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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    Aditya Nikam
    Jan 15, 2014 at 1:04 pm
    You have clearly missed the point of the article
    Reply
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      AKS
      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.
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        Akshay
        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!
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          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.
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            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.
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              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.
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                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.
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                  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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                    Deepak Lal
                    Jan 19, 2014 at 11:35 pm
                    This Prime Minister is an extremely over-rated economist and an equally extremely under-rated politician. The "extremity" consists of his inordinate capacity to lie. As an economist, a reborn neo-liberal, the rascal is incapable of moral judgment - extreme utilitarianism was always incapable of admitting to any moral aspects of social life that are not included in easily quantifiable welfare calculus. No wonder he can come up with gems such as "political stability is more important than fighting corruption" and can then have his chela, that tuppenny economist Sanjay Baru write a supposedly scholarly article about it. As a politician, an in-bred bureaucrat, the rogue is incapable of speaking the truth. That explains his obfuscation about "coalition dharma" and turning the 2G spectrum losses into a "welfare program". His supposedly great intellect, as an economist, is purely a media created encomium. You ask any one to name two really serious articles, whether theoretical or empirical, ever written by this guy, which have added even an iota to the literature in economics, and they would invariably come up short on answers. His much acclaimed "husbanding of India's reforms" 20 years ago was more of an imposed order, with a wee bit of deft political handling by P.V. Narasimha Rao, his then boss. In terms of probity, it is time that this country began to reess the parameters on which "probity" has to be judged. Mere absence of visible lack of integrity vis-a-vis public funding, in terms of lining ones pockets, is not enough. One, leadership is about probity in many respects, including probity of governance model that one allows to develop under ones watch. A "whatever will be will be" economist obviously would not even begin to have a conception of what that means. Equally importantly, let us not forget the fact that "coalition dharma" that allows the looting and per of the nation also continues to keep him in a position of power.an extremely under-rated politician, because he has demonstrated an inordinate capacity to sacrifice public interest for his own tenure as a prime minister. As it was said in 70's, Kissa is still about the kursi.
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                      Deepak Lal
                      Jan 19, 2014 at 11:36 pm
                      Wikileaks show US diplomats effectively united with their local counterparts against a common enemy: the people – whether the people take the form of anti-war activists, jurors or voters in an upcoming election.manmohan singh and monteck ahulawali a are such traitors in India.sadly bjp is corrupt as well and traitor, it was bjp and manmoahsn singh who were instrumental in removing natwar singh from foreign msintery and keralite msinter aiyayr from oil minstry because they awere acting in Indian interest in foreign and oil minstries which was not liked by americans so americans ordered manmoahn signh and his bjp freinds to make life for those msinters and made them quit.these minions to spread rumour in order to throw those ministers out9they were loyal congressi and loyal to sonia hi-still they had to go becausetraitor manmoans ingh wanted them go).. Ayaar and natwar were ones of the few non traitors in the cabinet.other patriot is from kerala too the defence minister.. Most of the punjabi coterie there are traitors like manmaohsn singh, mantack ahulalwalai and sibal who are corrupt and in traitors and are just pimps for angloamericans. sadly the punjabi coteire of gaddars are a lot in bjp too ike shshma swaraj, arn jetley-the unelected.there msut a a rule that no rajya sabha memebr can be a priemmsinter (which viz-indra hi case in 1976 rule was already there) and no rajya sabha mebr can be a cabinet minister. if you cannot get yourself elelcted then how can you be a leader of even twenty people let alone 1.2 billions humans.?
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                        Deepak Lal
                        Jan 19, 2014 at 11:34 pm
                        manmoahnsingh is NOT a spinessless puppet -he isthe REAL EVIL man who has presided overselling of india to americans because he is an american agent ,indianare fool in thinking that he is innocent and sonia is evil itis the other wayround-he is more foreiners agent than sonia-if he could get nuclear deal pssedwith bribery and in hurry in parlaiment then what stops him from bringinglokpal bill through presidentail decree?
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                          Deepak Lal
                          Jan 16, 2014 at 4:43 pm
                          so burdenign the common men with taxes and diesel prices whiloe enriching the parasite business cl is your definition of progressd. that is why mmsingh msut be tired in court and hnaged for his high treason agasint india ebcause he destr indian defense, nuckear and missile capability by 25 years.
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                            Deepak Lal
                            Jan 16, 2014 at 4:36 pm
                            that is why I always said do not trust NRIs AND DO not GIVE THEM UNDUE IMPORTANCE OR INFULENCE-they are the baits by which uk./usa has again infiltrated as cancer .Half of the Indian establishment is in bed with USthe w elite-Maino,Vinci,"Aiyar",Sibal,MMS,Prannoy Roy,Scindhia,NRam,esai,Deora,Arun Jaitley,Maarans,Karus,EJ NGOs,Jaswant Singhs,Jagan/TDP have US-UK conection-children in US in positively harmful liberal arts colleges/law colleges.so long as this circus of all critical parts of the indian power elite 'placing' their sons/daughters via marriage and immigration into the US does not end, this unequal treatment will continue. even MMS daughter who last I heard was a ACLU lawyer is probably carrying a american pport by now! not having foreign entanglements must be strictly enforced for higher levels of babus and political appointees.our elites can do nothing - not the congi regime for sure. and all the senior babus have their sons/daughters/bhatijas in the US.
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                              Deepak Lal
                              Jan 16, 2014 at 4:35 pm
                              “I hadwritten to the PMO way back in 2004 that coal blocks should be given through anauction. But the policy has been implemented now in 2012 and till date, noteven a single coal block has been allocated through auction. The governmentlost a lot of money by giving coal mines using the existing system.”Butthen, the PM himself advised that instead of waiting indefinitely, it is betterwe go ahead (with the allocations)," he said
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                                Dr.Kylasanatha Pillay
                                Jan 16, 2014 at 3:52 pm
                                Manmohan Sing ,his policies,governance,and programe during the last 10 years made India stand where it stood in 2004.The misrule made India degenerate due to rampant corruption.We hear a lot about Manmohanomics. It is fodder to onlookers,but to ordinary Indians it is a chimera.His record is one of a decade of human rights violationsdia remains static sans any perceptible development "like a painted ship on a painted sea"
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                                  Ara
                                  Jan 14, 2014 at 8:44 pm
                                  While a lot of Indians are not sure of Manmohan Singh, the foreign correspondent is way off the mark. He has absolutely no idea, what has happened in India, in the last 10 years. Sad, but true.
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                                    Gautam Majumdar
                                    Jan 14, 2014 at 7:26 pm
                                    MMS's consuency in am sent him to Rajya Sabha for 3 terms. he hasn't done anything for am nor his consuency. He clearly lacks leadership skills as UPA 2 has exposed. It was Narasimha Rao who had the political will for the break through. If MMS has his way he would pull India back to days of socialism as NREGA and Food Security bill have shown. He should remains within the confines of academia.
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                                      Gopikrishna Deshpande
                                      Jan 15, 2014 at 1:23 am
                                      Well, if we had persisted with socialistic policies, then the urban MPCE would have come down and the gap reduced. The gap in MPCE is not important, what is important is that everyone rises above where they were. There lies the success of capitalism and trickle down economics. Would a poor man rather be happy to see a rich man become less rich or would he be happy to let a rich man become much more rich than how much less poorer he became? The answer is obvious (it is the latter). So, the discussion about the gap is an academic exercise by lefist and socialist intellectuals
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                                        samvadi
                                        Jan 16, 2014 at 11:16 am
                                        MMS was right when he said that history will be kinder to him. It will indeed be, no matter who writes it. In the last 10 years, his most important achievement has been to ensure that the country has not marched backwards into Licence Raj again - because there was always a Left leaning NAC breathing down his neck. In the UPA-I he had Left parties in government to deal with. He has somehow ensured that even the the "story" out of the India's "growth story" might has vanished, but actual growth did not. To expect anything more than that would be a illusory.
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                                          jamal
                                          Jan 14, 2014 at 7:43 am
                                          History cannot be rewritten. The w credit goes to MMS who is the pioneer in unleashing reforms in this country when he as FM and PM Narasimha Rao just approved that. And also note that 10 years of MMS as PM, India achieved highest Growth in GDP than any other Govts in the past whether it being UPA 1 or 2 in comparison with Shining india's slogan of NDA's rule.
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                                            MOHAN RAJ
                                            Jan 15, 2014 at 7:10 am
                                            1. There is nothing like "Manmohanomics". MMS just implemented the ideas of Narasimha Rao. It should be "Raonomics" if you want to give a name to.2. MMS is a glorified Buerocrat who can only implement somebody's ideas. He has proven this in last 10 years.3. Nobody has benefited from any economics. India has been mis ruled by Congress for last 65 years and this is the hard fact
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