The two Indias

The fact that a rising trend in economic growth, in the short-term, leads to increasing inequality, is an old hat. After all, it is common knowledge that a boom in the markets generate wealth, not equity and redistribution. Attempting to achieve greater equality even in classical political economy was supposed to be a function of state intervention. What is, however, surprising is that today even the market-friendly World Bank admits it. The Bank8217;s world development report 2000-2001, notes that while India8217;s gross domestic product GDP grew in the 1990s by 6.1 per cent, the decline in poverty levels has been rather sluggish. In fact, the bank recommends a comprehensive and direct approach involving quot;opportunity, empowerment and security.quot; This would certainly come as a big blow for those who still continue to believe in the wonders of trickle-down economics.8217;Acirc;micro;What is especially disturbing is the discovery of a dangerous trend in the inequality: the increasing hiatus between the urban and the rural areas. In fact, the bank report on quot;attacking povertyquot; quotes National Account Statistics NAS to argue that the signs of rising inequality is mainly due to rising average consumption in the urban areas but not in the rural areas. This surely provides credibility to the argument that modern development has led to the emergence of two Indias: the rural versus the urban, the poor versus the rich. The kisan leader Sharad Joshi had aptly described it as Bharat versus India. The one time rhetoric has today uncomfortably been proved true. What are then the lessons to be learnt from such a revelation? First, with two-thirds of the population still continuing to eke out a living from agriculture even after half a century of independence and given a slower rate of poverty reduction in the rural areas, the task of poverty alleviation is surely gigantic. We need to go on a warfooting to tackle endemic poverty in the rural areas.Acirc;micro;Second, a precondition for a successful democracy, according to the noted political sociologist Barrington Moore, has been a successful alliance between the urban middle classes and the rural peasantry. This cannot come about if the few cities continue to prosper while the millions of villages suffer. Finally, if poverty reduction became sluggish during the 1990s and given that the 1990s were the reform years, such a discovery would immediately lead those against reforms to argue: quot;I told you so.quot; But on careful consideration it will be abundantly clear that one cannot blame the reforms for the slow process of poverty alleviation, especially in the rural areas. The markets have indeed performed. Consider the following: India in the 8217;90s have moved much beyond the sluggish Hindu rate of growth; today the World Bank admits that India is the fourth largest economy in the world going by purchasing power parity estimates. But why does India continue to house the world8217;s largest poor? The state is the real culprit.Instead of investing in education, public health and empowering the poor by rebuilding their entitlements, the state continued to regulate and throttle the markets for the first four decades. Today, instead of planning out the strategies of long-term poverty alleviation, it has even abandoned the basics of governance.