People's Democracy

(Weekly Organ of the Communist Party of India (Marxist)


No. 26

July 06 , 2008


Neo-Liberalism And Social Justice

Suneet Chopra

INDIA has now gone through some 17 years of a neo-liberal policy regime. Its results are there for us to see. If India has produced some 39 new dollar billionaires on the one hand, it has seen the increase of those unable to meet the 2200 calorie intake from 56.4 per cent in 1973-74  (the then poverty line for consumption) to 58.5 per cent in 1993-94 and to 69.5 per cent in 2004-05 of the rural population of the country. The all India figures for urban India in the same period were: 57 in 1993-94 to 64.5 per cent in 2004-05. It is evident then that a handful became richer at the cost of impoverishing the rest. In fact in 2004-05, nearly 84 crore people lived on an expenditure of Rs 20 per person per day, of whom some 24 crore lived on less than Rs 9 per person per day.

Then how did the government show decline in its figures of poverty? It simply brought down the definition of those living in poverty from 2200 calories to 1800 or less. In other words, the decline of the percentage below the poverty line was a statistical fraud. There are other figures that support our contention. While the necessary minimum availability of food grains is 478 gms per person per day, the figure in 1998 was 450.9 gms in 1998, and some 428 gms in 2004-05, a reduction of 50 gms per person per day. The figures for lentils are similar. The government tried to hide this fact by saying people had diversified their diet, are drinking more milk and eating more meat and grain. But if that were so, the amount of grain required would be considerably more to produce a lesser weight of meat and milk. The figures of the steadily increasing stocks of unsold grain with the Public Distribution System are proof of the fact that this is yet another fraud on the people by the votaries of neo-liberalism.

The state of employment also reflects the same reality. Not only has the growth of employment come down from 3.21per cent from 1980-1990 to 1.01 per cent in 1990-2000, but the percentage of unemployment rose from 6.3 per cent to 7.32 per cent. And it has since increased to 8.3 per cent. The wage situation is worse. In 1989, profits were 19.07 per cent of value added and wages no less than 50.78 per cent but in 2005, profits had increased to 55.64 per cent and wage fell to only 32.37 per cent. In the last three years profits have increased two and a half times while wages have gone down by a third. This is the state of affairs of the organised sector. Those in the unorganised sector are much worse off. If we take the agricultural labourers, the days or work available to them have come down from 100 a year in 1990 to 70 in 2000 and possibly only 38 in Punjab today. Surely this does not reflect their prosperity in the absence of alternative employment. True, some alternative employment is emerging in the form of work in brick kilns and at construction sites, but it can hardly be said to be a replacement for the days lost in agricultural work.

The farmers are, if anything, worse off. Every year, for over a decade now, 33 lakh farmers are forced to sell their land and enter the ranks of the landless. State after state, not excluding Punjab, has reported farmers' suicides. The figure of suicides in the whole country from 1997-2007 is no less than 1,66,304. Of these 78,737 committed suicide between 1997-2001, but the figure increased to 87,567 in 2001-2006, reflecting these are a growing phenomenon.



The causes are not difficult to identify. This tragic state of affairs began in 1991 when Manmohan Singh as finance minister cut back on fertilizer subsidy and on development expenditure so sharply that the per capita GDP came down in a year and we saw the first suicides of farmers. In the same period, the issue prices of grain from the PDS were doubled, so that by 1995 there were 320 lakh tonnes of foodgrains lying unsold with the government.

Worse, in 1994, following the redefinition of the priority sector for loans by the M Narasimhan committee report on financial liberalisation, the earlier policy of 1969 treating agriculture and small scale industry as a priority sector was given up adding a personal financial crunch to the collective one, with rural development expenditures coming down from 4 per cent of the Net National Product in the seventh plan period to 2.6 per cent now. We were told if the government left the space vacant, private players would step in. They did not.  The United Front government with Chidambaram as finance minister further compounded the distress of the rural poor by creating Above and Below Poverty Line categories of the PDS. The BPL virtually excluded all but those who could not buy from the system, while the APL prices were raised so much that they often were the same or more than the market price.  Further, between 1996 and 2001, the NDA intensified the attack on farmers by doing away with Quantitative Restrictions on the import of most agricultural products over four years before it was required by WTO, leading to a fall in the price of cotton, foodgrains, jute, sugar tea and coffee fell between 40 to 60 per cent, ruining farmers all over the country. Suicides were reported from not only Karnataka, but Kerala, Andhra and Punjab as well. The stock of food rotting in the government's godowns rose to 640 lakh tonnes and was eventually sold as pig feed to the USA and Europe at half the price it was being sold to Indians by the BJP-led NDA government.  The work begun by Manmohan Singh and Chidambaram as finance ministers was completed by Yashwant Sinha with devastating effect.



The UPA government, with Manmohan Singh as prime minister, P Chidambaram as finance minister and Montek Singh Ahluwalia as deputy chairman of the Planning Commission, was expected to see the World Trade Organisation policies implemented to the hilt. Indeed, it has, if one looks at the cut backs on funds for rural development schemes and failure to spend an adequate amount, as noted in the Standing Committee Report submitted to parliament. But the restraint of being a minority government with Left support under a Common Minimum Programme prevented this trio from going full steam ahead with neo-liberal policies. The CMP enjoined secularism, legislation like Employment Guarantee, Womens Reservations, the welfare  of agricultural labour and unorganised workers, restraint on privatising PSUs, spending 6 per cent of the GDP on education, protection of the PDS, no reduction of EPF rates, land reforms, forest rights, the Right to Information Act and an independent foreign policy, among other provisions. Due to this constraint the UPA government could not go ahead fully in many areas such as -- making our foreign policy subservient to USA, signing the Doha agreement and pushing the final nail into the coffin of India's agriculture dominated by petty producers, giving the go ahead with vast takeovers of land for SEZ's with tax holidays for the rich and no protection for the workers, outright sales of Public Sector Units and the destruction of the PDS.

The Manmohan Singh government has gone along expected lines. But it has been prevented from doing the worst. The Doha round discussions too are likely to come to a dead end. The attempt at the creeping privatisation of BHEL and the sale of NALCO and NLC were stopped. This was a major victory. The foreign entry into the Insurance sector, retail trade and banking through the route of FDI was stalled. The use of EPF funds for private investment was partially stalled. The complete dismantling of the APL category of the public distribution has been prevented. The Minimum Support Price for wheat and rice has been raised. The National Rural Employment Guarantee Act, Right to Information Act, the Tribal and Traditional Forest Dwellers (Recognition of Forest Rights) Act, have all been passed, while the pernicious Seed Act that would have ended farmers right to experiment and develop their own seed, has been stalled as have anti-worker changes in labour laws and new amendments have been made to the patent law to allow cheap life-saving drugs to the produced. Funds for education, health and credit to farmers have been increased and Rs 71,000 crore worth of debts of farmers have been waived.

But one must not become complacent due to these achievements. Many of these exercises are “wait and see” delaying tactics or mere eye-wash.  The farmers' loan waiver is only an account book exercise that allows the State to pay banks interest on what may well have been bad debts and gives the farmers nothing. That is why farmers continue to kill themselves even in Vidharba despite the prime minister's package. On the other hand, the steps taken by the LDF government of Kerala in bringing relief directly to the farmers have put an end to the spate of suicides there. The funds given for the NREGA are so inadequate as to make it ineffective. The framing of the Rules of the Forest Rights Act has been excessively slow so as to permit evictions. Back-door entry of FDI into the media have reduced most to becoming puppets of foreign capital. Funds for education, health, irrigation, rural credit and development have decreased or have only seen a nominal increase. It is evident that the UPA government intended these measures as eye-wash. This is obvious from the way a crisis was allowed to develop in our grain markets with foreign players being given free access to buying grain in India at prices well above the minimum support price and by allowing futures trading in the necessaries of life, so that the price mechanism has gone out of control and PDS system has been all but destroyed. At the same time in the name of checking inflation that has risen to an unprecedented 11.4 per cent, the UPA government has removed import duties from a number of agricultural products, thus carrying out the job of implementing Doha prescriptions without being seen to do so.

Further, the prices of oil that could have been held back, were raised again by giving fraudulent accounts of public sector  oil companies' losses and by refusing to tax private oil companies for their super profits or reduce government taxes on the value of oil. This forces us to conclude that the government of India is still firmly committed to carrying India along a path in which the rich will get richer and the poor poorer. And large sections of the people will be dispossessed, driven from their homes and forced to work in conditions not very different from slavery.

(To be continued)