People's Democracy

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


No. 47

November 20, 2011





Economic Reforms Led to

Growing Inequalities in India


IF the global financial meltdown of 2008 had not affected India so much, it was largely due to the stance taken by the Left against full convertibility of Indian rupee, increasing FDI caps in insurance, privatisation of banks and pension funds etc. As a result, India was able to weather the meltdown much better than other countries, asserted CPI(M) Polit Bureau member and MP, Sitaram Yechury. He was delivering a keynote address on 'India’s Experience with Economic Reform' at the 12th annual conference on Indian Economic Policy Reform held at Stanford Centre for International Development, (SCID) on November 5, 2011.


Yechury started off by informing the audience in this premiere institute in San Francisco, USA, that despite having three scholarships from reputed institutions in the United Kingdom, he chose to study in India itself and hence he was entirely a local product. Referring to the present situation where the world is experiencing a certain degree of turbulence in the economy, he expressed concern about the enormity of financial crisis. “According to some recent calculations the bailout cost for the US has been $27 trillion while the GDP of the USA is $14 trillion and this in itself shows the enormity of the economic crisis”. Faced with such enormous crisis, global capitalism is trying to convert corporate insolvency into sovereign insolvency, the burdens of which are then being passed on to the working class, he said. The growing protests across the world against this trajectory of policymaking are a testimony to the anger of the people. He mentioned about the closure of St Paul's Cathedral in London for the first time after the Second World War due to the Occupy London protest. The pressure from the people is such that it is quite probable if Greece would have a referendum, it would leave the Euro zone. “Portugal and Spain will be next to follow. So under these circumstances, how do we get the global economy going? I believe that the solution lies in increasing the purchasing power of people. This may sound Keynesian but I would much rather be 'Keynesian fundamentalist' than a 'fiscal fundamentalist'”.


Referring to the address delivered by union minister Salman Kurshid a day before at Stanford, wherein he mentioned about the Formula One car race held in Delhi and stated that 'India has arrived', Yechury reminded the audience of the speech made by the former President of India K R Narayanan who had said “We are building great highways, but remember to take care of pedestrian crossings”. Yechury argued that reforms will have to be considered in the ambit of the socio-economic conditions prevailing in the country. He quoted from the Economist magazine which carried an article 'Building India Inc', in its October 22, 2011 issue wherein it stated, “India is a superpower-in-waiting whose people vote, whose society is raucous, and whose corporates are red-blooded and striding onto the world stage”. But two lines later it asserted, “But that view is a delusion”. Yechury quoted data from the Planning Commission’s recently published India Human Development Report. 'Nearly 300 million people are living beneath the officially declared poverty line. From 1973-74 to the present, only 19 million people have been lifted above the poverty line. Forty per cent of our children are malnourished, 79 per cent are anaemic, etc.


Yechury said one must always keep these things in mind while discussing about reforms in India. He said the very first lines of the Indian Constitution speaks of India i.e., Bharat, but instead of one India, what we are creating today is two different Indias. “The number of dollar billionaires in India has been steadily growing. Today there are 61 billionaires in India whose combined wealth makes up around two-thirds of India’s GDP. At the same time, quoting from a report by Arjun K Sengupta, he said 78 per cent of Indians live on less than Rs 20 a day. He also mentioned about an IMF study India: Is the Rising Tide Lifting All Boats?  in which it came to a conclusion that the Gini co-efficient (an universally accepted measure of poverty) in India is actually rising.


“With only 10 out of every 100 persons going to university in India,  the nation has such a strong representation in great institutions of higher learning, including in Stanford. There is a great potential if more Indian students go to universities”. He quoted from a Le Monde article a few years ago that noted that India produced more university graduates annually than all of Europe combined. He said the need of the hour is to empower the people of India, so that they could really contribute to the global economy. “It is perfectly possible if we today do a course correction in terms of giving concessions. The current logic is that concessions must be given to corporates and they invest back the surplus capital, generating greater supply. However you need a market to buy that supply. So that logic doesn’t work. It would be much better for those huge amounts of tax foregone to be invested in proper public works that would create more employment, hence kicking up more demand. Today everybody talks about inclusive growth. Inclusive growth is not charity. It is genuine growth of all sections of society”.


Yechury reminded that one must recognise the dangers to the very democratic structure of our country due to the growing inequalities. He said that the Left in India is working overtime to rally people in fighting for policies that would bridge this growing economic inequality.




Yechury also participated in a panel discussion on ‘Corruption and Governance in India’ held at Stanford University on November 3 as part of SCID India Conference 2011. The discussion was moderated by Thomas Hansen, director of the Centre for South Asian Studies.


The most important effect of corruption today was the denial of rightful share to the citizens. He quoted the huge loss to the exchequer due to the 2G spectrum scam and said that money could have been used for subsidising food or education for the entire population.  Corruption has changed with the times. The earlier corruption in acquiring licenses has given way to present corruption in acquiring mining leases, he said.  “The result of the so called economic liberalisation has been proliferation of crony capitalism. The type of liberalisation that was happening is creating two different Indias – one the Shining India and the other Suffering India, of which people do not speak much”.


Yechury expressed concern at the dangerous impact the corruption and black money was having on the nation’s electoral system. Talking about the Constitutional scheme of State institutions, he said that the final responsibility lies with the Indian people. “The Executive is accountable to the parliament, which is in turn accountable to the people. This system fails when the parliament itself does not meet regularly. Three years back the parliament met for only 46 days in a year”. Yechury underlined the need for the effective functioning of parliament in order to reflect popular sentiments in the process of legislation. He asserted that it is the responsibility of the parliament to enact a fool-proof legislation to check corruption.


The initial presentation was followed by a lively question and answer session. On the recent topic of the popularity of Anna Hazare's campaign, Yechury remarked that fasting is something that has great mass appeal in India. “Many famous leaders, right from Mahatma Gandhi, to JP, VP Singh used these forms”. About Lokpal as a total solution to the bane of corruption in India, he differed and stressed the need for a  wholistic approach that would tackle the issue of money power in elections.  He opposed corporate donations to political parties and called for banning the practice. “If corporates want to donate money, they should contribute to the State funding of elections and not to individual parties”, he said.  Another issue that would have to be addressed is the pressing issue of judicial corruption, he felt.


To another question as to whether the CPI(M) would be relevant in 15 years from now, Yechury remarked “as long as what the CPI(M) stands for and says is relevant, the party will remain relevant”.


Yechury also spoke in another session on 'Governance and Accountability'  held on November 4 and moderated by Nicholas Hope from the Stanford Centre for International Development. A distinguished audience among whom included Anne Krueger, former deputy MD of the IMF, Anoop Singh, former chief economist of World Bank and director of the Asia and Pacific Department of the IMF, Roberto Zagha, World Bank Country Director, India.


Referring to the paper of Anne Krueger on rent seeking, Yechury said that in the current context, it should be replaced with words ‘rent sucking’. He felt that corruption is no longer confined to the old petty type. “Newer forms of corruption are difficult to understand – for example in all the recent scams, hardly any black money was involved. Many of the transactions were made legally in white money. Even the PM remarked recently that India cannot afford crony capitalism which is on the rise. The recent mining scams and land mafia are examples of the same”, he said.


Disagreeing with the contention that there has to be depoliticisation of the reform process, Yechury asserted that there must be accountability to parliament.


Salman Khurshid, minister for law and justice, government of India; Chandan Mitra, member of parliament; N K Singh, member of parliament were among those who put forth their views on the subject.