Posted by: Vikram | February 12, 2013

Why India is so poor

First, the rural scenario

Imagine you live in a mid-western town in provincial America. Public transport is unheard of. Without a car, you are going nowhere. You cant go to work. You cant go to the doctor. Your economic and social prospects are pretty much nil. Basically, without a car you are condemned to poverty. So you say, the solution is simple enough, go buy one.

But you cant. Not because there are ‘too many people competing for a car’. Nor because the license officials are ‘corrupt’. Its because you are simply not allowed to. The people who own the existing cars just wont let you. They think you are only fit to chauffeur and clean their cars, not own one yourself. They want you to be dependent on them, so they can keep exploiting you. Some of the lucky ones can repair cars, so they have a slightly higher status, but they cant own one. This is enough, however, for them to think they are ‘superior’ to you and destroy any solidarity you could have built with them to challenge the car owning classes.

Replace car with land. And class with caste. And you will begin to understand the nature of economic relations in rural India. A highly centralized economy, with land ownership, access to irrigation and electricity concentrated in the hands of a landed elite. And a mass population condemned to be labourers, with virtually no control of their economic lives. Note that the issue here is not the scarcity of land. India has the second highest area of arable land in the world after America1, and its warmer climate is much more suitable to farming than America. The issue is the distribution of land. After successive rounds of very feeble land reform, the only major change in India’s rural economy is the transfer of some land ownership from the upper caste Hindus to the castes just below them. Even 65 years after Indian independence, the vast majority of the most marginalized in India, the Dalits and Adivasis remain de facto landless2.

A very in depth, localized study of this situation is provided in Dr. Jan Breman’s (University of Amsterdam) book: ‘The Poverty Regime in Village India‘. Based on half a century of work in rural Gujarat, the book presents a penetrating account of the oppressive economic and social relations in south Gujarat, especially between the marginalized tribal Halpatis and the ruling Anavil Brahmin caste. Breman’s contributions cannot be covered in a single blog post, but I will summarize two key observations here, first from the book itself,

The idea of undeserving poor has taken root in the minds of those who are rich, more in these years of reforms. The rich, thus, neither feel guilty nor are afraid of any mobilisation by the poor in acute destitution because of the absence of solidarity among them. The result is that the landless, footloose rural proletariat lead a nomadic existence, following the seasonal, sectoral, and local fluctuations in the economy with occupational multiplicity.

From a review of the book in the Frontline magazine3,

The book shows that the expectation that the landless would leave the village seeking better life in non-agricultural and urban occupations and relieve pressure on land did not happen. On the contrary, it shows the irrational phenomenon of people having land acquiring skills and moving to lucrative non-agricultural occupations without leaving their hold on their land. The landless poor thus suffer “double denial”.

Rural India faces an enormously centralized and unequal economy based on agriculture, with virtually no non-farm employment4. Poverty and mass distress migration are natural outcomes.

Urban woes

The picture in metro India looks very different on the surface, but has the same underlying structure. After independence, India adopted a heavily socialist, state led path to industrial economic growth. Economic power was thus concentrated in the hands of bureaucrats who enjoyed state sanctioned discretionary powers, the few urban classes that were already moneyed due to the industrial expansion during colonial rule and the elite politicians, who formed the link between the moneyed classes and the bureaucrats.

The result was extremely slow economic growth rates and immense economic frustration among the newly educated classes. These new classes found themselves in an economy where they were neither able to start new economic activity, and were at the mercy of the business owning classes and bureaucrats despite their often superior skills. This drove the aspirational migration of the educated classes to the West (especially the US), where the freer market was better able to compensate and utilize their skills.

Distribution of GDP between the public and private sector in India 1961-1999
Source: ‘Why Ethnic Parties Succeed’, Kanchan Chandra, Pg 117

The 1990s brought a change in the structure of the urban economy in India. The dismantling of the infamous license raj opened the doors for the educated classes to create new businesses and the entry of multinationals has allowed them to access new jobs. However, it remains hard to start a business, and poor infrastructure continues to hamper the economic prospects of urban India.

On the other hand, the rural economy hasnt seen much change at all. Land distribution remains brutally unequal, and in addition the demand for land and other rural resources to fuel the economic expansion of the urban areas has led to further moves to centralize economic power in the rural context. Take for example, the recent move by the PMO to take away the power of approval granted to the village gram sabhas in matters of acquiring forest land, blatantly against the spirit of the Forest Rights Act5,
“The PMO-driven report required the environment ministry to change its August 2009 order—removing the clause that makes it mandatory for the state government to provide written consent from the project affected gram sabhas that all claims under the Forest Rights Act had been settled and that they approved of the diversion of forest land.”

India’s poverty is thus driven by extreme centralization of economic power. And this centralization is based on an unequal social and political contract between the ruling classes and the masses, not on any fundamental resource pressures or corruption.

References:

1:http://en.wikipedia.org/wiki/Land_use_statistics_by_country
2:”According to the draft paper of the Ninth Five-Year Plan, 77% of dalits and 90% of adivasis are either ‘absolute landless’ (own no land) or ‘mere landless’.”http://www.empowerpoor.org/backgrounder.asp?report=162
3:Anatomy of Poverty, http://www.hindu.com/thehindu/thscrip/print.pl?file=20080201506207600.htm&date=fl2502/&prd=fline&
4:”The dynamic rural nonfarm sector in China has been a major contributor to the country’s remarkable growth, while in India the growth in output and employment in this sector has been rather stagnant.” http://www.ifpri.org/sites/default/files/publications/dsgdp24.pdf
5: Diversion of forest land for industrial use may delay as environment ministry seeks time for consultations http://m.economictimes.com/news/politics-and-nation/diversion-of-forest-land-for-industrial-use-may-delay-as-environment-ministry-seeks-time-for-consultations/articleshow/18127015.cms

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Responses

  1. Thank you for this well written essay.

    What I take away from this primarily is, that the notion that corruption is the major problem plaguing India today is not true. Corruption stems from the fact that we continue to be a caste-based society among other fundamental issues. Claims that ending corruption is a cure-all are laughable until we understand where it comes from.

    How about the effect of reservations for SC/ST/OBCs? Does this have an impact at all, or are we talking about poverty that cripples people from even coming close to accessing these provisions for them?

    On a different (and maybe unnecessary) note, Jan Breman’s book’s price in India is 10 times what it costs in USA. I am tempted to read into this, but I will try my best not to. ;)

    • Amber Light, that indeed is the central contention. If corruption and population pressures were the reasons for the kind of absolute poverty we see in India, then China and Vietnam (both of which have less arable land per capita and about the same level of corruption) would not have so much less of human misery than we do.

      Regarding the impact of reservations, Sandeep in his comment below touches on the subject. Reservations do perform important signalling roles and do bring some change to the political equilibrium, but the destitution of the tribals and Dalits is so absolute, and the neglect of the upper caste dominated establishment so entrenched that there is no change in the economy of the rural areas.

      Also, it has been pointed out to me in earlier posts that the cadre of the caste based parties like BSP is not geared towards any kind of economic based mobilization, and more towards social issues.

      About the cost of the book, the Hindu review says that the book costs Rs. 795 in India, does it really cost one-tenth of that in the US ?

      • I have renewed hope on reading Sandeep’s comment because it aligns with my argument that the key to our problems and their solutions lies primarily in good basic education. If that is the case, it really is a simple solution even if it seems infinitely hard to implement.

        Yes, I read that the book costs 795 and tried to find a place to buy it online. Most online shops either don’t hold the book or price it at around 3000 Rs. The lowest price online I could find for the book in the US is 7$. Even funnier is that I looked for a place to buy it in the Netherlands where I am right now (where Jan Breman is from!!) and there are no stores that hold it.

    • AL, here is an Indian website that seems to be selling the book for Rs. 795, http://www.swb.co.in/store/book/poverty-regime-village-india

      Seems like an interesting website in general.

      • Thanks! And yes about the website.. agreed!

  2. Vikram, your observations clearly match with the ground realities. I am also from a village background. Over the years, the mechanization of agriculture has led to a situation where farmers do not require permanent labourers any more. Farm employment is very much seasonal now-days. Land owning castes are now turning to education without leaving their hold on the land. Thought because of population growth, the per family owned land has decreased but still high relatively for these castes.

    Now, my question is what is the solution for this problem. I am observing that reservation is not providing benefit to SC and ST’s at mass level because of absence of proper schooling. Also because of increase in land prices over the years, it is not easy for SCs to buy land anymore. So, the solution it seems lies only in getting job through education.

    • Welcome Sandeep. Your experience coincides with Jan Breman’s in Gujarat.

      Regarding the question of solutions. Breman gives the example of the Dhodias, “another tribal group with access to land, though marginal, are able to achieve a little more of stability, gain access to education, and experience improvement in living conditions. The present stirrings and mobilisation of the rural poor in all parts of the country, one hopes, marks the beginning of the second wave of land reforms, which becomes imperative.” (http://gaddeswarup.blogspot.com/2008/01/jan-bremens-poverty-regime-in-vllage.html)

      Folks like Chandrabhan Prasad have been insistent that Dalits educate themselves, especially in English. There is indeed evidence to show that education does indeed lead to a convergence in income levels, see http://vikramvgarg.wordpress.com/2012/11/05/trends-in-inequality-between-caste-groups-in-india/

      I also feel that another very important aspect is putting pressure on pro-Dalit parties like the BSP and to some extent, the Left Front, to actually work for the empowerment of the lower castes and not just run the protection rackets they are currently running.

      • I have doubt about efficacy of land reforms if it happens now. Already the population has increased many times in villages. Nuclear families are also becoming a norm these days. So from the available pool of land, if we divide the land equally among the families then per family land availability will be very much less. This land will be no more profitable for any of the families. In my view, a better solution will be to have a land ceiling at which a family can live comfortably and distribute the left over land among landless people. I like to know is some progress happening towards the land reforms ? I have knowledge of Bihar only where Nitish kumar goverment is giving some land to maha dalits.

    • Sandeep, there is an active Jan Satyagraha movement going on in India to provide land for landless laborers. Last year, tens of thousands of landless laborers, tribals and Dalits marched to New Delhi to demand land reform. A pact was made with them, lets see what happens now.

      http://www.ndtv.com/article/india/jan-satyagraha-march-ends-after-government-inks-truce-with-protesters-278224

      http://www.bbc.co.uk/news/world-asia-india-19825336

      Its good for me to hear that Nitish Kumar has given land to Maha Dalits, his reputation on land reform matters is not very good, and that was the only thing I had against him.

  3. I am from the West Indies of East Indian descent. As someone in the diaspora, I wonder how people like Mukesh Ambani who has built his house that is reported cost over one billion dollars could feel comfortable looking down into the slums of Mumbai. Where are the businessmen like the Tatas, Birlas etc. Aren’t they involved in philanthropy like Americans Bill Gates, Warren Buffet or try to persuade the government to get things done ? Or are they just to selfish and their belief in karma.

    • Welcome Raj. The wealth disparity in India is indeed stark and can move the conscience of almost anyone. But in a broader picture, I dont know if philanthropy and charity can really change anything, when the root causes of poverty are structural and require political action to resolve. After all, there are many, many fabulously wealthy people in Germany and Japan, yet those societies are considered quite egalitarian.

      Just to drive home my point, here is an excerpt from economist S.A. Aiyar’s article, “Not all readers know that a falling stock market has wiped out half to three-quarters of the wealth of India’s biggest businessmen. Critics are astounded to hear this, but it’s true.

      Mukesh Ambani’s star company, Reliance Industries Ltd, has fallen in price (adjusted for splits, bonuses etc) from a peak of Rs 1,608 in 2007-08 to just Rs 817 today, wiping out half his wealth. His other major company, Reliance Industrial Infrastructure Ltd, has lost 85% of its peak value (from Rs 3,049 to Rs 441).

      So, the gap between Mukesh and Maoist tribals has fallen dramatically. Are they cheering? Not at all. Mukesh’s wealth is irrelevant to them, whether rising or falling.”

      http://blogs.timesofindia.indiatimes.com/Swaminomics/entry/falling-stock-market-makes-india-more-equal-does-it-matter

      Note that there is a separate question of *how* the Ambani’s made their money, which is a topic of a separate debate.

  4. Nicely written.But whenever i read this, i remember somebody telling me this is just communist rhetoric. Not that i agree with that somebody.

    While it might be true that the political change is needed. Cant we the ordinary citizens do anything?

    While its true that most Indians are in denial, its probably time to start thinking about solutions other than a political one. A revolution in India will probably do more harm than good.

    • Welcome Camel Jockey. I feel the main thing we ordinary citizens can do is talk to the oppressed to let them know that they are not alone, and to each other, so that we know how cruel and far from its democratic ideal our current system is.

      The scale at which poverty and misery exists in India, I cant see a solution other than a political one. A new party that has the worker and the farmer as the centre of its economic vision, I have some hope in the Aam Aadmi party.

  5. “And this centralization is based on an unequal social and political contract between the ruling classes and the masses, not on any fundamental resource pressures or corruption.”

    Couldn’t agree more. This unequal contract also allows the Indian state to be ridiculously centralised (something as basic as Residuary Powers rest with the Centre) almost crippling democracy in India.

    Nice analogy at the beginning with land and cars.

    • Yes Hades, interesting to note that after all the upheavals in Pakistan, they have now ended up with a more federal governance system than India. They have a senate with equal representation from all provinces, and their constitution now has no concurrent list. Wonder when the political pressure for more decentralization will come in India.

  6. I have been google searching on this topic about poverty of india and so many insightful reasons are presented.

    Race,population,heat,religion,lack of technocrats,lack of good governance or governance model,corruption,resource poor are a few of the reasons i can remember which can make any country poor or rich.

    I will give a very generalized fact . Out of 200 or so countries 125 have christian majorities, 57 have islamic majorities, for Buddhist the number is no more than 20 but for hinduism it is only India/Bharat and Nepal.

    Elites are the drivers who are the most effective in bringing any change.If they are only 1% – even 1% of that 1% can make it happen.

    This is a task which will take minimum 2 forthcoming generations.

    Passion for Bharat (Not India) will make it happen.

    Vikram – You are doing a noble job. Aaap Bharat Ratn hain.

    • Welcome Sanjay. Thank you for the kind words.

      I think most scholars agree that policies, governance and social norms are the major factors that affect poverty. There are rich countries that have different racial compositions, different climates, different religions but what seems to be common in most prosperous countries is the rule of law, and social equality combined with liberal but well regulated economic policies.

      As for the number of countries being of different religions, I think it is better to think of India and China as nations that contain many countries.

  7. Vikram
    i wish you and everybody who care and make time for the bigger causes all the best.

    • Thanks Sanjay !


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