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India: Does Economy Really Matter?

Bhaskar Majumder

Does economy really matter? The answer is, Yes and No depending on how it is projected to the people and how people accept it. Let me be clear on one point her: I talk here on the size of the population effectively constituting the market and not the cost-effectiveness or the economic structure. Focusing on the size as such is also a difficult proposition for the dynamism of the factors that enable population to participate.

Economic opportunities have not been seen as a component of human rights though Constitution of India pledges Right to Life. Some state-administered labour markets are, however, rights-based with not much reported rights exercised by the labourers. The question that I posed conceals one more question, is the political turbulence imminent in case the economy stagnates? I decline to delve into the recent debates on this question for the time being.

People in the middle section with education in the institutional frame often express concern for their offspring – the probability of getting a stable job, preferably in the public sector that the state provides by enterprises or administration. If they get jobs in administration, they feel powered – this is more so in the heartland of India. Thus, at the micro level the relevance of the economy is understood as a pedestal that protects the households at the middle level. By middle level I mean those who fail to sustain livelihood of two consecutive generations from one generation’s income for inadequate saving after spending on food-fuel-house-education-health. Each generation, thus, needs economic space or income space.

The nature of the middle section differs in India over regions. If the sub-sections within the middle section could be clubbed together then it can be seen as aiming to occupy the organized segment of the economy including public sector enterprises and public administration (services); these sub-sections calculate the present value of their future income stream and participate in the market accordingly. This middle section is urban-based, active in polity and gets some indirect access to power elite. Thus, the concern of this section cannot be wished away. This section also engages workers at the bottom like domestic workers, drivers, and liftmen and helps the self-engaged persons remain engaged in their respective works like vegetable vendors, milkmen, rickshaw pullers and so on. In sum, if the middle section is bracketed as 10.0 per cent of India’s population that cover the Graduates in education or workers in the organized sector, then another 30.0 per cent are engaged by them by expenditure flow – the income of this 30.0 per cent is equivalent to the daily expenses of the middle 10.0 per cent on food grains-vegetables-hired services. The major expenses of the middle 10.0 per cent on comfort goods-quality education-tour-entertainment do not reach this 30.0 per cent, the latter constituted by the bottommost section of the population minus the destitute. A size of the economy constituted by 40.0 per cent of the population cannot be ignored.

The state advantage is, this middle section is internally competitive to crowd out a sub-section within – marginalizing them to be Maoists at their own peril or driving them out by Gresham’s Law from the country for search of education-job elsewhere. The bottom 70.0 per cent of the population is self-engaged and self-employed in home-based paid and unpaid works and in petty business for survival. This 70.0 per cent includes the 30.0 per cent as mentioned earlier. The problem is never with the top 5.0 per cent of the population like offspring of political elite, people in entertainment industry by heredity and offspring of corporate masters who do not ask for jobs.

If the economic aspiration of at most the 25.0 per cent just below this top 5.0 per cent are taken care of then the state remains free from any troubles. This 25.0 per cent of the total population are disproportionately distributed – most of who from this sub-section that matter are urban and seek jobs in the service sector. This 25.0 per cent includes the middle section mentioned earlier as 10.0 per cent. How does the formation and functioning of the economy help theses sub-sections? This is the aspirant section that needs all comfort goods and goods for demonstration, travel by air and AC compartments in trains and travel long distance by self-owned luxury car.  The economy constituted by production-import-supply of goods meant for this 25.0 per cent of the population is basically around refrigerator-AC-vacuum cleaner-car-microwave oven and the like. So the state has to protect production of these. The problem is producing these requires also capital-technology and supporting public goods like roads and electricity even with less manpower. Import of all private comfort goods is not a rational decision though this 25.0 per cent prefer foreign brand names. Many of the public goods that help consumption of private goods are non-importable.

Having said the above, I re-frame the question: if the economy matters, how does it? First, most of the bottom 70.0 per cent lives in faith-fait accompli and not going to produce any revolution for the state to be alert. The top 5.0 per cent are always with the state policies, whatever these are. The middle section will remain hassled with prolonged problems and produce storm over a cup of tea; some of them will prepare for the competitive examinations till they finally fail but by then they have reached the age of practicing non-violence. Though this 25.0 per cent constitutes the civil society, the state can adopt incentives-disincentives mechanisms to keep them at a distance from practicing radicalism. No denial of the fact that this 25.0 per cent in India is bigger than the size of population of any country excepting China. The economy that gets formed is really through state endeavours even if it is through destructive Keynesianism.  I link here deliberately the state and economy; both take birth in the womb of the society but make the society partially excluded.

Exclusion from the organized economy does not affect, for example, the Adivasis constituting 10.0 per cent of India’s population for they had not been part of the organized economy by choice. This 10.0 per cent for purposes of calculation at the national level may be bracketed within the bottom 70.0 per cent of India’s population unless of course they are evicted from their base like forests-hills-rivers. Other than the Adivasis, immediately post-Demonetization, I asked the roadside self-engaged sellers of Roti-Sabji how it would affect them – the response was ‘No Effect’ for each one earned then less than Rs. 500/- per day in the city of Allahabad. So was the response of the rickshaw pullers in the same city. Exclusion of most of the bottom section may not affect them much for they will be adversely included in the economy as temporary sweepers, cook, domestic assistants, and vendors. Exclusion matters when the section actually excluded feels excluded that is not acceptable to them.

As I understand, Indian economy is India’s political economy a part of which is culturally cocooned or a reflection of confluence of polity and culture. In some regions in India (read heartland) culture becomes public economics that remains engaged in public rituals often state-supported. I find concerns for rate of growth of GDP in ruling statisticians that does not carry much ethical meaning for the more the GDP the more the disproportionate share of the section minus the bottom 70.0 per cent at the least. It is vulgar that one per cent of India’s population own half the national wealth unless some of them take ‘’Quit India’’ route. But economics is not ethics. The concern for GDP is to make it appear acceptable that the higher the GDP the better is the scope for higher share of the bottom sections of population notwithstanding the elite consensus on failure of ‘’trickle down’’ so far. The students in social sciences, however, are not taught generally to differentiate between the gainers for the Pareto-type frame is religiously taught in classroom that ignore initial conditions. Continuous communications with the people at the bottom by economic ladder will make the point clear that they are not bothered about GDP or its growth.

Let me come to real issues now - the monotonically declining share of the farmers in GDP or continuity in unnumbered farmers’ suicide, or the idle assets seen as NPAs with the Banking system, or unaccounted money-flight. I abstain from calculating unemployment as headcount for most of the population in India have been historically seen as disguised unemployed and self-employed and self-engaged. I did not find any worker who received unemployment allowance in MNREGA.  

I don’t have any doubt that the present political regime is absolutely against finance-corruption and determined to unearth black money. The question remains, where does this money unearthed go? One, it could enhance MNREGA budget to actually encompass households by works for a minimum of 100 days per year; two, it could replenish the unpaid loans taken by farmers (small-marginal) declaring loan waiver; third, it could go to set up one million primary school in villages and in slums; fourth, it could engage the youth in public works in urban India.  It is a different question why the academic elite stopped talking about land reforms, security of the Kishans, facilitating rural artisans, ensuring rights of the forest-dwellers in their livelihood and all that.

An economy is what people make it. An organized economy is what the state makes. The ‘’economy matters’’ means thus different things to different sections: for the society it envelopes the geographic space or nature itself while for the state it is commodity space. In social economy the people remain with the domestic animals (called livestock), trees and plants, water, non-timber forest produce, indigenous knowledge (including faith-belief) to live in a non-comparative non-competitive frame. In (anti-social?) economy the commodity captures nature, excludes people and self-glorifies commoditization by different indicators some of which are GDP growth rate, Stock Market results, tax collected, unearthing black money and all that.

Though I plead for state-led economic security of all, I have reasons to accept that the state may fail in ensuring that for all may not be active for the purpose equally as the ruling polity desires. Also a segment of the society may not be at one with the state economic policies. Though economic acts are disintegrable from ruling policies of the polity, the economy matters only when the latter thinks its vote-bank may be vote-slip or vote-slide. Till date I do not find much reason why the ruling polity should feel shaky on the economy front.  

Bhaskar Majumder, Professor of Economics, G. B. Pant Social Science Institute, Allahabad - 211019

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Oct 14, 2019


Bhaskar Majumder [email protected]

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