The
Marxist
Volume: 17, No. 02
April-June 2001
TEN YEARS OF "ECONOMIC LIBERALISATION"
Prabhat
Patnaik
I
The
contrast
could
not
be
sharper.
When
the
Narasimha
Rao
government
had
introduced
neo-liberal
economic
reforms
in
1991,
a
veritable
euphoria
had
swept
the
country.
While
the
State
and
the
capitalist-controlled
media
had
been
largely
responsible
for
its
creation,
the
success
of
their
effort
owed
much
to
the
pervasive
sense
of
disillusionment
with
the
old
dirigisme,
and
to
the
hope
that
"something
different
might
work".
Today
when
these
reforms
have
completed
ten
years
of
existence,
no
hosannas
are
being
sung
to
their
achievement.
Even
bourgeois
commentators
are
hard-put
to
celebrate
ten
years
of
"reforms".
This
is
hardly
surprising.
The
Indian
economy
today
is
in
an
abysmal
state.
The
peasantry
has
been
squeezed
by
a
drastic
fall
in
agricultural
prices,
since
the
cushion
it
enjoyed
against
such
falls
has
been
removed
inter
alia
through
the
implementation
of
the
WTO
agreement.
The
growth
rate
of
output
in
the
material
commodity
producing
sectors
has
been
lower
during
the
1990s
compared
to
the
preceding
decade.
What
is
more,
while
the
rate
of
growth
of
foodgrains
production
is
lower
than
even
the
rate
of
population
growth
during
this
decade,
the
rate
of
industrial
growth,
which
was
already
lower
in
the
first
quinquennium
of
the
nineties
compared
to
the
preceding
one,
has
taken
a
nosedive
in
the
second
quinquennium.
Industrial
recession,
produced
conjointly
by
reduced
aggregate
demand
and
competition
from
imports,
has
had
severe
adverse
effects
on
urban
employment.
In
rural
India
there
is
striking
evidence
of
decelerating
employment
growth,
increasing
unemployment
rate,
and
declining
work
participation
rate
(which
usually
accompanies
growing
unemployment
owing
to
the
so-called
"discouraged
worker
effect").
Not
surprisingly,
the
rural
poverty
ratio
has
not
only
ceased
to
decline
but
has
even
gone
up
fractionally
compared
to
the
pre-reform
levels.
And
this
has
occurred
paradoxically
in
the
midst
of
a
massive
accumulation
of
unsold
foodgrain
stocks,
which
has
arisen
despite
declining
per
capita
output
levels.
To
cap
it
all,
the
entire
financial
system
has
been
rendered
extremely
fragile
during
this
decade,
resulting
most
spectacularly
in
the
collapse
of
US-64
prices
of
the
UTI.
So
miserable
has
the
performance
of
the
economy
been
that
the
Prime
Minister
in
his
Independence
Day
Speech
could
find
only
two
"achievements"
to
highlight:
the
low
rate
of
inflation,
which
actually
is
a
reflection
of
the
price-crash
faced
by
the
peasantry,
and
the
comfortable
level
of
foreign
exchange
reserves
which
is
a
consequence
mainly
of
"hot
money"
inflows.
The
so-called
"achievements"
in
other
words
are
not
achievements;
they
actually
constitute
problems.
Even
the
standard
ploy
of
the
Bretton
Woods
institutions,
of
attributing
the
crisis
engendered
by
"liberalization"
to
an
"insufficiency"
of
liberalization,
and
hence
of
using
every
such
crisis
as
an
excuse
to
push
the
"liberalization"
agenda
still
further,
is
not
working.
This
ploy,
which
was
so
effectively
used
in
the
former
socialist
countries
and
which
the
IMF
is
still
trying
to
use
here,
has
been
totally
lacking
in
credibility
in
the
Indian
context.
In
the
wake
of
the
US
64
scandal
for
instance
it
was
only
a
few
stray
voices
that
demanded
measures
to
revive
the
stock
market
(presumably
through
a
further
dose
of
largesse
to
finance
capital)
as
the
solution
to
the
UTI's
woes.
Most
bourgeois
commentators
dared
not
articulate
this
absurd
proposition
that
finance
capital
should
be
given
a
larger
pie
in
the
interests
of
middle
class
investors!
But a view that has gained currency in the wake of the palpably adverse consequences of "liberalization" for the vast masses of the people is that we need "liberalization with a human face", that "globalization" should be accompanied by greater concern for the plight of the people. This combination we shall argue below is a contradiction in terms: "liberalization" cannot have a human face; "globalization" under the aegis of imperialism would necessarily aggravate the plight of the people. Before doing so however let us provide in the following sections some statistical support for the assertions made above about the economy's performance during the nineties.
II
Output
and
Investment
The defenders of "liberalization", despite being on the defensive as regards the recent growth performance, argue nonetheless that it has ushered in a remarkable acceleration in the growth rate of the economy over the period as a whole, that the 3-3.5 percent growth rate at which we had been stuck for decades after independence (which was sometimes facetiously called the "Hindu rate of growth") has finally given way to more impressive figures. As a matter of fact, however, the acceleration in growth began much before the "liberalization" of 1991. The average annual rates of growth of GDP at constant prices (1993-4=100) for the three decades 1971-80, 1981-90 and 1991-2000 were 3.66 percent, 5.60 percent and 6.45 percent respectively. It is the 1980s in other words that saw an acceleration in the growth rate. The 1990s appear merely to have continued along the higher growth trajectory. Even this appearance however is erroneous. Decadal comparisons hide important shifts within the decade. To highlight these Table 1 gives quinquennial growth rates of "real" GDP.
Table
1:
Annual
GDP
Growth
Rates
Over
Quinquennia
(1993-4
Base)
1971-75
3.40
1976-80
2.87
1981-85
5.05
1986-90
7.01
1991-95
6.43
1996-00
5.87
Source:
Unless
otherwise
specified
the
tables
in
this
paper
are
based
on
various
numbers
of
"Macroscan"
in
Business
Line.
Compared
to
the
peak
growth
rate
experienced
during
the
second
half
of
the
1980s,
there
has
actually
been
a
steady
deceleration
of
the
growth
rate
of
the
economy.
Apologists
might
claim
that
the
process
of
"liberalization"
itself
began
in
the
late
eighties,
so
that
the
earlier
acceleration
must
still
be
attributed
to
"liberalization".
But
even
the
first
half
of
the
eighties
witnessed
a
significant
acceleration
in
growth
which
suggests
that
its
genesis
lay
elsewhere.
And
this
was
the
increase
in
the
investment
ratio.
In
any
economy
as
long
as
demand
constraints
do
not
become
more
pronounced
the
growth
rate
is
determined
essentially
by
the
ratio
of
investment
to
GDP.
Through
the
eighties
this
ratio
climbed
up
steadily
in
the
economy,
reaching
the
figure
of
25
percent
by
the
end
of
the
decade.
During
the
nineties,
while
this
ratio
has
remained
unchanged
(Table
2)
and
lower
on
average
than
the
end-eighties
peak,
demand
constraints
have
become
more
pronounced
(for
reasons
we
shall
discuss
later);
the
growth
rate,
far
from
accelerating,
has
therefore
tended
to
come
down
compared
to
the
late
1980s.
"Liberalization"
in
short
has
not
raised
the
investment
ratio;
on
the
other
hand
it
has
made
the
demand
constraint
on
the
economy
more
pronounced.
Table
2:
Share
of
Gross
Domestic
Capital
Formation
in
GDP
(Quinquennial
averages
per
cent)
1970-75
16.14
1975-80
19.12
1980-85
19.76
1985-90
22.70
1990-95
24.03
1995-00
24.05
Source:
Economic
Survey,
2000-01.
The
sectoral
composition
of
growth
brings
out
this
deceleration
more
clearly
(Table
3).
Table
3:
Annual
Average
Sectoral
Growth
Rates
_______________________________________________________
Primary
Secondary
Tertiary
1986-90
5.72
8.66
8.83
1991-95
3.77
8.04
6.40
1996-00
1.95
4.99
7.20
_____________________________________________________
Why
India's
growth
rate
suddenly
picked
up
in
the
eighties
and
why
it
has
been
going
down
from
the
late-eighties
peak
deserves
discussion.
The
reason
for
the
sudden
pick-up
in
growth
as
we
have
seen
lies
not
in
some
magic
of
"liberalization"
but
in
the
increase
in
the
investment
ratio.
This
latter
increase
in
turn
was
not
because
the
Indian
rich
suddenly
became
more
frugal,
so
that
investment
ratios
which
earlier
would
have
precipitated
severe
inflationary
crises
now
became
accessible
to
the
economy.
The
reason
lies
in
the
fact
that
in
the
post-oil
shock
period
when
multinational
banks
were
flush
with
petro-dollars
and
were
actually
pushing
loans
to
third
world
countries,
the
Rajiv
Gandhi
government
went
in
for
larger
foreign
borrowings
to
jack
up
the
investment
ratio.
It
is
this
debt-overhang
that
precipitated
the
1991
crisis
by
engendering
sudden
capital
outflows,
and
the
"confidence"
of
the
rentiers
had
to
be
restored
by
enacting
these
so-called
"reforms".
The
Rajiv
Gandhi
regime
in
other
words
did
not
resolve
the
earlier
crisis
of
the
Indian
economy;
it
papered
over
it
by
picking
up
easy
foreign
loans
and
this
in
turn
produced
an
even
bigger
crisis,
of
a
different
genre,
in
1991.
In
the
"reform"
era
a
whole
range
of
commodities
which
were
hitherto
inaccessible
to
the
Indian
upper
classes
suddenly
became
accessible,
and
soon
their
domestic
production
began.
In
certain
other
areas
too,
e.g.
agri-export,
profitable
opportunities
of
investment
opened
up.
While
these
opportunities
held
up
the
investment
ratio,
the
rise
in
the
rate
of
surplus
value
that
was
taking
place
through
cuts
in
subsidies
and
the
social
wage,
and
through
higher
administered
prices
impinging
on
the
working
people,
together
with
the
curtailment
of
public
investment,
ensured
a
degree
of
demand
compression
that
prevented
any
excess-demand-caused
inflation
(inflation
in
this
period
was
administered
rather
than
excess-demand-caused).
This
demand
compression
however
has
now
pushed
the
economy
into
a
recession,
and
the
investment
ratio
itself
started
coming
down.
The
foregoing
discussion
can
be
located
differently.
The
immanent
tendency
of
a
"liberalized"
economy
in
the
contemporary
context
is
to
be
beset
by
acute
and
generalized
demand
constraints;
it
is
intrinsically
characterized
by
a
perennial
crisis
of
generalized
over-production
owing
to
the
jacking
up
of
the
rate
of
surplus
value
in
the
economy
and
the
deflationary
policies
imposed
by
the
State.
The
Indian
economy
escaped
this
fate
temporarily
because
of
the
pent-up
demand
that
existed
for
a
variety
of
hitherto-inaccessible
goods
under
the
dirigiste
regime,
and
because
of
certain
unused
investment
opportunities
that
existed
in
its
interstices
owing
to
the
controls
it
imposed.
But
these
demand
stimuli
are
essentially
transitory
and
evanescent.
Once
their
effect
is
exhausted,
the
economy
is
back
to
its
state
of
a
perennial
over-production
crisis,
which
is
exactly
what
it
is
experiencing
now.
Let
us
dwell
briefly
on
the
reasons
why
a
contemporary
"liberalized
economy"
tends
to
be
perennially
demand-constrained.
The
rise
in
the
rate
of
surplus
value
that
such
an
economy
necessarily
brings
about
restricts
the
growth
of
consumption
of
the
working
masses.
This
could
be
offset
only
if
the
investment
demand
rises
sufficiently.
But
public
investment
in
such
an
economy
gets
curtailed,
since
a
retreat
of
the
State
from
its
role
as
a
producer
and
investor
(and
its
increasing
reorientation
as
an
entity
serving
directly
and
exclusively
the
needs
of
capital
including
international
finance
capital)
is
a
hall-mark
of
"liberalization".
Investment
by
capitalists,
both
domestic
and
foreign,
which
is
supposed
to
come
forth
in
large
quantities
as
the
so-called
fetters
imposed
upon
them
by
the
dirigiste
regime
are
withdrawn,
is
constrained
by
three
factors:
the
first
is
the
shrinking
of
the
mass
market
that
the
rise
in
the
rate
of
surplus
value
brings
about;
the
second
is
the
rise
in
the
real
interest
rate
which
is
a
necessary
fall-out
of
financial
"liberalization",
since
exposure
to
the
free
flow
of
finance
into
and
out
of
the
country
necessitates
that
rentiers
have
to
be
"bribed"
through
a
higher
real
interest
rate
to
prevent
them
from
taking
their
funds
to
the
"safe
haven"
provided
by
the
metropolitan
countries;
and
thirdly,
the
very
curtailment
of
public
investment
has
a
dampening
effect
on
private
investment
both
by
aggravating
infrastructural
constraints,
and
also
because
the
growth
of
markets
caused
by
the
former's
autonomous
growth,
which
is
a
stimulant
for
the
latter
(i.e.
public
investment
"crowds
in"
rather
than
"crowds
out"
private
investment),
is
no
longer
available.
This
of
course
still
leaves
the
possibility
of
larger
exports
offsetting
demand
constraints.
But
contemporary
"liberalization"
is
occurring
within
the
context
of
the
ascendancy
of
a
new
form
of
international
finance
capital
whose
effect
is
to
slow
down
the
rate
of
growth
of
the
world
capitalist
economy
as
a
whole,
by
rolling
back
Keynesian
"demand
management"
policies,
and
by
privileging
speculation
over
"enterprise"
everywhere.
This
in
turn
adversely
affects
export
prospects
of
"liberalized"
third
world
economies
(the
fact
that
a
country
like
China
continues
to
experience
a
successful
export
drive,
far
from
constituting
a
counter-example
to
this
argument,
indicates
on
the
contrary
that
China
is
not
an
example
of
a
"liberalized"
third
world
economy).
It
may
of
course
be
argued
that
precisely
in
a
period
when
the
world
capitalist
economy
is
slowing
down,
competition
among
capitals
to
lower
costs
to
grab
a
larger
share
of
the
shrinking
market
would
take
the
form
inter
alia
of
investing
in
low-wage
third
world
countries
to
meet
world
demand.
This
however
never
occurs
(except
possibly
in
the
geographical
fringes
of
the
metropolis
itself,
such
as
parts
of
Northern
Mexico),
because
of
the
infrastructural
constraints
in
most
third
world
countries,
aggravated
by
declining
public
investment,
and
of
the
general
uncertainty
that
metropolitan
capital
experiences
in
operating
in
the
third
world
(which
it
overcomes
only
when
its
object
is
to
capture
third
world
markets
themselves
through
local
production).
It
follows
then
that
the
era
of
"globalization"
is
an
era
of
"globalization"
of
finance
and
not
of
productive
facilities.
And
precisely
because
"globalization"
of
finance
entails
a
slowing
down
of
the
world
capitalist
economy,
economies
lke
ours
that
are
drawn
into
the
vortex
of
"liberalization"
and
"globalization"
have
an
immanent
tendency
towards
generalised
over-production,
which
manifests
itself
through
recession,
unutilised
industrial
capacity,
and
unsold
food-stocks,
i.e.
through
the
fact
that
everywhere
it
is
demand
that
limits
what
is
produced
and
sold.
(The
exception
of
course
is
the
infrastructural
sector,
but
the
shortages
here
are
a
reflection
of
the
same
phenomenon,
and
coexist
with
unutilised
capacity
in
sectors
producing
equipment
for
this
sector).
This
tendency
can
only
be
temporarily
masked
by
the
upsurge
in
elite
consumption
that
occurs
in
the
immediate
aftermath
of
"liberalization"
when
all
restrictions
on
the
availability
of
consumption
goods
are
done
away
with.
But
once
this
transition
phase
is
over,
the
basic
tendency
towards
over-production
manifests
itself,
as
it
is
doing
now.
It
is
not
the
vileness
of
a
Yashwant
Sinha
that
is
responsible
for
the
current
abysmal
state
of
the
Indian
economy
(though
Sinha
is
as
unimaginative
as
he
is
imbued
with
the
enthusiasm
of
a
neophyte
in
toeing
the
Fund-Bank
line);
it
is
the
logic
of
a
"liberalized"
economy.
Fiscal
Policy
The
need
for
enticing
multinational
corporations,
for
liberalizing
capital
flows,
for
privatizing
public
sector
enterprises
and
for
restricting
public
investment
is
argued
typically
by
citing
the
fiscal
crisis
of
the
State.
The
State,
it
is
argued,
has
inadequate
fiscal
resources,
it
has
very
little
prospects
for
raising
additional
fiscal
resources,
hence
it
must
step
back
and
allow
private,
including
foreign,
capital
to
undertake
the
task
of
investing,
for
which
it
has
to
create
a
conducive
environment.
Now,
there
is
no
doubt
that
the
contradictions
of
the
dirigiste
regime
come
to
a
head
through
the
fiscal
crisis
of
the
State,
as
the
attempt
of
the
ruling
classes
to
enrich
themselves
through
budgetary
transfers
and
tax
evasion
denudes
the
State
exchequer.
But
this
fiscal
crisis
is
vastly
compounded
under
the
"liberal"
regime.
The
scale
of
transfers,
especially
to
private,
including
foreign,
capital,
increases
many-fold.
If
primitive
accumulation
through
the
instrumentality
of
the
State
budget
underlay
the
crisis
of
dirigisme,
this
primitive
accumulation
reaches
massive
proportions
in
the
"liberal"
regime,
with
large
chunks
of
State
property
grabbed
"for
a
song",
and
with
subsidies
(to
capital),
transfers
and
tax
cuts
scaling
new
heights.
The
argument
for
rolling
back
the
State
from
its
producing
and
investing
role
therefore
becomes
a
self-justifying
one.
While
it
invokes
the
fiscal
crisis
for
its
justification,
this
fiscal
crisis
itself,
to
a
very
significant
extent,
is
its
own
contribution.
Just
take
one
set
of
illustrative
figures.
Table
4
gives
the
ratio
of
Central
tax
revenue
(both
gross
and
net)
to
GDP.
Table
4:
The
Ratio
of
Central
Tax
Revenue
to
GDP
(%)
Gross
Tax
Revenue
Net
Tax
Revenue
1989-90
10.6
7.9
1990-91
10.1
7.6
1991-92
10.3
7.7
1998-99
8.2
6.0
1999-00
8.8
6.6
2000-01
9.1
(RE)
6.6
(RE)
If
we
take
triennium
averages,
then
there
was
a
reduction
of
1.6
percent
in
Gross
tax
Revenue
and
1.3
percent
in
Net
Tax
revenue.
Even
taking
the
lower
of
these
figures
it
would
turn
out
that
if
only
the
same
tax-GDP
ratio
had
been
maintained
in
2000-01
as
prevailed
prior
to
"liberalization",
the
Central
government
would
have
garnered
an
additional
revenue
of
Rs.26000
crores
in
this
single
year
alone.
So
when
arguments
are
advanced
such
as
"We
have
no
option
but
to
invite
Enron
for
investing
in
power
generation,
otherwise
where
is
the
money
for
such
investment?"
their
vacuity
is
palpable.
And
this
reduction
has
taken
place
despite
the
fact
that
India
already
had
one
of
the
lowest
tax-GDP
ratios
in
the
entire
world.
With
tax-GDP
ratios
declining
and
the
proportion
of
fiscal
deficit
to
GDP
also
brought
down
and
kept
deliberately
low
at
a
level
acceptable
to
the
IMF,
the
State
is
forced
to
cut
back
on
its
investment
and
welfare
expenditures.
Many
otherwise
well-meaning,
and
even
eminent,
economists
fail
to
see
this
simple
fact.
They
argue
that
while
the
economy
should
be
"liberalized"
the
State
should
spend
more
not
less
on
education,
health
and
other
social
sectors
in
order
to
enable
the
economy
to
"take
advantage
of
the
opportunities
opened
up
by
liberalization".
This
argument
which
ignores
the
class-nature
of
"liberalization"
is
plain
wrong.
Since
"liberalization"
must
include
trade
liberalization,
customs
duties
must
be
brought
down;
since
an
economy
which
lowers
customs
duties
cannot
simultaneously
increase
excise
duties
(for
otherwise
it
precipitates
gratuitous
de-industrialization
by
favouring
imports
over
home
production),
its
capacity
to
raise
revenues
from
indirect
taxation
gets
reduced.
To
entice
foreign
capital
it
must
lower
direct
taxes
on
such
capital
(whether
or
not
foreign
capital
actually
comes)
for
otherwise
it
would
go
somewhere
else
with
lower
tax
rates.
To
maintain
some
inter
se
equity
between
foreign
and
domestic
capital,
the
latter
also
cannot
be
taxed
too
heavily,
so
that
corporate
tax
revenue
shrinks
relatively,
which
cannot
be
offset,
again
in
the
interests
of
inter
se
equity,
through
larger
personal
income
taxes.
It
follows
that
the
logic
of
a
"liberalized"
economy
is
to
reduce
the
tax-GDP
ratio;
a
reduction,
let
alone
the
maintenance,
of
social
sector
expenditure
is
inevitable
under
such
a
regime,
as
is
a
reduction
in
public
investment.
Anyone
seriously
interested
in
increasing
such
expenditures
must
argue
for
a
rolling
back
of
"liberalization".
Even
more
important
than
the
loss
of
revenue
is
the
fact
that
the
State
imbibes
as
economic
theory
the
ideology
of
finance
capital
(what
Professor
Joan
Robinson,
the
well-known
Keynesian
economist,
once
called
"the
humbug
of
finance"),
even
when
the
social
irrationality
entailed
by
this
ideology
is
palpable.
Consider
the
current
situation
in
India.
There
are
60
million
tonnes
of
foodgrain
stocks
with
the
government
of
which
at
least
40
million
are
unwanted
surplus
stocks.
If
the
State
borrowed
from
banks
to
finance
a
massive
food-for-work
programme,
then
there
would
be
no
inflationary
consequences
whatsoever;
such
an
action
would
not
even
raise
the
State's
net
indebtedness
since
the
money
would
accrue
to
the
FCI,
which
is
State-owned
and
which
would
pay
back
an
equal
amount
of
its
own
debt
to
the
banks.
(There
would
of
course
be
some
non-food
component
of
wages
but
these
too
would
create
no
problems
in
the
current
context,
which
is
marked
by
an
industrial
recession,
and
hence
can
be
ignored
here).
Such
an
action,
then,
while
having
no
adverse
consequences,
would
get
rid
of
surplus
stocks,
would
feed
millions
of
starving
people,
and,
if
properly
designed,
would
create
rural
infrastructure
which
could
raise
productive
potential.
But
having
imbibed
from
finance
capital
the
fetish
over
the
fiscal
deficit
as
revealed
in
the
budget
(not
even
the
genuine
fiscal
deficit
in
the
sense
of
the
net
increase
in
the
indebtedness
of
the
State
as
a
whole),
the
State
cannot
adopt
such
a
course;
on
the
contrary
in
the
midst
of
the
current
recession
its
concern
is
to
curtail
the
fiscal
deficit
which
can
only
compound
the
recession.
(The
Prime
Minister's
announcement
of
a
food-for
work
programme
on
Independence
Day
is
paltry:
it
would,
if
fully
implemented,
use
only
5
million
tonnes
of
foodgrains).
Consider
another
example.
The
country
is
facing
crippling
infrastructural
constraints.
The
capital
goods
required
for
investing
in
infrastructural
sectors,
such
as
power,
are
produced
within
the
country
by
public
sector
enterprises
which
are
currently
saddled
with
substantial
unutilised
capacity.
If
the
State
borrowed
from
banks
to
invest
in
infrastructure,
then
this
unutilised
capacity
would
get
used
up,
the
net
indebtedness
of
the
State
inclusive
of
public
sector
units
would
not
increase,
and
yet
the
infrastructural
crisis
would
get
alleviated.
It
would
however
mean
an
increase
in
deficit
only
in
that
part
of
the
State
sector's
transactions
which
figure
in
the
budget;
and
agencies
like
the
IMF
which
represent
international
finance
capital
would
disapprove
of
it.
Hence
the
crisis
continues;
desperate
efforts
are
made
to
entice
MNCs
to
invest
in
the
infrastructure
sector
in
India
even
as
domestic
unutilised
capacity
continues
within
the
State
sector
itself.
And
what
is
more,
the
existence
of
this
unutilised
capacity,
which
of
course
entails
loss-making,
is
then
made
an
excuse
to
privatise
these
very
public
sector
enterprises,
and
that
too
at
throwaway
prices.
This
constitutes
the
acme
of
irrationality.
Outcomes
which
are
utterly
irrational
from
a
social
point
of
view
are
imposed
on
us
because
the
State
imbibes
the
ideology
of
finance
capital.
V
Employment
and
Poverty
The
impact
of
the
industrial
recession
and
the
collapse
of
agricultural
growth
is
visible
in
the
growth
of
employment.
We
do
not
of
course
have
very
recent
data;
the
latest
data
we
have
relate
to
1999-00
(NSS
55th
round),
but
even
these
reveal
a
bleak
picture.
Table
5
gives
the
rate
of
growth
of
total
employment
between
successive
NSS
rounds.
Table
5:
Annual
Rate
of
Growth
of
Total
Employment
(%)
______________________________________________________
Rural
Urban
1983
to
1987-8
1.36
2.77
1987-8
to
1993-4
2.03
3.39
1993-4
to
1999-00
0.58
2.55
______________________________________________________
What
is
quite
remarkable
about
these
figures
is
their
conformity
with
the
qunquennial
output
growth
rate
figures
discussed
earlier.
The
acceleration
of
output
growth
in
the
late
eighties
(which
straddles
the
first
two
periods
here
but
perhaps
corresponds
more
to
the
middle
period)
is
accompanied
by
an
acceleration
in
the
growth
of
employment
in
both
urban
and
rural
India.
The
subsequent
collapse
of
output
growth
in
the
primary
sector
is
reflected
in
an
abysmally
low
rate
of
growth
of
rural
employment
(0.58
%)
in
the
nineties.
Likewise
the
slowing
down
of
secondary
sector
growth
is
also
reflected
here
in
a
slower
growth
of
urban
employment
in
the
last
period,
though
its
terminal
year
still
precedes
the
period
of
full
impact
of
recession.
Such
low
rates
of
growth
of
employment
would
normally
have
two
consequences:
first,
a
rise
in
the
unemployment
rate,
and
secondly,
some
reduction
in
the
participation
rate:
when
job
opportunities
are
few,
many,
especially
women,
simply
drop
out
of
the
work-force.
One
finds
confirmation
for
both
these.
The
current
daily
status
unemployment
rate
rose
between
1993-4
and
1999-00
for
rural
males,
rural
females
and
urban
males
(urban
females
were
the
only
exception),
the
rise
for
rural
males
being
the
steepest
(29
percent).
Even
if
we
use
the
more
stringent
concept
of
weekly-status
unemployment
(i.e.
a
person
belonging
to
the
work-force
who
did
not
work
for
even
one
hour
on
any
of
the
seven
days
preceding
the
date
of
the
survey),
we
again
find
an
increase
in
the
nineties,
from
15
per
thousand
in
1993-4
to
21
per
thousand
in
1999-00
for
rual
males
and
from
6
to
10
for
rural
females.
Likewise
between
1.1.94
and
1.1.2000
there
was
a
decline
in
worker
population
ratio
for
all
categories.
Taking
both
males
and
females
the
decline
was
from
444
per
thousand
to
419
in
rural
India
and
from
347
to
337
in
urban
India.
Taking
both
urban
and
rural
India
together
the
decline
was
from
418
to
395.
Some
have
attributed
this
decline
to
the
spread
of
education,
i.e.
people
have
voluntarily
dropped
out
of
the
work-force
in
order
to
obtain
education,
which
would
make
it
a
positive
rather
than
a
disturbing
development.
But
education
cannot
explain
the
entire
decline:
it
occurs
for
all
age-groups
across
the
specturm
not
just
for
school-age
children.
At
least
a
part
of
the
explanation
therefore
must
be
the
fact
that
reduced
prospects
of
finding
jobs
made
people
drop
out
of
the
work-force
altogether.
The
declining
employment
opportunities,
especially
in
rural
India,
is
reflected
in
the
movements
of
the
head
count
poverty
ratio.
Table
6
gives
these
movements
up
to
the
55th
round
of
the
NSS.
Table
6:
Head
Count
Poverty
Ratio
(%)
NSS
Round
Period
Rural
Urban
Ratio
Ratio
_________________________________________________________
32
Jul
77-Jun
78
50.60
40.50
38
Jan
83-Dec
83
45.31
35.65
43
Jul
87-Jun
88
39.60
35.65
46
Jul
90-Jun
91
36.43
32.76
50
Jul
93-Jun
94
38.74
30.03
51
Jul
94-Jun
95
38.0
33.5
52
Jul
95-Jun
96
38.3
28.0
53
Jan
97-Dec
97
38.5
30.0
54
Jan
98-Jun
98
45.3
N.A.
________________________________________________________
Source:
Upto
the
46th
round
the
figurs
are
taken
from
a
World
Bank
document.
The
50th
round
figures
are
from
Abhijit
Sen
who
uses
the
same
method.
From
the
51st
to
54th
rounds
the
rural
figures
are
from
S.P.Gupta
of
the
Planning
Commission,
and
the
urban
figures
are
from
G.Datt
of
the
World
Bank.
The
poverty
ratio
figure
fluctuates
a
good
deal,
is
based
(in
the
above
Table)
on
large
sample
data
for
some
years
and
thin
sample
data
for
others
(which
affects
comparability),
and
has
to
be
interpreted
with
caution
at
the
best
of
times.
A
few
things
however
stand
out
clearly:
first,
the
rural
poverty
ratio
declined
sharply
until
the
end
of
the
1980s,
after
which
the
decline
stopped
and
there
was
even
a
marginal
increase
(even
if
we
leave
aside
the
54th
round
figure).
The
1990s
in
other
words
saw
a
halt
to
the
decline
in
rural
poverty,
and,
if
anything,
a
fractional
increase
in
it.
Secondly,
the
decline
in
urban
poverty
which
again
was
quite
sharp
in
the
1980s
has
continued
into
the
1990s
though
at
a
less
sharp
rate.
Taking
rural
and
urban
India
together,
the
"liberalization"
years
have
been
bad
for
poverty.
The
consumer
expenditure
data
collected
in
the
55th
round
of
the
NSS
showed
a
sharp
decline
in
poverty
ratio
to
26
percent
which
Yashwant
Sinha
gleefully
quoted
in
his
budget
speech.
These
data
however,
as
everybody
accepts
now
and
the
Planning
Commission
has
clarified,
are
"contaminated"
and
unreliable.
In
the
employment
data
collected
in
the
55th
round,
and
quoted
earlier,
however,
there
is
supplementary
information
on
expenditure
which
is
not
"contaminated".
This,
according
to
one
estimate
(Sundaram,
EPW
Aug.11,
2001),
puts
rural
poverty
at
36.35
percent
for
1999-00,
and
urban
poverty
at
28.76
percent.
Of
course
estimates
for
the
same
year
differ
a
good
deal
depending
on
the
methodology,
and
other
researchers
(e.g.
Sen)
have
put
the
poverty
ratio
higher
for
this
year
even
with
the
same
data.
Let
us,
however,
accept
these
estimates
for
argument's
sake.
One
can
nonetheless
say
three
things:
first,
while
this
would
show
a
small
decline
in
rural
poverty
between
1993-4
and
1999-00,
there
is
no
decline
in
1999-00
relative
to
1990-1.
In
other
words
the
basic
proposition
that
the
1990s
have
been
bad
for
poverty
still
stands.
Secondly,
even
this
decline
is
because
of
the
low
agricultural
prices
which
have
meant
that
the
consumer
price
index
number
for
agricultural
workers
(which
is
the
deflator
used
in
poverty
estimates)
has
not
increased
much
of
late.
In
other
words
even
this
decline
in
poverty
is
because
of
a
shift
in
income
distribution
from
one
section
of
the
rural
working
population
to
another,
from
the
not-so-poor
to
the
poor.
Thirdly,
in
the
very
decade
(1991-00)
when
the
official
"real"
GDP
growth
rate
is
supposed
to
have
reached
6.45
percent
per
annum,
the
fact
that
the
percentage
of
rural
population
below
a
poverty
line,
defined
in
absolute
terms,
remained
at
best
virtually
constant,
indicates
the
massive
increase
in
income
inequality
that
occurred
in
the
economy
in
the
years
of
"liberalization".
No
other
decade
since
independence
had
witnessed
such
a
drastic
increase
in
inequality.
VI
Concluding
Observations
"Liberalization"
is
not
just
some
policy
option
that
the
government
chooses,
like
choosing
a
particular
tariff
rate
or
a
particular
price
policy.
It
is
a
major
episode
in
the
history
of
class
struggle.
It
corresponds
to
a
new
phase
of
world
capitalism
with
new
class
configurations.
To
discuss
the
effects
of
"liberalization"
without
taking
into
account
this
entire
class
context,
in
terms
exclusively
of
text
book
propositions
about
the
benefits
of
trade
is
both
naive
and
banal.
The
thrust
of
the
present
wave
of
"liberalization"
which
is
sweeping
the
entire
third
world
is
three-fold:
to
shift
the
balance
away
from
the
workers,
peasants,
petty
producers
and
even
small
capitalists
towards
large
capitalists
both
domestic
and
foreign;
to
shift
the
balance
away
from
domestic
capital
in
general
towards
foreign
capital;
and
to
shift
the
balance
away
from
capital-in-production
towards
capital-as-finance.
To
be
sure,
different
countries
are
at
different
stages
in
this
process,
which
is
carried
forward
by
a
combination
of
forces
driven
by
international
finance
capital
whose
chief
spokesmen
are
the
Bretton
Woods
institutions.
A
country
travelling
down
the
path
of
"liberalization"
cannot
even
pause
to
provide
a
"human
face"
to
the
process.
To
provide
even
a
mere
"human
face"
it
has
to
abandon
that
path
altogether
which
in
turn
can
become
possible
only
with
the
widest
mobilization
of
classes
against
those
promoting
"liberalization".
In
so
far
as
"liberalization"
is
not
a
mere
policy
option
but
a
process
driven
by
international
finance
capital
in
the
current
stage
of
imperialism,
it
follows
that
the
nation-State
that
is
carrying
forward
this
process
is
trapped
willy-nilly
into
defending
the
interests
of
international
finance
capital
even
against
its
own
population.
This
gives
rise
to
a
major
contradiction:
since
the
State
exists
on
the
domestic
civil
society,
and,
in
conditions
of
bourgeois
democracy,
has
to
respond
to
pressures
from
the
latter,
its
pursuit
of
the
path
of
"liberalization"
comes
into
conflict
with
the
legitimacy
which
it
would
like
to
surround
itself
with.
This
contradiction
is
typically
sought
to
be
overcome
in
two
ways:
first
through
an
explicit
attenuation
of
domestic
sovereignty
by
tying
the
domestic
State
into
international
agreements
like
the
WTO;
and
secondly
through
a
host
of
measures
that
"roll
back"
democracy
at
home
and
the
exercise
of
the
democratic
rights
of
the
people.
Even
such
an
arrangement
however
cannot
be
stable
if
the
united
people
rise
against
it.
It
has
to
be
buttressed
therefore
by
dividing
the
people
along
communal,
ethnic
and
other
lines.
The
ten
years
of
"liberalization"
that
we
have
seen
have
also
been
ten
years
marked
by
the
ascendancy
of
the
forces
of
communal-fascism.
This
has
been
no
accident.