Trickle-down economics and implications for development and displacement

Proponents of trickle-down economics believe that more investment in the corporate sector means more factories, and, as a result, more employment opportunities. Many economists also argue that the rise in economic growth rates is associated with a decline in poverty.

However, after the 1970s, it was seen that despite high economic growth, hundreds of millions of people in the developing countries remained in abject poverty. It underscored the need for development policies that are more targeted towards employment creation, better distribution of resources, and reduction of poverty.

Economic growth and poverty reduction

In India, the trickle-down economic approach in recent years is evident in its policies that prioritise corporate incentives over welfare spending. For instance, the government has reduced spending on welfare programmes like: 

— Nutritional social assistance programme. 

— School mid-day meal programme.

— Price stabilization fund scheme.

— Liquified petroleum gas (LPG) direct benefit transfer.

— Skill development scheme.

— Pradhan Mantri Awas Yojana. 

— Schemes targeted at farmers like interest-subsidy on short-term credit, fertilizer subsidies, and procurement of food grains.

However, empirical evidence suggests that a reduction in corporate taxes does not create desired corporate investment. Rather, such tax reductions often lead to widening income as well as consumption inequalities. Moreover, it has also been pointed out that the population belonging to the most socially and economically disadvantaged groups, like Scheduled Castes (SCs), Scheduled Tribes (STs), Other Backward Classes (OBCs), minority groups, women, and children, have benefited the least from high economic growth.

Expropriation of natural resources

Another facet of such trickle-down growth policies is “land grabbing”. In this context, the term “land grab” refers to the expropriation of natural resources, including land and forest, characterised by various forms of property rights including de jure ownership and de facto possession. In India, land grabbing is often accompanied by displacement and land alienation. 

Historically, the Nehruvian model of development, with its focus on modernisation, large-scale infrastructure, and institutional transformation, has created a process of “development-induced displacement”, especially in the tribal belt of India. The Indian State has pursued numerous development-oriented projects since its independence. These include irrigation and power projects, industrial projects, mining projects, forest and wildlife conservation projects, etc. Such projects displace the local indigenous people from resource-rich areas. 

For instance, P. Sainath in his book, Everybody Loves a Good Drought, cited that 1 in every 10 Indian tribals is a displaced person. Moreover, over 40 per cent of people displaced by development projects are tribals, despite constituting only around 8.6 per cent of India’s population. 

The case of Jharkhand 

The case of Jharkhand illustrates the problem. Around 26 per cent of the state’s population belongs to tribal communities. The state is also rich in key minerals like coal, bauxite, iron ore, copper ore, gold ore, limestone, and graphite. 

Coal mines are located in 12 out of its total 24 districts, and more than 75,000 hectares of land have been acquired for coal mining alone. Private companies have been allocated several of these coal blocks, while bauxite and iron ore mining remain equally intensive. The development of such mining projects goes hand-in-hand with the displacement of the local people. 

The only form of compensation provided to displaced people is largely monetary, which is calculated on the basis of the market value of the land at the time the government declares its intent to acquire it, rather than at the time of actual acquisition. But this monetary compensation is often not enough, as it does not take into account the loss of identity, natural resources, forests, and other non-material things. 

Moreover, displacement also leads to homelessness, joblessness, food insecurity, the loss of common property, social disintegration, and increased morbidity and mortality. Further, the factories and the employment opportunities generated by such projects often exclude the very people who are displaced by them. 

Special Economic Zones

The Special Economic Zone (SEZ) Act of 2005, enacted by the central government, is another case in point. The SEZs constitute economic enclaves with minimal taxes, tariffs, and regulations in order to promote exports, attract Foreign Direct Investment (FDI), generate employment, and develop better infrastructure. 

Both Indian as well as foreign multinationals have made financial investments in the SEZs, while the State has transferred large tracts of land and mineral rights to them in return. Land was thus allotted for industrial purposes, building of residential complexes, shopping malls, hotels, and golf courses. 

However, the displacement and dispossession of people who previously lived on these lands is a flip side of this development narrative. The Land Acquisition Act of 1894 served as an important instrument in this process, granting the state the legal power to acquire private land for public purposes, while largely disregarding personal grievances or objections. 

In 2013, the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation, and Resettlement Act sought to address this issue. But despite its progressive intent, the Act faces issues such as weak implementation, inadequate rehabilitation and livelihood support, poor land records, dilution through state amendments, exclusion of tribal and women’s rights, and the lack of comprehensive land-use planning.

Need to strengthen welfare policy implementation 

Moreover, India’s rehabilitation policies have also been criticised for the absence of protection for people who have been displaced before. The 2013 Act specifies that previously displaced people should either not be displaced again or should be awarded double compensation. However, data on displacement and rehabilitation across India show that displaced people are very rarely rehabilitated or resettled, leading to the migration of the indigenous people to other parts of the country in search of jobs.    

Thus, both displacement and rehabilitation have become a major part of the broader development narrative, largely shaped by the trickle-down approach to growth. The displacement of indigenous and tribal groups for development projects may or may not benefit the affected people, with studies pointing out that they often do not. 

The Scheduled Tribes in India constitute a higher proportion among the rural poor and the agricultural labourers. Health and education indicators also highlight their vulnerabilities. The government has introduced several schemes and policies for improving the welfare of tribal communities across health, education, and other development sectors. However, scholars, like Virginius Xaxa, have argued that these policies and schemes remain “alien” to the communities. 

The absence of support mechanisms and guidance makes this largely ineffective. Consequently, while displacement and rehabilitation of marginalised communities remain important aspects of India’s growth story, inaccessible and poorly implemented welfare measures further exacerbate the problems faced by marginalised communities. 

Post read questions

Does tribal development in India centre around two axes, those of displacement and of rehabilitation? Give your opinion.

Examine how the model of “trickle-down growth” has contributed to the displacement and dispossession of tribal communities in India.

To what extent has the Nehruvian model of development shaped the patterns of “development-induced displacement” among India’s indigenous populations?

Discuss how Special Economic Zones (SEZs) have transformed the nature of land ownership and livelihoods among tribal communities in India.

How have mining and industrial projects in resource-rich states like Jharkhand contributed to both economic growth and social dislocation?

(Ritwika Patgiri is a doctoral candidate at the Faculty of Economics, South Asian University.)

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