gmail.com), who was formerly with the department of political science, Delhi University.

The book review is posted with permission from the review author.