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NEW - January 2009

Bharat Samajh - Understanding India

INTRODUCTION
Azad Reading Room (ARR) is presenting a revised and updated version of this segment of the website. The earlier version (now placed in the ARR archives) was drafted in the second half of the 1990’s. Since then changes have taken place in India which we document to integrate them with our present understanding of the contemporary economy and society and drawing some implications for the evolving shape and direction of politics. The evolving and deepening global economic crisis has some serious consequences for India particularly the vulnerable 3⁄4 of the population. We take a brief note of the crisis in India (For our, somewhat, extended understanding see: S.A.Shah, 2009). This note brings the macro-data closer to contemporary realities – particularly relating to agrarian (rural) and manufacturing /industrial (urban) activities. A word of caution – statistical data, as gathered, compiled and presented in India has difficulties, subject to considerable variation of interpretation and traps for the unwary. The reader needs to exercise critical awareness with regards to the possible complexities of fact.*

POPULATION, WORKFORCE AND NATIONAL INCOME
In 2007 the total estimated population was reported as 1.1 billion (Economist Intelligence Unit – India Report, 2007; CIA World Facts, 2007). Of the total population the estimated workforce was between 460 million and 509 million in the period 2002 – 2008. Approximately 2/3 of the workforce was male and 1/3 female. Officially about 40 million children were part of the workforce. However, independent sources suggest that child labour could be as high as 100 million.

Nearly 70% of the workforce is dependent on agriculture and they reside in about 600,000 villages. The income contribution of agriculture to the GDP has been declining and in 2006-’07 stood at 25% of the total.

The estimated GDP for India (in purchasing power parity, PPP, terms) in 2006 was US $4,4 trillion of which agriculture contributed less than 25%, industry about 20% and services 55%. The sectoral division of the national income clearly emphasizes the dominant structural character of the Indian economy as an agrarian – trading economy.

Agricultural activity (production) is mainly carried out on thousands of small farms (below 5 -6 acres each). However, a major portion of agricultural production is marketed by the medium size (10 -20 acres each) and big size (above 20 acres each) farms. Both land and labour productivity in the farm sector remains low and the relative income from agriculture (excluding large farms and a segment of the medium size farms) has remained stagnant or declined over the past two decades. Industrial and service activities are carried out by thousands of small units linked to a small number of large conglomerates through contracts, sub-contracts, licensing and other business arrangements. Industrial and manufacturing activities remain concentrated in a small proportion of the districts in India – approximately 20 out of a total of 597 districts. Employment in India’s economy can be divided into two broad sectors – the so called FORMAL and INFORMAL. The formal sector employs 12% and the informal sector the remaining 88% (these proportions exclude agricultural farming activities) of the work force.

Unemployment is high and growing, particularly in comparison to the annual new entrants into the job market. Officially reported unemployment is between 6% & 8% however with the inclusion of underemployed (working less hours) and sub-employed (paid less than legal wages) the actual unemployment could be 20% or more.

A prominent feature of the labour force is its low level of skills/training. Only 3%-5% of the labour force in the informal economy has some vocational training. The majority of workers have no union representation – less than 10% of the workforce is organized in unions. In other words workers rights associated with bargaining processes to maintain/improve working conditions are available to a small minority of the workforce. In summary India remains a rural based agrarian economy with a small manufacturing sector alongside a large, rapidly expanding services sector.

AGRARIAN INDIA
With a majority of the population residing in rural India and a dominant proportion of the workforce dependent on agricultural activities for their livelihood it is important to consider land rights as well as the attempts to make them equitable. ARR has documented how the MALIKS (literally lords - referring to large landowners) through the 1980’s controlled the use of land. The control was exercised by a combination of using loopholes in enacted land legislation as well as the lack of vigourous implementation of the land reform laws – specifically covering ownership, credit, cultivation, distribution of surplus land, storage, transport and access to markets. With sustained ferocity the landless and land-poor have been deprived of their rights to an adequate and equitable livelihood.

What is the importance of land?
The veteran and experienced land rights administrator from W. Bengal, D. Bandyopadhyay, notes:
“If agrarian relations are not conducive to proper utilization of the techno-economic factors, their mere availability might not solve the crisis------- (since 1991 –SAS) -----the existing land reform laws that were enacted on the basis of the control guidelines in the early 1970’s not only--- (included –SAS) unwanted road blocks but--- (were- SAS) --- also obnoxious to the free play of capital in the land/lease market. Hence a strong lobby developed to scrap the ceiling laws, allow unfettered rights to lease markets, open up the agrarian sector to corporate bodies for capitalist farming and /or large scale contract farming ----------.”. (D. Bandyopadhyay,’08; also see: Prem Shanker Jha,’08 and Cf. S.P.Singh,’07). In Bharat Samajh I (now archived) we summarized data on rural class divisions, the growing inequality of land owned/cultivated, the weak/incomplete implementation of land reform legislation as well as the suspension of programs to redistribute surplus agricultural land.

Since the early 1990’s agricultural land ownership/use has continued to grow unequal. Comparisons Over time have some built-in difficulties – for example, due to changes in the methodology of measurement. Nevertheless, a recent carefully designed investigation points out:
“--------- the extent of landlessness went up by as much as 6 percentage points between 1992 and 2003-’04”. At the same time assuming 20 acres as a uniform ceiling, “----- there is about 15 million acres of ceiling surplus land in India----- this is more than three times the total amount that has ever been redistributed under the land reform programs in the states” (Vikas Rawal, ’08). No wonder that a recent report pointed out that landlessness remains as a true measure of poverty (Special Correspondent,’08).

There are two social forces impinging upon and propelling residents of rural India. First, is the migration within the rural sector and second between rural and urban India. Migration is an outcome of a complex set of factors made up by interacting economic and political vectors. Both of these social forces have significant consequences for the allocation of material resources (capital, labour and physical inputs). In India, there has been, by policy design & choice a growing neglect of agriculture visible as a slow rate of growth, shifts from mass food crops to non-food commercial crops (coarse to refined grains) and stagnant/declining incomes for a large segment of the agricultural population. (See: S. P. Singh.’08). An ongoing consequence of the above change is dispossession of segments of the farming community from their land – the specific change is hastened by the spread of corporate commercial farming and consolidated through corporate-state policies such as the establishment of SEZ’s (special economic zones), tax and pricing (inputs) measures and the growing consumption/demand (for refined food, fast food & packaged goods) of the upper income segments of the population.

Recently an interesting debate has, once again, surfaced** where caste and class forces are noted to be of opposed importance with regard to ground realities explaining political power & decision making in rural India. ARR suggests that both class and caste are relevant as dialectically interactive elements of the social process. Schematically, in India, caste and class forces exist in a dynamic social field which can be thought of as resembling a grid of vertical and horizontal divisions cut across, at 45 degree angles by ‘tribal’ (adivasi, janjati, vanvasi and others) segments of the population (See: D.D. Kosambi,’54; Oliver C. Cox, ‘48 ; Economic & Political Weekly.’08). Recognising the complexity of contemporary India and expressing caution regarding hasty conclusions we endorse the following comment –
“The enormous inequality in land ownership in India has not diminished in the last five decades. Even according to the National Sample Survey (NSS, which, as an official survey, is unable to capture the reality fully) the top 5.2 per cent of rural households today own 42.8 per cent of the area. The remaining 90.5 per cent of the households owned just 43.4 per cent of the area. Among these are 41.6 per cent of the rural households who own no land other than their homestead (10 per cent do not own even homestead land)”. (RUPE. “India’s Runaway Growth”, Part III,’08).

** For the current debate see the exchange between P.Chatterjee & M. Shah plus others in ECONOMIC & POLITICAL WEEKLY. Nov. 2008; Cf. the Special issue of EP&W on DD.Kosambi #30, July 26 - Aug. 1,'08.

MANUFACTURING AND INDUSTRIAL INDIA

A small proportion of urban Indians and much of the English-reading population of the world often consider India as a modern and high consumption society. Such an impression is conveyed by TV programs including advertising, newspapers & magazines (English & regional languages) as well as some radio programs. Yet the reality of contemporary India is one of stark & startling poverty. There are two principal features of India’s non-agricultural economy. Sometimes these features are described by the terms of ‘formal/organized’ sector and the ‘informal/unorganized’ sector. The former sector accounts for between 10% - 12% of the employment while the latter makes up the rest or 88% - 90%. The informally organized manufacturing sector is akin to a vast ocean (made up by units employing 20 or less persons) amidst which there are huge (employing thousands of workers per unit) corporate industrial organizations located in a concentrated pattern within 16 – 20 districts of the nearly 600 districts of India.
Another way of describing this sector is to separate the components as follows: (i) mining & quarrying (ii) manufacturing and (iii) electricity, gas and water. The first and third components make up 10% - 12% of the output while the second contributes about 80%. The manufacturing and industrial activity has undergone considerable diversification, however, the tilt of its evolution is towards catering to the demands of the upper income groups (See: Kaustuva Barik. AES,’07 & ’08).

In 2002 this author published a study in which the industrial/manufacturing sector was profiled, in summary form, as follows:
There are approximately 400,000 companies as registered units of which over 1200 were government (public sector) companies. Companies with investments below Rs.100, 000/- are the most numerous, that is, 87% of all non-government private limited companies. These companies are locationally concentrated in about 20 districts out of the nearly 600 districts – indicating a low density of industrialization. Manufacturing companies have been losing ground to the services providing companies – finance, trade and insurance. Diversification of manufacturing/industrial companies has taken place however, the diversification has been accompanied by jobless growth. Militarisation of the manufacturing sector has increased. High-end consumption (of so-called ‘white goods’ or consumer durables) has been emphasized through implemented economic policies. Linkages with Transnational companies (TNC’s) as part of the global corporate growth has been given priority. In other words privatization of economic activities has been emphasized in the design of economic policy.

Claims regarding the size of the middle class ranging between 200 – 500 million are exaggerations when compared to the estimate of a business analyst group (McKinsey, India) which suggests that the middle class in 2005-’06 stood at about 50 million persons. The proportion of households making up the ‘rich’ and affluent is about 6.5% while that of the ‘poor’ is made up by 57.5%. When one reads about the high rates of economic growth (7% - 9% annually) it needs to be placed in the context of benefits disproportionately being appropriated by the affluent. The comment below highlights the nature & orientation of the contemporary business leadership – “ The so-called captains of industry are not playing the role of savers and accumulators of capital or as efficient producers of goods and services for the domestic market ----- . Trading and speculative gains, tax evasions and wallowing in black money, entering into collaborative deals as minority partners, which reduce them to the status of commission agents of multinational corporations, have tended to be prominent in their business activity” (S.A. Shah,’02).

INDIA IN THE ECONOMIC CRISIS

Government spokespersons like the ex-Finance Minister P. Chidambaram and the Deputy Chair, Planning Commission, Montek S. Ahluwalia have indicated that India will not suffer much of the adverse consequences of the global economic downturn. At the same time corporate leaders like Ratan Tata have stepped forward to ask for government bailouts while business news coverage is full of headlines noting – “India Inc. looks to government to boost economy”. (Deccan Chronicle, Nov.’08).

Workers and other employees (including technical staff) are being laid of (retrenched). The stock markets have been the first and worst hit because, among other reasons, foreign funds are withdrawing from markets in substantial amounts. Bimal Jalan (former, Reserve Bank of India, Governor) is reported as saying, ‘It is difficult to find a solution right away’. Export markets are contracting at the same time as the value of the currency erodes – the Indian rupee has lost over 25% of its value against the US dollar. “The crisis affecting the country and the world can be described as ‘lack of confidence’. People have lost trust in the government and institutions alike. Nothing like it has been seen before, not even the so-called Great Depression or the oil shock of the 90’s. The industry feels the crisis requires further measures by the government to boost the economy” (Deccan Chronicle, Nov.’08).

Yilmaz Akyuz (former Chief Economist, UNCTAD) notes that “----- Asian countries are even more integrated to the global financial system than a decade ago, making the more vulnerable to shocks. -------- Asian developing countries lose US $50 billion a year from the cost of holding foreign reserves that are ‘borrowed’ – the term ‘borrowed reserves’ refer to that part of foreign reserves built up by a country that results from the inflow of capital as contrasted to ‘earned reserves’ which result from surpluses from trade or current accounts” (Martin Khor,’08).

Trade deficits are another source of instability. India has a growing deficit in trade which is traditionally covered by capital inflows. Recent tendencies of change in the form of reduced inflows of capital can trigger greater volatility of market behaviour (See: Samir K. Singh,’08 and Ignatius Chithelen,’08).

SUMMARY
1. Agrarian India remains the principal location of residence and work for a majority of the population – 70%. Agricultural economic activity contributes about 25% of the GDP. A majority of the poor and destitute population of India are part of India’s agrarian society. In recent years the visibility of the destitution is horrifically and starkly revealed as farmer suicides. Land resources and agricultural production is controlled by a dominant caste-class combine of ‘safaid posh’ (persons wearing white clothes). The agrarian economy is commercially organised and has increasingly favoured the growing & marketing of non-food cash crops including the principal ‘refined’ food grains (rice & wheat).

2. Industrial and manufacturing India which contributes less than 20% of GDP, employs 12% of the labour force or 62 million workers. In 2002 there were 590,000 registered companies of which 77,000 were public limited companies (government) and 513,000 private limited companies (corporations). Industrial and manufacturing activity is concentrated in less than 20 districts which makes India’s industrial density quite low. By policy design and implemented programs, particularly following the neo-liberal economic reforms of the 1990’s, increasing resources are being allocated for industry and manufacturing which has contributed to a sharp rise in income & wealth inequality.

3. Using data from the Government of India’s voluntary disclosure of incomes scheme (VDIS, 1997) we calculate the following, approximate’ class divisions: (i) RICH – 2.5% of the total number of households; (ii) AFFLUENT – 4% of the total number of households; (iii) MIDDLE INCOME - 36% of the total number of households; (iv) POOR – 57.5% of the total number of households. In 1997 the number of households included in the VDIS totaled 97.5 million.

4. A recent report summarizing a carefully designed statistical and qualitative estimate of the ‘common person’ in India, notes: “Despite high growth, more than three fourths of Indians are poor and vulnerable with a level of consumption not more than twice the official poverty line. This proportion of the population which can be categorized as the ‘common people’ is much higher among certain social groups, especially for scheduled castes and scheduled tribes. There is also evidence to suggest that inequality is widening between the common people and the better of sections of society” (Arjun Sengupta Et. Al.,’08).

5. Ongoing experiments exploring alternative and sustainable economic, social and political change, underscores the need to mobilize among the majority (rural & urban) of population groups in order to lay the foundations for appropriate institutions emphasizing the organization for cooperation, care (social concern) and solidarity. (See: Michael Lebowitz,’06).

REFERENCES: S. A. Shah. ECONOMIC CRISIS & MARKET TURBULENCE. 2009. Hyderabad, Azad Reading Room; S .A. Shah. DISPARITIES OF DEVELOPMENT. 2002. Hyderabad, Azad Reading Room; Economist Intelligence Unit. INDIA REPORT, 2007. London, 2007; CIA. WORLD FACTS. 2007; D. Bandyopadhyay. “Does Land Still Matter?” ECONOMIC & POLITICAL WEEKLY. March 8, 2008 and see: Prem Shanker Jha. “The State as Landlord”.OUTLOOK. 17 March, 2008; S.P. Singh. “Corporatization of Agriculture” in Alternative Survey Group. ALTERNATIVE ECONOMIC SURVEY, 2006-’07. New Delhi, Daanish; D.D. Kosambi. “Notes on the Class Structure of India”. MONTHLY REVIEW. March, 1954; Oliver Cromwell Cox. CASTE, CLASS, & RACE. 1948. N.Y., Doubleday; Vikas Rawal. “Ownership Holdings on Land in Rural India”. ECONOMIC & POLITICAL WEEKLY. March 8, 2008; Special Correspondent. THE HINDU. Dec. 9, 2008; S.P. Singh. “Emerging Issues in Agriculture” in Alternative Survey Group. ALTERNATIVE ECONOMIC SURVEY, INDIA, 2007-’08. New Delhi, Daanish; RUPE. “India’s Runaway Growth”, Part III in ASPECTS OF INDIA’S ECONOMY. #46. Mumbai, April, 2008; Kaustuva Barik. “Industry” in Alternative Survey Group. ALTERNATIVE ECONOMIC SURVEY. Op. cit. pp. 115-123; Kaustuva Barik. “Industry”. In Alternative Survey Group. ALTERNATIVE ECONOMIC SURVEY. 2007 – ’08. Op. cit. pp. 101 – 110; S. A. S hah. 2002. Op. cit.; S. A. Shah. 2002. Ibid. pp. 49-50; DECCAN CHRONICLE. 23 Nov. 2008; Ibid. p. 12; Martin Khor. ‘Global Turmoil and Asian Economies”. FRONTIER.. Nov. 23 – 29, ’08; Samir K. Singh. ’08. pp. 159 -165; Ignatius Chithelen. “Global Financial Crisis – A Long Way from Recovery”. ECONOMIC & POLITICAL WEEKLY. Sept. 6, 2008.

*At the opening of the twenty first century (2002), this author published a study titled DISPARITIES OF DEVELOPMENT (Azad Reading Room, Hyderabad, India). Some of the information/data used in this note is drawn from that study.

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