Wednesday, 3 August 2022

Elusive Growth in Agriculture ?

 

 

Dr. Soma Marla, Agriculture Desk. 22.1.22

Draft Paper on 75 years of Indian Agriculture

( Submit to EC, AIPSN for publication of booklets).

Elusive Growth  in Agriculture ?

Seventy five years passed since we attained independence from  Colonial Briton.  During this period Indian country side had undergone  many transformative changes in both agricultural production, relations  and development, thus impacting rural lives. With nearly 65 percent of population still  living in villages and a majority dependent on agriculture, it is time to examine how farmers fared during the 75 years.

Agricultural growth remains a prerequisite for sustainable economic growth and poverty reduction for the economies in transition. Agriculture not only ensures food security but also provides livelihood to millions of rural poor. Experts claim that investment agriculture is 2 to 3 times affective in alleviating poverty compared to any other sector in economy with returns of 1 : 12.

  From the early decades of the last century farmers played an important role in social transformation and mobilized country side in fight against    British colonialism. Apart from achieving independence they had two major objectives- emancipation from feudal bondage, land to the tiller and attainment of social equality  & economic prosperity in villages. How far these cherished goals have been reached after these long years of independence   an important issue. Soon after  independence Zamindari, Rytwari and other means of land ownership had been abolished. However, the very structure of land ownership in villages did not change significantly with bulk of the land concentrated in hands of  large sections of rich & middle peasantry with only a miniscule portion became accessible to small & landless peasantry belonging to backward & dalit sections. With the half-hearted land-reforms undertaken by different states having failed in most parts of the country, the problem remains largely unresolved. As of 2020, 84.2% of the peasantry fell in the category of small and marginal farmers, owning less than two hectares. This large section together owns a only 47.3% of cropped area, while the remaining 52.7% is held by a small minority of large and medium farmers who make up a mere 13.8% of the farmers. Indian agriculture is diverse with varied soils, rainfall, climate and cultivated crops and divided in to 13 different agro- climatic zones. Overall 48.9 % of cultivable land is irrigated with large tracks remaining dry lands dependent on monsoons. In terms of annual  agricultural productivity, growth rates  and farmer incomes states vary, ranging from  0.25 (Bihar) to 2.69 (Tamilnadu), all India average being 1.69. A major obstacle  for backwardness of Indian villages is land question ie. unequal  ownership of land and participation in agricultural production and distribution. Interestingly land owned by rich farmers is largely  irrigated  and well equipped with farm machinery and other storage infrastructure.   Although  land reforms have  been presumed a means to overcome differences in land ownership, the implementation was largely symbolic except states of West Bengal, Kerala and Andhra Pradesh.

During  70’s  after waging militant land struggles by Left parties, sections of land less Dalits and backward sections of rural communities was  distributed by state governments with land not more than 4 % of total cultivable land in the country. Small  land holding farmers are generally resource poor and are often subjected to climate and market vagaries. Naturally the productivity of small farms is low.

With persisting  high levels of social and economic inequalities and backward production system food production was insufficient to feed the nation. During the first decade after indolence compared to other sectors of the economy, agriculture was grossly neglected. With low domestic production near famine conditions prevailed. The whole nation was surviving on  ‘Ship to mouth’ largely dependent on import of food grains to meet shortages. Starting late 50’s governments  started increasing  investments in agriculture sector to correct the miserable food shortages and reduce hunger. Accordingly large dams such as Bakranangal and Nagarjun sagar were built. Fertilizer facorieswere built and rural electrification initiated.  These investments have brought a large tracks under irrigation. Desi (indigenous) varieties of food crops & cattle breeds were less productive and  development of more productive & high yielders were required to increase food production. Consequently dozens of agricultural and veterinary universities & research institutions under ICAR were established with assistance from USA under US land grant University model. As per the advice & supervision of Rockefeller, Ford foundations of America, elite  seed of wheat and Rice were   imported from  International crop research institutions located in Mexico and Philippines  and introduced to Indian fields for cultivation. Thus in late 60’s Green revolution was initiated in Indian villages. However, with introduction of new seeds in Green revolution, seeds ceased to be  an input saved by farmer and resown season after season. Seed became rather a complete package, dictating how much the other inputs- fertilizer, pesticides, tractors, diesel etc should be used. In short a complete package of inputs in cultivation came under the control of major global chemical & seed MNCs. The imported crop seeds were align to the local cultivation conditions and local rainfall pattern (agro eco system) and required input of irrigation, farm machinery and high doses of chemical fertilizers to obtain high grain yields. As the new seeds were align to local soils, climate the former had brought a multitude of new crop pests, weeds and diseases, hitherto unknown to Indian fields. After the World War II and Vietnam invasion a large section of chemical industry remained under utilized. In this background, strategically planted Green revolution came handy for American & Western MNCs for expansion of production and marketing of fertilizers, pesticides and herbicides in Indian villages. Increased expenditure on inputs like fertilizers, tractors and pesticides had several folds raised the cost of cultivation. Deep rooted in villages  Green revolution helped establish a strong grip of foreign seed and chemical MNCS  on Indian food production.

In the first decades of 21 st century, with rapid implementation of neoliberal reforms, the challenges have shifted to capture of agriculture and the markets by multinational corporations for its produce. The control of agricultural inputs is one of the primary means through which corporations are taking over agriculture. The ‘big four’ corporations– Bayer-Monstanto, ChemChina-Syngenta, DOW-Dupont and BASF – today control over 70% of the inputs such as fertilizers and commercial seeds.

Table.1 summarizes income disparities in in Indian villages.

Table 2: Class wise Income from Agriculture (Rs.) 2015-16 at constant prices

Category

No. of cultivators (million)

No. of cultivators % share

Area Occupied % share

Per Cultivator Annual Income (Rs.) 2015-16

Monthly Income (Rs.) 2015-16

Marginal <1ha.

99.86

68.53

24.15

33,636

2,803

Small (1 to 2 ha.)

25.78

17.69

23.2

1,16,196

9,683

Semi-Medium (2-4 ha.)

13.76

9.44

23.65

2,15,656

17,971

Medium (4-10 ha.)

5.48

3.76

19.96

4,35,846

36,320

Large ( >10 ha.)

0.83

0.57

9.04

12,82,125

1,06,844

Total/Average

145.71

100.00

100.00

87,614

7,301

Source: Data on number of cultivators and area occupied was obtained from Agricultural Census 2015-16, Ministry of Agriculture and Farmers’ Welfare, Government of India, 2018.

Hunger amidst Plenty:

Production of food grains has increased several folds ie. six times from 51 mln tons in 1950 to nearly 310 mln tons by 2021 thus making the nation so called ‘Self sufficient’ in food production.The following Table illustrates the rise in food production.

Food Item

Production ( mln.t)

(berween 1950- 2021)

Improvement Rate

(1951 to 2021)

Food grains

51.0  to 310.0

 6 x

Fruits & Vegetables

31.0  to  320.0

10 x

Milk

17.0 210.0

12 x  (World No 1)

Fish

0.75 to 14.1

18 x

 

Despite the impressive growth rates  achieved during the last 75 years and much said ‘ Self sufficiency’ in food production, today (2021) India among 116 nations slipped down to 101 position. Ironically it was in 94 th place in 2020. Despite the overflowing grain stocks with FCI, food availability has fallen significantly in villages. High level of  beneficiaries (up to 80 percent) of Government’s subsidized food security scheme is a clear testimony to prevailing hunger and malnutrition in villages.  Data from various surveys  indicate  high levels of child mortality, child stunting and with almost half of children and mothers malnourished. The enigma of persistence of hunger amongst plenty testifies the reality of  rural India. The mode of food production has shifted from one’s family consumption to markets.

Despite in the success in  food production

·         India is home for 200 mln people, 50 % of rural poor and shares quarter of total hungry in the world.

·         With 40 % of world’s malnourished population, country is loosing nearly 9 % of annual GDP.

·         Although rural women constitute 62 % of work force they face wage discrimination and hardly own any financial assets.

·         Average income of a small farmer both from cultivation and non farm activity is approximately Rs. 6,200. No farmer wants his children to practice farming again.

Shift from self consumption to Markets:

 As food became a marketable commodity, all three areas of it’s production viz.. input acquisition, production, marketing and distribution turned have come increasingly under the control of capital. Gradually Green revolution pushed Indian agriculture from food grain production to  cultivation pf cash crops such as Cotton, sugarcane to horticultural crops to cater to needs metrpols in India and abroad through exports. Statistics reveal that of the Rs. 100 paid by urban consumers while purchasing food items, the farmer’s share is not exceeding Rs. 32. All other intermediatories in the chain seems to be deriving high profits except the food producer. There appears   Early IX century Marxist economist Kautsky first noted the loss of peasantry in markets in favor of  capital and flow of surplus from villages to urban area and termed it market disequilibrium. As capitalist mode of production started dominating, regular fall in market prices as dictated by  domestic & world grain MNCs, crisis in villages from unequal exchange between farm & industrial goods, the agricultural crisis further deepend. Bankrupt from barrowed credit  and nearly 4.0 lac small & tenant farmers (mostly cultivators of Bt cotton, chillies and cash crops)  committed suicides. During the last two decades significantly reduced subsidies on fertilizers, electricity, diesel and farm extension activities following neo liberal  prescriptions of imperialist agencies such as WTO, IMF and others. Though the governments introduced some remedial schemes like crop support prices bank credits and crop insurance, their implementation was tardy and largely benefited rich farmers and industrialists. An interesting development in the second decade of this century is organized protests from farmers protesting against neoliberal pro corporate policies of union government. Recent farmers march to Parliament, massive Nasik Padayatra and historic year long farmers peaceful struggles are clear examples of resistance.

Description: https://images.indianexpress.com/2021/09/data-7.jpg

Data reveals that only 40.3 %  comes from crop cultivation and the rest comes from non farm labour in other fields and others. These data testifies the existing crisis in agriculture.

Apart from capturing agricultural inputs MNCs today deeply invested all along the value chains. Apart from well-known western corporations such as Walmart, Amazon etc, many Indian corporations like Reliance, TATA, Adani own their brand super markets as part of value chains, thus entered in to direct purchase of farm commodities, their storage and marketing (including exports). The major fury witnessed during year long farmers agitation against three farm laws was naturally directed against monopoly and domination of total agricultueral sector starting from inputs, production, marketing, storage to marketing.

Ecological crisis:

 Another negative affect of green revolution is intensive farming where high yields are assured only by application of high dose of fertilizers, water and pesticides. chemicalization has damaged the soil and the surrounding plant  microflora ie plant friendly & cooperative microorganisms, insects, earthworms and birds. Concentrated & high levels of Nitrogen, pesticides and pesticides often kept away the later  from root & plant environment thus depleting natural fertility of soil. For example of the 100 Kgs of Urea applied only 32 kgs is absorbed by the crop and the rest ends up as a pollutant to water bodies . Unutilized Nitrogenous fertilizers evaporates as Nitrous oxide, an important Green house gas.

Cultivation of rice by tapping ground water has resulted in plummeting ground water levels. Scientists predict Punjab with depleted ground water and climate change would soon turn in to a desert. Only alternative is replacing present water guzzling wheat- rice cropping pattern by less water demanding wheat, pulses, oil seeds and millets. This was the cropping system traditionally suits to Punjab ecosystem ie.. soils, local rainfall pattern and ecology. Climate change has further worsened the agriculture with consequent unseasonal rains, received total rainfall in a small interval followed by floods. Altered monsoon pattern and recorded very high temperatures resulting severe droughts. Excessive heat recorded in colder regions has pushed cultivation of apples and other crops to warmer tracks thus affecring their yields significantly.

Climate change could depress crop yields up to 30 percent by 2050, putting about 80 million more people at risk of undernourishment, according to a paper by the International Food Policy Research Institute produced for the Global Commission on Adaptation. Apart from  plummeting ground water levels and environmental crisis today Punjab is suffering from serious malnutrion as pulses & vegetables are not cultivated and became unaffordable to rural population.

Transfer of  food, surplus capital and even the soil nutrients (which   are irreplaceable, away from recycling locally) has resulted in serious economic, nutritional and ecological crisis. Karl Marx in his Ecological note books (1860) cautions export of large scale  food to far off urban areas away from local consumption writes the former breaks local food cycle and causes depletion of soil from it’s nutrients. Later Marxist ecologist Bellomy Foster termed it ‘Metabolic rift’. For example, Punjab termed as harbinger of Green revolution with high levels of food grain ptoduction unfortunately suffers from severe malnutrition.  Till 70’s pulses, Jowar,and oil seeds apart from wheat were  major crops till the onset of Green revolution. As a result whet- rice monocycle replaced cultivation of pulses-wheat-mustard  cropping system that was suited to local rainfall pattern and soils. Increaed rice Cultivation  required high levels of irrigation which came from exploitation of ground water. It was estimated that for production of 1 G of rice nearly 1,410 liters of water is required, while 10,000 liters for harvesting aKg of cotton. Besides these crops are align to local ecosystem and require application of high doses of Nitrogen fertilizers and pesticides gor control of new pests that were unknown earlier to this region.

 Agricultural Research and Extension:

 Research in development of new technology is necessary for  rising  production and productivity in agriculture. In June  1964, when Lal Bhahadur Shastri ji was  finalizing his ministry, nobody wanted the  agriculture portfolio. When C. Subramaniyam  was appointed as Agriculture minster,  the nation was already  in the throes of food crisis. We were importing 150 million tons of food grains ( ie. Almost  one tenth of  our annual consumption)  from US, under Pl-480 scheme accepting the   humiliating conditions attached to the imports.  Self-sufficiency in food grains became top priority. India imported  under guidance of Consultative Group on International Agricultural Research (CGIAR, a body funded by Rockfeller and Ford foundations), semi-dwarf high yielding (HY) wheats, developed by Borlaug and his team at the International Maize and Wheat Improvement Center (CIMMYT), Mexico, that ushered in the Green Revolution in India. Adaptation of imported germplasm to innovate indigenous varieties—like Kalyan, by DS Athwal and Sona by MS Swaminathan—aided the spread of this revolution. Around the same time, high yielding rice—IR8—developed by Peter Jennings and Henry M Beachell of International Rice Research Institute (IRRI, another CGIAR institution) was imported.

Indian  geneticists  actively supported gave a  new thrust  to Indian agriculture  embedded with  modern technology.  The  Green revolution and  the subsequent  attainment of self sufficiency in food production were achieved with implementation of a two pronged strategy- active propagation of  High Yielding  Varieties (HYV) of wheat and rice  and to  encourage farmers by providing  market  support prices. Along side were established National seeds Corporation  (NSC) , Food Corporation of India and National Dairy  Development board  at Anand headed by legendary Dr. D.V. Kurian. The subsequent success Green, white and blue revolutions  that brought self sufficiency in  food, milk and fish production  was achieved   by infusion of new  research policy based on modern science and technology.

Productivity of most of the crops was comparable to the global average . The low crop yields cannot be attributed to "non-availability" of improved technologies but several factors including inequalities in farming community, access to the  modern technologies, lack of crop technology suitable for small farmer holdings,  short growing season, varied agro-climatic conditions and weather extremities are other causes for low productivity. Establishment of nearly 50 state agricultueral universities , Krishi Vijnan Kendras in every district and 100 research institutes had paved the way in dissemination of agricultural technology and development of agriculture in the country. As shown in Table 1 above huge success has been achieved after independence. However, India's crop yields are lower than those in the US, Europe and China.  India's rice yield was 2191 kg/hectare, while the global average stood at 3026 kg/hectare, while wheat is 2750 kg/hectare as against the world average yield of 3289 kg/hectare. Whereas in India, on the same land, farmers grow more than one crop in a year and per day . From the very beginning,  a  major flaw in  the  agricultural R&D policy has been the neglect of farming needs of small farmers. The green revolution was drafted and developed technology was adopted mainly to cater the needs of large farms. The technology was based on introduction of  plant genes ‘ Norin’ (wheat)  and “Dae woo gen’ (rice) in to Indian wheat and rice varieties respectively. Introduced high yielding Mexican wheat and TN 1  and IR rice varieties containing the above genes were crossed with indian native counterparts to develop High Yielding crop varieties. But the new genes had the ability to change plant physiology thus facilitating high griain yields. But the irony is high yields are possible only under application of heavy doses of chemical fertilizers, irrigation and pesticides. This technology was introduced by CGIAR through International wheat (CIMYT, Mexico) and IRRI (Philippines), Use of high quantities of inputs ie. chemical fertilizers and tractors had enormously benefited Western MNCs manufacturing & marketing agro chemicals, seeds and tractors. In a way Green revolution helped the imperialism to enter Indian villages and establish a strong grip over Indan agriculture. On the other side high input based Green revolution largely benefited resource rich big farmers fetching profits from bumper harvests. Although small and marginal farmers were forced to adopt new technology by investing large sums for purchase of costly inputs lured by prospects of high grain yields. Small farmers had to borrow large sums of money for purchase od costly inputs, which subsequently impoverished them. It should be noted that nearly 70 percent of food produced in the country is produced in small farms owned by small, marginal and tenant farmers.

Since the unprecedented success of the green revolution, there have been significant advancements in science, its organization and management and transfer of technology to end users. The research system expanded considerably and extension system has undergone a continuous change. Advancements in molecular biology and information technology have taken shape and research on animals and horticultural crops has expanded.

R & D in Public sector, had  witnessed a  significant change after  introduction of various  International treaties such as IPS & Patents, WTO, new seed policy ( allowing  private seed firms to operate),  subsequently leading to market monopoly in seed  industry (  with hybrid and transgenic seeds in  cotton, maize, vegetables and others) .

Although small farmers were instrumental in increasing food production and making green revolution they fell in to debt trap and further pauperized. Thus the R& D strategy underlying green revolution has benefited domestic rich farmers , grain traders and foreign agro-chemical MNCs enormously. Even the mandate of public sector research moved further away from  research onrain fed crops to more  on to Hybrid crops,herbicide tolerant GM crops,  cotton, maize, Soybean and commercial crops invoving crop biotechnology. Ironically practically no suitable technologies like micro irrigation, cropping systems and non availability of  drought tolerant varieties of small millets, pulses and oil seeds. Incidentally these are the crops that ensure certain level of  security from vagaries of weather and pests traditionally cultivated in small holder farms. Unlike crop varieties, where seeds from earlier crop can be used for sowing in subsequent seasons,instead public research  emphasis on development of hybrid seeds pushed small farmers to acquire new seeds every season from markets. With domination of domestic seed market by mostly Global MNCs such as Monsanto, Cargil, Bayer and their Indian partner seed companies. High price seeds  charged by seed firms and gradual weakening of publis seed production & distribution small farmers are forced to incur invest large sums on purchase of inputs in crop cultivation. The financial woes of farmers began with opening of   Indian rural markets to foreign seed multinational firms under neoliberal policy implementationby subsequent governments by entering in to agreements with WTO and other imperialist agencies.

Table.3. Investments in Agricultueral Research and Extension.

 (Budget allocations, % of GDP)

Year

Research

Extension

1983

0.25

0.10

2021

0.39

0.18

Austrla and USA spend nearly 3.0 $ of their GDP.

A clear shift in curriculum and research  from  management of larger holdings to needs of small holder farmer holdings. It should focus on local agro ecological needs to sustain production  and income enhancement in small farmer  food production systems.

Crop Diversity:

Diversifying from existing cropping systems, predominated by rice and wheat in many unsustainable landscapes, to more nutritious and environment-friendly crops have often been suggested to address challenges of climate change and malnutrition. Cropping systems  proceeding a major cereal crop (wheat  in northern states, rice in Southern, eastern & North Eastern states) cultivation of  millets and oil seeds is a viable alternative. However, such a transition must protected by assuring profitable MSPs to millets and oil seed crops to benefit  income base of the farmers. Diversification to crops like pulses, oilseeds, vegetables and fruits, adapted to specific agro-ecologies, must also be planned, and implemented by the states with suitable incentives to farmers during the changeover. Such diversification would not only increase the nutritional value of the food system, but also holds potential to reduce water use and green house gas emissions. However, diversifying to new portfolio of crops will require establishment of  small and medium scale agro food industry to meet youth employment needs in villages. Crop Diversity

Mono culture or cultivation of one or few crops season after season depletes nutrients and water from soils thus making them infertile with in a few years. Mono culture also damages environment(with use of high doses of fertilizers, pesticides, ruins organic structure of soils depleted of plant friendly microorganisms, earth worms and insects. Apart  ecological damage monoculture robs diet of village poor of pulses, vegetable oils &  greens.

Pulses and some oil seeds  fix Nitrogen from atomosphere in soil,  and hence  require low doses of chemical fertilizers and irrigated water.Cultivation of a rice or wheat soon after pulses also benefits the later, reducing fertilizer requirement. Besides, alternative crops reduce incidence of pests and diseases apart from improvement  of ground water and other water sources, brings extra income to farm families.

Cultivation of short duration (45 to 65 days) of lentils or pulses like green gram allows farmers to grow  in rice fields between growing seasons. This helps smallholder farmers diversify their incomes and nutrition sources, which is vital in context of climate change.

Provision of animal proteins to 1.3 billion population may not be possible in near future. Fish significantly substitute dietary proten needs. Hence fish production should also become an integral part of small holder food production system. Integration of crop, animal husbandary, fish  and bee keeping promotes recycling nutrients sustainably. Apart from improvement in nutritional status could potentially enhance farmer incomes from small holdings.

Sustainable Agriculture:

Today Indian agriculture is facing two major problems- Impoverishment of small & marginal farmers and serious deterioration of natural Agro ecology. Econamic crisis of  farming community has worsened further during the last two decades mainly due to  price inequalities prevailing in markets. While crisis in agro ecology could be attributed to disproportionate exploitation of natural resources and  climate change. However both the above problems faced during the last 75 years of independence capitalist  are intrinsically linked to capitalist mode of  agricultural development. These issues need to be addressed to attain further progress in agricultueral development and farmers well being.

Two major social issues of Indian villages -  hunger and malnutrition can be addressed  with adoption of nature friendly sustainable farming methods.  Nearly 50 percent of children and young women suffer from malnutrition, and consequently causing 9 % loss of GDP.  Studies reveal investment of every 1 Re on Balwadi, midday meal & women nutrition  fetches return of Rs. 16 to 40 in terms of health and socio-econamic development. Interestingly investments in agriculture amount to one twelth, compared to other sectors of economy.Experts claim that investments in agriculture are  2 to 3 times more affective in addressing rural poverty  to investment in other sectors of economy.

 Integrative Agriculture:

To fulfill basic needs of small farmer house holds including food (cereals, pulse

oil seeds, milk, fruit, honey, fish, meat etc.) feed, fodder, fuel and fiber, a well-focused Integrated Farming strategy is needed.

Fig.1. Econamic benefits of Integrated Farming Systems,ICAR, 2019.

In small farmer holdings income from crop cultivation does not exceed 43 % of total house holds. Apart from cropsdiary, piggery, bee keeping and  vegetable production should be supplemented. Demonstrated Integrarative farming systems conducted at Modipuram UP), Coimbatore TN) show anextra  income up to Rs.79,000 per seaon from 1 ha with investment of Rs. 12,000 in  small farmer holdings.

In short present crisis in agricultural production, farmers income and environment can be better addressed by bringing radical policy changes that primarily benefit small farmer production systems.  An alternative strategy  stands on four pillars- 1. Land reforms 2). Sustainable farming 3). Farmer income security abd  4). Attainment of food & nutritional security. There is an urgent need to implement land reforms, replace present mode of  ecologically damaging capitalist mode of production by eco friendly sustainable farming preferably practiced in farmer cooperative production systems.

Self-reliant Development Challenge after 75 years of Indian Independence: What is the way forward?

 

Draft Feb 25, 2022

Self-reliant Development Challenge after 75 years of Indian Independence: What is the way forward?

Dinesh Abrol

 

Introduction

India is back to a “country of mass poverty” after 45 years. Two hundred thirty (230) million people in India are below poverty line due to the cumulative shocks of demonetization, GST and lockdown. The unemployment crisis is intensifying– the recent job riots in the states of Bihar and Uttar Pradesh[1] offer a small indication of the seriousness of the unemployment issue. Unemployment rates calculated for rural and urban areas have more than doubled and are even officially 14.34% and 14.71% respectively. Inflation in essential commodities continues to accelerate. In the midst of a massive unemployment crisis, in the informal economy where 90 per cent of people work about 400 million workers are at risk of falling deeper into poverty. 50 to 80% slum dwellers lost their primary source of income while their expenditures have increased. The reports of how there has been a reduction in fruit and vegetable consumption (rural 68.8%, urban 28.7%) and of cooking oil and pulses should be raising alarm bells in the offices of the governments, but that is yet to materialize.

The economy is experiencing the “longest economic slowdown since 1991”. Weak employment generation, uneven development, large informal economy today characterise the features. Around 80 per cent of small and medium enterprises across India are "insecure" about their future. A survey of 81,000 self-employed and micro or small businesses (SMBs) found 78 per cent of them incurred losses. Loss of household income was 67.3% for rural areas and for urban areas 56.9%. The Oxfam Report[2] suggests that the pandemic has led to an 84 % decrease in household income. Poor take more loans from private lenders at high interest. Year 2020 saw more suicides among business people, than even farmers as per National Crimes Records Bureau (NCRB). Suicide deaths of businesspersons jumped to 11,716 in 2020 from in 2009 9052 an increase of 29 per cent. Farmer suicides stood at 10,677 for 2020, which is around 1,039 cases fewer than that of business people.

Children are under higher risk of death from common childhood illnesses such as diarrhea, pneumonia, and malaria. 189.2 million, 14% of population, are undernourished. 51.4% of women between 15 to 49 years are anemic. 34.7% of the children under five are stunted. 20% suffer from wasting. COVID 19 experience exposed to us how vulnerable the people felt on account of poor health infrastructure and limited access to health facilities and medicines. Education of a total of almost 320 million learners from 1.5 million schools remained adversely affected during the period of last two years. Not all could transition to e-learning. Only 15% of rural households have internet access and 42% urban. Only 13% in rural areas—8.5% females—could use the internet. Disaster facing children and youth of the future India would not get averted easily, it is clear.

Where does Vishwa Guru Stand?

World Leader Report Card

Global Index

2014

2021

Standing

Global Hunger Index

63

101

Declining

Global Gender Gap Index

114

140

Declining

World Happiness Index

111

139

Declining

Democracy Index

33

53

Declining

Press Freedom Index

140

142

Declining

Henley Passport Restrictions Index

74

90

Declining

 Source: Trends map, October 2021

Economic reforms, inequality and poverty

The pandemic has not been an equalizer. Wealth and income inequality of India are among the worst in the world. As per the 'World Inequality Report 2022', India is among the most unequal countries in the world, with rising poverty and an 'affluent elite. The top 10% and top 1% in India now hold 57% and 22% of the total national income respectively. The bottom 50% share has gone down to 13%. The average annual national income of the Indian adult population is Rs 2, 04,200. Here, the bottom 50% of earns Rs 53,610 while the top 10% earns Rs 11, 66,520, over 20 times more. Public assets typically include public buildings housing administrations, schools, universities, hospitals and other public services.

The World Inequality Report 2022 was authored by Lucas Chancel and co-ordinated by renowned economists Thomas Piketty, Emmanuel Saez and Gabriel Zucman. The report goes on to say that over the past three years, the quality of inequality data released by the government has seriously deteriorated which has made it particularly difficult to assess recent inequality changes. The report notes that the share of public wealth across countries has been on a decline for decades now. The 'secular decline' in public wealth and rise in private wealth was only exacerbated by the outbreak of the corona virus pandemic.

The report says that emerging economies like India and China experienced faster increases in private wealth than wealthy countries after they transitioned away from regulated economies. In India, particularly, private wealth went up from 290% in 1980 to 560% in 2020. The super-rich have cornered most of the share of wealth created under the Modi regime by the Indian nation. According to the Economist, Mukesh Ambani and Gautam Adani’s net worth increased by 350 per cent and 750 per cent between 2016 and 2020. India is characterized by extreme inequality after the implementation of three decades of economic reforms.  (Source: The Economic Times Feb 25, 2022)

 

 

Inequality: Let us look at the latest numbers

Share of Wealth of Top ten (10) percent

The top 10% of the Indian population holds 77 % of the total national wealth.

Share of Wealth of Top one (1) percent

73 % of the wealth generated in 2017 went to the richest 1%, while 67 million Indians who comprise the poorest half of the population saw only a 1% increase in their wealth.

Rising Number of Billionaires & Millionaires

There are 119 billionaires in India. Their number has increased from only 9 in 2000 to 101 in 2017. Between 2018 and 2022, India produced 70 new millionaires every day.   

Rising Fortunes of Rich

Billionaires’ fortunes increased by ten times over a decade and their total wealth is higher than the entire Union budget of India for the fiscal year 2018-19, which was at INR 24422 billions.

Rising indebtedness due to poor access for citizens to healthcare

Many ordinary Indians are not able to access the healthcare they need. 63 million of them are pushed into poverty because of healthcare costs every year-almost two people every second. 

Growing wage inequality

It would take 941 years for a minimum wage worker in rural India to earn what the top paid executive at a leading garment company earns in a year.

Source: India Oxfam Inequality Report, 2022

Going back in time, the report notes that income inequality in India under the British colonial rule (1858-1947) was very high, with a top 10% income share around 50%. After independence, due to socialism-inspired five year plans this share was reduced to 35-40 per cent. The report argues that the post economic reform policies have led to one of the most extreme increases in income and wealth inequality observed in the world. It states that while the top 1 % has largely benefited from these economic reforms, the growth among low and middle-income groups has been relatively slow and poverty persists. The average household wealth in India is around Rs 983010. The bottom 50 % of the nation can be seen to own almost nothing, with an average wealth of Rs 66280 or 6 per cent of the total pie. The middle class is relatively poor with an average wealth of Rs 723930 or 29.5% of the total. In 2021, the wealthiest 10 % of the population own 65 % of the total wealth, averaging Rs 63, 54070 and the top 1 % owns 33 %, averaging Rs 32449360. Gender inequality in India is also considerably on the higher end of the spectrum. The share of female labour income share in India is equal to 18 per cent which is significantly lower than the average in Asia (21 % excluding China) & is among the lowest in the world. (Source: The Economic Times: December 07, 2021).                                      

Union Budget 2022-23 extends failed reforms

The Union Budget of 2022-23 has done nothing to stimulate demand for effecting an economic revival; the total budgeted government expenditure for 2022-23 is Rs 39.45 lakh crores, which is just 4.6 % higher than the revised estimate for 2021-22. This means that the increase is below the rate of inflation, entailing a drop in real terms, and hence also below the growth rate of real GDP projected by the Economic Survey, which is 8-8.5 per cent. Although in her budget speech, the Finance Minister claimed that there will be a sharp increase in capital expenditure driven by enhanced public investment, but this is not true. Rs. 62,114 crore (or more than 10 % of capex that year) for the Ministry of Civil Aviation to be transferred to Air India Asset Holding Limited “for servicing of loan transferred to SPV as a result of financial restructuring of Air India” cannot be counted as an increase in capital expenditure. In the projections for 2022-23, the capital expenditure figure quoted by the Finance Minister also includes Rs. 1.12 lakh crore of loans to state governments. This is definitely not capital spending by the Centre and is unlikely to be used fully even by the states to finance capital spending. One other provision in the budget for 2022-23 that is intriguing is a capital allocation of Rs. 53,033 crore to “other communications”.

The outlays for a whole range of schemes that provide relief to the poor have been slashed compared to the revised estimates for 2021-22. Thus the provision for the MGNREGS is just Rs 73,000 crores compared to Rs 98,000 crores in 2021-22 (RE) and Rs 1, 11,000 crores for 2020-21. The budget affects drastic cuts in social sector spending. There is a reduction in the devolution of resources to states. An increase in the devolution to states by 9.6 % in nominal terms in effect means a fall in its share in GDP, to an estimated 6.25 % compared to 6.91 % in 2021-22 (RE). There is no real increase in the budget for health and family welfare. Far from increasing the allocation for health to 3 % of GDP over time as the government had promised, there is a reduction in allocation for health relative to the estimated GDP. In the allocation for education, there is an increase by 18.5 %, but much of it is for digital education; and even this increase would leave the share of education expenditure in GDP unchanged at about 3.1 %, a far cry from the objective of raising it to 6 %.

There is an urgent need for a strategy that promotes economic revival while providing relief to the poor, and contributing to an abatement of inflation. The strategy, of giving tax concessions to the rich in the expectation of stimulating private investment, and raising indirect taxes, notably on oil, to raise revenue to compensate for what is foregone, is an important cause of the emerging inflationary recession scenario. Although it is amply clear by now that private investment, far from getting stimulated by such tax concessions, shrinks because of the ensuing recession, even in the current budget this strategy is at work: fuel prices have been raised by Rs 2 per litre (for unblended fuel which is the bulk of India’s fuel consumption) through an additional excise duty, while subsidies have been cut (which is analogous to arise in indirect taxes).

In order to correct the rising inequality with measures aimed at progressive direct taxation and reducing the share of indirect taxes that burden the people the Union Government must be forced to explore wealth, inheritance and higher corporate tax. In fact the best way of mobilizing financial resources is through Wealth Tax and Inheritance Tax. At a conservative estimate, the top 1 percent of the population owns 40 percent of total private wealth, about Rs 300 lakh crores. Even a 2 percent wealth tax on this would therefore yield Rs 6 lakh crores. Wealth tax must be complemented with an inheritance tax. Otherwise the rich will only divide up their wealth among progeny in order to escape wealth taxation. If only 5 percent of wealth by the richest 1 percent of the population is passed down every year to progeny, then an inheritance tax of one-third (33 1/3 percent), will fetch Rs. 5 lakh crores. These two taxes alone will thus fetch Rs 11 lakh crores per annum.

 

The central government has 8.9 lakh vacancies in its departments and ministry since March 2020. There are more vacancies in central PSUs, schools and colleges. The government could have prepared a consolidated list of vacancies and ordered filling of these vacancies on a priority basis to address the chronic job crisis. It could have appealed to state governments to do the same. It could have addressed growing poverty by giving direct income support to the poor - the bottom 40-60% of the population severely impacted by the pandemic. It is easy to identify them. The Ayushman Bharat uses the Socio Economic and Caste Census (SECC) of 2011 to identify the bottom 40% of its beneficiaries. The remaining 20% could also be picked from the same SECC. To raise income, the government could have also increased the minimum wages, stuck at Rs 176 for years. The Union Government should have raised the MGNREGA wages, which remains below the minimum wages at Rs 209.3 in FY22 and Rs 200.7 in FY21. These measures could have immediately raised the income levels of a large workforce to boost consumption demand in the economy.

Doubtful claims of Make in India programme

Post-reform dismal performance of the organised as well as unorganized sector led processes of manufacturing and services tell us that jobless growth, economic slowdown, lack of knowledge and skill intensive manufacturing, premature de-industrialisation and manufacturing are interconnected. The Make in India programme needs to create decent jobs and develop forward and backward linkages and reduce import dependence. The main policy components of the “Make in India” campaign are: 1) ease of doing business, land acquisition, 2) creation of physical infrastructure, 3) establishment of Delhi-Mumbai Industrial Corridor (DMIC), 4) Special Economic Zones (SEZs), 5) luring foreign companies with incentives for the expansion of manufacturing, 6) union government using public procurement of defence equipment, 6) reform of labour law and practices, 7) dilution of environmental regulations, 8) encouraging foreign direct investment (FDI) without technology transfer, 9) sale of central public sector enterprises, 10) monetisation of public assets for transfer of control of infrastructure to private parties, 11) tax concessions to big business, 12) custom duty changes, 13) further liberalization of intellectual property rights (IPR) protection provisions, 14) transfer of control of education and training facilities to corporate sector, etc.

The Modi Government launched the Make in India policy in 2014. This policy is the latest attempt since 1991 to make India the centre of the global manufacturing supply chain. The government has now put all of its eggs in the basket of the Production Linked Incentive scheme of July 2020 (PLI). Thirteen sectors are covered by PLI schemes. The sectors include mobile phones, pharmaceutical products, automobiles, specialty steels, textiles, photovoltaic panels and advanced chemistry cell batteries. The PLI is valid for five years, ending in 2026-27. The minimum capital outlay is US$14 million with an exception for Indian micro, small and medium enterprises, for which US$1.4 million is the entry level investment. The PLI schemes aim to place India more firmly within the global supply chain. The attempt is to direct foreign direct investment and private domestic investment to manufacturing. Although there are claims from the side of the Union Government, but it is not clear how much the framework will actually encourage the investors to practice localization of production and help build India new manufacturing clusters and get supporting companies to follow manufacturers into India, or help to generate employment in India. While during the COVID period the importance of local manufacturing, domestic market and shorter and local supply chains undoubtedly grew for the Modi government, but the domestic value addition and technological autonomy could not improve through the framework of PLI schemes is quite clear.

Electronic manufacturing

Why do we say this? Take for example how “Invest India” has chosen to market PLI scheme in the case of electronics manufacturing to be a success story of the Modi government. The claim is that a significant increase in global demand for consumer electronics has given India an opportunity to attract foreign investments as well as encourage domestic manufacturers to focus on manufacturing consumer electronics in India under the flagship ‘Make in India’ initiative of the government. It is true that India’s electronics exports have increased from US $ 9 billion to US 4 15 billion between 2014 and 2019. But it is also true that imports have also grown. India’s electronic imports stood at US 4 51 billion in 2019. There was an overall trade deficit of US 4 36 billion, out of which China accounted for US 4 19 billion. Top imported items (during 2019-20) were parts of smart phones, personal computers, data transmission machines,, parts of LED/LCD TVs, Integrated Circuits, cameras and servers. Assembly has been growing. There has been a shift from “semi knocked down” (SKD) to “completely knocked down” (CKD) level. 

The ICRIER report (August 2021) characterised the performance of PLI scheme in electronics as well begun but barely done. The report suggests that there exists a multitude of existing and emerging constraints. Current tariff and tax policies neither meet the industry needs nor maximize fiscal revenue. The industry is caught in the vicious cycle of small scale and high costs. There is absence of complementary supporting policies. The FDI inflows to Indian electronics industry have been low, even from free trade agreements (FTAs) countries. There is a lack of skilled workforce needed to produce complex parts and components and specialised technical personnel. The global electronics value chains have been seeking further opening of trade and investment regime. The conditions are at odd with the policy of phased manufacturing programmes (PMP) considered to be necessary for the reduction of import dependence. It is difficult to believe that this situation can be considered as significant progress is far from clear.

Under the National Policy on Electronics 2019, which was introduced to position India as a global hub for electronics system design and manufacturing, the Ministry of Electronics and Information Technology (MeitY) introduced a Production Linked Incentive Scheme for large-scale Electronics Manufacturing with effect from April 1, 2020. PLI scheme extends an incentive of 4 per cent to 6 per cent on incremental sales (over base year) of goods under target segments that are manufactured in India to eligible companies, for a period of five years subsequent the base year (FY2019-20). The scheme was open for filing applications till 31.07.2020. Over the next five years, the approved companies under the PLI scheme are expected to lead to total production of more than INR 10,50,000 crore (USD 140.6 Bn). Out of the total production in the next five years, around 60 per cent will be contributed by exports of the order of INR 6,50,000 crore (USD 87 Bn). While the PLI schemes have been recently launched by the government in several crucial sectors of the economy, it is important to note the impact they are creating on the ground.

 

Automobile and Auto components 

The Government of India (GOI) announced Production Linked Incentive (PLI) scheme for Automobile and Auto components sector to boost domestic manufacturing of Advanced Automotive Technology products and attract investment in the automotive manufacturing value chain with the highest total budgetary allocation of INR 25,938 crore. The industry contributes 35% of India’s Manufacturing GDP. A study has estimated that top 12 import categories such as drive transmission, steering units, engines etc. account for 62% of total imports. While India remains competitive in some areas, there remain technologies and parts that are either not made in India or for which we haven’t matched the global scale, prices, or quality. This PLI scheme will have to address the competitive gaps amidst the rapid technological shifts. Open for existing automotive companies as well as new investors, the scheme is a ‘sales value linked’ scheme and has two components of Advance Automotive Technology products: Champion OEM Incentive Scheme on battery electric vehicles (EV) and hydrogen fuel cell vehicles (HFCV) of all segments and Component Champion Incentive Scheme. Eligibility criteria to apply under the schemes are as follows (INR in Crores) for existing automotive investor is 1)Minimum Global Group Revenue of INR 10,000 crores and INR 500 crores for OEM and Component manufacturer respectively and 2) Minimum Global Investment in fixed assets of INR 3,000 and INR 150 for OEM and Component manufacturer respectively. In addition to this, the Company will also have to meet the criterion of incremental cumulative domestic investment and determined sales target.

The Ministry of Heavy Industries (MHI) has prescribed the Advance Automotive Technology Vehicles eligible for Champion OEM Incentive scheme. Hydrogen fuel cell vehicle of all segments, Battery electric vehicles of all segments, which will have to meet the performance criteria of FAME-II scheme or as notified from time to time by MHI, are currently the targeted items. List of Advance Automotive Technology Components was notified on 9 November 2021. Fast-evolving automotive regulations on emissions, safety and energy efficiency, coupled with swift changes in consumer trends are the driving factors for technological shifts globally including shift towards electric vehicles and rising level of vehicle automation and connectivity. It is pertinent to note that since the guidelines mention that the list of eligible products can be amended from time to time depending upon technological developments there is much reluctance being shown from the side of the private sector investors. Further the scheme guidelines require a minimum of 50% domestic value addition. With this ambivalence in the list of eligible products, it might not be possible for applicants to reap benefit for the entire tenure of the PLI scheme. Further, for continuation of the PLI scheme benefit, an applicant may require additional investment for ever-changing uncertain eligible product criteria. Further, in case applicant is not able to achieve the turnover and investment criteria due to alteration of the list of eligible products, MHI may invoke the bank guarantee furnished by the applicant.

India relies heavily on import of Lithium batteries. About 58% of the world’s lithium reserves are in Chile and about 43% of rare earth mineral reserves are in China. Owing to this skewed concentration globally, India had to import lithium batteries in huge quantities. In 2019-20, India imported 450 million units of lithium batteries valued at INR 6,600 Crores. Lithium battery pack is the most expensive component in an electric car, costing between 30 to 40 percent of the vehicle’s total cost. In the case of Semiconductor chips, prices of semiconductors have been climbing since 2020 amid global supply crunch Chip lead time increased to 17 weeks from 12 weeks in 2020. This will result in rise in import input cost as India relies heavily on import of semiconductor chips. Such heavy reliance on imports of inputs such as lithium batteries, semiconductor chips, e-drive, circuits, transistor etc. which accounts about half of the vehicle’s cost, may pose a significant challenge for applicants to comply with 50% of minimum domestic value addition criteria. Successful execution of the PLI scheme would require considerable investment in the charging and other infrastructure to support the operation of EV and HFCV amongst consumers. Infrastructure challenge may also deter the desired sales of EV and HFCV and as a result complying with Y-o-Y growth in determined sales value will be dubitable. These are certain speed limiters for auto PLI scheme, undermining the scheme at the current stage rather than by the results in the coming time would be imprudent.

Chinese ICT pathways for catch-up

Like the nation states of Japan and South Korea combined systematically the pathways of catch up and leapfrogging to pursue transformative changes the nation state of China has again tried following a similar path though faced with less favorable conditions of the post-WTO trading system in place now globally for investment in technology and foreign trade. For example, China does not grant automatically market access to foreign investors. Thus, China was able to negotiate favourable conditions for the absorption and assimilation of foreign technology in a number of new and emerging technologies. China is undertaking public investment to obtain the strategic leadership in digitalisation and industrialization. India is trying to rely on Google Amazon and Microsoft. China has been consolidating its presence in technology business, using Internet of Things, Internet of Services, Internet of Media, and rapidly promoting diversity in the use of AI and broadening the range of various industries, mastering big data and data analytics, and building now its own digital silk road to strengthen the place of domestic firms in the home market as well as the regions coming under the OBOR.

In China, Baidu, Alibaba, and Tencent (BAT) are contributing to self-reliant development. China has been able to exploit in a significant way multi-faceted datasets on individual consumers and users of data for systematic use in the development of artificial intelligence (AI) algorithms. The Chinese model allows a market of size that rivals Google, Apple, Facebook and Amazon (GAFA). AliGenie and Alexa, AI startups like Toutiau, which use AI algorithms to recommend news and websites to its users, have been able to get much space to grow in the domestic market. Baidu- analog to Google, began investing in AI in 2013, has established the Institute of Deep Learning, four internal labs, Baidu Cloud Baidu Brain supporting 370000 developers invoking its functions 2000 billion times a day; creating platforms in new fields-self driving platform Apollo and the customized AI operation system DuerOS, investing in self-driving mobility and speech interaction companies such as NIO and KITT. Alibaba, a Chinese Amazon analogue, built its strategy on the foundation of iDST, a pre-existing data centre established in Silicon Valley in 2014, and developed its cloud computing service which later evolved into ET brain artificial brain platform promoting AI use in all fields.

In 2014, UNESCO established in China its International Knowledge Centre for Engineering Science and Technology at the Chinese Academy in Engineering in Beijing specializes in big data and knowledge services. From 2016 onwards AI labs and products such as AliGenie and CityBrain Alibaba have been shaped up through the vertical integration in AI hardware products such as DeePhi Tech, Cambricon. Tencent has no clear analog in the US or EU setting up several teams to proceed and compete with each other not only promoting games but medical imaging recognition and analysis; Tencent is making investment in NIO and Tesla requiring data and AI-based algorithms. JD.com B2C platform owns warehouses and logistics uses, DiDi ride-hailing platform like UBER/OLA and Meituan Dianping (MD) provides on-demand services accumulating data for design and production.

Six areas in which China has shown amazing outcomes: New energy-RET, aerospace equipment, e-business, mega length bridges, transportation network (high speed rail, tunnels) and supercomputers; China accounts for % of world total-personal computers (90), solar cells, air conditioners, energy saving lamps (80), mobile phones (70), ships (45). In all these examples, it is the Chinese Government leading the transformative process. Four national AI platforms have been identified for support, and BAT is exploring already these fields in a systematic manner.  This strategy is allowing the transfer of capabilities developed in one sector to other-Baidu in speech and image recognition, Alibaba in data analytics, Tencent in interactive services.

At home state owned enterprises, quasi private sector firms and research institutions are developing AI 2.0-big data based intelligence, internet crowd intelligence, cross-media intelligence, human machine hybrid augmented intelligence autonomous intelligence systems. Benefits from AI 2.0 are being obtained from these developments in China in a systematic way for E-government, E-Commerce, Express Logistics, Intelligent communities, smart phones, televisions, household appliances, manufacturing and urban development. Institutional changes are pushing collaborative industry programmes and research plans, implementation of multi-regions, multi-sector plans of collaborative R&D to exploit diverse and complementary competences.

China started with the SEZ model complemented by State Planning policy complemented by incentives to foreign firms, and is continuing with state coordinated initiatives and cluster development through Made in China 2025 plan. Ningbo a port city chosen as a first pilot city for the implementation of Made-in-China 2025 plan; 20-30 cities cohort planned to join Ningbo and to achieve diversity in development; it signals shift from the strategy of perusal of grand production workshop and the intention to become a world manufacturing power. China has a coherent strategy for the future in place: 2015-25, 2026-35, 2036-49: focus on improving the quality of products, creating their own brands, building a solid manufacturing base by developing cutting edge advanced technologies, researching new materials, and producing key parts and components of major products; priority development of ten industries-IT, high end numerical machinery and automation, aerospace and aviation equipment, maritime engineering equipment and high level vessel manufacturing, rail equipment, energy saving vehicles, electrical equipment, new materials, biomedicine and high performance medical devices and agricultural equipment.

Lessons for industrial policy making

Scholarly analyses of the successful examples of late industrialization as undertaken in Japan and South Korea have some clear lessons. Comparatively speaking, India’s experience shows that the perusal of pro-service vision has also run India into premature de-industrialization. India is therefore having difficulty even in sustaining its competitiveness in the IT enabled service sector-ITES (ICT, finance and consulting). It has seemingly failed in increasing its public and private investment in services sector related R&D. The Indian experience is defined far more by the features of lack of successful efforts for the development of manufacturing, absence of symbiotic development of agriculture, industry and services, inconsistent with technological self-reliance and lack of commitment to the perusal of pathways of catch-up and leapfrogging on part of the political leadership.

Weaknesses of hardware sector and engineering education are impacting adversely on the creation of STI leadership for the development of manufacturing capabilities. These weaknesses are evident in the failures being experienced in respect of development of high value added IT products in the case of domestic companies. The share of foreign controlled companies has been growing in the higher value added segments of the ITES. India’s ability to offer low-cost, high-quality IT-BPO services has made it a world leader in this industry. However, employment in services has not grown as quickly as output. The majority of India’s jobseekers are low-skilled, but demand for workers is growing fastest in higher-skill industries. The supply of highly-skilled workers has not kept pace with demand, causing wages to increase faster for these workers than for lower-skilled ones.

Scholarly analyses indicate that the pursuit of catch-up and leapfrogging pathways have involved in these cases the nation states to undertake the following important changes: 1) a deliberate (planned) transformation of cognitive and productive structures that required the nation state to keep up with public investment in scientific, technological and educational institutions, 2) a balanced change in the share of agriculture, manufacturing and services (capacities), 3) pro-domestic manufacturing vision, 4) development of innovative enterprise, discouraged low road to export competitiveness, 5) augmentation of social capabilities, 6) development of user capabilities on the demand side to promote systemic and structural competitiveness and 7) building of developmental / entrepreneurial state apparatus.

The nation states chose to nurture as well as discipline to some extent the emergent social carriers in quite a few sectors in these countries. The state apparatus was far better placed in imposing on the business groups the obligation of systematic contribution to the processes of absorption and assimilation of new and emerging technologies. Thus, these nations have succeeded only because the states were able to undertake rent management quite successfully. The governments were able to create opportunities as well as withdraw incentives in a timely manner. Profitable investments were systematically encouraged. In the industrial and technological policies, the governments could incorporate the pro manufacturing vision, symbiotic development of agriculture, manufacturing and services, technological transformation and overall social progress in the sphere of education and health. These steps allowed the nation states of these countries to steer and coordinate the emerging socio-technical transitions.  

There was a major contribution from the deliberate, planned evolution of capabilities required for the development of the knowledge and technology intensive frontline sectors. The state of evolution of capabilities (new and emerging sectors) can be treated as a benchmark / criterion of success. Capabilities include not only education / human capital but also the capabilities associated with problem solving knowledge embodied in organizations and systems. The mere absence or presence of the market as an institution for resource allocation and mobilisation cannot explain success and failure to undertake sustainable industrialisation and digitalization in different types of socio-economic systems. It is clear that the late industrializing countries did not follow the policy of free market that the Washington Consensus prescribed and has been followed by the post mid-1980s political regimes and leaders to varied degree in one or other form in India.

Technological autonomy involves the accumulation of capabilities for technological learning. The processes of acquisition of the abilities of how to implement and eventually also how to generate new ways of producing and new products under conditions of dynamic increasing returns are critical to the achievement of success in technological learning. It is also well apparent that the benefit of production expansion accrued to the people of India only when there was focus on the implementation of indigenous innovation and the development of home grown innovative enterprises. Specific experience of implementation of the policies connected in the case of pharmaceuticals seems to suggest that achievements in respect of technological self-reliance were made possible with the help of the non-big business groups. As a social carrier of innovation young start-ups led by professionals with the help of public sector were willing to be subjected to some discipline.

The state could guide to some extent the growth process of pharmaceuticals in favour of the distribution of rents favourable to learning and indigenization. Of course, this happened also only up to a point; commitment of the policies after 1999-2002 was inconsistently followed and regressive in many ways. Even the phased manufacturing programmes / domestic content regulations could not be consistently implemented after a point in the sectors of automobile and renewable energy. Not only that phased manufacturing performance was not monitored rigorously by the state but also after growing in size the very same non-big business groups have also begun now to emulate the behavior of big business. Further the policymakers seem to be lacking in political will; they are not willing to discipline the firms in respect of their possible specific contribution to indigenous technology development. Analyses made have shown that in order to harness the gains of export promotion for technological learning in the post-World Trade Organization (WTO) conditions it was necessary for the Indian state to delay the process of external liberalisation and use the flexibilities available in the WTO Agreements for the development of pharmaceutical and auto sectors. It appears that this kind of selective protection would be essential whenever the target is to undertake the perusal of import substitution and export promotion in a consistent way.

The conditions of global competition and catching up requirements have changed quite rapidly on account of the institutionalization of WTO Agreements and the changing strategies of transnational corporations that are originating out of the influence of transnational corporations on the governments of advanced countries. Both import substitution and export promotion strategies are now experiencing hurdles as the barriers are raised by the transnational corporates having an advantage of the protection of WTO Agreements. The activities of global businesses can no longer be the same as in the decades of seventies and eighties that allowed South Korea and Taiwan to catch up. While the area of manufacturing activities is still a critical activity for remaining competitive, global competitors have been able to move rapidly the grounds of competition to the innovation activities such as R&D, engineering design, standards, marketing, supply chain management while transferring the standard manufacturing activities to lower cost locations itself in many cases including China and India.

Internal liberalisation failure occurred on account of the problem of exhaustion of home market. Lack of sustained investment demand can be a recurring problem in the paradigm of import replacement and exports of mature goods. The challenge of introduction of major innovations like the absorption of electronics, biotechnology, renewable energy technologies and new materials can be addressed only through the active coordination of development of technology and market demand and not through laissez faire policies. As a result those industrial policies that could incorporate successfully the capacity for learning to innovate while expanding production capacity are likely to have a better success in late industrialization. The US had to resort to the perusal of the idea of entrepreneurial state in order to catch-up with Japan.

Policy alternatives for self-reliant development

In the post-WTO world, it is clear that the instruments of state intervention would need a re-invention. Conditions need to be prepared for the state governments being able to transfer resources to young start-ups, cooperatives, small and medium enterprises and such new business entities which are ready to contribute to structural learning and innovation making for the development of local, regional and national socio-economic requirements. Big business needs to be disciplined by getting its distinguished members to fall in line with the requirements of society and economy. In the post-WTO world, it is today still possible to transfer resources to domestic firms in the name of technology, R&D, environment and backward area development. In the post-WTO world, resource poor actors can be supported because the governments of advanced countries needed this policy space.

As listed in the literature coming out on the question of industrial policies, we would like to identify the following principles as essential ingredients for success: (i) an ‘emulation philosophy’ vis-à-vis the most promising technological paradigms; (ii) various measures safeguarding the possibility of ‘infant industry learning’, involving also the purposeful ‘distortion’ of market signals as they come from the international arena; (iii) explicit policies of capability-building directed both at education and training but also at nurturing and shaping specific corporate actors; (iv) a ‘political economy of rent-management’ favorable to learning and industrialization, while curbing the exploitation of monopolist positions; (v) measures aimed to foster and exploit a weak Intellectual Property Rights regime, especially with respect to the companies of the developed world; (vi) strategies aimed at avoiding the ‘natural resource course’; (vii) ‘virtuous’ complementarities between industrial policies and macroeconomic management.

Production structures set the stage of learning dynamics- because they help prepare human minds for the discovery of production possibilities. In India the narrative of promotion of manufacturing also revolves at present around the theme of how the sector of manufacturing needs to become an engine of job augmenting growth. There is a talk of how the manufacturing sector needs to grow by 12-14 per cent and create in the coming 15 years 100 million decent jobs. Our own understanding that the sectors of manufacturing catering to rising demand need to be promoted in order to realise the job augmenting potential of manufacturing in the Indian economy. The new pathways of self-reliance should prioritize the stimulation of internal demand arising out of the crisis of agriculture, natural resources, energy, urban living and health need to become the priorities of employment guarantee, poverty reduction, infrastructure development and implementation of climate change related obligations. This would involve necessarily a shift away from the policy regime (s) focusing solely on the pathways of development offered by the strategies of import substitution and export promotion to the creation of a new policy regime which would diversify and focus also on the implementation of a new strategy of autonomous development bringing about the development of systems of local production and innovation by upgrading the local capabilities of peasants and artisans and their access to local resources and local markets to achieve self-reliance.  

In order to upgrade the system of innovation the state will have to actively focus on the use of instruments that foster the development of horizontal networks, indigenous clusters and technological effort intensive like environments with a view to harness the opportunities arising out of the spill-overs connected with the route of outward orientation in the cities attracting outsourcing investments. The strategy of leapfrogging would need developmental efforts not only to become inclusive and be geared explicitly to the reduction of poverty through welfare to safeguard their health, nutrition and education but also linked to the development of the capabilities of the poor and marginalized people as a part of the programmes for upgrading of their livelihoods in both rural and urban areas in a symbiotic way.

Basic needs of the urban and rural poor and productive apparatus upgrading requirements would now have to be met by the construction of “wider pathways of self-reliance” catering to the establishment of innovation development trajectories linked to the upgrading of local economies as systems in themselves which are competitive and effective in respect of improving the quality of life of the poor. Local economy systems would have to be built on the basis of technology configurations that value local resources, capabilities and markets rather than import replacement paradigm to meet the demand arising out of elite consumption and import dependent producers catering to imitative lifestyles.  It is important to recognize that how for the big business their interest in the idea of self-reliance was earlier completely contingent on the state’s ability to transfer resources to them for keeping their interest profitably intact in the project of industrial capital accumulation. Today their strategy is also directly focused upon encroachment of public sector resources through the processes of privatization, commodification and tax holidays.  These groups have their eye on the land, water, forests, minerals and knowledge resources and their strategies are already in direct conflict with the interests of the poor and marginalized in the sense that all these resources are going to be needed by the rural and urban poor if they want to emerge as the social carriers of innovations in the construction of new pathways of pro-people development in India and these late developing nations.

Concluding remarks

Failure to articulate the growing importance of construction of new pathways for sustainable and just development is very much the main issue facing the advocates of adoption of self-reliance based strategy of development. We need to argue that there exist alternatives and these alternatives must be pursued at the local and state level in collaboration with the forces opposed to neo-liberal policies. Experience of the countries of Latin America shows to some extent a way ahead to the leadership of rural and urban poor in Asia. Most recent experience of the left in India also suggests that the new pathways need to be articulated for a reinvention of the instruments of state intervention under the new conditions of post-WTO world.

Possibilities exist for the creation of new pathways of self-reliance if the political economy can be made favourable to the idea of self-reliance for ecologically and socially just development. It is noted that how the quality of strategizing is also going to matter in respect of creation of new routes to catch-up and leapfrogging. Whether the pathways pursued would be wider or narrower in terms of social conditions, innovative enterprise development and commitment to education and skill base formation is likely to be determined by political economy. Since the quality of strategizing efforts that the leadership of rural and urban poor need to show is crucial to the perusal of new pathways the challenge of policy alternatives is not an ordinary challenge.

Recent experience tells us that the failure to conceptualise alternatives is in fact becoming a question of survival of the progressive politics in India. The challenge is very much with regard to the design of appropriate pathways of symbiotic development of agriculture, manufacturing and services. Agro-ecological approaches provide an opportunity for not only agrarian transformation but also for rural industrialisation. Industrial development, renewable energy, sustainable urbanisation, water and waste management, provision of social determinants and resources for sustainable healthcare need to be promoted in an integrated way to create new niches in order to meet the aspirations for self-reliant, employment intensive, energy conserving, environment friendly and socially just development. We need to recognise that the constraints exist at not only the level of labour surplus but also at the level of socio-ecological problems. Alternate pathways of industrialization and capability building should be thus constituted using alternate socio-technical frames for indigenous innovation. Institutions required for the steering and coordination of the efforts required for the development of socio-technical systems and policy regimes would have to be developed to suit our own challenges, and we cannot rely on the imitation of others to achieve success.