People's Democracy

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


No. 42

October 21, 2012





Widening Divide between the Two Indias


THE latest World Bank Report on Global Hunger, 2012 confirms, once again, a fact consistently articulated in these columns that the neo-liberal economic reform trajectory followed during the last two decades has resulted in the making of two Indias. Worse is the fact that the hiatus between the rich and the poor continues to sharply widen.


At the global level, the World Bank admits that the number of undernourished people was on the rise from mid-1990s until 2006-08.  This is clearly the impact of imperialist globalisation that has sharply escalated the predatory urge of capitalism  to maximize profits.  The preponderance of various types and forms of primitive accumulation of capital has led to such a situation where the livelihood status of the majority of the world’s people is on decline. 


However, the World Bank measures not absolute but relative hunger, ie, the proportion of people who suffer from hunger broadly based on three component indicators – child underweight; child mortality rate; and  the proportion of undernourished people.  Even in terms of relative hunger measurements, India ranks at number 65 in a total of 79 countries assessed by the Global Hunger Index (GHI) 2012. Neighbouring Pakistan and Nepal are ranked higher.  What is worse is the World Bank’s observation, “According to latest data on child under-nutrition, from 2005-10, India ranked second to last on child underweight out of 129 countries.  Only Timor-Leste (try to locate this country on the map) had a higher rate of underweight children.”  India’s GHI 2012 is 22.9, higher than the GHI 1996 of 22.6.  This is the result of the two decades of the highly ‘celebrated’ reform process. 


Lamenting India’s track record as being “disappointing”, the World Bank Report says, “India has lagged behind in improving its GHI score despite strong economic growth. After a small increase between 1996 and 2001, India’s GHI score fell only slightly, and the latest GHI returned to about the 1996 level.  This stagnation in GHI scores occurred during a period when India’s gross national income (GNI) per capita almost doubled, rising from about 1,460 to 2,850 constant 2005 international dollars between 1995-97 and 2008-10.”  The Report further says, “After 1996, however, the disparity between economic development and progress in the fight against hunger widened and India moved further away from the predicted line (of declining hunger).” 


The Report notes how a civil war-torn Sri Lanka achieved impressively high literacy and life expectancy through welfare oriented policies, investment in public health and education systems.  Bangladesh, through targeted public interventions, has overtaken India on a range of social indicators including the level and rate of reduction of child mortality.  Note that in both the countries, these positive changes have occurred through committed State intervention and not through the operation of the ‘market forces’. 


Emphasising that under-nutrition is not simply the outcome of lack of food, the Report notes that this is dependent upon “inadequate health services or unsanitary environments”.  It goes on to say that, “36 per cent of Indian women of child bearing age were underweight compared with only 16 per cent in 23 Sub-Saharan African countries.”  


On behalf of the Indian government, the ministry of statistics files an annual country report to the United Nations on the progress in achieving the Millennium Development Goals (MDGs).  According to the 2011 Report, India is unlikely to achieve any of these MDGs by 2015.  This relates to the targets for reduction in poverty levels. The proportion of underweight children below three years will be, at best, 33 per cent as against the MDG target of 26 per cent.  The infant mortality rate will be, at best, 44 for thousand births as against the MDG target of 27. India will fall short of universal immunisation of one year olds by 11 percentage points.  Likewise in terms of maternal mortality rate, the target will fall short by 30 points.  This status report admits that households without any sanitation will be over 43 per cent by 2015.  With the abysmally low proportion of the GDP being spent on public health and the increasing trend of privatising universal health care, this situation will, in fact, worsen further. 


Yet another reason why the situation will worsen further is the relentless rise in the prices of all essential commodities which keep pushing larger numbers of people into poverty and malnutrition.  The Wholesale Price Index (WPI) has touched a new high of 7.8 per cent in September 2012.  The retail prices at which consumers buy will be much higher. The urban consumer inflation rate is estimated to be around 9.7 per cent, ie, 2 percentage points higher than the WPI. This inflation rate will substantially rise as experts estimate that “The full direct impact and the resulting cascade on prices (due to the recent hike in diesel prices) would only start coming from October.”  As India prepares to celebrate the coming festival season, for the vast mass of our people, it will only be a period of greater agony. 


For a miniscule section of our people who have directly benefited from this neo-liberal reform trajectory, these festivities would be brighter. The rich have, indeed, become richer. Apart from the rise in the number of US dollar billionaires – 54 of them holding  assets equivalent to a third of  India’s GDP – the top 500 listed corporate companies in the country report that for the three years ending March 2012, they held cash reserves of over Rs 9.3 lakh crores or $ 166 billion. This money is enough to double India’s power generation capacity or build 40,000 kms of six-lane highways every year as against the current 800 kms. 


Why is India Inc. sitting on such a huge amount of cash and not investing this. The answer lies in the very pattern of the creation of two Indias under this reform trajectory.  The vast majority of our people groaning under the relentless economic burdens imposed on them have very little purchasing power left after meeting their survival needs. The consequent shrinkage in domestic demand inhibits any investment. Unless there is a growing aggregate domestic demand, corporates would rather sit on their cash reserves rather than invest these in a situation where the people simply do not have the money to buy what they produce. These monies eventually flow into speculative activity  which explains the soaring prices of real estate and gold.


Is this situation irreversible?  Of course, not.  But the government continues to be committed to its neo-liberal understanding that a higher growth rate will automatically lead to reduction in poverty and undernourishment.  This, they are convinced, will happen through a process of downward filtration – a  process that has never happened without pro-active State intervention. It is precisely such intervention that this UPA government has abandoned at the altar of neo-liberalism.  Even in terms of its own theory of higher growth rate, it must be noted that the International Monetary Fund, last week, estimated that the Indian economy would grow at 4.9 per cent in 2012 down from its earlier projection of 6.2 per cent.  On both these counts, therefore, a more agonising period lies ahead for the vast majority of our people. 


This pattern can be reversed only by an active State intervention.  If the mega corruption scams can be prevented, then lakhs of crores of rupees would be available for large-scale public investments.  But these corruption scams are the direct outcome of these neo-liberal economic reforms that promote crony capitalism of the worst order.  Corruption is the most primitive form of primitive accumulation. 


Further, instead of subsidising the rich by giving them tax concessions which amount to Rs 6,000 crores more than the fiscal deficit of Rs 5.22 lakh crores, if these taxes were collected and used for massive public investments to build our much-needed infrastructure, then substantial employment opportunities would be created. This, in turn, leads to consequent growth in aggregate domestic demand which, in turn, would create conditions for higher levels of private investment as well.  Apart from putting India on a sustainable cycle of growth, this would directly impact on improving the livelihood of the vast mass of our people, thus leading to a reduction in hunger, poverty and malnutrition. 


There are no lack of resources in India to reverse the above trends regarding growing poverty and malnutrition.  What is required is a reversal of the current neo-liberal reform trajectory and, in its place, set in motion a process of pro-active State intervention through significant increases in public investments. 

(October 17, 2012)