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Ten years of India’s great rural guarantee

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RG_Nrega_20160203Ten years of a rural employment guarantee programme in India is well worth marking for the transformations it has brought about in rural districts and urban towns both, for the two kinds of Indias are so closely interlinked. The ten year mark has been surrounded by opportunistic political posturing of the Bharatiya Janata Party (BJP) of the ruling National Democratic Alliance and by churlish accusations from the Indian National Congress (or Congress party, now in the opposition).

When the National Rural Employment Guarantee Act came about (it is now prefixed by MG, which is Mahatma Gandhi) ten years ago, it was only the newest in a long line of rural poverty alleviation programmes whose beginnings stretch past the Integrated Rural Development Programme (still a touchstone during the Ninth Five Year Plan) whose early period dates from the 1970s as a more coherent manifestation of the ‘Food For Work’ programme. Democratic decentralisation, which is casually dropped into central government communications nowadays as if it was invented only last week, was explained at length as early as the Sixth Five Year Plan. And in the Fourth Five Year Plan, in the guidance section it was stated that measures were needed for “widening opportunities of productive work and employment to the common man and particularly the less privileged sections of society” which “have to be thought out in a number of different contexts and coordinated in to effective, integrated programmes”.

RG_MAH_nrega_4_dists

Work demand patterns in four districts (all in Maharashtra) from 2012 April to 2016 February. The cyclical nature of work demanded usually coincides with crop calendar activities in districts and sub-districts. This aspect of the MGNREGA information system can be used as a good indicator for planning by other line ministries, not only rural development. We can see the difference between the set of two districts of Akola and Gondiya, and the districts of Washim and Hingoli: the cyclical nature in the first two is more pronounced. The April to June demand is seen common, and increasing over the three years recorded by the charts.

This is only the barest glimpse of the historical precursors to the MGNREGA. The size of our rural population in the decade of the 2010s transforms any national (central government) programme into a study of gigantism over a number of dimensions, and so it is with the (MG)NREGA whose procedural demands for organising information over time and place became a discipline by itself, leading to the creation of a management information system whose levels of detail are probably unmatched anywhere in the world.

For its administrators, every week that the MGNREGA delivers money to households in a hamlet for work sanctioned by that small panchayat is one more successful week. There have over this last decade been considerably more successful weeks than unsuccessful ones. This has happened not because of politicians of whichever party of persuasion, but because of the decision made by many households to participate in the shape that NREGA (and later MGNREGA) took in their particular village. The politicians, like the parties they belong to, are incidental and transitory. At this stage of the programme’s life, it is to be hoped that it continues to run as a participatory pillar of the economy of Bharat, and assimilates in the years to come new concerns from the domains of organic (or zero budget) agriculture, sustainable development and ecological conservation.

At this stage the commentaries look back at the last year or perhaps two of the programme. “It is unclear, however, what the present NDA government thinks about the performance of the scheme,” commented the periodical Down To Earth. “Last year, Prime Minister Narendra Modi called MGNREGA a ‘monument of failure’. Now, the rural development ministry has termed it as ‘a cause of national pride’.” The magazine went on to add that MGNREGA “started losing steam when wages were kept pending, leading to the liability being carried forward to the following year”.

“What is relatively less known is the impact of MGNREGA on several other aspects of the rural economy, such as wages, agricultural productivity and gender empowerment,” a commentary in the financial daily Mint has pointed out. “While most critics lament the quality of assets created under MGNREGA, there is now increasing evidence based on rigorous studies, which suggest that not only has the asset quality been better than comparable government programmes, they are also used more by the community.”

The finance minister has been quoted by the daily Indian Express as follows: “A kind of indifference towards it (MGNREGA) was growing by 2013-14, when the scheme entered its seventh and eighth years. When there was a change of government in 2014-15, there was talk on whether the scheme will be discontinued, or its fund allocation curtailed,” Minister Arun Jaitley is reported to have said at the MGNREGA ‘Sammelan’ in New Delhi. “The new government [the BJP] not only took forward the scheme but also increased its fund.”

In a Press Information Bureau release, the Minister for Rural Development, Birender Singh, said that 2015-16 has seen a revival of the MGNREGA programme. He also said that more than 64% of total expenditure was on agriculture and allied activities and 57% of all workers were women (well above the statutory requirement of 33%), and that among the measures responsible for the “revival of MGNREGA are the timely release of funds to states to provide work on demand, an electronic fund management system, consistent coordination between banks and post offices besides monitoring of pendency of payments”.

RG_Nrega_MAH_wages_201602So far so good. What MGNREGA administrators need to mind now is for managerial technology and methods to not get ahead (or around) the objectives of the programme because these tend to keep the poor and vulnerable out instead of the other way around. The evaluations and studies on NREGA – and there have been a number of good ones – have shown that the more new financial and administrative measures there are, the greater the decline in participation in the programme. Administrative complexity also provides fodder to those, like this pompous commentator, who try to find in data ‘evidence’ that NREGA does “not help the poor”.

The MGNREGA’s usefulness and relevance is not only about creating employment when it is needed and its generally positive impact on wages. For all its shortcomings the MGNREGA programme has also helped revitalise the need to understand labour dynamics in rural areas particularly as it pertains to agriculture and cultivation. At a time when the flashier sections of the modern economy have lost their shine (if ever there was a shine) and when the need for panchayat-led, village-centric development that is self-reliant in deed and spirit is growing in Bharat, a programme like the MGNREGA has all the potential to serve the country well for another generation.

Written by makanaka

February 3, 2016 at 19:04

Poverty is a new market for management firms

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The Rs 1,336 proposed by McKinsey will neither help run this household nor provide any 'empowerment'.

The Rs 1,336 proposed by McKinsey will neither help run this household in rural Karnataka nor provide any ’empowerment’. The family’s entrepreneurship, running a cooked food stall in a part of the house, keeps it comfortably above the poverty line.

There is a new contributor to an old subject in India. The subject is poverty, and the newcomer is a management consulting company. This sort of company has no experience with such a subject, however the McKinsey Global Institute – which works as “the research arm of consulting company McKinsey” – has not been short of advisers on the matter.

What does this consulting company say and why should we keep an eye on their activity in this subject? This institute has issued a report called ‘From poverty to empowerment: India’s imperative for jobs, growth and effective basic services’. The proposal, unabashedly touted as new thinking, is that India should focus not on a poverty line but on a “more comprehensive measure of what it would take to satisfy a person’s basic needs for food, energy, housing, drinking water, sanitation, healthcare, schooling and social security”.

This new thinking – presented as a startling innovation in the same way that a new brand of running shoes or some such frippery is launched – is called an “empowerment line”. This ‘line’ has been placed at Rs 1,336 rupees a month – which McKinsey points out is about 50% higher than the national official poverty line.

McKinsey_India_poverty_coverWhat is sought to be fixed at the bidding of the current government of India and at what cost? This new report by the McKinsey Global Institute suggests that Rs 330,000 crore should be spent over the next 10 years to “empower 680 million Indians who are only marginally better than those under the poverty line”. And moreover that this spending be increased to reach 1.08 million crore by 2022 because “the government’s spending on various development schemes” does not “effectively reach much of the public”. At current rates of exchange, that is US$ 173 billion and what handsome percentage of that will be marked (or unmarked) as consultants’ fees?

Likewise, we must also examine those who have provided, as McKinsey has said, “insights and guidance” for this work. Among those listed are Subir Gokarn, director of research of Brookings India and former deputy governor of the Reserve Bank of India; Vijay Kelkar, chairman of the India Development Foundation, former chairman of India’s Finance Commission, and former finance secretary, Government of India; Montek Singh Ahluwalia, deputy chairman of the Planning Commission of India; Arun Maira and B K Chaturvedi, members of the Planning Commission of India; Rakesh Mohan, India’s executive director at the International Monetary Fund; Nandan Nilekani, chairman, Unique Identification Authority of India; S Ramadorai, adviser to the Prime Minister, National Council on Skill Development; and Soli Sorabjee, former attorney-general of India.

Disconnected entirely from the dynamics of district livelihoods and factors that influence income and well-being, consulting companies such as McKinsey must not continue to be engaged by central and state governments in any capacity.

Disconnected entirely from the dynamics of district livelihoods and factors that influence income and well-being, consulting companies such as McKinsey must not continue to be engaged by central and state governments in any capacity.

These people are votaries of the thesis that GDP growth is good, and that all policy must conform to such a doctrine. Hence it becomes easier to see the connection between the direction that the UPA 1 and UPA 2 governments have taken till here, and the firm grip finance and industry have on the country’s journey into ‘development’, aided by the outpourings of management consulting companies such as McKinsey. This ‘empowerment index’ is nothing but a repetition of the desire that over the period 2010-20, urban India must create 70% of all new jobs in India and these urban jobs will be twice as productive as equivalent jobs in the rural sector, as stated in ‘India’s Urban Awakening: Building Inclusive Cities, Sustaining Economic Growth’, a report by the McKinsey Global Institute issued in early 2010.

The expectation is that as India’s cities expand, India’s economic profile will also change. In 1995, India’s GDP was divided almost evenly between its urban and rural economies. In 2008, urban GDP accounted for 58% of overall GDP. By 2030, according to the McKinsey report’s calculations, urban India will generate nearly 70% of India’s GDP. Such a transformation, if it comes to pass, is expected to deliver a steep increase in India’s per capita income between now and 2030 wherein the number of middle class households (earning between Rs 2 lakh and Rs 10 lakh a year) will increase from 32 million to 147 million. And it is against the drawing of that alarming line of minimum urbanisation drawn four years earlier, that this new line must be viewed, together with the injunction that “India can bring more than 90 percent of its people above the Empowerment Line in just a decade by implementing inclusive reforms”.

A hasty and stunted legislation for food security in India

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The United Progressive Alliance in India, the ruling political coalition at whose centre is the Congress party, has called it “a historic initiative for ensuring food and nutritional security to the people”. By this is meant The National Food Security Bill, which was passed by the Lok Sabha on 26 August 2013.

In recent weeks, criticisms of the provisions of the bill and suggestions for its amendment gathered quickly, from political parties, from state governments, from civil society and NGOs and academics, and from citizens who have followed the twists and turns of the draft legislation since 2010. How many of these have been incorporated into the bill as passed by the Lok Sabha is still unclear, but a government press release stated that ten amendments were approved. I don’t know which ten but these would be small in number compared with the scores of amendments, corrections, modifications and re-draftings suggested by groups and coalitions that have long worked for food security in India and its states.

Sifting through news reports for relevant information, I find that:

(1) The government has said that the word ‘meal’ as used in the approved bill means hot cooked or pre-cooked and heated food and not the packaged food, which was a definition that provoked many when it was spotted in the draft. This is an important amendment as it has an impact on the enormous mid-day meals (for schoolchildren in government schools) and the integrated child development services (ICDS) programmes, which reach tens of millions. The fear was that packaged food would supplant, to the detriment of the children, hot and fresh cooked meals.

(2) As far as I can make out, another approved amendment gives states a year to implement the bill instead of six months. Earlier, under the ordinance (whose passage was roundly condemned), the central government was to determine the number of eligible beneficiaries in each state. Not only was this centrist in nature, it required the process by which beneficiary households were to be identified to be completed within 180 days, even though the guidelines for such identification are yet to be issued by the central government. Moreover, there has been no consultation with the states on this aspect.

(3) There is some reference made to the states determining their approach and measures towards implementing the bill, which will be (or may be) governed by “rules” that are to be drawn up in consultation with the state governments. This is important for, in the text of the Food Security Ordinance the central government reserved the right to introduce cash schemes instead of food in the Rules of the proposed legislation. This had signalled quite clearly its longer-term agenda of dismantling the system of procurement of grain from farmers at notified minimum support prices.

The reportage of the passing of the bill has touched upon a variety of issues and concerns, and here is a selection:

Lok Sabha passes Food Security Bill
Sonia Gandhi’s ambitious food bill gets Lok Sabha nod; UPA gets its ‘game-changer’
The Food Security Bill will cost a lot more than projected
Food security bill: Is it right or fight to food?
Long due, Food Security Bill meets mixed reaction
Food Bill will not raise fiscal deficit: Chidambaram
‘Not against Food Security Bill, but want certain changes’: BJP
Food Security a ‘historic opportunity’ or mere ‘vote security’?
Food security Bill gets Lok Sabha nod as Sonia lauds ’empowerment revolution’

The government has said that the Bill will cover 75% of the rural population and 50% percent of the urban population in all states, coming to an average of 67% for the total national population. This however will use (we await a full reading of the approved amendments that will clarify this matter) the methodology of the Planning Commission for poverty estimates which is to provide the basis for dividing the population between below and above the poverty line. This is the same methodology and ratios that have been soundly discredited.

The point that has been made forcefully by the Communist Party of India Marxist (CPIM) is that these caps on population compromise utterly the right of state governments to decide criteria as contained in the bill. The caps are set by Planning Commission methods, not by state governments themselves. That is why the guidelines that are to be drafted – via consultation, the central government has said – by the state governments must ensure the maximum inclusion, and not the limited inclusion decided by the Planning Commission.

Moreover, the All India Kisan Sabha at its 33rd All India Conference (24-27 July 2013 in Cuddalore, Tamil Nadu) had in a resolution of food security described the policy canvas against which this food security bill has now been passed:

“India has become more food-insecure over the last decade in terms of all three dimensions of food security: availability, access and absorption. Availability has been undermined by policies reducing productivity growth and making grain cultivation unremunerative. Access has been weakened by jobless growth and massive inflation destroying people’s purchasing power. Absorption has been undermined by the failure to invest in safe drinking water and sanitation. All three consequences are directly traceable to neoliberal policies. Yet, the UPA government hypocritically talks of food security and has promulgated a so-called Food Security Ordinance in an attempt to gain political mileage while flouting all norms of parliamentary democracy.”

Documents for reference:

The National Food Security Bill, 2013
The National Food Security Bill, 2011
The National Food Security Ordinance, 2013
Report of the expert committee on the national food security bill
Lok Sabha Standing Committee report on National Food Security Bill
Food subsidy and its utilisation
NRAA – Challenges of food security

Of an India behind the new poverty ratio

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Mural titled 'In the name of development', at Jawaharlal Nahru University, New Delhi

Mural titled ‘In the name of development’, at Jawaharlal Nahru University, New Delhi

New poverty claims from the government of India are being interpreted as (a) proof that the economic liberalisation is working, (b) that the ruling coalition has begun its preparation for the 2014 general election by claiming the largest percentage reduction of poverty ever, (c) that the ruling coalition by lowering the poverty line (and therefore the number of Indians identified as poor) will slash its social subsidies outlay, (d) that the way India measures poverty is desperately in need of repair, if not altogether in need of renewal.

The new state poverty lines table (see below for xls link)

The new state poverty lines table (see below for xls link)

India’s English-language media (in particular the financial and business press) has either repeated what the Planning Commission has released, or has reported reactions to the latest claim from opposition parties. Here is a selection:

“The proportion of people living below poverty line (BPL) has came down from 37.2 per cent in 2004-05 to 21.9 per cent in 2011-12 — a decline of 15.3 percentage points in a period that roughly coincides with the first eight years of the United Progressive Alliance.”
“The sharp drop was attributed to the high real growth in recent years, which raised the consumption capacity. The number of India’s poor fell to less than a quarter of its population in 2011-12, giving the government a reason to cheer amid the recent raft of disappointing macro economic data.”
“Over the last decade, poverty has witnessed a consistent decline with the levels dropping from 37.2% in 2004-05 to 29.8% in 2009-10. The number of poor is now estimated at 269.3 million, of which 216.5 million reside in rural India.”
“One theory is that this is the outcome of the trickle-down impact of the record growth witnessed in the first decade of the new millennium.”
“The BJP slammed the figures as a ‘political gimmick’ and a ‘conspiracy’ of the Congress to deprive the poor of the benefits of government schemes while CPI(M) said it amounted to ‘adding salt to the wounds of the poor’.”

It was only last year, in 2012 June, that the Planning Commission constituted an ‘expert group’ chaired by a former head of the Reserve Bank of India to “review the methodology for the measurement of poverty”. In the hoary tradition of Indian bureaucratese, this expert group is now “deliberating on this issue” (said the Planning Commission) and is expected to submit its report by the middle of 2014.

What is the main substance of the new claim? The note from the Planning Commission (titled ‘Press Note on Poverty Estimates, 2011-12’ and dated July 2013) has stated that the “percentage of persons below the poverty line in 2011-12 has been estimated as 25.7% in rural areas, 13.7% in urban areas and 21.9% for the country as a whole”. [A spreadsheet with the new statewise rural and urban poverty lines is available here.]

Government-friendly infographics from a financial newspaper

Government-friendly infographics from a financial newspaper

Thereafter the myth of the descending poverty line is outlined: that in 2004-05 the respective poverty ratios for the rural and urban areas were 41.8% and 25.7% and 37.2% for the country; that in 1993-94 the ratios were 50.1% in rural areas, 31.8% in urban areas and 45.3% for the country. And, in triumphant tones, that hence the 407 million Indians below the poverty line in 2004-05 had by 2011-12 dwindled dramatically to 270 million – a reduction of 137 million persons over a short seven years! And that indeed, it is all the more significant that for the last eight years it is the UPA (that is, the Congress) that has ruled India. So flows the polemic.

In the eagerness to find ‘rural’ and ‘urban’ and a ‘national’ poverty line, the tales of the deciles of the NSS surveys, referred to only fleetingly, are of importance (for the 43rd, 50th, 55th, 61st, 66th and 68th rounds, all of which we hope are being studied by the Rangarajan expert group). The deciles in the 68th round tell us that in rural India, the average monthly expenditure per person of Rs 153 on cereals would buy 7.3 kg of rice or 8.5 kg of wheat, and that the Rs 40 spent per person on pulses would buy 0.85 kg of pulses, both monthly measures (outside the fair price shop) being well under (13.8 kg and 1.2 kg respectively) the recommended dietary allowances.

Retail therapy and speed money merchants in urban India

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How India's retail sector is divided. Chart: Reuters

How India’s retail sector is divided. Chart: Reuters

Foreign direct investment (FDI) has been rolling into India at a steady pace, whether in banking and finance,whether in insurance (general insurance and health), pharmaceuticals, automobiles (particularly automobiles), information technology, food and beverages (very much so), and engineering and manufacturing. And then there is retail, which has so incensed all those who have firmly believed that India and Bharat need none of this and that the swadeshi and swarajya of the Independence movement are, 66 years on, needed even more than they were in the 1920s and 1930s. And I count myself amongst those so incensed.

It comes as a surprise then to read about the ‘brake on the economy’ that low-level corruption is in India, as a recent Reuters report has put it. The report is well done, and is right to probe the methods of corrupt underlings, but I find it bordering on the absurd that these practices – in short, hand over the moolah for the licence you want – are treated as hindering India’s ‘growth story’ (as the country’s finance minister monotonously calls it, ignoring the ecological idiocy of desiring more growth, unmindful of the millions of new deprivations his story has no place for).

Reuters has reported: “India is the next great frontier for global retailers, a US$500 billion market growing at 20% a year. For now, small shops dominate the sector. Giants from Wal-Mart Stores Inc to IKEA AB have struggled merely for the right to enter, which they finally won last year.”

This breathlessness, well captured by Reuters, is part of P Chidambaram’s favourite fairy tale. But of course, real life in curbside India is full of smoke and mirrors. Reuters said that a “daunting array of permits – more than 40 are required for a typical supermarket selling a range of products – force retailers to pay so-called ‘speed money’ through middlemen or local partners to set up shop”.

All that mall space unused, built atop what were once green fields. Chart: Reuters

All that mall space unused, built atop what were once green fields. Chart: Reuters

Speed money is a colourful term, and suited to the technicolour life and times of the retail business in India. Reuters sounds prudish when it reported, citing interviews with middlemen and several retailers, that the “official cost for key licenses is typically accompanied by significant expenses in the form of bribes”. The added cost, said Reuters, erodes profitability in an industry where margins tend to be razor-thin, and “creates risk for companies by making them complicit in activity that, while commonplace in India and other emerging markets, is nonetheless illegal”.

Commonplace and illegal as much as underpaying workers in the USA, I presume, which is what the retail capitalists do. See this report about workers at McDonald’s, Wendy’s, Yum! Brands, Burger King, Domino’s Pizza and Papa John’s going on strike in New York City demanding wages that are twice the current $7.50 an hour, which is described as impossible to live on. As for Walmart, it’s rankly exploitative imprisoning of its workers, paying them just above minimum wage but denying them freedom of association (the USA is a member state of the ILO, the International Labour Organisation) and medieval working conditions can hardly, in any country, make it a paragon or corporate virtue.

But the Reuters report, useful as it is in explaining the very broad-based and low-level graft that layers our cities like a fog, cannot venture into the area of the demands of international finance capital led neo-liberalisation. This seeks to prise open our economy – aided eagerly by the astoundingly greedy political class in India (Delhi, Bombay, Bangalore, Hyderabad, Ahmedabad, Calcutta and every other large city) – for profit maximisation. Never mind the few bleating complaints about streetfront corruption repeated by Reuters, there is optimism aplenty amongst financiers, business people, bankers, commodity brokers, the realty sector, the automobile and FMCG sectors, all fed by the fact that the United Progressive Alliance government of India is more than willing to bend, break and jettison wholesale regulations that favour the proletariat in order to satisfy international capital and Indian big business.

Only last December (2012) both the houses of Parliament in India were told that there would be an inquiry following media reports concerning the submission made by the global retail giant Walmart to the US senate that it had spent around Rs 125 crore (Rs 1.25 billion or about US$23.2 million) during the last four years on its lobbying activities, including the issues related to “enhance market access for investment in India”. Now, really, what’s a bit of ‘speed money’ compared to a sum like that? Or compared to the US$100 million (about Rs 455 crore) that Walmart is reported to have funnelled into India (to its Indian partner Bharti Enterprises) and at a time when multi-brand retail was not permitted?

The government that sold India

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On 14 September, India’s ruling political coalition, the United Progressive Alliance, of which the Congress (the Indian National Congress is its full name) is a dominant member, decided to allow foreign investment into a number of sectors. These include what is called ‘multi-brand retail’ and aviation. This government in taking this decision has ignored and overlooked the views and fears of tens of thousands of small shopkeepers, small traders associations, consumer groups and citizens – representing the will of several millions of households – who have publicly expressed in many fora their opposition to permitting foreign control (or consolidated, large domestic control) of the processes of aggregating and selling food products.

The decision, which has been raucously welcomed by the three major industry associations (CII, Ficci and Assocham) and which has been uncritically hailed by the Indian (English-language) business press, represents the whole gamut of neo-liberal policies which have been pursued by the Congress-led UPA government since coming into office in 2004 (and since 2009, when its current term began).

In their shrill and utterly partisan acclaim of the foreign investment decision, the business and financial press – in particular the newspapers Economic Times, Business Standard, Financial Express and Mint – have further underlined their role as propaganda sheets for the industrial-political class and their global partners in the project to loot India.

There has been a differential impact of the more than 20 years of economic liberalisation on the various classes of Indian society. Inequalities have grown rapidly, and there are some sections who have been more adversely impacted. Some sections of the middle class have benefited, at the cost of rural landless labour and the urban poor. Under this neo-liberal regime a large section of the working class is now in the unorganised and informal sector. Those who are on contract work and other irregular forms of employment constitute the bulk of the urban poor. There is also a large section of self-employed persons in the services sector who eke out a subsistence living.

In India, there are substantial classes and sections of society most affected by the policies of liberalisation and the intensified exploitation in the countryside. Landlords, big farmers who are politically well-connected, contractors, moneylenders and regional politicians (those in state assemblies) constitute the rural rich and have intensified the exploitation of the peasantry, agricultural workers and the rural poor. It is this tendency that has deepened India’s agrarian distress, contributed to the food and agricultural crisis – and it is in these chronic circumstances that this Congress-led government has allowed the inflow of foreign investment into food retail, fully aware of all the consequences that decision will heap onto the struggling rural and urban poor.

To illustrate some of these, the Communist Party of India (Marxist) in its Political Review Report in early 2012 had commented: “The issue of land acquisition has acquired a new dimension after the onset of the neo-liberal regime. As part of the capturing of natural resources the corporates and the real estate companies are out to grab land cheaply with the aid of the State apparatus. The peasantry, particularly the small peasantry sees this as a serious threat to its livelihood and especially when corporates and real estate speculators are going to make huge profits out of such lands.”

Can there be an alternative? As far as economic policies are concerned, most of the regional parties adhere to the policies of liberalisation. These regional parties represent mainly the interests of the politically astute and opportunist rural rich, the district bourgeosie who see themselves as brokers of every description to fit ‘reform’ decisions of every prescription. That is why most regional parties take no stand against the ‘liberalisation’ (or ‘reform’, to use the notorious International Monetary Fund-World Bank term) policies which have benefited regional rich too.

The very logic of neo-liberal reforms leads to and perpetuates the rapid growth of a labour force that is increasingly relegated to what is called the unorganised sector. The conversion of regular employment into casual and contractual labour, apart from generating higher profits, is part of the programme to ensure that working class unity remains divided. Larger and larger numbers – from the affected districts, such as the 320 drought-affected districts of 2012 – are joining the ranks of casual, temporary and self-employed workers, with few rights, uncertain wages, in the face of galloping food inflation, with no collective representation or honest political representation. These are the circumstances so ruthlessly exploited by India’s current government to usher predatory forces into our agriculture and food sector.

The day India said ‘yes’ to Wal-Mart

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Update – The real nature of the neoliberal economy of India has become clearer with the decision – against the run of public opinion and against the evidence from the agricultural and food sectors – to permit opening up the retail sector.

Since the decision was taken, the central government has spared no effort in a cynical and devious campaign to claim that permitting foreign direct investment in retail will benefit farmers and consumers. On Sunday, 27 November 2011, large advertisements were released in newspapers proclaiming the benefits of this decision. Nothing is further from the truth. India’s urban households, those eking out livelihoods from informal work and precarious manufacturing sector jobs, recognise the untruth and see the evidence in the 10%-15% annual food inflation. Our trade unions know this and our left parties know this.

Ranged against this population, rural and urban, are the ministries and industries who see in the permission a new means to control access to food and the provisioning of food. That is why I support the opposition represented by the Communist Party of India (Marxist), whose concerns reflect those of this broad majority.

The CPI(M) has said correctly that this decision “will destroy the livelihoods of crores of small retailers and lead to monopolisation of the retail sector by the MNCs”. The party’s statement said: “Coming in the backdrop of persistent high inflation, growing joblessness and agrarian distress, this decision shows the utterly callous and anti-people character of the UPA Government. The Government seems to be more eager to meet the demands of the US and other Western governments and serve the interests of the MNCs like Walmart, Tesco and Carrefour, rather than protect those of its own people.”

India’s central ministries – now even further disrobed to reveal their predatory nature as instruments of the country’s business satraps – have held up the flimsy excuse that conditions imposed will safeguard the farmer, consumer and small retailer. This is lies.

The restriction that foreign retail outlets are limited to operating in cities of over 1 million population is meaningless because those are precisely the places where the MNCs want to go, to tap the lucrative segment of the market. It is in these cities – there are 53 cities with populations of over a million – that small retailers are mostly concentrated. India has the highest shopping density in the world, with 11 shops per 1,000 persons – these have evolved as neighbourhood suppliers and represent a cultural integration of small supplier and household familiarity.

The result is a rich density of trusted small retail – India has over 12 million such shops and these employ directly over 40 million persons. Well over 95% of these shops are run by self-employed persons in floor areas of under 500 square feet (about 48 square metres). It is these small shopkeepers in urban areas who fear for their future with the now-sanctioned entry of the MNC retailers. International experience shows that supermarkets everywhere invariably displace small retailers. Small retail has been virtually wiped out in the developed countries like the US and Europe. South East Asian countries had to also impose stringent zoning and licensing regulations in order to restrict the growth of supermarkets, after small retailers were getting displaced.

Then there is the cunning untruth that the condition for making at least 50% of the investment in ‘backend’ infrastructure will benefit rural populations, as this is said to lead to more cold chains and other logistics, benefiting the farmers. International experience has, however, shown that procurement by MNC retailers do not benefit the small farmers – we have seen this in India despite the specious and manufactured ‘case studies’ produced by India’s management schools (the several worthless and compradorist Indian Institutes of Management and their similarly worthless competitors). Over time, smallholder farmers receive depressed prices and find it difficult to meet the arbitrary quality standards. Allowing procurement by MNCs will also allow the central government to reduce its own procurement responsibilities, and this will directly affect the food security of those millions of rural and urban households which depend India’s public food distribution system.

2011/11/25 – This is a turning point for India’s economy. The central government has allowed foreign investment up to 51% in the retail sector for ‘multi-brand’ ventures, and has allowed 100% foreign investment for single brand retailers.

With this permission, the ruling United Progressive Alliance has ignored utterly the concerns of hundreds of representations made over the last year by small traders and wholesalers, and by grocery shops’ assocations all over India, against the entre of foreign direct invetment in the retail sector. The ruling United Progressive Alliance has also ignored the needs and conditions of hundreds of thousands of smallholder farming families, who will from now on be steadily exposed to increasing levels of coercion to submit to corporate and industrial farming pressures, or to quit cultivation and join the masses of informal labour in urbanising towns and cities.

India’s powerful business and indutries associations – the Confederation of Indian Industry (CII), the Federation of Indian Chambers of Commerce and Industry (FICCI) and the Associated Chambers of Commerce and Industry of India (ASSOCHAM) – have vigorously for the last two years been manoeuvring the ruling political alliance towards this position. They have been aided substantially by representations from the countries and regions who have the most to gain from this permission being given – the USA and the European Union.

The so-called economists and analysts who are regularly polled by the business media and whose pronouncements are used to justify the progression of policy towards such permission, are making a variety of claims about the effects the expected foreign investment will have on India. They are saying that this “much delayed reform” will help unclog supply bottlenecks and help ease food inflation, that it will benefit farmers who can get better prices for their produce and will bring in international expertise to streamline supply chains in India.

This is rubbish meant to distract. The big retail corporations have for years been demanding entry into a country which is estimated to have a retail sector whose annual sales are said to be around US$450 billion. But this is a sector populated by tens of thousands of tiny family-run shops that account for 90% of this enormous volume of sales. This is a turning point for India’s economy, for it signals the start of yet another struggle to first block, and then throw out the retail conglomerates.

Here are some of the many news stories on this important matter:

Moneycontrol.com – ‘Don’t expect investments to flow instantly: Bharti Walmart’ – After a long wait, the government has finally allowed 51% foreign direct investment (FDI) in the multi-brand retail. It has also decided to raise the cap on foreign investment in single-brand retailing to 100% from the current 51%. …

The Hindu – ‘Cabinet approves 51 per cent FDI in multi-brand retail’ – In a bid to remove the impression that UPA II was suffering from “decision making paralysis” and kicking off the second generation reforms, the Union Cabinet on Thursday gave its approval to allowing 51 per cent foreign direct investment (FDI) in …

Shanghai Daily (subscription) – ‘India to allow global chains to open multi-brand retail stores’ – MUMBAI, Nov. 24 (Xinhua) — India’s cabinet has given the green light to foreign investors to take up to 51 percent stakes in multi-brand retail stores later Thursday after a meeting chaired by Prime Minister Manmohan Singh, said a report by the …

MarketWatch (press release) – ‘Government of India Unleashes Potent Phase II Reforms’ – WASHINGTON, Nov 24, 2011 (BUSINESS WIRE) — The US-India Business Council (USIBC) today hailed India’s steady progress in advancing major economic reforms with the Cabinet’s approval of opening India’s vast multi-brand retail sector to foreign direct …

Reuters India – ‘India opens supermarket sector to foreign players’ – India threw open its $450 billion retail market to global supermarket giants on Thursday, approving its biggest reform in years that may boost sorely needed investment in Asia’s third-largest economy …

Wall Street Journal – ‘Carrefour Welcomes India’s Decision To Open Multi-Brand Retail Market‘ – PARIS (Dow Jones)–French retail giant Carrefour SA (CA.FR) said Thursday it welcomed the Indian government’s decision to open the country’s multi-brand retail market to foreign investment. “Carrefour will follow with attention the finalization of the …

Voice of America – ‘India Opens Retail Sector to Foreign Supermarkets’ – November 24, 2011 India Opens Retail Sector to Foreign Supermarkets VOA News India’s Cabinet has approved a plan to open up the country’s $450 billion retail sector to foreign supermarkets, a reform that could unclog supply bottlenecks that have kept …

Wall Street Journal – ‘India Unlocks Door for Global Retailers’ – MUMBAI—India paved the way for international supermarkets and department stores to establish joint ventures, a major step in opening one of the last great consumer markets that has been off-limits to many of the world’s biggest …

Hindustan Times – ‘Left and Right sharpen knives for FDI battle’ – The Cabinet’s approval of 51% FDI in multi-brand retail is likely to flare up into a major political controversy with the main opposition parties gearing up to oppose it. While BJP leaders Sushma Swaraj and Arun Jaitley jointly condemned any such move …

Namnews – ‘Government Opens Up Country’s Retail Market’ – It’s official – the Indian retail market is now open to international chains, setting the stage for a major change of the local industry. Earlier today, the Indian government approved Foreign Direct Investment of up to 51% in multi-brand retail, …

Bloomberg – ‘India Allows Foreign Investment in Retail, Paving Wal-Mart Entry’ – India approved allowing overseas companies to own as much as 51 percent of retail chains that sell more than one brand, paving the way for global retailers such as Wal-Mart Stores …

indiablooms – ‘India opens retail to foreign players’ – New Delhi, Nov 24 (IBNS): India on Thursday decided to allow foreign direct investment (FDI) in its closely-guarded multi brand retail market, paving the way for global supermarket giants to step into the $450 billion sector that was widely seen as one …

Tehelka – ‘Cabinet approves 51% FDI in multi-brand retail’ – The Cabinet cleared 51 per cent foreign direct investment (FDI) in multi-brand retail on Thursday paving the way for global retail giants like Wal-Mart and Carrefour to enter India. The Cabinet also cleared 100 per cent FDI in single-brand retail. …

Newser – ‘India to allow more foreign retail investment, likely paving way for Wal-Mart’ – India’s Cabinet decided Thursday to allow more direct foreign investment in the nation’s huge retail industry, a move that could strengthen the country’s food supply chain and open India to giant global …

NetIndian – ‘Cabinet clears 51% FDI in multi-brand retail’ – After dithering for a long time, the Union Cabinet today cleared a proposal to allow 51 per cent Foreign Direct Investment (FDI) in multi-brand retail and raised the cap to 100 per cent in single brand retail. This will allow global retail giants like …

Boston.com – ‘India opens more to foreign multibrand retailers’ – AP / November 24, 2011 NEW DELHI—India’s Cabinet decided Thursday to allow more direct foreign investment in the nation’s huge retail industry, a move that could strengthen the country’s food supply chain and open India to giant global …

Retail Week – ‘Indian cabinet approves foreign investment in retail‘ – The Indian government has cleared the way to allow multinational retailers including Tesco, Carrefour and Walmart to enter its retail market. We provide a range of advertising opportunities. By advertising with us, you are guaranteed to reach the …

Atlanta Journal Constitution – ‘India opens more to foreign multibrand retailers’ – AP NEW DELHI — India’s Cabinet decided Thursday to allow more direct foreign investment in the nation’s huge retail industry, a move that could strengthen the country’s food supply chain and open India to giant global retailers such as …

Houston Chronicle – ‘India opens more to foreign multibrand retailers’ – NEW DELHI (AP) — India’s Cabinet decided Thursday to allow more direct foreign investment in the nation’s huge retail industry, a move that could strengthen the country’s food supply chain and open India to giant global retailers such …

IBNLive – ‘FDI in retail cleared; multi brand 50 pc, single brand 100 pc’ – The Union Cabinet FDI in multi-brand retail and single brand retail despite division within the UPA on the issue.

Moneycontrol.com – ‘Cabinet approves 51% FDI in multi-brand retail’ – Indian retailers finally get a chance to rejoice as the Cabinet today cleared the bill to increase foreign direct investment to 51% in multi-brand retail and 100% in single brand. Commerce and industry minister Anand Sharma said that he would give a …

Business Standard – ‘Too early to celebrate for Pantaloon retail’ – Valuations may prove to be a hurdle, while real gains will take time to yield. Stocks of organised retail companies like Pantaloon Retail and Shoppers Stop have been in action in the recent past on hopes that foreign direct investment (FDI) in the …

BusinessWeek – ‘India Allows Foreign Investment in Retail, Paving Wal-Mart Entry’ – Nov. 24 (Bloomberg) — India approved allowing overseas companies to own as much as 51 percent of retail chains that sell more than one brand, paving the way for global retailers such as Wal-Mart Stores Inc. …

Washington Post – ‘India to allow more foreign retail investment, likely paving way for Wal-Mart’ – NEW DELHI — India’s Cabinet decided Thursday to allow more direct foreign investment in the nation’s huge retail industry, a move that could strengthen the country’s food supply chain and open India to giant global retailers such as Wal-Mart. …

STLtoday.com – ‘India opens more to foreign multibrand retailers’ – AP | Posted: Thursday, November 24, 2011 10:36 am | Loading… India’s Cabinet decided Thursday to allow more direct foreign investment in the nation’s huge retail industry, a move that could strengthen the country’s food supply chain and open India to …

Newser – ‘India to allow more foreign retail investment, likely paving way for Wal-Mart’ – India’s Cabinet decided Thursday to allow more direct foreign investment in the nation’s huge retail industry, a move that could strengthen the country’s food supply chain and open India to giant global …

Wall Street Journal (blog) – ‘FDI in Retail: If Wal-Mart Builds It, Will Indians Come?’ – The Indian government deserves credit for doing what , for at least five years, it has been contemplating: setting the stage for the creation if a modern retail industry. It is unlikely that the Cabinet was seized by Adam Smith-like …

Houston Chronicle – ‘India opens more to foreign multibrand retailers’ – NEW DELHI (AP) — India’s Cabinet decided Thursday to allow more direct foreign investment in the nation’s huge retail industry, a move that could strengthen the country’s food supply chain and open India to giant global retailers such …

Zee News – ‘Cabinet clears FDI in multi-brand retail’ – New Delhi: In a major decision, the government Thursday approved 51 percent FDI in multi-brand retail paving the way for global giants like WalMart to open mega stores in cities with population of over one million. The nod from the Union Cabinet came …

This permission, given by a ruling political coalition that has allowed food inflation to rage on unchecked for the last three years, which has regularly pushed up the prices of petrol (gasoline) and diesel, and whose record on tackling corruption and graft is shamefully weak, will not go unchallenged.

India’s mantra of ‘inclusion’

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Vendor of alamancs (kaal-nirnay and panchangs), Maharashtra

Vendor of alamancs (kaal-nirnay and panchangs), Maharashtra

The Holi and Id-e-Milad breaks coming right after the presentation of Union Budget 2010-11 have been welcome, for they allow an unhurried look at what the Government of India is saying versus what it indicates it will do. This Budget’s two key documents – the Budget proposals for 2010-11 and the Economic Survey 2009-10 – contain a term which was entirely absent from government-speak only three years ago. That term is “inclusive”. The central and state governments are now using the words “inclusive” and “inclusion” to talk about almost everything: inclusive growth, financial inclusion and inclusive development. It has gained, in India of today, the same sort of currency that “sustainable development” did worldwide about a decade ago. What on earth does it mean for the sarkar?

“For the UPA Government, inclusive development is an act of faith. In the last five years, our Government has created entitlements backed by legal guarantees for an individual’s right to information and her right to work. This has been followed-up with the enactment of the right to education in 2009-10. As the next step, we are now ready with the draft Food Security Bill which will be placed in the public domain very soon. To fulfil these commitments the spending on social sector has been gradually increased to Rs 137,674 crore which now stands at 37% of the total plan outlay in 2010-11. Another 25% of the plan allocations are devoted to the development of rural infrastructure. With growth and the opportunities that it generates, we hope to further strengthen the process of inclusive development.”

Union Finance Minister Pranab Mukherjee

Union Finance Minister Pranab Mukherjee, caricatured by 'Mint', the financial daily newspaper

So said Pranab Mukherjee, Minister of Finance, in his Budget speech on 26 February 2010.

“A nation interested in inclusive growth views the same growth differently depending on whether the gains of the growth are heaped primarily on a small segment or shared widely by the population. The latter is cause for celebration but not the former. In other words, growth must not be treated as an end in itself but as an instrument for spreading prosperity to all. India’s own past experience and the experience of other nations suggests that growth is necessary for eradicating poverty but it is not a sufficient condition. In other words, policies for promoting growth need to be complemented with policies to ensure that more and more people join in the growth process and, further, that there are mechanisms in place to redistribute some of the gains to those who are unable to partake in the market process and, hence, get left behind.”

This is from Chapter 2 of the Economic Survey 2009-10, titled ‘Micro-foundations of Inclusive Growth’. Notice that the word “growth” has become a corollary to “inclusive”/”inclusion”. This is a serious problem, but not one that seems to concern the sarkar. Growth (most broadly, of GDP, which is a deviant, outmoded concept) and inclusion are utterly different ideas. The problems of “growth” can easily be illustrated by this paragraph:

“Price movements during fiscal 2009/10, as reflected in both the WPI [wholesale price index] and the CPI [consumer price index], have been characterised by very high rates of inflation in primary food articles and manufactured food products. The WPI rate of inflation for primary food articles crossed 20% in November 2009 and even at the end of January 2010 was close to 18%. Other than food products, the prices of other primary and manufactured goods have generally not increased by much.

A woman perched on the side bar of an autorickshaw, Surat district, Gujarat

A woman perched on the side bar of an autorickshaw, Surat district, Gujarat

Within the primary food articles basket, the goods that have exhibited the highest rate of inflation are foodgrains – pulses, wheat and rice, in decreasing order of magnitude. Within the manufactured food products segment, sugar products (sugar, khandsari and gur) have increased the most with annual inflation of over 51%. Another factor, which considerably blunted the impact of foodgrain releases by the government, was the overload on the PDS. There is a clear imperative to develop a distribution channel by the State governments, to supplement the PDS, so as to enable faster distribution of the additional releases made by the central government.”

From ‘Concluding Coments’, ‘Management of Prices’ in Review of the Economy 2009/10, by the Economic Advisory Council to the Prime Minister. That is what “growth” does to prices, and prices that move the way food prices have in India for the last three years utterly wreck “inclusion”. I find it worrying that the Economic Advisory Council is talking about a parallel distribution channel to supplement the PDS, when (1) any number of independent studies have pointed out that the PDS has been handicapped in fact by exclusionary policy and (2) when state governments are quite likely to use public-private partnership methods to set up alternative distribution channels, which heap more misery on the rural and urban poor.

"Pade likhe bane minister, Chale naukri paane ko, Dhakke khaakar bane driver, Mila truck chalaane ko"

"Pade likhe bane minister, Chale naukri paane ko, Dhakke khaakar bane driver, Mila truck chalaane ko"

How contradictory the government’s “inclusive” claims are versus its intentions as contained in its other Budget measures can be seen in the Budget highlights, in which the Ministry of Finance summarises the major provisions.

“Rs 200 crore provided for sustaining the gains already made in the green revolution areas through conservation farming, which involves concurrent attention to soil health, water conservation and preservation of biodiversity.”

The contradictions in this point are ludicrous in the extreme. The Green Revolution methods ignore entirely conservation farming, soil health, water conservation and preservation of biodiversity. These four points are achieved by orgnic and biodynamic methods, for which state support is either neglible or not there at all. The Budget highlights add:

“Reduction in wastage of produce:
* Government to address the issue of opening up of retail trade. It will help in bringing down the considerable difference between farm gate, wholesale and retail prices.
* Deficit in the storage capacity met through an ongoing scheme for private sector participation – FCI to hire godowns from private parties for a guaranteed period of 7 years.
Credit support to farmers – Banks have been consistently meeting the targets set for agriculture credit flow in the past few years. For the year 2010-11, the target has been set at Rs 375,000 crore.”

Retail trade has so far done exactly the opposite of what is claimed here, while more storage capacity will directly benefit the flourishing agricultural commodity futures traders and brokers. Increased credit support is visible only in bank statements whereas small and marginal farmers (who together account for 81.9% of operational agricultural land holdings) are left out. Several estimates made in the last three years (a World Bank study amongst them) show that 87% of marginal and 70% of small farmers are not getting credit through institutions. In fact, 51% of all farmers, big and small, get no banking services, let alone credit. If 2009-10 was the year in which “inclusion” became popular with Bharat sarkar, 2010-11 needs to be the year in which its “inclusive” claims are either backed up by credible action or thrown out.