Mani8217;s misplaced Aiyar

Mani argues, again with sagacity, that a higher growth in employment can take place only if agriculture and the unorganized sector are allowed to race ahead. Sadly, agricultural growth, he says, has actually fallen from the last decade of the Nehruvian model to the first decade of the Roavian model of economic reforms. The problem is that Mani hasn8217;t bothered to look at the other set of statistics in last week8217;s column, which have a lot to do with politicians such as him. Take agriculture. The crux of the problem of low growth is the poor level of investment in the sectorsince the early nineties, in real terms, public investment here has fallen, and though private investment has risen, the total has stagnated. Nor is it that the government is not investing in agriculture anymore, but that due to demands of Mani8217;s brethren, around half the amount spent goes in subsidies 8212; more than half of which don8217;t even reach the targeted class.

Politicians like Mani, for instance, don8217;t allow farmers to be charged even to the extent of recovering the cost involved in just maintaining canal systems. As a result, most canal systems in the country don8217;t even deliver a fraction of the water they should. Naturally, growth is a casualty.

Similarly, as stated in this column last week, close to 55 per cent of last year8217;s Rs 9,000 crore subsidy on urea went not to the farmers, but to prop up inefficient fertiliser units. If, for the past two decades, fertilisers had been imported, with absolutely no change in the prices paid by the farmers, the government would have saved a third of the total expenses of several tens of thousands of crore.

Pity, the country8217;s farmers don8217;t realise how politicians like Mani have short-changed them and instead look upon them as their protectors. A similarly sad story is that of the public sector, once again ostensibly set up to help growth. Apart from the fact that employment in this sector fell from 1.52 per cent in 1991 to a negative 0.1 per cent in 1998, is the issue of the losses PSUs incur. In 1996-97, the government earned Rs 10,258 crore on the Rs 2,02,021 crore invested in central PSUs compare this with even the interest paid by the government on its borrowings, and the PSUs lose around Rs 14,000 crore a year.

Similarly, in order to protect domestic industry, the ideal that Mani espouses is continuing with the old system of import curbs and high duties. Never mind that this in turn hiked prices of raw materials and made India8217;s exports less competitive. India8217;s share in global exports fell from 0.61 per cent in 1977 to 0.47 in 1986, but grew each year that import duties were reduced from 1991 to 1996. And since most of our exports, such as textiles, are labour-intensive, the employment impact of this policy are obvious. Mani may love to talk of Chinese ghettoes and prison labour, but there8217;s no denying that if India had China8217;s kind of export growth in textiles the two countries were on a par once, its earnings would have been 25 bn higher, and that would also have meant a major growth in employment.

Sadly, even people like Manmohan Singh, P. Chidambaram and Yashwant Sinha, haven8217;t been able to break the back of this crucial aspect of our warped socialism. That8217;s why the first decade of reforms haven8217;t yielded the kind of results we hoped for. And the future of reforms seems bleak with even leaders like Manmohan slipping into Mani8217;s kind of political doublespeak.

Manmohan talks of reforms with a human face8217;, though he knows full well that the old system hit precisely those very humans. Expecting change from this generation of politicians is, perhaps, to use Mani8217;s elegant turn of phrase, not a rational expectation.