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BW Businessworld

‘Inclusive Growth Is Larger Than MGNREGA’

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Both UPA I and UPA II have had identical social objectives: enormously expensive subsidy-laden programmes that began with job guarantee through MGNREGA and have since expanded to free education, food security and now universal healthcare.

But for "inclusive growth" purists, this amounts to sub-optimal utilisation of sovereign finances. Such programmes trap the nation in short-term measures such as poverty alleviation rather than sustainable objectives such as equity, equality and productive employment. In an interaction with BW's Rajeev Dubey, Professor S. Mahendra Dev, director (vice chancellor) of the RBI-owned Indira Gandhi Institute of Development Research, and author of Inclusive Growth in India: Agriculture, Poverty and Human Development, argues why our inclusive growth is far from ‘inclusive'. Edited excerpts of the interview:

It's beginning to sink into governments — particularly democracies — that you can't have growth without inclusion. How do you see UPA II's social objectives fitting into the inclusive growth theory?
The inclusive approach to growth began with economic reforms all over the world. This was due to growing inequalities globally from the 80s and 90s. At the global level, there was the Washington Consensus ideology which favoured a more inclusive approach to growth. Then, Unicef, UNDP began the Human Development Index as a measure of inclusive growth.

In India, we've been seeking growth with social objectives since the first Five-Year Plan. But the inclusive approach to growth started only with UPA I after the India Shining slogan (of NDA) didn't work — people thought that although growth was increasing, inequalities were increasing much more. UPA I started some of the programmes to address this.

A number of elements are essential for inclusive growth: agricultural growth, employment generation, poverty reduction, human development, removal of disparities (regional, rural-urban, social) and environmental sustainability. All these have to improve to also sustain growth.

One of the criticisms of the present government is that its focus is more on poverty alleviation than inclusive growth?
A criticism of the eleventh Five-Year Plan is that it sought to pursue growth through reforms and social justice through flagship programmes like the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), the Food Security Act or other poverty alleviation programmes. The inclusive approach to growth is slightly larger in scope. In that, the process is also important. So you have to have a participatory approach. That has not been followed either in UPA I or UPA. The thinking has been that programmes aimed at pleasing sections of the society are enough. The UPA thinks MNREGA brought them to power in 2009, and so will the Food Security Act in 2014. Political objectives will always be there in such cases, but you also need to internalise the inclusive approach by way of participation of people in growth.

Does it harm the overall objective of inclusive growth?
Some good things, such as increase in investment in agriculture, have happened. One has to give the UPA credit for that. But from the mid-90s until 2000, agriculture grew at only 2 per cent. Governments neglected agriculture thinking that industry and services would deliver higher growth, which in turn would generate employment. But that did not happen. That's why there were farmer suicides during that period, which continued later because of the neglect. But this government has increased investment in agriculture; as a percentage of the agriculture GDP, investment  has increased from 12 per cent to 21 per cent. But it's not clear where that money is going.

What are the best practices for inclusive growth from around the world?
Among the BRIC countries, the total factor productivity (total output for land used) in Brazil and China is more than 2 per cent. In India, it's less than 1 per cent. Brazil has science-based agriculture. They have done wonders in improving productivity through technology. In India, not much has happened in terms of technology after the Green Revolution, the White Revolution in milk, BT Cotton and hybrid maize. In other countries they've done much better.

We have to move away from the Green Revolution approach that we have been following — we should move away from rice and wheat to other crops. We need to improve the productivity of small and medium farmers. This can be done through the four ‘i's: incentives, investments, information and institutions. All these are important for small farmers too. A small farmer cannot get much by taking his two or three bags of tomatoes to the market. There you need a group approach. The small farmers should come together either through contract farming or cooperative farming so that they can get higher prices. Mere increase in production cannot increase the farmers' income. Sometimes higher production can also bring down prices. So marketing is important.

Water management is also important. There's going to be water wars this century. In fact, ensuring water security will be more difficult than energy security. Policies like free power are harmful because typically a farmer goes to the farm, switches on the water pump and leaves to return only the next day, thus wasting water and electricity. This is not inclusive growth. Water pricing and land and water management is also crucial.

There are three objectives for agriculture: One, achieving 4 per cent growth with diversification. If there's increase in rice and wheat yields, you can release land for diversification. Second, equity across regions, women, small and marginal farmers. Third, sustainable agriculture. Too much fertiliser and too much pesticide are also harmful. In Andhra, 2 million hectares have been brought under a sustainable agri campaign. It uses less fertiliser, less pesticides through an integrated pest management approach.
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Another thing lacking in India is the extension of technology. We have a lot of gap between the farmers' yields and those of the scientists on their farms. Farmers don't know how to apply the technology.

How about giving land as a way of bridging inequality?
If you see other countries, access to land is one of the ways of bringing equality. In China, it started with community farming. The community decided who will farm. Even now, you can't own land. You get it on a 99-year lease. But that's difficult in India because we are a democracy. Still, access to land is important. One of the working groups of the Planning Commission suggested that the government buy land and give it to poor people wherever it is available. Some of the women's groups in Andhra have taken loans to buy land for farming. Land reforms have been there since the beginning but they have been successful only in two states, West Bengal and Kerala, where Communist parties were in power.

Then, there is tenancy. In coastal Andhra, 75 per cent of land is under tenancy. Many are absentee landlords. But the NSS (National Sample Survey) data shows only 5 per cent tenancy because nobody reports. What happens is that they can't get credit. Tenants have no rights. Rights should be brought in. It should be legalised by assuring the landlords that their land won't be taken away. The Andhra government is trying to do that.

What would be the best practices in natural resource sharing to bring about inclusive growth?
In Maharashtra, Paani Panchayats grant water rights. Even landless households can get water. The Paani Panchayats require farmers to produce only low water intensive crops, not sugarcane. And they also have to manage water more efficiently. Such user associations can improve the water situation. Earlier, big landlords used to corner most of the water in the region.

Of course, in mining there are a lot of problems. If the farmer loses his land, then how can he be a stakeholder in the benefits? It is a similar situation in the case of land acquisition for industries. The Gram Sabha or the village panchayat should approve all mining or land acquisition in their area.











Illustration: Champak Bhattacharjee

Another argument is that the next level of inclusive growth is when you move people from low productivity activities to higher productivity activities. But we're still at the level of giving out doles. Are we using our inclusive growth agenda sub-optimally?
Some people say that growth comes first and equity later. That's a wrong approach. I feel it has to happen simultaneously. Otherwise, it leads to damage. Like it happened in the mid-90s when people concentrated on growth but not on inclusive approach. The damage has been done. We've also jumped from agriculture to services without focus on manufacturing. That is also hurting us. Services lead to unequal growth. Either you have very hi-tech areas which account for about 2 per cent of the workers, or very low productivity jobs like shops. In India, unemployment per se is not the problem, the working pool is the problem. Many people are working but in low productive jobs without any social security. Almost 92 per cent of workers are in the unorganised sector. You need to improve their position, from low productivity to higher productivity.

And then, in the manufacturing sector the share of employment is only 12 per cent. In China, it's 30. It is 40 per cent in other countries. So you can shift from low productivity agriculture to manufacturing and the incomes of the people will increase. Rural non-farm sector, agro processing can take that. We process only 2 per cent of our fruits and vegetables compared to the Philippines' 70 per cent.

Are we in a serious phase of jobless growth?
If you take NSS data, between 1993-94 and 1999-2000 there wasn't much employment growth. There was growth in 2004-05, but stagnation in 2009-10. The Planning Commission says the reason it was stagnant because earlier the population up to 18-20 years were termed ‘workers' because they were working. Now, most of them are studying. As a result, their participation rate in the labour market has declined. But in general, if you look at the organised sector, they are not producing enough jobs. They are more in the unorganised sector. 

What should the government push to accelerate job growth?
Manufacturing is better than services because it has a downstream effect. The linkages are also much more. Unfortunately, we are going the other way. Services are creating very low-end jobs. Whereas manufacturing can
create better jobs and it can absorb the agriculture workers.

(This story was published in Businessworld Issue Dated 12-03-2012)