Dr Ashwani Mahajan
Today there is no dearth of people in India who measure development by how proximate we are to USA’s model. No doubt there is a huge gaps in incomes, wealth and facilities between India and USA. USA’s per capita income is 33 times that of India on exchange rate basis and 13.2 times on purchasing power parity (PPP) basis. But this is equally significant to note that there is always a historical and cultural background of the development of any country and therefore experience of any one country cannot be imposed on others. In over words development model of any one country cannot be replicated in other countries. Therefore, it would not be prudent to talk of transforming India into USA.
Global institutions like World Bank, IMF and WTO have been making recommendations to adopt policies of globalisation. There is a consensus among these organisations about what type of policy, India should adopt. These policy prescriptions include opening up of Indian borders for foreign goods and foreign capital, allowing repatriation of profits by MNCs and also giving extra ordinary treatment by tweaking policies and also going to the extent of preferential treatment to foreign investors even by denying level playing field to domestic players. Several times, policy makers cave into their recommendations to the disadvantage of domestic business.
US Model – Exposed
Recently Bureau of Economic Research of USA, in its report has revealed that in the last 25 years, bottom 90 percent of USA’s population has become relatively poorer. Further in the last 12 years, another 9 percent of population, above this 90 percent has also joined the fate of the bottom 90 percent and their wealth has also eroded. In other words except top one percent of population, all others have become poorer. In 1989, 54 percent of USA’s wealth was concentrated with top 5 percent. By 2012 this had increased to 63 percent. Report further says that after recession top 10 percent population has gained the most, whereas bottom 90 percent have been laggard in the process.
Report says that due to rising cost and fee structure, student debts have been on rise. Student debts have quadrupled from US$ 260 billion in 2004 to US$ 1010 billion in 2011. Similar situation is emerging in India too, where education loans have increased from rupees 4393 crores to rupees 42993 crores during the same period.
Globalization apologists claim that in the last two decades and a half GDP growth has accelerated in countries of the Third World, new products have been added, technology has improved and the people have been benefited. Growth in infrastructure has also facilitated the people. Production of more goods and services is the only way to increase economic welfare, they say.
However, this is equally true that benefits of growth have actually not reached the poor in India and the pace of poverty reduction has slowed down. Remuneration (real) for workers has either declined or has stagnated in the last 25 years. A much larger proportion of production is being cornered by the capitalists than before.
In 1990, billionaires (these with more than US$ one billion of wealth) could have been counted on fingers; whereas today out of 1645 billionaires world over, 56 are from India and in all there are 412 billionaires from Asia, out of which 197 are from China (including Hong Kong) only. Size of the middle class households has been rising fast and reached 3.1 crore by 2011 and the same may increase to 5.3 crore by 2014-15, according to the estimates of National Council of Applied Economic Research (NCAER).
However this is also true that whereas Per Capita Income at current prices was Rs. 43750 in 2009-10 and according to the Planning Commission those with monthly income of Rs. 672 in rural areas and Rs. 866 in urban areas were treated as above poverty line; and even then 30 percent of population was found to be living below poverty line. It is notable that in 1973-74, 55 percent of population was living below poverty line, which declined to 36 percent by 1993-94; however since then the pace of poverty reduction has slowed down significantly. Though by own admission of Planning Commission, adopting a faulty definition of poverty line, 23.6 per cent population was living below poverty line in 2004-05, which was corrected by Prof. Tendulkar, who suggested an improved new methodology. According to Prof. Tendulkar’s methodology 37.2 percent population was found to be living below poverty line in 2004-05. Irrespective of the definition controversy, it is a common belief that pace of poverty reduction has declined in the post globalisation period.
Worsening Position of Farmers and Workers
In 1980-81, agricultural sector’s contribution to GDP was 38 per cent, which came down to 13.9 percent in 2013-14, while more than 53 per cent of work force is still engaged in this sector. More than 5 Lakh farmers have committed suicide since then, and India has emerged as suicide capital of the world, especially farmers’ suicides. Farmers are deserting agriculture and farmer’s sons are not ready to continue farming, as the same is no longer remunerative due to lack of remunerative prices and rising cost of production.
According to the data published in Annual Survey of Industries (ASI) by CSO, in 1990-91, 78 percent of value addition used to go to labour (as wages, salaries and other compensation of employees) and the same was reduced to 41 percent in 2010-11. Share of profits on the other hand increased from 19 percent to 56 percent during the same period. Though compensation of employees increased 5 times, price level increased more faster, leaving the labour in worst situation than before. When this model is leading to pauperisation of masses in USA and India alike, will it be advisable to blindly follow the same model?
(The author is Associate Professor, PGDAV College, University of Delhi)
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