India: Alternatives in Industrialization
by Amit Bhaduri *
A remarkable convergence has taken place among major political parties
in India around the issue of industrialization. The traditional Left is
converging rapidly with the Right, and irrespective of their stated
political colours, and all the major parties in the parliament are
merging into a colourless homogeneous mass, and a common economic
agenda. Isn't it Lenin who had said somewhere that economics is
nothing but concentrated politics. By that criterion, political parties
are now almost identical in their 'concentrated politics',
their differences carefully restricted to political rhetoric to keep
the show going. The result is mind boggling double talk. In so far as
the traditional Left is concerned, first Singur and then Nandigram
drove home the point that the left politicians think the same way as
the 'dream team' of economic policy makers at the centre,
who live constantly on the oxygen provided to them by the World Bank,
the IMF and the Asian Development Bank. The cultural nationalists of
Hindutwa variety become ferociously aware of their culture only when it
comes to Ram Mandir or 'Vande Mataram', but surrender
gladlyly to foreign multinationals. Congress has a remarkably short
memory about the Sikh massacre of 1984. The left parties breathe fire
about the Gujarat massacre of 2002, while BJP covers it up with false
propaganda and manipulation of the State machinery. Then Nandigram
massacre happens in 2007, and Advani compares it with Jallianwalabagh
conveniently forgetting Gujrat, while CPM leaders and its faithful
intellectuals shirk responsibility, calling it an unfortunate incident
that happened accidentally. The killing of 13 tribals in Kalinganagar
in 2006 by the police bears an uncanny parallel. The tribals were
refusing to hand over their land to the same TATAs in Kalinganagar,
just as in Singur the peasants are resisting and in Nandigram they have
resisted. Chronological surveys of field reports in all these cases
make clear that these were premeditated actions by the State
authorities to test the waters, and see how far they can go in pushing
their version of industrialisation. It is even justified by blaming
those who oppose such policies as anti- industry and anti-progress.
And yet, industrialization per se is not the issue; instead the
disagreement is over the answers to three interrelated questions that
lie at the heart of any process of industrialization:
-
Who is the central actor driving the industrialization process?
-
What is the sectoral commodity composition of output produced
by industrial growth?
- And finally, who loses and who wins in this
process?
Briefly, the answers to them define the quality of industrialization.
We have much more control over the quality of industrialization now
than we had in the nineteenth century. There are various ways of
industrializing as we know from the experiences not only of early
capitalism and centralized bureaucratic socialism, but also from
post-socialist and late capitalist attempts. Industrialization as these
experiences have shown is not merely an instrument of economic growth,
but it also has an inbuilt mechanism for distributing the costs and
benefits of growth. The ruling neo-liberal ideology pretends that the
benefits of high growth trickle down automatically to the poor, but
this proposition is not only empirically dubious; it is politically
foolish in a parliamentary democracy, because the speed of trickling
down remains unspecified while the government has to maintain a minimum
degree of legitimacy to win elections. Not surprisingly, the 'shining India' slogan crashed, and some of our most
prominent liberalisers have hardly proved their ability to win an
election!
India's recent high growth accompanying the process of
industrialization answers unambiguously the question as to who is in
charge of this process. It is led by corporations,which are mostly
private.The role that the governments have assigned to themselves
both at the central and at the state level is that of a promoter,
an agent of private corporations, not one of a regulator between big
business and poor people In this context we are repeatedly reminded
that industrialization has its costs, but it is conveniently left
unsaid that the cost must be borne by those who are least capable of
bearing it, the poor and the most marginalized sections of the
population. The rich corporations on the other hand are subsidized
handsomely by the governments in various ways, e.g. in CPM-ruled West
Bengal, for the Singur car project, the estimated subsidy to the
TATAS is over Rs. 850 crores for an investment of Rs. 1000
crores. Similar deals were said to have been made with the two
Ambanis in Dadri, Uttar Pradesh, and in the Mumbai Special Economic
Zone in Raigad, Maharastra respectively. Only when people resisted
In the name of high growth, industrialization works ruthlessly against
the poor majority denying them real political options within the orbits
of our existing parliamentary democracy. A spectre of despair and
popular anger is stalking in all corners of the country. Farmers are
committing suicide in hundreds especially in Andhra, Punjab and
Maharastra, because the government wants to usher in a new type of
commercial agriculture under WTO with expensive inputs supplied by
multinationals. In Jharkhand in the name of fighting extremism, tribals
are being evacuated forcibly in thousands from their villages under
Salva Judum to be huddled in Vietnam-style concentration camps, while
the corporations eye greedily their mineral resource rich land. Only
when the people resist with their lives the destruction of their
livelihoods, as in Nandigram or Kalinganagar, the governments are
forced to take a step backward in this ruthless process of
industrialization. The recent episode of the revision of SEZ
guidelines is an obvious case in point. It is becoming increasingly
clear that it is not a democratic government which works for the
people; it works for the corporations in the name of industrialisation
unless people are able to resist it
Since land is a state subject according to the Constitution of India,
acquiring or not acquiring land is the prerogative of the state
government. And yet, irrespective of their political labels, land is
being acquired by various state governments in a competitive race to
the bottom in servitude to win the favour of the corporations. This has
the full legal and moral support of the central government, but the
state has full constitutional power not to oblige. Land is being
acquired in different guises, for mining, for the location of
industries, for large estates and IT parks and finally for Special
Economic Zones(SEZ) under the 'eminent domain' clause which
allows the state to override private property right in land in 'public
interest'. Land being the largest, primary source
of livelihood in the agrarian economy becomes the most obvious case of
forcible transfer of resources from ordinary people to private
corporations, destructing livelihoods, and displacing people. In this
process, invariably the gainers are the corporations and losers are the
ordinary people connected to land in mamy ways, the peasants and
tenants, agricultural workers and artisans, tribals and fishermen. SEZ
became the most grotesque reminder of this pro-corporate, anti
–people bias built in this model of industrialization. Only
rising popular resistance could force the government to moderate its
stand, but the difference between acquiring SEZ land, and land for
mining or industrialization is very little insofar as the destruction
of people's livelihoods and displacement are concerned. The issue
is therefore not merely SEZ, but whether an alternative model of
industrialization more friendly to the poor is feasible in
today's India. To answer this question, we must consider the
second question posed earlier but left unanswered so far: what should
be the sectoral composition of India's industrial growth?
Although land is the most visible symbol of transfer of resources to
the corporations, the transfer mechanism is more pervasive, working
systematically against the poor both directly and indirectly. For
instance, the direct bias is seen in plan allocation. Despite over 60%
of our working population living in agriculture, recent five year
plans under different governments could allocate less than 5 per cent
of planned investment to agriculture. The indirect bias operates
pervasively through the pattern of consumption and production promoted
consciously by the state. Mammoth projects try to create the impression
of urban glossiness with fancy malls, underground metros, flyovers etc
at public cost. We take it for granted that many of these public
utilities are essential for efficiency, saving time in traveling,
improving the quality of life, even for attracting investment. We need
even more desperately higher efficiency and better quality of life in
rural India where the majority lives.
The promotion of such consumption and production pattern is not merely
iniquitous, it is detrimental to real development involving the poor.
It certainly benefits the urban elite population, and leads to
uncontrolled urbanisation and mega cities with growing hunger for
energy, water and urban housing space. We are told that world class
cities are our goals, so slums have to be cleared without providing
resettlement. Livelihoods of both urban and rural communities have to
be destroyed for expanding and modernizing the cities. In the process
the modes of transports we are creating with more flyovers for cars,
bigger airports, the shopping and housing complex we are promoting
become increasingly energy intensive, and the majority of our ordinary
citizens who do not consume them also have to pay directly or
indirectly for this pattern of consumption. This is why farmers get
less water for cultivation, are staved of electricity in critical
periods, clean drinking water or proper sanitation is a luxury in
villages.
The deepening crisis of Indian agriculture is largely the accumulated
result of this bias. With almost two thirds of our work force in
agriculture producing hardly over one fourth of national output, output
per worker in agriculture is about 40 per cent of national average
today, it was about 48 percent in 1993-94 and over half in 1987. In
contrast industry and service have a labour productivity double the
national average and the gap between the agriculture and the
non-agricultual sector is steadily growing. Direct estimates indicate
that labour productivity in manufacturing nearly doubled since 1991,
and in services it increased even more while in agriculture it
increased not even by 10 per cent.
This is the result of two sets of factors. On the one hand, selected
non-agricultural products consumed typically by the rich command higher
and higher price ( think of real estates, fancy apartments, cars,
restaurants etc), as the rich become richer with even more purchasing
power to buy these goods. This is a vicious circle of cumulative
causation, of mutually reinforcing positive feedbacks created by
economic liberalisation with little concern for the poor. Higher growth
is then achieved by transferring more and more resources to the
so-called high productivity sector producing for the rich in the name
of comparative sectoral advantage, while the higher demand from the
rich keeps the apparent sectoral productivity and corporate profits
high. It benefits enormously large corporations which organize this
pattern of production for profit, and the privileged sections in India
rejoice at the economic progress the country is making.
The other side of the same process is to deny resources to the poor in
the rural economy because they have no purchasing power. So money is
not found for basic health or education, for local investment to create
employment by the panchayats or for two square meals for children. The
annual tax concessions to big business envisaged originally in SEZ
proposal is estimated to have been about five times the annual national
rural employment guarantee budget; alternatively it could feed some 55
million people a year!
It is foolish to expect that despite all the subsidies and transfers in
their favour, corporate-led growth can create sufficient employment to
transfer sufficient labour from agriculture to industry and services in
the foreseeable future. The corporations are in the game of making
profit by cutting costs, including labour costs. They create more
output per worker but not much employment. One example is the TATA
steel in Jamshedpur which increased its annual production five times,
from 1 to 5 million tons between 1991 and 2005,but nearly halved its
work force from 85 thousand to 44 thousand. Consequently India's
record of employment generation in recent years has been dismal. An
eight per cent growth in output led by corporations has been
accompanied by about 1 per cent growth in regular employment, and the
increase in irregular employment is marked by flexible contracts loaded
against the workers. It should be realized that the more we accept the
logic of corporate growth and globalisation unconditionally, the
stronger would be the depressing effect on employment generation. In
particular, the increased relative importance of the external over the
internal market due to globalisation, would mean cutting labour cost
even more drastically by the corporations to be internationally
competitive. It is not an exaggeration to say that the current model of
industrialization amounts to a process of internal colonization. It
needs forcible displacement of tribals for control their mineral
resource rich land; it means destroying the livelihood of the peasants
and others connected with land to make place for industry; it means
destroying the livelihood of peasants, boatmen and fishermen to set up
large dams on rivers for hydroelectric power to feed large corporations
and big cities. It is a pattern of growth which immiserises agriculture
and the country to make corporate led industrialization
possible.
An economic alternative creating another kind of development is
imperative. It is feasible, and elements of it exist even in the
present political-economic system. Very briefly, it has to be based on
three basic premises. First, we must learn to rely far more on the
internal rather than the external market. The biggest driving force of
the internal market is the purchasing power of the ordinary people
derived from employment growth. Growth of the internal market through
rapid employment growth, requiring a far more selective approach to
globalization, is essential rather than repeating the mantra that there
is no alternative to this corporate-led globalization.
Second, economic growth must be the outcome of employment growth. Our
benchmark should be a time bound programme for full employment. How
much the growth in employment would contribute to growth in output
depends on how productively labour can be employed. India
performed poorly in this respect because a bureaucratized system of
central control killed local initiatives. We have to start by rejecting
simultaneously socialist orthodoxy of central planning and corporate
oriented neo- liberalism. On the one hand, we have to get out of the
grip of corporate led industrialization by making agriculture and the
rural economy the centre of economic dynamism, and on the other we have
to break the grip of current centralized bureaucratic decision making.
A start can be made here and now by extending the present national
employment guarantee scheme to an ambitious time bound full employment
programme, and delegating much of the decision making power to the
maximum to the panchayats and local bodies. They must have maximum
freedom and responsibility to identify, formulate and execute local
employment generating productive projects. A pre-condition for
this is fiscal autonomy for the panchayats. No government, central or
state, is willing to do this yet although the provision was made in
1993 for a finance commission to make panchayats financially self
sufficient . The record of the Kerala has been the best while that of
West Bengal Government has been among the worst. Acknowledging that he
Left Front played a role in getting NREGA enacted, it is shocking that
only 14 per cent of the money allotted in the poorest district of
Purulia for employment guarantee was spent until December, 2006, more
than half the money of employment guarantee provided by the centre
remaining unspent in the state, and not more than 16 days of employment
provided while the legal and financial provision allows for 100 days.
(Reports from other states too show a more or les similar situation
with an exception of certain areas). If the governments had shown the
same zeal in making a success of employment guarantee as they have
shown in acquisitioning land from the unwilling peasants, we would have
taken at least the first step towards a genuine process of development.
Finally, there is the question of finance. Where would the money come
from for such an ambitious employment programme, and how to make sure
it is spent effectively? The 2003 Fiscal Responsibility and
Budget Management Act (2003) which ties the hands of the Government in
spending money for most pressing needs like employment guarantee must
be scrapped. With this Act the Centre pushes privatization to raise
money, denies basic health and educational expenditure, and restricts
the role of public policy in the name of financial discipline. This
suits well the IMF, the World Bank, and the national and multinational
corporation who want the state to promote but not to regulate them.
This is where the Left should have its biggest battle, and insist that
money that is needed for employment, basic education, health and social
security of the unorganized workers must be found, if necessary by
revising this law. Because, underlying this fight is the bigger issue
of redressing the existing bias in resource transfer against
agriculture and the poor. Unfortunately, the left went along instead
with the neo-liberal economic ideology with only a whimper of protest,
and concentrating their energy on corporate-led industrialization.
The money for employment generation can be kept in a separate account
in nationalized banks with credit line extended to panchayats. This
would avoid duplication of institutions, while a system of mutual check
and balance between the panchayats and the local branch of nationalized
banks can be devised based on their performance as borrowers and
lenders. Banks would lend the next round only if the previous project
succeeds, and panchayats can borrow the next round only if the money is
well spent. It might turn out to be a situation akin to 'repeated
games' in which both sides gradually learn to recognise the
mutuality of their interests, paving the way for genuine
cooperation over time. It is this mutuality of interest which has
to be strengthened over time in creating new institutional forms of
sustained decentralised financing for development.
A programme of decentralized, employment-intensive, rural
industrialization through participatory democracy at the local level is
no utopia. It is the compulsion of our time. It is the only process of
industrialization that this vast and meandering democracy of enormous
poverty can sustain and strengthen over time to give dignity to all its
citizens. The quality of our industrialization would have to improve
through improving the quality of our democracy, as the two would
reinforce one another gradually over time. However, to pretend
this can be achieved through corporate-led growth, no matter how high,
is to live in a make believe world. It is a world which will collapse,
and make space for this alternative model of industrialization to serve
not the corporations, but the poor people of India.
( I am indebted to Madhu Bhaduri, Medha Patkar, Romila Thapar and Aseem
Srivastava , although none of them might share all my views).
* Amit Bhaduri (Professor of Economics, University of Pavia, Italy and Council for Social Development).