Failed Reforms Trigger Economic Divide

Not long ago, the affluence that was brought in by the reforms of previous governments was manifest in the fast moving top-end cars, and expensive apartments, in India’s mega cities.

While the reforms may have left much of India economically aspired, there are few means now to achieve them with the economic slowdown adversely affecting the market.

With government’s growing official debt, there is a severe shortage of funds.

So much so that the government knows there is a need for hospitals to be built, college building to be put up, butthere is no money.

A plan to build about 1,500 universities is gathering dust.

The Communists that supported the ruling coalition stymied reforms to an extent that the government under Prime Minister Manmohan Singh was seen undoing his own reforms policy that he trumpeted would change India; bring down the economic divide, diminish poverty.

More than 15 years after Dr Singh authored the reforms process, his failing rating as prime minister says it all.

During the Congress-led tenure the globalisation and industrialisation has suffered a big blow, says Confederation of India Industry.

With no new factories being built owing to the opposition of the Communists against reforms, the employment growth has been almost stagnant.

It has risen to just 2 per cent, which is disappointing in a country where an estimated 14 million youths enter the workforce every year.

Out of this 14 million, just 1 million get jobs in the regulated, above-ground economy, says a report.

It is widely believed that there has been no significant reform done at all in the past four and half years under Dr Singh, the time his federal coalition has been in power.

Even those who are the most upbeat on India are failing to recall any significant economic reforms made in the recent past under him.

A plan to build 30 Special Economic Zones was suspended because the government had no concrete plan for land acquisition.

A tell tale example was the Tata Motors Nano car project in West Bengal, a Communist governed state, that could not take off because of land acquisition issues, and growing political and social divide. Tata’s moved to Gujarat instead.

The state of the economy can be defined with the World Bank’s statistics that uses an income cut off of Rs21.6 per day in urban areas and Rs 14.3 per day in rural areas (at 2005 prices) to define who is poor.

For 2005, based on these income cut offs, the World Bank estimated that 42 per cent of Indians had incomes that placed them below the poverty line.

“The World Bank estimates added around 200 million more Indians to the category of ‘poor’. These additional ‘poor’, needless to say, are not eligible to the various benefits available under different government schemes for the poor, but it adds a totally new dimension to the poverty debate in the country,” says S L Rao is a former Director-General of National Council for Applied Economic Research.

The Planning Commission estimates that poverty levels in India have been falling sharply since 1983 and, based on the mixed recall period, around 21.8 per cent of the population (238 million out of a total population of 1,093 million) suffered from deprivation and were below the poverty line in 2005, he says.

ravi@khaleejtimes.com