75 years of free India: Where opposites are still true

Inequality has become the defining feature of the Indian economy, but the good news is change is still greatly possible, writes Jayati Ghosh

The brilliant Cambridge economist Joan Robinson visited India several times from the 1960s to the 1980s, and she had this to say: “Whatever you can say about India, the opposite is also true.” As we look at the Indian economy 75 years after Independence, this still rings true.

There are some clear achievements since 1947 — most crucially the rise of a reasonably diversified economy with an industrial base, which was something that had emerged by the 1970s.

From the mid-1990s onwards, the country also witnessed rates of economic growth higher than before, and more than many other parts of the world. Significantly, there was also less extreme volatility like financial crises, although there have been some periods of dramatic income reduction.

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Between the early 1990s and the end of the 2010s, income poverty also came down, but it must be noted that multidimensional measures of poverty remain dire, and we have no official and reliable data on poverty incidence in the decade since then.

The growth process came with some clear failures too.

An important one is the worrying absence of structural change, in terms of the ability to shift the labour force out of low-productivity activities, especially in agriculture, to those with higher yield and better remuneration.

Agriculture continues to account for around half the workforce even though its share of GDP is now less than 15 per cent. In the past decades, the agrarian crisis has hurt the livelihood of cultivators and rural workers, yet the generation of more productive employment outside this sector remains woefully inadequate.

Other major failures, which are reflective of the still poor status of human development in most parts of India, are in many ways related to this fundamental issue.

The persistence of poverty

These include the persistence of widespread poverty, the sluggishness of formal employment, the absence of food security for a majority, the inability to ensure basic needs of housing, sanitation and healthcare, the lack of universal education, the poor quality of school education and the sluggish enlargement of access to education and employment across different social groups and for women in particular.

In addition, there are problems caused by the very pattern of economic growth such as aggravated regional imbalances, greater inequalities in the control over assets and access to incomes, and dispossession and displacement of people from land and livelihood without adequate compensation and rehabilitation. And — now most strikingly evident — the climate change and environmental destruction that has been associated with unthinking pushes for “development”.

Seen in this light, it becomes apparent that a basic feature of the process of economic development thus far has been exclusion: exclusion from control over assets; exclusion from the benefits of economic growth; exclusion from the impact of physical and social infrastructure expansion; exclusion from education and income-generating chances.

This exclusion has been by class, income level, geography, caste, community and/or gender. However, exclusion from these benefits has not meant exclusion from the system – rather, those who are supposedly marginalised have been affected precisely because they have been incorporated into market systems.

We, therefore, have a process of exclusion through incorporation, a process that has actually been typical of capitalist accumulation across the world, especially in its more dynamic phases.

Peasants facing a crisis of viability of cultivation have been integrated into a market system that has made them more reliant on purchased inputs in deregulated markets while becoming more dependent upon volatile output markets in which state protection is completely inadequate. The farmers’ movement was really a rejection of this process and an attempt to prevent its further entrenchment.

Victims of integration

The growing army of “self-employed” workers, who now account for more than half of our workforce, have been excluded from paid employment because of the sheer difficulty in finding jobs, but are nevertheless heavily involved in commercial activity and exposed to market uncertainties in the search for livelihood. Those who have been displaced by developmental projects or other processes, and subsequently have not found adequate livelihood in other activities, are victims of the process of economic integration, though excluded from the benefits.

The lack of adequate productive employment generation may prove to be the most critical failure of all. India was supposed to get a demographic dividend from its youthful population. Instead, we are staring at a ticking time bomb of frustration. Remarkably, these features have persisted through different growth models and policy regimes in the post-Independence period, whether Nehruvian mixed economy or open economy market-based strategies and through varying periods of slow growth, stagnation and rapid growth.

The real problem is that economic growth did not create much employment. If anything, the relationship became even weaker with liberalising reforms.

Exposing the economy to global competition was supposed to favour more labour-intensive activities, but that has not happened. The share of manufacturing in both output and employment has remained stubbornly low. Even in services, now the largest sector, there is a big divide between new, high-value services that employ relatively few people, and the low-productivity work that most service providers are forced to engage in.

The expected formalisation of work and the concentration of workers into large-scale production units has not occurred — rather, there has been widespread persistence of informal employment and an increase in self-employment in non-agricultural activities. Most striking of all is that the period of rapid GDP growth has been marked by low and declining workforce participation rates of women, in a pattern that is unlike almost any other rapidly growing economy in any phase of history over the past two centuries.

All this means that inequality has become the defining feature of the Indian economy.

We have severe inequalities in wealth in many forms, including in incomes, nutrition, housing and access to healthcare and education. These inequalities are determined by class, but also by caste, gender, religion and location. And these have become a potent cause for all the other unfortunate outcomes.

So what of the future? Fortunately, as Joan Robinson said, the opposite is also true. Which means, it is possible to change all this. Despite all attempts at cultural homogenisation and centralised control, India is so complex, contradictory and unpredictable that changes can occur when we do not expect them and from directions we do not look at. There is tremendous creative energy and aspirations that are unlikely to be quashed or diverted beyond a point. That is what can still give us hope.

(The author is a renowned development economist.)