Similarly, the demand for a caste census has also been raised by former INC President, Rahul Gandhi, who vowed to press the BJP-led Centre to conduct a caste census. The INC leader spoke about the importance of such a census during campaign rallies in Chhattisgarh and has promised a caste census within “two hours” of the formation of the Congress government. The debates on the caste census thus are largely based on the idea that the marginalised in India are still bereft of their rights and equal opportunities. Their situation is dire, and the COVID-19 has undeniably had a profound impact. In 2020, the global GDP experienced a significant contraction of 5.2%, and India, in particular, faced a harsh economic downturn with a staggering 9.4% reduction in its GDP.

Thus while India continues to make its way up in a post-pandemic environment that has left its economy deeply shaken, as has been the case worldwide. However, reports attest that the pandemic’s impact has not been uniform. Marginalised communities have been disproportionately affected, whereas businessmen like Adani have seen their stocks rise about 3000% in the last two years according to a report by Economic Times.

This piece by SabrangIndia thereby tries to share a glimpse on the position of caste and gender occupy with relation to the economy and employability in India.

Caste and economy:

A recent report released by the Centre for Sustainable Employment at the Azim Premji University has highlighted the dire situation of marginalised castes in the economy.

One of the key observations of the report titled State of Working India: Social Identities and Labour Market Outcomes is that in 2004, over 80% of the sons of casual wage workers were themselves engaged in casual employment, highlighting a lack of upward economic mobility. This pattern persisted largely among Scheduled Caste and Scheduled Tribe workers and other castes. However, by 2018, this trend started to change. For non-SC/ST castes, the percentage of casual employment fell from 83% to 53%, with an increase in the availability of better quality work, including regular salaried jobs. For SC and ST castes, although there was a reduction (from 86% to 76%), the change was less pronounced and quite marginal in that. Therefore, while caste-based occupational segregation has also seen significant changes over the years, the shift towards change has been slow. In the early 1980s, SC workers were over five times more likely to be overrepresented in waste-related work and over four times in leather-related work. Although progress has been made, this overrepresentation has not been completely eliminated as of 2021-22. In the leather industry, the representation index decreased sharply to 1.4 in 2021, while in waste management and sewerage, overrepresentation of SCs decreased to 1.6 times in 2011 before a slight increase.

The report highlights a critical point namely that the correlation between non-agrarian GDP growth and non-agrarian employment growth has been weak since the 1990s. This suggests that policies promoting faster economic growth do not necessarily lead to faster job creation. However, between 2004 and 2019, there was a notable connection between economic growth and decent employment, which was disrupted by the pandemic.

Thus, unemployment remains a concern, with post-Covid unemployment rates higher for graduates, particularly those under 25, reaching a staggering 42%. In the corporate sector even in small firms, SC and ST owners and employers are underrepresented compared to their share in the overall workforce. An interesting point to note is that as firm size increases, the number of upper castes tends to increase in proportion. Interestingly and alarmingly, the report also reveals a disparity in earnings among different caste groups. Occupations with lower average earnings tend to have a higher representation of Scheduled Caste workers whereas in stark contrast, upper-caste workers are more strongly represented in higher-paying roles. Furthermore, the research indicates that intergenerational mobility has increased over the past 15 years, with more sons of casual wage workers transitioning to regular wage employment. However, marginalised castes have experienced less mobility in this regard in comparison to upper castes.

Therefore, according to the report, while there have been positive changes, significant disparities still exist which highlights and underscores the urgent need for policies and initiatives that promote equality and inclusive economic growth. The demand for a caste census, as voiced by Rahul Gandhi and supported by many including the Bihar government, remains a crucial step toward acknowledging and addressing these disparities.

Gender, economy and “shecession”

Little attention has been given to gender as an axis to enquire in the economy. Women have reportedly borne the brunt of the economic crises in the post-pandemic era; increasing distance from employment, induction in vulnerable work, and a general burden of additional household responsibilities have ensures that instead of any improvement in the status of women in the economy, there has been a catastrophic downslide.

The APU survey report highlights that while caste segregation has reduced, gender based segregation has only further increased and worsened since the onslaught of the pandemic.  India’s female labour force participation is one of the lowest in the world at about 27%. Furthermore if we look back we see that these trends have been long in formation, for between 2004-05 and 2011-12, about 19.6 million women decided to leave their paid employment, as reported in a 2012 World Bank study. This decision was influenced by multiple factors, according to IndiaSpend, including unpaid domestic responsibilities, insufficient public transportation options, and the ingrained idea that a woman’s primary responsibility was in the home.

The COVID-19 pandemic further exacerbated this issue. It triggered widespread job losses across various sectors, and in terms of percentage, according to the report by APU, women were more adversely affected on a much larger scale than men.

Thus in labour markets worldwide, gender disparities remain a persistent issue, with women facing much greater challenges and structural barriers in accessing employment and achieving economic equality. This concern is especially underlined by international agencies which highlight that a staggering 24.9 percent of women are unable to secure employment in low-income countries, in contrast to a rate of 16.6 percent for men in the same category according to the International Labour Organisation. This discrepancy highlights a pressing global concern and sheds light on the double burden women face due to gender roles as women are the ones who have to bear the brunt of personal and family responsibilities, including unpaid care work. In many developing nations, including India, these responsibilities are noted to be a huge deterrence for women not only from obtaining jobs but also from actively seeking employment or making themselves available for work on short notice.

Vulnerable work describes a condition where workers have insufficient wages, low productivity and difficult working conditions. While vulnerable employment is a serious issue for both genders, women tend to be disproportionately represented in specific types of work which is highly precarious in nature, and women are more likely to be found contributing to household activities or assisting in family businesses. Thus women are found to be overrepresented in vulnerable work, which is a factor reportedly further coupled with lower employment rates ends up having serious implications for women’s earnings and their overall share of global labour income which contributes to a significant amount of disparity between incomes between genders, which is often termed ats the “wage gap”. Thus, on a global scale, for every dollar of labour income earned by men, women earn a mere 51 cents, underlining the stark income divide.

India, in particular, grapples with a significant gender gap in employability. According to the ILO this gap stands at 50.9 percent, with only 19.2 percent of women actively participating in the labour force, compared to 70.1 percent of men. Furthermore, the World Economic Forum’s Gender Gap Report for 2022 placed India at an alarming rank with 135th out of 146 countries, trailing behind smaller neighbours such as Sri Lanka, Bangladesh, and Nepal. What’s more, India is among five nations, including China, Pakistan, Azerbaijan, and Qatar, with gender disparities exceeding five percent. The World Economic Forum has underscored that progress toward gender equality has been hindered and even reversed due to the COVID-19 pandemic. The pandemic disproportionately impacted women, contributing to what is commonly referred to as the “shecession.” This setback was worsened by the pandemic’s effects on sectors like retail and hospitality, where women constitute a significant portion of the workforce. The global struggle for gender equality in labour markets remains an ongoing challenge, with particular urgency in developing countries like India. As nations strive for inclusive economic growth, addressing these disparities is not only a matter of social justice but also crucial for unlocking the full potential of their economies.

When one delves deeper into actual figures related to gender parity, one is encountered with surprises and shocks. For instance, if we take the case study of Kerala, which is known for its robust social indicators, numbers have unveiled a shocking reality regarding female unemployment. According to the Economics and Statistics Department of Kerala, the state now grapples with the highest female unemployment rate in the entire country both in urban and rural sectors. This revelation stems from the department’s report for the year 2017-18, which indicates that female job seekers constitute a substantial 63.2 percent of the total workforce aspirants within the state. What’s more, the recently released Kerala State Economic Review for 2022 delves into the worrying occurrence of a notable gender wage disparity across the state. This wage gap isn’t confined solely to the informal or unorganised sector but is extended into the regular, salaried employment. These numbers contrast starkly with the general assumption of Kerala having stellar welfare indicators.

As almost eight decades have passed since India became independent and over this time, India has asserted its independence and evolved into a fast growing cultural and economic power regionally, and aims to become a global power. Although the days of a predominantly agrarian economy are now a distant reality. However, when ‘social identities’ that the Indian constitution has tried to alleviate over the years continue to be submerged in hierarchy and economic servitude, India as a land of opportunity and equality remains a distant dream.

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Oxfam, is a global organisation, with strong roots within India, that works on the ‘injustice of poverty’ and flags issues that enhance this injustice, structurally.[1] Oxfam also recently released a report on Wealth Inequality in India. One of the notable findings of the report is that the richest 21 billionaires own more wealth than 700 million Indians. Another startling finding is that top 1% of Indians now own 40.5% of the wealth in 2021 while the bottom 50% of the population has around 3% of wealth.[2]

This article is an attempt to understand how inequality finds its way into Indian system while the Constitution explicitly warns against such a concentration of wealth. The high concentration of wealth and economic inequality is used interchangeably in this article unless specified otherwise.

The numbers are alarming and there also have been questions raised on Oxfam’s methodology, data collection and calculations that led to these conclusions and findings. However, one does not need any clarification or a special investigation to conclude that staggering wealth and income inequalities exist in the country and in the whole world. The International Monetary Fund (IMF), the international institution for lending, also presents that, contrary to the trends of global inequality, in-country inequality is on the rise- even in developed countries. This means that, while the gap between poor countries and rich countries is decreasing (global inequality), the gap between rich people and poor people in a given country has been increasing.[3] Studies which were not specific to India have also found that the worlds’ 1% of population owns half of the world’s wealth as of 2010. The closest to a government report on Inequality in India we have is the ‘State of Inequality in India,’ released by the Economic Advisory Council (EAC) to the Prime Minister.[4] This report was later said to be prepared by a private firm without any aegis of the EAC or its members. The report took into consideration the Periodic Labour Force Survey’s (PLFS) to gain insight into the data. It stated that monthly salary of Rs. 25,000 is among the top 10% of the total wages earned as per PLFS 2019-20. It also stated that the top 1% earns more than thrice the bottom 10%.[5] So, essentially, even going by the most conservative arguments, inequality in India exists.

Now, onto understanding why inequality is an issue. The conventional philosophy used to be that the creation of wealth will end up removing the inequalities and in alleviation of poverty. This also resulted in emphasis on creation of wealth rather than creating frameworks to distribute it better.[6] More recent and developed wisdom holds that excessive inequality erodes social cohesion and political stability. High levels of income inequality are often related to high inflation and financial instability. Humongous amount of literature exists on that front to support that inequality which is bad for both societies and their sustenance.[7] To put it simply in an example, wealth in India buys a better health insurance plan and thus security or is useful even to fund treatment for an emergency health condition. Lack of the same wealth can result in loss of life and consequent problems for a family, the burden of having spent money of treatment that has gone in vain etc. This results with varied impacts effects different strata of society.

In summary, irrespective of whichever report highlights the inequality, it is a problem and would have to be dealt with if societies are to thrive and sustain.

Now, the last part of the understanding is about what ways inequality propagates itself in India today.

The Ways of Inequality

One of the most important ways in which money is distributed to people, in the current economic system, is the form of wage or salary. Most of population today does work to earn a living or is dependent on work, either done by them or by someone else. The work demands a salary and the salary is the framework in which a majority of income that is generated by the population gets distributed. This is determined by a wage market. This means, the market decides how much wage a person should get for the work they do, on the basis of simple supply and demand. Many studies point out that the inequal wage market where exploitation prevails is one of the most important causes of prevailing inequality.[8]

In India, there is a minimum wage law and minimum wage is usually decided by the state government and there is a floor wage, set by the central government below which no state can or shall set their minimum wage. The prevailing floor wage is Rs. 178 per day, in India. Even for this seemingly low rate of minimum wage, the implementation is abysmal, and the main challenge is to implement this policy strictly. Simply raising the minimum wage would have minimum to no impact since the complexities in implementation would still be prevalent. The government has not yet fully effectuated the already passed labour codes and it is yet to be seen if the labour codes will have any better.

Another important factor which promoted inequality is the lack of education. Since wages are essentially higher for those who are educated, lack of education also takes away the opportunity for the population to get into the salary ecosystem and receivers of some money. Efforts of successive government to prioritise education, earlier resulted in educated people without skill. Presently, there is an imparting of skills via various programmes in the hope that these skills will help people in getting jobs. However, this is being done now whereas the inequality has already made its way into the economic system on a large scale.

Another important factor is the already prevailing gender inequality in India that creeps into the economic system and results in inter-sectional discrimination and therefore different layers of inequality. For example, a woman who goes to work is paid far lesser than her male counterpart and this results in less participation of women in the workforce. This proportionately less participation has the effect of lesser wages for women in workforce. India has passed the Equal Remuneration Act, 1976 –that is 46 years ago, and despite this, the gap between the male and female pay is 28% according to the NSSO report of 2019.

According to the World Inequality Report, Indian men earn 82% of the labour income whereas women earn 18% of labour income. Therefore, within this economic inequality, women suffer the extra poverty the gender-based discrimination imposes on them.[9]

Indian Constitution and Concentration of Wealth

The Indian Constitution was not merely a political document ensuring basic rights. It has the features of an economic document (document with a socio-economic vision) too, woven into various articles. Article 19 (d)-granting the right to move freely throughout India, Article 19 (e) – to reside and settle in any part of the territory of India, Article 19 (g)- to practise any profession, or to carry on any occupation, trade or business- combinedly indicate that the Constitution, in itself, enshrines a framework where people had/have the freedom to trade, to engage in a business or to practice a profession, anywhere subject to reasonable restrictions.

Within the Directive Principles of State Policy (DPSPs, Chapter IV), Article 39 states that the state should direct its policy towards securing the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment.

The relevant portion of Article 39, for this article, is as follows:

39. Certain principles of policy to be followed by the State. —The State shall, in particular, direct its policy towards securing—

(a) that the citizens, men and women equally, have the right to an adequate means of livelihood;

(b) that the ownership and control of the material resources of the community are so distributed as best to subserve the common good;

(c) that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment

While the constitution was getting drafted, this article saw particular efforts from socialists like Prof. KT Shah, a member of Constituent Assembly elected from Bihar. These efforts were towards wording (defining) the article with specific definitions.[10] Shah moved an amendment to substitute the draft Article 31(iii)- the current 39(c) with the following:

“That there shall be no private monopolies in any form of production of material wealth, social service, or public utilities nor shall there be any concentration of means of production and distribution in private hands and the State shall adopt every means to prevent such concentration or accumulation.”

 He gave an explanation that if the original article remained as it was, it is liable to be interpreted in a way not at all intended perhaps by the draftsmen. On the contrary, another member Naziruddin Ahmad, elected from West Bengal, argued that the word concentration be substituted with the word ‘undue concentration’ since unless a communistic society was/is being established, a concentration of wealth was inevitable. He submitted that “earning of a good businessman, that of a lawyer of eminence, that of a minister of eminence and that of a common man in the street or a chaprasi[11], cannot be equal.”

Another socialist Professor Shibban Lal Saxena, a member elected from the United Provinces supported Prof. KT Shah’s amendment and urged Dr.BR. Ambedkar to at least to incorporate the spirit of those amendments somewhere within the Constitution.

Dr. BR. Ambedkar however stated that since the original article does not prevent the interpretation of Prof. KT Shah, there was no need for the amendment.

However, the Constituent Assembly debates show that there was apprehension about the (state not doing enough to avoid) the concentration of wealth and natural resources getting distributed in a manner that does not endorse community ownership. One might argue that the world has come a long way since the Constituent Assembly debates and the Constitution makers clearly left it for the population of the future to decide the economic system for themselves. Such argument holds its own strength. Economic systems are indeed dynamic, and they demand a constant evolution of legal frameworks. However, the important aim of economic system is not its own development and growth but the welfare of the people. The economic system cannot be for the detriment of the people in a country that is governed by a constitution with social and economic justice as its pillars.

Judiciary’s role

A critique of the Supreme Court has always existed within academic discourse that have concluded that, while the judgements from the apex court are appreciably progressive when it comes to the protection of property rights of people against state intervention, same sort of progressive trends were not present when it came to protection of the civil and economic and social liberties of all the Indian people.[12]

For example, in the case of Kesavananda Bharati vs. Union of India(AIR 1973 SC 1461) which dealt with the constitutional challenges to 25^th amendment to the Constitution, the court held that the part of newly inserted Article 31C which stated that no law made to give effect to Article 39 (b) and 39 (c) can be challenged in court on the ground that it does not give effect to such policy, to be unconstitutional.

To give some context, the Indira Gandhi government nationalised 14 banks and a shareholder, RC Cooper, of one of the banks approached the supreme court on the grounds that he was not paid enough compensation and therefore his right under Article 31 and Article 19 (1)(f) were violated. Article 31, which now stands omitted, stated that when land is compulsorily acquired, the compensation shall be paid. In the case of RC Cooper vs. Union of India (1970 SCR (3) 530), the Supreme Court held that compensation is something that is guaranteed by the Constitution of India and therefore, the court can go into the question of whether the compensation was reasonably adequate.

Essentially, Article 31 stated that government cannot take away the lands of people whereas the Supreme Court held that since adequate compensation is guaranteed by the constitutional scheme, the court can question such inadequacy of compensation. The court also said that, any compensation determining law also should not be violative of Article 19 (1) (f).

The same Indira Gandhi government, to go around this judgement of the Supreme Court in the case of RC Cooper, brought in the 25^th constitutional amendment. One of the changes the amendment brought in was that the word ‘compensation’ was substituted with the word ‘amount’ in Article 31, indicating that the government now can just give a nominal sum for the land taken rather than compensating. Another change was the insertion of Article 31C. Article 31 stated that no law, that works towards securing the goals specified in Articles 39 (b) and 39 (c), can be challenged in court on the ground that such law truly does no effectuate the goal.

The Kesawananda Bharti judgement went on to declare that the part which negates the judicial review is constitutional. In Minerva Mills vs. Union of India (AIR 1980 SC 1789) too, the court declares Section 4 of the 42^nd Constitutional Amendment as unconstitutional. The 42^nd amendment substituted the shield of Article 39(b) and 39(c) with all of Directive Principles of State Policy and this was declared unconstitutional in the case of Minerva Mills.

While these judgements are important, they cannot be the sole indicators of how the jurisprudence has evolved about concentration of wealth. There are other cases from both High Courts and the Supreme Court that present a progressive trend of interpreting Article 39 (b) and (c). In Group Industries vs. State of Uttar Pradeshv (AIR 1975 All 434), the Allahabad High Court had to deal with challenges to the UP Ceiling on Property (Temporary Restrictions on Transfer) Act, 1972 and the court justified the urban property rate ceiling and stated as follows:

“The object of the Ceiling Bill was furtherance of the directive principles of the State policy as set out in Article 39(b) and (c) of the Constitution and consequently to secure that the ownership and control of the material resources of the community are so distributed as best to subserve the common good and further to secure that the operation of the economic system does not result in the concentration of wealth and means of production to the common detriment. Placing restrictions on the valuation of urban property which one could legally hold is one of the methods by which concentration of wealth and means of production in private hands can be curtailed and avoided. By providing for a ceiling on the ownership of “urban property”‘ and for acquisition by the State of “surplus land” with power to redistribute such land, the legislature sought to secure that the material resources of the community are so distributed as best to subserve the common good.”

The Supreme Court in the case of State of Bihar vs. Maharajadhiraja Sir Kameshwar (1952 1 SCR 889), dealt with the acts of abolition of Zamindaris in the states of Bihar, Madhya Pradesh and Uttar Pradesh. The Supreme Court, stated as follows with respect to the state’s obligation and the reason why laws that are infringing on the private property are valid:

“Surely, it is to subserve the common good by bringing the land, which feeds and sustains the community and also produces wealth by its forest, mineral and other resources, under State ownership or control. This State ownership or control over land is a necessary preliminary step towards the implementation of the directive principles of State policy and it cannot but be a public purpose. It cannot be overlooked that the directive principles set forth in Part IV of Constitution are not merely the policy of any particular political party but are intended to be principles fixed by the Constitution for directing the State policy whatever party may come into power.” 

In the case of Ahmedabad Municipal Corporation vs Nawab Khan Gulab Khan – (1997) 11 SCC 123) Ahmedabad Municipal Corporation vs Nawab Khan Gulab Khan – (1997) 11 SCC 123) , the Supreme Court used the Article 39 to read right to shelter into Article 21.The case involved the encroaching settlements on the pavement of a road being removed by the local municipality and the residents of those settlements approaching the judicial forums. While keeping in view the financial capacity of the municipality, the Supreme Court ordered for evolution of schemes that can help the residents of the settlements resettle since the municipality had the constitutional obligations under the directive principles of state policy. The court stated as follows:

“The right to life enshrined under Article 21 has been interpreted by this Court to include meaningful right to life and not merely animal existence as elaborated in several judgments of this Court including Hawkers case, Olga Tellies case and the latest Chameli Singh’s case and host of other decisions which need no reiteration. Suffice it to state that right to life would include right to live with human dignity. As held earlier, right to residence is one of the minimal human rights as fundamental right. Due to want of facilities and opportunities, the right to residence and settlement is an illusion to the rural and urban poor. Article 38,39 and 46 mandate the State, as its minimise inequalities in income and in opportunities and status. It positively charges the State to distribute its largess to the weaker sections of the society envisaged in Article 46 to make socio-economic justice a reality, meaningful and fruitful so as to make the life worth living with dignity of person and equality of status and to constantly improve excellence.”

Therefore, while the apex court has given rich jurisprudence on protection of property, the also has been equally rich jurisprudence against the concentration of wealth.

Conclusion

While it is important to urge the government to take note of the DPSPs and take active steps to further the goals enshrined in them, it is equally important to take note of the international situation in which globalisation and the free movement of capital has become a dominant phenomenon. Therefore, any analysis of the inequality question and any effort to answer the inequality question will be haphazard without the consideration of international conditions. Having said that, the emphasis on a different international order or any such thing can be discussed if the national efforts reach their pinnacle. With the lack of effective implementation of labour codes and the spending on education etc not reaching their optimum standards, much has to be done on home front.

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• Core sector core sector industries (eight) – coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity – had expanded by 4.7 percent in August last year
• Coal, crude oil, natural gas, cement, and electricity recorded a negative growth of 8.6 percent, 5.4 percent , 3.9 percent, 4.9 percent and 2.9 percent, respectively, in August, according to the data of the Commerce and Industry Ministry
• Only fertiliser and steel production grew by 2.9 percent, and 5 percent, respectively during the month under review

New Delhi: Its bad news, again, from the economy. Eight core industries contracted to over three-and-half year low of 0.5 percent in August 2019, largely due to decline in the outputs in the coal, crude oil, natural gas, cement, and electricity sectors. This is admitted position and can be sourced to government data released on Monday. The date is from the Commerce and Industry ministry.

In contrast, the very same eight-core sector industries – coal, crude oil, natural gas, refinery products, fertiliser, steel, cement and electricity – had expanded by 4.7 percent in August last year. The previous low was recorded at (-) 1.3 in November 2015.

Coal, crude oil, natural gas, cement, and electricity recorded a negative growth of 8.6 percent, 5.4 percent, 3.9 percent, 4.9 percent and 2.9 percent, respectively, in August, according to the data of the Commerce and Industry ministry. However, fertiliser and steel production grew by 2.9 percent, and 5 percent, respectively, during the month under review.

Similarly, growth rate in the production of refinery products dipped by 2.6 percent in August this year as against 5.1 percent in the same month last year. During April-August, growth in the eight core industries grew by 2.4 percent from 5.7 percent in the year-ago period.

Commenting on the data, rating firm Icra Ltd said: “The performance of the core sectors in August 2019 was disappointingly weak, with a broad-based deterioration in six of the eight constituents and as many as five sectors recording a year-on-year contraction in that month”. ICRA Limited (ICRA) is an Indian independent and professional investment information and credit rating agency.^[2] It was established in 1991, and was originally named Investment Information and Credit Rating Agency of India Limited (IICRA India).

The contraction in the core sector growth in August 2019 confirms the view that the modest pickup in the IIP growth in July did not signal the start of industrial recovery, it added in a statement
 
 

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Prof Kaushik Basu (middle) with Kumaramangalam Birla, Errol D’Souza 

Without naming Modi, Prof Basu regretted, under him professionalism and morality in managing the economy are taking backseat, leading to such decisions as demonetization and manipulation of economic growth data. In sharp contrast, he praised former Prime Minister Manmohan Singh for showing extraordinary degree of professionalism in revamping the economy in 1991.

Recalling his years of working as chief economic adviser under Dr Singh post-2009, Prof Basu — flanked by IIM-A director Prof Errol D’Souza, and Kamaramangalam Birla, IIM-A chairman, who called him “one of India’s most illustrious economists” — said, India was then known for its “quality and integrity of its statistical system” among World Bank circles as also top economists like Nobel laureate Angus Deaton – something it may lose now.

Excerpts:

I have, over the years, become convinced that reasoning is the most under-utilized of human faculties. Read some of the discussions and commentary on social media, and listen to television debates, and you will wonder where reason has vanished. This is a telling commentary on education and explains why we make so many policy mistakes.

Within economics game theory illustrates the power of good reasoning. One important axiom of game theory asserts: It is not good enough to be rational yourself. You must recognize that others are likely to be rational too and take that into account.

Policy mistakes, such as the demonetization, which has hurt India’s growth, would not have occurred if there were policymakers that paid heed to this simple axiom. For every policy, you have to anticipate how ordinary individuals and also bureaucrats will respond. That is the key to designing successful policy mechanisms.

How good, professional reasoning is critical for good policymaking is illustrated well with India’s foreign exchange reserve story. For more than 20 years, till 1991, India’s foreign exchange reserves used to be roughly 5 billion dollars. The years 1991 to 1993 India saw some of the most far-reaching and well-designed reforms ever undertaken.

Those were the reforms that changed India’s growth story. One of the policy changes pertains to foreign exchange reserves. For a long time, the government’s belief was that since we have so little foreign exchange, we must not let people take foreign exchange out of the country. What this missed out on was not realizing that if you don’t allow people to take foreign exchange out, they will not bring foreign exchange in.

This logic led to the conclusion that you have to make it easier for people to take foreign exchange out of the country to increase the amount of foreign exchange in the country. This was part of the policy reform package of 1991-93. The benefit was magical. The foreign exchange reserve which used to be roughly 5 billion dollars for 20 years, rose in the next 20 years to nearly 300 billion dollars. It was professionalism with fine reasoning that led to this huge success.

Traditional economics talks a lot about profit-motive and individual rationality. What is often forgotten but is actually as important for a society’s long run success is morality. Morals and trust provide the nuts and bolts of society. Without those you can get short run success but not long-run development.

In 2009, when I was Chairman of Cornell’s Department of Economics, and taking a vacation in India, I got an unexpected phone call from the Prime Minister’s office. The caller, a Joint Secretary, quickly got to the point. Dr Manmohan Singh wanted to know if I would consider being the Chief Economic Adviser to his government.

The following day, after I met Dr Manmohan Singh and had a wonderful meeting, I made a vow. I told myself that, since my life till then had been one of pure indulgence, that of the joys of research, if I were to wean myself away from that, I must do so with only one purpose, that of serving society. That is what I tried to do during the 7 years I worked as a policymaker – 3 years with the Indian Government and 4 with the World Bank. Looking back, I feel better.

In the rough and tumble of everyday life, in trying to be successful at any cost, many people push aside all morality. We see this among politicians, who try to win elections at all cost; we see this among business persons, who try to earn more profit at all cost. This is the cause of many of society’s woes. Indeed, for long-run success of a society, it is essential to have these moral anchors.

Let me briefly turn to India’s economy to illustrate some of these arguments. There are unmistakable signs of India’s economy slowing down over the last few years. The latest data on industrial growth, pertaining to January 2019, shows that India’s industry is barely growing, with the growth rate down to 1.7%.In the year 2017-18 India’s exports were a little less than what the country exported in 2013-14, which means virtually 0% growth in exports on average for 4 years, which has rarely happened in the past.

What is happening to overall growth? The official data shows that GDP growth in the last quarter has gone down. And there are analysts, such as Arun Kumar, in Caravan magazine, arguing that growth is even lower because the unorganized sector for which we do not have proper data shows signs of a massive slowdown.

Further, the agricultural sector is in recession, and the farmers feel neglected. The most worrying is the jobs situation. If you put together all the piecemeal data coming in, it is clear that our workers are suffering greatly, with unemployment rate at over 7%, according to the Center for Monitoring the Indian Economy, and youth unemployment at 16%, as per a study by Azim Premji University. It is unfortunate that data on unemployment are being held back.

The concern about this, expressed recently by 108 leading economists, is a genuine concern. When I was Chief Economist of the World Bank, it was always good to see that India stood out, not just among emerging economies but all countries, for the quality and integrity of its statistical system.

The Nobel prize-winner, Angus Deaton, in an article with Valerie Kozel in 2005, gave India tribute for its pioneering statistical work. He mentioned how India’s “NSSO surveys, pioneered by Mahalanobis in the 1940s and 1950s, were the world’s first … household surveys to apply the principles of random sampling.” We must take care not to damage this reputation. None of all this is necessary. India’s fundamentals are strong and we should be doing much better.

The two reasons why this is happening are a shortage of professionalism and a disproportionate focus on big businesses and their interests. The first pertains to reason and the second to morals. Professionalism means policymaking based on data and reasoning. The economy is too complex to be handled by hunch and gut feeling. Passion is important but you cannot have exports booming, jobs being created by passion alone. Expertise and professionalism are critical.

Make no mistake. Business and enterprise are important. Big business is also a fact of today’s world and technology. But in trying to nurture business and enterprise we must not neglect the poor and the unorganized sector. India is still largely an agricultural nation and it is sad to see this major sector suffering.

India’s is a remarkable history. Around the time that we got independence, several nations – in Asia, in Africa, in the Americas – also gained independence. Many of these nations wanted to be open and democratic. It is an amazing fact of history that the only new nation from that time that has managed to hold on to democracy, secularism, and free speech, for all this time, is India.

We were lucky to have open-minded founding fathers, like Gandhi and Nehru, and thinkers with global humanity, like Tagore. They had their own struggles but in the end they strove to build a nation that was open to all religions, all races and tried to banish divisions of caste and gender.

Did India do right by holding on to democracy, secularism, free speech and quality higher education so early? I do not have a definite answer. But I do know that nations like the United States by holding onto these qualities did phenomenally well in the long-run. In the early 20th century, Argentina and United States stood neck to neck in terms of economic status.

My point is simple, whether or not the early investment in democracy, secularism, free speech and higher education was right, having made these investments, we must not fall into the trap of narrow-minded group identities, and begin to imitate nations that do not value these qualities, and make ourselves in the image of those nations.

On February 8, 1994, on the occasion of receiving the Indira Gandhi Prize, Vaclav Havel, Czechoslovakia’s great revolutionary and, later, president, spoke about his admiration for India and its founding fathers. And how India’s victory “was a great victory for the ideas of nonviolence, tolerance, coexistence, and understanding.”

He went on say, “I am convinced that the creation of multicultural civilization I have talked about, the creation of conditions based on mutual respect and tolerance of different cultures … will always find one of the important sources of its vitality in Gandhi’s work.”

India commands a huge global respect for its polity of openness and tolerance. There are forces at work in the country that want to destroy this and make us in the image of failed nations.

Courtesy: Counter View

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Only for three days live a woman’s life from dawn to dusk
Only for three days be a Dalit, moving and living near a temple
Only for three days be a tribal and live that life in a remote village
Only for three days be an urban or rural displaced and visit government offices
Only for three days be a Muslim and try buying a home in the city’s general neighbourhood
 

Only for three days, live the life of a city slum dweller
Only for three days, sleep on a hungry stomach
Only for three days, live in Kutch’s desert, the life of a salt worker
Only for three days, be a patient in a government hospital
Only for three days, be a student in a government school
Only for three days, be a river that flows through cities and industries
 
 
Only for three days, oppose the errant governments, politicians, the strong and rich freely
Only for three days, talk to oneself, switch off the phone
Only for three days, spend time with books
Only for three days, live a gender equal life
Try living the contrary, just for 45 days
And, then, discuss the prevalent growth model…

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