Small-scale hurdles News Archive News

Where wealth accumulates and men decay: study the quotas in a government order on small enterprises

Written by Bibekdebroy

June 11, 2007 12:00 AM IST

7 min read

Here is a quote from an office memorandum issued on May 21 by the International Cooperation Section of ministry of micro, small and medium enterprises MSME. 8220;Ministry of MSME and its organisations, viz SIDO, NSIC, KVIC and Coir Board have been facilitating participation of micro, small, KVI and coir units/entrepreneurs in international exhibitions under their respective schemes. Often, the ministry, SIDO, NSIC, KVIC and Coir Board participate in the same exhibition from different pavilions and there is no coordination amongst them.8221; So everything is going to be under an MSME umbrella, to increase synergy and spread costs. I am not convinced. By the same token, one can argue that MSME should be scrapped and all industry policies unified under a single ministry of industry. However, let8217;s read on. Financial assistance consists of DA hotel charges, space rent and travel expenses. For space rent, 8220;Up to 50 per cent of the space rent actually paid. In case of women entrepreneurs/SC 038; ST entrepreneurs and entrepreneurs from the North Eastern Region, up to 100 per cent.8221; For travel expenses, 8220;Up to 75 per cent of the airfare by economy class or train fare, as the case may be. In case of women entrepreneurs/SC 038; ST entrepreneurs and entrepreneurs from the North Eastern Region, up to 100 per cent of the airfare by economy class or train fare actually paid8221;.

Rather remarkably, there is no differentiation in DA/hotel charges, probably because of oversight. Also, 8220;at least 22.5 per cent of the entrepreneurs/exporters/institutions/SHGs sponsored for participation in international fairs and exhibitions should belong to the SC/ST category. 30 per cent of the entrepreneurs/exporters/institutions/SHGs sponsored for participation in international fairs and exhibitions should be women, 15 per cent should belong to Minority category, while 10 per cent should be from North Eastern Region. 22.5 per cent of the officers/ representatives being deputed for these events from the Ministry, SIDO, NSIC, KVIC and Coir Board should be from SC/ST category8221;. Price incentives and quotas simultaneously. Isn8217;t this taking reservations a bit too far? Perhaps not. There is the PM8217;s speech to the CII, where he quoted Oliver Goldsmith: 8220;Ill fares the land, to hastening ills a prey,/ Where wealth accumulates, and men decay.8221; I am sorry. I got the speeches mixed up. This was the December 16, 2005 speech. I had in mind the May 24, 2007 speech. Industry must 8220;resist excessive remuneration to promoters and senior executives and discourage conspicuous consumption. In a country with extreme poverty, industry needs to be moderate in the emoluments levels it adopts. Rising income and wealth inequalities, if not matched by a corresponding rise of incomes across the nation, can lead to social unrest.8221;

Industry remuneration is a shareholder issue, unless we return to pre-1991 days. But consider the broader point. Is there evidence of rising income and wealth inequalities in India? We look at the Forbes billionaires list and Mukesh Ambani8217;s net worth of 20.1 billion and deduce wealth inequality must have increased. Only 82 countries have GDP more than that, and Malawi8217;s GDP is only 2.2 billion! There is a double problem with this argument. First, this Forbes-type list depends on capital market valuations and, second, one shouldn8217;t compare a stock like wealth with a flow like GDP or income. Since data on wealth are impossible to get, one doesn8217;t know whether wealth inequality has increased. According to Human Development Report, India8217;s income inequality measured by Gini coefficient is 32.5 and there is no evidence of this having increased. Indeed, it is significantly lower than 44.7 in China. At 7.3, the ratio of expenditure of the richest 10 per cent to poorest 10 per cent in India is also lower than China8217;s 18.4 and, again, there is no evidence of this having increased. We are still waiting for detailed data from 2004-05 NSSO to be made public. In their absence, the conclusion is unambiguous. The assertion that there are rising income and wealth inequalities isn8217;t proven. Barring STs, who tend to be geographically concentrated, it is impossible to establish this even for categories like SCs, women, minorities or across geographical regions. And if one moves to non-income indicators of inequality, like education, the case for increased inequality becomes weaker still.

There was a second proposition in the PM8217;s May 2007 speech. Increased economic inequality leads to social unrest. A sense of economic deprivation leads to individual discontentment. For this to metamorphose into social unrest, the discontentment must become collective. This is the revolutionary stuff Marxist dreams are made of. Barring issues of land acquisition and compensation, is there any evidence of class-type economic discontentment leading to collective social unrest in India? Almost none, barring tribal areas where Naxalite movements are concentrated and where there is crisis of governance. Mis-governance 8212; lack of physical and social infrastructure, law and order, and so on 8212; isn8217;t quite an inequality issue. There are certainly individuals who are deprived, those who have been bypassed in trickle-down. However, if one addresses the twin issues of women-headed households and aged people, the bulk of BPL households will be addressed. This means, collective social unrest isn8217;t driven by economic reasons. It is driven by social and political reasons. The Gurjjar protests are a case in point.

A 21st-century government should recognise deprivation as an individual issue and defuse collective tension based on caste/religion. Apart from anything else, whenever there is attempt to segregate, mainstreaming never occurs and deprivation becomes permanent. Contrast economic development in special category Article 370 and 371 states with Goa. Rather paradoxically, they are in a part of the Constitution titled 8216;Temporary, Transitional and Special Provisions8217;. Caste and religion are attributes that should remain in the private domain, irrelevant for public policy purposes. What should be relevant for policy is deprivation based on class. Governments permitting, that is precisely what would have happened thanks to growth and urbanisation. But governments won8217;t permit and will intervene to encourage this collective caste cum religious identity. This isn8217;t an MSME problem. It8217;s a mindset that the UPA government has encouraged across the board: 22.5 per cent of public sector bank accounts must be for SC/STs, 27 per cent for OBCs, 30 per cent for women, a yet-undetermined figure a commission will decide for the Northeast. Ditto for petrol obtained from public sector petrol pumps, gas connections, MTNL/BSNL connections, vehicles using public roads, and so on. The possibilities are infinite. In December 2005, PM didn8217;t quote the relevant lines from Goldsmith8217;s 8216;The Deserted Village8217;. 8220;Even now the devastation is begun,/ And half the business of destruction done.8221; Wait for that to be completed.

Tags: