Gandhi and the Swadeshi Project

Written by  //  October 1, 2010  //  Economic & Social Policy  //  40 Comments

Celebrating Gandhi jayanti, October 2, 2010

On the eve of the 141st birth anniversary of MK Gandhi, I’ve been thinking a lot about the legacy of his economic ideology. Gandhian economics did not outlast Independence by too many days. During the freedom struggle, plenty of lip service had been paid to his ideals of sarvodaya, swaraj and swadeshi. Soon after swaraj had been acquired, however, it was decided that the path to sarvodaya would pass through a brand of swadeshi that Gandhi would have difficulty recognizing.

Nehru inherited from Gandhi the fierce desire to be self-reliant. Nehru’s India would not be content with political independence but would also demand economic independence and self-sufficiency. But somewhere, dazzled by the bright lights of hydroelectric dams, world-class engineering colleges and space projects, Nehruvian swadeshi lost touch with the Gandhian notion of individual self-sufficiency, based on the village republic.

A lot of ink has been spilled on how Nehru failed urban India. His import quotas and controls denied wealthy Indians the best of Western consumption, the license-raj choked the rise of the Indian entrepreneur, and the prohibition of foreign capital constrained rapid technological advances. I find this characterization of Nehru symptomatic of the urban obsession of policy-makers, academics, the media and people like you and me. Maybe a more open and capital-friendly approach would have positioned India better today and maybe it wouldn’t, but Nehru’s greatest failure was the abject neglect of the countryside. In doing so, he set the urban standards by which Indian development would be judged for the next 60 years, and, indeed, continues to be judged today.

Gandhi would probably be horrified at contemporary India. The central government is struggling to engage with demands for swaraj (or azaadi if you will) from different parts of the country. Swadeshi is a thing of the past: the Gandhian notion died with Gandhi while the closed and regulated Nehruvian economy was firmly booted out by another Prime Minister, Dr. Manmohan Singh, twenty years ago. As for sarvodaya, well, somewhere between farmer suicides and forced evictions on the eve of the Commonwealth Games, we’ve lost sight of that that particular ideal.

But the Gandhian ideology is, at least in spirit, as important today as it was all those decades ago and for the first time in several years, policymakers are sitting up to listen. The next ten years must be the decade of the rural economy. Not in the narrow sense of the Green Revolution but through a vision that reaches out to all of the rural poor. This vision must encompass the improvement of agricultural productivity, providing social security nets to the rural poor, making food a universal right, and integrating the countryside with the Great Indian GDP Growth Engine. The hundreds of billions of dollars that are projected to pour into infrastructure cannot only create glitzy new airport terminals or autobahn-like sea-link roads. Rural development demands investment in irrigation and storage facilities to reduce the continuing reliance on rainfall, on transport and communications, and on the expansion of financial services in the vast disconnected reaches. Rural empowerment, on the other hand, implies a stronger committment to strengthening the institution of the panchayati raj.

Gandhi would probably consider this belated interest in rural development a betrayal of his core ideas anyway. The economic system of khaddar and charkha could well be stuck on another planet as far as the global economy is concerned. Nonetheless, reversing the neglect of rural India is a significant first step towards ensuring that even if swadeshi remains a relic of the past, the legacy of sarvodaya endures.

40 Comments on "Gandhi and the Swadeshi Project"

  1. M.S.Sundararajan October 2, 2010 at 7:42 am · Reply

    Very good article.Is this not what our illustrious past president Abdul Kalam also advocating?I t is high time that neglect of villages,agriculture and allied fields like horticulture,uplift of tribals etc is abandoned and all sections of society,not just the indutrial sector is taken up. Towards this,GDP should be replaced by Development of Human Index which will really show the progress of all sections of society

    • Daanish Raj October 4, 2010 at 7:34 am · Reply

      For me, this article that you’ve penned on Bapu’s birthdate is extremely significant. It is extremely encouraging to note that many economists, and more importantly citizens of our generation, like yourself, recognize the hollowness of this urban centric development model that is firmly entrenched in India right now, as emphasized year after year in the annual budget. I fear that a majority of urban indians are blissfully oblivious to this truth. I myself grew up reading about the liberalisation of 1991 as the best thing that ever happened to my country – and I was still reading an ICSE economics textbook, whose syllabus is autonomous (I assume), vis a vis the central board one

      I think the most immediate and greatest problem, or even threat if you may call it, that India faces right now, is that of “inequity”. I think we must realize that this injustice is not only unsustainable but more importantly, completely unacceptable. I really think that we need a jolting change that will awaken people in a way that they try to question and reform our systems.

      In this respect:
      a) Many eminent economists have indicated how flawed GDP percentages can be, as an index of growth of a country. They do not reflect existing satisfaction or happiness levels amongst many other such notions. I think there could be another index that captures inequity in a country, by comparing for example (and I’m just simplifying here), incomes and assets of the richest versus the poorest citizens of that country. If there is already something like this that exists, then clearly it is not being used nearly enough in the public domain.

      b)A thought: As part of school and college curriculum, we could make it mandatory for every student to spend 3-6 months in a village/tehsil, doing some sort of an internship project or working on their research interests. I think this could help greatly in enabling urban Indians to empathize with the problems that our brothers face in less fortunate surroundings. Many countries (including Israel and Singapore) impose compulsory military service for their citizens. I think this measure is quite like that. It could encourage a lot of young people to enter public service or politics and in the long run, devise more equitable and implementable policies for our country.

  2. Nakul October 2, 2010 at 6:47 pm · Reply

    Re: ‘somewhere, dazzled by the bright lights of hydroelectric dams, world-class engineering colleges and space projects, Nehruvian swadeshi lost touch with the Gandhian notion of individual self-sufficiency, based on the village republic.’

    (Hello Anisha!) I suppose you can’t say everything in a blog post, but I hope you’ll allow me a brief historical quibble. I think there’s a bit more to the story than that. The Gandhian view of development had always been the subject of serious disagreement during the freedom struggle, and it was debated at some length in the constituent assembly. One of the voices most starkly opposed to Gandhi’s was that of Ambedkar (‘The village is a cesspool, a den of ignorance, narrow-mindedness, and communalism’, etc). He thought Gandhi’s emphasis on the village couldn’t be basis of development policy, certainly not in its pristine theoretical form anyway, because it was so naive and romantic. Ambedkar’s is the vision that prevailed. It’s an open question whether he was *right* of course — the truth probably lies somewhere in between — but he did win that particular debate when it mattered.

  3. Arghya October 3, 2010 at 3:45 am · Reply

    Lovely article Anisha, pleasure to read.

  4. Mallika Chandrasekhar October 3, 2010 at 4:19 am · Reply

    Anisha,
    I always love to read articles penned by you, it gives me the opportunity to understand things in the economistic perspective. I totally agree with the view on ‘the next ten years must be the decade of ‘rural economy’. I have just completed reading a book on China’s history during Chairman Mao Zedong times. Out of all the various policies he intiated, the one that got my attention was the ‘country side education’, wherein he would send some high ranking official as means to ‘re-educate ‘ him/her to the far away remote and distant villages of China to live and learn the real way of Chinese life. Maybe it was a sort of punishement for some small offense, but in doing so , he was able to get the attention of what the real people of China were about. Only by doing so could he change the way China was. The real change if it has to come must always begin from the smallest, poorest, rural life of of a country only then can the benefits tricle down and gain momentum as an avalanche of development processes.

  5. Anisha October 3, 2010 at 7:28 pm · Reply

    Thanks, Arghya, MS!

    Nakul (hello!), I think you’re absolutely right: the whole swadeshi project was always something of a pipe dream and not too many people apart from Gandhi ever took it seriously. But Nehru (and possibly Ambedkar) didn’t just reject swadeshi; he focused almost all his energies on planning an industrial, urban India. At the same time, he seemed to profess a deep commitment to rural development. A devout Gandhian like JC Kumarappa was put in charge of the Agrarian Reforms Committee, (and subsequently found a place on the Planning Commission as well) and land reform was widely touted by the AICC as a pillar of the development process. Ultimately, though, it would seem that none of these issues ever got the time that Nehru seemed to find for planning the rest of the economy (land reform, for one, stalled for the next two decades).

    For what it’s worth, I’m not quite advocating a return to Gandhi’s swadeshi (not necessarily because it’s a bad idea but where would we even begin?). I do, however, think a reshuffling of priorities is in order.

    Mallika, I hope I wasn’t advocating a Maoist Revolution :) As you say, a rural education sounds alright on paper, but Mao’s practice of it may have been little more than political persecution.

  6. Daanish Raj October 4, 2010 at 7:41 am · Reply

    and sorry, in all that rambling, I forgot to congratulate you on what was a very delightful read Anisha. Needless to say, I’m loving your thought! :)

    • Anisha October 4, 2010 at 1:07 pm · Reply

      Many thanks :)

  7. Daanish Raj October 4, 2010 at 7:50 am · Reply

    For me, this article that you’ve penned on Bapu’s birthdate is extremely significant. It is extremely encouraging to note that many economists, and more importantly citizens of our generation, like yourself, recognize the hollowness of this urban centric development model that is firmly entrenched in India right now, as emphasized year after year in the annual budget. I fear that a majority of urban indians are blissfully oblivious to this truth. I myself grew up reading about the liberalisation of 1991 as the best thing that ever happened to my country – and I was still reading an ICSE economics textbook, whose syllabus is autonomous (I assume), vis a vis the central board one

    I think the most immediate and greatest problem, or even threat if you may call it, that India faces right now, is that of “inequity”. I think we must realize that this injustice is not only unsustainable but more importantly, completely unacceptable. I really think that we need a jolting change that will awaken people in a way that they try to question and reform our systems.

    In this respect:
    a) Many eminent economists have indicated how flawed GDP percentages can be, as an index of growth of a country. They do not reflect existing satisfaction or happiness levels amongst many other such notions. I think there could be another index that captures inequity in a country, by comparing for example (and I’m just simplifying here), incomes and assets of the richest versus the poorest citizens of that country. If there is already something like this that exists, then clearly it is not being used nearly enough in the public domain.

    b)A thought: As part of school and college curriculum, we could make it mandatory for every student to spend 3-6 months in a village/tehsil, doing some sort of an internship project or working on their research interests. I think this could help greatly in enabling urban Indians to empathize with the problems that our brothers face in less fortunate surroundings. Many countries (including Israel and Singapore) impose compulsory military service for their citizens. I think this measure is quite like that. It could encourage a lot of young people to enter public service or politics and in the long run, devise more equitable and implementable policies for our country.

    • Anisha October 4, 2010 at 1:07 pm · Reply

      Hi Daanish, thanks for your comments. I don’t know if it is possible to legislate a sense of empathy with the rural poor into young kids. After all, many kids live around the urban poor and the familiarity with that deprivation hasn’t particularly encouraged them to feel empathy for slum dwellers and the like.

      On the subject of popularising non-GDP measures of development, I completely agree with you. I don’t know how it works in policy but being constantly bombarded with “India shining” growth figures can really disconnect the urban middle class from how badly we as a country are performing on basic human indicators. There are plenty of poverty, inequality and human development measures out there. The media could well take a lead in publishing at least half as many stories on our failures as they do on our successes.

      • Vipul October 4, 2010 at 3:58 pm · Reply

        Anisha and Daanish, I disagree. GDP has its limitations, particularly when governments try to manipulate it by ill-conceived fiscal stimulus. But at a broad level it tells a good story, particularly for developing countries. Once you reach the levels of development of the US or Netherlands, GDP probably doesn’t tell that much of the story.

        Daanish, you raise the point about happiness. But GDP per capita is pretty strongly correlated with most measures of happiness and life satisfaction: (i) within countries (ii) between countries, and (iii) across time (secular trends). Again, the correlation weakens once you’re at US or Netherlands middle class income levels, but we’re talking of India here. (The other extrinsic factor that strongly correlates with happiness is freedom — such as the freedom to choose an occupation — yet another reason for economic liberalisation — over and above its growth-increasing impact).

        Human development measures are important but again, they correlate fairly well with GDP per capita plus freedom. For instance, in this paper, Swaminathan Aiyar estimated that “with earlier [economic] reform, 14.5 million more children would have survived, 261 million more Indians would have become literate, and 109 million more people would have risen above the poverty line.” Aiyar uses Amartya Sen-style analysis. I don’t know how reliable these numbers are — there are many hidden assumptions and counterfactuals are always tricky — but I find it hard to counter the basic claim that economic growth saves lives.

        • Anisha October 4, 2010 at 6:14 pm · Reply

          Economic growth increases income. It can save lives only if it increases the incomes of the desperately poor. This has been happening at a very slow rate for the last six decades. Perhaps the reason for the skewed distribution of the gains from growth is that we are simply relying on figures such as GDP growth and assuming that this growth will take care of all developmental issues. Maybe if this reliance on GDP growth was accompanied by a little more nuance – human development indicators, the size of the poverty gap, income inequality – then we could better understand who it is that this growth is benefiting. You mention correlations: isn’t it easier (and possibly better policy) to use a direct indicator rather an indirectly correlated one?

          Aiyar’s paper isn’t an exercise in economics. He hasn’t even attempted to deduce causality – but has just imposed growth rates from one distinct period onto another. He might as well impose US growth rates from the Clinton era onto India and claim that if Clinton had become the Indian prime minister, then those are the growth rates we would have enjoyed.

          It’s interesting that you mention Amartya Sen. He is renowned for having rejected the income approach to measuring poverty in favour of the capabilities approach or the functionings approach. Try his article, “The Equality of What”. Or any book about his work. Most econ textbooks will do as well.

          Finally, as an aside: the Cato Institute isn’t really known for objective research. It’s a libertarian lobby group paid for by oil interests to produce a specific kind of research, which promotes their political objectives. Check this out for some very interesting reading.

          http://www.newyorker.com/reporting/2010/08/30/100830fa_fact_mayer?currentPage=all

          • Vipul October 6, 2010 at 10:58 pm ·

            Anisha, I’ve read that New Yorker piece, but thanks for bringing it to my attention. I am aware that the Cato Institute is a libertarian policy think thank just like the Center for American Progress is a liberal/progressive think tank and the Heritage Foundation is a conservative think tank (to name just a few examples). I have seen no evidence that Cato’s work is more sloppy than that of most policy think tanks such as CAP or Heritage. In any case, the paper I pointed to uses publicly available data (I have looked at the data myself and it checks out), makes some clear assumptions (which you may or may not dispute) and reaches some conclusions. There isn’t any “original research” here (such as a direct collection of data from survey participants) that is opaque to quick verification.

            Since you raise the issue of the Jane Mayer article, I am also aware that Cato was bankrolled by the Koch brothers, who run the largest private oil company in the United States. In the 1970s and 1980s, they bankrolled a number of libertarian and free market initiatives. However, they are responsible for very little of the current funding for Cato or any of the other things they kickstarted. Assuming that all of Cato’s policy positions on energy/environment issues are because they have been bought by the Koch brothers or other oil interests, this covers a very small and insignificant fraction of Cato’s research and policy work, and has no direct bearing on the paper(s) I mentioned.

          • Vipul October 6, 2010 at 11:18 pm ·

            Anisha, it is fine to use other measures than GDP, if they are easily available or easy to compute. But this doesn’t mean that GDP needs to be superseded. As an analogy, if we cannot directly measure what food people *eat*, then measuring what food people *buy* serves as a reasonably close substitute. And it’s safe to say, in general, that the food that people buy is pretty closely correlated with the food they eat.

            Also, on a factual basis, you are wrong that economic growth saves lives only if it increases the income of the desperately poor. That is of course one of the main ways it saves lives, but (i) economic growth can save lives of rich people too, and (ii) economic growth can reduce the costs of and increase accessibility to many things that tend to save lives.

            More importantly, economic growth *does* pull people out of poverty. This may have been happening too slowly for your taste, but it’s happening. Quoting from his book In Defense of Globalization:

            “It fell to me to work on this problem [of reducing desperate poverty in India] since I had just returned from Oxford and was the economist assigned to assist the proponents in the Indian Planning Commission of this plan to raise the minimum incomes of the poor. I assembled the income distribution data that were available at the time; their quality was pretty awful because of inadequate statistical expertise in most countries, nor were they standardized for international comparability. But a quick scan seemed to suggest that there was no magic bullet: countries seemed to have somewhat similar income distributions regardless of their political and economic cast. So the primary inference I made was that if there is no way to significantly affect the share of the pie going to the bottom 30 percent, the most important thing was to grow the pie. In short, my advice — what I might call with some immodesty the Bhagwati hypothesis and prescription — was that growth had to be the principal (but, as I argue below, not the only) strategy for raising the incomes, and hence consumption and living standards, of the poor.”

            In my words: a lot of economic growth would reduce desperate poverty, even if it increased inequality, because the increase in inequality wouldn’t be much. And very little growth with greater equality would not pull people out of poverty.

          • Anisha October 7, 2010 at 6:07 am ·

            You might be right about Cato, I wouldn’t know. It’s fair to assume, though, that this little article (not to mention its over-the-top title!) wouldn’t be printed in a reputed journal of economics.

          • Anisha October 7, 2010 at 9:58 am ·

            “And it’s safe to say, in general, that the food that people buy is pretty closely correlated with the food they eat.”

            a) We don’t know what the rural poor in India buy. We know GDP per capita which, as a measure aggregating across the entire economy, is not the same thing. b) A satisfactory standard of living does not include just food but social goods like medical care and education. These are either entirely unavailable or are of exceptionally poor quality.

            “Also, on a factual basis, you are wrong that economic growth saves lives only if it increases the income of the desperately poor. That is of course one of the main ways it saves lives, but (i) economic growth can save lives of rich people too, and (ii) economic growth can reduce the costs of and increase accessibility to many things that tend to save lives.”

            a) From this comment I feel that you are picking arguments with me for the sake of it. Save rich lives? Increasing someone’s income from Rs500,000 per year to Rs1,000,000 raises their standard of living; it does not “save lives”. Raising someone’s income from Rs2500 per year to Rs25,000 per year could well save lives by eliminating infant mortality, child malnutrition, deaths due to absence of medical care, even farmer suicides. b) What are these “many things”? Do you mean schools and colleges and hospitals? They’re largely absent from rural India. Do you mean access to bank accounts? The financial inclusion drive is about a year old and very, very far from completion. Do you mean transport and communication? There is a substantial gulf between rural and urban connectivity and integration with the wider economy.

            “…growth had to be the principal (but, as I argue below, not the only) strategy for raising the incomes, and hence consumption and living standards, of the poor”

            The pie quote by Bhagwati has been hammered to death in countless high-school debates. Needless to say, it simplifies the task of policymaking because the only bottomline you have to look at is GDP. Let’s not forget that GDP growth is not a force in itself but the result of specific economic activity. For example, GDP growth could be the result of rising urban consumer demand. Or a rise in foreign demand for Indian exports. Or expansion of infrastructure development by the government. Or a remarkable improvement in technology. All of these trends could lead to faster GDP growth. Growth isn’t a deity in itself that spreads wealth and prosperity among all and sundry. Of course more GDP is better than less. Does that mean we completely ignore how it is generated? Are we intellectually incapable of expanding the mandate of policymakers?

            “In my words: a lot of economic growth would reduce desperate poverty, even if it increased inequality, because the increase in inequality wouldn’t be much. And very little growth with greater equality would not pull people out of poverty.”

            Your implicit assumption clearly is that a focus on rural development will dramatically hinder, even stall, the growth process. I believe this is symptomatic of the obsession with urban centres as the only engines of growth. Improvement in agricultural productivity has predated industrial development in all advanced economies. Why are we so convinced this is impossible in the Indian context?

            As for our little debate, it’s run on pretty long, I think. You’ve told me I’m wrong a couple of times, and that my arguments are confusing. In response, I can only say that in your lengthy comments you’ve ignored the fact that poverty in rural India increased steadily till 1991 in absolute terms and stagnated thereafter. Your claims of declines in povery have a lot to do with poverty ratios based on contentious definitions of poverty lines. You haven’t addressed how government is to ensure that the entire population has access to three square meals a day (at the very least). You’ve scoffed at a concern for inequality in income distribution (presumably based on a widely held American philosophy) without realising that, unlike in America, inequality in India translates into millions of people suffering a standard of living below any physically, socially or morally acceptable level. And you haven’t responded to my claim that if agricultural growth doesn’t move above zero to at least 4 per cent, the wonderful 10 per cent GDP story will remain a myth.

            Perhaps you are philosophically opposed to the idea of a welfare state or even of big govenment directing the growth process. In which case, we must respectfully agree to disagree and move on.

            Thanks for the comments. I’m sure we’ll meet again on someone else’s page :)

          • Vipul October 7, 2010 at 2:01 pm ·

            Anisha, I think you are confusing me with Sumeet, when you say that I am implicitly assuming that growth has to be focused on urban centres. I didn’t say anything of the sort. In fact, I tend to agree more with you — apart from the growth in telecommunications, most of IT will not have a significant impact on the majority of Indians for some time. My main points have been that (i) GDP works fairly well as an indicator of economic development, at least at the stage of development that India is at. (ii) Economic growth saves people’s lives in myriad ways, including but not limited to raising their individual incomes. (iii) Poverty in India has gone down a lot, both in percentage terms and in terms of the absolute number of poor people. The steeper reductions in poverty have coincided with periods of greater liberalisation and greater economic growth by and large (as you point out, the post-1991 period). I think the numbers prima facie support this assertion (to take just one example, the Wikipedia page poverty in India reports numbers in percentages, but we can multiply by the populations involved). If you’re arguing for the contrary, I think you’d need a full blog post to develop those arguments.

            I do agree with you that an increase in agricultural productivity is crucial to long run economic growth. (I think I said this in the very first comment I made on your post). The first such major increase happened with the Green Revolution, brought to India largely as a result of Norman Borlaug’s work. I’m not sure where and how the next major increase in agricultural productivity will come from (if I knew, I might quit my job to enter the agricultural tools business) but it could involve, for instance, genetically modified crops, improved irrigation, better storage, improved supply chains.

            How this may be achieved, and what role government has in supporting (and, more importantly, not obstructing) improvements in agricultural productivity, are important questions but I haven’t really provided my views on them. For what it’s worth, I think that since government owns and operates most roads, the improvement of road infrastructure should be a government-centred responsibility (though they may outsource it to private contractors using BOT). In other areas, much of the productivity improvements we have seen have been initiated through private efforts. To take a well known example, the introduction of mobile phones in coastal Kerala have led to a sharp reduction in wastage of fish catches because fishermen and traders can get in touch by phone to update each other on the sizes of the catch and the prevailing market prices. The Indian government has been pretty reluctant to let Walmart operate in India, which I think is sad because Walmart has had a record of substantially improving supply chain efficiencies where they’ve operated (they’re already doing this to some extent). Then, there is ITC’s e-Choupal initiative that you’ve mentioned.

            I’m not arguing that government has no role to play. In many cases, government plays a negative role through a series of price distortions and restrictions on trading, but the government could (and sometimes does) provide encouragement and support to successful private initiatives. What role precisely government should play is something I haven’t really given an opinion on, and couldn’t do in a short blog comment.

            My main reason for scepticism of a “vision” that reaches out to the poor is more mundane: a sense of how politics works in practice (i.e., what the people demand at the polling booths) makes me suspect that most visions, enforced through politics, will rapidly degenerate into very silly policies. If you want to get sensible economic policies through a democratically elected government, you might first need to educate the electorate on economics — a somewhat hard task even in developed countries, let alone in India.

            Anyway, I gather you may be tiring of this discussion, so I’ll make this the last comment from my side on this blog post. Thanks for your original post and replies and for your sporting response to my rather cumbersome dissent.

          • Anisha October 7, 2010 at 2:26 pm ·

            Thanks for that, Vipul. Should have added a link on how the number of people around the poverty line is increasing, not decreasing, in India.

            Poverty in India

            Cant disagree with the ideas on rural development. It’s worth thinking about developing a non-cynical strategy to put them in place. I’m not really suggesting anything new here, there has been some interest from the government in this regard; I can only hope that their interventions are both sincere and effective.

  8. Sumeet October 4, 2010 at 8:47 am · Reply

    I tend to take a different view point on this.

    Nehru’s failure were large and are quite well documented, so I am not contesting either the half thought out policies or his over emphasis on industrialization and rapid technology progress, which moved away quite significantly from Gandhi’s dream of Indian village being the bedrock of Indian democracy.

    However, it is difficult to be fully convinced about the efficacy of Gandhi’s dreams and ideals either. Having worked in Indian villages, I can at least attest that it is very unlikely that there exist sound innovative methods or policy initiatives that can bridge the urban-rural divide, combat poverty etc. etc.

    So it is not obvious how the task of ‘emancipating the poor’ so as to speak, can be accomplished either using Gandhian ideologies or Nehruvian platform.

    At least I am thoroughly convinced that schemes like working directly in the rural areas and trying to focus on agriculture productivity are not likely to produce large changes in the forseeable future.

    The method which appears to be more suitable is the ‘percolate down’ method. That is my rather elitist take on things. Basically it has to be driven by application of modern methodologies and moving a large populace out of agricultural jobs into more productive careers, considering the IT is now established quite firmly and the percolation will carry down to a considerable degree.

    • Anisha October 4, 2010 at 1:33 pm · Reply

      Hi Sumeet, thanks for your comments. Let’s just look at a few figures. India’s population is about 1200 million. Of this number 880 million live in areas classified as rural. The IT sector employs just over 1 million people. How many years would it take before the population can be “moved out” of agriculture? How many more years of extreme poverty must rural India endure?

      We’ve grown up thinking villages are these awful, dirty, backward places and that if we concentrate enough on urban development then those villages will just disappear. But the trickling down of growth since 1991 has only increased the value of the share of industry and services in total GDP. The proportion of the population employed in these sectors has hardly moved. At the same time, our cities are exploding, well short of infrastructure, and have become home to terrible deprivation themselves.

      Finally, if nothing else persuades you, this argument might. 10 per cent GDP growth is unsustainable without dramatic improvements in the rural and agricultural sectors. Low agricultural productivity can only lead to repeated supply shortages, hysterical levels of inflation, and ever-increasing government subsidy bills. This really complicates macroeconomic management and also dramatically reduces the scope for government spending on growth-inducing key infrastructure. Moreover, the transformation of the rural sector could unlock consumer demand in a way that we can’t even fully imagine yet. Till this sector picks up, it will act as an enormous drag on the economy as a whole.

      You “choose” urban development over rural but I honestly dont think that any such choice exists. You’re right in that we need to find creative solutions. But find them, we must.

      • Sumeet October 5, 2010 at 5:25 am · Reply

        Thanks for a quick reply!

        Improve agricultural productivity we must, but I am not sure what is the creative route to doing the same, and what is the right direction for the policy maker to take to include marginal farmers into the loop.

        Quickly on the other points

        (1) The IT sector is still small, but I was trying to argue that a lot of different kind of computer enabled services can penetrate into the rural areas. These can include e-learning, IT health products, information systems for improved productivity etc.

        (2) I still stand by my argument that it can only be a ‘percolate down’ approach and not ‘bottom up’.

        I.e There are two ways to go about it, both quite distinct to my mind. The first is to start from the villages, enrich the masses and move up, the second is to make the urban centers clusters or hubs of excellence and percolate down.

        Over a period of time, my thinking has tended to align more closely with the percolate down approach, because I think it is the only pragmatic approach to things.

        Plus we are more or less living in an information economy now, where access to quick and fast information is one of the most critical factors for improved access, and I am certain that this is here to stay, so in essence the whole economy needs to move to an information base.

        Basically I am arguing for shifting the basis of economy to information from agricultural products, where everything is closely tied down to information in the end.

        • Anisha October 5, 2010 at 12:39 pm · Reply

          Ah, but you have come up with at least one creative solution yourself!

          “(1) The IT sector is still small, but I was trying to argue that a lot of different kind of computer enabled services can penetrate into the rural areas. These can include e-learning, IT health products, information systems for improved productivity etc.”

          I agree entirely. ITC’s e-choupal initiative comes to mind.

          The problem with depending on growth “percolating” from urban to rural areas is that it hasn’t worked too well so far. Its success may rely on the Indian economy growing at 20 per cent per annum to have any impact in our lifetime, and maybe not even then.

          • Sumeet October 6, 2010 at 5:19 am ·

            Yes, I agree.

            The ‘percolation down’ approach hasn’t really worked as well, and its not very clear how much it can percolate and what are the ‘middle layers’ required for the percolation to really work.

            Infact, you are right in the assessment that urban and rural India have largely remained very disjoint clusters and in practice, there has been very little useful cooperation between the two.

            Fortunately, as we speak (and write!) the Indian democratic framework continues to strengthen and decentralize itself, and I believe that such a decentralization is the first step towards an inclusive economic growth model.

            Regarding, 20 percent growth etc., I really think that 10 percent growth is a brilliant achievement that can probably not be superseded, so the effort has to be put into making sure that the ‘fruits of this growth’ are shared equally through robust policy frameworks that ensure equitable development.

  9. Vipul October 4, 2010 at 2:38 pm · Reply

    Anisha,

    You’re right that improvement in agricultural productivity is a necessary condition for people currently in villages to get rich. In the nineteenth century US, more than half the population was employed in agriculture. Today about 3% is — and the US produces more food per capita than back then. It’s not as if those currently in agriculture are working 20 times more — it’s increased productivity.

    However, Gandhian economics is not the route to increased productivity. Gandhi did stress two important ideas — “customer is the king” and “live and let live” — but beyond that, his philosophy isn’t very helpful to growth. His spinning wheels may have been great for character-building, but they are a very inefficient way to produce clothes. Gandhi was resistant to modern technology — not because he was ignorant of it, but because he was obsessed with character-building and showing off his moral fibre. We can overlook these personal weaknesses in a person who contributed so much to endowing struggle with peace — but let’s not glorify this.

    Most importantly, Gandhi’s ideal of self-sufficiency was profoundly illiberal, prosperity-reducing, and immoral. For somebody who freely borrowed ideas from Tolstoy and Thoreau and writers of all stripes, and lived in the UK and South Africa, one might have thought that Gandhi would be less hypocritical about the critical role that the exchange of goods, services, and ideas plays in improving our standard of living. But one would be wrong. I think Gandhi was to quite an extent right that elite city folk (as exemplified by Nehru) looked down with a bit too much contempt on poor villagers, and that poor people from villages are capable of innovating and improving their lot. But this innovation comes about through trade, exchange, and markets — not through “self-sufficiency” in the sense of rejecting foreign influences.

    Also, on a purely factual basis, you are wrong that the Indian economy has been liberalised — the Indian economy, particularly agriculture and labour-intensive industry, remains shackled by regulations, much of it a legacy of the unholy mix of Nehruvian socialism and Gandhian self-sufficiency. The regulations are coming off but all too slowly. Economic Freedom of the World and similar reports place India between 60th and 90th on economic freedom, to take just one type of measurement.

    • Anisha October 4, 2010 at 6:19 pm · Reply

      Hi Vipul. To be completely fair, at no point did I advocate a charka-khaddar economy. In fact, I referred to it as a “relic of the past”. Perhaps I should have been more clear in this. My original claim, indeed the point of the whole article, was to advocate a reassessment of policy priorities on the part of the government. In particular, I have argued for an increased focus on rural development. This, I believe, is in the spirit of Gandhi who believed that the tiller was the foundation of our economy.

      Yes, the Indian economy is still regulated. The scale of regulations are considerably less than in the period from 1947-1980.

  10. Vipul October 4, 2010 at 2:48 pm · Reply

    Anisha, I think you use the term “neglect” a little too freely. You say that 880 million people in India are classified as rural, and they have been neglected. Are these people neglecting themselves as individuals? Are they neglecting their children and parents? Are they neglecting each other?

    Or do you mean that you and I are neglecting them? But how is it surprising if we neglect others — each person takes care of himself/herself and his/her immediate friends and neighbours. I’m not sure people in any Indian village care more about me than I care about them — why then call them “neglected” and not me?

    Perhaps you’re suggesting that what really matters is how much attention you and I pay to these people — that somehow our neglect of them is more morally or consequentially significant than their neglect of us. If so, why? Do you or I have more moral obligations to those villagers than they have to us? Is it that we are more equipped to help them than they are to help us (or themselves, for the matter)?

    Perhaps you are talking of neglect only by politicians. But rural people vote too! They can exercise their ballot to influence politicians, and probably do. Politicians work hard to capture rural votes, even going to the trouble of inciting riots to boost their electoral prospects. Perhaps you’re suggesting that rural people don’t know what’s good for themselves, so they vote for politicians who then “neglect” them?

    I’m confused.

    • Anisha October 4, 2010 at 6:37 pm · Reply

      Thanks for that exposition of the wonderful wheels of democracy at work :) Needless to say, if the rural vote translated directly into political power, they’d be spending a lot more money on themselves financed through higher taxes on corporate India, as an example. We don’t live in Ayn Rand’s mythical backyard, we live in a society with severe inequality of access to opportunity. A lot of this inequality stems from market failures (the lack of access to insurance or credit, as a typical example) and is self-perpetuating. To the extent that India aspires to become a welfare state, eliminating starvation deaths and extreme deprivation has got to be a top priority.

      Of course, if you’re an each-man-for-himself sort of person then I can offer you what I suggested to Sumeet. 10 per cent per annum GDP growth cannot be sustained without substantial improvements in the agricultural sector. For this un-Gandhian reason alone, it would make a lot of sense to affluent, urban families.

  11. Anirbit October 7, 2010 at 1:48 pm · Reply

    @ Anisha

    I can’t but agree to a large extent with the central observation of yours in the original article. But I can’t see you giving a prescription of recovery from the issues that you indicate are strangling the progress that we would like to see.

    I am not trained in economics but whatever I understand of it does tell me that the notion of growth as measured by GDP does seem blind to a large extent to the issue of sustenance. Won’t a bumper crop some year get reflected in the GDP and the fact that it is not a forerunner of better crops for the next years be completely ignored? (Kindly correct me if I am being too naive!)

    Talking from the point of science and its education (which I understand far better) I somehow feel that most economic growth measurements focus on the ends rather than the means. Its like the typical scene of a bunch of Indian experimental scientists feeling exuberant about having published some paper in a high-profile journal but completely ignoring (suppressing?) the fact that to do that research every bit of instrument used was actually imported from the so called “first-world” countries! (in biology research people even have to buy special kind of mice from France at tens of lakhs of Rupees per animal) You might be at mortal risk if you suggest to a typical Indian experimental grad student to spend their PhD time indigenously trying to build an apparatus which otherwise India bleeds to buy.

    I guess when we talk of swadeshi the imagery of charkha-khaddar gets taken a bit too literally. And when we talk of free markets and free-trade the idea of being able to import easily from outside gets over glorified. (Thats important as a rescue process when in a crisis but can’t be an alternative to home grown solutions) Its like the condemnable attitude of going gaga about HYV seeds. Its true that Norman Borlaug saved a few million lives in those days but I can’t help feeling sad how precariously we have potentially damaged the environment with little-understood effects of genetic engineering. Notwithstanding the fact that the Green Revolution wiped out at least a 1000 varieties of rice from India. I guess a critical economic study can reveal how much of a loss that has been.

    The spirit of Gandhi if taken as he might have meant it (that is actually a charkha economy) would have lead to disasters as has been very carefully explained by Amartya Sen in many of his articles. But in principle there is an obvious lesson to be learnt which India’s urbanized focus of development has almost deliberately forgotten. The lesson of self-reliance. There cannot be a sustainable substitute to the people of India being able to themselves produce for their needs.

    This requires not just growth in terms of financial growth ensuring that every one is at least assured 3 meals a day but also a complete reversal of the priority list of most Indians. Where the means become more important than the ends.

    It is not enough to be just able to produce more food but it is important that we can do that without using imported technology and without using scientifically controversial methods. A focus on just development as seen from the skewed urban prism so horrendously drives the nation into adopting every piece of fad without enough thought about consequences. (I wish I could get rid of my cell-phone which I feel guilty of using now having seen numerous research data on how probably cell-phones are dangerously damaging the environment like by reducing the pollination tendencies of bees by more than 50%!)

    All this I guess will be a natural consequences of increasing the reach of education and making fool proof as to how we measure education. Dumb parameters like number of PhDs produced can be so easily fudged by just dangerously lowering the criteria for getting a PhD as is not so uncommon in India. I was pretty surprised to see that in your vouching for rural development you somehow missed the factor of absence of education and the limited reach of reason in India!

    Very often the phrase “rural development” gets used in India just to mean increasing job opportunities for the rural people. This is dangerous for many reasons. Since a focus to just produce more jobs which the rural India can access can only lead to covert exploitation like illiterate people being deceived to work in radioactivity prone regions of nuclear power-plants with no safety mechanisms in place in lieu of may be a new pair of clothes and a meal. Producing more jobs if becomes the goal then that would be so dangerously self-defeating.

    The goal should be to make government/private funding/education be easily accessible to people so that they can now innovate and do the job that they had anyway been doing (like say farming) in a more intelligent and more self-reliant way.

  12. Anisha October 7, 2010 at 3:19 pm · Reply

    Hi Anirbit, thanks for your detailed comments. As both you and Vipul have pointed out, this post lacks detail on the “vision” for rural India. I plead guilty; the intent was to put up a short piece on October 2 in memory of MK Gandhi. Maybe another blog post to (try to) answer some of the questions all of you have raised!

    I do agree with you that focussing on growth indicators restricts us to a bottomline figure rather than to the actual dynamics of how the economy works. Growth can take place (especially in the short run) by excluding a very large number of people. The fact is, however, that this a) violates the objectives of an aspiring welfare state and b) leads to the eventual bottleneck that will strangle growth in the medium term.

    On the subject of self-reliance, well, that’s a little bit more tricky. It’s usually hard to justify isolationism, at least in economic terms, but a case can certainly be made for reaping the benefits of external trade and investment in as efficient and self-serving way as possible. For instance, are imports used to feed high-end consumption or capital goods which can enhance productivity? Do capital inflows find their way to greenfield projects or are they financing real estate price bubbles? Are the returns from FDI solely accruing to the investors or are crucial technologies being transfered to the domestic population? These are tough questions for any government to answer. Look no further than the SEZ controversies.

    As far as job creation goes: I think providing jobs can be a very important safety net for the rural poor. The vulnerability of poor families to income shocks because of reasons as random as a bad monsoon is very high. This, in turn, forces them to slash savings and expenditure on education and health. Providing an income safety net is a large part of eliminating this uncertainty and encouraging more private savings and investment by the poor. I agree, though, that in light of the huge scale of the task at hand, this will not be sufficient. The government must take a stronger position in inviting investment into rural India.

  13. Anirbit October 8, 2010 at 4:54 am · Reply

    @Anisha

    Thanks for your reply.

    You talk of “excluding a very large number of people”. I would say that this is in fact a very subtle issue. In what sense do you want to include the larger populace? If the objective is solely to include a large number of people then one might again get into the quagmires of reservations and affirmative actions and what not. The oh-so-eager Indian governments in their over the top attempt to portray equity have always found cheaper way out by almost gifting opportunities to undeserving people. This kind of mass pleasing policies only turn out to be counter productive in many ways. Not only it reduces the average quality but it always reduces the work quality of the deserving people by denying them an invigorating atmosphere. No surprise that best of Indian minds flock to the foreign shores. It is simply more beneficial to work in environments where a lot of commensurately talented people are working together.

    You can’t have progress in any sense unless the best are given the best.

    But then inclusive growth is completely essential. One can’t bypass that either. But in what sense does it have to be inclusive? Do you want education to increase its reach by lowering the admission cut-offs of the best Indian universities or by increasing the schooling quality everywhere so that the talented students anywhere in India can take up the challenge of crossing the uncompromising quality standards of the best Indian universities.

    A singular pursuit of equity without regard for assurance of quality environment for the best of people will result in dangerous compromise of quality.

    On the same note I share your concerns about the eventual fate of capital flows into India and FDI flows and imports. It is likely that our fears are true that freeing up the economy (in a non-technical sense) hasn’t resulted in its benefits reaching the grass-roots. May be everyone has gotten a bit better and may be many millions less die of hunger but somewhere the benefits across the economic stratas has been massively disproportionate!

    It is important to have “free-markets” and it important to let private investments become easier to make. It is important that it be made easier for private investors and foreign institutions to come and open universities in India so that the shoddy Indian establishments get some competition and the students are no more left at the whims and fancy of the God-like attitude of Indian education bureaucracy. It is important to enhance free competition in the market removing it from the Neheruvian shackles of “license raj”. (May be these were important in the context when he did those but today they can get suicidal)

    But one shouldn’t go gaga about freeing up markets and making imports easier at the cost of compromising on efforts on self-reliance. There is simply no alternative in the long run to being able to produce things in house. In the short run for say biology research to progress it should be easier to get any chemical from anywhere in the world but then in the long run it is dangerous if we always continue to pay 1000s of dollars to some foreign companies for every micro-gram of chemical we need!

    It is depressing that even in more than half a century of independence we can’t produce inside our country chemicals pure enough for use in the research laboratories!

    It is horrifying to think that India can’t produce any microchip and hence it has to succumb to all the million sanctions about what kind of microchips we can import for our research and this cripples our space research since the satellites that go up are actually using lower quality chips than the one inside the computers you and I are using to type this blog!

    I would like to understand further from you what you understand/know/think of this issue of fate and reach of capital flows and imports in India. If on this blog post that looks like a massive digression may be over emails you can share your technical know-how of the subject.

  14. Anirbit October 8, 2010 at 5:08 am · Reply

    @Anisha

    I agree with your point of creating job opportunities for rural India as providing a safety net so that they can invest in quality aspects of life and start looking beyond just sustenance.

    But there has to be a point of caution. What kind of jobs?
    It has be ensured that in the garb of job creation we don’t end up pushing those people into precarious jobs where every work ethics and safety measures are hijacked for the sake of livelihood. To give an analogy the Delhi government is going gaga about the CWG having produced a lot of jobs. But what kind of jobs? It still just as laborers working at the construction sites in so dangerous situations that about 80 have died in the preparation for CWG and not withstanding the shameless use of child-labour!

    A rush to produce economic safety nets by increasing jobs is going to probably increase just the above kind of situation. One needs stringent implementation of social safety nets before we focus purely on job creation. Otherwise we would very likely have a Frankenstein at hand.

    Why not improve the adult education programs and increase the reach of education and make funds easily available to the people in the rural areas so that they can lead a better life as farmers rather than flocking to the concrete jungles of the metros in search of a few more Rupees of money in lieu of a dangerous life. Why not think of “rural development” as making farming a more lucrative profession and enable people doing farming to do it more respectfully and more intelligently without relying on the vagaries of monsoons (as you pointed out) or on controversial genetically engineered seeds (as I was pointing out).

    If I may be allowed a moment of philosophizing, what profession on earth can be more important than to produce food for others?

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