People's Democracy

    SAHMAT, Social Scientist Holds Convention On

India: An Economic Agenda For 2004

A CONVENTION on India: An Economic Agenda for 2004 was held on July 5, 2004 in the constitution club of the national capital. Among the distinguished participants in the convention, were Professor Amiya Kumar Bagchi, Dr Ashok Mitra, Prof Prabhat Patnaik, Prof Utsa Patnaik, Prof C P Chandrasekhar, Prof G S Bhalla, Prof G K Chaddha, Prof Sukhadev Thorat, Prof Jayati Ghosh, Prof T S Papola, Dr Madhura Swaminathan and Mr Vikas Rawal, (all economists). Besides these and some other economists other notable intellectuals who contributed to discussion were Dr Ashok Rao and Dr Dinesh Abrol. Leading Left political leaders, intellectuals, party workers and other political activists constituted the audience.

Well known Marxist thinker Professor Prabhat Patnaik in his opening address remarked, “The mandate of the people in recent Lok Sabha elections is, in fact, a verdict of the people against the neo-liberal economic policies which were pursued in this country for the past thirteen years. The NDA government at the centre attempted to implement these policies more vigorously. Now the UPA government at the centre which enjoys the outside support of the Left parties is committed to implement Common Minimum Programme which aims at following an alternative course of development. The CMP recognises that for improving the quality of life of the mass of the people the state must assume responsibility. However, the state will not discharge its responsibility on its own. What is necessary in this regard is that people collectively raise their voice in support of the CMP and create constant pressure on the government to implement it.” Professor Patnaik referred to threats to pursuit of alternative development trajectory for which of the people voted decisively. He stated that there is obvious and vocal opposition of the CMP from international and domestic financial interests, the Bretton Woods institutions and the beneficiaries of the NDA’s economic dispensations.

The discussion was divided in four sessions based on themes. In such a discussion, obviously the first session was to be devoted to “Macroeconomic Possibilities.” Professor Prabhat Patnaik, Prof C P Chandrasekhar and Prof Jayati Ghosh presented their papers in this session. In his presentation, Prof Patnaik pointed out that the CMP, notwithstanding its overall thrust towards agriculture and employment generation also contains inconsistencies. In this document itself, in Patnaik’s opinion, there are ideas which can prevent a change of course.

Professor Patnaik argues, while growth per se means nothing for employment, there is growth fetishism in the CMP which is likely to be exploited by finance capital to wrest concessions to the detriment of the employment objective. Professor Patnaik dismissed the criticism of the media and the mainstream economists that there is real resourse constraint to implement the CMP. Emphasising the fact that India has one of the lowest tax-GDP ratios in the world, he argued that there is plenty of scope for raising tax-revenue. The stock market does not reflect the health of the economy. At the same time, stock prices changes may lead to capital flight in a world of free financial flows. In order to prevent capital flight, controls are necessary which will also permit pursuit of a pro-people development trajectory. In Prof Patnaik’s opinion, it is now generally agreed that free financial flows are inimical to development, sovereignty and democracy. Criticizing the Fiscal Responsibility Act he suggested that it must be repealed forthwith. This Act is meant to appease finance capital and is opposed to state activism in matters of development expenditure.

Prof C P Chandrasekhar in his presentation argued that there is much that is disconcerting about the industrial development process resulting from the adoption of a neo-liberal agenda in the 1990s. He pointed that manufacturing performance during the 1990s and more recently has been worse than in the 1980s. Secondly, there are signs of consolidation within the large industrial sector, while medium and small scale industry registered slow growth. Finally, industrial growth has been mostly jobless implying that industrial growth has contributed very little to employment growth.

These features of manufacturing growth during neo-liberal era are a direct result of policy. Prof Chandrasekhar thus advocated for abandoning this policy. He suggested introduction of four elements into any industrial policy that may be pursued by the UPA government.

First the role of public investment is an important stimulus to industrial expansion through direct demand expansion and income generation and by relaxing infrastructural bottlenecks need to be restored. Second, debt-financial consumption spending must be replaced by a system in which financial institutions support investment through lending and investment. More widespread lending to small and medium sized firms is crucial if a phenomenon of job-displacing growth is to be reversed. Third, despite the fact that foreign investment is needed, repatriation of technology payments and dividends need to be regulated. Finally, industrial policy should encourage small scale manufacturing with the employment and linkage effects in mind.

Jayati Ghosh making out a strong case for regulation of capital flows argued that the UPA government must recognise that capital controls must form a basic part of the overall economic strategy. However, such controls both on inflows and outflows of capital should be flexible and responsive to change.

Participating in the discussion Prof Amiya Kumar Bagchi, pointed out that in a model of high industrial growth similar to the one adopted in Gujarat, growth may really be jobs reducing. In such a situation, transfer of work force from agriculture to manufacturing sector may not be possible. Consequently a large proportion of population continues to depend on agriculture and remains trapped in deep crisis caused by the irrationality in the system.

The theme of the second session was Rural Regeneration. Prof Utsa Patnaik making her presentation underlined the principal task on the agrarian front. Referring to agrarian distress she pointed out that agrarian distress throughout the country predates drought of 2002. It in fact has been built up owing to many years of wrong neo-liberal policies.

In Prof Utsa Patnaik’s opinion, agrarian distress has been caused largely by sharp decline in public investment and development spending in rural India. This has contributed to halving of out put growth and produced large-scale unemployment. Favouring immediate measures in form of food for work programme to give relief from rural distress she thought that employment guarantee scheme could take time to formulate and implement.

Prof Patnaik also advocated the following measures for overcoming rural distress. First, immediate measures for debt relief to indebted farmers. Second, BPL ration cards are to be issued to all who wish to apply because of the rampant poverty in different states. Finally, provide legal protection to prevent alienation of land against debt (whether private or institutional).

Agreeing with Prof Utsa Patnaik, Dr Madhura Swaminathan argued in her presentation that there is massive and widespread economic hunger in India. She supports a well functioning universal public distribution system (PDS) for ensuring adequate physical access to food both at the local and households level. Targeted PDS has not been found effective in ensuring food security to the needy. Dr Swaminathan asserts that food security for all requires combination of policies: a well functioning universal PDS, an employment guarantee programme, and special food programmes for groups within the population with special needs.

Prof Jayati Ghosh in her presentation on Feasability in a Rural Employment Guarantee argued that this scheme has no cost constraint. She has estimated total cost of programme between Rs 44,000 crore and Rs 53,000 crore. At first glance this may look like a large amount for an annual outlay. However, she does not consider it so because increased wage incomes in rural areas are likely to generate positive multiplier effects. Moreover such expenditure may yield dividends through improving conditions of production in rural areas.

While participating in the discussion Prof T S Papola characterised the Employment Guarantee Scheme as feasible. However he asserted that in rural areas the need of the hour is creation of wholetime employment rather than part time employment. Moreover he emphasised the need of transfer of rural population to industrial sector, which may be possible only when this country does not witness industryless growth. Prof G S Bhalla underlined the relationship between decline in investment in agriculture and the growing distress in this sector.

The theme of the third session was Fiscal Federalism and Public Investment. Speaking in this session Dr Ashok Mitra argued that the outcome of the 2004 Lok Sabha elections is a categorical rejection of anti-poor economic measures passing as reforms. To honour this mandate the CMP should have made recommendations for realigning of Centre-State relations in favours of states including suggestions for a drastic revision of the existing financial relations. Dr Mitra is of the view that the CMP does not mention any such agenda.

Prof Amiya Kumar Bagchi underlined the possibility of increasing centralisation built-in the constitution. Recognising this centralisation bias in the centre-state relations until the Eighth Finance Commission the states were granted relief from the burden of debts. However since the Ninth Finance Commission under the influence of neo-liberal policy the centralisation bias in centre-state relations has been used to tighten the stranglehold of the centre on the states. In Mitra’s opinion, the states are being deliberately pushed in to the debt-trap. This he considers totally unconstitutional. He thus suggested that the conditions relating to economic performance of the state for determining transfer of resources from the centre to the states must be scrapped by the Twelfth Finance Commission. He also advocated that a National Land Reforms Commission should be set up to carry out land reforms in the various states of the country.

Dr Ashok Rao, speaking in this session argued that the provisions of the CMP in respect of public sector are both inadequate and unsatisfactory.

Session IV was devoted to Affirmative Action and Education. Prof Sukhadev Thorat making his presentation on Marginalized Groups and the Common Minimum Programme argued that commitment of the CMP to ensure SC/ST reservation in the private sector is essential. Given the prevalence’s of significant discrimination in employment in the private sector, formulation of a reservation policy is necessary. This approach is positive not only from social point of view but is also necessary for sustained economic development. Underlining the limitations of existing land distribution, he pleaded for redistribution of land particularly to ensure some transfer of land to persons belonging to SC/ST categories. Prasenjit Bose highlighted subversion of secular and democratic education by the former BJP-led NDA government. He also emphasised the need for universalisation of education and larger allocations of resources to realise this objective. 

Prof Prabhat Patnaik summarising the discussion in the various sessions stated that we have not only to remember whatever has been stated in the CMP. What is more important is that various aspects of the CMP are in direct conflict with neo-liberal policy. The neo-liberal policy is a total philosophy and it has its own logic. The alternative course of development rejects it completely. Therefore, the possible challenge of the neo-liberalisers is to be met unitedly. This is fact in the need of the hour.