We need an Indian model of development and distribution that recognizes our special needs

I don’t know if you have realised this but the terms of debate in Indian politics have changed quite

dramatically over the last decade. Take some recent controversies: the decision to tax petrol but to subsidise kerosene; the fuss over land acquisitions for SEZs and the

Nandigram furore; the massive write-off of farmers’ loans; the NREGA scheme and the dispute over how to tackle the following that Naxalites have gained in tribal areas.

 

   Though each of these issues is different, the debate is almost exactly the same.

 

   In every case, the argument is between the same two schools of thought: those who believe that the stability of the economic system is paramount and those who reckon that the formal economic system has failed to distribute resources fairly across India and across social classes.

 

   The first school of thought argues that India is now an emerging superpower, potentially one of the world’s largest economies. If we are to take our rightful place in the world then we must be economically responsible.

 

   It argues that we cannot simply write off loans because this will create a mentality where people never pay their debts. We cannot continue to subsidise products because subsidies create distortions in the economy. NREGA may help individuals but it is of little benefit to the economy as a whole. And as for land acquisition, this is an inevitable aspect of economic progress.

 

   The second school of thought argues that while the Indian economy has performed spectacularly over the last decade or so, the gains of this new prosperity have not been fairly distributed. The formal economic system tends to favour those within the organized sector and entirely ignores those at the margins of society.

 

   This school believes that it is an obscenity that farmers should continue to commit suicide only because they cannot repay loans. It is absurd to expect the poor to keep paying more and more for kerosene when they can barely earn enough to stay alive. Because the economic system has not been able to create enough jobs, NREGA is a necessity.

 

   Broadly put, it argues that the gains of the recent prosperity will not reach those at the bottom of society if they are distributed according to the market. Therefore, there must be direct transfers of resources (loan write-offs, subsidies etc) if we are to ensure social justice and prevent people from being swayed by the likes of the Naxalites.

 

   The interesting thing about these terms of reference is that they have pushed the old Left-Right divide into irrelevance.

 

   Both Left and Right are on the side of formal economics. The Left aligns with the Right for land acquisition whether in Nandigram or Singur, arguing that agriculture must give way to industry. Nor does the Left have any patience with Naxalites. It believes that all reform must come through the State. And it agrees with the Right that tribals must be moved if there are mineral resources under their villages because these resources belong to the nation as a whole.

 

   If there is a difference, it is that the Left puts its faith in the State while the Right believes in the market. But neither side believes that we must go outside the formal economic system for direct transfers of resources. Neither side agrees that it is insensitive to force people off land that their families have tilled for generations only so that new factories can be built.

 

   In political terms, the second school of thought is often associated with Sonia Gandhi. Certainly many of the controversial direct-transfer initiatives stem from her conviction that she has seen both socialism and capitalism up close and that neither seem to do very much for the poorest in our society. Hence her support for NREGA, loan write-offs, kerosene subsidies etc. (Her passion for RTI flows from the same mistrust of the State and of ‘isms’.)

 

"So perhaps it is now time to junk the old arguments about Marxism versus the Market. Both are Gods that have failed."

   After some initial skepticism, the political establishment has fallen in line. Even the BJP which made fun of her ‘jholawala’ ideas has stopped laughing after the Congress got re-elected. There is little doubt that these were the policies that won the Congress the election.

 

   But what surprises me is that even middle class cynicism about the direct-transfer approach seems to be fading. The kerosene subsidy provokes little outrage. Contrast the way the editorial writers treated the provisions for social schemes in this budget to the scornful pieces that greeted the introduction of NREGA and the loan write-off.

 

   One indication of the change in mood is the attitude to Naxalites. I am always surprised to see how much sympathy there is for the followers of the Naxalites (if not the Naxalites themselves) in such middle class media as Twitter and the Internet. There is a growing recognition that we have prospered while others have starved.

 

   Another indication is the growing ambivalence over land acquisition. When Mamata Bannerjee began her agitation against the Nano project, almost everyone I know in Calcutta was angry and outraged. But eventually, most of them voted for Mamata anyway. And today, if you mention SEZs, many people will argue that these involve seizing land from poor farmers for the benefit of well-connected fat cats.

 

   It matters also that global capitalism is in crisis. Five years ago, Wall Street was telling us to use the market more innovatively and to be ruthless with those who lagged behind. Then, Wall Street itself went bust and the investment banks went running to governments for funds to help them survive as they lagged behind. Wall Street’s failure awakened the Indian middle class to the limitations of the global capitalist model. Of course, the market has enormous strengths. But it also has hidden weaknesses.

 

   I suspect that the softening of middle class attitudes towards social sector schemes marks a coming of age. The middle class is now more at ease with the new prosperity. The old greed is fading and a more balanced recognition of the need for equitable growth is emerging.

 

    My worry is that this new divide between the formalists and those who want to go outside the system is not being debated or discussed enough. The model works at present because Sonia Gandhi has the clout to push for social sector schemes and Manmohan Singh has the experience to know when to give way and when to hold firm.

 

   But a consensus cannot be based on individuals and their balancing effect on each other. It must derive out of reasoned argument and out of the consent of the Indian people.

 

   So perhaps it is now time to junk the old arguments about Marxism versus the Market. Both are Gods that have failed. What we need is an Indian model of development and distribution that recognizes our special needs.

 

   We seem to be getting there. But of course, there is much more to be done. And much to be debated.