TCA Srinivasa-Raghavan: Political solutions first, please

LINE & LENGTH

The rural problem is now very big. Turning the Planning Commission into the Scheming Commission is not the answer.

In Left discourse the word "crisis" pops up very frequently. Indeed, some would say that without it there would be no Left discourse at all.

But for once the Left has a point. There is indeed a multi-dimensioned crisis developing in the rural areas.

The economic dimension is the starkest, with 600 million Indians living off farms that no longer produce enough to support them all properly. The political dimension can be seen in the increasing resort to arms in the poorest areas, the so-called Naxal "menace". The social dimension is the equivalent of the Dickensian world of utterly miserable lives.

A despairing debate, initiated by the farmers' suicides, has been initiated. But this is not the first time such a debate has taken place. There was a similar debate in the late 1960s and early 1970s because the "objective conditions" were pretty much the same then.

That debate led to a great deal of analysis. Those who want a quick and succinct summary should delve into the recently published third volume of the RBI's institutional history. If nothing else, they will emerge a little humbler.

The solution that India opted for then had two parts. The long-term solution consisted of an increased role for the state as the investment leader and employment provider. The short-term remedy became price control to keep the urban mobs from rebelling, which they did in a small way in 1974.

Both worked, as such things do, for a while and then started to fail. But it took the entire decade of the 1980s, which ended in a different sort of crisis, to convince the leadership that an alternative way had to be found.

Fortunately, the Washington Consensus was at hand, not to mention men steeped in it. The 1991 reforms, which consisted of pushing the state back, worked like a charm initially. I don't need to spell out its contours. They are well-known enough.

The question that needs asking now is whether this solution, too, is beginning to run its course and whether there is a need to start modifying it in some way. Ardent votaries of reform will say""echoing the truly dedicated proponents of the 1970s solution"""don't blame reform because it is not complete". In other words, the state has not been pushed back fully.

The UPA government, however, doesn't agree with this notion. That, indeed, is why it has started to bring the state back. But thanks to Dr Manmohan Singh, this is being done with notable exceptions in the matter of industrial policies and investment, where the private sector has retained the post-1991 reforms pride of place. In the financial sector also there is no move to bring back the old ways, except perhaps by the finance minister.

That leaves the old problem""agriculture""to which no one seems to have any solution. As the editorial in this paper on Tuesday pointed out, it has all sorts of warts and wiggles of all sizes and shapes, which will take decades to sort out. But I think it makes sense to be warned about a few things.

The first pertains to land: there simply isn't enough of it and we don't have the 18th and 19th European solutions of mass migration to other continents. The second pertains to the people who live off the land. There is no way we can accommodate all of them into manufacturing, which, at the very best, can employ under the most ideal outcome perhaps a 100 million people""that too over the next half a century. That would still leave around 450 million or so marooned on land. Even if we exclude the women from those seeking jobs outside the home, around 250 million would still be left.

This, then, is the magnitude of the problem India faces. It is the classical Malthusian one. That pesky priest was proved wrong then because of colonialism, migration and technology. Now only technology is left as something worth betting on. Even so providing jobs for so many millions is going to be impossible.

The issue that India needs to resolve before it starts to tackle the crisis meaningfully is decide whether the first cut should be political or economic. My view is that taking a simple econocratic approach""ever-increasing investment a la China""will not help because even the best policies and the resulting outcomes are not going to help beyond a certain point. The sheer numbers of people involved make it a political problem primarily, rather an economic one alone.

In fact the problem is already political, not just in India but in China as well, where there are daily rebellions. It goes to the credit of the Congress party""mostly Dr Manmohan Singh, really""that it has seen the writing on the wall and has been talking of "inclusive" growth. But talk is easy.

The way the government is going about it""how do we deliver services to the poor?""is an incomplete thought-out approach because come what may, that is not going to happen. Managing supply is not the same as managing politics, and turning the Planning Commission into the Scheming Commission is not the answer.

I will return to some possible new approaches in the next piece.