The politics of Manmohanomics

The middle class that has benefited the most is also Singh’s biggest critic.

Published:January 14, 2014 4:56 am
Figures show that more than 20 years of economic reforms, initiated by Singh but pursued by all governments, in spite  of corrective mechanisms such as the MGNREGA, have resulted in greater inequality. IE Figures show that more than 20 years of economic reforms, initiated by Singh but pursued by all governments, in spite
of corrective mechanisms such as the MGNREGA, have resulted in greater inequality. IE

The middle class that has benefited the most is also Singh’s biggest critic

In his latest press conference, Prime Minister Manmohan Singh declared that “history will be kinder to me than the contemporary media, or for that matter, the opposition parties in Parliament”. He is probably right, not only because he is the first PM since Jawaharlal Nehru to complete two five-year terms in a row, but also because Singh has had a huge impact on Indian society by orchestrating major economic reforms from 1991 onwards. The man is also refreshingly modest.

But it’s time to take stock not only of the achievements, but also the limitations of almost 23 years of “Manmohanomics”. One of the basic assumptions during the dismantling of the licence/ permit raj era in the 1990s, when the state-owned economic model had clearly exhausted its potential, harked back to the trickle-down theory. This theory holds that once liberalisation measures re-energise private sector entrepreneurship, a rise in the growth rate also benefits the bottom of the pyramid. The question is how much the bottom benefits. In his first speech after taking over as president, Pranab Mukherjee declared in July 2012 that “trickle-down theories do not address the legitimate aspirations of the poor”.

What kind of indicators can we use to substantiate this claim — or its opposite? The controversy around the poverty line suggests that a simple evaluation based on the numbers of absolute poor may not be the most suitable. It is also not the most relevant measure of inequality, which is key to test the validity of the trickle-down theory. Certainly, the percentage of Indians below the poverty line declined from 37 per cent in 2004-05 to 29.8 per cent in 2009-10. But has the gap between rich and poor narrowed? How much wealth has really percolated down? To answer such questions, it is preferable to rely on National Sample Survey Organisation data and more specifically, to its calculation of monthly per capita expenditures (MPCE). This indicator offers an instrument by which to measure the evolution of the standard of living and of inequality.

In 1993-94, the average MPCE was Rs 281 in rural India and Rs 458 in urban India. They rose, respectively, to Rs 772 (+174 per cent) and Rs 1,472 (+221 per cent) in 2007-08, which means that the gap between urban and rural areas has jumped from 63 to 91 per cent.The gap diminished somewhat between 2007-08 and 2011-12, with rural MPCE reaching Rs 1,430 (+85 per cent) and urban MPCE rising to Rs 2,630 (+79 per cent), but it remained more than 20 percentage points higher than what it was in 1993-94, at 84 per cent. The gap between rural and urban areas has become particularly pronounced in states where cities have boomed, like Karnataka, with the Bangalore phenomenon, and where, the gap between rural and urban MPCE has increased from 57 to 93.5 per cent.

But we must look beyond the urban/ rural divide and examine the increasingly alarming difference that exists among villages state-wise. If we concentrate on the 15 largest states of India, we see that in 1993-94, the rural MPCE of those above average (Haryana, Rajasthan, Gujarat, Andhra Pradesh, Tamil Nadu, Punjab and Kerala), all located in the south and west, was Rs 345, when the rural MPCE of the states below average (Karnataka, Uttar Pradesh, West Bengal, Madhya Pradesh, Orissa, Maharashtra, Assam and Bihar), was Rs 255. Almost 20 years later, in 2011-12, the rural MPCE of the above average states (the same as in 1993-94, plus Karnataka and Maharashtra, which have improved) jumped to Rs 1,883, while that of the others (the same as in 1993-94, including the newly created Jharkhand and Chhattisgarh) was only Rs 1,122. This means that the gap between villages in the richest parts of rural India and those in the poorest parts of rural India has jumped from 35 to 68 per cent.

The situation has not changed so dramatically in urban India, but the trend is the same. In 1993-94, the MPCE of the above average states (Haryana, West Bengal, Maharashtra, Assam, Punjab and Kerala) was Rs 490, whereas in those below average (Karnataka, Uttar Pradesh, Rajasthan, Gujarat, Madhya Pradesh, Andhra Pradesh, Orissa, Tamil Nadu and Bihar), it was Rs 360. In 2011-12, the urban MPCE of the above average states (the same as in 1993-94, plus Karnataka and Andhra Pradesh and minus Assam and West Bengal) was Rs 3,153, whereas in those below average, it was Rs 2,170. This means that the gap between citizens in the richest parts of urban India and those in the poorest parts of urban India has increased from 36 to 45 per cent.

These figures show that more than 20 years of economic reforms, initiated by Singh but pursued by all governments, in spite of corrective mechanisms such as the MGNREGA, have resulted in greater inequality. This trend is in contrast to the decade between 1983 and 1993-94, when the percentage of those below the poverty line declined by 9.8 percentage points, while it was reduced by only 8.3 percentage points over the following 10 years.

This is quite understandable. First, rural residents were bound to lag behind given the slow growth of agriculture. Over the years 2005-06 and 2011-12, the average annual growth rate of industry at 2004-05 prices has been 7.5 per cent, while services grew at an ever-quicker pace — 9.95 per cent. Agriculture lagged behind at 3.8 per cent. These figures reflect the government’s lack of interest in agriculture, which has resulted in declining investment (in irrigation, for instance) and diminishing subsidies (for instance, for fertilisers).

Second, liberalisation allows those who have some capital — be it in terms of education, land or money — to invest and flourish while others have to wait for the trickle-down effect. Now, this percolation is only possible in geographical terms when the rich can invest where the poor live. Logically, they should be incentivised to do so the moment the cost of labour rises in the most developed parts of the country, but infrastructure (electricity, roads) is often lacking elsewhere. Instead, the poor go to the richest areas, as migration flows show.

The rise of inequality in India may not be what Singh will be remembered for in history, but it has probably been the most striking consequence of the trickle-down theory. After two decades of liberalisation, investment in agriculture and infrastructure is key. Only the state can undertake such investment. The fiscal reform that would make it possible may well be the need of the day to create jobs, not only in the cities where industry needs to grow, but also in villages.

Ironically, the very same middle class that has benefited most from Manmohanomics, as evident from the social inequalities described above, is the most critical of Singh.

The writer is senior research fellow at CERI-Sciences Po/ CNRS, Paris,
professor of Indian Politics and Sociology at King’s India Institute, London, Princeton Global Scholar and non-resident scholar at Carnegie Endowment for International Peace

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  1. A
    Aditya Nikam
    Jan 15, 2014 at 1:04 pm
    You have clearly missed the point of the article
  2. A
    Jan 17, 2014 at 7:39 am
    History has already been written and can not be undone by advers. MMS has been good executor of the policies of his bosses. Whether its Rao or SoGa. Now we need to judge his bosses.
  3. A
    Jan 15, 2014 at 2:00 pm
    Well after reading this article I can only say that a lot of effort has been put to glorify Mr. Manmohan Singh for something which happened many decades ago, without considering if those were reactive actions due to debt and poor economic condition of India that time. How can someone justify a weak PM who didn't take any right measure to handle corruption in his own cabinet, even in his own office but was a so called good FM some decades ago!
  4. D
    Deepak Lal
    Jan 16, 2014 at 4:34 pm
    11.11.2013.biggest crime of congress is that though sonia hi won the elelction -not by a wide margin but she won it-she handed over India to a traitor sardar manmohan singh the known agent of americans and british -whose history of treachery was known-that is the biggest crime of cognress. In that crime the role of deable shushma swaraj of bjp the ugly was well known. This mmsingh kutta has been worse than all traitors combined in last 300 years.the bideshi woman not only won election but is less treacherous than many hindus and sikhs today in indian govt.
  5. D
    Deepak Lal
    Jan 19, 2014 at 11:37 pm
    2007a great misconception is that so caled liberalization and globalization was brought to india by this manmohan singh. In fact soon after victory in iraq war in febraury 1991 the bush no. first declared a new world order in which he explicitly said that he will open up the world for american business. In fact his trade seccratary immeditealy announced that she will make sure that america open up the thighs of thrid world countries as a slowly and surely to american business(true analogy to a rape)-that was given the name liberalization and globalization for which the british and americans had been working since 1986. What was left for america to do was install maleable stooges inside the thrirld world countries. escpeally those types who are unelctable and have no m base of their own-- in other words who are not elelctable democratically but installed from above through media and other manitions.this manmohan singh in india fulffiled that criteria of being unliked and unelctable insignificant person who was willing to act on arder of his american masters -if they had asked him to turn communist he would have done that.It is a sad refletion on india that since 1986 we have has only weaklings as our prime minsiters and finance ministers not to speak of non mentionable defence ministers who made sure that indians nuclear and missle programme got stuck at 1986.
  6. D
    Deepak Lal
    Jan 16, 2014 at 4:33 pm
    21st decemeber 2013dia bribes usa with arms deal with wishful thinking by petdog(kutta really) mmsingh the unelectablestead of boycotting americans goods and espceially easily to be spied uopn american arms this mmsingh the pet dog -kutta -has dared to show two fingers to Indian sentiments by favouring americans with another arms deal worth thoiusand of crores of Rupees! how shameless and how corrupt media is in india not to have rqaised about the loylaty and treachery of this mmsingh who msut be kicked out and then tried and hanged publicy for his treason.but no. ! Even rahul hi is going to get approval from Ficci ! The same Ficci whose once president someone called a singh(a punjabi again!) -the chairman of Ficci was pestering rajiv hi to make all concession to china in the period from 1985 to 1988 so much (and english media was with him) - that at one this very week 25 years ago rajiv hi went to china and said that Tibet is really a conuent part of China and India has no objection to that"-all because of pestering from Ficci and other trade bodies because at that time america wanted India ot be freindly to china and stan and be keeping distance from Russia who had supplied India with latest fighters the MIg 29 ! (at that time america had ignored all protest from india about nuclear programme of stan from 1986 TO 1988) .Such are the traitors in the business commniuty of India ! now tehse same busines cl has infiltrated and become misnters and in collboration with some fucntionaries they are looting india and siphoning off money to London banks and other british off s pirate islands.
  7. D
    Deepak Lal
    Jan 16, 2014 at 4:33 pm
    MMS has done his best to be the best pal of the US and is now reaping his love for it just as other bum-chums of the US did in the past..His indecent haste in pursuing the N-deal and the manner in which it was driven through parliament speaks for itself.Under his stewardship,we've abdicated our foreign policy to the US especially on Pak,compromising without any reduction in terror.Many decisions on defence also have been dela allegedly by the US according to sources in Delhi,including the Rafale deal Would the US have treated any of the diplomats from a "white" 4-eyes only" nation such as the UK,Canada,Oz or NZ or its western NATO allies for such a minor alleged offence,or interfered with India's judiciary to virtually smuggle out the maid and her family to the US as such? When India kept mum over the espionage activities of a US diplomat caught in the act and quietly sent him home,is this how we are treated in return? in the desi elite minds, the Anglos cannot be tarnished like that. they take it as a reflection on themselves, in a twisted way. they feel a serious threat to their own standing if the "Anglo" image is brought down.Feel very sorry for Devyani, it is an abject lesson to all Indian middle-cl aspirants as to what USA is all about. We didn't learn it the right way during the needless war on Iraqi civilians and when an old ally Saddam was executed, there were people tomtoming about some 'Indian growth story' and we still didn't learn during war in Syria or when Gaddafi was tortured in Libya. So now the evil ahs landed at our doorsteps and we have no options but to learn it the hard way. US is a police state in control of Sauron with very little oversight and a few puppets as frontmendia media carry US news since Indian media is controlled by US eniesince all Indian media (at least English language ones) carry a lot of US news as their headlines,only if they had ben patriotic for India , they should be reporting every indecent search and arrest procedures that happen regularly in the US to their citizens. Compile and write articles on incarceration rates and other petty crime rates. It is quite easy to do, even the local editions of US papers carry crime stats regularly by county/city district. Our media folks need to step up to such columns with pictures and numbers to make others uneasy.
  8. D
    Deepak Lal
    Jan 16, 2014 at 4:33 pm
    NaMo should go ballistic on the UPA for signing Hercules deal days after an Indian woman diplomat was subject to custodial rape in a US jailGiving Rs 4000 crore gift for raping an Indian diplomat shows how deeply USA has peneterated (pun intended) top leadership of IndiaApproving the Rs. 4000 Crore purchase of C-130s should be used by Modi to drag Manmohan Singh face-down through the gravel for the slavish opportunist he is.
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