Haq's Musings: Hype

India's rapid economic growth has brought it enormous positive attention of the world media, billions of dollars in foreign investments, and new-found status on the international diplomatic scene. Goldman Sachs has promoted it by coining the term "BRIC" which groups India with other major emerging markets like Brazil, China and Russia as an investment destination. Inclusion in G20 has put the Indian leaders alongside the world's richest G7 nations. Indian business leaders in partnership with India's planning commission have mounted unprecedented "India Everywhere" branding campaign at the World Economic Forum held in Davos, Switzerland each year. Indian writers have been promoting "Chindia" which seeks to put India on an equal footing with China.

Goldman Sachs has clearly contributed to the euphoria about India, by projecting that its economy could be 50 times its 2006 size by 2050, which would make it the world's third largest, after China and the United States. However, Goldman's Jim O'Neill has also said that when he ranked countries by the potential risks to their growth — everything from inflation to corruption — India ranked 97th in the world, behind Brazil and the Philippines. London-based Maplecroft terror risk index based on 2009 data ranks Iraq first, Afghanistan second, with Pakistan and Somalia third and fourth respectively. They are rated at extreme risk along with Lebanon 5, India 6, Algeria 7, Colombia 8 and Thailand 9, according to Reuters.

The UK-based risk advisory group's index tracks the risks of an attack, the intensity of violence as measured by casualties per incident, a country's history of extremist violence and threats made against it by groups such as al Qaeda.

"Media coverage can often skew public perceptions of terrorism risk in a country by publicising mass casualty attacks," said Maplecroft political risk analyst Eva Molyneux.

Having been subjected to a barrage of Indian marketing messages in the last decade, I have been trying to assess how much of it is real, and what part is just pure hype by the western and Indian media. A recent interview given by Dr. Jayati Ghosh has helped me put it in perspective. Dr. Jayati Ghosh is Professor of Economics and currently also Chairperson at the Centre for Economic Studies and Planning, School of Social Sciences, Jawaharlal Nehru University, New Delhi.

Comparing China and India:

Here are the key points Dr. Ghosh makes:

1. Talk of Chinindia is nonsense. China and India are two very different countries with different histories. India has never done the hard work of basic reforms that China did decades ago. Unlike India, early reforms combined with greater state control on the economy have helped China achieve rapid and massive reduction in poverty.

2. Unlike China, India does not run any trade surplus or current account surplus to fund its growth. In fact, India has been running significant twin deficits. India depends much more on foreign investments for its growth than China.

3. Although large number of Indians estimated at 110 million have been the main beneficiaries of India's rapid economic expansion, their numbers are only about 10% of India's 1.1 billion people. The growth has excluded the rest of the 90% of the population, leaving them in abject poverty.

4. Instead of fighting against economic injustice, people are being divided along ethnic, religious and caste lines. There is an increase in all kinds of unpleasant social and political forces in India, where people are turning against each other, against linguistic, caste and faith groups, because they can't hit at the system—it's too big. So they pick on somebody their own size, or preferably smaller.

Comparing India and Pakistan:

There are some arrogant Indians in cyberspace as well as the physical world who contemptuously dismiss any comparison of India and Pakistan. However, the responsible Indian and UNICEF officials concur that Indians are much worse off than Pakistanis and Bangladeshis in terms of basic nutrition and sanitation.

India is worse than Bangladesh and Pakistan when it comes to nourishment and is showing little improvement in the area despite big money being spent on it, said India's Planning Commission member Syeda Hameed.

"There has been an enormous infusion of funds. But the National Family Health Survey gives a different story on malnourishment in the country. We don't know, something is just not clicking," Hameed said.

Speaking at a conference on "Malnutrition an emergency: what it costs the nation", she said even Prime Minister Manmohan Singh during interactions with the Planning Commission has described malnourishment as the "blackest mark".

"I should not compare. But countries like Bangladesh, Pakistan and Sri Lanka are better," she said. The conference was organized in 2008 by the Confederation of Indian Industry and the Ministry of Development of Northeastern Region.

According to India's National Family Health Survey, almost 46 percent of children under the age of three are undernourished - an improvement of just one percent in the since 2001.

India might be considered an emerging economic power, but it is way behind Pakistan, Bangladesh and even Afghanistan in providing basic sanitation facilities, a key reason behind the death of 2.1 million children under five in the country. Lizette Burgers, chief water and environment sanitation of the UNICEF, has said India is making progress in providing sanitation but it lags behind most of the other countries in South Asia.

While a mere 14 percent of people in rural areas of India - that account for 65 percent of its 1.1 billion population - had access to toilets in 1990, the number had gone up to 28 percent in 2006. In comparison, 33 percent rural Pakistanis had access to toilets in 1990 and it went up to an impressive 58 percent in 2006.

Similarly in Bangladesh, 36 percent of rural people have access to proper sanitation. The corresponding figures for Afghanistan and Sri Lanka were 30 percent and 86 percent respectively.

“This is a huge problem. India has made some progress but there is a lot to be desired. The speed in which we are (India) increasing the toilet usage will not help much,” Burgers told IANS, a day before an international sanitation campaign in Delhi.

She, however, said that the huge population in India is a major challenge. Burgers said that between 1990 and 2006, rural areas of the country has witnessed a growth of 181 million people of which 39 million people did not have access to toilets.

According to the international health and sanitation watchdog, there are at least 2.5 billion people across the globe who do not have access to toilets and 50 percent of them are in the south Asian region.

Pakistan's water quality is not good, but it is significantly better than in India.

On page 288 of his book "Water management in India" the author P. C. Bansil quotes a UN study that says India ranks a poor 120 on a list of 122 countries in water quality.

India's neighbors Bangladesh, Nepal, Sri Lanka and Pakistan rank much better at 40, 64, 78 and 80 respectively.

Growing Poverty in India:

Part of the problem fueling anger and insurgencies is the growing number of the poor in India. Here's a recent Reuters report:

"India now has 100 million more people living below the poverty line than in 2004, according to official estimates released Sunday.

The poverty rate has risen to 37.2 percent of the population from 27.5 percent in 2004, a change that will require the Congress-ruled government to spend more money on the poor.

The new estimate comes weeks after Sonia Gandhi, head of the Congress party, asked the government to revise a Food Security Bill to include more women, children and destitutes.

"The Planning Commission has accepted the report on poverty figures," Abhijit Sen, a member of the Planning Commission told Reuters, referring to the new poverty estimate report submitted by a government panel last December.

India now has 410 million people living below the U.N. estimated poverty line of $1.25 a day, 100 million more than was estimated earlier, officials said.

India calculates how much of its population is living below the poverty line by checking whether families can afford one square meal a day that meets minimum nutrition needs.

It was not immediately clear how much more the federal government would have to spend on the poor, as that would depend on the Food Security Bill when it is presented to the government after the necessary changes, officials say.

India's Planning Commission will meet the food and expenditure secretaries next week to estimate the cost aspects of the bill, government officials said.

A third of the world's poor are believed to be in India, living on less than $2 per day, worse than in many parts of sub-Saharan Africa, experts say".

Here is the entire transcript of Dr. Ghosh's interview:

PAUL JAY, SENIOR EDITOR, TRNN: Welcome back to The Real News Network. I'm Paul Jay. Joining us again from Amherst, Massachusetts, from the PERI institute, is Jayati Ghosh. She's a professor of economics at the Center for Economic Studies and Planning at the School of Social Sciences at JNU in India. Her recent book is After Crisis. Thanks for joining us again, Jayati.

JAYATI GHOSH: Hello.

JAY: So there's a lot of talk about the growth and expansion in India and China, and especially India these days. We're hearing again about the Indian miracle. Whose miracle is it, anyway? And is it such?

GHOSH: No, it's not actually a miracle. In fact, I think—first of all, let me clarify. India and China are very, very different. We really can't compare them. And all this talk about Chindia and so on, it's nonsense, because China is a fundamentally different country. It's not just that it has had much more rapid growth for a longer period and been more successful in poverty reduction, but it's a whole different institutional system. It still has much more substantial state control, especially over finance. It is still able to manipulate the nature of the growth of the economy more directly through the central state than India is. And because it had a revolution and because it had land reform and egalitarian income distribution it was operating on a much more equal asset base, which then allowed economic policies to have different effects. India is different. In India we never did the hard work in terms of the major transformations, like asset redistribution, land reform, and so on. We still have a very unequal society, of course, income distribution as a distribution.

JAY: Well, before we go to India, let's just back up to China for a second, because we'd been hearing that a lot of that income distribution, land reform, and a lot of that's been undone over the last 10, 15 years, and this kind of rise of state-managed capitalism in China is going back the other way. Is that not the case?

GHOSH: To some extent. But remember that the base on which it was operating was still fundamentally more egalitarian. And that's important because, you know, the major episodes of poverty reduction in China, if you look at it, are the early 1980s and the mid-1990s, and these were periods when agriculture prices rose and benefited the farmers. Now, that helped poverty reduction and income distribution, because there was egalitarian land distribution—it was the peasant households that benefited and became less poor and all of that kind of thing. So poverty reduction had been closely related to that feature of China, which is very different from India. But you're right that the pattern of growth from the early 1990s has been in equalizing, has been one which has, you know, focused on this export-led growth paradigm in the coastal region, neglected the west and the central regions, you know, brought in migrant workers, often in terrible conditions, by suppressing growth in the countryside. All of that did happen. Again, I think the difference is that from about 2002 you find that the Chinese state is more aware of this, so there's a shift in terms of public investment towards the central and the western regions. The latest stimulus package disproportionately they're spending in the west and the central regions of the country. There was an attempt to give more rights to migrant workers who are normally denied all the rights that are available to urban workers. There is now the attempt to revamp the health system and make it once again something which is affordable for all Chinese citizens. So there has been a shift in the recent past in China.

JAY: So in India you're saying there never was major reforms and it's getting worse.

GHOSH: Absolutely. If you look at the pattern of Indian growth, it's really more like a Latin American story. We are now this big success story of globalization, but it's a peculiar success story, because it's really one which has been dependent on foreign—you know, we don't run trade surpluses. We don't even run current account surpluses, even though a lot of our workers go abroad to Saudi Arabia and the Gulf, to California, as IT workers. We still don't really run current account surpluses. So we've been getting capital inflow because we are discovered as this hot destination. You know, we are on Euromoney covers. We are seen as this place to go. Some of our top businessmen are the richest men in the world. They hit the Fortune top-ten index. All of that kind of thing. This capital inflow comes in, it makes our stock market rise, it allows for new urban services to develop, and it generates this feel-good segment of the Indian economy. Banks have been lending more to this upper group, the top 10 percent of the population, let's say. It's a small part of the population, but it's a lot of people, it's about 110 million people, which is a pretty large market for most places. So that has fuelled this growth, because otherwise you cannot explain how we've had 8 to 10 percent growth now for a decade. Real wages are falling, nutrition indicators are down there with sub-Saharan Africa, a whole range of basic human development is still abysmal, and per capita incomes in the countryside are not growing at all.

JAY: So I guess part of that's part of the secret of what's happening in India is that the middle, upper-middle class, in proportion to the population of India, is relatively small, but it's still so big compared to most other countries—you were saying 100, 150 million people living in this, benefiting from the expansion. And it's a lot bigger. It's like—what is it? Ten, fifteen Canadas. So it's a very vibrant market. But you're saying most of the people in India aren't seeing the benefits.

GHOSH: Well, in fact it's worse than that. It's not just that they're not seeing the benefits. It's not that they're excluded from this. They are part of this process. They are integrated into the process. And, in fact, this is a growth process that relies on keeping their incomes lower, in fact, in terms of extracting more surplus from them. Let me just give you a few examples. You know, everybody talks about the software industry and how competitive we are. And it's true. It's this shiny, modern sector, you know, a bit like California in the middle of sub-Saharan Africa. But when you look at it, it's not just that our software engineers achieve, it's that the entire supporting establishment is very cheap. The whole system which allows them to be more competitive is one where you are relying on very low-paid assistants, drivers, cooks, cleaners. You know, the whole support establishment is below subsistence wage, practically, and it's that which effectively subsidizes this very modern industry.

JAY: What's happening politically? Do you see a reflection of resistance as a result of all this, coming from the impoverished people?

GHOSH: Well, you know, unfortunately, I think that there is a tendency now in India for these very major income distribution shifts and this very significant increase in exploitation and destitution not to have a political voice. It's surprising to me. Food prices have been going up by 20 percent now for two years. When this was happening in the '70s, you had food riots all over the country. You had major social instability. You don't have that today. You don't have that same outcry. We've had a big crisis where lots of workers lost their jobs, people's money wages are falling. You don't find the outcry. What you do find is the increase in all kinds of unpleasant social and political forces, where people turn against other linguistic groups, they turn against other caste groups, they turn against other religions, you know, because you can't hit at the system—it's too big. So you pick on somebody your own size, or preferably smaller than you so you can actually bash them up.

JAY: But why is that in a country like India, which is one of the few countries that has had a kind of left political tradition that has more or less remained intact?

GHOSH: Well, I wish I could say it's intact. I think the left also, in India, it's still, I think, a very vibrant and very important political force, but it is under attack and it's under attack from both the right and left. It's under attack from imperialist forces who want to suppress a genuine left movement in India. And it's been queried by a lot of confusion by all kinds of conflicting, you know, political groups that are based on caste or on religion or on other kinds of identity politics. I do believe, though, that the future of the left is integral to the future of India as we know it, which is to say a secular democracy. So it's absolutely critical to keep that left voice not just alive but expanding in India.

JAY: Thanks very much for joining us, Jayati.

GHOSH: Thank you.

JAY: And thank you for joining us on The Real News Network.

Here's the complete video of Dr. Ghosh's interview:

Haq's Musings

Saturday, April 24, 2010

BRIC, Chindia and the Indian Miracle

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