Indian Economy in Transition: Essays in Honour of C.T. Kurien 2014040212, 9789351500452

Citation preview

SAGE was founded in 1965 by Sara Miller McCune to support the dissemination of usable knowledge by publishing innovative and high-quality research and teaching content. Today, we publish more than 750 journals, including those of more than 300 learned societies, more than 800 new books per year, and a growing range of library products including archives, data, case studies, reports, conference highlights, and video. SAGE remains majority-owned by our founder, and on her passing will become owned by a charitable trust that secures our continued independence. Los Angeles | London | Washington DC | New Delhi | Singapore

Indian Economy in Transition

Thank you for choosing a SAGE product! If you have any comment, observation or feedback, I would like to personally hear from you. Please write to me at [email protected] —Vivek Mehra, Managing Director and CEO, SAGE Publications India Pvt Ltd, New Delhi

Bulk Sales SAGE India offers special discounts for purchase of books in bulk. We also make available special imprints and excerpts from our books on demand. For orders and enquiries, write to us at Marketing Department SAGE Publications India Pvt Ltd B1/I-1, Mohan Cooperative Industrial Area Mathura Road, Post Bag 7 New Delhi 110044, India E-mail us at [email protected]

Get to know more about SAGE, be invited to SAGE events, get on our mailing list. Write today to [email protected]

This book is also available as an e-book.

YZ

Indian Economy in Transition Essays in Honour of C.T. Kurien

Edited by S. Janakarajan, L. Venkatachalam and R. Maria Saleth

Copyright © Madras Institute of Development Studies, 2015 All rights reserved. No part of this book may be reproduced or utilized in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage or retrieval system, without permission in writing from the publisher. First published in 2015 by SAGE Publications India Pvt Ltd B1/I-1 Mohan Cooperative Industrial Area Mathura Road, New Delhi 110 044, India www.sagepub.in SAGE Publications Inc 2455 Teller Road Thousand Oaks, California 91320, USA SAGE Publications Ltd 1 Oliver’s Yard, 55 City Road London EC1Y 1SP, United Kingdom SAGE Publications Asia-Pacific Pte Ltd 3 Church Street #10-04 Samsung Hub Singapore 049483 Published by Vivek Mehra for SAGE Publications India Pvt Ltd, typeset in 10/12 pts Adobe Garamond Pro by Diligent Typesetter, Delhi and printed at Sai Print-o-Pack, New Delhi. Library of Congress Cataloging-in-Publication Data Indian economy in transition : essays in honour of C.T. Kurien / edited by S. Janakarajan, L. Venkatachalam and R. Maria Saleth.   pages cm   Includes bibliographical references and index.  1. India—Economic policy—1991– 2. India—Economic conditions—1991–  3.  Economic Development—India. 4. Economic development—Environmental aspects—India.  I. Kurien, C. T.  II. Janakarajan, S., 1953–  III. Venkatachalam, L.  IV. Saleth, R. Maria, 1955–  HC435.3.I624293   330.954—dc23   2015  2014040212 ISBN: 978-93-515-0045-2 (HB) The SAGE Team: N. Unni Nair, Isha Sachdeva, Nand Kumar Jha and Anupama Krishnan

Contents List of Figures vii List of Tables ix Foreword by Professor R. Radhakrishna xv Preface xix CHAPTER 1

Indian Economy in Transition: Context and Overview of Issues S. Janakarajan, L. Venkatachalam and R. Maria Saleth

1

CHAPTER 2

Globalization and Indian Economy: Issues and Concerns U. Sankar

18

CHAPTER 3

Food Price Inflation and Public Procurement: The Indian Experience 41 Abhirup Sarkar CHAPTER 4

Agrarian Change under Reforms: A Case Study of Tamil Nadu, 1980–2005 57 Venkatesh B. Athreya CHAPTER 5

Is Farming Profitable to Farmers in India? Evidence from Cost of Cultivation Survey Data A. Narayanamoorthy

88

CHAPTER 6

Measuring Labour Market Insecurity in Rural India: A Gendered Analysis Brinda Viswanathan and Padmini Desikachar

112

vi  Indian Economy in Transition CHAPTER 7

‘Education for All’ in India: Issues, Policies and Imperatives S. Chandrasekhar and M.H. Suryanarayana

141

CHAPTER 8

The Emerging Ageing Scenario in India, 2001–51 S. Irudaya Rajan

156

CHAPTER 9

Impacts of Increased Urban Demand for Water on Livelihood Resilience in Peri-urban Areas of Chennai S. Janakarajan

177

CHAPTER 10

Design of Economic Instruments and Participatory Institutions for Environmental Management in India M.N. Murty

207

CHAPTER 11

Household-level Pollution in India: Patterns and Projections K.S. Kavi Kumar and Brinda Viswanathan

232

CHAPTER 12

Market-based Institutional Reforms for Water Allocation in India: Issues and the Way Forward L. Venkatachalam

259

CHAPTER 13

Millennium Development Goals: How Is India Doing? Sudipto Mundle

276

CHAPTER 14

Social Discrimination in India: A Case for Economic Citizenship Barbara Harriss-White and Aseem Prakash

294

CHAPTER 15

‘Rural Poverty: Policy and Play Acting’ Revisited. Why Doesn’t the Indian State Do Better in Regard to Poverty Reduction? John Harriss

327

About the Editors and Contributors 347 Index 353

List of Figures 2.1. Measures of Openness—Percentage of GDP at Market (current prices)

34

3.1. Relative Price Movement of Food and Non-food 44 3.2. Annual Food Price Inflation: April 2006–07 to June 2010–11 45 3.3. Procurement Price of Rice and Wheat 54 6.1. Proportion of Men and Women within Each State with a Value 1 for (a) dues and (b) davfwrk122 6.2. Insecurity Index for Women across States and Union Territories130 7.1. Probability of a Child Continuing in School Every Additional Year 7.2. School Life Expectancy (in years) 7.3. Percentage of Students Currently Attending Education at Primary Level and Above 7.4. Probability of a Child Continuing in School Every Additional Year in Karnataka

149 150 152 153

8.1. Age Structural Transition, India: 2001–2101 8.2. Age Pyramids, India 2001–2101 8.3. Incidence of Widowhood among Females and Males in India (in per cent)

168 170

9.1. Map of Chennai Showing A-K and Palar Basins

181

1 0.1. Pigouvian Tax on Polluter 10.2. Pollution Tax and Standards 10.3. Cosean Bargaining

210 213 215

172

viii   Indian Economy in Transition 1 0.4. 10.5. 10.6. 10.7.

Abatement Function for SPM Concentration Abatement Function for SO2 Concentration Abatement Function for NOx Concentration Strategic Behaviour of Active Groups in Water Pollution Abatement

220 221 222

226 11.1. Primary Source of Energy for Cooking in India: 1993–94 to 2004–05 239 11.2. Distribution of Cooking Fuels across Regions and Years: Rural and Urban India 240 11.3. Per Capita Local and Global Emissions: 2004–05 242 11.4. Household Cooking Fuel Consumption across States: 2004–05243 11.5. Per Capita Local and Global Emissions across MPCE Classes: 2004–05 245 11.6. Local and Global Pollution Projections: 2026 254

List of Tables

2.1. 2.2. 2.3. 2.4. 2.5.

India’s Foreign Trade in Goods 1990–91 to 2009–10 India’s Foreign Trade in Services 1990–91 to 2009–10 FDI Inflows and Outflows 1990–2009 ($ billion) Foreign Investment in India India’s Overall Balance of Payments

23 27 29 31 32

3.1. Production of Cereals and Food Grains in Million Tons 43 3.2. Yield, Acreage and Per Capita Gross Availability of Cereals in 2005 46 3.3. Food Grains Production Per Capita and Poverty in Indian States47 3.4. Average Stock Holding of Food Grains by FCI 51 3.5. Procurement, Off Take and Stock Holding 1990–91 to 2010–1152 4.1. Some Basic Data on Total Population 4.2. Labour Force Participation Rates—Usual Status for Tamil Nadu and All India: 1983 to 2004–05 4.3. Number of Workers and Workforce Participation Rate for Tamil Nadu 4.4. Worker Participation Ratios of Tamil Nadu and All India for Various Years 4.5. Marginal Workers in Tamil Nadu and All India: 1991 and 2001 4.6. Per Cent Distribution of Workers by Employment Status, Tamil Nadu, 1993–94, 1999–2000 and 2004–05 4.7. Unemployment Rates in Tamil Nadu and All India 4.8. Growth Rates of Employment in Tamil Nadu 4.9. Annual Trend Rates of Growth of GDP, Indian Economy 4.10. Growth Rate at 1980–81 Prices, Tamil Nadu (NSDP) and India (GDP), Per Cent Per Year

59 60 61 61 62 63 64 65 66 67

x   Indian Economy in Transition 4.11. Annual Average Rates of Growth of GSDP and Per Capita Income (at 1993–94 prices), Select States, 1993–94 to 2004–05 67 4.12. Sectoral Composition of GSDP, Tamil Nadu, Select Years, Shares in Per Cent 69 4.13. Sectoral Composition of GSDP, Selected States, 1993–94 and 2004–05, Shares in Per Cent 70 4.14. Sectoral Distribution of Workers by Sex, Tamil Nadu, Per Cent, 1977–78 to 1999–2000 71 4.15. Sectoral Distribution of Workers by Residence, Tamil Nadu, 1999–2000 and 2004–05 71 4.16. Net and Gross Area Sown, Cropping Intensity and Irrigation Intensity, Quinquennial Averages, Tamil Nadu, 1976–2005 73 4.17. Annual Compound Growth Rate of Area (A) Production (P) and Yield (Y) of Major Crops in Tamil Nadu 75 4.18. Area, Production and Productivity of Paddy, Quinquennial Averages, Tamil Nadu, 1976–2005 76 4.19. Area, Production and Productivity of Cereals and Pulses, Quinquennial Averages, Tamil Nadu 1976–2005 78 4.20. Yields of Important Crops in Tamil Nadu, Per Hectare, Selected Years 79 4.21. Annual Average of Net Area Irrigated, Lakh Hectares by Different Sources, Tamil Nadu, 1950 to 2006 79 4.22. Area, Production and Productivity of Paddy, Tamil Nadu, 2006–1081 4.23. Area, Production and Productivity, All Food Grains, Tamil Nadu, 2006–10 81 5.1. Share of Area and Production in Each Crop by the States Selected for the Analysis, 2009–10 91 5.2. Cost of Cultivation, Value of Output and Profit in Paddy 93 5.3. Cost of Cultivation, Value of Output and Profit in Wheat 95 5.4. Cost of Cultivation, Value of Output and Profit in Gram 97 5.5. Cost of Cultivation, Value of Output and Profit in Groundnut98 5.6. Cost of Cultivation, Value of Output and Profit in Sugarcane100

List of Tables  



xi

5.7. Cost of Cultivation, Value of Output and Profit in Cotton 101 5.8. Number of Times Profit Reaped or Loss Faced by the Farmers in Each Crop during the Study Period 102 5.9. Increase (no. of times) in Cost of Cultivation and VOP of Six Selected Crops during Pre- and Post-1990s 103

6.1. Classification Scheme for Labour Market Security Variables 6.2. Eigen Values and the (cumulative) Proportion of Variation Explained by the Components for Computing the Labour Market Insecurity Index 6.3. Weights Corresponding to the First Principal Component and the Mean and Standard Deviation of the Variables Constituting the Index 6.4. Proportion of Individuals with Positive Index Values 6.5. Mean of Labour Market Insecurity Index by Socio-demographic Characteristics 6.A.1. Distribution of Persons Employed in Usual Status and Current Weekly Status, 15 Years and Above: Rural, 2004–05 6.A.2. Distribution of Persons Unemployed or not in Labour Force for More than Two Days, 15 Years and Above: Rural, 2004–05 6.A.3. Distribution of Persons Unemployed All Seven Days, 15 Years and Above: Rural, 2004–05 6.A.4. Distribution of CWS Employed According to Number of Work Activities, 15 Years and Above: Rural, 2004–05 6.A.5. Distribution of Persons by Number of Half-Days Worked in a Week, 15 Years and Above: Rural, 2004–05 6.A.6. Distribution of Persons in Non-manual Work (NMW), 15 Years and Above: Rural, 2004–05 6.A.7. Distribution of Rural Persons in Labour Force 15 Years and Above, 2004–05 6.A.8. Description of Independent Variables 6.A.9. Probit Estimates of Labour Market Insecurity 7.1. Percentage of Students Currently Attending Education at Primary Level and Above (rural) 7.2. Percentage of Students Currently Attending Education at Primary Level and Above (urban) 7.3. School Life Expectancy (years) in Karnataka 7.4. Head Count Ratio of Poverty in Karnataka

119 126 127 128 129 133 134 134 134 134 135 135 135 137 146 147 152 153

xii  Indian Economy in Transition

8.1. The Global Demography of Aged, 2007 158 8.2. Number and Proportion of Elderly by Different Age Groups, India, 1961–2001 159 8.3. Sex Ratio and Growth Rate among the Indian Elderly, 1971–2001160 8.4. Expectation of Life at Ages 60 Years and 70 Years for India 161 8.5. Elderly in India, 2001 162 8.6. Sex Ratio among the Elderly, 2001 Census 164 8.7. Indices of Ageing, 2001 Census 166 8.8. Emerging Ageing Scenario, 1961–2101 168 8.9. Population Ageing in Different Regions of India, 2001–2101171 8.10. Percentage Distribution of Elderly by Living Arrangements, 2004 173 8.11. Percentage of Elderly Living with Their Children by Regions of India 2004 174 9.1. 2002 Population and Caste Statistics for Magaral Village 182 9.2. 2001 Population and Caste Statistics for Palayaseevaram Village183 9.3. Number of Households Accessing Domestic Water from Different Water Sources 185 9.4. Depth and Status of Wells Constructed during 1985–2004 186 9.5. Depth and Status of All the Wells in the Study Villages 186 9.6. Changing Occupational Characteristics of Population in the Study Villages 191 9.7. Average Agricultural and Non-agricultural Annual Income in the Study Villages 193 9.8. Peoples’ Perception about Economic Status of Family, Their Caste and Village Compared to What Existed 20 Years Ago 194 9.9. Peoples’ Perception about Family Health, Educational Status and Environmental Status Compared What Existed 20 Years Ago 196 9.10. Access to Better Housing, Electricity and Telephone Compared to 20 Years Ago (total for both the study villages)197 9.11. Overall Living Conditions: Are You Better-Off Compared to Your Father’s Time? 198 9.12. Caste-wise Agricultural and Non-agricultural Assets (`)199

List of Tables  

9.13. Caste-wise Average Net Assets (gross assets minus gross liabilities) in the Selected Villages 9.14. Adaptive Strategies and Sustainability of Livelihoods

xiii 201 204

10.1. Shadow Prices of Pollutants (` per tonne) 10.2. Physical and Monetary Accounts of Air Pollution for an Average Thermal Power Generating Firm in Andhra Pradesh

217

11.1. Household Emissions Profile: 2004–05 11.2. Pollution–Income Relationship: Local Pollution 11.3. Pollution–Income Relationship: Global Pollution

242 250 251

218

14.A.1. Share of Muslim Employees in Selected Central Government Department and Institutions 322 14.A.2. Representation of SCs/STs in Services of All Central Ministries/Departments as on 1 January 1999 323 14.A.3. Representation of SCs/STs in Services of All Central PSEs as on 1 January 2000 323 14.A.4. Representation of SCs/STs in Public Sector Banks and Financial Institutions 324 14.A.5. Percentage Distribution of Population and Unorganized Workers by Poverty Status and Social Groups 325 14.A.6. Percentage Distribution of Informal Workers by Socio-religious Groups within Different Poverty Status (2004–05) (in million) 326 14.A.7. Average Daily Earnings of Casual Workers (` per day), 2004–05326

Foreword

I

ndia has achieved an impressive economic transition since 1990s due to the major economic reforms and globalization policies initiated in 1991. The economic transition has paved the way for a greater role for private sector, expansion of international trade and enhanced flow of global investments. Economic growth rate, which hovered around 4 per cent in the pretransition period, has risen to about 8 to 10 per cent. India could withstand the recent global recession and financial crisis and maintained a moderate growth of 5 to 6 per cent. Despite population growth, the per capita income has been increasing with corresponding changes in the overall living standard of the masses. With the expansion of education and health facilities, the literacy rate and life expectancy level have also improved. Owing to a massive program of infrastructural investments, especially in recent years, India has made rapid strides in road network and air and sea connectivity. More than three-fourths of the Indian villages are connected by road and this has resulted in cementing the rural–urban continuum, creating, thereby, myriad forms of non-farm employment opportunities in small industries, trade and services. This has also enabled urban enterprises, even multinationals, to market their products in rural areas, though, to some extent, at the cost of artisans and traditional service providers. From an external perspective, Indian commerce and trade have seen major transformation with a reduction in traditional export of primary goods and an enhancement of the modern export of industrial, commercial and software products. India is now able to build massive foreign exchange reserves and Indian investments abroad are also growing with significant regional and sectoral diversification. What is remarkable is the fact that there has also been an internal economic transformation of historical significance. Agriculture, which used to be the predominant source of growth in 1960s and 1970s, is now contributing only about 16 per cent of the national income. With the changed investment priorities, economic policies and international economic climate, the industry, trade and commerce,

xvi  Indian Economy in Transition and service sectors have now emerged as the major drivers of economic growth. The performance of the information and communication sectors has been particularly phenomenal, making India as one of the top leaders in these sectors. Because of significant investment in agricultural and irrigation development programmes and the spread of Green Revolution technologies in the pre-transition period, India was able to achieve food self-sufficiency. India is now able to increase the export of food products and could still maintain a large food grain stocks. Despite the problems of targeting and distribution, the public distribution system has made food security almost a reality in some parts of the country. The developments in the social arena have also been remarkable with the implementation of development programmes, legal measures and affirmative action to counter the nagging problem of caste- and religion-based discriminations. The socially discriminated groups have improved their access to education and employment, though the gap with other social groups still persists. The upward mobility of these groups, which occurred over time in the economic and social spheres, has also led to similar ascendancy in the political sphere. While the benefits of the economic transition are multifarious and impressive, the flip side is that the process of economic transition ongoing since the 1990s has been painful, especially on the rural and social sectors particularly in the initial stages. The way in which economic transition is achieved has also opened up many issues and challenges. The structural transformation brought out by the process of economic transition has sharply reduced the share of agriculture in national income but its share in employment declined very slowly from 58 per cent to 51 per cent over the last decade. Indian agriculture, which still supports a large segment of population through employment and livelihood at a subsistence level, is in a serious crisis at present, as it has become unprofitable, particularly in the dry land and tribal areas. The process of globalization is not an unmixed blessing in view of many economic, social and cultural side-effects. There are also other equally serious policy issues and development challenges. Poverty has declined but malnutrition remained almost levelled off at an unacceptable level. The higher economic growth in the transition period was accompanied by worsening inter-state, rural–urban and intra-urban inequalities. Literacy has increased but educational quality has declined. The increasing employment in the industrial and service sectors is also associated with increasing levels of labour insecurity due to the process of temporary and contract work arrangements. Social and economic discriminations, though has declined, are not completely eliminated yet.

Foreword  

xvii

While India is one of the very few nations with a large young and working population, the social and health security implications of ageing remain a major future issue. Resource depletion and environmental degradation are another equally, if not more, serious challenges, as they will determine the health and sustainability of not only the population but also the economic growth process itself. Above all, the overall governance, which is crucial for policy formulation and program implementation, is falling far short of expectations. Unless these issues and challenges are immediately addressed, the economic transition that India has achieved can neither be complete nor sustainable. This volume covers some of the key issues and challenges that have emerged during and after the process of economic transition in India. These issues and concerns are addressed by eminent scholars with vast experience in their own field of research with varying disciplinary focus and using different methodological approaches. Taken as a whole, this volume provides vast information and rich insights into some of the major economic, social, environmental and institutional issues of our times. This volume is really a fitting tribute to Professor C.T. Kurien, as it relates with his favourite theme of economic transformation on which he himself contributed prominently over a long span of time. I congratulate and thank the authors and editors of this volume for their thought, contribution and commitment. I take this as an indication of the tremendous respect and affection that Professor C.T. Kurien has earned with the academic fraternity. I am positive that this timely volume will be a great addition to the literature and will certainly get an overwhelming positive response from students, researchers and practitioners of development economics both within and outside India. Professor R. Radhakrishna Former Chairperson, MIDS, Chennai Former Chairman, National Statistical Commission, New Delhi Chairperson, Centre for Economic and Social Studies, Hyderabad

Preface

T

his volume is published in honour of Professor Christopher Thomas Kurien. Professor Kurien is one among the few economists in India who has made a lasting contribution to economic research and policy. He is a researcher of distinction and a teacher par excellence with an academic career spanning over six decades. Graduated from the Madras Christian College and Stanford University, he joined the faculty of Madras Christian College. Later, he joined the Madras Institute of Development Studies (MIDS) as its first Director developing it as one of the topmost national institutes for social science research in India. He has been a passionate thinker and prolific writer publishing over 13 books and innumerable professional articles on various facets of the Indian economy. He was the recipient of the Lifetime Achievement Award from the University Grants Commission. It can be noted that his first book Our Five Year Plans was published in 1966 and his last and the 13th book Wealth and Illfare: An Expedition into Real Life Economics was published in 2012, when he was 80 years, testifying that his passion and commitment for research have overcome his age. We are conscious that bringing this volume in honour of Professor Kurien should not be a usual ritual but should be a real testimony proportionate to his immense contributions to the research and teaching in development economics. In this sense, we consider it to be appropriate to organize first a national-level felicitation seminar with contributions from scholars who are associated with Professor Kurien as students, co-workers and colleagues over his long career. The title of the seminar was Indian Economic Transition: Emerging Issues and Challenges, which is actually a recurring theme of his research and publications over the years. In this seminar organized in early 2011, over 20 papers were presented by 25 scholars from both India and abroad. The present volume includes a select set of these papers after a thorough process of review and revision. These papers cover some of the key issues and challenges related to recent development experience in India such as the implications of globalization, impact of economic liberalization on agriculture, food security,

xx   Indian Economy in Transition poverty and inequality, issues concerning social sectors such as education, human development, aging population and social discrimination, problems related to urban and peri-urban resource conflicts, environmental and ecological concerns, and the challenge of democratic governance, economic citizenship and decentralization. This volume represents a true canvass of issues and challenges that have emerged in the aftermath of the process of economic transformation brought about by the economic reforms implemented since the early 1990s. Admittedly, the coverage of issues in this volume is not complete and exhaustive but only selective and eclectic. But, the issues covered in the volume represent some of the major issues that have dominated the development discourse in the country during the past couple of decades. This volume does not pretend to provide conclusive answers to all the questions. Nevertheless, it has actually been successful not only in delineating the critical issues and major challenges facing the Indian economy at present but also in raising a large number of new questions and concerns that are likely to stimulate policy change and further research. We take this opportunity to record our sincere thanks and appreciation to a number of people and organizations who have made the timely publication of this volume a reality. First, we thank Professor R. Radhakrishna, Former Chairperson of MIDS and Current Chairman, Centre for Social and Economic Studies, Hyderabad, who proposed the idea of bringing a volume in honour of Professor Kurien and continued to provide us with support and guidance. We are also grateful to Professor K.L. Krishna, Chairperson, MIDS, for his cooperation and support. We also thank the Indian Council of Social Science Research, New Delhi, for providing funding support for the felicitation seminar and the Malcolm and Adiseshiah Trust, Chennai, for providing funding support for the publication of this volume. We are particularly grateful to the authors of all the chapters of this volume for their patience, cooperation and support during the entire process of review and revision. We also thank the faculty, staff and students of MIDS for their support. Finally, but more importantly, we thank SAGE Publications for bringing out this volume with such nice quality and in shorter time. We do hope this volume will receive the attention of researchers, students and policymakers. S. Janakarajan L. Venkatachalam R. Maria Saleth MIDS, Chennai

1

Indian Economy in Transition: Context and Overview of Issues S. Janakarajan, L. Venkatachalam and R. Maria Saleth

Introduction

D

espite a decline in India’s growth rate after the recession, Indian economy could overcome global recession more efficiently compared to many other developed and developing countries. In fact, India has been one among a very few developing countries which sustained a decent income growth during this period (Acharya, 2007). Indian economic recovery can be attributed in part to the economic liberalization policy that has resulted in an enormous and regular flow of foreign direct investment (FDI), rising foreign exchange reserves, rapid industrialization, changing pattern of consumption, and swift development of infrastructure facilities such as express highways, metro rails, flyovers and airports. However, the flipside of such economic transition has a grim source of concerns because the benefits of the growth process have not adequately percolated to the masses (Kabra, 2012). Moreover, the process of development has also generated serious social, economic, political, demographic, and ecological issues and challenges. The issues and challenges Indian economy currently facing are manifold and far reaching. They include impact of globalization on trade and

2  S. Janakarajan, L. Venkatachalam and R. Maria Saleth investment, high food inflation, agricultural stagnation and food security concerns, rural labour market insecurity, and the consequent rural–urban migration, ageing population, impacts of urbanization and urban pressure, lack of basic needs such as protected drinking water supply, rising pollution and declining environmental standards, falling overall human development indicators and ineffectiveness of democratic governance in addressing these key challenges. Meanwhile, the perpetual problems such as persisting poverty, widening economic inequality, farmers’ distress, discrimination, deprivation, social exclusion, poor healthcare and social insecurity, poor literacy rate, high under-five mortality rate and infant mortality rate, poor social security system, unhealthy sex-ratio, gender discrimination and so on also persist as serious concerns for the policymakers. In this volume, some of these issues and challenges are addressed by eminent scholars. This chapter sets the stage and context, and provides an overview of the 14 chapters that are included in this volume.

Context The United Nations Development Programme (UNDP) update for 2009 shows that 320 million Indians, almost 25 per cent of the population, live in extreme poverty. The World Bank’s global economic prospects show that 827 million of the Indian population live on less than $2 a day. On the other hand, according to Arjun Sengupta’s National Commission for Enterprises in the Unorganized Sector (2009), 836 million Indians (77 per cent of the population) live on `20 ($0.45) a day and 86 per cent of India’s work force is in the unorganized sector. He further adds that hardly less than one-fourth of India’s population enjoy the fruits of high economic growth. Suresh Tendulkar Committee report (Planning Commission, 2009) suggests that 37 per cent of India’s population still live below the poverty line. Let us look at some of the India-specific social indicators in relation to China and some South Asian countries as taken from the 2011 Human Development Report of the UNDP. The infant mortality rate in India is 134, whereas it is 101 in China, 97 in Sri Lanka, 145 in Pakistan and 146 in Bangladesh. The adult literacy rate in India is 62.8 per cent, whereas it is 94 per cent in China, 90.6 per cent in Sri Lanka, 55.5 per cent in Pakistan and 55.9 per cent in Bangladesh. The under-five mortality per 1000 live births in India is 66, but it is only 19 for China and 15 for Sri Lanka. In 2011, the life expectancy at birth for Indians is 65.4, but 73.5 for Chinese, 74.9 for Sri Lankans and 68.9 for Bangladeshis. The gross domestic product (GDP)

Indian Economy in Transition  

3

per capita on purchasing power parity terms for India is $3296 in 2009, but the comparable figures are $6828 for China and $4772 for Sri Lanka. The poverty levels seen in conjunction with poor human development indicators make it obvious that India is far away from achieving the UN Millennium Development Goal (MDG) of halving poverty by 2015. With such stark facts staring at the Indian government, one is justified in questioning the effectiveness of economic transition achieved with the economic liberalization policies in achieving the social and welfare goals. More seriously, there is also the challenge of sustainability of the development process. This is because the growth and development processes have concomitantly brought in a great deal of irreplaceable ecosystem losses and environmental degradations. Natural resources and water, in particular, are the greatest gifts of nature and they are used in all economic activities. Water has become a critical factor because even a small reduction in its availability will lead to a larger reduction in economic output and social welfare. All critical functions that are vital for human existence such as the hydrological cycle, decomposition and recycling process, crop pollination, etc., are highly valuable nonmarket ecosystem services, which the humanity is enjoying at a zero price. Indeed, the economic growth has been made possible only because of such ecosystem services provided by different natural and ecological systems. But, do we recognize the role of our ecosystems in sustaining economic growth? For most of us and, in particular, for the policymakers, the natural resources are thought to be the cheapest and also infinite in supply. The state and central governments and those who drive policies from behind are so carried away to believe that unlimited growth is possible (as well as desirable) along with eradication of poverty and malnutrition simply by pushing the growth factors upwards. It is believed that with higher growth and income, it is possible, in a later stage, to invest in natural capital to compensate the damages caused in the early stages. This is, in fact, the philosophy behind the Environmental Kuznets Curve hypothesis. But, have they ever considered the fact that the achieved growth in the GDP actually includes the costs of the severe damages caused to our natural capital (Brandon and Homman, 1995). Who will pay for it? Moreover, the nature, beyond a point, will not be able to automatically recover itself and recycle its resources. At that stage, the ecosystem will pull down the growth, as is evident from different parts of the country where polluting units are closed down due to serious ecological problems. What is really pernicious is the fact that the cumulative impacts of the damages on ecology and environment are so severe that it is hard to understand how one could undo the damage, especially in face of uncertainties caused by the looming threat of

4  S. Janakarajan, L. Venkatachalam and R. Maria Saleth climate change due to global warming. The irreversibility and uncertainty issues with the global environmental problems have profound implications on the sustainability of growth. Evidently, there has been some important initiatives in recent years in ‘greening India’s national accounts’. However, there is little success in this respect. The sustainability of growth and development depends largely on the key issues of ecological security, water security and food security. Moreover, it is important to realize that poverty and inequality are very closely interrelated with ecological losses and environmental degradation. This is for the simple reason that more the damage that are caused to ecology and environment, the worst affected are the people under poverty. Indeed, the 2011 Human Development Report notes that a ‘joint lens shows how environmental degradation intensifies inequality through adverse impacts on already disadvantaged people and how inequalities in human development amplify environmental degradation’. It further adds that ‘environmental trends over recent decades show deterioration on several fronts, with adverse repercussions for human development, especially for the millions of people who depend directly on natural resources for their livelihoods’. These observations are particularly relevant for India. Furthermore, agricultural sector in India is acutely stagnated for several reasons, most important of which are the high input costs, irregular and inadequate availability of key inputs such as water, and high rural indebtedness. The continuing and the widespread incidence of suicides among farmers can be directly attributed to unprofitable agriculture and the resultant rural indebtedness. This raises an important question of ensuring food security for over a billion people in India. Yet another annoying issue, which is also perhaps a flip side of the story of Indian growth and development, is the increasing menace of high degree of corruption at all levels. • How to make the poor and the vulnerable sections of the population to automatically take part in the emerging globalized market? • How does the mass get benefitted from high growth rates achieved by the country? • Are there prospects for Indian agriculture at all? How the question of food security is addressed in India? • Booming industries and expanding cities contribute to a severe stress on the infrastructure and environment. What are the ways to overcome them? • How powerful or fragile the Indian democracy is? Are there ways to negotiate an equitable process of growth within the prevailing power structures?

Indian Economy in Transition  

5

Overview of Issues U. Sankar’s chapter Globalization and Indian Economy: Issues and Concerns emphasizes the disproportionate benefits of globalized trade and economic liberalization between developed and developing economies. While globalization of economies for international trade and cooperation benefits developed countries in a large measure to further strengthen their economies, developing or poor countries suffer mainly due to poor bargaining capacity. He argues that the globalization efforts have not benefitted the poor countries in any substantial manner, particularly in reducing poverty, inequality and deprivation. Much advocated measures such as capacity building in developing countries, technical assistance and aid for trade remain only as normative concerns. Furthermore, trading in agricultural commodities is distorted due to very high subsidies prevalent in Europe, US, Australia and other developed countries. What makes it worse is the fact that in most of the trade negotiations the agenda is formulated by the developed world, which quite heavily reduces the scope and purpose of the several rounds of trade negotiations that have been held so far. Despite all trade liberalization policies adopted since 1991, India’s total export of world merchandize increased from 0.6 per cent in 1993 to 1.1 per cent in 2009; while for China, it has gone up from 0.9 per cent in 1993 to 8.7 per cent in 2007. Interestingly, the share of foreign trade in services between 1991 and 1992 and 2009 and 2010 has been favourable. During this period, exports increased by 36 times and imports by 31 times. FDI in India has also gone up during the period 1991 to 2010–11 from `0.08 billion to `34.61 billion, at the same time, the outflow of FDI has also gone up from `0.01 billion to `14.897 billion. Foreign exchange reserve is yet another indicator used to measure the performance of an economy. Thus, India’s foreign exchange reserve increased from $9.2 billion in 1991–92 to 279.1 billion in 2009–10. By this period, India has also emerged as the fourth largest foreign exchange reserve, next to China, Japan and Russia. Nevertheless, as far as India’s external debt is concerned, the picture is dismal. It was $85.3 billion in 1992, which has gone up to $261.2 billion in March 2010. The chapter concludes with an emphatic observation that while international cooperation is more seriously advocated by the developed countries, the issues concerning environment and climate change are given only the least priority. Abhirup Sarkar’s chapter Food Price Inflation and Public Procurement: The Indian Experience discusses the issue of food inflation in the country in the context of high growth performance experienced in the country in recent times. The author feels that while the growth performance is over-celebrated

6  S. Janakarajan, L. Venkatachalam and R. Maria Saleth in the country, intimidating food inflation is not given due importance. He indicates that the high growth performance of the economy has slightly been trickled down to the grassroots, which might have increased the demand for food grains in the country. This may have been one of the reasons for food inflation. It is also mentioned that the demographic growth is not commensurate with the overall production and productivity of land in the country. Unless some urgent measures are undertaken to improve the productivity of land, the looming threat of food insecurity in the country would become further intensified. At the same time, the author argues that a mere increase in production and productivity of food grains does (not?) ensure food for poor; however, it is more important to ensure that the fruits of growth reach the poorest so that the purchasing power of this section of the population also improves at least to cope with the food inflation. Agricultural stagnation, profitability of farmers and food security are other pressing concerns in India currently. Venkatesh Athreya in his chapter Agrarian Changes under Reforms: A Case Study of Tamil Nadu, 1980–2025 effectively discusses agricultural performance of Tamil Nadu in comparison with India during the period 1980–2005 using both aggregate and village-level data. The village-level information used in this chapter is based on the first survey conducted in a set of villages in Tiruchirapalli district in the late 1970s and subsequent surveys. Agrarian transformation has been noticed in Tamil Nadu in terms of social and economic mobility over a period of 25 years (1980–2005). The author acknowledges that although there is a rise in productivity of major crops without any technological breakthrough, the area and production have come down. One of the major constraints noted in this chapter has been limitations in expansion of irrigation in Tamil Nadu, which constraints agricultural productivity and vitality in the state. Furthermore, like many other regions in the country, Tamil Nadu has witnessed overall agricultural stagnation and agrarian distress, which is a large measure attributable to reduced farm subsidies (in particular, chemical inputs), unprofitable farm output prices, impact of import competition on prices of domestic output, difficulties in accessing institutional credit, etc. One of the noticing features, however, has been a substantial growth in non-agricultural employment, which is evident from the details of the resurvey of villages. It is a big question mark whether the rise in non-farm employment has resulted in the overall well-being of the population. A. Narayanamoorthy’s chapter Is Farming Profitable to Farmers in India? Evidence from Cost of Cultivation Survey Data supports substantially the conclusion of Athreya that farmers have incurred losses despite there has been

Indian Economy in Transition  

7

increase in production and productivity. Using the cost of cultivation data for six important crops for the period 1975–2007, he demonstrates the substantial losses made by farmers, particularly during post-1990s. Disparity in employment pattern, wages paid and employment security between men and women are well documented. Agricultural stagnation resulting in massive rural–urban migration has hard hit the women’s employment opportunities adding to their vulnerability. Brinda Viswanathan and Padmini Desikachar in their chapter Measuring Labour Market Insecurity in Rural India: A Gendered Analysis bring to light labour market insecurity, particularly for rural women, which is the much neglected and unexplained area of research. In the Indian context—perhaps both in rural and urban areas—women’s participation in labour market is more uncertain, insecure and gender-insensitive. This chapter with this background uses a rigorous statistical approach in order to construct an index of labour market insecurity to conduct a comparative analysis across gender, regions or socio-economic groups. Authors use National Sample Survey Organisation (NSSO) data for the year 2004–05 for rural India. In the final analysis, authors conclude that women are found to be much more labour market insecure than men. Indeed, this chapter has significant policy relevance, in particular, for poverty alleviation and empowerment of women in India. Literacy is one of the most important human development indicators which largely contributes to the well-being of people. Most discussed indicators in the context of schooling are student–teacher ratio, number of years spent in school, dropout rates, etc. The chapter by S. Chandrasekhar and M.H. Suryanarayana ‘Education for All’ in India: Issues, Policies and Imperatives brings to light an important aspect of school education, namely, ‘school life expectancy’ (SLE). The authors provide estimates of SLE across geographical regions in India using the NSSO data on ‘Participation and Expenditure in Education’ from the survey conducted during the 52nd Round (July 1995 to June 1996) and 64th Round (July 2007 to June 2008). Among the determinants of SLE, poverty, gender and nearness of domicile units to school appear to be prominent. Finally, it is suggested that the policies should go beyond conventional measures such as budgetary allocation and it is imperative that one looks into issues such as ‘enrolment rates, dropout rates and SLE and also focus on quality of schooling and learning outcomes’. S. Irudaya Rajan’s chapter The Emerging Ageing Scenario in India, 2001–51 discusses yet another crucial demographic factor, namely ageing of the population. Ageing is already an important issue across developed world and emerging to be a significant challenge in the most populous

8  S. Janakarajan, L. Venkatachalam and R. Maria Saleth countries such as India and China with India accommodating 77 million elderly persons according to the 2001 census. This figure is rapidly growing every year. Irudaya Rajan’s chapter provides a trend analysis of ageing population in the past and projects the emerging scenario for the next 100 years, using the 2001 Census data. The projected 60+ population in 2101 is 504 million (30 per cent of the total population) 70+ population is 273 million (17.2 per cent) and 80+ population is 105.5 million (7.1 per cent). Thus, this chapter addresses an important policy issue of much needed social security cover and welfare measures for the growing elderly population in this country, in particular elderly widows and those of abandoned. Degree of urban expansion in India has been quite rapid. Indeed, in states such as Tamil Nadu the degree of urbanization is over 40 per cent according to 2011 census. Urban expansion affects the economy of both states and the nation. After all, cities are regarded as engines of growth. But the impact of urbanization falls differentially among segments of the population, more so the people who live on the periphery of city. Furthermore, the stress on the resource base, such as water, is turning out to be acute. Janakarajan’s chapter Impacts of Increased Urban Demand for Water on Livelihood Resilience in Peri-urban Areas of Chennai brings out the impacts of urbanization on natural resources and livelihoods options of people in the peri-urban areas. Rapid urbanization in developing countries and associated rapidly increasing demand for water is putting increasing pressure on the areas that supply water. In the case of Chennai, sources of urban water supply are located both in the peri-urban and more distant rural areas. Urban demand for water in southern India has been increasing at an alarming rate, at the same time there has been a rapid increase in the competing demand for water across uses and users. The net result is that water resources are being over-exploited and the rate of over-exploitation appears to have been accelerated in areas that have also been exporting water to urban areas such as Chennai. Findings presented in this chapter indicate clearly that export of water from peri-urban villages has significantly contributed to the steep lowering of groundwater table. Many surface water bodies such as tanks are in the process of deterioration due to misuse and encroachments. Most importantly, women and landless agricultural labourers who lost their traditional employment due to urban expansion are left with no choice but seeking odd jobs in urban areas or remain unemployed. This creates problems in the urban areas and increases the vulnerability of this social group. Most macroeconomic models, planners, mainstream and progressive economists who are involved in policy making have failed to find solutions to major issues of the liberalized global market economies, such as

Indian Economy in Transition  

9

growing ecological and environmental insecurity which have a huge bearing on growing poverty, inequality and vulnerability. Many also conclude that all these are manifestations of market failure. M.N. Murty, in his chapter Design of Economic Instruments and Participatory Institutions for Environmental Management in India, examines the possibilities of using economic instruments, especially pollution taxes in combination with a novel method or what he refers to as the ‘bargaining approach’ in which he advocates people’s participation for establishing a decentralized pollution control mechanisms. ‘The bargaining methods providing incentives for all stakeholders of an environmental resource to participate in its management result in decentralized solutions and savings in the transaction costs’. He uses a case study of five coal-fired thermal power generating units in Andhra Pradesh for estimating pollution taxes using a mathematical model. However, household level pollution due to use of conventional fuel of firewood and cow dung raises an enormous concern of health hazard for rural population, in particular women and children. K.S. Kavi Kumar and Brinda Viswanathan in their chapter Household-level Pollution in India: Patterns and Projections analyzes the ‘pollution–income relationship (for both local and global pollution), separately across rural and urban households in India based on unit record data on fuel consumption obtained through National Sample Survey 2004–05’. The trends in patterns of fuel consumption across different regions in India highlights the extent of local and global emissions of carbon dioxide and other green house gases. On the basis of the estimated relationship, the study makes an attempt to project household level pollution for 2026. One of the most significant points raised by the authors relates to the severe health burden falling, in particular, on women and children arising out of the constant use of fuel wood not by choice but due to compulsion. Water governance is yet another issue which warrants fair attention. Fractured institutions, myopic approach and lack of commitment have all resulted in a big mess in the water sector in India. Institutional reforms in the water sector in India have been a much debated subject in recent times, especially after the liberal involvement of multilateral agencies such as World Bank. L. Venkatachalam’s chapter Market-based Institutional Reforms for Water Allocation in India: Issues and the Way Forward discusses various aspects of market-based institutional reforms advocated in the water sector based on an extensive literature. Lack of efficiency, transparency and accountability mar the existing institutional arrangement. Creation of institutional arrangement in the present fragmented regime would mean a huge transaction costs with no guarantee for an efficient water management

10  S. Janakarajan, L. Venkatachalam and R. Maria Saleth system. Therefore, the chapter concludes that market-based institutional interventions are better under the present context in India, which is ‘capable of generating non-zero sum outcomes through efficient, equitable and sustainable water allocation mechanisms’. All maladies such as poverty, inequality, lack of drinking water and sanitation, malnutrition and so forth are global concerns. In the Millennium Declaration, the 191 member countries of the UN have committed themselves to do away with these maladies by the year 2015 from the poor and developing nations. The most important of such challenging tasks are eradication of extreme poverty and hunger, achieving universal primary education, reducing child mortality rates and ensuring environmental sustainability. Sudipto Mundle in his chapter Millennium Development Goals: How is India Doing? attempts to measure development performance of India on the basis of evaluating MDGs. The author assesses India’s MDG performance based on the Central Statistical Organization report (2009), which provides data for the period 2006–08. The author claims that as regards poverty reduction, based on the CSO projections, perhaps the country would be well on track. But the regional disparities pose a very stiff challenge: the poorest states of the country may not achieve the target! India has considerably moved up the per capita income scale compared to 1990s, and continues to do so at a very rapid rate as one of the fastest growing among the major economies of the world. Within India the poorest states with the lowest per capita incomes will find it most difficult to achieve this target, which is actually biased against them. As regards reduction of hunger by half, the author indicates that India may not achieve this target because as per the MDG declaration proportion of underweight children in 1990 should have been reduced from 54 per cent to 27 per cent by 2015, but the projected outcome is going to be around 41 per cent. Also, for achieving 100 per cent universal education, the author indicates that India could achieve this target well in time. However, with regard to the reduction of child mortality rates, India’s performance is poor: the target for India is to reduce the under-five mortality rate at 42 per thousand live births but the anticipation is around 70 and ‘in the worst performing states like UP, MP, Chhattisgarh, Orissa, Bihar and Jharkhand, the expected outcome is more than 90 per thousand live births’. Similarly, achieving other MDGs such as environmental sustainability, maternal health, combating HIV and other diseases, gender empowerment and gender equity is questionable. The issues of discrimination and governance are the two primary concerns which needed to be discussed in the context of the chapters discussed

Indian Economy in Transition  

11

above. Barbara Harriss-White and Aseem Prakash in their chapter Social Discrimination in India: A Case for Economic Citizenship very meaningfully discuss the issue of continuing social discrimination in India despite adequate provisions laid down in the Constitution. The authors explore ‘the reasons whereby individuals with the same endowments (assets, entitlements, rights, skills, education, experience) but differing in social group (caste, religion, gender, ethnicity, etc.) command different tangible returns (income, development benefits, realised entitlements) and less tangible ones (such as dignity and respect)’. The authors argue that different types of discrimination in Indian society is institutionalized through several formal and informal organizations regardless of principles of equality as laid down in the Constitution. Many developmental projects executed since the time of independence have not yielded anything positive to eradicate the abject poverty and social discrimination in the country. The authors argue that the regime of discrimination in India is such that although a vast majority have ‘fewer claims’ on state and society (in comparison with others who belong to the dominant classes), such discriminated class of population struggle for sustaining life and earning everyday livelihood. This is understood to be in sharp contrast to what the Indian Constitution promises to its citizens. In the process of ‘new liberalized world’, which is driven by swift market decisions, forces of competition and differentiation, a vast majority is fast losing their access to means of production, in particular land. A new class of differentiated mass is emerging everyday for whom there is a great sense of deprivation and exclusion. And, given the Indian economy where already one-third of its population live below poverty line, the feeling of participation in the economic boom, economic growth processes and claims on the Indian government have been either dwindling or fast tending towards zero. And the final question: What do we achieve at all through democratic– political processes? Or should one go through the activist mode to get things done? John Harriss, in his chapter ‘Rural Poverty: Policy and Play Acting’ Revisited. Why Doesn’t the Indian State Do Better in Regard to Poverty Reduction? discusses different aspects and concerns pertaining to democratic governance in India. He regards India as the largest and at the same time more robust parliamentary democracy in the world, but with the abysmally poor record of service deliveries. He wonders how voters tolerate such failure. Why are even poor people ready to pay for private schooling rather than exercising their voice to demand a better public service? Why do voters apparently tolerate high levels of corruption in these and other public services and on the part of their politicians—quite a high proportion of

12  S. Janakarajan, L. Venkatachalam and R. Maria Saleth whom have criminal records? Why is it that the drive for progressive social legislation has come through judicial activism rather than through a political process? These are some of the crucial and relevant questions addressed in this chapter which have enormous contemporary relevance. In the final analysis, he concludes that while 73rd Amendment of the Constitution to bring in the rule of decentralized participation in governance through Panchayat Raj institutions is much appreciated, their practical achievements have been limited barring a few states such as Karnataka.

Implications for Research and Policy To what extent have we fulfilled the welfare and human development requirements in the country, which involves developing capabilities of people for living a long and healthy life with access to education and basic needs essential for a decent living? It is the responsibility of political and democratic institutions to provide the much needed social and economic order, peace and security and ensure the overall welfare for the people. In a democracy, political institutions are said to be more powerful in not only providing peace and welfare but also protecting human dignity and human rights. The chapters presented in this volume may, at least, help readers to take stock of the current situation and contribute to the future directions of research and policy. The contributions of this volume to research and policy are many and varied. Some of them, which are required to be flagged here, are discussed below. 1. Poverty and inequality persist despite rapid growth experienced in the country. Does it mean that the fruit of the recent growth and development in India has not percolated enough to the grassroots? To what extent simple money transfer to the poor, as planned under different development and welfare programs, would help to reduce poverty and inequality? Are there other durable and long-term policies and institutional alternatives that could reduce poverty and inequality on a more permanent basis? If so, what are they? How to identify these policies and institutions? Do the existing cognitive constraints enable us to identify ‘appropriate’ policies and institutions? 2. Growth has led to severe ecological and environmental losses. How to reach a balance between the two in order to make the development sustainable? The cumulative impact of the damages done to

Indian Economy in Transition  

13

ecology and environment is so severe that it is hard to understand how these could be ignored in the calculation of the true GDP. In this framework, it is extremely relevant to look into the issues relating to environmental accounting and the need for greening the national income accounts. Nonetheless, there are some unresolved concerns which need further research. How to estimate the impact of ecological and environmental losses on the future generation? How about those damages which cannot be redeemed, for instance, depletion of groundwater resource and species extinction? How to incorporate the value of the environmental benefits and costs within the macroeconomic framework so that the sustainability of development can be monitored and ensured? 3. One of the emerging debates in the context of economic growth relates to pollution control. The existing laws and related institutional mechanisms do not prove to be effective in many emerging countries, including India. This problem, in particular, is emerging as a major threat to human well-being. Health impact of air and water pollution is indeed the most threatening to the lives and livelihoods of millions of people in India. Is environmental tax or green tax an answer to the growing pollution threat? How to operationalize these taxes in order to make pollution control measures effective? Are there other ways, including the involvement of local and global stakeholders, to combat the pollution menace? These are some of the issues which need further research. 4. In an era of economic liberalization and rapid growth, key natural resources such as water need to be managed more carefully and efficiently. In an environment in which existing government agencies and utilities in India perform poorly, can the market be an answer? If so, to what extent market or other forms of institutions can fulfil the requirements of the people in a country such as India where over 30 per cent of the population lives below poverty line? Or, are there ways to streamline public utilities to perform and deliver better services? 5. Rapid change in lifestyle, in particular among the middle class and upper-middle class population of the country, is considered to be the key for economic growth and prosperity that we have seen in the past few years. This trend is likely to continue for many years to come and it is predicted that India will emerge as the world’s fifth largest consumer market by 2025. But, there are quite a good number of questions which need to be answered in this context.

14  S. Janakarajan, L. Venkatachalam and R. Maria Saleth What is the energy requirement of India and how the gap between the demand and supply is going to be met? What will be its impact on the distribution of income? What will be its impact on carbon emission and its contributions to global warming? Interestingly, as one of the chapters suggests here, the burning of the firewood as a cooking medium is turning out to be a significant contributor to carbon and other greenhouse gas emissions, besides contributing to severe health problems, particularly to women and children in rural India. How to switch over from a fossil fuel-based economy towards more environmental friendly energy-based economy? This indeed is a critical policy issue that needs further research. 6. One of the important emerging concerns of the growth experience has been food inflation. It affects both the poor and the rich in the urban and rural areas. If at all the income of the poor has gone up a little in the recent times as claimed by the Planning Commission, this has been neutralized by the rising food inflation, making the real income of the poor to fall or remain the same. Therefore, can one conclude that the growth and development as experienced in this country is more leaning towards rich and middle class? How to address the imperfections in the agriculture markets? How to bring the producers and consumers together so that the ‘welfare leakages’ in the market can be plugged out? 7. Agriculture is seemingly a clear casualty of the liberalization policy. Near stagnation in agricultural sector for many years has pushed farmers to extreme distress leading to widespread suicidal deaths. Coupled with this are the disturbing trend of withdrawal of subsidy to agricultural inputs such as fertilizers, acute water scarcity, rising input costs, and irregular supply of electricity to farm sector have all made agriculture unprofitable. As a result, there has been a largescale sale of prime agricultural land for non-agricultural purposes as seen in almost all states in India. The key issue, therefore, is how to revive the farm economy and ensure its profitability. Many solutions are available but the issue remains to their timely implementation. 8. As a consequence of persisting distress in agriculture, many small and marginal farmers and landless agricultural labourers have resorted seeking non-agricultural employment opportunities in cities and towns. While this has been a sort of a survival strategy for those who have migrated from rural areas, how such distressinduced migrations contribute to urban stress? Do such migrations help in the reduction of poverty or it simply results in conversion

Indian Economy in Transition  



9.

10.

11.

12.

15

of rural poverty into urban poverty? The social and infrastructural implications of the steep rise in urban slum and homeless population are yet to be rigorously evaluated. There is a great deal of discussion on labour market insecurity particularly in rural India. To what extent has the implementation of rural employment programs helped in ensuring labour security in rural India? Do these programs actually contribute to poverty reduction? Or, have they created labour scarcity in the agriculture sector by way of transferring the agricultural labourers towards rural employment programs? What about the impact of various other welfare schemes of the state and central governments on the labour market structure in rural areas and the resulting impact on agriculture? The target date for the UN Millennium Declaration is coming to a close in 2015, but most of the poor and developing countries, including India, have not been anywhere near achieving the MDGs The key issue is why were these countries not able to achieve the MDGs? What are the bottlenecks? Since the time MDGs were declared, the world has gone through a significant transformation with more market penetration. New powers are on the rise. Have such transformations been conducive or impediments to the implementation of MDGs? One fundamental question is whether the changing market rules and interdependent regimes help or hinder implementing the MDGs? How are the MDG concerns shared and viewed by major global economies under the transforming and regrouping conditions? One of the most important indicators of human development is literacy rate. A mere budgetary allocation for education will not help in achieving human development. One needs to go beyond this conventional approach and look for a horde of indicators such as SLE, gender disparity in education, social discrimination in providing education, unhealthy teacher–student ratio, and lack of basic infrastructural facilities such as protected drinking water and sanitation in schools. As one assesses these large set of literacy related indicators, the impression is that India has to go a long way in raising the level of literacy rate essential to achieve the human development. A key component of social welfare relates to the social security cover for the growing elderly population. Of late, this issue has emerged as a major policy concern for India with the growing number of aged population. This emerging social concern needs immediate attention as there have been growing cases of destitute and abandoned

16  S. Janakarajan, L. Venkatachalam and R. Maria Saleth elderly people. How to modify the existing human development index (HDI) to accommodate other important issues (such as water supply and sanitation) so that the HDI can reflect the true welfare of the individuals. 13. One of the stunning revelations of the 2011 census has been the huge jump in the urban population. While urban population has been about 31 per cent at the national level, it has been much higher in states such as Tamil Nadu (49 per cent), Kerala (48 per cent), Maharashtra (45 per cent), Gujarat (43 per cent), Karnataka (39 per cent), Punjab (38 per cent), and Haryana (35 per cent). The main impact of this rapid urbanization has been the rising pressure on urban infrastructure, especially housing, transport and drinking water supply. In this context, one of the important issues that need further research is the nature and impacts of the transformation process of peri-urban areas that are located around the vicinity of major urban centres. These peri-urban locations not only suffer from lack of livelihood options for the population but also face the diversion of key natural resources such as land and surface and groundwater to the meet the needs of the sprawling cities. 14. Finally, democratic governance is an area that calls for a more focussed research. Growing concerns of corruption, lack of transparency in governance and persisting forms of discriminations are some of the key challenges which the Indian democracy is still struggling to resolve. Some of the questions which deserve further debate include: Is Indian democracy at a risk of failure? Does the political process remain participatory, prescriptive or authoritarian? Is our democracy still a nascent one and, therefore, the economic, social and political costs that we have paid and continue to pay for its maintenance could be excused? The chapters included in this volume show that Indian democratic governance is still far away from delivering these fundamental services to the majority of this country. Democracy cannot be blamed for such a poor show. But, at the same time, there appears to be a clear case of renegotiating democracy.

Concluding Remarks The volume represents a wide canvass of issues and challenges that have emerged in the process of economic transformation brought about by the economic reforms implemented since the early 1990s. Admittedly, the

Indian Economy in Transition  

17

coverage of issues and challenges found in this volume is more eclectic and selective rather than extensive and exhaustive. However, they are certainly the ones that are dominating the development debate in India during the past three decades. The treatment is both disciplinary and trans-disciplinary in nature. The methodological frameworks are based on descriptive, analytical and quantitative approaches. While the chapters individually address some dimensions of development, the volume, taken as a whole, provides an overall picture of an assessment of the kind of development process that is ongoing in India. The volume tries to provide answers to some issues, but it also raises several new questions. The answers can become the basis for change in development policy. The questions, on the other hand, can give direction for future research.

References Acharya, S. (2007), India’s Growth: Past and Future, http://depot.gdnet.org/cms/ conference/papers/acharya_plenary1.pdf Brandon, C. and K. Homman (1995), The Cost of Inaction: Valuing the Economywide Cost of Environmental Degradation in India, Asia Environment Division, World Bank, Washington, DC. Kabra, K.N. (2012), Appropriate Development: People First, Institute of Social Sciences, New Delhi. Planning Commission (2009), Report of the Expert Group to Review the Methodology for Estimation of Poverty, Government of India, New Delhi. Sengupta, A. (2009), The Challenge of Employment in India: An Informal Economy Perspective, National Commission for Enterprises in the Unorganized Sector, New Delhi. United Nations Development Programme (2009), Human Development Report: Overcoming Barriers: Human Mobility and Development, UNDP, New York.

2

Globalization and Indian Economy: Issues and Concerns U. Sankar*

1. Introduction

B

hagwati (2004) defines economic globalization as diverse forms of international integration, such as foreign trade, multinational direct foreign investment, movements of short-term portfolio funds, technological diffusion and cross-border migration. Diffusion of knowledge is another form of globalization. The main factors contributing to the process of globalization include reductions in transport and communications costs, rapid developments in information and communication technologies (ICTs) and adoption of outward-oriented economic policies by many governments. In a globalizing economy, distances and national boundaries have diminished. Financial globalization has also proceeded at a very rapid pace over the past two decades. Firms are organizing themselves into transnational networks. The markets and the productions of different countries have become interdependent and countries are linked through trade, capital and technology flows. * The author is grateful to Barbara Harris-White, Ananta Kumar Giri and C.T. Kurien for their comments and suggestions.

Globalization and Indian Economy  

19

Establishment of global regimes for international cooperation and governance enlarge opportunities for the member countries in certain areas, but they do restrict their domestic policy spaces in other areas. When countries at different stages of development participate in the creation of global regimes, developing countries often realize their poor bargaining ability at the agenda setting stage and in coping up with the changes at the implementation stage. There are different views of economists on economic globalization and functioning of the global institutions. Bhagwati views economic globalization an unambiguously good thing, with a few downsides that thought and effort can mitigate. Stiglitz (2002) notes many failures of globalization and suggests that international economic agencies must be reformed, made more transparent and accountable, and less dependent on special interests. Kurien (2002) says revolutionary changes in ICTs and rapid spread of financial capital might bring in the coming decades a period of incessant transformation. He notes that the ease with which currencies and liquid capital enter and exit shakes up national economies in many ways, altering their interest regimes, monetary management, fiscal policies and above all, giving the impression that little can be done to counter the sway of capital and that the process is irreversible. (p. 2)

Kaul et al. (2003) note that the existing institutional architecture for global governance exhibits sign of adaptive inefficiency, with institutional changes lagging behind rapidly evolving realities. This chapter considers opportunities and challenges for India in reaping the benefits of globalization while safeguarding her national interests. It assesses her experiences and concerns in participation in the global regimes. Section 2 deals with the features of the global trading regime. Section 3 deals with trade in goods and services. Section 4 deals with capital flows and issues related to management of capital flows. Section 5 is devoted to the intellectual property regime. Section 6 contains concluding remarks.

2. The World Trading Regime The World Trade Organization (WTO) charter establishes the WTO as an international organization and defines its functions and structures. It has four annexes. Annex 1 covers General Agreement on Tariffs and Trade (GATT) 1994 and related agreements, General Agreement on Trade in

20  U. Sankar Services (GATS) and Trade-related Intellectual Property Rights (TRIPS). The GATT has brought within its ambit agriculture and textiles and clothing for the first time. Liberalization of trade in services has just begun under the GATS. The TRIPS has established multilateral disciplines governing intellectual property rights (IPRs). Annex 2 covers the dispute settlement mechanism and Annex 3 trade policy mechanism. A noteworthy feature is that Annexes 1 to 3 are parts of a ‘single undertaking’ approach and this is binding on all members. Annex 4 contains plurilateral agreements that apply only to members who signed them. The fundamental principles which are the foundations of the multilateral trading system (MTS) are: (a) most favoured-nation (MFN): treating all countries equally, (b) national treatment (NT): treating foreigners and locals equally, and (c) freer trade: tariff reductions and removal of non-tariff barriers (NTBs). There are some exceptions to these principles. The Dispute Settlement System of the WTO is based on clearly defined rules, with timetables for completing a case. In terms of the WTO structure, the highest authority is the Ministerial Conference. At the second level, there are three bodies: the General Council, the Dispute Settlement Body and the Trade Policy Review Body. All the three bodies consist of all WTO members. At the third level, there are Goods Council, Service’s Council and TRIPS Council. At the fourth level, there are many committees. A unique feature of the WTO is its democratic structure. As it is run by its member governments, all major decisions are made by the membership as a whole. Decisions are generally made by consensus; when consensus is not possible the WTO allows for voting on the basis of ‘one country, one vote’. The specific situations are (a) three-quarters of votes for an interpretation of any of the multilateral agreement and waiver of an obligation imposed on a particular member by a multilateral agreement, (b) approval by all members or by a two-thirds majority to amend provisions of the multilateral agreements depending on the nature of the provision concerned and (c) a two-thirds majority to admit a new member. The form and structure of the WTO provide a platform for countries in different stages of economic development to articulate their views and concerns. Tariff bindings and gradual elimination of NTBs increase the predictability of market access. The Trade Policy Review mechanism is an open and transparent mechanism for reviewing countries’ trade policies and the implementation issues. The Dispute Settlement Mechanism has elements of an international judiciary. The Agreements incorporate special provisions for developing and least developed countries. The ‘special

Globalization and Indian Economy  

21

and differential treatment’ (S&DT) provisions allow developed countries to treat developing countries more favourably than other WTO members. These include non-reciprocity in trade negotiations between developed and developing countries, extra time for developing countries to fulfil their commitments, and various means of helping and safeguarding the interests of developing countries. This global regime provides an opportunity for developing countries to globalize their economies and achieve high growth rates. Firms in developing countries have an opportunity to restructure their business keeping in view of global trading opportunities on the basis of comparative advantage. Access to foreign capital market, especially in the form of foreign direct investment (FDI), not only can supplement domestic savings for capital formation but also result in transfer of improved and environmentally sound technologies and associated knowledge, skills and management practices, and thereby achieving dynamic efficiency gains in a sustainable manner. The MTS has two noteworthy achievements. First, it has resulted in expansion of new trade relations among countries. Based on the International Monetary Fund (IMF) Direction of Trade Statistics relating to bilateral trade for the years 1980 and 2005, World Trade Report 2007 notes that the median number of import sources had increased from 53 in 1980 to 105 in 2005. In 1980, there were only positive import flows for 59 per cent of all possible North– South country pairs and just 18 per cent of all possible South–South country pairs. By 2005, there were positive import flows for 83 per cent of all possible North–South country pairs and 39 per cent of all possible South–South country pairs. (p. 247)

Second, between 1950 and 2005, the world GDP expanded eightfold but the world trade had grown more than 27-fold. Between 1993 and 2005, the share of developed countries in the world merchandise export fell from 73.3 per cent to 62.6 per cent, while the share of developing countries increased from 25.2 per cent to 34.1 per cent. This global regime also poses many challenges to developing countries. Member countries are required to establish a WTO-consistent economic policy regime which necessitates legal, institutional and administrative reforms. While this regime enlarges the opportunity set for global transactions, it constrains the policy space of governments. There is growing awareness among developing country members that the anticipated benefits of trade liberalization have not accrued to most of them. They had

22  U. Sankar reservations about the Agreement on Agriculture and the Agreement on Trade-related Intellectual Properties, but joined the WTO as all the agreements come under a single undertaking. Many countries could not seize the trading opportunities because of structural adjustment problems, poor transportation and communication facilities, high cost of compliance with technical barriers to Trade and Sanitary and Phytosanitary Agreements, and other trade-related costs. The access and participation costs for many small developing countries remain high, both at the negotiating and the implementation stage. Developing countries perceive that the S&DT provisions have not been implemented effectively. Measures such as capacity building in developing countries, technical assistance and aid for trade remain only best endeavour measures and are not mandatory. The world trade in agricultural goods is highly distorted because of high level of subsidies in the European Union (EU), US and other developed countries. Many developed countries use NTBs such as tighter environmental standards, labour standards and conformity required with process and production methods. These regulations are proliferating, more frequent, stringent and complex (UNCTAD, 2004). There is also asymmetry in trade liberalization. Although there is considerable liberalization in flow of goods and capital, there are many barriers to mobility of labour and technology. The Doha Round of trade negotiations began in 2001 as a Development Round. On most negotiating issues, the agendas are set by developed countries and the participation rates of developing countries in terms of written and oral presentations are poor. Only recently Brazil, China, India and South Africa could make their presence felt in the negotiating forums. Despite 10 years of negotiations and hard bargaining, the Doha Round of negotiations is in a stalemate.

3. Trade in Goods and Services Even though the process of domestic liberalization and external sector reforms began in India in the mid-1980s, broad-based economic reforms covering both domestic and external sectors were initiated in India in 1991 following the balance of payments (BoP) crisis. The major external sector reforms in the 1990s were dismantling licensing on machinery and raw material imports, devaluation of rupee by 18 per cent, lowering of peak industrial tariffs from 355 per cent in 1991–92 to 65 per cent in 1994–95, and convertibility of rupee in the current account in 1994.

Globalization and Indian Economy  

23

Trade in Goods In April 2001 consumer goods were freed of import licensing. According to the WTO Trade Policy Review, 2007, 73.8 per cent of India’s tariff lines were bound. The bound tariffs for all goods in 2005 were 49.2 per cent—114.2 per cent for agricultural goods and 34.9 per cent for nonagricultural goods. The simple average of ad-valorem applied rates was 19.2 per cent for all goods—37.6 per cent for agricultural goods and 16.4 per cent for non-agricultural goods. India’s average peak customs duty for nonagricultural products fell from 40 per cent in 1999–2000 to 10 per cent in 2007–08. Customs duty as percentage of imports was 7.4 in 2008–09. Only 14 per cent of the tariff lines accounting for 3 per cent of the imports faced customs duty more than 10 per cent (Economic Survey 2009–10, p. 172). Use of import restrictions under the GATT Articles XX and XXI has declined to 3.5 per cent of tariff lines. India monitors imports of about 300 sensitive products. Table 2.1 provides data on India’s merchandise trade from 1991–92 to 2009–10. During this period exports increased by 19.2 times and imports by 28.3 times, while the increase in GDP was 9.5 times. Compared with a compound annual growth rate (CAGR) in exports of 21 per cent during Table 2.1 India’s Foreign Trade in Goods 1990–91 to 2009–10

Year (1)

Exports ( ` crore)

Imports ( ` crore)

GDP at Market Prices ( ` crore)

Exports Plus Imports/GDP (per cent)

(2)

(3)

(4)

(5)

1991–92

44,042

47,851

654,729

14.0

1992–93

53,688

63,375

752,591

15.6

1993–94

69,751

73,101

865,505

16.5

1994–95

82,674

89,971

1,015,764

17.0

1995–96

106,353

122,678

1,191,813

19.2

1996–97

118,817

138,920

1,378,617

18.7

1997–98

130,101

154,176

1,527,158

18.6

1998–99

139,752

178,332

1,751,199

18.2

1999–00

159,561

215,236

1,952,036

19.2

Table 2.1 continued

24  U. Sankar Table 2.1 continued

Year

Exports ( ` crore)

Imports ( ` crore)

GDP at Market Prices ( ` crore)

Exports Plus Imports/GDP (per cent)

2000–01

203,571

230,873

2,102,314

20.7

2001–02

209,018

245,200

2,278,952

19.9

2002–03

255,137

297,206

2,454,561

22.5

2003–04

293,367

359,108

2,754,620

23.7

2004–05

375,340

501,065

3,239,224

27.1

2005–06

456,418

660,409

3,706,473

30.1

2006–07

571,779

840,506

4,283,979

33.0

2007–08

655,864

1,012,312

4,947,857

33.7

2008–09

840,755

1,374,436

5,574,448

39.7

2009–10

845,125

1,356,469

6,231,172

35.3

Source: Columns (2) and (3) from Reserve Bank of India Handbook of Statistics, 2009–10, Table 128 and Column (4) from Table 1. Column (5) is computed from Columns (2), (3) and (4).

2003–04 and 2008–09, in 2009–10 the growth rate was only 0.5 per cent. In case of imports, the value of imports in 2009–10 was lower than the value in the previous year, whereas the CAGR for the previous five years was 26 per cent. The ratio of sum of exports and imports to GDP, a measure of a country’s openness, increased from 14.0 per cent in 1991–92 to 39.7 per cent in 2008–09. India’s trade balance remained negative in every year during the last decade and reached –9.6 per cent of GDP in 2008–09. India’s share in the world merchandise exports had increased from 0.6 per cent in 1993 to 1.1 per cent in 2009. India faces market access problems in developed countries’ markets in sectors such as agricultural goods, meat products, textiles and clothing, and leather products. These problems arise because of tariff escalation for India’s labour-intensive exports and proliferation of NTBs (see Sankar, 2006). In comparison to India, China’s growth in merchandise trade has been spectacular. China’s share in the world merchandise exports increased from 0.9 per cent in 1993 to 8.7 per cent in 2007. According to the WTO Trade Policy Review 2006, China had 100 per cent tariff binding. The simple average of ad valorem bound duties for all goods in 2006 was 10.5 per cent and the applied tariff was 9.95 per cent. The bound and applied rates

Globalization and Indian Economy  

25

for agricultural goods were 15.85 per cent and 15.7 per cent, respectively. China’s rapid growth in exports and its dominant share of manufacturing in exports is attributed to its policies such as FDI in export-oriented units and thrust on growth of labour-intensive manufacturing (see Sankar, 2010a).

Trade in Services The need for bringing trade in services under the MTS was felt because (a) services now account for about 60 per cent of the world GDP, while the share of services in the world exports is about 20 per cent, (b) international mobility of services owing to the introduction of new transmission technologies and (c) the opening up of erstwhile monopolies in service sectors to competition in many countries. It was also felt that liberalization of trade in services along with liberalization of trade in goods and technology transfer would stimulate economic activity through guaranteed policy bindings and creating synergies. The GATS provides a framework for negotiations in liberalization of trade in services. It contains two exceptions: Article 1(3) excludes ‘services supplied in the exercise of governmental authority’—supplied neither on a commercial basis nor in competition with other suppliers. It excludes air transportation services. Services are classified into 12 mutually exclusive sectors. They are: (1) business services, (2) communication services, (3) construction and related engineering services, (4) distribution services, (5) educational services, (6) environmental services, (7) financial services, (8) health-related social services, (9) tourism and related services, (10) recreational, cultural and sporting services, (11) transport services and (12) other services. There are 161 sub-sectors. The definition of services depends on the territorial presence of the supplier and the consumer at the time of transaction. There are four modes. Mode 1 covers services supplied form the territory of one member into the territory of any other member (cross-border trade). Mode 2 covers services supplied in the territory of one member to the consumer of any other member (consumption abroad). Mode 3 covers services supplied by a service supplier of one member, through commercial presence, in the territory of any other member (commercial presence). Mode 4 covers services supplied by a service supplier of one member through the presence of natural person of a member in the territory of any other member (presence of natural persons). Article XX, Para 1 commits members start a new round of negotiation in 2000. These negotiations are based on the ‘request-offer approach’. Since 31 March 2003 members submitted 69 initial offers (including China and India). Since 19 May 2005 members submitted 30 revised offers (including

26  U. Sankar China and India). The Guidelines and Procedures issued by the GATS Council on 28 March 2001 indicate that there should be appropriate flexibility for individual developing country members to open fewer sectors, liberalize fewer types of transactions and progressively extend market access in accordance with their development situation. Members’ commitments are to be given sector-wise and mode-wise. They can indicate the restrictions under market access and NT columns. When members do not want to make any commitment in a sector/sub-sector, they mention ‘unbound’; if there is no restriction, they mention ‘none’. Developed countries seek market access under modes 1 and 3, but they create impediments in mode 4 in the form of quantitative restrictions on certain categories of workers; economic needs test; non-recognition of qualification, degrees and experience; and payment of social security contribution even for temporary stay. Many including US and the EU have not opened utility services owned or contracted out by their governments. Many developing countries (including a few developed countries) are concerned about the consequences of liberalization of services trade on the pursuit of their domestic policies, such as loss of jobs, provision of targeted subsidies, concern for equity and sustainability of service provision by the new entrants. Further, adequate regulatory structures have not been created in many developing countries to achieve policy goals in social or environmental service sectors. Table 2.2 provides information about India’s foreign trade in services from 1991–92 to 2009–10. During the two decades the exports increased by 36 times and imports by 31 times. Except in 1995–96, exports were higher than imports. The share of the sum of exports and imports to GDP, another indicator of openness of an economy, increased from 3.3 per cent in 1991–92 to 12.6 per cent in 2008–09. An important item in the invisibles is software services. The net contribution of software services increased from `26,308 crore in 2000–01 to `202,890 crore in 2008–09, reflecting a CAGR of 25.6. India’s share in the world export of commercial services in 2007 was 2.7 per cent compared with 3.7 per cent for China. India’s trade surplus in services trade remains positive. The BoP current account comprises merchandise trade and invisibles; the latter is classified under services, transfer and income. In recent years, the trade balances and net transfers have been negative and net balances in services and transfers have been positive. During the 20-year period, India had current account deficit (CAD) for 17 years (see Table 2.5). The CAD was less than 2 per cent of GDP during 2004–05 to 2007–08, and it increased to 2.4 per cent in 2008–09 and 2.9 per cent in 2009–10. CAD provides additional savings to the economy, but it also adds to the external debt.

Globalization and Indian Economy  

27

Table 2.2 India’s Foreign Trade in Services 1990–91 to 2009–10

Year

Exports ( ` crore)

Imports ( ` crore)

Exports Plus Imports/GDP (per cent)

(1)

(2)

(3)

(4)

1991–92

12,347

9214

3.3

1992–93

13,721

11,023

3.3

1993–94

16,510

14,833

3.6

1994–95

19,260

17,377

3.6

1995–96

24,748

25,450

4.2

1996–97

26,565

23,944

3.7

1997–98

35,102

30,159

4.3

1998–99

55,527

46,413

5.8

1999–00

68,137

50,467

6.1

2000–01

74,555

66,650

6.7

2001–02

81,739

65,850

6.5

2002–03

100,419

82,775

7.5

2003–04

123,175

76,794

7.3

2004–05

193,711

124,880

9.8

2005–06

255,668

153,057

11.0

2006–07

333,093

200,029

12.4

2007–08

363,042

206,798

11.5

2008–09

467,915

237,017

12.6

2009–10

443,881

281,356

11.6

Source: Columns (2) and (3) from Reserve Bank of India Handbook of Statistics, 2009–10, Table 141. Column (4) is based on Columns (2) and (3).

4. Capital Flows The BoP capital account has five items: foreign investment, loans, banking capital, rupee debt service and other capital. Foreign investment consists of FDI and foreign portfolio investment (FPI). Loans include external assistance, company borrowing (medium term and long term)

28  U. Sankar and short-term credit. Loans and non-resident deposits under banking capital are debt creating. India has adopted a gradualist approach to liberalization of its capital account. The 1991 reform opened the door to FDI via automatic route, whereby the government empowered the Reserve Bank of India to approve foreign equity up to 51 per cent in 34 priority industries. At present, up to 100 per cent foreign investment is permitted under the automatic route, subject to sectoral caps and rules. In 1992, India permitted foreign institutional investors (FIIs) to invest in primary and secondary markets for securities and products sold by mutual funds, with a minimum of 70 per cent inequities. The equity share of a single FII was limited to 5 per cent and of all FIIs together to 24 per cent. India amended Patent and Copyrights Acts to make them TRIPS consistent. In February 2006, equity restrictions were lifted in several activities except single-brand retailing, atomic energy, lottery business, gambling and betting. FDI norms were further relaxed in January 2008 in various sectors and new areas such as commodity exchange, credit information and aircraft maintenance opened for overseas investors. Indian companies are permitted to raise equity capital abroad subject to certain conditions. They are allowed to borrow up to $20 million abroad when the maturity of the loan is at least three years and for loans exceeding $20 million the maturity requirement is five years or more. For capital goods imports and factory expansion, borrowing up to $500 million is allowed. Policies for remittance for individuals, exporters of goods and services, and 100 per cent export-oriented units have been liberalized. India’s policy changes and external factors caused changes both in the net volume of transactions and composition of the capital account. The share of the capital account (net) in GDP was less than 0.6 per cent in 1991–92, which increased to 8.7 per cent in 2007–08 and fell to 0.5 per cent in 2008–09 due to global recession and again increased to 4.05 in 2009–10. India’s policy has been to encourage non-debt creating capital flows from abroad. Both FDI and FPI are not debt-creating instruments but FPI can be volatile. Net FPI was `110,619 crore in 2007–08, and it dropped to `–65,045 crore in 2008–09 and jumped to `153,967 crore in 2009–10. Table 2.3 provides information about FDI inflows and outflows for the world and India from 1990 to 2009. The world inflows increased steadily from $154 billion in 1991 to $707 billion in 1998, jumped to $1088 billion in 1999 and to $1402 billion in 2000, remained below $1000 billion until 2005 and increased to $1459 in 2006, reached a peak value of $2100 billion in 2007 and then fell due global recession. FDI

Globalization and Indian Economy  

29

Table 2.3 FDI Inflows and Outflows 1990–2009 ($ billion) Inflows

Outflows

Year

World

India

World

India

1991

154.0

0.075

198.1

0.011

1992

166.0

0.252

202.7

0.024

1993

223.5

0.532

242.6

0

1994

256.1

0.074

286.9

0.082

1995

342.5

2.151

362.6

0.119

1996

389.0

2.525

396.5

0.240

1997

486.5

3.619

476.1

0.113

1998

707.2

2.633

682.3

0.047

1999

1087.5

2.168

1076.8

0.080

2000

1401.5

3.588

1232.9

0.514

2001

825.3

5.478

753.1

1.397

2002

628.1

5.620

537.1

1.678

2003

565.7

4.321

565.7

1.876

2004

732.4

5.778

920.3

2.175

2005

985.8

7.622

893.1

2.985

2006

1459.1

20.328

1410.6

14.282

2007

2100.0

25.001

2267.5

17.233

2008

1770.9

40.418

1928.8

18.499

2009

1114.2

34.613

1101.0

14.897

Source: UNCTAD, FDI/TNC Database (www.unctad.org).

inflows into India were less than one billion dollars until 1994, between two and four billion dollars in 1995–2000, between four and eight billion dollars in 2001–05, increased to more than $20 billion during 2006 and 2007 and reached a peak of $40.4 billion in 2008. In 2009, India’s inflows decreased to $34.6 billion. With the introduction of Foreign Exchange Management Act in 2000, companies were allowed to invest 100 per cent of the proceeds of their American Depository Receipts/Global Depository Receipts (ADR/GDR) issues for acquisition of foreign companies and outward direct investments.

30  U. Sankar The limit was raised in March 2002 to $100 million for automatic route. In March 2003, the government allowed Indian companies to invest up to 100 per cent of their net worth. This limit was raised further to 200 per cent of net worth in 2005 to 300 per cent of net worth in 2007, and finally to 400 per cent of net worth in 2008. These acquisitions are producing new set of global leaders, for example, Tata Steel becoming the fifth largest steel producer in the world after acquiring Millennium Steel, NatSteel and Corus; Suzlon Energy, second largest producer of wind turbines, and so on (see Kumar, 2008). Unlike in China where state-owned units dominate in the global acquisitions, in India all the enterprises are privately owned. India’s FDI outflows were less than one billion dollars per annum until 2000, between one and three billion dollars during 2001 to 2006 and jumped to more than $14 billion in 2006 and beyond. According to the World Investment Report 2010, India’s foreign inward and outward stocks in 2009 were $164 billion and $77 billion, respectively; the corresponding figures for China were $473 billion and $230 billion. Foreign-invested enterprises have served as a platform enabling China to manufacture products that meet world market specifications with respect to design, quality and technological content, thereby contributing to the export orientation of the economy. In view of the current global recession and its trade imbalances, China now discourages investment in exportoriented units but encourages investments in advanced technologies and cleaner production. It may be noted from Table 2.4 that (a) 1993–94 onwards FPI credits were very large compared to the FDI credits; (b) except for 2009–10, FDI debit was a very small proportion of FDI credit but FPI debt as percentage of FPI credit from 1997 to 1998 was at least 60 or more (in three years FPI debt exceeding FPI credit); and (c) greater volatility in FPI credit and debit flows. Loans (net) were relatively small until 2005–06 but increased by more than 300 per cent to `110,434 crore in 2008–09 and to `163,491 crore in 2007–08 and decreased to `36,388 crore in 2008–09. The share of net external assistance in net loans has been declining and it amounted to less than 17 per cent in 2009–10.The net commercial borrowing witnessed big increases in 2006–07 (to `72,365 crore) and in 2007–08 (to `91,086 crore). Mohan (2008) attributes the higher external commercial banking drawals to sustained domestic investment demand, import demand, the hardening of domestic interest rates and also the greater risk appetite of global investors for emerging market bonds. Due to the global meltdown the net commercial borrowing declined in 2008–09 (to `36,931 crore) and

Globalization and Indian Economy  

31

Table 2.4 Foreign Investment in India Direct ( ` crore) Year

Credit

Portfolio ( ` crore)

Debit

Credit

46

10

Debit

1991–92

375

0

1992–93

1051

92

746

6

1993–94

2041

204

12,420

975

1994–95

4241

25

13,818

2584

1995–96

7317

101

11,717

2621

1996–97

10,170

77

17,581

5846

1997–98

13,317

124

20,758

13,990

1998–99

10,550

162

13,660

13,879

1999–00

9409

13

43,198

30,093

2000–01

18,404

0

60,297

49,485

2001–02

29,269

24

44,166

34,550

2002–03

24,681

284

42,720

38,045

2003–04

19,830

0

128,981

77,083

2004–05

27,234

287

128,813

141,394

2005–06

39,730

273

303,088

246,731

2006–07

102,037

385

494,102

432,472

2007–08

139,985

465

935,683

825,715

2008–09

159,401

773

578,346

642,543

2009–10

179,969

25,787

759,004

605,119

Source: Reserve Bank of India Handbook of Statistics, 2009–10, Table 141.

in 2009–10 (to `11,855 crore). Net short-term loans reached a peak value of `63,939 crore in 2007–08, fell drastically to `–12,972 crore and rose to `11,815 crore in 2009–10. In recent years, the net non-resident deposits have been positive, except in 2004–05.

External Debt India’s external debt stock increased from $85.285 billion at the end of March1992 to $261.154 billion at the end of March 2010. During this period the debt stock/GDP ratio fell from 38.7 to 18.9 per cent and the

32  U. Sankar debt service ratio fell from 30.5 per cent to 5.5 per cent. There is also a change in the composition of the debt. Concessional debt as percentage of total debt fell from 44.8 in 1992 to 16.8 in 2010, but short-term debt/total debt fell from 8.3 per cent in 1992 to 3.9 per cent and jumped to 13.2 per cent in 2006, it reached 20.1 per cent in 2010. The rapid increase in shortterm debt to total debt is largely due to spurt in the trade credit.

Foreign Exchange Reserves India’s foreign exchange reserve at the end of 1991–92 was `23,850 crore or $9.222 billion. The overall balance in the current and capital accounts determines increases/decreases in India’s foreign exchange reserves. Except in 1995–96 and 2008–09, the capital account surplus was higher than the CAD (see Table 2.5). As a result, the foreign exchange reserve increased steadily to `1,237,965 crore or $309.723 billion by end of 2007–08. By the end of 2008–09, the reserve fell to $251.985 billion due to a drastic decrease in capital account surplus. During 2009–10 the capital account surplus exceeded the CAD and the foreign exchange reserve increased to $279,057. The ratio of foreign exchange reserve to imports of goods and services was about 80 per cent in 2009. In the end of December 2009, India was the fourth largest foreign exchange reserve holder after China, Japan and Russia. Table 2.5 India’s Overall Balance of Payments

Year

Current Account ( ` crore)

Capital Account ( ` crore)

Increase in Foreign Exchange Reserves ( ` crore)

1991–92

–2235

9809

9351

1992–93

–12,764

12,127

2481

1993–94

–3634

27,903

27,368

1994–95

–10,583

26,694

14,575

1995–96

–19,646

14,312

–9,799

1996–97

–16,282

42,614

20,760

1997–98

–20,883

36,605

14,367

1998–99

–16,789

35,881

16,593 Table 2.5 continued

Globalization and Indian Economy  

33

Table 2.5 continued

Year

Current Account ( ` crore)

Capital Account ( ` crore)

Increase in Foreign Exchange Reserves ( ` crore)

1999–00

–20,331

45,328

26,648

2000–01

–11,598

40,610

27,528

2001–02

16,426

41,080

56,593

2002–03

30,660

52,366

82,037

2003–04

63,983

77,277

143,993

2004–05

–12,174

125,367

115,907

2005–06

–43,737

111,965

65,896

2006–07

–44,383

203,673

163,634

2007–08

–63,479

427,926

396,689

2008–09

–131,614

28,490

–97,115

2009–10

–180,757

253,058

64,237

Source: Reserve Bank of India Handbook of Statistics. For 1990–91 to 2000–01 from the Handbook of Statistics, 2008–09 (Table 143) and for 2001–02 to 2009–10 from the Handbook of Statistics, 2009–10 (Table 141).

Openness and Macroeconomic Management With trade liberalization and the gradual removal of restrictions on international capital flows and greater integration of domestic with global financial markets, India is becoming an open economy. We give three measures of openness of Indian economy. As noted in Table 2.1 the share of exports plus import of merchandise trade as percentage of GDP increased from 14 in 1992–93 to 39.7 in 2008–09. During this period exports and imports of services as per centage of GDP increased from 3.3 in 1991–92 to 12.6 in 2008–09. Hence the share of exports and imports of goods and services in GDP increased from 17.3 per cent in 1991–92 to 52.3 per cent in 2008–09. The third measure is the sum of credit and debt in BoP current and capital accounts to GDP. This ratio increased three times from 37.2 per cent in 1991–92 to 110.4 per cent in 2008–09. This measure is an indicator of financial globalization. For the trends, see Figure 2.1. The East Asian crises in 1997 and 1998 and the global recession of 2008 have led to fears that a developing country can be subject to a capital flight crisis. In India, uncertainty about oil price increase, global recession of

34  U. Sankar Figure 2.1 Measures of Openness—Percentage of GDP at Market (current prices) 120 100 80 60 40

0

1990–91 1991–92 1992–93 1993–94 1994–95 1995–96 1996–97 1997–98 1998–99 1999–00 2000–01 2001–02 2002–03 2003–04 2004–05 2005–06 2006–07 2007–08 2008–09 2009–10

20

Exports and Imports of Goods

Exports and Imports of Goods and Services

Credit plus debt in BoP current and capital account

2008 affecting prospects of merchandise exports and outsourcing, accumulation of foreign exchange reserves, volatility of FPI and short-term credit, and large quantitative easing in the US raise issues relating to management of foreign exchange reserves, exchange rate policy, monetary policy, move towards full capital account convertibility and nature of financial market regulation. The RBI intervention in the market has been in the form of sterilization to prevent rupee appreciation. But sterilization results in an increase in money supply and creates inflationary pressures. There is also opportunity cost of holding foreign exchange. Mohan (2008) says, the precise nature of the causal relationship among capital flows, the exchange rate, interest rates and reactions of monetary policy has certainly become more complex. … On a day-to-day basis, it is capital flows which

Globalization and Indian Economy  

35

influence the exchange rate and interest rate arithmetic of the financial markets. Instead of the real factors underlying trade competitiveness, it is expectations and reactions to news which drive capital flows and exchange rates, often out of alignment with fundamentals. (p. 244)

RBI Annual Report 2009–10 notes that the global crisis revealed how countries are interlinked beyond the conventional channels of trade and capital flows. Globalization will continue to be a source of opportunity to maximize the country’s growth potential, but there would be increasing pressures on current comparative advantages of India, besides raising the scope for faster transmission of shocks from the global economy to the domestic economy. Changes in global growth and inflation conditions, monetary policy stance of advanced economies, asset market trends, movements in exchange rates of key currencies and global commodity prices increasingly affect domestic macroeconomic and financial conditions, quite unrelated to domestic fundamentals or policies. In the past, global imbalances and the pattern of ‘capital flowing uphill’, the challenge of the impossible trinity and costs of country specific approach to deal with the trinity, and inadequacy of global safety nets have posed complex globalization induced policy challenges for India. (p. 12)

The Report of the Committee on Capital Account Convertibility, 1997 (with S.S. Tarapore as Chairman) (Reserve Bank of India, 1997), recommended a phased implementation of capital account convertibility, to be completed by the year 1999/2000. It suggested a number of preconditions: fiscal consolidation, lower inflation and a stronger financial system. The issue was re-examined by the Committee on Fuller Capital Account Convertibility in 2006, which recommended that at the end of the five-year period ending in 2010/11, there should be a comprehensive review. Panagariya (2008) provides the case against a rush to full convertibility as follows: (a) genuine empirical evidence on the benefits of capital account convertibility is lacking; (b) on the fiscal front, India faces far from satisfactory initial conditions for convertibility; (c) the financial sector is still undeveloped in India; (d) India is still far from fully integrated on the trade front; and (e) the embrace of full capital account convertibility raises the risk of a crisis. The external effects of policies of some developed countries, both in originating the 2008 crisis and in finding solutions for recovery from the crisis and failure of the global financial institutions in providing global financial stability, suggest that the time is not ripe for full capital account convertibility in India. Nachane (2010) suggests options for capital management and recommends capital controls on inflows/outflows and prudential financial regulation.

36  U. Sankar In the context of the recession of 2008, Stiglitz (2009) provides two reasons for regulation: [O]ne is that there can be large externalities, or large effects of the action of one party on the well-being of others, effects that are not adequately reflected in the price system. The growing interdependence of financial institutions, brought on by derivative transactions, has only made matters worse. It appears that they had failed to engage in an adequate network analysis of these interdependencies. A second reason for regulation is investor protection—preventing predatory lending and other abusive practices. (pp. 6–7)

He argues that the existing regulation was not robust as it was predicated on a particular behavioural model. According to him robust regulation should, in addition, recognize the limitations of regulation—that there will be circumvention of any set of regulations. He says the same failure to understand the critical role of externalities and failures in the price system in regulation also led regulators and market participants to misjudge the nature of the innovations in the financial system.

5. TRIPS The TRIPS Agreement recognizes that IPRs are private rights and there is a need for multilateral framework of principles, rules and disciplines dealing with international trade in counterfeit goods. It contains articles on NT and MFN. It covers copyright and related laws, trademarks, geographical indications, industrial designs, and patents, layout designs of undisclosed information and control of anti-competitive practices in contractual licenses. Members are required to ensure that enforcement procedures are in their laws to allow effective action against any act of infringement of IPRs. Article 8 relates to the adoption of measures necessary to protect public health and nutrition, and to promote the public interest in sectors of vital importance to their socio-economic and technological development, provided such measures are consistent with the provisions of this agreement. It also refers to the need for appropriate measures to prevent the abuse of IPRs by right holders or the resort to practices which unreasonably restrain trade or adversely affect the international transfer of technology. From the perspective of developing countries, the TRIPS agreement has been a contentious and highly debated issue in two areas: access to medicines at affordable prices to the poor and asymmetric treatment of modern scientific research and traditional knowledge and right over

Globalization and Indian Economy  

37

biological resources. Article 31(f) of the agreement states that the products under compulsory licensing must be primarily for the supply of the domestic market. Recognizing the gravity of the public health problems resulting from HIV/AIDS, tuberculosis, malaria and other epidemics and lack of the manufacturing capabilities in many least developed and developing countries. India and a few developing countries played an important role in drafting the Doha Declaration on the TRIPS Agreement and Public Health. This provides waiver from the obligation and permits exports to such countries that have insufficient manufacturing capacity, subject to certain conditions. The General Council amended the TRIPS Agreement on 8 December 2005. India’s Patent (Amendment) Act, 2005 provides the waiver. For rights and terms of access to resources, there is an asymmetry between inventions based on modern scientific knowledge and research on the one hand, and biological resources and traditional knowledge on the other hand. IPRs are private rights. Most biological resources and traditional knowledge are under common property regimes with open access. India and other like-minded mega biodiversity countries have been advocating (a) mandatory inclusion of country of origin/source, prior informed consent of competent national authority, and access and benefit sharing (ABS) regimes. If the suggestions are accepted, there will be significant reductions in biopiracy, lowering of transaction costs of implementing the ABS regime and increase in flow of income to the providers of the resources and the knowledge. India’s Biological Diversity Act, 2002 draws its mandate from the Convention on Biological Diversity, 1993. In 2003 the National Biodiversity Authority was created and in 2004 the Biological Diversity rules were framed. Some progress has been made in building a database on biodiversity and traditional knowledge but the progress in establishing an ABS regime for biological resources and traditional knowledge has been very slow.

6. Concluding Remarks India’s external sector reforms since 1991 enabled India attain and sustain higher growth path for nearly two decades. In recent years India has achieved the second highest GDP growth rate. The Indian economy was less affected by the global recession of 2008 and it has become resilient to some extent to the external shocks. Now India has become an attractive destination for FDI. A few large Indian firms have become multinationals.

38  U. Sankar India is one of the leading counties in ICTs and exploited the outsourcing opportunities. At the global level, India’s image has improved and it has been playing a significant role in many multilateral negotiations. However, there are problems exist. From the 11th Plan, India embraced an inclusive growth strategy. Although there is empirical evidence that globalization raised GDP growth rate, empirical evidence on the impact of globalization on income inequality and poverty reduction is inconclusive. In reviewing the distributional effects of globalization in developing countries, Goldberg and Pavcnik (2007) conclude that ‘it seems fair to say that the evidence has provided little support for the conventional wisdom that trade openness in developing countries would favor the less fortunate (at least in relative terms)’. They find ‘little support for the premise that adjustment to changing economic conditions would occur through labor reallocation from declining to growing sectors of the economy’ (p. 77). IMF (2007) reports that trade globalization is associated with a reduction in inequality, but financial globalization, particularly FDI, is associated with an increase in inequality. The IMF finding is not surprising, because the main drivers of FDI are availability of human skills and well-developed physical infrastructure, which are available only in developed regions. Hence, the immediate beneficiaries of globalization are likely to be highly skilled persons in urban areas who have the capacity to exploit the opportunities from globalization. In order to achieve inclusive growth, India needs policies for promotion of labour-intensive sectors, upgradation of human skills in less-developed states and creation of safety nets for labour in the affected industries. Many, including Stiglitz, have highlighted the need for reforming global institutions like the IMF and the World Bank. The WTO is a democratic institution in the sense that every county has one vote and it is transparent. However, in its actual function, we observe many asymmetries like differences in phases of trade liberalization in agricultural and non-agricultural sectors, differential treatment of modern scientific knowledge and traditional knowledge in patenting, and greater mobility of trade flows and capital flows but lesser mobility of labour and technology flows. If one assesses the WTO in terms of the concept of ‘triangle of publicness’, that is, publicness in consumption, publicness in decision making and publicness in distribution of net benefit, developed by Kaul et al. (2003), it has not yet become a global public good. The need for international cooperation and global governance is obvious especially in addressing common concerns of mankind like global warming, loss of biodiversity and millennium development goals (global public good by public choice). The global community has endorsed principles

Globalization and Indian Economy  

39

of international cooperation for solving environment and development problems in the Rio Conference on Environment and Development and the United Nations Framework Convention on Climate Change, namely equity, historical responsibility, and common but differentiated responsibilities of states according to their respective capabilities. In the context of climate change, acceptance of the principles means global agreement on binding green house gas emissions reductions by developed countries to prevent average global temperature increase to less than 2°C, provision of financial assistance to developing countries for their mitigation and adaptation programmes, and transfer of climate-friendly technologies from developed countries to developing countries at affordable prices. The stalemate in the Copenhagen Conference, 2009 and the failure to reach a global agreement on the binding emission reductions in the Cancun Conference, 2010 raise questions about ability of the existing global regimes to provide the global public goods. For an assessment, see Kaul et al. (2003) and Sankar (2010b). The International Task Force on Global Public Goods (2006) notes that ours is a world of shared risks and common opportunities, grounded in the world of mutual dependence and growing interconnection. It describes that international cooperation is a tool for altruistic purposes and it serves geopolitical interests. It is also a tool for nations to align their long-term enlightened national interests to achieve common goals. The factors hindering international cooperation include (a) political myopia, (b) governments’ unwillingness to accept binding international commitments because of the fear they restrict their domestic policy spaces, (c) differences in preferences and priorities of governments, and (d) lack of catalytic leadership. The challenge for countries is to find ways and means of overcoming the barriers to address the common concerns of mankind in such a way that every nation finds that it is better-off via international cooperation than otherwise.

References Bhagwati, J. (2004), Defense of Globalization, Oxford University Press, New York. Goldberg, P.K. and N. Pavcnik (2007), Distributional Effects of Globalization in Developing Countries, Journal of Economic Literature, Vol. 45, pp. 39–82. Government of India (2010), Economic Survey, 2009–10, New Delhi. International Monetary Fund (2007), Globalisation and Inequality, Chapter 4, World Economic Outlook, IMF, Washington D.C. International Task Force on Global Public Goods (2006), Meeting Global Challenges: International Cooperation in the National Interest, Final Report, Stockholm.

40  U. Sankar Kaul, I., P. Conceicau, K.L. Goulven and R.U. Mendoza (2003), Providing Global Public Goods: Managing Globalisation, Oxford University Press, New York. Kumar, N. (2008), Internationalization of Indian Enterprise: Pattern, Strategies, Ownership Advantages and Implications, IS-BP No. 40, Research and Information System for Developing Countries, New Delhi. Kurien, C.T. (2003), Economic Transformation: A “Micro-Global” Perspective, Presidential Address at The Indian Economic Association, 85th Annual Conference, The India Economic Journal, Vol. 50, No. 2, pp. 1–24. Mohan, R. (2008), Capital Flows to India in BIS Paper 44, Financial Globalisation of Emerging Market Capital Flows, http://www.bis.org/publ/bppdf/bispap44.pdf. Accessed on 1 December 2010. Nachane, D.M. (2010), Capital Management Techniques for Financial Stability and Growth, Economic and Political Weekly, Vol. 45, No. 46, pp. 36–39. Reserve Bank of India (1997), Report of the Committee on Capital Account Convertibility, Mumbai. ———. (2009), Handbook of Statistics, 2008–09, Mumbai. ———. (2010), Handbook of Statistics, 2009–10, Mumbai. ———. (2010), Annual Report 2009–10, Mumbai. Sankar, U. (2006), Trade and Environment: A Study of India’s Leather Exports, Oxford University Press, Delhi. ———. (2010a), The Global Trading Regime and Sustainable Development of China and India, in N.S. Siddharthan and K. Narayanan (eds), Indian and Chinese Enterprises, Global Trade, Technology and Investment Regimes, Routledge, New Delhi. ———. (2010b), Global Public Goods: Provision, Production and Benefits, in M. Govinda Rao and Mihir Rakshit (eds), Public Economics Theory and Policy, Essays in Honour of Dr Amaresh Bagchi, SAGE Publications, New Delhi. Stiglitz, J.E. (2002), Globalization and its Discontents, W.W. Norten, New York. ———. (2009), Interpreting the Causes of the Great Depression of 2008. BIS Paper No 53, Financial System and Macroeconomic Resilience, http://www.bis.org/pub/ bppdf/bispap53.htm. Accessed on 17 December 2010. United Nations Conference on Trade and Development (UNCTAD) (2004), Environmental Requirements and Market Access for Developing Countries, http:// ro.unctad.org/trade_env/test1/meetings/rio/TD_X1_BP_1.pdf. Accessed on 10 November 2004. ———. (2010), World Investment Report, 2010, UNCTAD, Geneva. ———. (2010): Trade and Development Report, 2010, UNCTAD, Geneva. World Trade Organization (2006), China Trade Policy Review, WT/TPR/S/61/ Rev, www.wto.org/english/tratop_e/tpr_e/tp299_e.htm. ———. (2007), 2007 World Trade Report, http://www.wto.org/english/res_e/ booksp_e/anrop_e/world_trade_report07_e.pdf. Accessed on 1 July 2008. ———. (2007), India Trade Policy Review, WT/TPR/S/182, www.wto.org/english/ tratop_e/tpr_e/tp283_e.htm

3

Food Price Inflation and Public Procurement: The Indian Experience Abhirup Sarkar

Food Price Inflation: Demand Side and Supply Side Factors

D

uring the course of the last couple of years, inflation in general and food price inflation, in particular, have reached alarming heights in the Indian economy. Comfortable growth in manufacturing and services has been partly overshadowed by this intimidating inflation, especially in the prices of food grains. Despite the authorities’ assurance that the rate of inflation is going to come down, the prophecy has over and over again turned out to be incorrect. Since food price inflation is the main element in the rising price index, to get a clue as to what is causing the inflation, we have to understand why the prices of food grains are rising. There could be both demand side and supply side factors causing increases in food prices. These factors, in general, have different connotations for welfare. Food price inflation can be attributed to demand side factors when there is a sustained increase in the demand for food. This increase, in turn, is usually caused by an increase in the purchasing power of the consumers. Therefore, if inflation is caused by an increase in purchasing power, from

42  Abhirup Sarkar the point of view of welfare, it is not necessarily an undesirable thing to happen. In recent years there has been significant growth in manufacturing and services in the Indian economy generating fresh purchasing power in certain quarters. Can we, therefore, conclude that the increase in food prices is partly due to this growth? Unfortunately, the growth that has taken place in the Indian economy in recent years has not been able to reach the entire society, at least directly. In particular, there is a significant part of the poorer section of the population which has remained unaffected by growth. On the other hand, the section of the population which has certainly benefitted from growth consists of the relatively affluent who are unlikely to increase their demand for rice or wheat with an increase in their income. The only possible channel through which demand for food could have been created on a significant scale is the Mahatma Gandhi National Rural Employment Guarantee Scheme. Since February 2006, `1.08 lakh crore has been released under the scheme (The Times of India, 29 January 2011), at least a part of which must have reached the poor and increased the demand for food. From the supply side, the price of food may rise due to inadequate production of food. From the welfare point of view, this is undesirable. To have an understanding of the supply side, one should look at the long-run trend of production of food as well as short-run shortfalls in stocks. In particular, we have to understand whether the recent price increase is an isolated short-run phenomenon or has there been a long-run tendency of rising food prices. Table 3.1 provides the production of rice, wheat, coarse cereals, total cereals and total food grains over the period 1990–91 to 2009–10. Over this period, production of cereals (rice, wheat and coarse cereals) has grown at an annual average rate of 1.53 per cent, average annual growth rate of food grains (cereals and pulses) over the same period has been 1.47 per cent, and the (projected) average annual growth of population between 1990 and 2010 is 1.49 per cent. Therefore, there is a slight increase in the per capita availability of cereals and a slight fall in the per capita availability of food grains over the last 20 years. To this, if one adds the possibility that, however slowly, some fruits of economic growth are trickling down to the poor increasing their purchasing power and demand for food, then one has to admit that over the past two decades production of food grains have not grown as fast as it ought to have grown. This deficiency shows up in the long-run behaviour of the relative price between food and non-food commodities. Normalizing the relative price of food and non-food articles to unity in 1990–91, in 2009–10 it was 25 per cent higher. On an average, the relative price of food has been 15 per cent

Food Price Inflation and Public Procurement  

43

Table 3.1 Production of Cereals and Food Grains in Million Tons Year

Rice

Wheat Coarse Cereals Total Cereals

Pulses

Food Grains

1991–92

74.68

55.69

25.99

156.36

12.02

168.38

1992–93

72.86

57.21

36.59

166.66

12.82

179.48

1993–94

80.3

59.84

30.82

170.96

13.3

184.26

1994–95

81.81

65.77

29.88

177.46

14.04

191.5

1995–96

76.98

62.1

29.03

168.11

12.31

180.42

1996–97

81.73

69.35

34.11

185.19

14.24

199.43

1997–98

82.54

66.35

30.4

179.29

13.83

193.12

1998–99

86.08

71.29

31.33

188.7

14.91

203.61

1999–00

89.68

76.37

30.34

196.39

13.41

209.8

2000–01

84.98

69.68

31.08

185.74

11.07

196.81

2001–02

93.34

72.77

33.37

199.48

13.37

212.85

2002–03

71.82

65.76

26.07

163.65

11.13

174.78

2003–04

88.53

72.15

37.6

198.28

14.91

213.19

2004–05

83.13

68.64

33.46

185.23

13.13

198.36

2005–06

91.79

69.35

34.06

195.2

13.39

208.59

2006–07

93.35

75.81

33.92

203.08

14.2

217.28

2007–08

96.69

78.57

40.76

216.02

14.76

230.78

2008–09

99.18

80.68

40.03

219.9

14.57

234.47

2009–10

89.13

80.71

33.77

203.61

14.59

218.2

higher over the last two decades compared to what it was in 1990–91. The behaviour of relative price is shown in Figure 3.1. In the short run, the increase in food prices has been more dramatic. Production of food grains and cereals actually declined in 2009–10 compared to 2008–09. There was a negative growth of 7.4 per cent in cereals production and 6.9 per cent in food grains production in 2009–10 over 2008–09. Following this negative growth of production of both food grains and cereals in 2009–10 over 2008–09, during the first three months of 2010–11, consumers’ price index of food (for industrial workers) increased at an average annual rate of almost 14 per cent. In fact, following the drastic reduction in supply, the price of food grains shot up most dramatically

44  Abhirup Sarkar Figure 3.1 Relative Price Movement of Food and Non-food 1.4 1.2

Relative Price

1 0.8 0.6 0.4 0.2 0

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19 20 Year Series 1

between April 09–10 and December 09–10 and started falling thereafter. The short-run behaviour of food price inflation is shown in Figure 3.2. Part of this increase can be attributed to speculative hoarding which has been triggered off by the sudden fall in supply. But it needs to be emphasized that speculation cannot be the primary cause of food price inflation, for if speculation alone could lead to sustained inflation, one would have observed speculation driven inflation in years of normal production as well. Since one does not observe that to happen, one must conclude that the root cause of the recent food price inflation must lie with the supply side. How to deal with the problem of food price increase? Since it is basically a problem of discrepancy between demand and supply or more specifically a problem of inadequate production, a long-run solution involves increase in production and productivity of the food sector. But this cannot be done overnight. So, is there an immediate short-run solution? Here one is reminded of the role of the government as a stabilizer of food prices. In India, the government procures food stocks at a pre-announced minimum support price from farmers and traders just after the harvest. The purpose is not only to guarantee a minimum income to the cultivators but also to provide food for the underprivileged through the public distribution system and, if the need arises, to bring down market prices

Food Price Inflation and Public Procurement  

45

Figure 3.2 Annual Food Price Inflation: April 2006–07 to June 2010–11 0.25

0.2

0.15

0.1

0.05

0

Apr 09–10

Dec 09–10

by selling additional stocks during periods of scarcity. Is the government performing its role? In other words, has the government been taking adequate measures to solve the long-run as well as the short-run problems of food scarcity?

Role of the Government: Long Run The government has to take different sets of policies to handle the long-run and the short-run problems of food price inflation. First, we talk about long-run policies. Clearly, food output per capita has to increase on a permanent basis to handle the long-run problem of food price inflation. This is necessary not only because population is growing over time but also because there is some trickledown effect of growth to the poor, leading to

46  Abhirup Sarkar an increase in their purchasing power and demand for food. The important question is: how to increase the output of food grains over a long run? In fact, food grains production can be increased either by increasing the acreage under food grains production or by increasing productivity or both. Table 3.2 records yield (productivity), acreage, population density and per capita availability of cereals in six countries, including India, with similar population densities. It is clear from the table that in 2005 India devoted 30.27 per cent of its total land to cereals production, which is much higher than the acreage of the other countries. On the other hand, Indian yield of cereals production is way below the yield of cereals in all other countries. The two, taken together, would suggest that it is difficult to increase the production of cereals or food grains in India by increasing the acreage. Productivity or yield, on the contrary, has great potential to be increased. However, before we discuss the constraints of increasing the level of productivity in the agricultural sector, let us look at the last column of Table 3.2. The last column of Table 3.2 suggests that per capita availability, in general, has got nothing to do with food security. Most citizens of South Korea, Japan or the Netherlands get to eat more than the average Indian, yet per capita production of cereals is higher in India compared to these countries. Indeed, in a world of free trade, a country or a region can get its supply of food by buying it from another country or region in exchange of other goods, such as manufactures. In other words, in a world of free trade, it is not necessary to produce food domestically to guarantee food security. All one needs is enough purchasing power to buy food. The average food availability is not Table 3.2 Yield, Acreage and Per Capita Gross Availability of Cereals in 2005

Country

Yield (kg per hectare)

Acreage (percentage)

Density (population/ sq. km)

Per Capita Gross Availability (gram per day)

South Korea

6282.8

10.85

491.70

379.8

Netherlands

8153.5

5.21

395.11

294.5

Belgium

8414.4

10.55

339.71

715.9

Japan

6027.7

5.35

337.23

261.9

India

2366.7

30.27

328.59

597.3

United Kingdom

7229.4

11.91

246.88

955.5

Food Price Inflation and Public Procurement  

47

very low in India. However, because a significant part of the population does not have enough purchasing power to buy food, there is widespread hunger in spite of a comfortable level of per capita food availability. This is further illustrated by Table 3.3. In this table per capita production of food grains for the year 2003–04, which was available for consumption in 2004–05, are presented for 28 Indian states along with poverty ratios in each state for 2004–05. There are states like Chhattisgarh and Madhya Pradesh where relatively high per capita production coexisted with high poverty. Again, there is Kerala where in spite of extremely low per capita production, poverty level was low. Finally, there are states like Punjab and Haryana where high per capita production coexisted with low poverty, as Table 3.3 Food Grains Production Per Capita and Poverty in Indian States Food Grains Production Per Capita (gm per day)

Poverty

Andhra Pradesh

474

15.8

Arunachal Pradesh

582

17.6

Assam

390

19.7

Bihar

346

41.4

Chhattisgarh

796

40.9

Goa

336

13.8

Gujarat

335

16.8

Haryana

1606

14.0

Himachal Pradesh

605

10.0

Jammu & Kashmir

376

5.4

Jharkhand

279

40.3

Karnataka

326

25.0

State

Kerala

48

15.0

Madhya Pradesh

673

38.3

Maharashtra

277

30.7

Manipur

427

17.3

Meghalaya

264

18.5

Mizoram

407

12.6 Table 3.3 continued

48  Abhirup Sarkar Table 3.3 continued Food Grains Production Per Capita (gm per day)

Poverty

Nagaland

534

19.0

Orissa

510

46.4

Punjab

State

2655

8.4

Rajasthan

811

22.1

Sikkim

480

20.1

Tamil Nadu

187

22.5

Tripura

454

18.9

Uttarakhand

524

39.6

Uttar Pradesh

678

32.8

West Bengal

521

24.7

All India

535

27.5

one would expect. When poverty is regressed on per capita food grains production taking into account all the 28 states, the coefficient of the regressor turns out to be small but negative (b = –0.00461) and significant (t = 7.87). However, the two outliers in terms of per capita production, Punjab and Haryana, are certainly responsible for this overall negative relationship. If we drop these two states, then the relationship becomes positive (b = 0.015624) and significant (t = 2.88). In both cases, however, the R square values are small, being 0.04 in the first case and 0.06 in the second case. From all this, it is clearly hard to ascertain that increased per capita production of food grains leads to lower levels of poverty and starvation per se. However, even though adequate per capita food availability is not sufficient for food security, it is somewhat necessary because the prospect of importing food from abroad is still uncertain and limited for India. As we have already argued, for this we need to increase the yield of food production. Two essential steps are to be taken to increase food productivity. First, fragmented land holding would have to be put together to form larger plots of land where mechanized farming is possible. Second, irrigation facilities through the construction of large dams are to be set up. Indeed, many policymakers believe that the most formidable hindrance to increasing productivity is the lack of irrigation and the dependence on natural rainfall for cultivating the soil. In 2007–08, only 54.3 per cent

Food Price Inflation and Public Procurement  

49

of the total land of the country producing cereals was irrigated. The corresponding figures for pulses and total food grains were 16.2 and 46.8 per cent, respectively. It seems that substantial productivity gains can be achieved by extending irrigation to the unirrigated land. Now, irrigation can come from ground water, ponds and small as well as big dams. India is a large builder of dams and in terms of building dams it ranks third in the world (after China and US). Of the total irrigated land, dam irrigation accounted for 38 per cent in 2000 and of the fourfold increase in the production of food grains between 1951 and 2000, up to a quarter of this increase took place in dam irrigated areas (Thakkar, 2000; Singh, 2002; Duflo and Pande, 2007). Again, confining oneself to dam irrigated areas alone, attempts have been made to ascertain how much of the increase in production is due to mechanization and how much due to dam irrigation. The results have widely varied: World Commission on Dams (2000) attributes 10 per cent of the increase to dam irrigation while Gopalkrishnan (2000) estimated the contribution to be 50 per cent. The Commission has observed that the economic internal rate of return of irrigation dams all over the world have varied from more than 12 per cent to less than 4 per cent, with the return being more than 10 per cent in the majority of the cases under study. Therefore, it is generally felt that dam irrigation has played an important role in increasing agricultural production in general and food grains production, in particular, in India as well as in rest of the world. However, apart from increasing production, building of dams has led to massive displacements. Again, estimates of the extent of displacements vary widely. According to a report brought out by the World Commission of Dams (2000), an average Indian dam displaces 31,340 persons and submerges 8,748 hectares of land. Estimates of total persons displaced by the construction of dams over the second half of the last century varied from 16 million to 40 million. The World Commission of Dams (2000) has estimated that around 40–50 per cent of the displaced people belonged to the traditionally disadvantaged tribal community. The report also reveals that the situation in other less developed countries of Asia, Africa and Latin America, with respect to dam-related displacement, is similar. In other words, in other less developed countries also the burden of displacement is borne disproportionately by tribals and other historically disadvantaged groups. More recently, even the economic desirability of large dams has been questioned. Duflo and Pande (2007), on the basis of data spanning from 1970 to 1999, evaluate the performances of Indian dams. When a dam is

50  Abhirup Sarkar built, its effect is felt both upstream where it is built (the so-called catchment area) and downstream (the so-called command area). When a dam is built, a large part of the catchment area is submerged, salinity of water in the area increases and diseases like malaria spread out from still water. The command area, on the other hand, gains from the construction of the dam. Not surprisingly, Duflo and Pande (2007) find that after the dam is built, in the catchment area, agricultural production does not increase but there is a rise in poverty. On the other hand, there is an increase in agricultural production and a decline in poverty in the command area. However, on the basis of their estimates, the authors conclude that the net financial gain from large dam construction is marginal, about 1 per cent, and is associated with a rise in poverty in the aggregate. One problem, however, remains with the existing cost–benefit approach. This is the problem of evaluating the benefits of increasing agricultural production, consequent to the building of a dam, in terms of market prices. Market prices are determined by forces of demand and supply. Prices are low either because supplies are high or because demand is low. If supplies are already high and consequently prices are low, the market price would rightly indicate that the benefit from an extra unit of production is low. However, this is not necessarily the case when prices are low because of low demand. If demand is low just because the society has a low preference for the product, then again a low market price rightly indicates low social benefit. But if low demand is due to poverty or low purchasing power, then the consequent low market price does not necessarily mean that the social benefit from an extra unit of production is low. This is especially true for food grains in a country like India. As Sen (1981) has argued, famines and starvation often occur due to entitlement failures which in turn may be caused by low purchasing power. In fact, starvation can coexist with low local prices. In such cases, more production might be required in spite of prices being low. However, one cannot deny that big dams in India have displaced millions. This poses the uncomfortable question as to whether we can hurt one group of Indians, who are usually poor and vulnerable, to feed the rest of the countrymen many of whom are also poor. If we cannot then the inevitable question is: how are we to increase productivity in the agricultural sector? One possibility is to switch to other forms of irrigation like small dykes, wells or ground water. However, Biswas and Tortajada (2001) and Dhawan (1989) argue that these alternative forms of irrigation are cost-ineffective and are incapable of meeting the huge demand for irrigation in a vast country like India where rainfall is highly fluctuating. The other way out is mechaniza-

Food Price Inflation and Public Procurement  

51

tion. Here again there are two major problems. First, mechanization might require more inputs like fertilizers, electricity and high-yield variety seeds which, in turn, are complementary with irrigation (Evensen and McKinsey, 1999). In other words, mechanization might not be feasible without adequate irrigation. Second, as we have argued above, landholding in Indian agriculture is fragmented, which itself is a big hindrance to mechanization. Therefore, large-scale irrigation and consolidation of landholding, both of which seem essential for increasing agricultural productivity, would imply displacement and the displaced persons need to find an occupation elsewhere. For making this possible, industrialization seems to be the only feasible option. But then, industrialization itself requires land. We are indeed faced with a non-trivial problem of choice.

Role of the Government: Short Run The recent upsurge in food prices is mostly a short-run phenomenon arising out of a sudden fall in supply. To handle such emergencies, the government has a public distribution system. Using the public distribution system the government can procure less output than it offloads during a period of scarcity, thereby stabilizing market prices. This act would certainly entail a running down of government stocks when there is a bad harvest. Table 3.4 depicts the stock holding behaviour of the government over the last few years. It is extremely puzzling to note that in 2009 and 2010 when there was an acute fall in food grains production, government

Table 3.4 Average Stock Holding of Food Grains by FCI Year

Average Stock Holding (in lakh tons)

2005

200.4

2006

184.03

2007

186.59

2008

263.47

2009

455.17

2010

580.01 (till July)

52  Abhirup Sarkar stocks have significantly increased. How do we explain this increase in government stocks in a period of shortage? Table 3.5 provides a longer run picture of procurement, off take and stock holding of rice and wheat. We have regressed yearly stocks of rice and wheat held by the government on annual output of rice and wheat as obtained from Table 3.1. We find that the relationship between stock holding of rice and the production of rice is positive and statistically significant (b = 0.13, t = 1.93). On the other hand, the relationship between stock Table 3.5 Procurement, Off Take and Stock Holding 1990–91 to 2010–11 Procurement Year

Off Take

Wheat

Total

1990–91 12.92

11.07

23.99

7.75

17.16

1992–93 12.72

6.38

19.1

9.89

1993–94 13.56

12.84

26.4

9.46

1994–95 13.12

11.87

24.99

8.85 10.59 19.44 18.08

8.72 26.8

1995–96

9.93

12.33

22.16

11.63 12.72 24.35 13.06

7.76 20.82

1996–97 11.88

8.16

20.04

12.31 13.32 25.63 13.17

3.24 16.41

1997–98 14.54

9.3

23.84

11.2

7.76 18.96 13.05

5.08 18.12

1998–99 11.55

12.65

24.2

11.83

8.9

9.66 21.82

1999–00 16.62

14.14

30.76 1242

2000–01 18.93

16.36

35.29

10.42

2001–02 21.12

20.63

41.75

15.32 15.99 31.3

2002–03 19

19.03

38.03

24.85 24.99 49.84 17.16 15.65 32.81

2003–04 20.78

15.8

36.58

25.04 24.29 49.33 13.07

6.93 20.65

2004–05 24.04

16.8

40.83

23.2

18.27 41.47 13.34

4.07 17.97

2005–06 26.69

14.79

41.48

25.08 17.17 42.25 13.68

2.01 16.62

2006–07 26.3

9.23

35.53

25.06 11.71 36.77 13.17

4.7

17.93

2007–08 26.29

11.13

37.42

25.22 12.2

5.8

19.75

2008–09 32.84

22.69

55.53

24.62 14.88 39.5

2009–10 32.59

25.38

57.98

26.89 21.97 48.86 26.71 16.13 43.36

2010–11

22.53

27.66

1991–92

9.41

5.13

Rice

Stocks

Rice

7.91

Wheat Total

8.58 16.49 10.21

10.26 10.48 20.74

4.03

Rice

Wheat Total 5.6

15.81

8.86

2.21 11.7

8.06 17.95

9.93

2.74 12.67

9.14 18.6

13.55

20.73 12.16

7

20.54

10.63 23.05 15.72 13.19 28.91 7.79 18.21 23.19 21.5

3.24

Note: 2010–11 figures are up to August 2010.

44.98

24.91 26.04 51.02

37.43 13.84 21.6

13.43 35.58

2.27 22.88 32.05 55.43

Food Price Inflation and Public Procurement  

53

holding of wheat and the production of wheat is positive but not statistically significant (b = 0.27, t = 1.58). Therefore, over a long run there is no evidence that the government’s stock holding behaviour is destabilizing. Indeed, for the rice market, on average, the government has reduced its stocks when there has been a fall in output. How do we then explain the recent upsurge in stocks coexisting with a steep fall in output? An explanation is often provided in terms of protecting large farmers. It is argued that the revenue the farmer earns from the market is the product of the quantity of sales and the price. In a period of shortage, the quantity of sales goes down. Without any government intervention, as a result of this fall in the quantity of sales, the market price goes up. Thus, the market provides insurance to the seller against bad harvest. The fall in quantity is partly compensated by the rise in the market price. But if the government intervenes by offloading additional stocks in the market, the market price is prevented from going up. This, in turn, hurts the farmers whose income unambiguously goes down because the quantity of sales has gone down and the market price, because of government offloading, does not increase. So the argument is that the government has not reduced its stocks because it wants to protect the interest of the farmers, especially that of the large farmers and big traders who are the primary sellers in the market. On closer examination, however, the argument does not hold. Table 3.5 shows that during 2009–10, the year when there was a fall in output, procurement of rice remained almost constant and procurement of wheat actually went up. The argument in the preceding paragraph does not explain why government procurement should go up (or even remain constant) in a period of acute shortage of output. Second, off take from government stocks did increase during 2009–10 as shown in Table 3.5, but did not increase enough to check the price rise, probably because of a lack of infrastructure of public distribution. We shall offer a different explanation for the rise in procurement and a consequent rise in government stocks. First, it is to be noted that each year, whether it is a year of normal production or one of shortage, the government needs to acquire some food grains from the market. This is because the government is committed to distribute a certain amount of food grains through the fair price shops. Also it needs to provide rations to the military and keep some precautionary stocks in case of natural calamities like floods, earthquakes or famines. Now, in a year of low rainfall or drought, the government gets prior indication that there is going to be a shortage in the coming year and food grains prices are going to go up in the market. Therefore, given the high expected market prices in the immediate future,

54  Abhirup Sarkar Figure 3.3 Procurement Price of Rice and Wheat 1000 900 800 700 600 500 400 300 200 100 0

1

2

3

4

5

6

7

8

9 10 11 12 13 14 15 16 17 18 19 20

Series 1 Rice-Series 1

Series 2 Wheat-Series 2

the government realizes that it can procure its required amount of food grains from the market only if it increases the procurement price. Accordingly, the procurement price, which is announced just before the harvest, is substantially increased. From Figure 3.3 we find that this is exactly what had happened when a fall in production was anticipated. In particular, the procurement price of both rice and wheat sharply increased in 2008–09 and 2009–10. Evidently, this was done in anticipation of a high market price. The increase in the procurement price and the subsequent rise in the market price had two effects. First, the private stock holders found themselves fund constrained when they tried to buy the normal stocks at the higher market price. Moreover, as the amount of money invested in stocks increased, the risk involved with stock holding also increased. The two, taken together, made private stock holding for future sales less attractive. Second, as the government had increased the procurement price, selling to the government became more profitable. As a consequence of these two effects more stocks were sold to the government and the total amount of stocks held by the government increased substantially. Does this perverse increase in government stocks take place whenever there is a fall in the production of food grains? We have seen earlier that this is not the case. On an average, government stocks have declined with

Food Price Inflation and Public Procurement  

55

decreases in the levels of output. Although the relationship is statistically significant for rice, not so for wheat, a reverse relationship certainly does not exist over the long run. Therefore, the recent perverse response of government stocks must have been an exception rather than a rule. Indeed, for small declines or increases in output levels, the government can stabilize prices by releasing more stocks to the market or buying more stocks from the market without changing the procurement price. But if the output change is exceptionally large, as was the case in recent past, the public distribution system is not only unable to handle the crisis, but can give a signal to the market by increasing the procurement price which can perversely increase government stock holding.

Concluding Remarks In this chapter we have tried to identify the nature and causes of food price inflation in India. We have looked both at the long- and the short-run aspects of rising food prices. Over the long run, growth of population on the demand side and slow increase in productivity on the supply side have been responsible for a gradual rise in the relative price of food to nonfood articles. A necessary step to come out of this malady is to increase the productivity of the agricultural sector. However, increasing agricultural productivity is not enough to guarantee food for all, especially for the poor. Along with an increase in productivity it is necessary to increase the purchasing power of the disadvantaged section of the society. As for the short run, we come to the conclusion that for relatively small deviations in output from the normal level, the public distribution system of the government has been more or less capable of stabilizing prices. But for a large decline in output, as was the case in 2008–09, there is a perverted stock holding behaviour of the private agents which in turn makes it difficult for the government to manage its own stocks with the purpose of achieving price stabilization.

References Biswas, A. and C. Tortajada (2001), Development and Dams: A Global Perspective, International Journal of Global Resources Development, Vol. 17, No. 1, pp. 9–21. Dhawan, B. (1989), The Big Dams: Claims and Counter Claims, Commonwealth, New Delhi.

56  Abhirup Sarkar Duflo, E. and R. Pande (2007), Dams, Quarterly Journal of Economics, Vol. 122, No. 2, pp. 601–46. Economic Survey, Government of India, 2009–10, http://indiabudget.nic.in. Evenson, R. and J. McKinsey (1999), Technology Climate Interactions in the Green Revolution, Economic Growth Center, Yale. Gopalakrishnan, E. (2000), ICOLD Comment on Report of World Commission of Dams, www.dams.org/report/reaction/icoldindia.htm. Reserve Bank of India, Database on the Indian Economy, http:// dbie.rbi.org.in Sarkar, A. (2007), Development and Displacement: Land Acquisition in West Bengal, Economic and Political Weekly, 21 April, pp. 1435–42. ———. (2011), Development, Displacement and Food Security: Land Acquisition in India, in Chetan Ghate (ed.), Oxford Handbook of the Indian Economy, Oxford University Press, New Delhi. Sen, A. (1981), Poverty and Famines: An Essay on Entitlement and Deprivation, Clarendon Press, Oxford. Singh, S. (2002), Taming the Waters: The Political Economy of Large Dams in India, Oxford University Press, New Delhi. Thakkar, H. (2000), Assessment of Irrigation in India, World Commission of Dams. World Commission on Dams (2000), Dams and Development: A New Framework for Decision-Making. Earthscan Publications, London. World Development Indicators 2009, World Bank, Washington DC.

4

Agrarian Change under Reforms: A Case Study of Tamil Nadu, 1980–2005 Venkatesh B. Athreya

Introduction

P

rofessor C.T. Kurien’s seminal work on the dynamics of rural transformation in Tamil Nadu between 1950 and 1975 based on secondary data (Kurien, 1981) remains pioneering and classic. Since then, there has been very significant change in the Indian economy and society, in terms of structures, policies and outcomes. There have been conflicting assessments of the impact of the growth processes of the Indian economy since 1980, and especially since 1991, on aspects of deprivation such as poverty, unemployment and inequality. Critics of neoliberal reforms under way since 1991 argue that these have been highly deflationary and have depressed demand, especially in rural areas.1 Agriculture is seen as having been affected negatively by the reforms for a number of reasons: • Sharp rise in input costs, as a result of subsidy cuts, as the government seeks to rein in the fiscal deficit to win the confidence of finance capital, especially from abroad. • Fall in output prices because of opening up the country to agricultural imports by removing quantitative controls and lowering import tariffs.

58  Venkatesh B. Athreya • Financial liberalization leading to a reduction in institutional credit for agriculture and a rise in rates of interest for farm loans. • Sharp decline in rural development expenditure of governments causing a decline in rural demand. • Imposition of a targeted public distribution system for food grain and essential commodities, hurting the rural poor. • Reduction in public investment as well as publicly funded R&D in agriculture and weakening of extension services. While the growth of the economy at the national level is thus seen to be sectorally skewed, with services, and more recently, manufacturing, doing well in terms of output growth, but agriculture doing badly, the picture varies considerably across states. The state of Tamil Nadu is seen as one of the better performing states, both in terms of economic growth and in terms of human development. The growth pattern in the state since 1980 has not been too dissimilar to that of the country as a whole. The share of agriculture in state domestic product (SDP) has declined very sharply, especially over the 1990s, while that of services has increased considerably. The performance of industry has been mixed. However, as in the case of India as a whole, output growth in industry and services has not been matched by employment growth, with the result that the state has seen a rising rate of unemployment. In this chapter, we review the major trends in the economy of the state, with a particular focus on the agrarian and rural economy. It will also look at human development. Specifically, this chapter will examine: • the overall growth and changes in the composition of the SDP of Tamil Nadu between 1980 and 2005; • the growth in area, output and yield of important crops; changes in irrigation, agricultural machinery and techniques; policies towards agriculture in terms of provision of credit, extension services, input subsidies and price support; • the trends in employment and unemployment; and • the role of the state government, especially in relation to the rural economy.

Population and Employment We begin our discussion by looking at the broad demographic changes in the state of Tamil Nadu since 1980. Table 4.1 presents some basic data on the population of the state. While the state’s population increased by nearly

Agrarian Change under Reforms  

59

Table 4.1 Some Basic Data on Total Population

Sl. Census No. Year

Population (in millions)

Literacy Rate (per cent)

TN

TN India TN India TN

India

Sex Ratio Proportion Rate of Females per of SC&ST Urbanization 1000 Males India TN India

1

1961

33.69

439.2 31.4 28.3 18.8 21.5 26.1

18.0 992

941

2

1971

41.2

548.2 39.5 34.5 18.5 21.5 30.2

19.9 978

930

3

1981

48.41

683.3 46.8 43.6 19.4 23.5 32.9

23.3 977

934

4

1991

55.86

846.3 62.7 52.2 20.2 24.3 34.7

25.7 974

927

5

2001

62.41 1027

27.8 987

933

73.5 65.4 20.0 N.P 44.0

Source: Tamil Nadu—An Economic Appraisal 2005–06, Government of Tamil Nadu.

50 per cent between 1961 and 1981, the rate of growth of population has been declining since 1981. It grew by a little less than 30 per cent between 1981 and 2001. The urban population has grown much faster than the rural over this period as well. While the rate of urbanization—defined as the percentage of the population resident in urban areas to total—rose rather slowly between 1981 and 1991, it has grown rather more rapidly during the decade of 1991– 2001, rising from 34.7 per cent in 1991 to 44 per cent in 2001. The state is now the most urbanized one in the country, overtaking Maharashtra, but the increase is due in part to the inclusion of more than 600 town panchayats, many of which are rather rural in character. There has been a remarkable rise in the rate of literacy in the state—defined as the percentage of literate persons in the population aged seven years and above—from 46.8 per cent in 1981 to 73.5 per cent (male 82.3 per cent and female 64.4 per cent) in 2001, a rate of increase broadly in line with the national picture.2 The proportion of children (aged 5–14 years), attending school, from agricultural labour households in rural Tamil Nadu rose from 47.6 per cent in 1987–88 to 85 per cent in 1999–2000 for males. The corresponding increase for female children was even more impressive, from 32.4 to 84 per cent (Jha, 2006). The state has had a consistently higher population sex ratio, defined as females per 1000 males, than the country as a whole, reflecting the somewhat better relative status of women in the state compared to many of the populous north Indian states. It must be noted, however, that in recent decades, the state has had a declining female-to-male ratio in the age group

60  Venkatesh B. Athreya Table 4.2 Labour Force Participation Rates—Usual Status for Tamil Nadu and All India: 1983 to 2004–05 Sl. No. Year

Rural Male

Urban Female

Male

Female

1

1983

69.9

52

65.3

25.3

2

1987–88

60.4 (54.9)

47.7 (33.1)

59.5 (53.4)

24.3 (16.2)

3

1993–94

61.3 (56.1)

48.1 (33)

60.1 (54.3)

24.7 (16.5)

4

1999–2000

61.(54)

48.4 (30.2)

58.5 (54.2)

22.7 (14.7)

5

2004–2005

60.4

46.7

61.1

25.3

Source: 1. National Sample Survey Organisation (NSSO) and 2. Tamil Nadu Development Report, Planning Commission, Government of India. Note: Values parentheses represent labour force participation rates for all India. All values are in percentage.

of 0–6 years, reflecting, among other things, persistent gender inequality arising from patriarchy and a population policy exclusively focused on limiting family size without addressing gender inequality.3 Table 4.2 shows the labour force participation rates from National Sample Survey (NSS) data for Tamil Nadu for the years 1983, 1987–88, 1993–94, 1999–2000 and 2004–05. The rates have remained fairly stable throughout the period from 1983 to 2004–05, with the only noticeable aspect being a small decline in rural female participation rates between 1983 and 1987–88, perhaps reflecting improved school enrolment among girls in the younger age groups. The picture that the censuses of 1981, 1991 and 2001 provide is shown in Table 4.3. For rural males, the figures closely match the data from the NSS rounds. In the case of females, the census data show significantly lower participation rates, although the difference seems to be coming down. In the case of urban males also the differences between NSS estimates and the nearest period census figures have been coming down. What is interesting is that the census figures for 2001 show that there is an absolute decrease in the number of male workers in rural areas between 1991 and 2001, and only a marginal increase in the number of female workers, the overall result being a decline in the total number of rural workers in 2001 over 1991. This reflects a shift of the labour force from rural to urban areas in the case of male workers, but possibly no significant shift for female workers.

Agrarian Change under Reforms  

61

Table 4.3 Number of Workers and Workforce Participation Rate for Tamil Nadu Rural Sl. No. Year

Urban

Male Number

a

Female

Male

Female

Rate

Number

Rate

Number

Rate

Number

a

Rate

1

1981

9.67

59.2

5.41

33.6

4.18

51.3

0.93

12

2

1991

10.82

58.3

7.01

38.5

5.14

52.8

1.22

13.1

3

2001

10.4

59.4

7.18

41.3

7.76

56.4

2.48

18.4

Source: Tamil Nadu Development Report, Planning Commission, Government of India. a The numbers are in millions and rates are in percentage. Table 4.4 Worker Participation Ratios of Tamil Nadu and All India for Various Years Rural Sl. No. Year

Males

Urban Females

Males

Females

Usual Status (PS + SS)

1

1983

68.2 (63.5)

51.4 (39.3)

60.8 (58.1)

23.7 (17.3)

2

1987–88

58.7 (53.9)

46.1 (32.3)

55.8 (50.6)

22.7 (15.2)

3

1993–94

60.2 (55.3)

47.8 (32.8)

57.5 (52.1)

23 (15.5)

4

1999–2000

59.4 (53.1)

43 (29.9)

56.3 (51.8)

21.5 (13.9)

Source: 1. NSSO (1996, 2001) and 2. Tamil Nadu Development Report, Planning Commission, Government of India. Note: Values parentheses represent labour force participation rates for all India. All values are in percentage.

Table 4.4 presents worker participation ratios by NSS data over successive rounds for Tamil Nadu, with data for India as well. The larger difference between labour force participation rates and worker participation rates in 1999–2000 as compared to 1993–94, especially for rural females, is consistent with the all India picture of very slow growth of rural employment across the country between these two years. Table 4.5 brings out the

62  Venkatesh B. Athreya Table 4.5 Marginal Workers in Tamil Nadu and All India: 1991 and 2001 Sl. No. Year

Rural

Urban

Males

Females

Males

1

1991

0.4 (0.7)

6.5 (8.1)

0.2 (0.4)

1.3 (1)

Females

2.5 (3.4)

Total

2

2001

7.6 (7.9)

11.2 (14.2)

2.7 (2.4)

3.5 (3.4)

6.6 (8.7)

Source: 1. NSSO (1996, 2001). 2. Tamil Nadu Development Report, Planning Commission, Government of India. Note: Values parentheses represent labour force participation rates for all India. All values are in percentage.

sharp rise in the proportion of marginal workers across all categories—rural, urban, male and female—between 1991 and 2001, for both Tamil Nadu and India, and thus provides further support for the hypothesis of a slower rate of growth of employment during the 1990s. Table 4.6 shows the changes in the distribution of the state’s working population by status of employment across the full sample rounds of the NSS from 1993–94 to 2004–05. The proportion of self-employed workers declined between 1993–94 and 1999–2000 for males and females in rural areas and for males alone in urban areas. Between 1999–2000 and 2004–05, however, this trend became reversed and the proportion selfemployed rose for all categories—rural and urban, male and female—in Tamil Nadu as well as at the all India level. However, from a longer-term perspective, there has been a gradual trend of decline in the proportion of the workforce that is self-employed and an increase in the wage-employed. Thus in 1972–73, 42.2 per cent of rural male workers and 39 per cent of rural female workers were self-employed. These figures declined to 31.6 per cent and 36.5 per cent, respectively, in 1983. The corresponding all India figures were higher in all cases, being 55 per cent and 54.7 per cent in 1972–73 and 49.3 per cent and 56.4 per cent in1983 for males and females, respectively. The fact that the proportion of the rural workforce that is selfemployed is far smaller for Tamil Nadu than it is for India as a whole is not surprising since the state has one of the highest proportions of labour households to all rural households in the country. Thus, in 1993–94, 547 out of 1000 rural households were labour households in the state as against 383 for India as a whole. These figures rose respectively to 590 and 402 in

Agrarian Change under Reforms  

63

Table 4.6 Per Cent Distribution of Workers by Employment Status, Tamil Nadu, 1993–94, 1999–2000 and 2004–05 Males Sl. No. Category

1993– 1994

1

41.4

Females

1999– 2000

2004– 2005

1993– 94

39.9

41.9

1999– 2000

2004– 2005

Rural Self-employed

35.8

(57.7) 2

Regular employed

12.5

(55) 15.3

(8.5) 3

Casual labourers

46.1

(58.6) 13.4

(8.8) 48.9

(33.8)

5.2

38

46.1 (57.3)

6.9

(2.7) 46.7

(36.2)

52.9 (38.7)

6.6 (3.1)

55.1

47.3

(39.6)

Urban 4

Self-employed

34.5 (41.7)

5

Regular employed

6

Casual labourers

40.3 (42.2) 25.2 (16.1)

33

38.0 (41.5)

45.4

45.2

(41.7) 21.6

16.7

(16.8)

34.5 (44.8) 40.3 (29.2) 25.2 (26)

39.4

44.3

(45.3) 40.7

41.2

(33.3) 19.9

14.5

(21.4)

Source: NSS, various rounds. Note: Figures in parentheses are for all India.

1999–2000. Although these figures declined to 521 and 377, respectively, for Tamil Nadu and India in 2004–05, Tamil Nadu clearly retained its more ‘proletarian’ character. It is not possible to conclude from the relative rise in the proportion of self-employed between 1999–2000 and 2004–05 that there is a reversal of the long-term trend of increase in the proportion of wage-employed in the labour force. The NSS data for 2004–05 also show that the earnings of the selfemployed are generally very low. What we may be seeing is a process where the non-availability of wage-employment drives workers from households with little or no assets to seek to make a living by engaging in low productivity self-employment, given the absence of social security for the unemployed.

64  Venkatesh B. Athreya Although the economy of Tamil Nadu has done well in terms of income growth and development of industry in comparison with many other states over the decades since 1970, it has faced the problem of persistent high levels of unemployment and underemployment. Between 1972–73 and 1983, the rate of unemployment for rural males doubled in the case of Tamil Nadu while the figure for India rose only marginally. The rate of unemployment in the state was more than twice the rate for the country for both males and females in rural areas in 1983, while in urban areas, the rates for Tamil Nadu were higher than those for the country by more than 40 per cent. Table 4.7 provides data on the daily status unemployment rates for the state and the country for the reference years 1987–88, 1993–94 and 1999–2000 from NSS data. For rural males, the rate for the state continues to be around twice that for the country. In the case of rural females also, the state’s unemployment rates are substantially higher than for the country. In fact, except for the case of urban females in 1999–2000, the state reports a higher rate of unemployment than the country. This partly reflects the fact that the state has a much higher degree of landlessness and a much higher proportion of labour households than most other states, factors that result in greater open unemployment on account of a greater degree of proletarianization. Interestingly, when one looks at the rate of unemployment for the educated, the state does better. In 1999–2000, the state reports lower Table 4.7 Unemployment Rates in Tamil Nadu and All India Rural

Sl. No.

Year

I

Daily status

1

Urban

Males

Females

Males

1987–88

8.4 (4.6)

10.7 (6.7)

12.3 (8.8)

2

1993–94

12.8 (5.6)

11.3 (5.6)

8.6 (6.7)

3

1999–2000

14.3 (7.2)

12.3 (7)

9.(7.3)

8.6 (9.4)

II

Among educated

4

1993–94

1.8 (1.4)

0.6 (0.8)

4.3 (4)

6.8 (6.2)

5

1999–2000

9.9 (5.6)

13.5 (14.6)

4.7 (6.2)

Females 13.2 (12) 12.7 (10.5)

13.9 (14.3)

Source: Tamil Nadu Development Report, Planning Commission, Government of India. Note: Figures in parentheses are for all India. All values are in percentage.

Agrarian Change under Reforms  

65

Table 4.8 Growth Rates of Employment in Tamil Nadu Sl. No. Sector

Growth Rate (per cent per annum) 1971–80 1981–90 1991–2000

1

Agriculture and allied activities

2.45

1.48

0.30

2

Mining and quarrying

0.19

2.87

10.28

i)

Primary sector (1+2)

2.44

1.49

0.34

3

Manufacturing

3.92

1

6.89

4

Construction

3.78

3.73

19.65

ii)

Secondary sector (3+4)

3.90

1.31

8.57

5

Trade and commerce

3.37

2.10

9.24

6

Transport, storage and communication

1.74

2.43

2.22

7

Other services

0.79

4.70

2.33

iii)

Tertiary sector (5+6+7)

1.97

3.29

5.04

Total (i+ii+iii)

2.48

1.83

2.71

Source: Tamil Nadu Development Report, Planning Commission, Government of India.

rate of unemployment for this category than the country in all categories except that of rural males. Underlying the growing rate of unemployment is a decline in the rate of growth of employment in the sector which accounts for the major share of the working population, namely agriculture and allied activities. Table 4.8 provides data on broad decadal rates of growth of employment in major sectors across three decades from 1970 to 2000. While the rates of growth of employment in the secondary and tertiary sectors showed significant improvement in the 1990s as compared to the 1980s, the situation was quite the reverse in respect of the primary sector. The rate of growth of employment in this sector had already declined in the 1980s as compared to the 1970s, but the decline in the 1990s was dramatic. Quite possibly, the rate of growth of employment in crop husbandry per se was negative, as it certainly was for agriculture as a whole for rural males. Overall, the employment situation, especially in rural areas, seems to have deteriorated in the period since 1980.

66  Venkatesh B. Athreya

Economic Growth In the period since 1980, the rate of growth of the Indian economy as measured by the gross domestic product (GDP) has been distinctly higher than in the period 1950–1980. Table 4.9 presents data on the sectoral rates of growth of the Indian economy thus measured at different intervals of time since the mid-1960s. It can be seen that the best growth performance of the agricultural sector was during the period from the mid-1980s to mid-1990s. By contrast, the following decadal period has seen virtual stagnation in agricultural GDP. This is also reflected in the virtual stagnation in the output of food grain during this period, implying an emerging crisis of food security. How did the Tamil Nadu economy fare over the period since 1980 in terms of economic growth? Table 4.10 presents data on the rate of growth of the net state domestic product (NSDP) in comparison with that of India’s NDP over successive plan periods. It is clear that the state of Tamil Nadu has, like the country as a whole, experienced a higher growth rate of output since 1980 as compared to the period 1950–80. It is also evident that the rate of growth of the state has been lower than that of India over a part of the period since 1980. How has the state fared in comparison with other major states? Table 4.11 provides data on the rate of growth of gross state domestic product (GSDP) for some of the relatively more ‘developed’ major states during the period 1993–94 to 2004–05. In terms of GSDP growth rate, Tamil Nadu does relatively poorly among the better performing major states. However, since its rate of growth Table 4.9 Annual Trend Rates of Growth of GDP, Indian Economy Manufac- Mining and Food Nonturing Quarrying Electricity Grain Food Agriculture 1965–66 to 79–80

3.8

6.9

6.2

3.0

2.6

2.9

1965–66 to 74–75

2.7

9.4

3.8

3.4

3.0

3.2

1975–76 to 84–85

4.3

6.6

7.3

2.5

2.9

2.6

1985–86 to 94–95

6.2

4.2

8.3

3.1

5.7

4.1

1994–95 to 04–05

6.4

2.9

5.1

0.7

0.5

0.6

Source: C.P. Chandrasekhar, The Progress of ‘Reform’ and the Retrogression of Agriculture, accessed at www.macroscan.com.

Agrarian Change under Reforms  

67

Table 4.10 Growth Rate at 1980–81 Prices, Tamil Nadu (NSDP) and India (GDP), Per Cent Per Year Sl. No.

Tamil Nadu

India

1

1st Plan (1951–56)

4.45

3.6

2

2nd Plan (1956–61)

2.90

4.0

3

3rd Plan (1961–66)

1.58

2.2

4

4th Plan (1969–74)

3.40

3.3

5

5th Plan (1974–79)

7.00

5.2

6

6th Plan (1980–85)

6.01

5.2

7

7th Plan (1985–90)

**

5.1

5.7**

8

8th Plan (1992–97)

7.0**

6.5**

9

9th Plan (1997–2002)

4.7**

5.5**

**

7.8**

10

Plan Period

10th Plan (2002–07)

8.5

Source: 1. Tamil Nadu Human Development Report, Government of Tamil Nadu, 2003. 2. Mid-term appraisal, Eleventh Five Year Plan, Government of India, 2010. ** Mid-term appraisal, Eleventh Five Year Plan, Government of India. Table 4.11 Annual Average Rates of Growth of GSDP and Per Capita Income (at 1993–94 prices), Select States, 1993–94 to 2004–05

Sl. No. State

Per Capita Income in Per Capita Per Capita Rupees at Income in GSDP Income 1993–94 Rupees at Growth Rate Growth Rate, Prices, 1993–94 Prices, % p.a. % p.a. 1993–94 2004–05

1

Tamil Nadu

5.52

4.22

8955

13,999

2

Andhra Pradesh

5.99

4.81

7416

12,352

3

Karnataka

6.96

5.34

7838

13,820

4

Kerala

6.22

4.80

7983

13,321

5

Gujarat

7.48

5.32

9796

16,878

Table 4.11 continued

68  Venkatesh B. Athreya Table 4.11 continued

Sl. No. State

Per Capita Income in Per Capita Per Capita Rupees at Income in GSDP Income 1993–94 Rupees at Growth Rate Growth Rate, Prices, 1993–94 Prices, % p.a. % p.a. 1993–94 2004–05

6

Maharashtra

5.77

3.63

12,183

17,864

7

West Bengal

7.07

8

Punjab

4.40

5.58

6756

12,271

2.56

12,710

16,756

9

Haryana

6.37

3.94

11,079

16,872

Source: Tamil Nadu Economic Appraisal 2005–06.

of population is lower than that of many other states, it does somewhat better in terms of per capita income. It is interesting to note that the state of West Bengal posts the highest rate of growth of per capita income and the second highest rate of growth of SDP during the period from 1993–94 to 2004–05.4 Although the growth rate of GSDP in Tamil Nadu since 1980 has been consistently greater than the rate of growth of population, implying a steadily rising level of per capita income and the rate of growth of per capita income has been quite impressive since the early 1990s, there have been significant changes in the composition of output which have implications for the well-being of the agrarian population. Table 4.12 presents data on the sectoral composition of the state’s output for selected years from 1960–61 to 2005–06. The first thing to note is that even by 1970–71, the primary sector had ceased to be the largest contributor to the state’s GSDP, and its place had been taken over by the tertiary sector. The kind of diversification in the structure of output in terms of sectoral composition that Tamil Nadu exhibited as early as the mid-late 1960s did not occur in the Indian economy as a whole until much later. Interestingly, the pace of diversification has continued, and the state is now among the most diversified states in terms of the structure of its output. It can be seen that the share of agriculture and allied activities in GSDP has come down from 24.56 per cent in 1980–81 to just 11.59 per cent in 2005–06, a normal agricultural year. Interestingly, the share of industry as well as manufacturing has declined over the same period. The share of the

0.17

Electricity, gas and water supply

16.55 2.69 0.35 1.56 3.96 0.97

Trade, hotels and restaurants

Transport

Communications

Banking and insurance

Real estate and business services

Public administration

Of which

36.22

7.91

Tertiary

6.85

Unregistered manufacturing

20.27

42.46

Registered manufacturing

Of which

Secondary

Agriculture and allied activities

43.51

1960–61

1.66

4.02

2.11

0.64

4.43

15.81

38.33

0.31

10.16

9.68

26.88

32.78

34.79

1970–71

3.56

4.99

3.25

0.95

4.75

16.87

40.59

0.43

12.47

14.95

33.49

24.56

25.92

1980–81

4.26

5.53

5.77

0.93

4.68

16.51

43.48

2.03

7.95

16.22

33.10

21.85

23.42

1990–91

5.40

6.63

7.21

1.94

6.82

15.40

53.06

2.81

6.86

13.03

29.42

15.12

17.51

1999–2000

Source: Adapted from Table No. 6, p. 10 of Tamil Nadu—An Economic Appraisal 2005–06, Government of Tamil Nadu.

3

2

Primary

1

Of which

Sector

Sl. No.

Table 4.12 Sectoral Composition of GSDP, Tamil Nadu, Select Years, Shares in Per Cent

5.04

8.01

8.03

3.92

6.97

16.36

57.61

1.66

6.89

13.22

28.48

11.59

13.91

2005–06

70  Venkatesh B. Athreya Table 4.13 Sectoral Composition of GSDP, Selected States, 1993–94 and 2004–05, Shares in Per Cent Sl. No. State

Primary Sector

Secondary Sector

Tertiary Sector

1993–94 2004–05 1993–94 2004–05 1993–94 2004–05

1

Andhra Pradesh

35.73

27.18

21.92

22.96

42.35

49.93

2

Karnataka

36.32

19.41

25.40

27.98

38.27

52.61

3

Kerala

30.58

14.71

20.62

20.69

48.80

64.59

4

Tamil Nadu

24.79

13.96

33.69

30.00

41.52

56.04

5

Gujarat

25.46

18.45

35.77

39.08

38.77

42.45

6

Haryana

42.44

28.19

26.24

27.45

31.32

44.35

7

Maharashtra

20.16

11.93

32.77

29.22

47.07

58.85

8

Punjab

46.13

37.07

21.76

23.48

32.10

39.45

9

West Bengal

33.84

23.12

23.02

20.21

43.14

56.67

India

33.54

22.81

23.69

24.78

42.77

52.41

Source: Tamil Nadu Economic Appraisal, 2005–06, Government of Tamil Nadu.

tertiary sector, on the other hand, has increased sharply from 40.59 per cent in 1980–81 to 57.61 per cent in 2005–06. This is similar to developments at the national level and in many other States. Table 4.13 shows the comparison between Tamil Nadu and selected major states in this regard for the recent period. Only Maharashtra has a lower share of the primary sector in GSDP than Tamil Nadu, in both 1993–94 and 2004–05. With respect to the share of secondary sector in GSDP, though Tamil Nadu remains second to Gujarat in both 1993–94 and 2004–05, the share has declined from 33 per cent to 30 per cent while in the case of Gujarat, the share has increased from 35.77 per cent to 39.08 per cent. It is an established feature of modern development experience that the share of the primary sector including agriculture in national income declines as income increases. Development is associated in the popular consciousness with an increasing share of the secondary sector—especially, within this sector, manufacturing—and of the tertiary sector in national income. However, there is an important difference in this regard between the advanced capitalist countries and the ‘developing’ countries. In the case of the latter, declines in the share of the primary sector in national income have not been accompanied by a corresponding shift of the labour

Agrarian Change under Reforms  

71

force from the primary sector to other sectors. The experience of India, as well as of Tamil Nadu, bears this out. Table 4.14 presents data on the sectoral distribution of workers by sex for Tamil Nadu between 1977–78 and 1999–2000 during each of the ‘full sample’ NSS rounds, while Table 4.15 presents the same by residence for 1999–2000 and 2004–05. Taken together, Tables 4.14 and 4.15 bring out the following points: • Despite the large decline in the share of the primary sector in the GSDP of the state, the share of the primary sector in employment Table 4.14 Sectoral Distribution of Workers by Sex, Tamil Nadu, Per Cent, 1977–78 to 1999–2000 Sl. No. Period 1

Sex

1977/78

2

1983

3

1987/88

4

1993/94

5

1999/2000

Primary

Secondary

Tertiary

Male

57.4

19.7

22.9

Female

73.2

16.2

10.6

Male

49.2

23.1

27.6

Female

70.4

16.4

13.1

Male

46.1

24.6

29.3

Female

65.8

20.4

13.8

Male

45.5

23.6

30.8

Female

67.3

19.0

13.7

Male

42.9

25.7

31.4

Female

62.8

20.7

16.5

Source: National Sample Survey. Table 4.15 Sectoral Distribution of Workers by Residence, Tamil Nadu, 1999– 2000 and 2004–05 Rural

Urban

Combined

1999– 2000

2004– 2005

1999– 2000

2004– 2005

1999– 2000

2004– 2005

Primary

68.4

65.7

9.3

8.7

50.3

46.6

Secondary

18.1

19.8

36.2

38.5

23.7

26.0

Tertiary

13.5

14.5

54.5

52.8

26.0

27.4

Sector

72  Venkatesh B. Athreya remains stubbornly high, being nearly half even in 2004–05, after a decade and a half of reforms. In rural Tamil Nadu, the share of primary sector employment in the total is close to two-thirds. • While the share of the tertiary sector in the GSDP of Tamil Nadu is close to 60 per cent, its share in employment is less than half of that proportion. • Over the longer term, there has been some shift of the work force out of the primary sector, with the share of this sector declining, between 1977–78 and 1999–2000, from 57.4 to 42.9 per cent for males, and from 73.2 to 62.8 per cent for females. The fact of a persistently high share of the work force in the primary sector, taken together with the fact of extremely slow growth of employment in this sector during the period since 1990–91 suggests a major crisis of livelihoods in the state. The possibility of such a crisis is not inconsistent with pockets of dynamic growth of employment in areas of the state where industry (as in the case of textiles in the Karur– Erode–Tiruppur–Coimbatore belt) or services (as in the case of financial/ information technology services in the Chennai metropolitan area) may be growing at a relatively rapid rate. We turn now to changes in the agricultural sector.

Agricultural Economy: Changes, 1980–2005 We begin with an analysis of changes in land use patterns over the period since mid-1970s. Since 1976, there has been a gradual reduction in the share of net sown area (NSA) in the geographical area of the state. Between 1976 and 1980, the share was close to 50 per cent. It has since then gradually declined to about 38 per cent in the first five years of the decade of 2001 to 2010. Gross cropped area (GCA) has declined to around 44 per cent during the period 2001–2005 from a figure close to 58 per cent during the period 1976–1980. There is a corresponding increase in the share of geographical area under all fallows. The latter has risen from around 13.5 per cent between 1976 and 1980 to around 20.5 per cent between 2001 and 2005. Particularly striking is the sharp rise in the area of land fallow for more than one year, classified

Agrarian Change under Reforms  

73

as ‘other fallows’. This category has continuously increased from less than 4 per cent during 1976–80 to more than 12 per cent during 2001–2005. This may also reflect a situation where cultivators, especially the smaller ones, either lack the wherewithal to undertake crop cultivation on account of difficulties in accessing credit, water or other key inputs or find the cost– risk–return structure unviable. There is some evidence at the all India level that the terms of trade have moved against agriculture from the end of the 1990s (see Chandrasekhar, 2007). There is also evidence that institutional credit to agriculture has become both more scarce and more expensive since the early 1990s (see Ramachandran and Swaminathan, 2003). The share of area under non-agricultural uses has also increased from around 13 per cent in the period 1976–80 to around 16 per cent in the period 2001–2005, reflecting, in part, increasing urbanization. An important constraint to agriculture in the state is water availability. There have been significant changes in the irrigation regime in the state, changes which were already under way during the late 1970s. These changes, along with several other factors, have led to changes in area sown and irrigation intensity. Table 4.16 presents quinquennial averages for annual NSA, GCA, cropping intensity and irrigation intensity for the period 1976 to 2005 for Tamil Nadu. Table 4.16 Net and Gross Area Sown, Cropping Intensity and Irrigation Intensity, Quinquennial Averages, Tamil Nadu, 1976–2005

Sl. No. Period

Net Area Sown in ‘000’ Hectares

Gross Cropped Area in ‘000’ Hectares

1

1976–80 (4 years)

6196.19

7579.19

1.223

2755.64

3631.27

1.316

2

1980–85

5598.71

6628.50

1.184

2558.55

3241.46

1.265

3

1985–90

5644.39

6665.77

1.181

2433.08

2989.38

1.228

4

1990–95

5761.69

6972.11

1.210

2675.72

3333.48

1.245

5

1995–2000 5501.56

6485.58

1.179

2874.29

3453.88

1.202

6

2000–05

5792.15

1.164

2556.66

3018.12

1.177

4970.46

Net Area Irrigated Cropping in ‘000’ Intensity Hectares

Gross Irrigated Area in ‘000’ Irrigation Hectares Intensity

Source: Season and Crop Reports, Tamil Nadu, Various Issues.

74  Venkatesh B. Athreya The data suggest a sharp decline in NSA, GCA and CI as well as II since the end of the 1990s. Over the 25 years since 1980, the annual NSA has declined by as much as 1.2 million hectares on average, and the GCA by an even higher figure of 1.8 million hectares. Even granting the uncertain quality of the data, these figures are suggestive of major shifts in land use. The declines in area irrigated and in irrigation intensity reflect the maturing of problems in the state’s irrigation regime which were noted as being incipient in earlier work (see Athreya et al., 1990).

Area, Output and Yield of Major Crops Over the years since the end of the 1970s, there have been some shifts in cropping pattern in the state. There has also been a fair amount of technological change, and these have implications for yields. Taken together, the changes in area and yield determine changes in production. Table 4.17 brings together some data on decadal rates of growth of area, yield and output of major crops in the state from the 1960s to the 1990s. Overall, the pattern of changes in area under different crops may be summarized as follows. Paddy has more or less retained its share of GCA at approximately one-third. Its yields have increased more or less throughout the period, with some year-to-year fluctuations, but the decade of the 1980s was the one that saw the most rapid growth in paddy yields. Area under millets has come down steadily, both in absolute terms and as a share of NSA/GCA. The major millets in the state are jowar and bajra, followed by ragi. Yields of bajra have risen steadily throughout the period since 1960, while area under the crop has declined consistently. In the net, the output of bajra has been declining throughout. Jowar has seen large declines in area during the1970s and 1990s, punctuated by marginal increases in the decades of the 1960s and the 1980s. Overall, there has been a substantial decline in area under jowar. Yield of jowar has been generally increasing, the exception being the decade of the 1980s, but this trend in yield has not prevented the overall output of the crop from declining steadily from the 1970s onward. Pulses show a very different pattern from other food grain crops. Except for a marginal decline in yield in the 1960s, area, yield and output of pulses have grown throughout the four decades from 1960 to 2000. Sugarcane, a high-value crop, also shows an increase in all three variables—area, yield and output—throughout the four decades, except for a marginal decline in yield in the 1960s. Of the remaining two important crops in the state, cotton shows considerable fluctuation in area and output, the overall result being a decline

Agrarian Change under Reforms  

75

Table 4.17 Annual Compound Growth Rate of Area (A) Production (P) and Yield (Y) of Major Crops in Tamil Nadu Sl. No. Crop 1

2

3

4

5

6

7

8

Rice

Jowar

Bajra

Pulses

Food grains

Sugarcane

Groundnut

Cotton

1960s

1970s

1980s

1990s

A

Variable

2.66

2.32

–2.32

1.34

Y

1.40

4.39

5.27

2.22

P

4.07

6.81

3.06

3.66

A

0.10

–3.86

0.11

–3.59

Y

2.27

1.40

–1.77

2.66

P

2.38

–2.47

–1.61

–0.92

A

–7.75

–6.76

–5.99

–4.71

Y

6.75

4.70

2.03

P

–1.01

A

4.07

Y P

5 –1.79

–1.30

–2.65

2

5.29

1.40

–0.34

3.50

4.01

3

3.73

5.80

9.30

4.40

A

1.96

2.25

–3.69

–0.88

Y

2.67

3.40

1.28

6.01

P

4.13

5.63

–2.43

6.70

A

9.30

1.69

7.30

4.20

Y

–0.51

4.30

0.70

2.02

P

8.34

5.59

7.75

6.25

A

1.69

1.93

7.25

1.60

Y

–3.10

–3.60

2.50

2.70

P

–1.41

–2.95

10.01

3.03

A

–3.79

–1.56

5.35

–2.22

Y

2.40

3.80

13

P

–1.30

2.93

19.18

0.35 –2.09

Source: Tamil Nadu Development Report, Planning Commission, Government of India.

in area and increase in output. Underlying this pattern is a consistent increase in yield, though the yield seems to have levelled off during the 1990s. Groundnut shows declines in yield and output through the 1960s and 1970s, but all three variables—area, output and yield—show increase

76  Venkatesh B. Athreya during the next two decades. The overall result is a significant rise in output of groundnut. What this picture of changes in area, yield and output for major crops suggests is that agriculture in the state has generally been dynamic, although with considerable fluctuations. It is also clear that there has been a general rise in crop yields and some degree of technological dynamism. Within this overall assessment, one must of course also point out the considerable degree of instability in respect of area, yield and output of practically all major crops, which becomes readily apparent if one examines annual data. This instability is at least in part due to the dependence of agriculture in the state on uncertain rainfall and an unstable irrigation regime.

Paddy The key crop in the state is paddy, which accounts for around one-third of the GCA. Table 4.18 provides some data on the performance of the state in paddy cultivation. The yield of paddy has been rising steadily through the 1980s and 1990s, but there has been a setback in the most recent period. Nevertheless, the paddy yield in the state ranks fourth among major states in 2005–06, with Punjab, Haryana and Andhra Pradesh ahead of it. Underlying this increase Table 4.18 Area, Production and Productivity of Paddy, Quinquennial Averages, Tamil Nadu, 1976–2005 Annual Average for Paddy Crop Sl. No. Period

Area (000 hectares)

Production (000 tonnes)

Productivity (kg/hectare)

1

1976–80 (4 years)

2682.22

5326.35

1980

2

1980–85

2342.20

4720.11

2005

3

1985–90

2003.69

5616.74

2818

4

1990–95

2138.56

6698.59

3134

5

1995–2000

2164.67

6732.49

3099

6

2000–05

1785.18

5162.29

2821

Source: Season and Crop Reports, Tamil Nadu, Various Issues.

Agrarian Change under Reforms  

77

in paddy yield over the years are improved methods of cultivation and more intensive use of inputs such as chemical fertilizers as well as a certain extent of mechanization. Taking all cereals together, the state shows a significant increase in yield between 1976–80 and 2000–2005. The same is the case with pulses. These points are brought out by the data in Table 4.19. The trend in yields in the case of cereals, pulses and food grains is very similar to what we observed in the case of paddy. Yields increase steadily through the 1980s and 1990s, but decline over the period 2000–05. What should be a matter of concern is that the annual output of both paddy and cereals as a whole, averaged over 2000–05, is in fact smaller than that for the period 1976–80. Not surprisingly, the state is crucially dependent on supplies of rice from the central pool through the Food Corporation of India, for its food security. The yields of some important crops of Tamil Nadu for selected years are shown in Table 4.20. Again, the general trend is one of increase in yields over time, although not without fluctuations, and with a setback in the most recent period. We have already noted that water is a major constraint to agricultural expansion in the state. We shall now very briefly look at changes in the irrigation regime in the state. The average area irrigated by different sources during the decades since 1950 is presented in Table 4.21. The most important change in the irrigation regime is the decline in the share of tank irrigation and the dramatic increase in the share of area irrigated by wells. While the share of total NIA accounted for by tanks has been steadily declining, from around 37 per cent in the 1950s to around 22 per cent by the 1990s, that accounted for by wells has increased from around 24 per cent in the 1950s to around 47 per cent by the 1990s. The share of NIA irrigated by canals has declined, but (unlike tanks) more modestly, from around 39 per cent in the 1950s to around 30 per cent in the 1990s. More recently, well irrigation has gained further ground. In 2005–06, the share of well irrigation in NIA was 53.1 per cent, of which 12 per cent came from tube wells and the rest from open wells. Although the gross irrigated area (GIA) since the beginning of the 1990s has been somewhat less than in the period before 1980, the quality of irrigation has also changed, with the farmers having access to wells being able to use water more effectively. However, insofar as a very large proportion of wells are utilized with the help of electrically energized pump sets, the availability of power acts as a constraint to irrigation management. The decline of tank irrigation, which is an important aspect of the crisis in irrigation, affects small and marginal farmers severely. These sections are known to depend to a relatively greater

4564.80

1976–80 (4 years)

1980–85

1985–90

1990–95

1995–2000

2000–05

1

2

3

4

5

6

Pulses

Food Grains (Cereals + Pulses)

6004.55

7677.76

7957.36

7145.21

6015.01

6435.06

2306

2593

2494

2125

1549

1410

612.68

615.98

758.13

670.46

563.41

587.38

240.27

261.02

330.02

290.32

204.74

196.69

389.4

423

447

436.2

362.8

334.5

3173.68

3569.66

3948.36

4050.74

4429.02

5152.19

6244.81

7938.78

8287.38

7435.53

6219.76

6631.75

1935

2217

2100

1841

1398

1288

Production Productivity Area Production Productivity Area Production Productivity (‘000 tonnes) Kg/Ha (‘000 ha) (‘000 tonnes) Kg/Ha (‘000 ha) (‘000 tonnes) Kg/Ha

Source: Season and Crop Reports, Tamil Nadu, Various Issues.

2560.99

2953.68

3190.22

3380.28

3865.61

Area (‘000 ha)

Sl. No. Period

Cereals

Table 4.19 Area, Production and Productivity of Cereals and Pulses, Quinquennial Averages, Tamil Nadu 1976–2005

Agrarian Change under Reforms  

79

Table 4.20 Yields of Important Crops in Tamil Nadu, Per Hectare, Selected Years Crop

Unit

1960– 1970– 1980– 61 71 81

1990– 91

1999– 2005– 2000 06

Rice

Rice in kg

1414

1974

1865

3116

3482

Jowar

Grain in kg

816

730

790

1010

983

732

Bajra

Grain in kg

616

660

840

1080

1525

1157

Pulses

Grain in kg

265

271

324

425

420

337

Sugarcane

Tonnes of Cane

Groundnut Nuts in kg Cotton

Lint in kg

101.5

100.8

2541

80

77

108

105

1217

920

860

1220

1541

1775

167

200

200

290

325

260

Source: Tamil Nadu—An Economic Appraisal, Various Issues and Season and Crop Report, 2005–06. Table 4.21 Annual Average of Net Area Irrigated, Lakh Hectares, by Different Sources, Tamil Nadu, 1950 to 2006 Irrigation Source

1950–51 1960–61 1970–71 1980–81 1990–91 to to to to to 1959–60 1969–70 1979–80 1989–90 1999–2000 2005–06

Canals

7.92

8.83

8.94

Tanks

7.76

9.12

8.49

9.16

6.21

5.75

Wells

4.97

6.45

9.18

10.38

13.13

15.37

Other sources

8.23

8.24

8.00

0.46

0.39

0.35

0.19

0.17

0.18

Total NIA

21.11

24.79

26.96

27.96

27.75

29.10

GIA

27.3

32.66

35.22

31.15

33.94

33.97

Source: Tamil Nadu: Economic Appraisal, 2005–06.

extent on tank irrigation whereas the well-to-do farmers tend to have better access to both canal and well irrigation (Nagaraj, 2002). It can be seen from the foregoing that there has been a fair amount of technological change in the agrarian economy of Tamil Nadu. The impact of this has of course been uneven across districts, crops and classes.

80  Venkatesh B. Athreya Paddy has been the favoured crop among food grains, while sugarcane and groundnut have prospered among the non-food crops. There is an emerging set of horticultural crops, but these still account for a small proportion of both total crop area and the value of agricultural output. A substantial proportion of the area cultivated in the state remains unirrigated. In 2005–06, the share of GIA to GCA was 56.3 per cent, with GIA to GCA being 62.1 per cent for food crops, 61.7 per cent for food grain crops and 40.7 per cent for non-food crops. The two crops which are almost entirely irrigated are paddy (93 per cent) and sugar cane (99 per cent). The share of irrigated area to total also varies considerably across districts. In four districts –Tiruvarur, Nagappattinam, Thanjavur (together comprising the earlier undivided Thanjavur district) and Tiruvallur—more than 80 per cent of cropped area is irrigated. At the other end, in the four districts of Nilgiris, Krishnagiri, Thoothukudi and Perambalur, less than one-third of cropped area is irrigated.5 Technological changes in crop agriculture in the state have taken the form mainly of greater use of high yielding varieties, chemical fertilizers and pesticides and electric and diesel pump sets, and in more recent periods, mechanization of several agricultural operations.6 We have already seen that there has been no substantial increase in area irrigated since the 1960s but that the share of different sources, and with it, the quality of irrigation, had changed substantially. These changes, as noted already, tend to favour the more substantial farmers. But the small and marginal farmers have also adopted the new technologies, though with less success.7 On balance, it has to be said that there has been no major technological breakthrough in agriculture in Tamil Nadu since the green revolution of the late 1960s.8 Not surprisingly, the performance of agriculture in the state in terms of growth in yield and output levels has been rather modest.9 The assessment provided by one scholar on the nature of agricultural modernization in Tamil Nadu seems pertinent in this context: In the agricultural sector, modernisation, growth and recovery have come about basically through internal structural changes—as in the irrigation regime—or through the processes of ‘reorderings’ and diversifications, with accumulation of productive forces playing only a secondary role. Sustaining, or accelerating, the growth process would require tapping of surpluses, which largely accrue to rich farmers, for productive investments in agriculture, through appropriate taxation measures and through land reforms—and these policies do not seem to be anywhere on the agenda of the state governments. (Nagaraj, 2002)

Agrarian Change under Reforms  

81

Agriculture in Tamil Nadu 2005–10 Has the agricultural scenario in the state of Tamil Nadu changed significantly in terms of area, output and yield of major crops since 2005? Extending the analysis to 2010 based on secondary data available, the answer has to be negative. Tables 4.22 and 4.23 present the relevant data. The following inferences can be drawn: • Average paddy yields have not risen since 1990–95 period. The average yield for 2005–10 is 2902 kilograms per hectare. • Food grain yields are also fairly stagnant. The average yield of food grains for 2005–10 is only 2251 kilograms per hectare. Table 4.22 Area, Production and Productivity of Paddy, Tamil Nadu, 2006–10 Sl. No. Year

Paddy Area, in Thousand Hectares

Paddy Production in Thousand Tonnes

Paddy Productivity in Kilograms Per Hectare

01

2005–06

2050

5209

2541

02

2006–07

1931

6611

3423

03

2007–08

1789

5040

2817

04

2008–09

1932

5183

2682

05

2009–10

1845

5665

3070

Table 4.23 Area, Production and Productivity, All Food Grains, Tamil Nadu, 2006–10 Sl. No. Year

Area in Thousand Hectares

Production in Thousand Tonnes

Productivity in Kilograms Per Hectare

01

2005–06

3316

6116

1844

02

2006–07

3166

8262

2610

03

2007–08

3098

6582

2125

04

2008–09

3191

7102

2225

05

2009–10

3034

7511

2476

82  Venkatesh B. Athreya • Area and production fluctuate, but there is no trend growth over the entire decade of 2001–10. The average area under paddy per year for 2005–10 is 19,09,000 hectares and the average output per year is 55,42,000 tonnes, both slightly better than in 2000–05 but lower than what obtained during the 1980s and the 1990s. • Agriculture in the state is facing long-term stagnation. Policies to address this crisis are urgently needed. • There is urgent need for more public investment in agriculture and infrastructure for it. • Soils have to be improved, irrigation expanded, and extension services revamped and strengthened, focusing on the small and marginal farmers. • Easy credit, more input subsidies and better procurement prices are also needed. • Better marketing arrangements, encouraging agri cooperatives and constructing storage facilities for perishable produce are needed urgently.

State Policies and the Rural Economy Although agriculture is a state government subject under the Indian constitution, it is a fact that central policies and schemes play a crucial role. Since 1991, the reform policies followed by the central government, and more or less imposed on the state governments both through political processes and through the use of the Finance Commission awards, have had serious consequences for agriculture in the country as a whole. The fiscal crisis of the state governments has intensified due to the policies of central expenditure compression and diminished devolution of resources from the Centre. At the same time, more and more expenditure burdens, including higher interest charges on funds borrowed from the centre, have fallen on the state governments. One consequence of this set of circumstances has been a decline in the rural development expenditure of state governments during the reform period.10 The reduction in government expenditures on rural development has been one of the factors underlying the slowing down of agricultural growth. Agricultural output as a whole has grown rather slowly in the period of reforms as compared to the preceding periods. In the 1980s, agricultural output grew at about 4 per cent per annum, but the rate of growth came

Agrarian Change under Reforms  

83

down to less than 2 per cent in the 1990s. The mid-term appraisal (MTA) of the 10th Five Year Plan (2002–07) notes that the rate of growth of GDP in agriculture and allied sectors was only 1.9 per cent per annum between 1996–97 and 2001–02. Subsequently, it had fallen further to just 1 per cent per annum during the first three years of the tenth plan, 2002–2005. As the MTA points out, ‘…per capita agricultural GDP shows no significant upward trend after 1996–97, only fluctuations’ (MTA, p. 187). The MTA also tells us that the rate of growth of crop output was only 1.1 per cent per annum since 1996–97, down from 3.1 per cent between 1980 and 1997. Input use in agriculture decelerated from over 2.5 per cent per annum during 1980–97 to about 2 per cent thereafter. Also, During the period 1997–2002, agricultural prices declined relative to prices not only of inputs but also non-food consumer goods. As a result, purchasing power of agricultural incomes…decelerated more than GDP at constant prices. Real farm incomes … not only show no per capita growth after 1997, but also exhibit increased variability. (MTA, p. 190)

Growth of agriculture has been very poor since 2000. This is especially the case with food grains.11 Thus, the stagnation in output and yield of important crops observed in Tamil Nadu in the period since 2000 is not an isolated instance. It is similar to the national picture. However, in the case of Tamil Nadu, it is noteworthy that the crisis of stagnation has not manifested itself in the form of farmers’ suicides on any significant scale nor have there been starvation deaths of the kind witnessed in some other regions of the country during the drought of 2002–04. One reason for this has been the presence of a system of social welfare, which includes pensions of various kinds for the relevant vulnerable groups (old age, destitutes, widows, agricultural labourers and so on), a functioning, universal public distribution system with an extensive network of fair price shops reaching almost all habitations and providing grain at subsidized prices, a mid-day meal scheme covering all school children from class 1 to 10, provision of supplementary nutrition to children in the age group of 2 to 5 years through the Integrated Child Development Services (ICDS) scheme, a functioning preventive and curative health system, with over 8500 health sub-centres, more than 1400 primary health centres and over 300 hospitals in the public sector and provision of maternity and other benefits to a sizeable number of women in need. Successive state governments have found it difficult to roll back these welfare provisions, though attempts to do so have been made in the reforms period.

84  Venkatesh B. Athreya

Summing Up the Macro Picture for Tamil Nadu What does one make of all the changes in the rural economy of Tamil Nadu that have occurred since 1980, of which a sketchy picture has been provided in this chapter? At one level, one can say that the rural and the agrarian economy continued to exhibit some dynamism, at least until the late 1990s. Despite the fact that the area irrigated has not seen any major increase, and that there have been no technological breakthroughs, the yields of crops have risen since 1980, and the value of agricultural output has grown. Levels of education and health have improved considerably in rural areas, although there is some apprehension that these may have been partially eroded in the last decade of economic reforms. Real wages of rural and agricultural labour have risen, though there has also been a rise in the degree of landlessness. While non-agricultural employment has increased, it has not kept pace with the rise in the share of non-agricultural output in SDP, nor has it kept pace with the growth of the labour force. There is possibly greater rural unemployment than was the case in 1980, but there are also trends of out-migration to productive employment and consequent flow of remittances to households, although data on these are hard to come by. But there is no denying the fact of fairly stagnant yields and low returns to crop agriculture in general in the state, arising from changes in terms of trade, impact of import competition on prices of produce, rise in input costs and difficulties in and costs of accessing institutional credit. In Athreya et al. (1990), the point was made that the state played a key role in the agricultural dynamism that had been observed in the study area. The changes since the late 1990s, which have led to stagnation and crisis in agriculture in the wake of a reduction in the proactive role of the state visa-vis agricultural transformation, seem to bear out the assessment that the dynamism observed in the agrarian economy of the state of Tamil Nadu in 1980 was crucially dependent on the state’s role.

Notes   1. See, especially, Patnaik (2007). Patnaik shows that rural development expenditure—defined as the total of plan outlays of centre and states under the five heads of agriculture, rural development, irrigation and flood control, special areas programmes, and village and small scale industry—declined from an annual average of 3.8 per cent of NNP in 1985–90 to just 1.9 per cent by

Agrarian Change under Reforms  

  2.

  3.   4.   5.   6.

  7.

 8.

  9.

85

2000–01. With infrastructure expenditures—defined to include all energy and transport including urban—added, the corresponding figures were 11.1 and 5.8 per cent. In the period since 2004, there has been some reversal of this decline. Of course, there is a persistent gender gap in literacy rates, especially in rural areas. Rural literacy rates are also lower than urban ones by a good margin in most districts of the state, as is the case all over the country. The only exception in Tamil Nadu (excluding the wholly urban district of Chennai) is Kanyakumari district, which is also the district with the highest literacy rate. Here, the literacy rates in 2001 were: urban male 91.12 per cent; urban female 85.51 per cent; rural male 88.95; rural female 83.44 per cent. For a detailed analysis of the phenomenon of declining female-to-male ratios in the age group 0–6 years in India, see Athreya (2003). More recent estimates suggest that the growth rate of GSDP rose over the period 2004–05 to 2006–07 but dropped sharply from 2007–08 to 2010–11 in Tamil Nadu. Of course, there are considerable variations in the share of area irrigated even within a district. The number of pump sets per thousand hectares of GCA is the highest in Tamil Nadu in the entire country, and that by a large margin. In 1987, for instance, the number of pump sets per thousand hectares of GCA was 194 in the state as against 160 for Punjab, 120 for Haryana and only 64 for India as a whole (Nagaraj, 2002). Mechanization of ploughing and harvesting are more recent developments. Currently, a machine for transplanting has come into use. In general, small farmers in India have less access to mechanized technologies. In 2003, among farmers possessing 10 hectares or more of land, there were 38 tractors per 100 households; the corresponding figures were 18 among those possessing between 4 and 10 hectares and only one among those possessing up to one hectare(NSS Report 497). Around 2001, Tamil Nadu had 9.62 tractors per hectare of cropped area (11.32 per hectare of cultivated area or NSA) as against 49.15 for Punjab, 36.54 for Haryana, 23.39 for Uttar Pradesh, 21.50 for Gujarat and 15.62 for Rajasthan. The average for India was 13.71. However, when one considers the fact that Tamil Nadu had only 3.3 per cent of its holdings in the 4 hectare plus category whereas the corresponding figures for Punjab, Rajasthan, Haryana and Gujarat are 29.4 per cent, 29.6 per cent, 17.9 per cent and 22.4 per cent respectively, its level of tractor use can be considered impressive. Remarkably, Uttar Pradesh, with only 2.9 per cent of its farms with size exceeding four hectares, had a higher level of tractorization than Gujarat and Tamil Nadu. Tractor use has been increasing rapidly in Tamil Nadu in recent years. However, since a significant proportion of tractor users are small farmers who find it more cost effective to hire tractors for use rather than invest large amounts of capital to buy them, increased tractor use is not adequately captured by a

86  Venkatesh B. Athreya statistic like tractors per unit area cultivated. Even so, the number of tractors per hectare of cultivated area rose from 11.32 in 2001 to 24 in 2005–06. 10. Jha (2006), accessed at www.macroscan.com 11. While there has been some recovery in agricultural growth at the all India level since 2004–05, it continues to be characterized by fluctuations. The growth rate of agriculture and allied sectors was at a high of 10 per cent in 2003–04 reflecting a recovery from the severe drought of 2002–03, but fell to 0 in 2004–05. It recovered to 5.9 per cent in 2005–06, and then fell to 3.8 per cent in 2006–07. After rising to 4.7 per cent in 2007–08, it fell sharply to 1.6 per cent in 2008–09 and further to 0.2 per cent in 2009–10. Already, output growth in 2012–13 is expected to be below that of 2011-12, with an absolute fall in the physical output of food grains. Estimated rate of growth of agricultural output as a whole is said to have declined from 3.6 per cent in 2011–12 to 1.4 per cent in 2012–13.

References Athreya, V.B. (2003), Gender and Survival during the Decade of Reforms, The Indian Economic Journal, Vol. 50, No. 2, pp. 43–53. Athreya, V.B., G. Djurfeldt and S. Lindberg (1990), Barriers Broken, SAGE Publications, New Delhi. Chandrasekhar, C.P. (2007), The Progress of ‘Reform’ and the Retrogression of Agriculture, accessed at www.macroscan.com Djurfeldt, G., A. Rajagopal, N. Jayakumar, R. Vidyasagar, S. Lindberg and V. Athreya (2008), Agrarian Change and Social Mobility in Tamil Nadu, Economic and Political Weekly, Vol. XLIII, No. 45, 8 November. Government of India, Economic Survey, Various Issues, http://www.indiabudget. nic.in/survey.asp. ——— (2005a), Mid-term Appraisal of the Tenth Five Year Plan (2002–2007), http://planningcommission.gov.in/plans/mta/midterm/midtermapp.html. ——— (2005b), Tamil Nadu Development Report, Academic Foundation, New Delhi (under arrangement with the Planning Commission, Government of India), http://planningcommission.nic.in/plans/stateplan/sdr/sdr_tamil.pdf. ——— (2010), Mid-term Appraisal of the Eleventh Five Year Plan, http://planningcommission.gov.in/plans/mta/11th_mta/MTA.html. Government of Tamil Nadu (2003), Tamil Nadu Human Development Report, published by Government of Tamil Nadu in association with Social Science Press, Delhi, http://hdr.undp.org/en/content/tamil-nadu-human-developmentreport-2003. ———, Tamil Nadu—An Economic Appraisal, Various Issues, http://www.tn.gov. in/dear/.

Agrarian Change under Reforms  

87

Government of Tamil Nadu (2003), Season and Crop Report, 2004-05, http:// www.tn.gov.in/crop/archives/year2004_05/index.htm ———, Season and Crop Report, 2005–06, http://www.tn.gov.in/crop/ ———, Season and Crop Report, 2009-10, http://agritech.tnau.ac.in/pdf/2012/ Season%20&%20Crop%20Report%202012.pdf Jha, P. (2006), Some Aspects of the Well-being of India’s Agricultural Labour in the Context of Contemporary Agrarian Crisis (Mimeo). Kurien, C.T. (1981), Dynamics of Rural Transformation, Orient Longman, Chennai. Nagaraj, K. (2002), Tamil Nadu Economy (Mimeo). Patnaik, U. (2007), Neoliberalism and Rural Poverty, Economic and Political Weekly, 28 July 2007. Ramachandran, V.K. and M. Swaminathan (2003), Agrarian Studies, Tulika, New Delhi.

5

Is Farming Profitable to Farmers in India? Evidence from Cost of Cultivation Survey Data A. Narayanamoorthy*

Introduction

I

ndian agriculture has achieved tremendous development in terms of production and productivity of various crops since the introduction of green revolution during the mid-1960s. The production of food grains increased from 72 million tonnes (mt) in 1965–66 to 233 mt in 2009–10. Similar growth has also been achieved in oilseeds, sugarcane, cotton, fruits, vegetables and other crops (GoI, 2012). As a result of significant increase in production of commodities, the per capita availability has also increased despite *This is a revised version of the paper presented at MIDS-ICSSR National Seminar on ‘Indian Economy in Transition’ organized in honour of Prof. C.T. Kurien at the Madras Institute of Development Studies, Chennai during February 10–11, 2011. The author is thankful to V.M. Rao, S. Neelakantan, Judith Heyer and the participants of the seminar for their useful comments and to P. Suresh for the research assistance. However, the author takes full responsibility for the errors remaining in the paper.

Is Farming Profitable to Farmers in India?  

89

substantial increase in population. The increased volume of crop output has also helped increase the wage rate and generate more employment opportunities in the rural areas, particularly for the landless labourers (Dev and Ranade, 1998; Saleth, et al., 2003; Narayanamoorthy and Deshpande, 2003). The incidence of rural poverty has also reduced considerably from 56.44 per cent in 1972–73 to 28.33 per cent in 2004–05 mainly because of the improved production of agricultural commodities, which is also proved by a large number of studies (Ahluwalia, 1978; Narayanamoorthy, 2001; Saleth et al., 2003; Hussain and Hanjra, 2003, 2004). All these achievements would not have been possible without the incisive role of Indian farmers (NCF, 2006; Swaminathan, 2008). In spite of this giant achievement, no great news is coming from the farm sector especially since mid-1990s. Farmers’ suicides, indebtedness, crop failures, un-remunerative prices for crops and poor returns over cost of cultivation are the foremost features of India’s agriculture today. Farmers committing suicide was not apparent before the early 1990s, but it became a widespread phenomenon today in many states in India. Over two lakh farmers have committed suicide in India between 1990–91 and 2009–10 and the proportion is alarmingly high in states like Maharashtra, Andhra Pradesh and Karnataka (Sainath, 2010). Why is this happening in India? Is it because of poor returns from crop cultivation? Are crop failures due to vagaries of monsoon the reasons? Could the increased indebtedness be the reason? A large number of studies have analyzed these issues since mid-1990s where the problem of farmers committing suicide started appearing as a serious problem in the policy circle. Some of the studies reported that inadequate supply of institutional credit, decline in productivity of crops and imperfect market conditions as the major reasons for this phenomenon (Deshpande, 2002; Deshpande and Prabhu, 2005; Reddy and Galab, 2006; Mishra, 2006; Vaidyanathan, 2008). Some researchers have blamed the green revolution for the farmers’ suicides without paying adequate attention to the benefits that the green revolution brought to the farmers and to the country as a whole (Vasavi, 2010). Though the farmers’ suicides started mostly from early nineties in India, some of the researchers have attributed this phenomenon to behavioural and social factors (Mohanty, 2001; Mohanty and Shroff, 2004; Gyanmudra, 2010). However, they do not explain how behavioural and social problems could occur suddenly to farmers.1 Profit from crop cultivation is essential not only for the survival of the farmers but also facilitate to reinvest in agriculture for the next season. If the flow of income from crop cultivation is not regular and inadequate,

90  A. Narayanamoorthy farmers may not be able to repay their debts, which would obviously lead to increased indebtedness2 (Darling, 1925; NSSO, 2005b; Narayanamoorthy and Kalamkar, 2005; GoI, 2007; Reddy and Mishra, 2009; Deshpande and Arora, 2010). Despite this, not many studies have made detailed analysis to find out as to what is happening to the profitability of different crops in relation to the cost of cultivation over a period of time. Without using any temporal data on cost of cultivation, some recent studies have observed that stagnation in real income and rise in input prices more than the prices of the agricultural produce could be the reasons for farmers suicides (Kalamkar and Narayanamoorthy, 2003; Narayanamoorthy, 2006a, 2006b, 2007; Deshpande and Arora, 2010; Sainath, 2010). The National Commission on Farmers (NCF) has also recognized that inadequate return from the crop cultivation is the main reason for present agrarian crisis and farm suicides (NCF, 2006). Considering the widespread indebtedness of the farmers and severe agrarian crisis, many initiatives were taken to solve the crisis. Besides state-specific incentive programmes, the Government of India announced a national level massive farm loan waiver scheme worth of over `70,000 crore during 2008–09. Although it benefited a large number of farmers who had defaulted in repayment of debt, it had not made any perceptible impact on solving the agrarian crisis so far. In fact, Sainath (2010), who studied extensively the farm suicides in Maharashtra and other states, writes that the farm suicides increased in most states after the announcement of loan waiver scheme. This was probably because the one-time support programme (loan waiver) would alone not be sufficient to solve the problem of farmers who require increased income from crop cultivation (Vaidyanathan, 2008). In fact, the indebtedness and other related problems occur mainly due to poor returns from crop cultivation. Therefore, one should study the issue of profitability in different crops in an in-depth manner using larger coverage of data to find out whether farmers reap any profit from crop cultivation. Dev and Rao (2010) have recently analyzed the issue of profitability utilizing temporal data, but only focusing on paddy and wheat crops in a different context. Except this study, there seem to be not many studies available utilizing cost of cultivation data covering different crops and longer period in India with specific focus on profitability. Cost of cultivation survey data published by the Commission for Agricultural Costs and Prices (CACP) contains rich information on the cost and output on various crops on a temporal basis (see Rao, 2001; Sen and Bhatia, 2004). Therefore, utilizing the data from cost of

Is Farming Profitable to Farmers in India?  

91

cultivation survey on six important crops covering period from 1975–76 to 2009–10, an attempt is made in this study to find out the trends in profitability of different crops over a period.

Data and Methodology This study mainly utilizes the data on cost of cultivation survey compiled from various reports of the CACP for all its analyses.3 It covers the data of eight time points, starting from 1975–76 and ending with 2009–10 for which latest published data is available from CACP at the time of completing this study. Our aim is to find out the profitability of different types of crops and therefore six important crops have been carefully chosen from different group of crops from different states. They are paddy (rice), wheat, gram, groundnut, sugarcane and cotton. These have been selected from different states which are having major share either in area or production of the selected crops so that the results can be generalized. Accordingly, Andhra Pradesh has been selected for paddy crop, Punjab for wheat, Madhya Pradesh for gram, Gujarat for groundnut, Maharashtra for both sugarcane and cotton. The share of area and production of the selected state in each crop at the national level during 2009–10 is presented in Table 5.1. Table 5.1 Share of Area and Production in Each Crop by the States Selected for the Analysis, 2009–10 India Total Crop (selected state)

Production (mt)

Area

Production

Paddy (Andhra Pradesh)

41.92

89.90

8.21

11.83

Wheat (Punjab)

28.46

80.80

12.38

18.77

Gram (Madhya Pradesh)

8.17

7.48

37.77

44.20

Groundnut (Gujarat)

5.48

5.43

33.26

32.37

4.17

292.30

18.11

21.95

10.13

24.02*

34.50

24.39

Sugarcane (Maharashtra) Cotton (Maharashtra)

Area (mha)

Share (per cent) of Selected States

Source: Computed from GoI (2012). Notes: mha: million hectares; mt: million tonnes; * refers to million bales.

92  A. Narayanamoorthy CACP has been using nine different cost concepts (A1, A2, A2+FL, B1, B2, C1, C2, C2* and C3) for computing cost for various crops in India.4 Which is the appropriate cost that should be considered to calculate profitability of crops is always a debatable question in India. Many scholars have considered cost A2 for calculating profit despite knowing well that cost A2 does not cover interest on value of owned capital assets and rent for the land, which would form substantial share in modern agriculture today. Moreover, there is also a growing concern that farmers should also get income for performing managerial functions in agriculture, as has been followed in other professions where managing director or CEO gets hefty salary for performing managerial operations. The cost A2 also does not include the cost for performing managerial operations in agriculture.  In this chapter, we have therefore considered two cost concepts namely cost C2 and cost C3 to find out the profitability (returns over cost of cultivation) of different crops selected for the analysis. Cost C2 covers all actual expenses in cash and kind incurred in production by owner, rent paid for leased-in land, imputed value of family labour and also the interest on value of owned capital assets (excluding land). Cost C3 includes all the components of cost C2 and adds 10 per cent of cost C2 on account of managerial functions performed by the farmer.5 Since cost C2 and C3 cover all the costs incurred by the farmers, we have appropriately considered these two costs for calculating profitability of different crops. Profit of the crop is calculated by deducting cost C2 and C3 from the value of crop output.6

Analysis on Returns from Crops As mentioned earlier, we have selected six crops belonging to different groups of crops for the analysis of profitability. It is well known that the cost required for and income generated from each crop varies significantly because of various reasons. The cost of cultivation and the value of output are generally found to be higher among the irrigated crops than that of the less-irrigated or the crops that are cultivated under rain-fed condition. For instance, the cost required for cultivating one hectare of gram is substantially less than the same required for cultivating sugarcane. Therefore, we have appropriately analyzed the profitability of each crop separately instead of analyzing all crops together to locate the exact trends in profitability of crops considered for the analysis. Let us first take paddy crop for analysis.

Is Farming Profitable to Farmers in India?  

93

Returns from Paddy Of the six crops considered for the analysis, paddy is an important food grain crops cultivated predominantly in all parts of the country. After the introduction of green revolution, paddy’s area share increased in the total food grains area, when many food grain crops have lost its area.7 India’s total area under paddy increased from 30.81 mha in 1950–51 to 41.92 mha in 2009–10. Presently, area under paddy accounts for about 35 per cent in total food grains area and close to 43 per cent in the total food grains production in India. Although paddy is cultivated throughout India in all seasons, the major cultivating states are West Bengal, Andhra Pradesh, Uttar Pradesh and Orissa, which together accounted for over 45 per cent of India’s total area in 2007–08. Andhra Pradesh, a major paddy growing state accounting for about 10 per cent of India’s total area during 2007–08, is selected for studying the profitability of paddy crop. As mentioned earlier, we have computed profit of the crop by deducting the value of crop output with the cost of cultivation under two scenarios namely (a) relating value of output with cost C2 and also (b) with cost C3 from value of output (VOP). Let us first study the profit of crop in relation to cost C2 (see Table 5.2). Andhra Pradesh is one of the leading Table 5.2 Cost of Cultivation, Value of Output and Profit in Paddy Cost of Cultivation ( `/ha) Year

Cost C2 Cost C3

VOP ( `/ha)

Profit ( `/ha)

Ratio

VOP-C2 VOP-C3 VOP/C2 VOP/C3

1975–76

2193

2413

1879

–314

–534

0.86

0.78

1980–81

3895

4284

3785

–110

–499

0.97

0.88

1985–86

5291

5820

4913

–379

–908

0.93

0.84

1991–92

10,258

11,284

10,321

63

–963

1.01

0.91

1995–96

17,980

19,778

17,592

–388

–2186

0.98

0.89

2001–02

27,043

29,748

25,408

–1636

–4340

0.94

0.85

2006–07

30,492

33,541

32,024

1532

–1517

1.05

0.95

2009–10

54,203

59,623

61,376

7173

1753

1.13

1.03

Source: Computed from CACP (various years). Notes: mha: million hectares; VOP: value of output; due to non-availability of data for some specified years, data from the nearest point are used for the analysis.

94  A. Narayanamoorthy states in terms of productivity of paddy and is also efficient in terms of cost of production (Dev and Rao, 2010). Therefore, it was expected that the farmers must be reaping high profit from their paddy cultivation. However, this is not borne out from the analysis of CACP data. Of the eight time points taken for analysis, the farmers were able to make some margin of profit only in three time points and in the remaining five time points, the cost C2 was found to be higher than value of crop output. This means that farmers were not able to recover even the cost of cultivation from the value of output of paddy in five out of seven time points. Even in the three time points, the profit realized by the farmers was also not substantial; it varied only from `63 to `1532/ha. Predictably, the profitability of paddy was further worsened when one calculated the profit in relation to cost C3 which is 10 per cent more than the cost C2. In this scenario, farmers were making losses in seven out of eight time points considered for the analysis. Agrarian distress and farmers’ suicides have taken place in a larger proportion after early 1990s in India. Therefore, apart from looking at the overall profitability of the crop selected for the analysis, we have specifically looked into whether any perceptible change is taking place in the profitability of paddy cultivation after 1991–92. Although no significant change was found in the trends in profitability of paddy crop before and after 1991–92, the magnitude of loss incurred by the farmers in relation to cost C3 was found to be large especially after 1995–96. For instance, in relation to cost C3 at current prices, the loss was only `963/ha during 1991–92, but had increased to `4340/ha in 2001–02. This is an unexpected result as we were expecting that the profit from paddy cultivation will be large because of the following three reasons. First, paddy is cultivated predominantly under irrigated condition where crop failure seldom occurs. Second, unlike for many other crops, the support price scheme [minimum support price (MSP)] is effectively implemented for paddy crop. Third, Andhra Pradesh is also a high-productivity state in paddy crop. Overall, the message from this analysis is very clear that for the farmers cultivating paddy crop is not profitable. If this is the case for an efficient paddy producing state, one wonders what would be the condition of the farmers cultivating paddy in less efficient states.

Returns from Wheat Wheat is another food grain crop we have chosen to study its profitability. It is also an important food grain crop cultivated predominantly in the northern and western parts of India. This crop is also benefited substantially

Is Farming Profitable to Farmers in India?  

95

in terms area expansion and productivity due to the introduction green revolution in India. The area under wheat has consistently increased from 9.75 mha in 1950–51 to 28.46 mha in 2009–10. Today, wheat is the second most important food grain crop after paddy crop accounting for over 27 per cent of the country’s food grains area. The major wheat cultivating states are Uttar Pradesh, Punjab, Haryana, Rajasthan and Madhya Pradesh. These five states together accounted for about 76 per cent of area and over 82 per cent of wheat production in India during 2007–08. Punjab has been selected for studying the profitability of wheat crop because it is one of the major wheat cultivating states in India. Unlike the scenario of paddy crop, the results presented in Table 5.3 pertaining to wheat crop appear to be somewhat better. Although we do not see any uniform trend over the years in terms of profitability of wheat, farmers were able to reap moderate profits in five out of eight time points when cost C2 is considered for calculation. The profit over cost C2 varied from `5300 to `7026/ha during 2001–02 and 2009–10. However, this scenario changes when one takes cost C3 for calculating profit, where the loss incurred by the farmers increased to four out of eight times. Besides, the extent of profitability is also reduced substantially during 2006–07. Has the profitability of wheat remained same during pre- and post1990s? The cost of cultivation has generally increased at relatively faster rate during the 1990s. Therefore, we expected the profit would be less or Table 5.3 Cost of Cultivation, Value of Output and Profit in Wheat Cost of Cultivation ( `/ha) Year

Cost C2 Cost C3

VOP ( `/ha)

Profit ( `/ha)

Ratio

VOP-C2 VOP-C3 VOP/C2 VOP/C3

1975–76

2632

2896

2400

–232

–496

0.91

0.83

1980–81

3439

3783

3283

–157

–501

0.95

0.87

1985–86

5388

5927

5782

394

–145

1.07

0.98

1991–92

9275

10,202

10,824

1549

621

1.17

1.06

1995–96

14,311

15,742

13,704

–608

–2039

0.96

0.87

2001–02

22,931

25,224

28,314

5383

3090

1.23

1.12

2006–07

29,947

32,942

35,800

5853

2858

1.20

1.09

2009–10

38,283

42,111

45,309

7026

3198

1.18

1.08

Notes and Source: Same as in Table 5.2.

96  A. Narayanamoorthy the loss incurred by the farmers would be higher in wheat cultivation during post-1990s. However, contrary to our expectation, the profit earned by the farmers from wheat crop was found to be better under both cost C2 and cost C3 conditions during post-1990s. Prior to 1991–92, the cost of cultivation was higher than the VOP in all the time points, whereas farmers were able to get about 19–23 per cent of profit over the cost C2 during 2001–02 and 2006–07. This increased profit from wheat possibly because of the steep increase in MSP announced by the government (see Dev and Rao, 2010).8 However, one is not confident whether the farmers will be able to repay their crop loan taken for crop cultivation and also will be capable of meeting their consumption expenditures with this meagre profit, which is not even 25 per cent over the cost of cultivation.

Returns from Gram Profitability in crop cultivation generally varies from one crop to another. Therefore, after having studied the profitability of two major cereal crops, we have selected one important pulse crop namely gram (Bengal gram) to study. Gram has been cultivated traditionally across different regions in India, although its area has been hovering only around 7–8 mha since 1950–51. It is also a major crop in the group of pulse crops, accounting for nearly 32 per cent of India’s total area under pulse cultivation. Gram is cultivated predominantly in six states namely Madhya Pradesh, Maharashtra, Andhra Pradesh, Rajasthan, Uttar Pradesh and Karnataka, which together accounted for about 89 per cent of its area in 2007–08. Of the six major states, Madhya Pradesh has been a major gram growing state accounting for about 38 per cent of India’s total area in 2007–08. Therefore, we have selected Madhya Pradesh to study the profitability of gram crop. The data presented in Table 5.4 shows that the farmers cultivating gram in Madhya Pradesh have not faced any serious problem in securing back their cost of cultivation. Of the eight time points considered for the analysis, farmers have made some margin of profits in all other time points, except in 1995–96. However, the profit earned by the farmers was very low in most time periods except 2006–07 and 2009–10, where the profit was as high as 25 per cent over the cost C3. The profit earned by the farmers in comparison to cost C2 was varying from `3321 to 5721/ ha between 2001–02 and 2009–10. Similarly, the profit in comparison to cost C3 was varying from `2149 to 4189/ha during the same period. Are there any changes in profit level of gram crop between pre- and post-1990s?

Is Farming Profitable to Farmers in India?  

97

Table 5.4 Cost of Cultivation, Value of Output and Profit in Gram Cost of Cultivation ( `/ha) Year

Cost C2 Cost C3

VOP ( `/ha)

Profit ( `/ha)

Ratio

VOP-C2 VOP-C3 VOP/C2 VOP/C2

1975–76

906

997

1003

97

6

1.11

1.01

1980–81

1571

1728

1874

303

146

1.19

1.08

1985–86

1998

2198

2683

685

485

1.34

1.22

1991–92

5018

5520

5667

648

147

1.13

1.03

1995–96

6283

6911

6184

–99

–727

0.98

0.89

2001–02

11,722

12,894

15,043

3321

2149

1.28

1.17

2006–07

15,323

16,855

21,044

5721

4189

1.37

1.25

2009–10

18,468

20,315

22,198

3730

1883

1.20

1.09

Notes and Source: Same as in Table 5.2.

Although we do not see any perceptible change in the level of profit between these two periods, farmers have incurred losses once (1995–96) during post-1990s. One must investigate whether any extraordinary situation prevailed in gram cultivation during 1995–96 in Madhya Pradesh. In any case, the analysis shows that farmers cultivating gram were able to make 25–37 per cent of profit over and above the cost C2 and C3 during 2006–07, which was not observed in paddy and wheat. Overall, gram cultivation seems to better in terms of profitability as compared to paddy and wheat.

Returns from Groundnut Oilseeds are also major crops in India, which have been traditionally cultivated in various regions. Unlike pulse crops, the area under oilseed crops has increased substantially from 10.73 mha in 1950–51 to 27.46 mha in 2008–09. Groundnut accounts for a major share in the total area under oilseeds over the years. The area under groundnut has increased from 4.49 mha in 1950–51 to 8.32 mha in 1993–94, but declined sharply to 6.22 mha in 2008–09. Despite sharp reduction in area under groundnut in recent years, it still accounted for close to 23 per cent in India’s total

98  A. Narayanamoorthy area under oilseed crops in 2008–09. We have selected groundnut crop for study in view of its major share in the total oilseeds. Gujarat, Andhra Pradesh, Tamil Nadu and Karnataka are the major groundnut cultivating states in India. These four states together accounted for about 81 per cent of its total area in 2007–08 and Gujarat alone accounted for close to 30 per cent of area. Therefore, Gujarat became our obvious choice for studying the profitability in groundnut. The data presented in Table 5.5 shows that there is no clear cut trend in the profitability of groundnut, which varies substantially across different years taken for the analysis. When C2 is used for calculating profit, the farmers were getting a small amount of profit in five of the time points. During the years of 1995–96 and 2006–07, farmers have incurred a loss of about `2031/ha and `831/ha respectively. However, this profitability scenario changes particularly when one takes C3 for profit calculation, where farmers have incurred losses four out of seven time points. In fact, the losses are found more number of times during the post-1990s as compared to the pre-1990s situation. This could be possibly because of the import of low-value edible oils from other countries during the post-1990s. Whatsoever may be the reason, overall, except in two time points, namely 1975–76 and 2001–02 when farmers realized profit of about 27–28 per cent over the cost C2, we do not notice any appreciable profit from groundnut cultivation. Table 5.5 Cost of Cultivation, Value of Output and Profit in Groundnut Cost of Cultivation ( `/ha) Year

Cost C2 Cost C3

VOP ( `/ha)

Profit ( `/ha)

Ratio

VOP-C2 VOP-C3 VOP/C2 VOP/C3

1975–76

1463

1609

1861

399

252

1.27

1.16

1980–81

2161

2377

2302

141

–75

1.07

0.97

1985–86

4334

4767

5043

709

275

1.16

1.06

1991–92

7192

7911

7606

415

–305

1.06

0.96

1995–96

10,363

11,399

8332

–2031

–3067

0.80

0.73

2001–02

15,974

17,572

20,464

4490

2892

1.28

1.16

2006–07

18,079

19,887

17,266

–813

–2621

0.96

0.87

2009–10

31,053

34,158

27,613

–3440

–6545

0.89

0.81

Notes and Source: Same as in Table 5.2.

Is Farming Profitable to Farmers in India?  

99

Returns from Sugarcane Sugarcane is a high-value and water-intensive commercial crop cultivated traditionally in most part of India. Because of the continuous support and financial assistance from the state and sugar industries, the area under sugarcane cultivation has increased substantially from 1.71 mha in 1950–51 to 4.17 mha in 2009–10 in India. The major sugarcane growing states are Uttar Pradesh, Maharashtra, Tamil Nadu, Karnataka, Andhra Pradesh and Gujarat. These six states together accounted for about 86 per cent of India’s total area in 2007–08. Of these six states, Maharashtra alone accounted for about 22 per cent of area in 2007–08. Therefore, Maharashtra has been selected for studying the profitability of sugarcane crop. It is popularly believed that the farmers cultivating sugarcane earn substantial profit because of the following three reasons. First, it is cultivated completely under irrigated conditions and therefore crop failures due to vagaries of monsoon normally do not occur. Second, since the government fixes statutory minimum support (SMP) price that is linked with the sugar recovery, farmers get assured price for their produce without facing any price volatility. Third, since sugarcane is cultivated mostly under the model of contract farming with a guarantee of purchasing of sugar industries, farmers are assured of institutional credit and marketing facility, which are seldom available to cultivators of most crops in India. With this background, let us now analyze the data to find out whether the farmers cultivating sugarcane harvest any profit or not. The data presented in Table 5.6 partly supports the general belief. The data shows that the farmers were able to make profit in six time periods in relation to cost C2. However, in relation to cost C3, farmers have incurred huge losses amounting `4300–9200/ha in 2001–02 and 2006–07, respectively. Unlike the other crops analyzed so far, we see a clear-cut trend in the profitability of sugarcane. The share of profit over the cost C2 and C3 in sugarcane has been declining consistently over the years. The profit margin was in the range of 43–57 per cent over the cost of cultivation during 1975–76, but this margin reduced substantially over the years. In fact, the cost of cultivation and VOP were almost same during 1991–92 and 1995–96, suggesting that farmers were not gaining any return from the cultivation of sugarcane. Another important point emerges out from the data presented in Table 5.6 is that the post-1990s situation in terms of profitability is very poor as compared to pre-1990s situation. Farmers have incurred huge losses or the cost of cultivation was almost equivalent to VOP during the post-1990s.

100   A. Narayanamoorthy Table 5.6 Cost of Cultivation, Value of Output and Profit in Sugarcane Cost of Cultivation ( `/ha) Year

Cost C2 Cost C3

VOP ( `/ha)

Profit ( `/ha)

Ratio

VOP-C2 VOP-C3 VOP/C2 VOP/C2

1975–76

6581

7239

10,337

3756

3098

1.57

1.43

1980–81

11,201

12,321

15,886

4685

3565

1.42

1.29

1985–86

14,196

15,615

18,076

3880

2461

1.27

1.16

1991–92

22,468

24,715

24,744

2276

29

1.10

1.00

1995–96

28,890

31,779

32,511

3621

732

1.13

1.02

2001–02

53,493

58,842

49,582

–3912

–9261

0.93

0.84

2006–07

75,102

82,612

78,294

3192

–4318

1.04

0.95

2008–09

85,802

94,382

90,313

4512

–4069

1.05

0.96

Notes and Source: Same as in Table 5.2.

This was not the case during pre-1990s where the profit was substantial for sugarcane cultivating farmers. What could be the main reason for this? Clearly, the main reason appears from the analysis of CACP data is that the cost of cultivation has increased much faster than that of VOP, which has obviously reduced the margin of profit during the post-1990s. The analysis clearly suggests that the farmers are unable to reap any profit in the recent time even in the high-value commercial crops like sugarcane.

Returns from Cotton Similar to sugarcane, cotton is a very important non-food crop cultivated in different regions in India from historic times. However, it is predominantly cultivated in rain-fed regions during kharif season. The area under cotton cultivation has increased from 5.88 mha in 1950–51 to 9.41 mha in 2007–08 in India, with large fluctuations across different years. The major cotton growing states are Gujarat, Maharashtra, Andhra Pradesh and Punjab. These five states together have accounted for about 78 per cent of India’s cotton area. In 2007–08, Maharashtra was the largest cotton cultivating state accounting for about 34 per cent of India’s cotton area. Therefore, we have selected Maharashtra for studying the profitability of cotton.

Is Farming Profitable to Farmers in India?  

101

Cotton became a very controversial crop especially in Maharashtra, because a large number of farmers who have cultivated this crop have committed suicide since early 1990s. Although there have been differences of opinion about the reasons for farm suicides, one could not rule out the possibility that the massive farm suicides in cotton growing regions was mainly due to low profitability. Let us now study the profitability of cotton crops. As expected, the data presented in Table 5.7 clearly show that the profitability of cotton crop has been declining over the years. During the mid-1970s and mid-1980s farmers were able to reap 20–29 per cent of profit margin over cost C2. However, this setting changed thereafter. In fact, farmers have suffered heavy losses amounting `3459/ha in 2001–02 and `1799/ha in 2006–07 over cost C2. If we take into account cost C3 for computation, this amount of loss also increased to `3966 to `5183/ha during 2001–02 and 2006–07, respectively. The information on cost of cultivation and VOP of different years also indicates that the farmers have suffered heavy losses during post-1990s as compared to the situation of pre-1990s. A steep rise in the cost of cultivation over the rate of increase in the value of production during post1990s appeared to be the main reason for the huge loss suffered by the cotton farmers in Maharashtra state. This increased loss from the cotton cultivation might be the main reason for the high proportion of farmers’ suicides in Maharashtra. Table 5.7 Cost of Cultivation, Value of Output and Profit in Cotton Cost of Cultivation ( `/ha) Year

Cost C2 Cost C3

VOP ( `/ha)

Profit ( `/ha)

Ratio

VOP-C2 VOP-C2 VOP/C2 VOP/C3

1975–76

1047

1152

1252

205

100

1.20

1.09

1980–81

2144

2358

2246

103

–112

1.05

0.95

1985–86

1916

2108

2475

559

367

1.29

1.17

1991–92

3267

3594

3862

595

268

1.18

1.07

1995–96

10,375

11,412

12,358

1983

946

1.19

1.08

2001–02

17,234

18,958

13,775

–3459

–5183

0.80

0.73

2006–07

21,669

23,836

19,870

–1799

–3966

0.92

0.83

2009–10

35,822

39,404

39,755

3932

350

1.11

1.01

Notes and Source: Same as in Table 5.2.

102   A. Narayanamoorthy

Declining Profit: Cost or Output? The analysis of different crops presented above shows that the farmers have either realized very little profit or suffered huge losses in cultivating most of the investigated crops. Even in the years in which farmers realized profit, it was mostly less than 30 per cent over the cost of cultivation (see Table 5.8). It has been widely argued by the researchers that the prices for different crops were not announced in consonance with the cost of cultivation and therefore the farmers have been suffering loss or left with meagre profit or loss since 1990s. Is this correct? Loss or fewer profit margins from crop cultivation can occur either because of steep rise in cost of cultivation or fall in the value of output realized by the farmers. Or, if the increasing rate of VOP is less than the rate of increase in cost of cultivation, farmers might suffer loss from crop cultivation. While analyzing the profitability of different crops above, we did not consider the rate of increase in VOP in relation to the cost of cultivation. In order to find out whether cost is increasing faster than VOP, we have measured the rate of increase (number Table 5.8 Number of Times Profit Reaped or Loss Faced by the Farmers in Each Crop during the Study Period Profit Level Crop

Cost Type

>30 Per Cent

=60

–0.170

20.6

53.4

28.6

Caste Groups

Others MPCE Percentiles

Age Groups

Principal and Subsidiary Status EPS and SS

–0.294

22.6

38.3

28.8

EPS and NSS

–0.581

14.3

48.4

30.7

UPS and SS

3.729

99.7

38.0

37.9

UPS and NSS

6.718

100.0

39.8

39.8

NPS and SS

2.953

99.4

91.9

91.7

Notes: EPS: Employed per principal status; NSS: Not subsidiary status; UPS: Usual principal status; SS: Subsidiary status; NPS: Not in principal status

Mean Index Value

–2.0

–1.0

0.0

1.0

2.0

3.0

4.0

5.0

Mean and Standard Deviation of Insecurity Index: Women

Figure 6.2 Insecurity Index for Women across States and Union Territories

Central

Mean

West

States/Regions

East

Std Dev

South

North East

jm pj hr uc hp dl ch up ch mp dn go rj mh gj dd or wb jh bh lk ke an po ap ka tn tr as ng mn mz sk mg ar

North

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Standard Deviation

Measuring Labour Market Insecurity in Rural India  

131

large index values arise due to more women being in subsidiary status or in self-employment in these states compared to other states (NSSO, 2006). A comparison of Kerala and Tamil Nadu shows that both have high standard deviation but mean values differ substantially—low mean value for Tamil Nadu and a much higher mean for Kerala. In Kerala, labour force attachment is weaker in the weekly status (34.7 per cent versus 7.3 per cent). Women are more likely to be found among only subsidiary status workers than in principal status. Also, more rural women seem to work for 3.5 days or less with a high percentage (25 per cent) reported as unemployed for all seven days in Kerala (compared to the all India average of 3.2 per cent). A fairly high percentage of women in Kerala are also reported as ‘available for work’. In this respect, Kerala case may be different from the rest of India and more akin to developed countries where higher levels of education and aspirations makes them less inhibited in responding that they are ‘available for work’. Taken together, these factors yield a higher mean index value for Kerala. Further analysis needs to be carried out to better understand the gender dimensions of labour market insecurity.

5. Conclusions This study has developed an approach to capturing in a single measure the multi-dimensional nature of labour market insecurity and has applied it to the multi-subject employment status information contained in the latest NSS unit record data. The study fills a gap in research because conventional approaches of using unidimensional measures may not adequately capture the true extent of, or miss altogether, labour market insecurity of key socioeconomic groups. These groups could benefit from proper identification of their insecurity and from better targeting of labour market programs. The focus of the study is on those who have weak connections to the labour force as manifested in their labour market status, labour time utilization and behavioural responses to labour market risks. The study does not capture the income dimension of labour market insecurity because earning information is not available for self-employed persons in the NSS dataset. Depending on a group’s socio-economic characteristic, the dimension of labour market insecurity that is salient can differ across groups as shown by the estimated coefficients of the probit analysis reported in the study. A case in point is the gender dimension. The significant and positive coefficients for females in respect of the labour force status and the labour time utilization domain shows that these dimensions are manifested in the labour market

132   Brinda Viswanathan and Padmini Desikachar insecurity experienced by women. In contrast, the negative signs for the behavioural response for females show that labour market insecurity is not manifested in this form for women as they are much less likely than males to report themselves as available or seeking work. The results also show that self-employed own account workers and the unpaid family workers engaged in manual agricultural activities are relatively more labour market insecure than other categories of self-employed workers. There are several potential applications of the methodology developed in this study. From a policy perspective, an important application is that the index can be used as a predictor of a range of socio-economic outcomes of labour market interventions, including poverty program participation under self-selection targeting methods. Future directions for research include extending the analysis at the state level to understand how regional differences in the different constituents of labour market insecurity can explain the differential impact of self-targeting programs across regions.

Note 1. PCA is more suited to variables or dimensions that are continuous and not discrete (binary in this case) but Filmer and Pritchett (2001) suggest a variation in that approach for application to categorical variables. Asselin (2002), Howe et al. (2008) show that multiple correspondence analysis (MCA) is a more appropriate method to estimate an index with discrete variables. These methodological issues are being considered in further extensions of this study.

References Asselin, L.-M. (2002), Composite Indicator of Multi-dimensional Poverty, http:// www.pep-net.org/fileadmin/medias/pdf/Multi-Dim-Pov-Doc.pdf. Accessed on 10 March 2011. Chamlou, N., (2008), The Environment for Women’s Entrepreneurship in the Middle East and North Africa Region, World Bank Report No. 44824, World Bank, Washington D.C. http://siteresources.worldbank.org/INTMENA/ Resources/Environment_for_Womens_Entrepreneurship_in_MNA_final.pdf. Accessed on 2 February 2011. Das, M.B. and S. Desai (2003), Why Are Educated Women Less Likely to be Employed in India? Testing Competing Hypotheses, Social Protection Discussion Paper Series No 0313, World Bank, Washington DC.

Measuring Labour Market Insecurity in Rural India  

133

Desikachar, P. and B. Viswanathan (2011), Patterns of Labour Market Insecurity in Rural India: A Mutidimensional and Multivariate Analysis, Working Paper 62/2011, Madras School of Economics, Chennai, India. Filmer D and L.H. Pritchet (2001), Estimating Wealth Effects without Expenditure Data or Tears: An Application to Educational Enrolments in States of India, Demography, Vol. 38, No. 1, pp. 115–32. Howe, L.D, J.R. Hargreaves, and S.R.A. Huttly (2008), Issues in the Construction of Wealth Indices for the Measurement of Socio-economic Position in Lowincome Countries, Emerging Themes in Epidemiology, Vol. 5, No. 3, http://www. ete-online.com/content/5/1/3. Accessed on 28 February 2011. Kessler-Harris, A. (2003), In Pursuit of Economic Citizenship, Social Politics, Vol. 10, No. 2, pp. 157–75. Kingdon, G. (1998), Does the Labour Market Explain Lower Female Schooling in India? Journal of Development Studies, Vol. 35, No. 1, pp. 39–65. Krishnamurty, J. and G. Raveendran (2008), Measures of Labour Force Participation and Utilization, paper prepared for National Commission for Enterprises in the Unorganised Sector, New Delhi. Murgai, R. and M. Ravallion (2005), Is Guaranteed Living Wage a Good Antipoverty Policy? World Bank Policy Research Working paper 3640, World Bank, Washington D.C. NSSO (2006), Employment and Unemployment Situation in India: 2004–05 (Part-I), NSS 61st Round, National Sample Survey Organisation (NSSO), Ministry of Statistics and Programme Implementation, Government of India. Unni, J. and G. Raveendran, (2007), Growth of Employment (1993–94 to 2004– 05): Illusion of Inclusiveness? Economic and Political Weekly, January 20, pp. 196–99. World Bank (2010), India’s Employment Challenge: Creating Jobs, Helping Workers. Oxford University Press, New Delhi.

Appendix Table 6.A.1 Distribution of Persons Employed in Usual Status and Current Weekly Status, 15 Years and Above: Rural, 2004–05 Numbers (millions)

% of Male/Female Population All

Share of Women in Total Workers (per cent)

72.8

87.9

30.1

82.0

90.0

33.2

Employed in

Males Females Males Females

Usual Status

194.00 83.70

96.6

Current Weekly Status 190.00 94.40

94.5

134   Brinda Viswanathan and Padmini Desikachar Table 6.A.2 Distribution of Persons Unemployed or not in Labour Force for More than Two Days, 15 Years and Above: Rural, 2004–05 Numbers (millions)

% of Male/Female Population

Males

Females

Males

Females

All

Share of Women in Total Workers (per cent)

28.60

54.40

14.2

47.3

26.2

65.5

Table 6.A.3 Distribution of Persons Unemployed All Seven Days, 15 Years and Above: Rural, 2004–05 Numbers (millions)

% of Male/Female Population

Males

Females

Males

Females

All

Share of Women in Total Workers (per cent)

7.17

3.70

3.6

3.2

3.4

34.0

Table 6.A.4 Distribution of CWS Employed According to Number of Work Activities, 15 Years and Above: Rural, 2004–05 Numbers (millions) Females

Males

Females

All

Share of Women

157.00

83.80

78.2

72.9

76.3

34.8

43.80

31.20

21.8

27.1

23.7

41.6

Males Single activity

% of Male/Female Population

Other than single activity

Table 6.A.5 Distribution of Persons by Number of Half-Days Worked in a Week, 15 Years and Above: Rural, 2004–05 Numbers (millions)

Distribution Across ‘Work Intensity’ (per cent)

Number of Days Worked in a Week

Males

Females

Males

Females

All

Share of Women (%)

3.5 days or more

182.00

84.70

90.6

73.7

84.4

31.8

Less than 3.5 days

18.90

30.30

9.4

26.3

15.6

61.6

Measuring Labour Market Insecurity in Rural India  

135

Table 6.A.6 Distribution of Persons in Non-manual Work (NMW), 15 Years and Above: Rural, 2004–05 Numbers (millions) Males NMW Not NMW

% of Male/Female Population Females

Share of Women

18.9

7.6

18.7

81.1

92.4

39.4

Females

Males

37.90

8.74

163.00

106.00

Table 6.A.7 Distribution of Rural Persons in Labour Force 15 Years and Above, 2004–05

Numbers (millions) Not looking/seeking

#

Seeking/available for work

Distribution Across Duration Seeking Employment (per cent)

Males

Females

Males

Females

Share of Women (per cent)

151.00

86.00

75.1

74.8

36.3

50.00

29.00

24.9

25.2

36.7

Note: #This group includes not reported. Table 6.A.8 Description of Independent Variables Variable

Description

Dfem

Female = 1, Male = 0

Age

Age in years Dummy Variables for Education Level Primary and Middle School = Reference Group

Dnolit

Not literate

Dlit

Literate

Dsecabv

Secondary and above Table 6.A.8 continued

136   Brinda Viswanathan and Padmini Desikachar Table 6.A.8 continued Variable

Description Dummy Variables for Caste Groups Other Castes = Reference Group

Dsc

Scheduled Caste

Dst

Scheduled Tribe

Dobc

Other Backward Class Dummy Variables for Occupation of Household Head Self-employed in Non-agriculture = Reference Group

Daglab

Agricultural labour

Dothlab

Other labour

Dhtyoth

Others

Dsagr

Self-employed in agriculture

Lnmpce

Log of monthly per capita expenditure

Sqlnmpce

Squared lnmpce Dummy Variables for Religion Other Religions = Reference Group

Dmuslm

Muslims

Dhindu

Hindus

Hhsz

Household size

Wrkr_hh_pr

Ratio of number of workers to household size

Prdepchi

Proportion of dependent children in the household Dummy Variables for Landholding Classes Medium and Large Farms = Reference Group

Dnoncul

No land and not cultivator household

Dsmallmarg

Small and marginal farmers

0.000

0.000

0.000

0.000

0.132

0.000

***

***

–0.066

–0.217***

0.035

0.173***

0.015

Dsc

Dst

Dobc

Daglab

Dothlab

Dhtyoth

Dsagr

0.436

0.000

0.300

–0.290***

Dsecabv

0.082

0.000

***

–0.137

Dlit

0.098

***

–0.027*

0.000

–0.017

***

Dnolit

0.000

Dfem

Age

p-value

Coeff.

1.487***

Explanatory Variables#

Employment by Usual Status Workers (dues)

0.027

–0.011 0.216

0.688

0.000

***

0.243

0.000

0.036

0.000

0.000

0.000

0.001

0.004

0.000

0.000

p-value

0.246***

0.039

*

0.112

***

0.127***

0.216

***

–0.083

***

–0.052***

–0.018

***

1.096***

Coeff.

Employment by Current Weekly Status (dcws)

Table 6.A.9 Probit Estimates of Labour Market Insecurity

0.136

***

0.017

0.397

***

0.460***

0.019

0.111

***

–0.090***

0.017

–0.026

–0.012

–0.008

***

1.127***

Coeff.

0.000

0.423

0.000

0.000

0.158

0.000

0.000

0.284

0.150

0.383

0.000

0.000

p-value

Unemployed or not in Labour Force for More than Two Days (ducds)

0.713

0.000

0.000

0.000

0.138

0.001

0.679

0.000

0.001

0.000

0.000

0.000

p-value

Table 6.A.9 continued

–0.012

0.127***

0.361

***

0.415***

0.037

0.099

***

0.016

0.448

***

–0.119

***

–0.161***

–0.036

***

0.104***

Coeff.

Unemployed on All Seven Days of the Week (dunemp_all_7d)

0.000

0.000

0.000

0.000

0.000

0.257

0.000

0.000

***

***

0.010***

***

***

0.230***

172,867

0.2470

0.029

***

–0.373

Dmuslm

Dhindu

Hhsz

wrkr_hh_pr

Dnoncul

Dsmallmarg

Intercept

Sample Size

Pesudo R2

0.842

–2.596 0.3249

172,867

***

–0.037

–0.245

***

–4.440

***

–0.062***

0.024

–0.094

–0.046

***

Coeff.

0.001

0.135

0.000

0.000

0.000

0.424

0.012

0.011

0.000

p-value

Employment by Current Weekly Status (dcws) 0.331

–1.634

0.1704

172,867

***

0.196***

0.207

***

–1.314

***

–0.030***

–0.210

***

–0.218

***

–0.018

**

Coeff.

0.002

0.000

0.000

0.000

0.000

0.000

0.000

0.141

0.039

p-value

Unemployed or not in Labour Force for More than Two Days (ducds) 0.948

–2.741

0.2977

172,867

***

0.059

0.134

***

–3.928

***

–0.048***

–0.237

***

–0.291

***

–0.059*

***

Coeff.

0.008

0.155

0.004

0.000

0.000

0.000

0.000

0.015

0.003

p-value

Unemployed on All Seven Days of the Week (dunemp_all_7d)

Note: * denotes significance at 10 per cent level, ** denotes significance at 5 per cent level, *** denotes significance at 1 per cent level.

–5.230

–1.019

–0.227

0.000

1.139

–0.066***

Sqlnmpce

p-value

Lnmpce

Coeff.

***

Explanatory Variables#

Employment by Usual Status Workers (dues)

Table 6.A.9 continued

0.001

0.000

0.279

0.000

0.003

0.000

0.064***

0.068***

***

–0.020

***

–0.057

0.091

–0.014

Dlit

Dsecabv

Dsc

Dst

Dobc

Daglab

Dothlab

0.000

0.000

***

Dhtyoth

Dsagr

–0.053

–0.103

***

0.037

0.421

0.088

***

–0.022

Dnolit

0.000

*

0.000

0.172

–0.004***

Age

p-value

Dfem

Coeff.

***

Explanatory Variables#

More than One Activity in Week (dmultact) 0.737

0.023

0.175 0.188

0.000

0.000

***

0.000

0.341***

0.311

0.003

0.000

0.303

0.000

0.002

0.000

0.000

0.000

p-value

***

0.043

***

0.129***

–0.022

0.150***

–0.060

***

–0.059

***

–0.009***

***

Coeff.

Intensity of Work Less than 3.5 Days in a Week (dlowork) 0.393

0.991

***

–0.090

***

0.531***

1.244

***

0.085

***

0.000

0.000

0.000

0.000

0.000

0.000

0.000

0.070***

0.092

***

0.000 0.000

0.094

0.000

0.000

0.000

p-value

–0.350***

***

0.293

***

–0.005***

***

Coeff.

Manual Work (dnmw)

0.000

0.372

0.000

0.000

0.782

0.545

0.000

0.069

0.497

0.146

0.000

0.000

p-value

Table 6.A.9 continued

0.097

***

0.021

0.554***

0.845

***

0.004

0.010

0.117

***

0.030*

–0.012

0.020

–0.008***

–0.057

***

Coeff.

Seeking/Available for Alternate Work (davfwrk)

0.066

0.001

0.036

–0.006***

Dhindu

Hhsz

0.238 172,867 0.0867

172,867

0.0244

–0.397***

***

0.182***

–0.339

***

0.001

–0.002

0.098

***

–0.147

***

Coeff.

0.000

0.000

0.000

0.000

0.565

0.912

0.001

0.000

p-value

Intensity of Work Less than 3.5 Days in a Week (dlowork)

0.2175

172,867

–1.176**

–0.097

***

–0.278***

0.035

0.000

0.000

0.064

*

–0.049

0.013

0.000

0.000

–0.006**

–0.094

***

–0.311

0.000

***

0.000

0.757 –0.073***

p-value

***

Coeff.

Manual Work (dnmw)

0.107

0.1062

172,867

4.809***

0.162

***

0.205***

–0.187

***

–0.036***

***

0.081

***

0.088***

–1.443

***

Coeff.

0.000

0.000

0.000

0.000

0.000

0.000

0.003

0.000

0.000

p-value

Seeking/Available for Alternate Work (davfwrk)

Note: * denotes significance at 10 per cent level, ** denotes significance at 5 per cent level, *** denotes significance at 1 per cent level.

2

Pesudo R

Sample size

0.033

0.000

0.170

–0.207*

***

Intercept

0.000

Dnoncul

Dsmallmarg

0.123

0.034

–0.297***

Prdepchi

wrkr_hh_pr

0.000

***

0.000

p-value

Dmuslm

0.123

–0.072

***

Coeff.

***

Sqlnmpce

Lnmpce

Explanatory Variables#

More than One Activity in Week (dmultact)

Table 6.A.9 continued

7

‘Education for All’ in India: Issues, Policies and Imperatives* S. Chandrasekhar and M.H. Suryanarayana

Introduction

T

he battle to achieve economic development will be ‘won or lost in the classroom’; so declared President Sebastian Pinera while initiating the ‘Blackboard Battle’ in Chile. Education as a process transforms human beings and countries and facilitates realization of the potential. For these reasons, it plays a critical role in promoting sustainable development. This has been the motivation for the World Declaration for Education for All at the World Conference of representatives from 155 countries and 150 organizations (Jometein, Thailand) in 1990. The Millennium Development Goals too lay stress on universal primary education and reducing gender disparity in primary and secondary education by 2005 and at all levels by 2015. * This paper was presented at the National Seminar on Indian Economy in Transition: Prospects, Issues and Concerns in Honour of Professor C.T. Kurien at Madras Institute of Development Studies, 10–11 February 2011. We would like to thank all the participants for their constructive feedback.

142   S. Chandrasekhar and M.H. Suryanarayana An outcome evaluation in 2000 of the Decade of Education for All revealed that (a) the number of school-going children increased from 599 million in 1990 to 681 million in 1998; (b) about 113 million children were out of school; (c) discrimination against women was widespread and nearly a billion adults (mostly women) were illiterate.1 Policy responses to these findings have varied across countries. Much of the evaluation is in terms of budgetary allocations and investments in input indicators. This chapter examines goals, achievements and impediments of such a pursuit in India from a policy evaluation perspective.

Plan Policy for Education Indian Constitution assures free and compulsory education for all children up to the age of 14 years. It even sought to achieve Universal Elementary Education in a matter of a decade. But it has remained a forlorn hope; even today about 70 million children do not receive any schooling and more than a third of the population is illiterate. Successive Five Year Plans have formulated strategies to achieve universal education. However, given the limited progress, even the Tenth Plan had to focus on ‘Universalization of Primary Education’. In its pursuit of this goal, the Tenth Plan laid emphasis on universal access, universal enrolment, universal retention, universal achievement and equity. When it comes to evaluation, the focus is similar and on input indicators. The Eleventh Five Year Plan too evaluates the Tenth Plan efforts in terms of input measures. For instance, the plan measures the extent of access in terms of the following measures: • the number of habitations with a primary school within a distance of 1 km (10.71 lakh, 87 per cent); • uncovered habitations (1.61 lakh, 13 per cent); and • the number of habitations with an upper primary school within a distance of 3 km (9.61 lakh, 78 per cent) (GoI, 2008; p. 2). The Eleventh Plan measures the Tenth Plan policy response as follows: • access to primary education is nearly complete with the opening up of 1.32 lakh primary schools and 56,000 Education Guarantee Centre (EGS)/Alternate and Innovative Education (AIE) centres;

‘Education for All’ in India  

143

• provision of about 89,000 upper primary schools up to 2006–07; • the number of habitations uncovered at primary and upper primary levels remains at less than one lakh (GoI, 2008; p. 2). The plan goes to evaluate the policy outputs/outcomes in terms of the following information: • Between 2001–02 and 2004-05, (a) the number of primary schools in the country increased from 6.64 lakh to 7.68 lakh; (b) the number of upper primary school increased at a faster rate from 2.20 lakh to 2.75 lakh; and (c) 2.23 lakh new primary/upper primary schools, 1.88 lakh new school buildings and 6.70 lakh additional classrooms sanctioned. • During the same period, the total enrolment at elementary education level increased from 159 million to 182 million. • Between 2001–02 and 2006-07, the number of out-of-school children declined from 32 million to 7.0 million. • The number of districts with high density of (over 50,000) out-ofschool children declined from 48 to 29 in 2005–06. • About 6.9 per cent of the total children in the 6–13 age group were out of school; 2.1 per cent of them accounted for dropouts and 4.8 per cent for never-enrolled children, of course, largely due to poverty. • As regards the social profile of out-of-school children, 9.97 per cent were Muslim children, 9.54 per cent Scheduled Tribes (STs), 8.17 per cent Scheduled Castes (SCs), and 6.97 per cent of Other Backward Class (OBC); a majority (68.7 per cent) concentrated in five states, viz., Bihar (23.6 per cent), UP (22.2 per cent), West Bengal (9 per cent), MP (8 per cent) and Rajasthan (5.9 per cent). The plan document recognizes the gravity of school dropouts, which it attributes to poor quality of education. The average school attendance as percentage of the enrolment rate was 70 in 2004–05; it was as low as 57 per cent and 42 per cent in UP and Bihar, respectively. Since the 1960s, the dropout rate in primary classes has decreased at a low rate of 0.5 per cent per annum and at a steeper rate of 10.03 per cent during 2001–02 to 2004–05. The dropout rate has declined relatively faster for the girls than the boys. It is high at 50.8 per cent at the elementary level (classes I–VIII). As regards primary education (I–V), the dropout rates for SCs (34.2 per cent)

144   S. Chandrasekhar and M.H. Suryanarayana and STs (42.3 per cent) are substantially higher than the national average (29 per cent). The gender dimension of the dropout syndrome is acute. As regards the tribal students, two-thirds of them do not go beyond class VIII. Given this scenario, the Eleventh Plan has sought to achieve, inter alia, universal enrolment of children in the 6–14 age group; elimination of all gender, social and regional gaps in enrolments by 2011–12; elimination of dropout at primary level and its reduction from over 50 per cent to 20 per cent by 2011–12. The Government of India has even passed an education bill called the Right of Children to Free and Compulsory Education Act, 2009, to guarantee free and compulsory elementary education for children aged between 6 and 14 years (GoI, 2009).2

A Policy Evaluation Perspective Much of the statistical information provided in the preceding section is informative and relevant for policy evaluation and formulation. However, it pertains to discrete input indicators sans an integrated perspective on association between inputs and outputs/outcomes. It is important at least to authenticate the policy decisions in terms of empirical estimates of such associations for the following reasons. First, there is little focus on the output dimension, particularly, assessment of student learning in order to verify the quality of output. Completion of primary/elementary education per se is no proof of literary and numeracy skills. In other words, quantitative measures of educational output do not measure educational quality and learning outcomes. For instance, available estimates reveal an increase in enrolment consequent upon the enactment of the Right to Education Act but not in quality. As per the Annual Status of Education Report 2010 by the NGO Pratham, 96.5 per cent of all children aged 6–14 years get enrolled in schools. However, it found a decline in students’ ability to do basic mathematics and only 53.4 per cent of children in Class V could read Class II level textbooks (Times of India, 15 January 2011). Second, even the information on input indicators is used without any normalization for population. For instance, statistics on number of habitations without any access to school facilities, with/without a distance specified, would not make much sense from an economic perspective unless due importance is given to the size of population concerned.

‘Education for All’ in India  

145

Third, from a human development perspective, it is also important to have estimates of education received by the population, which could be effectively used in policy targeting across social groups and sectors. Of course, the plan provides estimates of gross enrolment ratio, which only measures institutional capacity to provide education. Even net enrolment ratio measures coverage of the school-age population at different levels. For comprehensive planning, it would be worthwhile to have measures of participation, educational attainment or the number of years of schooling completed which facilitate assessment of progress with respect to final delivery and hence achievement. One comprehensive indicator, advocated and used in the Human Development Report 2010, is school life expectancy (SLE), which measures the average duration of participation in education of every child enrolled in school. Thus, it facilitates an assessment of the overall level of development and performance of an education system. Technically, SLE is defined as the total number of years of schooling that a child can expect to receive assuming that the probability of his enrolment at successive stages of schooling in future is given by the prevailing patterns of age-specific enrolment rates of children. In this sense, it is similar to the concept of Life Expectancy at birth and in a similar way SLE too provides a measure of output of the education system. Higher SLE implies increasing exposure to education. The general perception is that SLE should at least be 10–12 years corresponding to the primary and secondary phase of education.3 In addition to serving policy purpose, SLE provides a standard of comparison across education system in different countries. The global average is 12.3 years of schooling while it is 10.3 for India (UNDP 2010; p. 145).

Data The National Sample Survey Organization (NSSO) has conducted surveys on ‘Participation and Expenditure in Education’ during its 52nd Round (July 1995–June 1996) and 64th Round (July 2007–June 2008). The 64th round survey collected information on (a) participation of persons aged 5–29 years in the education system of the country, (b) private expenditure incurred by households on education, and (c) the extent of educational wastage in terms of dropout and discontinuance, and its causes (see GoI, 2010). We use the data from the 64th round to estimate SLE and identify factors affecting SLE.

146   S. Chandrasekhar and M.H. Suryanarayana

Estimates of SLE From Table 7.1 (rural India) and Table 7.2 (urban India) it is evident that there are differences in the age of enrolment, that is, there are large variations in proportion of students in the age groups five years and above across various states. The percentage of students currently attending an educational institution increases with age and then begins to drop. Table 7.1 Percentage of Students Currently Attending Education at Primary Level and Above (rural) Percentage of ‘Students’ in the Age Group 5

6–10 11–13 14–15 16–17 18–24 25–29

Andhra Pradesh

73.7

92

84.9

66.9

48.7

11

0.2

Arunachal Pradesh

30

76.2

87.9

75.4

75.6

21.6

2

Assam

44.4

91.3

91.8

68.1

50.7

20.3

0

Bihar

35.3

73.8

75.8

61.2

44.1

10.2

0.5

Chhattisgarh

15.6

91.9

88.7

72.3

56.4

10.6

0

Delhi

45.4

97

90.5

89.3

55.8

19.5

0

Goa

0

82.9

84.5

53.9

12.8

0

Gujarat

60.2

91.1

79.7

53.3

33

7.7

0

Haryana

56.1

89.1

89

76.6

60.1

17.7

0.4

Himachal Pradesh

73.6

98.1

98.2

95.2

81

22.8

1.4

Jammu & Kashmir

38

93.3

92.7

82.6

74.1

33.5

2.5

Jharkhand

38.1

80.3

82.3

68.9

45.5

14.1

1.1

Karnataka

33.4

93.4

87.9

74.4

49.1

16.1

0.1

Kerala

27.1

97.2

99.8

96.8

86.6

28.5

1

Madhya Pradesh

45.1

90.6

87.4

63.8

43.1

10.3

0.2

Maharashtra

11.1

92.8

89.8

79.9

55.9

15.8

1.5

Manipur

20.6

86.2

94.7

86

72.6

28.5

3

2.5

74

91.5

83.3

71.9

27

0.6

Mizoram

35.3

98

95.3

82

47.9

6.2

0.7

Nagaland

17.9

86.3

97.3

91.2

76.1

22.5

2.4

Megahlaya

100

Table 7.1 continued

‘Education for All’ in India  

147

Table 7.1 continued Percentage of ‘Students’ in the Age Group 5

6–10 11–13 14–15 16–17 18–24 25–29

Orissa

65.9

89.7

81.5

60.1

28.7

7

0.3

Punjab

45.4

90.1

88

70.8

52.5

17.8

0.6

Rajasthan

55.7

85.4

81.8

65.9

51.3

12.1

0.3

7.4

90.4

98.1

84.5

75.1

27.2

0

90.8

99.2

96.2

82.8

55.8

11.6

0.2

89

89.9

75.5

60.1

15.4

0.7

Sikkim Tamil Nadu Tripura

1.6

Uttaranchal

55.6

90.3

89.9

83.9

63.5

26.7

2

Uttar Pradesh

42.4

85.4

84.1

67.3

51.6

18.6

1.1

West Bengal

38.1

90.1

82.5

65.4

44.6

11

0.9

A & N Islands

8.3

95.5

97.7

96.3

70.5

23.7

3.2

Chandigarh

7.1

72.6

87

90

75

5.8

0

Dadra & Nagar Haveli

80.8

91.9

81.1

59.1

59.5

7.7

0

Daman & Diu

77.8

97.3

66.7

16.7

8.7

0

Lakshadweep

66.7

100

Puducherry

79.5

98.7

95.1

All India

44.9

87.3

85.3

97.6 100

100

84.6

16

0

77.9

62.8

15.5

7.5

69.1

50.5

14.5

0.6

Source: GoI (2010). Table 7.2 Percentage of Students Currently Attending Education at Primary Level and Above (urban) Percentage of ‘Students’ in the Age Group 5

6–10 11–13 14–15 16–17 18–24 25–29

Andhra Pradesh

52.8

94.5

91.4

81.1

68.6

27.2

1.9

Arunachal Pradesh

67.7

92.3

92.7

96.9

94.4

48.4

0

Assam

47

92.1

88

78.9

63.6

32.6

0.6

Bihar

32.6

79.8

82.5

76.8

75

37.4

2.4

Chhattisgarh

26.2

85.2

93.6

80.2

60.5

28.6

0.3

Delhi

49.1

92.2

91.8

82.6

66.2

22.2

2.3

Table 7.2 continued

148   S. Chandrasekhar and M.H. Suryanarayana Table 7.2 continued Percentage of ‘Students’ in the Age Group 5

6–10 11–13 14–15 16–17 18–24 25–29

Goa

27.3

95.4

76.2

96.2

60

32

0

Gujarat

69.2

94.6

88.9

73.5

59.3

17.5

1.3

Haryana

57.8

91.4

91.3

82.5

69.6

27.8

1.1

Himachal Pradesh

92.8

97.6

99.3

96.9

88.3

44.5

6.3

Jammu & Kashmir

38.2

97.1

96.1

91

86

45.4

4.4

Jharkhand

52.6

90.1

92.6

82.5

73.8

40.5

4

Karnataka

42.5

98.4

96.1

85.1

71.2

21.3

0.3

Kerala

31.3

99

99.9

96.9

81.7

30.6

1.7

Madhya Pradesh

42.9

91.7

91.4

79.8

63

33.4

2.4

Maharashtra

38.9

94.7

93.1

82.2

64.8

29

3

Manipur

15.1

95.7

97.4

95.9

85.6

42.7

2

3.4

Megahlaya

84.3

90

91.1

84.1

59.9

7.1

Mizoram

40

98.3

97.9

97.1

81.7

36

1.8

Nagaland

35.7

89.6

93.7

89.3

92.2

40.9

0.9

Orissa

81.1

90

86.8

68.7

61.4

30

3

Punjab

38.3

79.8

87.8

81.9

66.1

22.2

1.3

Rajasthan

59.9

91.9

88.6

82.1

65.6

28.3

3

Sikkim

28.6

91.7

83.9

81.3

64.7

26.4

0

Tamil Nadu

84.3

98

96.1

90.7

67.7

22.5

1.9

0

91.8

91.6

94.1

84.3

34.7

1.4

Uttaranchal

39.8

88.3

89.6

61.8

80.6

30.1

1.3

Uttar Pradesh

47.8

79.5

77.6

65.4

58.1

28

3.1

West Bengal

45

89.1

88.2

Tripura

A & N Islands Chandigarh

0

62.6

28

3

87.8

96

28.9

3.5

94.3

78.5

53.9

7.5

10.7

0

86

70.3

0

100

100

66.7

Daman & Diu

100

100

100

90.9

86.7

23.7

0

Lakshadweep

33.3

93.1

93.8

76.9

21.2

8.7

Puducherry

85.3

98.9 100

90.5

75.5

32.7

2.4

All-India

50.4

90.6

78.9

65.5

27.1

2.2

Dadra & Nagar Haveli

Source: GoI (2010).

42.7

74.1

98.9 100

93.8 89.3

100

‘Education for All’ in India  

149

As mentioned earlier, a single indicator that captures the extent of educational attainment is the SLE, the expected number of years of schooling. In order to calculate this, we focus on those aged 6–18 years of age and examine their educational attainment. But before that we present the results of the life table analysis (Figure 7.1). On the x-axis is the transition from one year to the next year while the probability is depicted on the y-axis. What we have plotted are the survival rates for each year of schooling among those aged 6–18 years, that is, what percentage of children survive and go on to study at the end of each year. Of course, care should be taken to note that a distinction is not made between children repeating the same class and children who pass on to the next grade. This distinction cannot be made because of the lack of data on grade repetition. Hence our outcome variable number of years of school should be interpreted keeping this limitation in mind. Notice that the survival rates for urban boys and girls is higher than that of boys and girls in rural India. The survival rates are the lowest for rural girls. Figure 7.2 presents the SLE for the major states of India. In line with popular perception, the SLE is higher in Kerala, Himachal Pradesh and Tamil Nadu and is the lowest in Orissa. Of course, in line with the findings

Probability

Figure 7.1 Probability of a Child Continuing in School Every Additional Year 1 0.95 0.9 0.85 0.8 0.75 0.7 0.65 0.6 0.55 0.5 0.45 0.4

1–2

2–3

3–4

4–5

5–6

6–7

7–8

8–9 9–10 10–11 11–12 12–13

Rural Male

Urban Male

Rural Female

Urban Female

Source: Calculated from Unit Level Data of NSSO 64th Round (July 2007–June 2008) Survey on Participation and Expenditure in Education.

150   S. Chandrasekhar and M.H. Suryanarayana Figure 7.2 School Life Expectancy (in years)

8.9

9.6

INDIA

10.2

West Bengal

9.2

Uttarakhand

10.6

Uttar Pradesh

9.2

Rajasthan

Orissa

8.7

9.8

Punjab

Maharashtra

Madhya Pradesh

Kerala

Karnataka

9.0

9.9

Tamil Nadu

11.3 9.7 9.8

Jharkhand

11.1

Himachal Pradesh

Gujarat

8.8

9.7

Haryana

Bihar

Chhattisgarh

Assam

Andhra Pradesh

9.7 9.5 9.6 9.3

Source: Calculated from Unit-level Data of NSSO 64th Round (July 2007–June 2008) Survey on Participation and Expenditure in Education.

from Table 7.1 there are differences across rural and urban areas and also by gender. The profile by social groups across rural and urban areas is on expected lines. The SLE is the lowest for the SCs in rural (8.9 years) and urban (9.5 years) areas. For STs, it is 8.9 and 10.5 in rural and urban areas respectively, while for OBCs, it is 9.3 and 10 years. For all other social groups, it is the highest—9.7 years in rural areas and 10.5 years in urban areas. The logical question that follows is what are the determinants of SLE? Chandrasekhar and Suryanarayana (2011) estimate a Cox proportional hazard model in order to identify the correlates of number of years of schooling. From a policy perspective, they find that distance to the nearest school is a significant determinant of SLE. Farther the distance from upper primary school and distance from secondary school, higher is the hazard of dropping out of school early. They find support for providing specific programmes for the benefit of children from minority groups since children from ST, SC households and children belonging to OBCs have lower SLE. The occupation of the household matters in the sense that in rural India, children from households engaged in agricultural labour are more likely to be at risk

‘Education for All’ in India  

151

of dropping out of school earlier. They find a similar result in urban area for children from households reporting casual labour as their occupation. Poverty ratio is highest among agricultural labour in rural areas and casual labour in urban areas. Among other household characteristics, children from Hindu and Muslim households have lower levels of schooling compared to children from Christian households. Finally, girls in rural areas are at risk of dropping out earlier but the opposite is true in urban areas. A similar result is evident when one compares the SLE for boys (9.4 years and 10.2 years) and girls (9.1 years and 10.3 years) in rural and urban areas.

Policy Response: The Case of Karnataka Poverty reduction cannot be addressed without a significant increase in educational attainment. Higher level of educational attainment is the first step towards facilitating acquisition of job-oriented skills and improving the chances of becoming employable and getting higher wages. Future work needs to examine the correlations between SLE and poverty for the National Sample Survey (NSS) Regions. Following this it is important to calculate changes in the SLE for the NSS Regions and understand whether regions with improvements in SLE are the regions that also had the fastest reductions in poverty. We highlight this aspect by focusing on the southern state of Karnataka. From Figure 7.3 it appears that on the average, children in Karnataka start school later than the age of five. The percentage of students currently attending an educational institution increases with age and then begins to drop. The situation in Karnataka is comparable to the all India average. The average SLE in rural and urban Karnataka is 9.3 years and 10.4 years respectively. There are differences in SLE across the four NSS regions of the state. The SLE in the four regions, viz. Coastal and Ghats, Inland Eastern, Inland Southern and Inland Northern4 are 10.4, 10.5, 10.3 and 9.1 years respectively (Table 7.3). The message from Figure 7.3 and Table 7.4 is that the government needs to focus on those aged 14 and above in order to increase the level of educational attainment. It is children in this age group who are likely to drop out following any adverse shock to the household. SLE is the lowest in Inland Northern region and this is true for boys and girls. However, there is no apparent difference in the average number of years of schooling between boys and girls across all the four regions and for Karnataka as a whole. Rural and urban SLE for each of the NSS regions is not reported because of sample size limitations.

152   S. Chandrasekhar and M.H. Suryanarayana

Percentage

Figure 7.3 Percentage of Students Currently Attending Education at Primary Level and Above 100 90 80 70 60 50 40 30 20 10 0

5

6–10

11–13

14–15

16–17

18–24

Age Group Karnataka Rural

Karnataka Urban

All-India Rural

All-India Urban

Source: GoI (2010). Table 7.3 School Life Expectancy (years) in Karnataka Male

Female

All

Coastal and Ghats

10.1

10.7

10.4

Inland Eastern

10.6

10.4

10.5

Inland Southern

10.2

10.3

10.3

Inland Northern

9.4

8.8

9.1

Karnataka

9.9

9.6

9.8

Source: Calculated from Unit-level Data of NSSO 64th Round (July 2007–June 2008) Survey on Participation and Expenditure in Education.

The lower the dropout rate in a region, the higher the SLE and this becomes apparent when we plot the probability of a person continuing in school every additional year (Figure 7.4). Notice that probability of being in school every additional year drops sharply for those in the Inland Northern region. For the other three regions the curves overlap each other for the first 10 years of schooling.

‘Education for All’ in India  

153

Table 7.4 Head Count Ratio of Poverty in Karnataka Rural

Urban

1993–94

1993–94

8.96

15.51

Inland Eastern

14.55

37.14

Inland Southern

29.59

28.79

Inland Northern

37.88

57.46

2004–05

2004–05

20.26

42.87

5.1

28.96

Inland Southern

15.15

14.07

Inland Northern

27.35

57.04

Coastal and Ghats

  Coastal and Ghats Inland Eastern

Source: Authors’ calculations.

Probability

Figure 7.4 Probability of a Child Continuing in School Every Additional Year in Karnataka 1 0.95 0.9 0.85 0.8 0.75 0.7 0.65 0.6 0.55 0.5 0.45 0.4

1–2

2–3

3–4

4–5

5–6

6–7

7–8

8–9 9–10 10–11 11–12 12–13

Year Coastal and Ghats

Inland Eastern

Inland Southern

Inland Northern

Source: Calculated from Unit-level Data of NSSO 64th Round (July 2007–June 2008) Survey on Participation and Expenditure in Education.

154   S. Chandrasekhar and M.H. Suryanarayana Based on the discussion that the head count ratio of poverty is the highest in the Inland Northern region it is not surprising that SLE is lower by 1.4 years as compared to Inland Eastern region. Children from poorer households are less likely to go to school is a fairly established fact in the literature. Furthermore, children from poorer households are likely to enrol later. This is evident in Inland Northern region. The average age at time of enrolment is higher at 5.8 years in Inland Northern region compared to 5 years in Inland Eastern region. In terms of policies and interventions, data from the NSSO 64th Round (July 2007–June 2008) Survey on Participation and Expenditure in Education suggests that the government is indeed focusing on the Inland Northern region. In this region 75 per cent of the students aged 6–18 years report getting free education. This is higher than the average for the state, which is at 65 per cent. Over five per cent of students report getting scholarship or stipend compared to the state average of seven percent. Similarly, 63 per cent of those in the Inland Northern region report receiving textbooks compared to the state average of 55 per cent.

Discussion This chapter provides estimates of SLE across geographical regions of India. Given the focus on primary education and recognition of the need to stem dropout rates, it is only to be expected that SLE will improve over time and gender disparities will get bridged. However, this achievement will mask other confounding factors. The Annual Status of Education Report clearly highlights the issue of children not being able to read and write at a level expected of them. It is plausible that gender disparities in learning outcomes could widen. Gender disparities can continue to persist despite reductions in gender disparities in school attendance (see Amin and Chandrasekhar, forthcoming). Given that girls are likely to be engaged in domestic work they could spend lower amount of time studying at home. Data from time use survey in India reveals systematic differences between boys and girls in time spent doing homework in rural India (Motiram and Osberg, 2008). At the same time, the concept of leisure might be different in case of boys and girls. More importantly, parents are more likely to incur direct schooling costs for boys rather than for girls. Hence, from a policy perspective it is important to go beyond input measures like budgetary allocation and number of school and outcome measures like enrolment rates, dropout rates and SLE and also focus on quality of schooling and learning outcomes.

‘Education for All’ in India  

155

Notes 1. See http://www.unesco.org/education/efa/ed_for_all 2. Elementary education means education from first class to eighth class. The bill provides for setting up new state-run neighbourhood schools and reserving at least a quarter of seats in private schools for poor children. 3. It has one important limitation is that it does not take into account the quality dimension. Still it would be a useful first step to estimate in any policy making for the education sector. 4. Coastal and Ghats: Uttara Kannada, Dakshina Kannada and Udupi Inland Eastern: Shimoga, Hassan, Chikmagalur, Kodagu Inland Southern: Tumkur, Kolar, Bangalore, Bangalore (Rural), Mandya, Mysore, Chamarajanagar Inland Northern: Belgaum, Bagalkot, Bijapur, Gulbarga, Bidar, Raichur, Koppal, Gadag, Dharwad, Haveri, Bellary, Chitradurga, Davanagere

References Amin, S. and S. Chandrasekhar (2012), Looking beyond Universal Primary Education: Gender Differences in Time Use among Children in Rural Bangladesh, Asian Population Studies, Vol. 8, No. 1, pp. 23–38. Chandrasekhar, S. and M.H. Suryanarayana (2011), Estimates and Determinants of School Life Expectancy, Working Paper, Indira Gandhi Institute of Development Research, Mumbai. Government of India (2008), Eleventh Five Year Plan 2007–12 Volume II Social Sector, Planning Commission, Oxford University Press, New Delhi. ———. (2009), The Right of Children to Free and Compulsory Education Act, 2009, The Gazette of India, Registered no DL-N(o4)0007/2003-09, Ministry of Law and Justice, New Delhi. ———. (2010), Education in India: 2007–08: Participation and Expenditure, NSS 64th Round (July 2007–June 2008), Report No. 532, National Sample Survey Office, National Statistical Organisation, Ministry of Statistics and Programme Implementation, Government of India, May 2010. Motiram, S. and L. Osberg (2008), Demand or Supply for Schooling in Rural India? http://www.isid.ac.in/~pu/conference/dec_08_conf/Papers/SripadMotiram.pdf UNDP (2010), Human Development Report 2010, New York, http://hdr.undp.org/ en/content/human-development-report-2010

8

The Emerging Ageing Scenario in India, 2001–51 S. Irudaya Rajan

Introduction

T

he world is witnessing a scenario of rapidly changing demographic conditions, predominantly in the developing countries. The resulting slowdown in the growth of the number of children per couple along with the steady increase in the number of elderly has a direct bearing on both inter-generational and intra-generational equity and solidarity, which constitute the basic foundations of human society. Population ageing results mainly from reductions of fertility, a phenomenon that has become virtually universal. Since 1950, the proportion of older people in the total population has been steadily increasing, from 8 per cent in 1950 to 11 per cent in 2007, and it is estimated to reach 22 per cent in 2050 (United Nations, 2007). Ageing will also have an impact on economic growth, via savings, investment, consumption, labour markets behaviour, pensions, taxation and inter-generational transfers. In the social sphere, this phenomenon influences family composition and living arrangements, demand for housing and migration, and the need for health-care services. On the political front, population ageing may shape voting patterns and political representation (United Nations, 2007). The recent emphasis on studies on elderly population in the developing world is attributed to their increasing numbers and deteriorating living conditions in the later years of life. While increasing numbers are attributed to demographic transition, deteriorating

The Emerging Ageing Scenario in India, 2001–51  

157

social and economic conditions are a result of the fast-eroding traditional family system in the wake of rapid modernization, internal and international migration, and urbanization. India accommodates 77 million elderly persons, a figure second only to the number of the elderly in China, according to the 2001 census. Economic, social and health aspects of this fast-growing segment of the population pose a great challenge to all socio-economic sectors in India. In this context, this chapter overviews the trends in ageing in the past and project the emerging scenario for the next 100 years, using the 2001 age structure and the available trends in fertility, mortality and migration rates.

Global Ageing At the world level, the number of old persons is expected to exceed the number of children for the first time in 2047 (United Nations, 2007). In the developed regions in which population ageing is far advanced, the number of children dropped below that of older persons in 1998. In 2007, the United Nations Commission on Population and Development is focusing its work on the changing age structures of populations and their implications for development. Table 8.1 shows the global demography of the aged in 2007. The pace of population ageing is more rapid in developing countries than in developed countries. Consequently, developing countries have less time at their disposal to adjust to the consequences of population ageing. Moreover, population ageing in developing countries is taking place at lower levels of socio-economic development than has been the case for developed countries. Currently, there are 704.8 million elderly population; among them, 70.8 per cent (495.1 million) belongs to the age group of 65 and above. Even at the age of 80 years, there are 94.2 million persons and it is important to note that the global sex ratio at 80 plus is just 558 males per 1000 females. More than 60 per cent (452.8 million) of the elderly population live in less developed regions and Asia accounts for 55 per cent of them (Table 8.1). The median age for the world population now is around 28 years and it is likely to reach 38 years in 2050. Among those aged 60 years or more, the fastest growing segment is that of the oldest old of 80 years and above. Their numbers are currently increasing at 3.9 per cent per year. Today, persons aged 80 years or over account for about 1 in every 8 old persons (60 years or more). By 2050, this ratio is expected to increase to approximately 2 in every 10 old persons.

252.0

452.8

50.1

385.4

153.5

52.7

58.3 4.9 4.4

World

More developed regions

Less developed regions

Africa

Asia

Europe

Latin America and the Caribbean

Northern America

Oceania

Australia/New Zealand

Source: United Nations (2007).

Total

704.8

Major Areas/Regions (in millions)

Table 8.1 The Global Demography of Aged, 2007

2.0

2.3

25.6

23.7

62.8

180.7

22.7

211.6

106.1

317.7

Male

60+

2.4

2.6

32.7

29.0

90.7

204.7

27.4

241.2

145.9

387.1

Female

Total

3.2

3.5

42.2

36.5

116.8

263.7

32.5

306.3

188.8

495.1

1.4

1.6

17.8

16.1

45.7

120.5

14.4

139.9

76.2

216.1

Male

65+

1.8

1.9

24.3

20.4

71.1

143.2

18.1

166.5

112.6

279.1

Female

0.9

0.9

12.2

7.4

27.8

42.0

3.8

46.3

47.9

94.2

Total

0.3

0.3

4.3

2.9

8.4

16.2

1.5

18.5

15.3

33.7

Male

80+

0.6

0.6

8.0

4.5

19.4

25.7

2.3

27.8

32.6

60.4

Females

The Emerging Ageing Scenario in India, 2001–51  

159

Overview of India’s Elderly The 2001 census has shown that the elderly population of India, consisting of 28 states and seven Union Territories, was around 77 million. In 1961, the elderly population had been only 24 million; it had increased to 43 million in 1981 and to 57 million in 1991. The proportion of elderly persons in India has risen from 5.63 per cent in 1961 to 6.58 per cent in 1991 (Irudaya Rajan, Mishra and Sarma, 1999) and to 7.5 per cent in 2001 (Irudaya Rajan, 2007). This trend is true for other old age groups as well. The elderly population aged 70 years and above which had been a mere 8 million in 1961 rose to 21 million in 1991 and to 29 million in 2001 (see Table 8.2). The proportion of the elderly above 70 years of age to total population increased from a mere 2.0 per cent in 1961 to 2.9 per cent in 2001. In 1961, Indian Census reported 99,000 centenarians. The corresponding number in 2001 was 139,472. The growth rate among different groups of the elderly namely 60 plus, 70 plus and 80 plus, during the decade 1991–2001 was much higher than of the general population growth rate of 2 per cent per annum. The sex ratio among the elderly in India favours males as against the trend prevalent in other parts of the world (see Table 8.3). India is one of the few countries in the world in which males outnumber females. This phenomenon among the elderly is of prime importance because female life expectancy at ages 60 and 70 is slightly higher than that of males. However, at any given age, there are more widows than Table 8.2 Number and Proportion of Elderly by Different Age Groups, India, 1961–2001 Number (in millions)

Percentage of Elderly to the Total Population

Age

1961

1971

1981

1991

2001 1961 1971 1981 1991 2001

60+

25

33

43

57

77

5.6

6.0

6.49

6.76

7.5

70+

9

11

15

21

29

2.0

2.1

2.33

2.51

2.9

80+

2

3

4

6

8

0.6

0.6

0.62

0.76

0.8

90+

0.5

0.7

0.7

1

1.8

0.1

0.1

0.1

0.2

0.2

100+

0.01

0.01

0.01

0.01

0.1

0.02

0.02 0.02

0.02

0.01

Source: Compiled by the authors from the last five censuses.

160   S. Irudaya Rajan Table 8.3 Sex Ratio and Growth Rate among the Indian Elderly, 1971–2001 Sex Ratio of Elderly (males per 1000 females)

Growth of Elderly (per cent)

Age

1971

1981

1991

2001

1971–81

1981–91

1991–2001

60+

1066

1042

1075

1028

2.78

2.72

3.04

70+

1030

1026

1084

991

3.13

3.08

3.32

80+

950

990

1090

1051

2.54

4.35

2.35

90+

897

892

1019

1131

0.66

5.08

n.a

100+

798

844

896

1782

0.19

0.44

n.a

Source: Estimated by the authors from the last four censuses.

widowers. Reasons for this unusual phenomenon need to be identified in a wider context. Since the beginning of the 20th century, life expectancy at birth among Indian males had been higher than that among females until the first half of the 1990s. Besides this unusual demographic pattern of excess female mortality at infant and childhood ages, the analysis becomes further complicated by the phenomenon of age exaggeration among the aged. Thus, the above observation of more males in old age does not reveal a true picture of situation among elderly persons (for details, see Mari Bhat, 1992; Irudaya Rajan, Sarma and Mishra, 2003). In India, the sex ratio of the aged as well as of the old-old favours males. Reasons for more males in old age may consist of under-reporting of females, especially widows, age exaggeration, low female life expectancy at birth, and excess female mortality among infants, children and adults (Sudha and Irudaya Rajan, 1999, 2003; Mari Bhat 2002). Notwithstanding the several analytical and statistical problems indicated above, it cannot be disputed that the preponderance of females in extreme old ages needs to be brought to the attention of planners and policymakers. Available findings on ageing suggest that fertility has played a more predominant role in the ageing process compared to mortality. As far as India is concerned, there has been a substantially greater reduction in mortality than fertility since 1950. For instance, while the crude birth rate declined from 47.3 during 1951–61 to 22.8 in 1999, the crude death rate fell more steeply from 28.5 to 8.4 during the same period. Logically, therefore, India is expected to undergo a faster decline in fertility in the immediate future compared to decline in mortality because mortality had

The Emerging Ageing Scenario in India, 2001–51  

161

Table 8.4 Expectation of Life at Ages 60 Years and 70 Years for India Male Period

Female

e0

e60

e70

e0

e60

e70

1970–75

50.5

13.4

8.6

49.0

14.3

9.2

1976–80

52.5

14.1

9.6

52.1

15.9

10.9

1981–85

55.4

14.6

9.7

55.7

16.4

11.0

1986–90

57.7

14.7

9.4

58.1

16.1

10.1

1991–95

59.7

15.3

10.0

60.9

17.1

11.0

1995–99

60.8

15.7

10.3

62.5

17.7

11.6

1996–00

61.0

15.8

10.4

62.7

17.8

11.7

1997–01

61.3

16.0

10.6

63.0

18.1

11.9

Source: Compiled from life tables produced by the Registrar General of India for various periods.

already reached low levels. The ageing process in India will, therefore, be faster than in other developing countries. Moreover, the transition from high to low fertility is expected to narrow the age pyramid at its base and broaden it at the top. In addition, improvement in life expectancy at all ages will allow more old people to survive thus intensifying the ageing process. In this context, an examination of the phenomenon of increasing life expectancy indicates that the gain is going to be shared more and more by old people which will make them live increasingly longer lives. Table 8.4 provides evidence in support of this observation. It may be seen that males are expected to live 16 years beyond the age 60 and 10 years beyond the age 70, the corresponding years for females being 18 years and 11 years, respectively. Urban females are expected to live for an additional two years at age 60 than their rural counterparts.

State-wise Analysis Uttar Pradesh led with the highest number of the elderly (11 million) followed by Maharashtra (8.5 million), West Bengal (5.7 million) and Tamil Nadu (5.5 million). The smallest number of the elderly is found in the union territory of Lakshadweep (Table 8.5). In terms of proportion of the

Kerala

Punjab

Himachal Pradesh

Tamil Nadu

Maharashtra

Goa

Pondicherry

Orissa

Uttaranchal

Karnataka

Andhra Pradesh

Haryana

Tripura

Chhattisgarh

West Bengal

02

03

04

05

06

07

08

09

10

11

12

13

14

15

5,708,014

1,506,393

232,896

1,590,118

5,798,171

4,065,985

655,726

3,044,221

81,082

112,858

8,464,895

5,545,499

548,890

2,200,153

3,338,428

Population 76,826,245

India

60+

India/States

01

Rank

Table 8.5 Elderly in India, 2001

7.1

7.2

7.3

7.5

7.6

7.7

7.7

8.3

8.3

8.4

8.7

8.9

9.0

9.0

10.5

7.5

Per Cent

Population

2,275,599

534,077

106,606

656,182

2,082,435

1,611,495

258,515

1,168,791

31,939

41,928

3,094,957

2,097,100

245,121

939,859

1,402,678

29,376,651

70+

2.8

2.6

3.3

3.1

2.7

3.0

3.0

3.2

3.3

3.1

3.2

3.4

4.0

3.9

4.4

2.9

Per Cent

Population

670,812

135,486

35,296

184,587

505,185

457,643

70,331

293,770

8223

10,969

780,039

557,029

81,152

299,106

389,332

8,060,098

80+

0.8

0.7

1.1

0.9

0.7

0.9

0.8

0.8

0.8

0.8

0.8

0.9

1.3

1.2

1.2

0.8

Per Cent

Uttar Pradesh

Gujarat

Rajasthan

Manipur

Jammu & Kashmir

Bihar

Lakshadweep

Jharkhand

Assam

Mizoram

Sikkim

Delhi

Daman & Diu

Chandigarh

Andaman & Nicobar Islands

Meghalaya

Arunachal Pradesh

Nagaland

Dadra & Nagar Haveli

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

Source: Based on the 2001 census.

Madhya Pradesh

16

8818

90,540

49,967

105,870

17,478

44,977

8045

720,743

29,144

49,066

1,562,062

1,580,601

3732

5,513,117

678,384

145,775

3,829,791

3,502,295

11,701,369

4,292,242

4.0

4.5

4.6

4.6

4.9

5.0

5.1

5.2

5.4

5.5

5.9

5.9

6.2

6.6

6.7

6.7

6.8

6.9

7.0

7.1

2618

37,709

18,063

39,790

6222

18,170

2930

269,146

11,018

20,108

601,856

553,844

1288

2,046,843

274,603

61,569

1,473,636

1,310,502

4,470,314

1,609,752

1.2

1.9

1.6

1.7

1.7

2.0

1.9

1.9

2.0

2.3

2.3

2.1

2.1

2.5

2.7

2.8

2.6

2.6

2.7

2.7

611

13,644

5655

11,258

1676

5216

811

70,929

2716

5313

169,824

148,144

381

566,871

82,415

17,211

394,208

374,579

1,273,057

436,919

0.3

0.7

0.5

0.5

0.5

0.6

0.5

0.5

0.5

0.6

0.6

0.5

0.6

0.7

0.8

0.8

0.7

0.7

0.8

0.7

164   S. Irudaya Rajan elderly in the population, the low fertility state of Kerala ranks number one, with 10.5 per cent of its population, in 2001. Punjab and Himachal Pradesh occupy the second largest position in terms of the percentage of elderly, followed by the states of Tamil Nadu (8.9) and Maharashtra (8.7). Dadra Nagar Haveli registered the lowest proportion (4). The percentage of the elderly in the 80 years and above category is the highest in Himachal Pradesh (1.3 per cent), followed by Kerala (1.2 per cent). India is one of the few countries in the world in which males outnumber females. However, among the elderly, female life chances are higher. Thus, at any age, there are more widows than widowers. Moreover, according to the 2001 census, the sex ratio among the Indian elderly of 60 years and above is 1028 females for 1000 males. The trend is in favour of males in the age group of 70 plus years, but it becomes favourable to females in the population of 80 years and above. Kerala has recorded the highest sex ratio—1247 females per 1000 males. The situation improves further to 1319 among the elderly of 70 plus years, and to 1472 among the elderly of 80 years and above (Table 8.6). Table 8.7 shows various indices of population ageing in India. Kerala has registered the highest median age (27.9 years), indicating its status as a forerunner of demographic transition, followed by Goa (27.6 years), Tamil Nadu (27 years) and Pondicherry (26.5 years). The highest index of ageing Table 8.6 Sex Ratio among the Elderly, 2001 Census Sex Ratio (females per 1000 males) India/State

60+

70+

80+

1028

991

1051

Andaman and Nicobar Islands

766

827

932

Sikkim

772

734

752

Nagaland

780

786

765

Jammu and Kashmir

846

820

837

Bihar

882

827

811

Uttar Pradesh

886

821

830

Arunachal Pradesh

889

892

900

India

Table 8.6 continued

The Emerging Ageing Scenario in India, 2001–51  

165

Table 8.6 continued Sex Ratio (females per 1000 males) India/State

60+

70+

80+

Chandigarh

891

887

953

Assam

949

876

923

Meghalaya

957

991

1050

Delhi

963

925

996

Punjab

971

865

922

Mizoram

977

1019

1184

Lakshadweep

979

1024

1177

Manipur

986

988

1033

Haryana

991

863

884

Uttaranchal

1002

952

984

Jharkhand

1005

945

891

Tamil Nadu

1013

977

1040

Himachal Pradesh

1021

997

1027

Orissa

1022

958

892

West Bengal

1047

1032

1093

Tripura

1064

1105

1230

Rajasthan

1084

1108

1261

Madhya Pradesh

1084

1112

1240

Andhra Pradesh

1099

1051

1215

Karnataka

1111

1137

1258

Gujarat

1148

1239

1410

Maharashtra

1150

1063

1218

Chhattisgarh

1181

1182

1175

Pondicherry

1222

1239

1249

Daman & Diu

1239

1370

1886

Kerala

1247

1319

1472

Goa

1260

1424

1553

Dadra & Nagar Haveli

1270

1381

1406

Source: Based on the 2001 census.

166   S. Irudaya Rajan Table 8.7 Indices of Ageing, 2001 Census Median Age

Index of Ageing

Age Dependency Ratio

Jammu & Kashmir

21.6

18.7

11.6

Himachal Pradesh

24.5

29.1

15.1

Punjab

24.2

28.8

15.2

Chandigarh

24.6

17.2

7.6

Uttaranchal

21.5

21.2

13.8

Haryana

21.8

20.9

13.3

Delhi

23.5

16.0

8.4

Rajasthan

20.1

16.9

12.8

Uttar Pradesh

19.6

17.2

13.6

Bihar

19.5

15.8

13.0

Sikkim

21.6

15.4

9.0

Arunachal Pradesh

19.8

11.3

8.3

Nagaland

20.0

12.4

7.7

Manipur

23.1

20.6

11.1

Mizoram

21.7

15.6

9.3

Tripura

23.3

21.6

12.3

Meghalaya

18.1

10.8

8.6

Assam

21.6

15.7

10.3

West Bengal

24.1

21.4

11.9

Jharkhand

20.6

14.7

10.8

Orissa

24.1

24.9

14.1

Chhattisgarh

22.3

19.6

13.0

Madhya Pradesh

21.1

18.4

13.1

Gujarat

23.6

21.0

11.5

Daman and Diu

23.7

18.6

7.5

Dadra and Nagar Haveli

22.3

11.3

6.6

Maharashtra

24.4

27.2

14.8

Andhra Pradesh

24.4

23.7

12.6

State

Table 8.7 continued

The Emerging Ageing Scenario in India, 2001–51  

167

Table 8.7 continued Median Age

Index of Ageing

Age Dependency Ratio

Karnataka

24.3

24.1

12.7

Goa

27.6

33.9

12.5

Lakshadweep

23.0

18.0

10.3

Kerala

27.9

40.2

16.5

Tamil Nadu

27.0

33.0

13.9

Pondicherry

26.5

30.8

12.6

Andaman and Nicobar Islands

24.5

16.7

7.5

All India

22.7

21.1

13.1

State

Source: Based on the 2001 census.

in the country is also reported for Kerala (40.2) followed by Goa (33.9), Tamil Nadu (33.0) and Pondicherry (30.8). This is also true for median ageing and dependency ratio of the aged.

Regional Ageing Scenario 1961–2101 Since 1961, India’s elderly population (60+) has grown from 25 million to 77 million in 2001. Our projections indicate that the proportion of the elderly would reach 20 per cent in 2051, 25 per cent in 2071 and 30 per cent in 2101. Similarly, the numbers would increase from the current level of 77 million to 298 million in 2051 and to 504 million in 2101 (see Figure 8.1). There were only 9 million persons aged 70 years and over in India in 1961; it increased to 30 million in 2001 and it is expected to rise to 131 million in 2051 and 273 million in 2101. Similar trends are reported for the age group 80 and above as well (Table 8.8). A few comments on the projections are called for. We have used the 2001 census totals and applied them to the age structure projected by the Registrar General of India as the base population (Registrar General of India, 1996, 1999); assumptions on future fertility and mortality trends are based on past trends as revealed by the Sample Registration System and other sources such as the first and second rounds of National Family Health Surveys (Visaria and Irudaya Rajan, 1999; Guilmoto and Irudaya

168   S. Irudaya Rajan Figure 8.1 Age Structural Transition, India: 2001–2101 40.0 0–14

30.0 60+

25.0 20.0 15.0 70+

10.0 5.0

01

96

21

91

20

86

20

76

20

71

20

66

20

61

20

56

20

51

20

46

20

41

20

36

20

31

20

26

20

21

20

16

20

11

20

06

20

01

20

20

81

80+

0.0

20

Population per cent

35.0

Year

Source: Aliyar and Irudaya Rajan (2007). Table 8.8 Emerging Ageing Scenario, 1961–2101 60+

70+ Population (millions)

80+

Year

Population (millions)

Per Cent

1961

25.0

5.6

9.0

2.0

2.0

0.6

1971

33.0

6.0

11.0

2.1

3.0

0.6

1981

43.0

6.5

15.0

2.3

4.0

0.6

1991

57.0

6.8

21.0

2.5

6.0

0.8

2001

76.8

7.5

29.4

2.9

8.1

0.8

2011

96.5

8.1

42.4

3.5

10.9

0.9

2021

133.0

9.9

52.4

3.9

15.8

1.2

2031

184.1

12.7

74.8

5.1

19.7

1.3

2041

233.3

15.3

104.4

6.8

28.8

1.8

2051

298.2

19.1

131.3

8.3

40.5

2.5

2061

346.5

22.4

171.6

11.0

51.6

3.2

Per Cent

Population (millions)

Per Cent

Table 8.8 continued

The Emerging Ageing Scenario in India, 2001–51  

169

Table 8.8 continued 60+ Year

Population (millions)

2071 2081

70+ Per Cent

Population (millions)

377.2

24.5

422.3

26.9

2091

463.6

2101

504.7

80+ Per Cent

Population (millions)

Per Cent

195.5

12.9

69.8

4.5

212.7

14.1

77.6

5.3

28.7

247.8

16.1

88.8

6.1

30.1

273.0

17.2

105.5

7.1

Source: Census of India (1961–2001); Aliyar and Irudaya Rajan (2007).

Rajan, 2001, 2002, 2005; Irudaya Rajan, Sarma and Mishra, 2003). The projection period ranges from 2001 to 2101 (see Figure 8.2). It is also important to note that the number of projected elderly persons above 60 years of age in 2061 was already born in 2001 and our projections are therefore likely to valid for the next 60 years. As of 2001, one-fourth of the Indian elderly live in south India (24.4 per cent), followed by central India (23.7 per cent) and the lowest proportion live in north-east India. In 2051, the situation slightly changes; however, south India still leads with the highest proportion of the elderly (25.5 per cent) of all the regions in India. In 2101, two out of five Indian elderly persons (37.9 per cent) would live in central India, followed by east India (25.3) and south India declines to the third position with a mere 12.5 per cent. The same patterns are expected for old-old persons of above 70 years of age and for oldest-old persons (above 80 years of age) in the coming years in India (Table 8.9). The regional ageing dynamics are expected to play a major role in designing policies and programmes for elderly.

Marital Status of the Elderly Marital status of the elderly assumes special significance in the context of care in old age as it is known that those who are married fare better in all economic and social aspects than those who are single (Holden et al., 1988; Zick and Smith, 1991). A major concern relates to the increasing proportion of elderly women, especially widows in the population. Two reasons are given for the marked gender disparity in widowhood namely

170   S. Irudaya Rajan Figure 8.2 Age Pyramids, India 2001–2101 Male

67.4

Female

0 2001 Male

67.4 Male

67.4

67.4 Female

0 2051

Male

80+ 75–79 70–74 65–69 60–64 55–59 50–54 45–49 40–44 35–39 30–34 25–29 20–24 15–19 10–14 5–9 0–4

67.4

67.4 Millions 80+ 75–79 70–74 65–69 60–64 55–59 50–54 45–49 40–44 35–39 30–34 25–29 20–24 15–19 10–14 5–9 0–4

Female

0 2031

Male

67.4 Millions

Female

0 2071

Female 80+ Male

0 2091

67.4

75–79 70–74 65–69 60–64 55–59 50–54 45–49 40–44 35–39 30–34 25–29 20–24 15–19 10–14 5–9 0–4

67.4 Millions

Source: Aliyar and Irudaya Rajan (2007).

67.4

67.4 Female

0 2101

67.4

76.8

9.6

18.2

2.3

15.9

12.1

18.8

India

North India

Central India

North-east India

East India

West India

South India

25.2

14.5

20.3

3.0

22.2

11.4

96.5

2011

35.0

19.7

28.3

4.4

29.5

15.9

133.0

2021

47.3

27.5

39.5

6.6

40.8

22.4

184.1

2031

59.6

34.8

49.1

8.7

51.9

29.2

233.3

2041

71.0

42.6

63.2

11.4

71.6

38.3

298.2

2051

74.6

46.3

76.6

13.3

90.9

44.7

346.5

2061

73.6

47.3

86.9

14.9

107.7

46.9

377.2

2071

Source: Aliyar and Irudaya Rajan (2007). North: Delhi, Haryana, Himachal Pradesh, Jammu Kashmir, Punjab, Rajasthan and Chandigarh. North-east: Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Tripura and Sikkim. West: Goa, Gujarat, Maharashtra, Daman and Diu and Dadra Nagar Haveli. Central: Madhya Pradesh, Chhattisgarh, Uttar Pradesh and Uttaranchal. East: Bihar, Jharkhand, Orissa, West Bengal and Andaman & Nicobar Islands. South: Andhra Pradesh, Kerala, Karnataka, Tamil Nadu, Pondicherry and Lakshadweep.

2001

(In Millions)

Table 8.9 Population Ageing in Different Regions of India, 2001–2101

71.6

49.3

101.8

17.2

132.8

49.6

422.3

2081

67.8

50.1

115.5

19.2

160.4

50.5

463.6

2091

63.3

50.8

127.5

21.1

191.2

50.9

504.7

2101

172   S. Irudaya Rajan Figure 8.3 Incidence of Widowhood among Females and Males in India (in per cent) 80.00 70.00 60.00

Male

Female

50.00 40.00 30.00 20.00 10.00 0.00

20– 25– 30– 35– 40– 45– 50– 55– 60– 65– 70– 75– 80+ 24 29 34 39 44 49 54 59 64 69 74 79 Age in years

Source: Estimated by the researchers based on the 2001 census.

in India: (a) longer life span of women than of men and (b) the general tendency in India for women to marry men older than themselves (Gulati and Irudaya Rajan, 1999). Also widowed men are much more likely to remarry and thus restore their earlier status than widowed women (see Figure 8.3). According to the 2001 census, 33.07 per cent of the elderly in India live without their life partners. Widowers among old men form 14.98 per cent as against 50.06 per cent widows among old women. Among the oldest-old (80 years and above), widowhood is much more common. Almost half of them live without spouse. Gender-wise analysis shows that 71.11 per cent of women were widows while only 28.89 per cent men in the oldest old (80+) age group were widowers, according to the latest population census. Loss of the spouse is a major disaster in old age and such individuals who have undergone this trauma deserve suitable and adequate social safety nets. Designing policies to protect the elderly females, particularly the widows, should form the major welfare programme in the country, especially since it has been shown that old widows suffer much greater vulnerability to adverse outcomes like poor general health status, disability and poor utilization of health care (Sreerupa, 2006).

The Emerging Ageing Scenario in India, 2001–51  

173

Living Arrangement National Sample Survey in its 60th round (January–June 2004) focused on many issues including economic independence, living arrangements and health status of the elderly population (60 years and above). This was a large-scale sample survey conducted throughout the country and its first report was published in March 2006. The elderly covered in the sample consisted of 17,750 males and 17,081 females. Here we have analyzed the pattern of living arrangements among the Indian elderly by sex and place of residence (Table 8.10). Significantly, nearly 77 per cent of the elderly live either with their children without spouse or co-reside with spouse and children. This finding reflects the social convention of co-residence with children as the most preferred living arrangement for the elderly. Another 12 per cent of the elderly live with their spouses while only 5.2 per cent of them live alone and 4.4 per cent live with others—relatives or non-relatives. Although only Table 8.10 Percentage Distribution of Elderly by Living Arrangements, 2004 Living Arrangements Living alone

Rural

Urban

Total

Male Female Total Male Female Total Male Female Total 2.8

8.0

5.3

2.1

6.5

4.3

2.6

7.6

5.2

10.4 15.5

8.4

12.0

With spouse only

13

8.7

12.5

13.3

7.5

With spouse and other members

58.9 28.4

44.2

64.9

29.4

46.8 60.9 28.6

44.8

32

15.4

48.2

32.2 16.5 47.6

32.1

Without spouse but with 15.5 47.5 children Without spouse but with other relatives

0.7

5.0

3.7

2.4

6.2

4.4

2.4

5.3

3.9

Without spouse but with nonrelatives

0.2

0.6

0.5

0.5

0.5

0.5

0.3

0.6

0.5

Source: National Sample Survey Organisation (2006).

174   S. Irudaya Rajan a small percentage of the elderly live alone in India, results indicate that older women are more likely than men to be living alone (8 per cent vs. 3 per cent) and that older men are more likely than older women to live with their spouses (15 per cent vs. 8 per cent) or with spouse and other members (61 per cent vs. 29 per cent). These gender differences, however, are almost entirely due to the differences in marital status. As we have already noted, there are more widows in India than widowers who form the majority of the elderly population living alone. In the absence of extra familial sources of care and support, they form a particularly vulnerable section of the aged population. Further, the much higher proportion of aged women who are widowed raises the share of aged women as compared to that of men among the elderly, residing with their children but without spouse. Although much disparity in the rate of co-residence with children is not seen between the rural and the urban elderly, the differences continue to be pronounced as between old men and old women. Despite high levels of co-residence with children, among the elderly in India, co-residence levels differ considerably by region, reflecting variations in the kinship system (matrilineal and bilineal system in the south and the patrilocal system in the north). Table 8.11 shows that co-residence levels are in general higher in the northern parts of the country, especially the northwest and the northern hills where 85 and 84 per cent respectively of the elderly live with their children. In contrast the lowest level of co-residence is found in the southern region of the country at 72 per cent. A sex disaggregated analysis of the living arrangements reveals that broadly a higher per cent of aged men co-reside with their children than Table 8.11 Percentage of Elderly Living with Their Children by Regions of India 2004 Rural

Urban

Total

Region

Male Female Total Male Female Total Male Female Total

South

72.2

69.8

71.0

77.4

74.3

75.8

73.5

71.2

72.4

West

73.7

73.1

73.4

81.8

74.4

77.9

76.3

73.7

74.9

North-west 84.2

86.2

85.2

83.9

83.6

83.6

84.2

85.6

84.9

North

75.1

75.8

75.4

84.8

79.2

81.9

76.6

76.6

76.5

East

83.9

81.3

82.7

83.0

82.1

82.6

83.3

81.2

82.4

Table 8.11 continued

The Emerging Ageing Scenario in India, 2001–51  

175

Table 8.11 continued Rural Region

Urban

Total

Male Female Total Male Female Total Male Female Total

North Hill 84.2

84.7

84.4

82.0

88.2

85.2

83.7

84.5

84.0

North-east

78.4

77.7

78.1

81.0

84.8

82.5

78.9

78.1

78.6

Union Territories

76.3

80.3

78.8

80.7

79.7

80.4

80.9

77.4

79.7

India

76.5

75.9

76.2

80.3

77.6

79.0

77.4

76.2

76.9

Source: Tabulations made by the authors based on the National Sample Survey, 60th round. Note: East Region: Assam, Orissa, West Bengal North-east Region: Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura North Hill Region: Himachal Pradesh, Jammu & Kashmir North-west Region: Haryana, Punjab, Rajasthan North Region: Bihar, Madhya Pradesh, Uttar Pradesh South region, Andhra Pradesh, Karnataka, Kerala, Tamil Nadu Union Territories: Andaman & Nicobar Islands, Dadra & Nagar Haveli, Delhi, Lakshadweep, Pondicherry, Daman & Diu, Chandigarh West Region: Goa, Gujarat, Maharashtra

aged women, with the exception of mainly the northern hill region. The gender difference in co-residence persists across rural and urban locations. Further, it was found that co-residence with children is higher in urban areas than in rural areas. The difference could be due to the higher cost of housing in the urban areas which induces higher rates of co-residence.

References Aliyar, S. and S. Irudaya Rajan (2007), Population Projections for India, 2001–2101. Centre for Development Studies. Thiruvananthapuram, Unpublished. Guilmoto, C.Z. and S. Irudaya Rajan (2001), Spatial Patterns of Fertility Transition in Indian Districts, Population and Development Review, Vol. 27, No. 4, pp. 713–38. ———. (2002), District Level Estimates of Fertility from India’s 2001 Census, Economic and Political Weekly, Vol. 37, No. 7, pp. 665–72. ———. (2005), Fertility Transition in South India, SAGE Publications, New Delhi.

176   S. Irudaya Rajan Gulati, L. and S. Irudaya Rajan (1999), The Added Years: Elderly In India and Kerala, Economic and Political Weekly, Vol. 36, No. 44, pp. 46–51. Irudaya Rajan, S. (2007), Aging, Pension and Social Security in South Asia. Chapter 1, pp. 1–38, in S. Irudaya Rajan (ed). Social Security for the Elderly: Experiences from South Asia, Routledge, Taylor & Francis Group, London/New York/New Delhi. Irudaya Rajan, S., U.S. Mishra and P.S. Sarma (1999), India’s Elderly: Burden or Challenge? SAGE Publications, New Delhi/Thousand Oaks/London. ———. (2003), Demography of Indian Aging, 2001–2051, Journal of Aging and Social Policy, Vol. 15, Nos. 2 and 3, pp. 11–30. Mari Bhat, P.N. (1992), Changing Demography of Elderly in India, Current Science, Vol. 63, No. 8, pp. 440–48. ———. (2002), Maternal Mortality in India: An Update. Studies in Family Planning, Vol. 33, No. 3, pp. 227–36. Registrar General of India (1996), Population Projections for India and States, 1996– 2016. Census of India 1991. New Delhi. ———. (1999), Ageing Population of India: An Analysis of the 1991 Census Data. Census of India 1991. New Delhi. Sudha, S. and S. Irudaya Rajan (1999), Female Demographic Disadvantage in India 1981–1991: Role of Sex Selective Abortions and Female Infanticide, Development and Change, Vol. 30, No. 3, pp. 585–618. ———. (2003), Persistent Daughter Disadvantage: Do Estimated Sex Ratio at Birth and Sex Ratios of Child Mortality Risk Reveal? Economic and Political Weekly, Vol. 38, No. 41, pp. 4351–60. United Nations (2007), World Population Aging 2007. Department of Economic and Social Affairs, Population Division, New York. Visaria, P. and S. Irudaya Rajan (1999), National Family Health Survey: A Landmark in Indian Surveys, Economic and Political Weekly, Vol. 34, Nos. 42 and 43, pp. 3002–07.

9

Impacts of Increased Urban Demand for Water on Livelihood Resilience in Peri-urban Areas of Chennai S. Janakarajan*

Introduction

A

ll around the world urban growth and rural–urban migration is a dominant demographic trend. This has led to a rapid increase in the population of urban areas and, to a lesser extent, to rural depopulation. The level of urbanization in developing countries is fast catching up with the developed world and, by 2015, it is estimated that around 60 per cent of the world’s population will be living in urban areas. It is also expected that by 2015 * This paper is part of the project NEGOWAT carried out during 2003–2006 involving partners from Europe, Latin America and India. The project aimed developing tools and methods to better understand conflicts over water in peri-urban area in developing country, which included Chennai. The project aimed to initiate and facilitate negotiations between different stakeholder groups. I am particularly grateful to Dr Charles Batchelor and Dr John Butterworth for their valuable comments and editorial help.

178   S. Janakarajan there will be 27 cities with a population greater than 10 million (i.e., mega cities). Twenty-three of these mega cities will be in developing countries. As many of these cities are already experiencing major societal, infrastructural and service delivery problems, the outlook for poorer social groups, in particular, is rather bleak unless drastic measures are taken. This raises a fundamental question whether such kind of urbanization is sustainable and desirable (Allen and You, 2002).

Population Growth and Urbanization in India India is one of the most densely populated countries in the world. In 1901, the population was 212 million. This is equivalent to a population density of 66 people per km2—or looked at another way, 1.5 hectare (ha) per person. Population density has risen steadily and remorselessly since 1901 to the 2001 estimate of 1027 millions, which is equivalent to 324 people per km2 or 0.3 ha per person. In 1901, around 11 per cent of India’s population lived in urban areas and according to the 2011 census it is about 31 per cent. In the state of Tamil Nadu, little less than 50 per cent of the population live in urban areas as per 2011 census. • It is important that the growth of urban areas is not being seen in isolation from processes and trends in surrounding peri-urban and rural areas. Rapid urbanization is to a large extent the product of high population growth in rural areas and rural–urban migration. The migration in the South Asian context could be primarily due to economic compulsions (or what may be called distress induced) (Dreze and Sen, 1995). This provides the ‘push’ factor for rural poor to leave land holdings that have often become sub-divided to the point of no longer being able to support a decent livelihood. There is also the ‘pull’ factor that is often linked to a perception of towns and cities as being the route out of rural poverty (i.e., the perception that ‘the streets are paved with gold’). This perception is almost invariably false as the most likely reality is that rural poverty is simply exchanged for urban poverty and a life of squalor in everexpanding slums. • Whilst the information presented above suggests a gloomy state of affairs, it must be recognized that the urbanization process can have both positive and negative impacts on rural and peri-urban areas. Cities often act as engines of growth or development and as places where abundant (and cheap) labour come together with capital flows to produce the goods and services upon which economic growth is

Impacts of Increased Urban Demand for Water  

179

built. Depending on political viewpoint, this can be seen as inspiring economic growth and change or dispiriting commoditization of people within a sweatshop economy. Either way, the demographic trends and driving forces are such that processes of urbanization appear to be inevitable and irreversible. In the foreseeable future, most people will live urban lives. Hence, the role of development workers and theoreticians must be to ensure that the transition is a smooth, equitable and empowering as possible. As discussed above, the growth of urban areas is not something that happens in isolation from the rural world. Cities act as huge demand centres for rural and ecological goods and services. The population density of cities means, almost by definition, that a city cannot be self-sufficient within its own space in terms of sourcing food, water, power and even air (as anyone who has spent time in a large city during a period when the wind does not blow will know). Cities can be seen as organisms sucking in nutrients from the surrounding rural hinterland and giving back excreta of all kinds. The ecological footprint of cities as they seek to quench their voracious appetite for resources of all kinds is huge and many times greater than the area of the city itself. This has always been the way with cities and there is growing evidence that the collapse of many early city-based civilizations can be directly linked to growth that led to the collapse of the resource base and ecology in areas surrounding the city.

Population Growth in Tamil Nadu since Independence Similar to the rest of India, Tamil Nadu has seen huge population growth over the past century. In 1901, the state had a total population of 19.3 million people. By 2011, the population had risen to 72.14 million, of whom 48.1 per cent were urban dwellers. In terms of population density, this gives Tamil Nadu an average of 555 people km2, as against the national average of 382. As per the 2001 census, Tamil Nadu had 832 towns which has gone phenomenally to 1097 in 2011. There are two extreme views exist of urban–rural dynamics in relation to livelihoods. In one, the cities are seen as engines of growth and places in which rural youth can throw off the restrictions and poverty of rural existence, thereby achieving lives that their parents could only have dreamt of. In the converse view, cities are seen as being demonic, sitting like a malign and cancerous growth in the middle of a previously healthy rural ecology, sucking in resources and spewing out waste products and broken lives. Of course, the

180   S. Janakarajan reality lies somewhere in between these two extremes. The main issue is how to maximize the benefits and reduce the negative consequences of urbanization. As such, the big challenge facing society as a whole is to find ways by which the city can live in balance and harmony with its rural hinterland.

Chennai’s Demand for Water Chennai has seen the same growth dynamics as the rest of the country with population growth averaging an amazing 24 per cent per decade since 1901 and peaking at 65 per cent in the 1940s. This has seen Chennai (then Madras) grow from a town of 230,000 people in 1901 to one of over seven million in 2011. Taking an average per capita demand of 150 litres per person per day (which means actual access to less than 100 when leaks, etc., are taken into account), this implies a domestic demand for water in the city of around 400 million cubic meters (mcum) per year. Unplanned growth in cities leads to severe stresses on both cities and on the rural hinterland that supports them. People living in cities experience severe stress due to the increasing problem of meeting demand for limited resources and services such as land, water, transportation, power and sanitation. This is reflected in the mushrooming of slums; transport congestion; sickness due to unhygienic sanitation, irregular access to safe water supplies; rising crime rates; and, above all, rising levels of air, water and soil pollution. The effect of globalization and market liberalization, coupled with deliberate efforts of governments (both central and state governments) in South Asia to attract foreign investment, have had major impacts on the ecology and environment of peri-urban areas of major cities. The spread of industries, housing colonies, transfer of water from peri-urban villages to cities have had negative impact on the livelihoods of peri-urban populations. Understanding the impact of urban growth on surrounding periurban and rural areas is crucial to identifying policies that can mitigate the negative effects of urbanization. Key questions include: How does urbanization impact on rural, peri-urban and urban livelihoods? To what extent are the net effects positive or negative? What is the scope for mitigating the negative impacts of urbanization on, in particular, the livelihoods of poorer social groups in rural, peri-urban and urban areas? This chapter seeks to answer these questions within the specific context of Chennai city, and with a particular focus on the transfer of water from the rural hinterland into the city. We do this by looking in detail at the impacts of transport of water from rural villages into the city, and considering the extent to which these villages are affected socially, economically and environmentally. The basic premise of this study is that the water transport

Impacts of Increased Urban Demand for Water  

181

from peri-urban area to cities has affected rural livelihoods, in part by shifting water use out of agriculture and into municipal water supply. Although selling water provided a source of income for many farmers, the question remains as to whether this provides adequate compensation for the change in livelihoods that has been experienced by the wider population. and further raises the big issue of sustainability of local ecology.

Methodology This chapter is primarily a field-based work loaded with primary data. Given that the natural resource being studied was water, it made sense to use hydrological boundaries as the large-scale boundaries for this study. Therefore, the two basins which supply Chennai with most of its water, namely the A-K basin and Palar basin, were taken up for analysis (see Figure 9.1). In 2004, a meso-level survey was conducted in 23 villages and 41 villages in the Palar and A-K river basins, respectively. In the meso-level survey, the study team Figure 9.1 Map of Chennai Showing A-K and Palar Basins

Source: Chennai Metro Water Board.

182   S. Janakarajan tried to capture general information through group interviews. A second level of analysis was a micro-level survey in one village from each basin, during which a detailed study of poverty and livelihoods was carried out. The two selected villages were Palayaseevaram and Magaral villages from Palar and A-K basins, respectively (see Figure 9.1). In these two villages, a detailed household survey was conducted during the period 2004–05. The findings presented in this chapter are primarily from the micro-level surveys.

Magaral Village Magaral is located beside the Kosathalaiyar river at a distance of 43 km from Chennai city. People commonly refer to the village as Metro Water Magaral as a consequence the large number of wells in the village area that are used as a source of water supply for Chennai. Based on a 2002 survey, the total population of the village is 1637 and there are 458 households. Demographic information relating to this village is presented in Table 9.1. Land value on the roadside is relatively high compared to interior lands and the value of this land has been increasing rapidly in recent years. Roadside land sold at `75,000 per ha in 1990 and in 2002, sold for ` 500,000 per ha. In 2013, after the real estate boom, the land value per acre has crossed `20 million per ha, as most of these parcels of land are being converted into housing plots. The official total irrigable land is 145 ha, dry land is 205 ha and poromboke (common land or government land) is 203 ha. Traditionally, the irrigated area in this village was triple cropped with paddy rice being the most important crop followed by groundnuts. However, the irrigated cropped area has been declining for some time as a result of water scarcity. In 1999–2000 season, the area under the first paddy crop was 98 ha, followed by 105 ha Table 9.1 2002 Population and Caste Statistics for Magaral Village Magaral Village Caste Groups

Male

Female

Total

SC

399

372

771

ST

101

99

200

BC

343

315

658

OC Total Source: Survey 2001–02.

5

3

8

848

789

1637

Impacts of Increased Urban Demand for Water  

183

and 54 ha in the second and third seasons. But by 2003–04 the total area in the first and second season had fallen to 45 ha and 32 ha respectively, and there was no third cultivation. Total gross irrigated area in 1999–2000 was 459 ha but in 2003–04 it had dropped drastically to 185 ha. The village has a number of tanks, but these have not been used for many years, and wells have emerged as the most important source of irrigation water. Initially, open wells were constructed but as groundwater levels have fallen only bore wells are being constructed. In 1980, there were 110 wells of which 50 were open wells in the depth range of 6–10 m and 60 bore wells in the depth range of 20–24 m. At the time of the survey (2003–04), there were no functioning open wells but there were 127 bore wells in the depth range of 37–41 m, most of which have been sunk during the last few years prior to the survey. However, of these 127 bore wells, approximately half yield either no water or with very limited supply.

Palayaseevaram Village Palayaseevaram village is located on the side of the Palar river at a distance of 50 km from Chennai city on the Chengalpattu—Kancheepuram road. The total population of the village is 2447 (as per 2001 census) and there are 1174 households. The split between men, women and caste groups is shown in Table 9.2. The village has 482 ha of irrigable land, 585 ha of dry land and 432 ha of poromboke (common) land. Land value on the roadside in this village is also disproportionately high compared to value of interior lands. Roadside land that was worth for around `125,000 per ha two decades ago(early 1980s), but were sold for around `1.25 million per ha during the time of survey (2003–04). Like in the other survey village, land value in this village Table 9.2 2001 Population and Caste Statistics for Palayaseevaram Village Palayaseevaram Village Caste SC

Male

Female

837

828

Total 1665

ST

4

2

6

BC

354

407

761

OC Total

9

6

15

1204

1243

2447

Source: Census of India 2001.

184   S. Janakarajan has jumped quite disproportionately to `25 million per ha in 2013 due to unprecedented real estate activities. There is a sugar factory in the village on 28 ha of prime irrigated land, which historically had been irrigated using water from a spring. Since the sugar factory started operating, water flow from the spring has ceased and a total command area of 56 ha is no longer irrigated. In 1980, there were 71 wells (24 wells in wet lands and 47 in dry lands) and depths were in the range 7–8 m. Now there are 150 wells with depths in the range 18–30 m. Out of these, 50 are bore wells and the rest are open wells. But most of these wells and bore wells are either dry or supply only limited volumes of water. During the time of the survey (2003–04) there were only 20 wells in use.

Status of Water Supplies in the Study Villages Tanks and Other Water Bodies There are three large irrigation tanks in the Magaral village area and 14 small tanks or ponds that are used by villagers for non-irrigation purposes such as washing. At present, the three large tanks are in a poor state of repair. Weirs and sluices are damaged and the tank beds and foreshore areas have been encroached and/or are being used as locations for digging brick pits. None of the tanks are being used as a source of irrigation water. Palayaseevaram has seven tanks of various sizes, one spring channel that is defunct and nine small tanks or ponds that have never been used as a source of water for irrigation. Similar to Magaral, all the tanks and water bodies have fallen into a state of disrepair and, in the case of Palayaseevaram, inflows to the tanks and water bodies have also reduced in recent years.

Domestic Water in Magaral and Palayaseevaram Table 9.3 presents the findings of a survey of use of domestic water sources in the study villages that was carried out in 2005. This survey showed tremendous improvements in the water supply infrastructure over the period 1985 to 2005 as the majority of households switched from accessing water from village wells to street taps. However, these figures mask the fact that there has been a dramatic deterioration in access to adequate quantities of safe water. In 2000, water supply in Magaral was continuous whereas water supply in Palayaseevaram was for five hours per day. By 2004 the situation

Impacts of Increased Urban Demand for Water  

185

Table 9.3 Number of Households Accessing Domestic Water from Different Water Sources Magaral 1985

Palayaseevaram

2005

1985

2005

16

445

Street taps

0

311

House tap connection

0

70

0

99

Hand pumps

2

0

13

0

Common well and other wells

378

0

491

0

Other sources

0

0

9

1

Not applicable

1

0

16

0

381

381

545

545

Total Source: Survey 2004–06.

was completely different. Magaral’s supply was for two hours per day and Palayaseevaram’s supply is only for an hour a day. This situation compelled the Magaral villagers to illegally tap water from the Chennai Metro Boards’s pipeline to the Tamaraipakkam and Poondi well fields.

Status of Groundwater in the Study Villages In recent years, there has been a continuous decline of groundwater table in the study villages. Round-the-clock pumping of groundwater, primarily to supply water to Chennai, has contributed to a growing gap between extraction and recharge. Table 9.4 gives an indication of the extent groundwater table decline over time in the study villages. A total of 90 bore wells and open wells have been constructed in Magaral village since 1985. Of these, 64 were constructed to a depth greater than 25 m. More worrying is that during the same period 69 wells have been reported to have failed. The pattern of groundwater depletion in Palayaseevaram is somewhat different as a result of geological formations that act as a major constraint on groundwater development. In Palayaseevaram, successful construction of deep wells is more difficult than in Magaral. The stunning fact is, however, that 21 of the 23 wells constructed in Palayaseevaram during 1985–2004 have failed. Table 9.5 presents information on all the wells in Magaral and Palayaseevaram. This table shows that there are fewer wells in use in Palayaseevaram as compared to Magaral and that, in both villages, the tendency is for shallower wells to have failed.

186   S. Janakarajan Table 9.4 Depth and Status of Wells Constructed during 1985–2004 Magaral Village Depth Range(m)

Wells and Bores Installed Since 1985

Palayaseevaram

Wells and Bores Failed Since 1985

Wells and Bores Installed Since 1985

Wells and Bores Failed Since 1985

25

64

35

1

1

Total

90

69

23

21

Source: Survey 2004–06. Table 9.5 Depth and Status of All the Wells in the Study Villages Magaral

Palayaseevaram

Total No. of Wells and Bores

No. of Wells and Bores in Use

7

0

7

37

14

23

10–15

12

0

12

4

2

2

15–25

27

7

20

1

1

0

71

34

37

1

0

1

117

41

76

43

17

26

Depth Range(m) 25 Total

No. of No. of No. of Wells and Total No. Wells and Wells and Bores Not of Wells Bores in Bores Not in Use and Bores Use in Use

Source: Survey 2004–06.

Cultivation Status In both villages, agricultural activities have declined quite drastically in the past couple of decades. FAs mentioned earlier, Magaral was well known for being able to produce three paddy crops per year and it used to be amongst the highest in the state for paddy yields at around 6.5 tonne per ha. In 1980, gross cropped area under paddy, groundnut and pulses were 350 ha. But in the year 2004, only in 12 ha of land paddy

Impacts of Increased Urban Demand for Water  

187

and in 40 ha groundnut, pulses and vegetables were cultivated. Palayaseevaram on the other hand was well known for sugarcane cultivation which was grown in addition to paddy. In both villages, these water intensive crops were cultivated throughout the year. The present status, however, is pathetic. In Palayaseevaram, the 2004 village agricultural records are blank with no entry. As per 2002 records, area under paddy was 6 ha and area under sugarcane was 4 ha. The rest of the lands were left fallow because of water scarcity.

4. History of Water Transport from Study Villages Magaral Village In 1969, 10 bore wells were constructed by the Chennai Metro Water Board on common land near to roadside to provide a source of water supply for Chennai city and the nearby industries. By the year 2000, nine out of ten bore wells had failed and purchase of water from farmers became an important alternative source of supply. However, of the many farmers’ bore wells that were used to supply Chennai in 2000, only 10 were supplying water in 2005. All the others had ceased supply due to decline in the water table. In addition to farmers’ wells, four bore wells were constructed in 2000 by the Tamil Nadu Water Supply and Drainage Board (TWAD) to supply water to Tiruninravur town. By 2005, two of the TWAD bore wells had failed. One bore well was constructed in 2001 to supply water to Nadugudhu panchayat. The Magaral village panchayat has been asking the Tiruninravur town Panchayat to share the water tax collected from Magaral panchayat since 2002–03 but Tiruninravur town panchayat has rejected the proposal. Thus, some of the sources of conflict can be summarized as follows: • Continuous pumping of groundwater to supply Chennai for more than 35 years has reduced the groundwater availability considerably in the village, even for drinking. Agriculture has also been badly hit due to water scarcity. • Decline in agriculture has resulted in agricultural labourers having to migrate in search of alternative sources of income. • The construction bore wells in Magaral and pipelines to supply Chennai was carried out under an UNDP programme. At the time,

188   S. Janakarajan the Chennai Metro Water officials informed that the purchased water was used only for drinking purposes in Chennai but, in reality, it was used mainly for industries located in the northern part of Chennai. Since the water supply in the village was abundant, farmers did not object to transfer of water to Chennai. But the severe drought in 1983 changed farmers’ views. Water in all the village’s irrigation tanks and open wells dried up. This prompted farmers to install bore wells with a view to saving the standing paddy crops. But the government thought that if farmers used groundwater for irrigation by digging bore wells, it would reduce the yields of 10 government bore wells which were supplying drinking water to Chennai. Therefore, the then ruling government in the state (AIADMK) issued Ordinance 5 of 1983, Madras and Chengalpattu Groundwater (Regulation). The ordinance had the following components: (a) it prohibited use of groundwater for irrigation and other agricultural and horticultural operations and, (b) it introduced a licensing system that required water users to apply and pay for licence that would only be valid for a maximum of 60 days. The Farmers’ Association took up this issue to the court immediately. The court stayed the ordinance and ordered that, without any fee and without any time limit farmers could be permitted to extract groundwater but only for agriculture. The court also stated that selling water to tanker trucks was prohibited. Therefore, after the court order, the Magaral farmers started digging bore wells and extracting groundwater in a massive way. Thirty-three farmers were selling water to Chennai Metro Water Board in 2000, but by June 2004 only 19 farmers were able to sell water. This number was reduced to only 10 farmers in 2005. Interestingly, despite the court order that prohibits sale of groundwater, the Metro Water officials are compelling farmers to sell water, which is a complete violation of the court ruling. Indeed, the Tamil Nadu Groundwater Regulation Act 1987 bans extraction and sale of water from 300 notified villages, but this Act has been violated by the Metro Water Board officials. During the time of the survey, there was mixed response among farmers to selling water to Metro Water Board. Although agricultural activities have declined, there is not much conflict on this issue in this village because people have been engaging in alternate livelihood activities such as cattle rearing and urban employment. On the whole, it appears that people are still betteroff despite the damage to agriculture and local ecology. We shall discuss this issue in more detail in later sections.

Impacts of Increased Urban Demand for Water  

189

Palayaseevaram Village Originally, it was planned that water would be pumped from the Palar riverbed to supply water to adjoining areas of the Chennai city such as Alandur, Pallavaram, Chrompet, Tambaram, Anakaputhur, Pammal, Chithilapakkam and Vandalur Zoo. The people of Palayaseevaram opposed this move on the grounds that it would affect the groundwater availability in the region. A memorandum was submitted to the District Collector and the matter was taken up with the then Chief Minister, Mr. Karunanidhi. He took a decision which was in favour of Chennai city and he sought the support of the village and eventually it gave its consent for the extraction to take place. Work started in 1972 with the TWAD Board constructing 11 wells in the Palar river bed that were designed to extract water from the river bed aquifer. The estimated water yield at the head works was 4.9 million litres per day (mld) but actual water availability was much less than this figure. For the past five years, supply of water from these wells has reduced drastically. Six additional wells were constructed in the year 2004 on the other side of the river, which is part of the village called Pullambakkam/Thirumukkodal. Substantial illegal sand mining in the river bed much beyond permissible limits has been reported to be the main reason for the steady reduction of water supply in wells. It should be noted that the Chennai Metro Water Board wanted to buy water from the farmers of Palayaseevaram, but the TWAD Board objected to this proposal. Their argument was that they already had a substantial stake in the village as early-comers who had already constructed 11 wells. Therefore, the farmers of this village were requested not to sell water. Some of the sources of conflict can be summarized as follows: • Continuous pumping of groundwater from the river bed has reduced groundwater availability in the village even for drinking. • Agriculture has been badly hit due to water scarcity. • Illegal sand mining has exacerbated the problem of over-extraction by reducing the potential yield of the river bed aquifer. • During 2003–04 large volumes of water were purchased from the village and transported to Chennai in tankers. • The sugar mill constructed in the village is both a major user of water and source of effluents. It is believed that the factory is the primary cause of the drying up of a spring. As a result of water shortages, several petitions and memorandums were sent to the government. And a group of NGOs organized a series of

190   S. Janakarajan demonstrations. The NGOs also organized a public hearing on the issue of illegal sand mining in Chennai, which attracted considerable attention from civil society and the media. The jurists, which included some judges such as Justice V.R. Krishna Iyer condemned severely the illegal sand mining and suggested that the Government appoint a committee to look into the details of damage done to the river bed and to suggest ways to protect it. Despite these moves, the current situation is one of passive struggle. People of the village are absorbing the shocks to their livelihoods that have resulted from water depletion. Many have left the village for urban employment, others have sold their lands and many more are planning to sell their lands. If there is no open or active conflict, it is because: • The village is located on the main corridor linked to Chennai and, hence, there is easy access to the metropolis. • The very powerful sugar mill lobby having high political connections and, as a result, is able to threaten people. • There has been a rapid growth of non-farm employment in activities such as construction, garment manufacture, petty business, illegal sand mining and transport • The non-availability of farm labourers who find more gainful employment in non-farm activities.

Changing Occupational Characteristics Table 9.6 compares the number of people in various types of employment in 2005 with the situation in 1985. It can be seen that, although the absolute number of people involved in agriculture in Magaral has increased, the overall importance of agriculture as a source of income has declined as the growing population has become increasingly involved in non-agricultural activities. Interesting additional observations that can be made with regard to the findings in this table include: • Both villages are severely affected due to over-exploitation of water resources but there is a major difference in occupational characteristics between Palayaseevaram and Magaral villages. • In Magaral, agriculture continues to be the major occupation whereas in Palayaseevaram agriculture as an occupation has reduced in importance.

182

76

Not available

Not available

House work

Unemployed

Sick, retired and old age

95

71

181

166

382

156

11

25

20

580

510

–

–

238

91

236

371

550

436

557

500

143

131

115

98

Present/Past (per cent)

Not available

2

65

351

240

199

4

115

7

21

52

532

445

87

Past

133

284

233

200

598

636

23

338

132

81

62

363

324

39

Present

–

14,200

358

57

249

320

575

294

1886

386

119

68

73

45

Present/Past (per cent)

Palayaseevaram

Source: Survey 2004–06. *Other workers include urban casual labourers, brick workers, artisans, construction workers, stone workers, sand mining and all other forms of non-farm casual work.

162

Children below three years

14

Studying

7

Industries and transport Other workers* 2

5

Business

42

14

Govt. employees

Total non-agricultural

61

443

Total Agricultural

Livestock

39

442

Landless agricultural labourers

70

71

Cultivators

Present

Past

Type of Occupation

Magaral

Table 9.6 Changing Occupational Characteristics of Population in the Study Villages

192   S. Janakarajan • The main reasons for this difference are the location of the villages and the different hydrogeological conditions. • Palayaseevaram is located close to the national highway and is well connected by road and train. • Since there are major towns on both sides of the village and the Chennai city is also easily accessible, people find it easy to commute and seek employment elsewhere. In contrast, Magaral is not well connected by road, which makes it difficult for people to commute. Another notable feature, which indicates decline in the importance of agricultural employment, is the increasing number of women reporting housework as their major occupation at present as compared to two decades ago. For instance in Palayaseevaram, 65 women reported housework as their major occupation in 1985 and this number has gone up to 233 in 2005. In Magaral, this figure has gone up from 76 to 181. Similarly, there is a large increase in the number of people reporting to be unemployed in both villages. Unemployment did not exist in either village two decades ago.

Earnings from Agricultural and Non-agricultural Employment Table 9.7 shows that, in general in the study villages, people earn more from non-agricultural occupations than agricultural occupations. The exceptions are the cases of Scheduled Castes and Scheduled Tribes who appear to earn less from non-agricultural occupations. As might be expected, regardless of occupation, Scheduled Caste and Scheduled Tribes earn much less than other castes.

Peoples’ Perception about Livelihood Status A series of subjective questions were asked with a view to obtaining information on perceptions of economic status, educational status, health conditions and access to basic infrastructure such as housing, electricity and telephones. The results of this survey are summarized in Table 9.8. Observations that can be drawn from this survey include the following.

52

146

Scheduled Caste

Scheduled Tribe

Backward castes

381

Source: Survey 2004–06.

All castes

2

181

Caste Particulars

Other castes

No. of Households

10,180

3700

10,547

12,631

9250

Average Agricultural Income ( `)

Magaral

13,636

52,500

20,692

2515

10,709

Average Non-agricultural Income ( `)

545

5

187

1

352

No. of Households

Palayaseevaram

3389

0

4101

0

3069

22,147

52,104

24,530

18,000

20,467

Average Agricultural Average Non-agricultural Income ( `) Income ( `)

Table 9.7 Average Agricultural and Non-agricultural Annual Income in the Study Villages

83

Palayaseevaram

1

Palayaseevaram

52

Palayaseevaram

3

Palayaseevaram

139 25%

Palayaseevaram

Source: Survey 2004–06.

99 26%

Magaral

Total

1

Magaral

OC

71

Magaral

BC

8

Magaral

ST

19

Better

Magaral

SC

Village/Caste Groups

181 33%

107 28%

1

1

60

34

0

10

120

62

Same

Family

225 41%

175 46%

1

0

75

41

0

34

149

100

Worse

136 25%

39 10%

1

1

71

35

1

0

63

3

Better

277 51%

177 47%

2

1

35

31

0

18

194

78

Same

Caste

132 24%

165 43%

2

0

81

80

0

34

95

100

Worse

235 43%

43 11%

2

0

71

38

1

0

161

5

Better

213 39%

165 43%

0

2

79

72

0

18

134

73

Same

Village

97 18%

173 45%

3

0

37

36

0

34

57

103

Worse

545 100%

381 100%

5

2

187

146

1

52

352

181

Total

Table 9.8 Peoples’ Perception about Economic Status of Family, Their Caste and Village Compared to What Existed 20 Years Ago

Impacts of Increased Urban Demand for Water  

195

There is a big difference in perceptions of economic status in the two villages. While nearly one-fourth of the people of Magaral confirm that their families are better-off, over 45 per cent of respondents reported that their caste groups and village (as a whole) are worse-off compared to 20 years ago. In fact, only 11 per cent of the people reported that the village as a whole is better-off compared to 20 years ago. In contrast, in Palayaseevaram, while one-fourth of the population feel that the economic status of their families is worse-off, a good number of them feel that various caste groups and village as a whole have done better economically. There is a significant difference in SC perceptions between the two villages. A vast majority in Magaral feel that the economic condition of their families, caste groups and village as a whole has worsened. However, in Palayaseevaram, at least one-fourth of the families feel that they are better-off. Interestingly among the BC community (i.e., the land-owning community) one gets the opposite view. In Magaral, more people feel better-off compared to Palayaseevaram. Perhaps this is because of the better water availability in Magaral for agriculture, at least until recent times. While many people feel that their families’ economic status has worsened, they feel that the economic status of their caste group and village as a whole have done much better. When asked about the status of family health and education compared to 20 years ago, some categorical answers were given. By and large the general perception of the people of all castes is that educational status of the family has improved, while family health condition has deteriorated (see Table 9.9). When people were asked to give their perceptions with regard to the environmental status of the village as a whole, a vast majority in both villages reported that it has worsened compared to 20 years ago. Table 9.10 presents the findings from a survey based on another set of indicators that considered changing housing conditions and access to electricity and telephones. An obvious improvement in all of these indicators can be seen across all caste groups. For instance, among the SC population, the number of thatched house roofs has reduced from 475 to 261 and the number of tiled houses and concrete roofed houses has increased. The number of SC households having access to electricity has gone up from 51 to 458. While none among the SC had access to a telephone 20 years ago, six families had telephones installed by 2005. Respondents were also asked whether they were feeling better-off compared to their fathers’ time. This question was asked with the objective of obtaining peoples’ perception whether overall living conditions in the village had declined or improved over time. In Magaral village, there was an even

148

Palayaseevaram

0

Palayaseevaram

52

Palayaseevaram

3

Palayaseevaram

203 37%

Palayaseevaram

Source: Survey 2004–06.

188 49%

Magaral

Total

1

Magaral

OC

52

Magaral

BC

32

Magaral

ST

103

Better

Magaral

SC

Village/Caste Groups

204 37%

174 46%

2

1

82

83

1

18

119

72

Same

138 25%

19 5%

0

0

53

11

0

2

85

6

Worse

Health Status of the Family

398 73%

273 72%

3

1

122

116

1

41

272

115

Better

118 22%

98 26%

1

1

55

29

0

7

62

61

Same

29 5%

10 3%

1

0

10

1

0

4

18

5

Worse

Educational Status of the Family

9 2%

21 6%

0

0

2

5

0

1

7

15

Better

41 8%

124 33%

0

1

6

51

1

20

34

52

Same

495 91%

236 62%

5

1

179

90

0

31

311

114

Worse

Environmental Status of the Village

545 100%

381 100%

5

2

187

146

1

52

352

181

Total

Table 9.9 Peoples’ Perception about Family Health, Educational Status and Environmental Status Compared What Existed 20 Years Ago

51

0

Electricity

Telephone

Source: Survey 2004–06.

8

19

Tiled roof

Group houses

30

Thatched roof

Concrete roof

Past

475

Facilities

6

458

129

73

63

261

Present

Scheduled Caste

0

7

0

0

1

52

Past

0

52

0

6

4

42

Present

Scheduled Tribe

1

145

1

31

100

180

Past

28

305

5

124

93

92

Present

Backward Castes

0

1

0

2

2

1

Past

2

7

0

5

1

1

Present

Other Castes Past

1

204

20

41

133

708

36

822

134

208

161

396

Present

Total

Table 9.10 Access to Better Housing, Electricity and Telephone Compared to 20 Years Ago (total for both the study villages)

198   S. Janakarajan Table 9.11 Overall Living Conditions: Are You Better-off Compared to Your Father’s Time? Magaral

Palayaseevaram

Caste Group

Yes

No

Total

Yes

No

SC

81

100

181

153

198

ST

18

34

52

1

0

0

0

1

Backward Caste

97

49

146

78

101

6

1

186

Others Total

Total

NA

Total

1

352

1

1

2

3

3

0

0

6

197

184

381

235

298

10

2

545

Source: Survey 2004–06. Note: NA: Not available.

split in the response (see Table 9.11), whereas in Palayaseevaram, a majority responded in the negative saying that they were worse-off compared to their fathers’ time. In both villages, a majority of SC people expressed the opinion that they were currently worse-off compared to their fathers’ time. It should be noted that this social group have a high level of dependency on wage employment in urban areas. Interestingly, the general perception of landless labourers was that agricultural wage employment was much better compared to non-farm work. The reason given was that, despite the wages in non-farm activities being slightly better, working hours in agricultural work are relatively low and there is no need to travel long distances to and from work. Also in agricultural work, food is often provided along with the cash wage and, after the agricultural work is finished, labourers are able to look after their domestic chores and take care of their children and livestock. Labourers in non-agricultural employment often have to leave their village early in the morning and return late in the evening. Many others have to stay in the urban areas and only return home once a week. In either case, they have to spend a substantial amount of money on transport and food. Furthermore, non-farm employment is quite irregular. Yet another set of indicators were used to assess levels of agricultural and non-agricultural assets. As might be expected in a typical peri-urban village, the average value of non-agricultural assets owned per household is higher than the value of agricultural assets (see Table 9.12). However, differences were observed across various caste groups. In Magaral, for instance, the average value of the non-agricultural assets of SC and ST households was much

Backward castes

Source: Survey 2004–06.

2

146

Scheduled Tribe

381

52

Scheduled Caste

All people

181

Caste Particulars

Other castes

No. of Households

134,769

595,250

3,42,186

962

814

Av. Agricultural Assets

Magaral

72,539

68,000

1,46,106

28,744

25,829

Av. Non-agricultural Assets

Table 9.12 Caste-wise Agricultural and Non-agricultural Assets (`)

545

5

187

1

352

No. of Households

Palayaseevaram

36,837

0

46,120

0

32,321

Av. Agricultural Assets

61,569

95,400

1,14,796

5,000

32,971

Av. Non-agricultural Assets

200   S. Janakarajan higher than agricultural assets. However, in Palayaseevaram, there was hardly any difference between the average value of agricultural and non-agricultural assets owned by SC respondents. Among the land-owning communities (BC) in Magaral, the value of agricultural assets was much higher compared to non-agricultural assets. This indicated that agriculture has remained as the major occupation of this group. Whereas in Palayaseevaram, the indications were that agriculture is an occupation in steep decline. It is notable that in Palayaseevaram where agriculture has been in steep decline that the SC population seems to be better-off compared to Magaral in so far as assets are concerned. Relative to Magaral, the average net assets (total assets minus total liabilities) of the SC population in Palayaseevaram is about four times higher (see Table 9.13). This can be attributed to the higher level of mobility of people for urban employment. It was also believed that many SC households in Palayaseevaram were engaged in lucrative, but illegal, sand mining activities. On the other hand, landowners seem to be still better-off in Magaral compared to Palayaseevaram in terms of net assets ownership, perhaps because of the better land values which are linked to the relatively better groundwater availability. Although the overall importance of agriculture as an occupation is on the decline in Magaral and has virtually been wiped out in Palayaseevaram, the data presented in this section gives an impression that there has been an increase in prosperity in the study villages compared to two decades ago. Let us see who has prospered and factors which have contributed to their prosperity. Most of those who have had access to good groundwater have prospered. Historically, this class of farmers have benefited from profitable agriculture and, during the past three decades, from water sales. Some of the well-to-do farmers, or rather members of their households, have gained access to good non-farm employment in the Chennai city. Their remittances have made a major difference to family incomes. The SC community by and large in Palayaseevaram village and to some extent in Magaral seem to be better-off. This can be attributed in part to illegal sand mining from the Palar river. Furthermore, Palayaseevaram village is on the main corridor to and hence well connected to the city of Chennai. Since the SC community (mostly landless) is relatively mobile, members of this social group have been able to earn better incomes as compared to communities who are less mobile. All communities have benefited to some extent from proximity to Chennai and improved transport links. Amongst other benefits has improved access to better education and health-care facilities.

Backward castes

Source: Survey 2004–06.

All castes

381

2

52

146

Scheduled Tribe

Other castes

181

No. of Households

Scheduled Caste

Caste Particulars

29,234

57,452

25,000

9552

12,175

Av. Liability

Magaral

1,78,074

6,38,250

4,30,840

20,154

14,469

Av. Net Asset

545

5

187

1

352

No. of Households

18,603

50,000

33,032

50,000

10,403

Av. Liability

Palayaseevaram

Table 9.13 Caste-wise Average Net Assets (gross assets minus gross liabilities) in the Selected Villages

79,747

45,400

1,28,123

–45,000

54,890

Av. Net Asset

202   S. Janakarajan

The Myth of Prosperity, Adaptive Strategies and Sustainability of Livelihoods A series of questions relating to poverty and livelihoods were posed in the Introduction of this chapter. As a result of the survey findings, it is possible to further elaborate the questions as follows: • To what extent have water sales affected agriculture in peri-urban villages? • So also, as over-exploitation of water resources is a trend right across the region, to what extent do trends in water supply and demand differ in peri-urban areas as opposed to rural areas? • Equally important, are communities in peri-urban areas better or less able to cope with the affects of over-exploitation of water resources when compared to communities in rural areas? • To what extent do fast-changing lifestyles in peri-urban villages contribute to increased demands for water and other services? • Have water-related changes resulted in prosperity or deprivation in peri-urban villages? • Do the majority feel better-off or worse-off due to the spread of cities? • Are the farmers in the peri-urban villages rational decision makers in so far as their livelihoods are concerned or livelihoods patterns are forced upon them? The first set of questions is important if the extent of water extraction for urban areas is a large relative to water availability in the villages. Therefore, it is necessary to consider the scale of water transfers from the study villages relative to demand and use by domestic and agricultural users within the village boundaries. In the 2000 and 2004, around 11 mcum and 1 mcum of water was exported from Magaral. The area of paddy that could have been irrigated with this water would have been 348 ha and 115 ha. The lower level of water transfer in 2004 can be explained by falling groundwater levels and associated well failure. However, it is clear from the above statistics that water sales from Magaral village have been significant and that they have had a destabilizing effect on agriculture. However, as areas under irrigation have also been declining in rural areas, it can be argued that water sales have only accelerated a trend that can be found throughout the region. The second and third sets of questions are highly relevant because many village-level respondents indicated that they feel better-off as compared to

Impacts of Increased Urban Demand for Water  

203

two decades ago. As the survey questions were highly subjective, it is likely that respondents are putting a relatively high value on access to goods and services that are perceived to be an integral part of urban lives and livelihoods. As such respondents possibly put a fairly low value on the costs of accessing these goods and services and in particular increased expenditure on various items such as health, education, clothing, transport and social functions such as marriages. The indications are that a large majority find it difficult to match income with the increased demands of their households. It is also clear that the environmental degradation is increasingly important in terms of livelihoods and quality of live. Declining water tables have affected the reliability of domestic water supplies and environmental pollution has affected health standards. Moreover, the existing village institutions such as Panchayat have become increasingly powerless and unable to compete with powerful urban institutions such as the Chennai Metro Water Board. While water rights for urban populations are often negotiated collectively by the municipal service providers, rural water rights are often taken for granted. The case studies presented here illustrate the fact that urban institutions effectively ignored the rights and demands of these villages. This makes living in these villages even more uncertain, insecure and difficult, besides making mockery of village-level institutions. Sustainability of livelihoods depends upon access to natural resources (land and water), access to gainful employment and secure income. The adaptive strategies of people to declining groundwater conditions and declining agriculture include a shift to non-farm employment, selling of land, migration to the city, illegal sand mining, dairy farming and sheep rearing. Average annual incomes of those who have successfully shifted to gainful non-farm employment are quite high compared to those who entirely depend upon agriculture (see Table 9.14). But important questions that remain include: To what extent are these non-farm jobs regular? Can everyone get access to non-farm employment and therefore get relieved from poverty? Not all are fortunate to get access to non-farm jobs because access to non-farm jobs depends upon factors such as skills, education, capacity to commute, capacity to communicate and so forth. A majority of people in villages seem to lack these qualities and as a result they run the risk of being unemployed. It is precisely for these reasons I conclude that the livelihood patterns are imposed on farmers in the peri-urban areas of Chennai. And, to characterize their decisions to shift to such odd nonfarm jobs as ‘rational choice and rational decision’ will only turn out be an overtly mindless exercise.

204   S. Janakarajan Table 9.14 Adaptive Strategies and Sustainability of Livelihoods

Name of the Village

Particulars Regarding

Magaral

No. of households Average yearly income/ households

Palayaseevaram No. of households Average yearly income/ households

Only Non-farm Employment Dependent Households

Only Farm Dependent Employment Households

Both Farm and Non-farm Dependent Employment Households

Total

80

205

96

381

36,488

14,437

33,280

23,815

297

46

185

528

29,039

10,970

25,989

26,396

Source: Survey 2004–06.

As stated in the Introduction, it is often regarded that ‘cities are the engines of growth/development’. This view is based on a long-term development paradigm that puts a high weighting on economic growth. It is indeed important to understand and analyze whether this view takes full account of the livelihood needs of all social groups within rural, peri-urban and urban populations. Results presented in this chapter indicate that economic growth and the process of urbanization result in a situation whereby some social groups are distinct winners but others are losers. City expansion results in an increased demand for resources in terms of land and water. As discussed earlier, these resources are absorbed by cities to the gain of some groups but to the detriment of others. Increasing population, declining agricultural activities and ecological and environmental degradation compel people to migrate to cities. This in turn results in stress on urban infrastructure and increased demands for water and land. In order to cope with this pressure, the city continues to expand in an unplanned manner and in a process goes on indefinitely, thereby contributing to a vicious circle of urban and peri-urban conflicts and stress. The key issues include: how to break this vicious circle? and what might be the role of government, civil society and stakeholders in such a process?

Impacts of Increased Urban Demand for Water  

205

Analytical Summary and Conclusions Mass poverty in India is characterized by lack of purchasing power and malnutrition and unfulfilment of all basic necessities of life. Since independence, policies of all successive governments both at the centre and state levels have been oriented towards poverty eradication. But poverty is still a dreadful menace which threatens India’s progress. So what has gone wrong with India’s policies? Let us take the specific case of peri-urban villages in Chennai. Peri-urban villages are subjected to the same stresses as rural villages. However, by being located in the hinterland of an urban area, peri-urban villages are subjected to additional stresses but they also benefit from opportunities that are not as readily available to rural villages. Government policies tend to be city-centric and instead of attacking poverty in peri-urban areas they often exacerbate it. The social groups that are most affected are the landless and those who depend heavily upon agriculture for their livelihood. In the absence of deliberate government efforts to create alternate livelihood options in peri-urban villages, people try to obtain non-farm employment. However, much non-farm employment is irregular and transitory. As is often the case in such situations of rapid change, female-headed households are the most vulnerable and the most likely to be exploited. Finally, the analysis attempted in this chapter brings out the following points: • Export of water from peri-urban areas to urban areas has contributed significantly to lowering of groundwater tables and deterioration in the functionality of surface-water bodies such as village tanks and ponds. Hence export of water to urban areas has contributed to the indebtedness of many farmers who have seen their investments in irrigation fail. • The decline in the importance of agriculture in peri-urban areas has had a knock-on effect on the many social groups that traditionally have relied on agriculture as a source of employment (e.g., labourers). The net result is that landless agricultural labourers and marginal farmers migrate to urban areas for want of employment. This creates problems in the urban areas and increases the vulnerability of this social group. • While some social groups have gained from land and water sales, a majority have been suffering due to lack of assured and gainful employment and from increasingly unreliable domestic water supplies.

206   S. Janakarajan Findings presented in the chapter indicate that a large number of people feel better-off compared to what they were two decades ago. These tend to be those that have been able to take full advantage of the opportunities that are provided by nearby urban areas. The most important question therefore is: what is the enabling environment that is needed to support effective diversification of livelihood strategies? Abilities to adapt depend upon several factors such as education, transport network, skill acquisition and so on. What concrete efforts are taken by the government to create this enabling environment? This is precisely the point where consideration must be given to improve planning of water-related service delivery in rural, peri-urban and urban areas and multi-stakeholder participation in planning processes. The aim should be to create stakeholder platforms (Warner, 2007; Janakarajan et al., 2007) that identify solutions to problems from which both urban and periurban areas could benefit (i.e., win-win situations!).

References Allen, A. and N. You (2002), Sustainable Urbanisation: Bridging the Green and Brown Agendas, University College London, London, UK. Dreze J. and A. Sen (1995), India: Economic Development and Social Opportunity, Oxford University Press, Oxford and New Delhi. Janakarajan, S., J. Butterworth, P. Moriarty and C. Batchelor (2007), Strengthened City, Marginalized Peri-urban Villages: Stakeholder Dialogues for Inclusive Urbanization in Chennai, India, in J. Butterworth, R. Ducrot, N. Faysse, and S. Janakarajan (eds.), Peri-urban Water Conflicts: Supporting Dialogue and Negotiation, Technical Paper Series 50 IRC, Delft, the Netherlands. Warner, J., ed., (2007), Multi-Stakeholder Platforms for Integrated Water Management, Ashgate, UK.

10

Design of Economic Instruments and Participatory Institutions for Environmental Management in India M.N. Murty

1. Introduction

E

nvironmental resources (air and water) have a natural regenerative capacity and they can accept certain amounts of pollution loads from anthropogenic activities without affecting themselves. It means that the natural regenerative capacity of air and water imposes a constraint on the supply of waste disposal services. Industry and households demand waste disposal services and when this demand exceeds the supply constrained by the natural regenerative capacity, it leads to degradation of environment. Given the public good nature of waste disposal service,1 market is absent for this service and the polluter takes it as a free service. Therefore, the demand for the waste disposal service may exceed the natural supply. It is therefore important to look for instruments and institutions to reduce the demand for waste disposal services to their natural levels of supply. This chapter examines the possibilities of using economic instruments, especially pollution taxes and bargaining approaches resulting in people’s

208   M.N. Murty participation in pollution control. Section 2 provides a brief and less technical account of the alternative instruments and institutions for pollution abatement. Sections 3 and 4 describe, respectively, certain methods of designing pollution taxes and participatory institutions to control industrial pollution in India. Finally, Section 5 provides the conclusions.

2. Alternative Instruments and Institutions for Pollution Abatement Alternative institutions for the control of environmental pollution are (a) market, (b) government and (c) community or associations of people. A practical policy may involve all these institutions; see Murty et al. (1999) and World Bank (1999) for details. Normally one does not come across a market with producers of waste and processors of waste acting with same price/cost arrangements to abate pollution. Therefore, it is generally stated that market forces fail to control environmental pollution. Government has been viewed as an alternative institution to deal or manage the environment. Community action or people’s participation is now gaining prominence as an alternative to governmental agencies for the management of environmental resources.2

Market, Government and Instruments for Pollution Control Non-market policy instruments include command-and-controls (CAC). Market-based instruments consist of pollution taxes (Pigou, 1920) and marketable pollution permits (Dales, 1968). These are often referred to as economic instruments. The choice between these instruments depends on both their efficacy in achieving the target level of emissions and the relative size of welfare losses they produce (Baumol and Oates, 1988). Government can use either non-market policy instruments or market-based or economic instruments or a combination of two.

Command and Controls The CAC instruments are in the form of fines, penalties and threats of legal action for closure of the factories and imprisonment of the owners. They can be used either for facilitating the use of specific technologies for the

Design of Economic Instruments and Participatory  

209

environment management or for the realization of specific environmental standards. It can be shown that the cost of imposing and implementing compliance are generally higher when CAC instruments are used than with economic instruments. Furthermore, under CAC instruments, there can be no incentives for firms to innovate or invest in more efficient pollution control technologies or in cleaner process technologies.

Economic Instruments Economic instruments can be divided into three categories: price-based instruments, quantity-based instruments and hybrid instruments. These instruments are often called market-based instruments. Together with supply–demand forces of the market, they achieve efficiency even with the presence of environmental externalities such as air and water pollution.

Price-based Instruments The price-based instruments are first suggested by Pigou in 1920 in the form of taxes and subsidies to deal with detrimental and beneficial environmental externalities in production and consumption. Instances are pollution taxes on a polluting commodity either through its production (paper, leather, electricity, etc.) or consumption (cigarette, packed food, etc.) or on a polluting input (fuel inputs, chemicals, etc.). It could be a tax on either polluting output or pollution load. Also, they can be subsidies on the commodities the production of which generate environmental benefits (e.g., neighbour’s rose garden giving one the free benefit of beauty). The pollution tax or Pigouvian tax is a corrective instrument to realize the socially optimal level of economic activity generating pollution. Pollution tax could be interpreted as the price the polluter has to pay for using the waste disposal services from the environmental media. Since the market is missing for the waste disposal service, this price could not be determined in the market. The supply and demand schedules for this service could not be observed in the market. However, given the property right to the environmental resource to the public or government, environmental regulation3 by the government or public could make the polluter liable to pay a price for the waste disposal service. The polluter pays the price in the form of cost he/she incurs for complying with the environmental regulation. Therefore, the marginal cost of pollution abatement (MCA) or the cost the polluter is willing to incur for reducing every successive unit of pollution abatement could be interpreted as the demand price of waste disposal

210   M.N. Murty Figure 10.1 Pigouvian Tax on Polluter MCA MD MD (Marginal damage cost)

E

B

R

t

S

O

E*

Em

MCA (Marginal cost of abating pollution) Emissions

service. Figure 10.1 depicts the demand curve for the waste disposal service as the falling MCA or demand price with respect to the pollution load generated. Alternatively, it could be seen as the curve depicting the rising MCA with respect to the pollution load reduction. There is an opportunity cost or health and other damages suffered by the public by allowing the pollution. The supply price of waste disposal service is the price charged to the polluter by the government or public for every unit disposal of waste into the environmental media. Therefore, the marginal damages (MD) or damages from every successive unit of pollution that the public is willing to bear could be interpreted as the supply price of waste disposal service. Figure 10.1 describes the supply curve of waste disposal service as the rising MD or supply price with respect to the pollution loads. Let us illustrate the Pigouvian tax/subsidy framework diagrammatically. In Figure 10.1, MCA and MD, respectively, represent the marginal cost of abatement and marginal damages from pollution. E m and E* stand for pollution loads with and without tax instrument, respectively, and t stands for the pollution tax. With the polluters using the pollution abatement technologies, the optimality or maximization of welfare requires that the pollution to be reduced up to the level at which the MCA equals the MD as shown in Figure 10.1. If a tax equivalent to t on per unit of pollution is levied on the polluter based on the polluter pay principle, the polluter

Design of Economic Instruments and Participatory  

211

has an incentive to reduce pollution up to the optimal level, E* in the free market. The polluter has two choices: Pay tax equivalent to E*EREm or reduce pollution load from Em to E*, incurring the cost equal to E*ESEm. If the polluter reduces the pollution, he/she will save cost equal to ERS as in Figure 10.1. Therefore, given the tax rate equivalent to t, he/she chooses to reduce pollution rather than paying the tax. The damages from pollution are felt by a large number of people (more so with water pollution). Therefore, the damages from a unit of pollution at margin are the sum of MD to all the affected people. Therefore, to design a Pigouvian tax, we require the information about abatement cost functions of polluting firms and damage functions for all the affected people. The cost of collecting the information to estimate these functions can be prohibitively high. For example, millions of people are affected from the pollution of a major river like Ganges and an urban air shed like Delhi and therefore it may not be economically feasible to design the Pigouvian tax.

Quantity-based Instruments Dales (1968) suggested an alternative to the pollution tax, a system of tradable pollution rights for the management of environment. He proposed that the property rights be defined to the use and abuse of environment and such entitlement be offered for sale to the highest bidder. This system is like a tax to achieve the specified environment target at a minimum cost. For example, in the case of air pollution, this approach first determines the optimal level pollution in a given geographical area. The level of pollution to be tolerated is then divided into a number of permits among various polluting units within the area (either by free distribution or by auctioning). Firms which are already comparatively more efficient in controlling their wastes or pollution (the ones that face lower unit cost for pollution control) may continue their original level of production and emissions. But they will have some extra pollution permits (or entitlements) to spare. They can sell such extra permits to firms which are less efficient in controlling their wastes (the ones that face higher unit costs for pollution abatement). Provided monitoring is possible and effective, the net result is that total pollution is kept within the prescribed levels. The more efficient firms will sell their surplus permits to less efficient firms which require more permits in order to continue with original production plans. In this process, a market for pollution permits is created in which trading in permits takes place up to the point at which the aggregate supply of permits is equal to the aggregate demand for permits and the equilibrium permit price is equal to the marginal cost of abatement to each firm.

212   M.N. Murty

Mixed Instruments: A Practical Approach In practice, we should have a mixture of both command and controls and economic instruments. Economic instruments alone may not be feasible because their imposition requires lot of information on firm-level emission, technology, etc., which are not easy to come by. Command and control measures alone are inefficient measures (they may result even in the use of costly pollution abatement technologies by the firms). Similarly, the estimation of damages to affected people in the case of pollution tax, and knowing before the optimal level of pollution in the case of tradable permits pose practical problems for the design of economic instruments. Fixation of pollution standards by Pollution Control Boards and using either pollution tax or marketable permits instrument to induce the polluter industry to meet those standards is a hybrid method using regulatory and economic instruments. However, in this case the criteria of fixation of environmental standards are a subject of debate whether they have to be decided on scientific basis or on the basis of referendum or political process. Scientifically, they have to be based on the evidence concerning the effects of air pollution on health or of polluted water on fish and human life. They can be alternatively decided through a political process by having referendum on the choice among alternative sets of pollution standards. Still, there are issues whether they should be at state level or national level, should the standards be a compromise between the industry and people and so on. Once the environmental standards are given a priori, the difficult problem of estimating the damages to all the affected people from pollution can be avoided for designing the economic instruments. However, we need an estimate of pollution abatement cost. It is economically feasible to obtain an estimate of pollution abatement costs because (a) the polluters may normally be much less in number than the affected people, and (b) tangible information can be obtained about technologies used by the polluters, pollution loads and levels of production. Using the firm-level data on pollution loads, costs of abatement and production levels and the pollution abatement cost functions can be estimated using econometric techniques. Given the environmental standards and the estimated marginal abatement cost function, a rate of tax can be fixed such that the firms will automatically have an incentive to reduce pollution for meeting the standards. This is explained in Figure 10.2. Let the emission standard be OE and the current rate of the firms emission be OD. If the firm has to reduce pollution load from D to E as per the environmental standard, the rate of tax equivalent to OA will make the firm to do so. The firm has an incentive to do pollution abatement rather

Design of Economic Instruments and Participatory  

213

Figure 10.2 Pollution Tax and Standards MCA

A

C

B

F

MCA (Marginal cost of abatement)

t O

E

D

Emissions

than paying tax because the cost of abatement given by the area BFDE in the figure is lower than the tax liability given by the area BCDE. Similarly, marketable pollution permits can be used to obtain the reduction in pollution load by the firms as required by the environmental standards. It can be shown that the tax standards or tradable permits and standard methods result in the adoption of least cost technologies by the firms (see Baumol and Oates, 1988, for more details). There can be many situations in which command and control instruments are unavoidable. In several cases, the social cost of a particular activity depends on factors beyond the control of those directly involved. For example, the effects of discharge of effluents into a river depend upon the conditions of the river at that particular point of time. Similarly, stagnant air can trap pollutants of air, perhaps even collecting them becomes hazardous. Therefore, exogenous meteorological conditions may contribute to occasional crisis requiring temporary emergency measures in the form of command and controls. Pollution tax rates cannot be changed on short notice to deal with emergencies and even if the changes are effected, polluters respond with a longer time lag. Marketable permits also result in longrun adjustments in environmental quality and are not suitable for emergencies. Command and control measures on the other hand can be quickly operated to deal with more than normal amount of emissions arising out of emergencies, because they do not require extra monitoring. Therefore, in

214   M.N. Murty practice, neither economic instruments nor command and controls alone constitute an optimal environmental strategy. The cost minimizing strategy to realize given environmental standards is a mixed strategy consisting of economic instruments and command and controls.

Community Action or People’s Participation Generally, government is given the power of designing and implementing the command and control measures and the economic instruments described above with the assumptions that it is benevolent and there are supporting legal and other instruments. In many countries, government may not be benevolent and the required environmental laws are absent, and even if they are present they are ineffective due to various reasons. It is therefore important to look for institutions alternative to government for controlling environmental externalities. The alternatives can be (a) collective action of all agents relevant for managing the environment and (b) a purely market option. Coase (1960) argued that different types of externalities can be optimally controlled by creating specific property rights among concerned agents. Property rights mean either rights to clean water and air in the context of people or rights to pollute in the contexts of producers (during production) and consumers (during consumption). This important finding of Coase, now known as Coase theorem, is stated as follows: Consider a situation of an externality (say pollution). These are two agents involved here namely the generator and the affected parts. Given the initial property rights to any resource either to the generator of the externality or to the affected party, and if the cost of bargaining is zero, the bargaining between the two parties results in the optimal control of externality. The final outcome of bargaining is invariant to the initial property rights (e.g., in the case of air pollution whether the right to clean air is vested in the affected people or whether the right to pollute is given to the polluter). This result is further explained in Figure 10.3. In this figure, pollution load is measured along x-axis and the MCA and MD are measured along y-axis. The optimal pollution load is given as OE. For the pollution loads higher and lower than OE, there are incentives for gainful bargaining between the polluter and the affected party. If the polluter has the right to pollute beyond OE, then the MD is higher than MCA for the pollution loads, the affected party has an incentive to bribe the polluter at any rate lower than MD for a unit reduction in pollution and the polluter has an incentive to accept the bribe at any rate higher than the MCA. Therefore, bargaining between the two parties takes place until the pollution load is reduced to OE. Similarly, since MCA is higher than MD for the

Design of Economic Instruments and Participatory  

215

Figure 10.3 Cosean Bargaining MCA MCA

MD

MD

O

E

Pollution

pollution loads lower than OE, the polluter has an incentive to offer bribe to the affected party at any rate lower than MCA and the affected party has an incentive to accept bribe at any rate higher than MD. Again, the bargaining between them leads to the optimal pollution load OE. There are several practical problems for the Cosean bargaining to work in practice for controlling the environmental externalities. First of all, in reality, the transaction costs or costs of bargaining are not zero but positive. It can be shown that with positive costs of bargaining, the resulting pollution load through bargaining can be higher or lower than the optimal pollution load ‘OE’ depending on the initial property rights. It means that with the positive transaction costs, the final result will be no longer invariant to the initial property rights. Secondly, one of the key assumptions in the Coasean solution is that all the externalities are captured in the value of property rights and there are incentives for gainful bargaining. This can work well for the externalities on a smaller scale or local externalities of the type described by Coase (a building that blocks wind mill’s air currents, a confectioner’s machine that disturbs doctor’s quiet, etc.). However, many environmental externalities occur on a grander scale with a large number of receivers and many times a good number of generators (e.g., pollution of a river and the atmosphere), which makes defining property rights and facilitating bargaining difficult.

216   M.N. Murty One way of dealing with this problem is to create a common property right to the river for all the affected people as one group and have an association of polluters of the river so that the bargaining to reduce river pollution can take place between the two parties. The third problem for Coasean bargaining arises again in the context of defining the property rights for an environmental resource. The environmental resource is a stock affecting the welfare of both present and future generations. Capitalization of future benefits from this resource is not possible because property rights to future generations of affected people cannot be defined. One approach to take care of future generation is to consider the government as its representative. The government can compete in the market for environmental property rights of the future generation and pay for it by issuing a debt which has to be serviced by the future generation. Another approach is based on the assumption that the present generation has a bequest motive to the future and wants to bequeath to the future the preserved resources. However, both government intervention and bequest motive are outside the scope of Coases’s property rights approach. In the Coasean bargaining solution, government has a minimal role to play. Its role is only to create property rights and protect them and then the free-market bargaining between the agents will optimally control the externality. Various institutional alternatives now considered for the control of environmental externalities contain some elements of market mechanism with the government playing only a limited role. Given the doubtful quality of government and transaction costs of government instruments, it is imperative to look for new institutions to define and implement property rights for the environmental externalities. The collective action by all the agents involved has been found to be one such new institution.

3. Estimating Pollution Taxes for Air Pollution Abatement Environment provides waste disposal services as productive inputs to industry. Given the environmental regulation, producers place a value on these inputs as they value other conventional inputs labour, man-made capital and materials. Environmental regulation meant for ensuring the environmentally sustainable industrial development imposes a cost on the industry. UN methodology for the integrated environmental and economic accounting calls this cost as maintenance cost or the cost to the industry for maintaining

Design of Economic Instruments and Participatory  

217

Table 10.1 Shadow Prices of Pollutants (` per tonne) Industrial Pollutants

Mean

Standard Deviation

SPM

1043

1067

SO2

5867

8706

NOx

11,539

21,153

the quality of environment at its natural regenerative level (UN, 1993). As explained in Section 2, environmental regulation of pollution taxes or other instruments are needed for making the industry to internalize this cost. There is a need for estimates of shadow prices of environmental inputs for calculating the maintenance cost to the industry and the estimates of pollution abatement cost functions for designing pollution taxes. A model describing the technology of power generation as one of producing jointly good output, power and bad output, pollution load can be used for estimating the shadow prices and marginal pollution abatement cost functions of industrial pollutants. This model is known as output distance function in the theory of production. The processes of waste generation or material balance conditions are indirectly considered in the production relation expressed in the reduced form as output distance function.4 The producer demand price for waste disposal services from environment could be defined as the opportunity cost in terms of good output foregone to reduce bad output in this model and this price may be regarded as the shadow price of pollution or marginal cost of pollution abatement. Using the estimate of this model, the estimates of marginal cost of abatement of industrial pollutants can be obtained.5 Table 10.1 provides estimates of shadow prices of pollutants suspended particulate matter (SPM), SO2, and NOx for thermal power generation in Andhra Pradesh.

Cost of Environmentally Sustainable Power Generation Scientifically, the environmental standards (Minimum National Standards [MINAS] in India or WHO standards) are supposed to be designed taking into account the natural regenerative capacity of environment media. Therefore, the cost of complying with these standards to the industry may be interpreted as cost of environmentally sustainable industrial development. This cost has to be accounted in the measurement of Green GDP

218   M.N. Murty or environmentally corrected net national product (ENNP). The ENNP could be defined as ENNP = C + Pk DK + Pn DN,(1) where C, DK and DN represent, respectively, consumption, changes in manmade capital, and natural or environmental capital and Pk and Pn are prices of manmade and natural capital (see Witzman, 1974, Dasgupta and Maler, 1998, and Murty and Surender Kumar, 2004). The first two terms in Equation (1) constitute the conventional NNP while the last term accounts for the value of change in natural resource stock (change in environmental quality) due to various economic activities during the year. UN methodology suggests the development of physical and monetary accounts of natural capital as satellite accounts to conventional national accounts for estimating Pn DN. Time series of physical accounts of ambient quality of atmosphere, and water resources and forest cover have to be developed to estimate DN. For example, in the case of air pollution studied in this chapter, DN could be measured as the excess of pollution load of SPM over the pollution load corresponding to safe ambient standards. In case of CO2, DN could be simply pollution load generated because it adds to the stock of CO2 already present in the atmosphere. Table 10.2 provides physical and monetary accounts of air pollution for a representative firm belonging to Andhra Pradesh power generating industry during a year. The annual cost of reducing the pollution levels of SPM, SO2, and NOx from the current levels to zero in all thermal power generating plants in Andhra Pradesh is estimated as `534 million. This cost could be interpreted as the cost of environmentally sustainable thermal power generation in Andhra Pradesh. Table 10.2 Physical and Monetary Accounts of Air Pollution for an Average Thermal Power Generating Firm in Andhra Pradesh SPM

SO2

NOx

Load (tonnes/yr)

7836

10,488

1668

Shadow price (`)

1043

5867

11,539

Cost of abatement (` million)

8173

61,533

19,247

Note: Row 2 of the table shows the data of observed emissions of SPM, NOx and SO2.

Design of Economic Instruments and Participatory  

219

Shadow Prices of Pollutants and Pollution Taxes Estimation of pollution taxes using Taxes-Standards method requires the estimates of MCA and the data about pollution standards. The shadow prices of pollutants reported in Table 10.1 could be also interpreted as marginal costs of pollution abatement. Using the estimated distance function in Appendix A for thermal power generation in Andhra Pradesh, plant-specific shadow prices could be calculated. The MCA for each pollutant could be obtained by finding a relationship between the shadow price of pollutant and pollution load. The MCA of a plant could depend on output, pollution and plant-specific characteristics among others. Specifying this relationship as stochastic, MCA function for thermal power generation in Andhra Pradesh is estimated each for SPM, SO2 and NOx as given in Equations (2), (3) and (4), respectively. In these equations, the dependent variables are shadow prices or marginal costs of pollutants (SPMS, SO2S, NOxS) and independent variables are electricity output, pollution concentrations (SPMC, SO2C, NOxC), plant specific dummy variables (Di, i = 1,…,4) and time. There is a rising marginal cost with respect to pollution reduction as expected. SPM ln SPMP = 11.82 + 0.255* ln (OUT) – 1.02* ln (SPMC) (22.80) (2.92) (–13.71)

+ 0.705*D1+ 0.308*D2 – 0.57*D3 (2.96) (1.00) (–3.31)

(2)

0.108*D4 – 0.22*TIME (0.55) (13.71) Adjusted R2 = 0.7822 Figure 10.4 depicts the marginal pollution abatement cost function for SPM. On y-axis marginal cost of abatement and on x-axis SPM concentration are measured. SO2  ln SO2P = 9.33 + 1.012* ln (OUT) – 0.835* (27.24) (11.73) (–14.85)   ln (SO2C) –02.16*D1 –2.27*D2 – 1.69*D3(2) (–8.37) (–6.68) (–10.13) –0.352*D4 – 0.073*TIME (–1.47) (–3.01) Adjusted R2 = 0.8196

0

400

800

1200

1600

2000

2400

2800

100

120

140

160

200

220

240

260

280

300

320

SPM concentration in miligrams per N M cube

180

Figure 10.4 Abatement Function for SPM Concentration

Monetary Value of Abatement (physical abatement times electricity prices)

340

360

380

400

Design of Economic Instruments and Participatory  

221

Figure 10.5 depicts the marginal pollution abatement cost function for SO2. On y-axis marginal cost of abatement and on x-axis SO2 concentration are measured NOx ln NOxP = 4.94 + 1.21* ln (OUT) – 0.63* (14.67) (13.48) (–10.67) ln (NOXC) – 3.88*D1 – 2.41*D2 – 0.93*D3 (–16.58) (–7.50) (–5.23)

(3)

–1.38*D4 – 0.27*TIME (–6.34) (10.8) Adjusted R2 = 0.8062 Figure 10.6 depicts the marginal pollution abatement cost function for NOx. On y-axis marginal cost of abatement and on x-axis NOx concentration are measured. Using the abatement cost of functions shown in Figure 10.6 and using MINAS Stack Emission Standards of 115, 80 and 80 milligrams per NM3, respectively, for SPM, SO2 and NOx, the tax rates are computed as `2099, 20,519 and 5554 per tonne of emissions. If these taxes are levied on power

Monetary Value of Abatement (physical abatement times electricity prices)

Figure 10.5 Abatement Function for SO2 Concentration

35,000 31,500 28,000 24,500 21,000 17,500 14,000 10,500 7000 3500 0

0

50

100

150

200

250

300

350

400

SO2 concentration in miligrams per N M cube

450

222   M.N. Murty

Monetary Value of Abatement (physical abatement times electricity prices)

Figure 10.6 Abatement Function for NOx Concentration

1,0000 9000 8000 7000 6000 5000 4000 3000 2000 1000 0

0

100

200

300

400

500

600

Nox concentration in miligrams per N M cube

generating company, the company has incentives to internalize the maintenance cost or cost of pollution abatement as discussed in Section 2.

4. Collective Action: A Deterrent to Colluding Industry and Corrupt Bureaucracy6 Governments of many developing countries and even some of developed countries are non-benevolent so that the responsibility of dealing with market failure and achieving some developmental objectives cannot be completely left to them. In the case of control of externalities like the environmental pollution, the corrupt bureaucracy of developing countries often colludes with external diseconomy creating agents in augmenting the externality problem rather than controlling it. In such situations, there is no other option left to the parties affected by the externality but to take recourse to collective action or political influence for dealing with the bureaucracy and the perpetrator of the externality. As already explained in Section 2, Coase (1960) argues that given the initial property rights to either the externality generator or the receivers, the costless bargaining between them in a free market will result in the optimal control of the externality, the final outcome

Design of Economic Instruments and Participatory  

223

being independent of the initial allocation of property rights. Becker (1983) has shown that the political influence exerted by pressure groups can have similar effects as having a benevolent government to deal with market failure. In his own words: The same analysis of competition among pressure groups, without the introduction of social welfare function or benevolent government, explains expenditures on defense and other public goods, taxes on pollution, and other government activities that raise efficiency, even when some groups are hurt by the activities (Becker, 1983).

However, bargaining cannot be costless as Coase proposes, and transaction costs are important in the world of Coase and Becker. Even with transaction costs, there can be significant net welfare gains from collective action, and the case for collective action will be reinforced if the government is non-benevolent. Take the case of industrial water pollution abatement in India. More than 20 years of environmental legislation in India has not produced a pollution tax and the CAC methods used so far by the Indian government have not made a dent in industrial pollution control. This has also been the case with many developing countries. One important reason of this is the absence of awareness among the people about the extent of damage from pollution, and their inability to organize themselves as pressure groups for participating in the management of pollution abatement. In such a situation, industry and the non-benevolent bureaucracy have incentives to collude for violating environmental standards. Industry can bribe the regulator to over report its effluent quality or not report it at all. There are several agents involved in the political economy of industrial pollution abatement: affected people, elected representatives, bureaucracy and industry. Incentives exist for a sub-coalition of agents, like a coalition of affected people and elected representatives and another coalition of bureaucracy and industry. These conditions could constitute politically active pressure groups. Murty (1995b) has shown that the competition among these pressure groups may result in the optimal control of pollution.

Pollution Taxes, Corruption, Bribes and Penalties In the case of non-benevolent government, as it may be the case in many developing countries, the mere enactment of environmental laws does not guarantee that they are actually executed. There can be several points of view about the way corruption takes place in bureaucracy. One view point is that in the pyramid structure of bureaucracy, corruption increases as one goes down

224   M.N. Murty the cadre while it is virtually zero at the highest level. Opportunities for corruption arise when principal officer delegates enforcement authority to lower cadre officer (Rose-Ackerman, 1978; Milgrom and Roberts, 1988). In such a system checks and balances operate to minimize corruption in bureaucracy since there is a probability that the bribe-taking lower cadre officer is being caught and penalized by the superior officer. Mukherjee and Png (1994) have shown that in a pyramid structure of corruption, the penalty for bribe taking and the compensation for honesty behaviour of lower cadre officers affected by regulator have uncertain effects on pollution abatement. Another view point is that corruption is distributed (perhaps evenly) among all cadres of bureaucracy. There is tacit agreement among officers of all cadres to share the bribe collected so that a lower cadre officer, say an inspector, has the sanction of his superior to take bribe. It is this bureaucratic corruption of this form that manifests in many developing countries. In India it is a commonly held public belief that inspectors dealing with collection of taxes, monitoring industrial pollution, etc., have sanction of their bosses to take bribe. The third view point is that corruption provides incentives for both bureaucracy and politicians (the legislature or elected representatives) to collude. There may be collusion between bureaucracy and elected representatives with motive of rent seeking from the power constitutionally granted to them. This type of corruption can find a place in the societies where the public is not politically active or organized to deal with erring legislators as is the case with democracies in many developing countries. A check on later two types of bureaucracy can only come through politically active groups or people affected by industrial pollution. Politically active groups of people affected by an externality can influence their elected representatives in a democracy to stem bureaucratic corruption. They can bring pressure on their elected representatives, say, a municipal committee in case of a local externality, to impose penalties on bribe-taking bureaucracy. Alternatively, they organize themselves as pressure groups to take recourse to legal action against colluding elected representatives, bureaucracy and industry. Thus depending upon the way corruption actually takes place, there can be sub-coalition of agents relevant for industrial water pollution abatement: a coalition of affected people and elected representatives and a coalition of industry and bureaucracy in the second case; affected people alone and a coalition of industry, bureaucracy and elected representatives in the third case. Collective action of affected people has transaction costs in the form of time devoted and efforts made to organize for detecting violation of environmental standards by a coalition of bureaucracy and industry and for effecting legal action.

Design of Economic Instruments and Participatory  

225

Public Perception of Damages and Penalties Consider a situation in which four sets of agents are involved in the industrial pollution abatement: (a) affected public, (b) elected representatives of public (say a municipal committee), (c) bureaucracy (the executive implementing the environmental legislation) and (d) industry. In the absence of any checks from the affected public, there can be incentives to bureaucracy and industry to violate the environmental standards.7 Given a pollution tax as per the environmental legislation, industry has an incentive to bribe the bureaucracy, at a rate less than the tax per unit of effluent, for over-reporting its effluent quality. A false certification of higher effluent quality by bureaucracy helps industry to shun its responsibility for meeting the standards. The extent to which the affected public can make bureaucracy and industry to comply with environmental standards depends upon its degree of perception of damages and influence it can exert either through its political organization or elected representatives or both. The degree or probability with which the affected people perceive their damage and are able to apprehend the bribetaking bureaucracy and non-complying industry depends upon the amount of time and effort devoted for politically organizing themselves. Politically active affected people can bring pressure on their elected representatives to impose penalties on bureaucracy and industry if they are caught colluding with each other for violating the standards. Probability with which they are caught depends upon the degree of political activity.

Non-benevolent Government and Strategic Behaviour of Active Groups in Water Pollution Abatement There are incentives for the formation of sub-coalitions of various agents involved in industrial water pollution abetment if the bureaucracy or regulator is corrupt.8 As explained earlier, it may be possible that affected people and municipal committee act in tandem. People need the help of their representatives to deal with industry and bureaucracy, and the representatives require people’s support to get re-elected. Also it may be possible that industry and bureaucracy have incentives to collude for sharing the cost saved from non-compliance of environmental standards by industry. This simple bifurcation of politics into two sub-coalitions is made to highlight the effect of political activity of pressure groups on industrial water pollution abetment. However, in actuality, a few other sub-coalitions are possible and a similar analysis can be attempted with them. Thus, we have two

226   M.N. Murty groups of agents: Group I affected people and municipal committee with a strategy of time spent on political organization, W and cost function G1 and Group II industry and bureaucracy with a strategy of level of environmental quality, E and cost function G2. The cost to each group depends on the W, E and penalties and bribes (see Murty, 1995b). Given penalties and bribe, Group I minimizes G1 with respect to W given E while Group II minimizes G2 with respect to E given W. The strategic behaviour of Groups I and II yields the reaction functions. W (E) =

δG1 δG 2 , W / ( E ) ≤ 0 and E (W ) = , E / (W ) ≥ 0. δW δE

The equilibrium strategies of two persons Nash non-cooperative game are defined as W *(E *), and E *(W *), which are given by the intersection of curves depicting the reaction functions of Groups I and II as shown in Figure 10.7. Increasing penalties on industry and bureaucracy have the effects of increasing environmental quality E, given W, and decreasing the time devoted to political activity W, given the environmental quality E. The equilibrium environmental quality of a two person Nash non-cooperative Figure 10.7 Strategic Behaviour of Active Groups in Water Pollution Abatement

Marginal Damages/Marginal Costs

w E1(w)

E2(w) E3(w)

w w2* w1* w3(E) w2(E) w (E) 1

O

Ep

E*

Environmental Quality

E

Design of Economic Instruments and Participatory  

227

game increases as the penalties increase. Thus, there are welfare gains of increasing penalties either in the form of decrease in damages due to the improvement in environmental quality, or in the form of saving in cost of political activity. Since there are costs to industry from increasing E, there can be net welfare gains from increasing penalties so long as incremental damage reductions to affected parties are higher than the incremental cost to industry. In fact the optimal rates of penalties and optimal environmental quality are determined by the condition that marginal cost of abatement to industry is equal to marginal reduction in damages. However, in the current framework, the optimal rates of penalties are determined by the statutorily fixed environmental standards. It could be shown that even if the government is non-benevolent, the statutorily fixed environmental quality could be achieved through political competition (see Murty, 1995b, for proof).

5. Conclusion Economic instruments of pollution taxes and marketable permits and institutions facilitating people’s participation are two efficient methods of controlling environmental pollution. Coase bargaining methods with participatory institutions result in the decentralized solutions with significant savings of transaction costs as opposed to Pigovian taxes. There is enough empirical evidence of environmental regulation through people’s participation in the developing countries (Murty et al., 1999; World Bank, 1999). A method of estimating pollution taxes for thermal power generating industry in India described in this chapter underscores the informational requirements for designing such taxes. There is a cost associated with the environmentally sustainable industrial development that is described by the UN methodology of Integrated Environmental and Economic Accounting as the maintenance cost. This cost could be considered as the cost to the industry of complying with the environmental standards fixed taking into account natural regenerative capacity of environmental media. A method in the theory of production describing pollution as a bad output jointly produced with the good output is used in this chapter to estimate the maintenance cost. The panel data of five coal fired thermal power plants in Andhra Pradesh state of India for 8 years are used for the estimation. The shadow prices of pollutants and cost of pollution abatement are estimated for Andhra Pradesh GENCO. The pollution taxes to make the thermal power plants in Andhra Pradesh to comply with the MINAS stack

228   M.N. Murty standards are estimated as `2099, 20,519 and 5554, respectively, for SPM, SO2 and NOx. Political activity of people affected by an externality is measured in terms of a fraction or the number of people perceiving damages from the externality or the probability at which they can apprehend the colluding industry or the bureaucracy. There is a cost of political activity in terms of time devoted to it by the affected people. A sub-coalition of affected people and elected representatives can impose penalties on the bureaucracy and industry if the former is caught taking bribes and the later is found over stating the effluent quality. The Nash non-cooperative game among the sub-coalitions of agents yields an equilibrium environmental quality which is superior to the environmental quality without political activity. As the rates of penalties increase, equilibrium environmental quality of the game increases. There can be rates of penalties and a level of political activity with respect to which statutorily fixed environmental standards can be achieved. Also, the rate of penalty required to achieve statutory environmental quality through competition between the pressure groups with non-benevolent government is the same as the rate of tax required, using the taxes standard approach with benevolent government.

Notes 1. Waste disposal service of environmental resources is a public good with a property that the exclusion is not possible by charging a price for it. 2. This alternative is now becoming attractive because of high monitoring and enforcing costs to the Pollution Control Boards and other governmental agencies and the presence of corruption of government especially in many developing countries. 3. In the current literature, the regulation by the government and the public are, respectively, regarded as the formal and informal regulation. See World Bank (1999). 4. Murty et al. (2012) have shown that there could be problems in defining the shadow prices of pollution and finding the trade-off between pollution and output along the production frontier in this model. However, they have shown that modelling abatement as an intermediary input does yield the positive trade off and facilitate the definition of shadow prices of pollution. 5. See Murty and Gulati (2007) describe the output distance function and its estimate for the thermal power generating industry in Andhra Pradesh (AP) state of India.

Design of Economic Instruments and Participatory  

229

6. This section is drawn mainly from Murty (1995b). 7. The second view point on corruption is chosen here for attempting a detailed analysis. A similar type of analysis can also be made with respect to the third view point on corruption. 8. The structure of corruption in bureaucracy assumed here is different from the one considered in some recent works in this area. It is assumed that the bribes taken by bureaucracy is shared by all cadres of officers, while some recent studies consider a pyramid cal structure of corruption (corruption reduces as one climbs up the bureaucratic ladder, becoming virtually zero at the top).

References Aigner, D.J. and S.F. Chu (1968), Estimating the Industry Production Function, American Economic Review, Vol. 58, pp. 826–39. Baik, K. and J.F. Shogren (1994), Reimbursements for Citizen Suits, Journal of Environmental Economics and Management, Vol. 27, No. 1, pp. 1–21. Baumol, W.J. (1972), On Taxation and Control of Externalities, American Economic Review, Vol. 42, No. 3, pp. 307–22. Baumal, W.J. and W. Oates (1988), The Theory of Environmental Policy, Second Edition, Cambridge University Press, Cambridge. Becker, G.S. (1983), A Theory of Competition among Pressure Groups for Political Influence, Quarterly Journal of Economics, Vol. 98, pp. 371–400. Coggins, J.S. and J.R. Swinton (1996), The Price of Pollution: A Dual Approach to Valuing SO2 Allowances, Journal of Environmental Economics and Management, Vol. 30, pp. 58–72. Coase, R.H. (1960), The Problem of Social Cost, Journal of Law and Economics, Vol. 3, pp. 1–44. CPCB (1995), Standards for Pollutants, Central Pollution Control Board, New Delhi. Dales, J.H. (1968), Pollution, Property and Prices. University of Toronto Press, Toronto. Dasgupta, P., and K.G. Maler (1998), Decentralisation Schemes, Cost-benefit Analysis, and Net National Product as Measure of Social Well-being. The Development Economics Discussion Papers Series No.12, LSE, STICERD. Fare, R. (1988), Fundamentals of Production Theory, Springer-Verlag, Berlin. Fare R., S. Grosskopf, C.A.K. Lovell and S. Yaisawarng (1993), Derivation of Shadow Prices for Undesirable Outputs: A Distance Function Approach, Review of Economics and Statistics, Vol. 75, No. 2, pp. 375–80. Fare R., S. Grosskopf and J. Nelson (1990), On Price Efficiency, International Economic Review, Vol. 31, pp. 709–20. Fare R., S. Grosskopf and C.A.K. Lovell (1994), Production Frontiers, Cambridge University Press, Cambridge.

230   M.N. Murty Fare, R. and D. Primont (1995), Multi-output Production and Duality: Theory and Applications, Kluwer Academic Publishers, Netherlands. Gray, W.B. and S.J. Shadbegian (1993), Environmental Regulation and Manufacturing Productivity at the Plant Level, Working Paper No 4321, National Bureau of Economic Research, Washington, DC. Heyes, A.G. (1977), Environmental Regulation by Private Contest, Journal of Public Economics, Vol. 63, pp. 407–28. James, A.J. and M.N. Murty (1996), Water Pollution Abatement: A Taxes-Standards Approach for Indian Industry, Working Paper No. E/177/96, Institute of Economic Growth, Delhi. Konar, S. and M. Cohen (1997), Information as Regulation: The Effect of Community Right to Know Laws on Toxic Emissions, Journal of Environmental Economics and Management, Vol. 32, pp. 109–24. Mehta, S., S. Mundle and U. Sankar (1995), Controlling Water Pollution: Incentives and Regulation, SAGE Publications, New Delhi. Milgrom, P. and J. Roberts (1988), An Economic Approach to Influence Activities in Organization, American Journal of Sociology, Vol. 94, pp. S154–79. Mukherjee, D. and I. Png (1994), Corruptible Law Enforcers: How Should They Be Compensated? Discussion Paper No. 94-07, Indian Statistical Institute, Delhi. Murty, M.N. (1991), Management of Common Property Resources: Limits to Voluntary Collective Action, Journal of Environmental & Resource Economics, Vol. 4, pp. 581–94. Murty, M.N. (1995a), Environmental Regulation in the Developing World: The Case of India, Review of European Community and International Environmental Law, Vol. 4, No. 4. pp. 330–37. Murty, M.N. (1995b), Collective Action: A Deterrent to Colluding Industry and Corrupt Bureaucracy, Working paper No. E/165/95, Institute of Economic Growth, Delhi. Also Printed in M.N. Murty, A.J. James and Smita Misra (1999). Murty, M.N. (2009), Environment, Sustainable Development and Well-being: Valuation, Incentives and Taxes, Oxford University Press, New Delhi. Murty, M.N., A.J. James and Smita Misra (1999), The Economics of Water Pollution: The Indian Experience, Oxford University Press, New Delhi. Murty, M.N. and U.R. Prasad (1999), Emission Reductions and Influence of Local Communities in India, Oxford University Press, New Delhi. Murty, M.N. and S. Kumar (2002), Measuring Cost of Environmentally Sustainable Industrial Development in India: A Distance Function Approach, Environmental and Development Economics, Vol. 7, pp. 467–86. Murty, M.N. and Surendar Kumar (2003), Environmental and Economic Accounting for Industry, Oxford University Press, New Delhi. Murty, M.N. and S.C. Gulati (2007), Measuring Cost of Environmentally Sustainable Industrial Development and Designing Pollution Taxes: A Case Study of Thermal Power Generation, Indian Economic Journal, Vol. 54, pp. 135–44.

Design of Economic Instruments and Participatory  

231

Murty, S., R.R. Russel and S.B. Levkoff (2012), On Modeling Pollution Generating Technologies, Journal of Environmental Economics and Management, Vol. 64, pp. 117–35. Nandy I., R.A. Daryapurkar and S.N. Kaul (1991), Common Effluent Treatment Plant: An Overview, National Environmental Engineering Research Institute (NEERI), Nagpur. NEERI (1991), Report on Environmental Pollution Caused by Patancheru and Bollaram Industrial Estates in Nearby Villages of Medak District of Andhra Pradesh, India, Nagpur. O’Connor, D., (1992), The Use of Economic Instruments in Environmental Management: The Experience of East Asia, Economic Instruments for Environmental Management in Developing Countries, Proceedings of a Workshop held at OECD Headquarters in Paris on 8 October 1992, OECD, Paris. Pargal, S. and D. Wheeler (1996), Informal Regulation of Industrial pollution in Developing Countries: Evidence from Indonesia, Journal of Political Economy, Vol. 104, No. 6., pp. 1814–27. Pigue, A.C. (1920), The Economics of Welfare, MacMillan, London. Porter, M.E. and C. van der Linde (1995), Towards a New Conception of the Environment Competitiveness Relationship, Journal of Economic Perspectives, Vol. 9, pp. 97–118. Rose-Ackerman, S. (1978), Corruption: A Study in Political Economy. Academic Press, New York. Shephard, R.W. (1970), Theory of Cost and Production Functions, Princeton University Press, Princeton. UN (1993), Integrated Environmental and Economic Accounting: Interim Version (Sales No. E93 XVII. 12), United Nations, New York. World Bank (1999). Greening Industry: New Roles to Communities, Markets and Governments, Oxford University Press, New York.

11

Household-level Pollution in India: Patterns and Projections* K.S. Kavi Kumar and Brinda Viswanathan

1. Introduction

T

he energy use at household level in a society is an important factor to determine the stage of development, status of local environment inside the house and also the global emissions contributed by the region. A large number of Indian households, especially in the rural areas, still depend on solid fuels for cooking purpose. With a few exceptions in eastern India, firewood, dung and other bio-fuels constitute bulk of the solid fuels used by the Indian households. It is now well documented that use of such fuels for cooking, particularly in kitchens without proper ventilation, and using stoves with very low efficiency results in high emission of various pollutants. The associated health effects are also well documented. It is evident

* An earlier version of this paper was presented at SANDEE @ 10: Environment and Development in South Asia, conference organized by the South Asian Network for Development and Environmental Economics at Kathmandu, Nepal on 6–7 December, 2010. The authors would like to gratefully acknowledge the valuable comments given by the seminar participants.

Household-level Pollution in India  

233

that incomplete combustion of these fuels leads to emission of black carbon, whose control is essential for climate change mitigation. Although household income continues to be a significant determinant of solid fuel consumption, substantial scope exists for policy intervention. In this context, promotion of ‘cleaner’ fuels such as liquefied petroleum gas (LPG) and cleaner stoves assumes greater importance. The penetration of LPG for cooking has seen a significant surge in some states in India, whereas in other states its consumption is relatively lower. Clean cookstove programs launched earlier in India have not been very successful, but the recent program launched by the Government of India aims to renew the efforts in this context and proposes to provide clean energy through next generation of household cookstoves. Given this background, this chapter attempts to analyze the trend and pattern of fuel use at household level in India using unit record data from the National Sample Survey (NSS) for the year 2004–05. This chapter estimates the relationship between income and pollution and uses the same to project local and global emissions from the Indian households under various policy scenarios, including the deeper penetration of clean fuels and wider utilization of improved cookstoves for the year 2026. This chapter is organized as follows. The next section provides a brief overview of the various strands of related literature. The third section describes the trend and pattern of fuel consumption across various regions of India. Profile of local and global emissions for the year 2004–05 is also provided along with its patterns across states and monthly per capita expenditure (MPCE) classes. The fourth section describes the econometric methodology and data used to estimate the income–pollution relationship and discusses the results obtained. The fifth section presents the estimates of future projections of local and global emissions from the Indian household sector under various policy scenarios. The last section provides concluding remarks.

2. Household Energy and Pollution While the literature on household-level energy use and resultant pollution is rich and vast, this chapter focuses on three relevant strands for this study: (a) indoor air pollution and health burden; (b) access to clean energy, energy demand and pollution at the household level; and (c) modelling income–pollution relationship.

234   K.S. Kavi Kumar and Brinda Viswanathan

Health Burden due to Solid Fuels Solid fuels burned in traditional stoves often result in inefficient combustion, with less than 80–90 per cent conversion of fuel carbon into carbon dioxide (CO2). The products of incomplete combustion—such as carbon monoxide, formaldehyde, benzene and many other pollutants that have potential to cause health hazards—are emitted through small particles in many houses using solid fuels. Given that most houses have inadequate ventilation in kitchens and living rooms are not separated from kitchen areas, the emissions from use of solid fuels are inhaled routinely by the members of the household. Particularly, the women, children and elderly in the house have maximum exposure to these emissions. Several studies have now conclusively established the relationship between the exposure to the indoor pollution and some significant health risks. It must be noted that because exact measurement of indoor pollution and the associated exposure is often difficult, most studies have linked the use of solid fuels with health burden. Despite inaccuracies, the evidence on health burden appears to be robust (Ezzati, 2004). Smith et al. (2004) observed that the most common health problems associated with exposure to indoor air pollution include (a) acute lower respiratory infections (pneumonia) in children, (b) chronic obstructive pulmonary disease and (c) to lesser extent, lung cancer. Health risks associated with indoor air pollution are now considered as one of top 10 risk factors in the world—with countries like India and China experiencing the maximum impact due to such risks. Balakrishnan et al. (2004) in their study of indoor air pollution associated with use of solid fuels for cooking in Andhra Pradesh established that use of solid fuels for cooking exposes the members of the family on a daily basis to air pollution, which is more than the standards prescribed for outdoor air pollution. Further, the study established that even when the cooking is done outside the house (or in a separate kitchen) using solid fuels, the resultant levels of respirable suspended particulate matter (RSPM) and the household members’ exposure to the same significantly exceeds the prescribed standards for ambient air. A macro/micro estimate of health burden due to use of solid fuels is provided by Smith and Mehta (2001), World Bank (2001) and Parikh et al. (2001, 2003). Another relatively less discussed aspect of solid fuel usage is their contribution to global warming. The bio fuels, which constitute bulk of solid fuels in India, are typically considered ‘carbon neutral’—that is, the carbon released into the atmosphere through burning of these fuels is recaptured during the growth of the biomass. However, the incomplete combustion of

Household-level Pollution in India  

235

biomass fuels releases what are known as ‘black carbon’ particles, which is a significantly stronger greenhouse gas (GHG) pollutant than CO2. Venkataraman et al. (2005) showed that use of wood and other biofuels in south Asia has resulted in release of black carbon to the tune of 172 gigagrams/ year (Gg/year) in the year 1995 and almost similar amount (160 Gg/year) a decade earlier. This study also established that these emissions contributed significantly to atmospheric concentration of GHGs from the region. Enabling the household to shift from solid fuels to ‘cleaner’ fuels (such as LPG) for cooking results in reducing not only the health burden but also the global warming, and hence the climate change mitigation policies in this region should also include measures to reduce dependence of households on solid fuels for cooking. From this perspective, the National Biomass Cookstoves Initiative (NCI) launched in late 2009 by the Government of India could provide clean energy to the Indian households through next generation of household cookstoves. These cookstoves are expected to result in particulate emissions that are similar to household using LPG. Venkataraman et al. (2010) estimated that about 5,70,000 premature deaths and 3.2 per cent of national disease burden could have been prevented (by reducing particulate matter emissions) with such initiatives in place in 2005. Further, they argue that about 4 per cent of India’s GHG emissions could have been reduced through NCI. Similarly, Wilkinson et al. (2009) also showed significant health and GHG emission reduction benefits due to NCI. Thus, such initiative would have dual advantage of GHG emission reduction as well as health benefits. There could be several practical considerations in implementing such an initiative. NCI cookstoves would still be considered at the lower end of the energy ladder and also lacking in sophistication due to far lower ease of operation as a ‘switch-off–switch-on’ appliance when compared to the stoves using LPG. At present, the NCI cookstoves have been lab-tested for certain forms of biomass, but their performance for any type of biomass is still unknown. On account of this feature, the acceptability may be less widespread than envisaged as the nature and availability of biomass would vary from region to region. If some of these apprehensions could be addressed, in the short run it could still prove beneficial to the poorer households, allowing them to move out of energy poverty and lead healthier lives.

Household Energy Demand In this context, an assessment of the current pattern of household energy consumption, including its regional variation, is useful in estimating the current local and global emissions and their impacts. A large number of

236   K.S. Kavi Kumar and Brinda Viswanathan studies analyzed various issues related to household energy in India. Since a large majority depend on the so-called ‘dirty’ fuels (including firewood, dung, agricultural residue, etc.), one of the primary areas of focus has been on access to ‘clean’ energy. ESMAP (2003) explored the role played by subsidies in enabling the poor to access to ‘clean’ energy in India, while Antonette D’sa and Murthy (2004) analyzed the factors determining the penetration of LPG across Indian households. These include issues concerning appropriate pricing and financing schemes, and dependable supply and delivery. Viswanathan and Kumar (2005) explored the regional differences in fuel use patterns in India. Observing that wide disparity exists between rural and urban households as well as across states, the study argues that pro-rich and pro-urban bias of kerosene supply through the public distribution system has influenced the observed variation in fuel consumption pattern. More recently, Patil (2010) provided a synthesis of the status of rural energy access in India. Arguing that the energy access levels were widely differing across the states, the study highlighted the significantly large disparity between the ‘successful states’ and ‘failure states’ in terms of the cooking energy access compared to electricity access (which could serve as a proxy for the overall development). The ratio was 5.3 and 3.4 for cooking energy access and for electricity, respectively. Filippini and Pachauri (2004) and Gundimeda and Kohlin (2006) used NSS data to estimate the demand elasticity for electricity and household fuels, respectively. The electricity demand is observed to be income and price inelastic, making it a necessary good while the expenditure elasticity for fuelwood was estimated to be high, indicating the likely use of this fuel for cooking purposes for a long time in India. More recent studies of similar nature have appeared in World Bank (2008) and Zigova et al. (2009) modelling household electricity and energy access, respectively. MestI and Eskeland (2009) used these expenditure elasticities to estimate future projections of emissions from household energy consumption. Their results showed that while deeper penetration of cleaner fuels would ensure improved health outcomes in future, the GHG emissions would increase significantly from the household sector in India.

Environmental Kuznets Curve Hypothesis A combination of the type of energy and the efficiency of the appliances used determines the level of pollution at any given point in time for a specific region. An empirical regularity that has been observed in many instances is the inverted-U relationship between pollution and income, referred as environmental Kuznets curve (EKC) hypothesis. This relationship has been

Household-level Pollution in India  

237

assessed for both local and global pollutants either across a cross-section of households or countries at any given point of time or temporally for a given region and a given pollutant. While existing theoretical justifications for the EKC are largely based on macroeconomic foundations, Andreoni and Levinson (2001) and Pfaff et al. (2004) provided micro foundations for the EKC hypothesis. Chaudhuri and Pfaff (2002) estimated the indoor air pollution and income relationship based on micro-data for Pakistan. The study demonstrated that under plausible assumptions about the emissions implied by the fuel use, inverted-U relationship exists between indoor air pollution and income. Kumar and Viswanathan (2007), using NSS data for the years 1983, 1993–94 and 1999–2000, showed that EKC exists for indoor air pollution among rural Indian households. Both these studies have not used directly measured indoor pollution data due to non-availability of the data. A more technically correct direct approach in measuring air pollution concentration was adopted by Zhang and Vanneman (2008), but no evidence for EKC among rural Indian households was found. However, the study results could be biased due to smaller sample and hence lesser variability in income. Such an empirical assessment has been attracting widespread attention as it has enabled understanding of the processes that have contributed to the turning point leading to a decline in pollution beyond a certain level of income. In several instances, this observed decline in pollution levels after its initial rise has been attributed largely to the normal course of development. Exceptions to this, leading either to a lower peak that was achieved or a turning point earlier than the expected or both, are typically induced by technological changes and/or policy interventions. This is encouraging and beneficial to the developing countries as they need not trace the EKC and may have the option of ‘tunnelling through’ to a lower level of pollution after only a limited rise from its initial levels. The challenges to such an intervention are either institutional in terms of negotiating with the developed nations for facilitating technological transfer or investing in indigenous research to arrive at locally suitable options.

3. Trends and Patterns of Household Energy Use and Pollution in India Over the past one decade the composition of energy mix showed very little variation in rural India. The evidence from NSS data shows that the percentage of households using solid fuels as primary energy source for cooking (including, firewood, coal/coke and dung cake) has decreased from 95 per

238   K.S. Kavi Kumar and Brinda Viswanathan cent to 85 per cent during 1993–94 to 2004–05. The urban India, on the other hand, registered significant change over the same period, with decline in percentage of households using solid fuels from 40 per cent in 1993–94 to 26 per cent in 2004–05. One of the major differences between rural and urban Indian households is in terms of their use of kerosene as cooking fuel. Compared to almost negligible use of this fuel in rural India, kerosene played a crucial role as the transition fuel for urban India leading to an impressive LPG penetration. Figure 11.1 shows the changes in composition of various fuels used as primary cooking fuels by the rural and urban Indian households over the past decade. The rural–urban contrast firstly lies in the huge gap in the use of LPG versus firewood as the most dominant primary source in rural areas. Secondly (and more significantly) the contrast is in terms of absence of kerosene as a transition fuel in rural areas and realization of the unmet demand with other fuels like dung which are even lower than firewood in the energy ladder.

Consumption of Solid Fuels: Regional Differences There are significant regional differences in India in terms of the consumption of solid fuels. Figure 11.2 shows the percentage of households using solid fuels (including firewood, coal/coke, dung cake, etc.), kerosene and LPG as primary source for cooking in different regions for three years in the past 10 years for rural and urban India, respectively. In rural India, barring the eastern Indian states, the rest of the states showed penetration of LPG with about 10 to 12 per cent of households reporting this fuel as primary source for cooking in the year 2004–05. With the exception of the western Indian states, all states showed very little consumption of kerosene for cooking. In urban India, penetration of LPG has been very impressive with all the regions having more than 50 per cent of the households consuming LPG as primary cooking fuel in the year 2004–05. Further, in all the regions, kerosene served as transition fuel. In terms of the solid fuels, the southern and the eastern states have showed similar pattern of consumption over years, whereas the western and the northern states exhibited comparable consumption pattern of these fuels in the last decade.

Profile of Household Emissions The local and global emissions attributable to each household can be estimated using emission coefficients and the quantity data of each fuel consumed by the household. The NSS data provides data on quantity of each

Percentage

2004–05

firewood

Rural

coal/coke

dung

Years

0% 1999–00

0%

1993–94

20%

40%

60%

80%

100%

20%

40%

60%

80%

100%

1993–94

kerosene

Figure 11.1 Primary Source of Energy for Cooking in India: 1993–94 to 2004–05

Percentage

LPG

Urban

1999–00

2004–05

240   K.S. Kavi Kumar and Brinda Viswanathan Figure 11.2 Distribution of Cooking Fuels across Regions and Years: Rural and Urban India Distribution of Primary Source of Cooking Fuels: Rural 80% 60% 40%

South

East

West

04–05

99–00

93–94

04–05

99–00

93–94

04–05

99–00

93–94

04–05

0%

99–00

20% 93–94

Percentage

100%

North

Regions - Years Solid-fuels

LPG

Distribution of Primary Source of Cooking Fuels: Urban

100% 80% 60% 40%

South

East

West

04–05

99–00

93–94

04–05

99–00

93–94

04–05

99–00

93–94

04–05

0%

99–00

20% 93–94

Percentage

Kerosene

North

Regions - Years Solid-fuels

Kerosene

LPG

fuel consumed for every household surveyed. In case of certain fuels such as dung and agricultural residue, however, the quantity data is not available. Not accounting for these fuels would lead to underestimation of local emissions. In order to account for emissions from the fuels for which the quantity data is not available in the NSS data, the average household-level energy consumption reported in other sources such as National Family

Household-level Pollution in India  

241

Health Survey data is used. The quantity of energy attributable to dung and agricultural residue has been estimated by subtracting the energy consumed through the known sources from the average household level energy consumption. The emission coefficients are sourced from Smith et al. (2000), Venkataraman et al. (2010), and MestI and Eskeland (2009). For the global emissions, only three prominent GHGs are considered—namely, carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O). In case of local pollution, while several pollutants such as carbon monoxide (CO), non-methane volatile organic compounds (NMVOC), particulate matter (PM), black carbon (BC) and organic matter (OM) are considered, the discussion is based only on the particulate emissions. While calculating the GHG emissions from the firewood it is the common practice to consider it as a carbon-neutral fuel. However, given the significant supply–demand gap reported for the firewood in various wood-balance studies, the present study assumes a non-renewability factor of 10 per cent for firewood and hence treats it as a net emitter of CO2. A similar approach is followed by other studies (e.g., Venkataraman et al., 2010). Based on these assumptions, Table 11.1 reports the emission profile for rural and urban Indian households in 2004–05. The estimated aggregate local and global annual emissions are in line with other estimates reported in the literature (e.g., Venkataraman et al., 2010). The rural–urban differences are one of the most distinguishing features of the emissions profile reported below. While the per capita emission of local pollution is higher among the rural households, the per capita global emission is higher among the urban households—reflecting the respective fuel use pattern. Figure 11.3 shows the state-wise local and global per capita emissions for the year 2004–05, along with national average in rural and urban households. As can be seen from this figure, the PM emissions are on average lower among the urban households across all states. However, the eastern states with access to solid fuels such as coal report higher PM emissions, even among the urban households. In fact, the per capita PM emissions among urban households are higher than that in rural households in Jharkhand. The per capita global emissions are uniformly higher among the urban households compared to the rural households across all states. The observed differences in per capita emissions are largely a reflection of the fuel consumption pattern shown in Figure 11.4. The rural households on an average depend largely on firewood for cooking purpose; however, some states show an exception to this trend due to access to other fuels including agricultural waste (e.g., Haryana and Punjab) and coal (e.g., the eastern states). This is true even among the urban

242   K.S. Kavi Kumar and Brinda Viswanathan Table 11.1 Household Emissions Profile: 2004–05 Rural

Urban

All India

806.4

103.0

908.4

Total Emissions PM (000 tons/yr) CO2 (million tons/yr)

50.2

24.6

74.8

CO2-hh (million tons/yr)

102.0

81.4

183.6

CO2e (million tons/yr)

138.0

85.6

224.4

Per Capita Emissions PM (kg/yr)

1.12

0.44

0.95

CO2 (tons/yr)

0.07

0.11

0.078

CO2-hh (tons/yr)

0.14

0.35

0.19

CO2e (tons/yr)

0.19

0.37

0.24

Source: Own calculations based on NSS unit record data. Emission coefficients are from Smith et al. (2000), Venkataraman et al. (2010), and Mestl and Eskeland (2009). Note: PM—particulate matter; CO­2—carbon dioxide from cooking fuels; CO2hh—carbon dioxide from cooking fuels plus electricity consumption; CO2e—greenhouse gas emissions from cooking fuels and electricity consumption, expressed in carbon dioxide equivalent terms. Figure 11.3 Per Capita Local and Global Emissions: 2004–05

Rural

Urban

States

Figure 11.3 continued

j r P K r r r P h ri j j

h

0.600 0.500 0.400 0.300 0.200 0.100 0.000

P

Global (tons/year)

P n B l

2.500 2.000 1.500 1.000 0.500 0.000

AP Asm Bih Chtg Guj Har HP JK Jhr Kar Ker MP Mah Ori Punj Raj TN UP Utrn WB Total

Particulate Matter (kg/year)

AP Asm Bih Chtg Guj Har HP JK Jhr Kar Ker MP Mah Ori Punj Raj TN UP Utrn WB Total

2.000 1.500 1.000 0.500 0.000

Household-level Pollution in India   States

Rural11.3Urban Figure continued

243

0.600 0.500 0.400 0.300 0.200 0.100 0.000

AP Asm Bih Chtg Guj Har HP JK Jhr Kar Ker MP Mah Ori Punj Raj TN UP Utrn WB Total

Global (tons/year)

States Rural

Urban

Figure 11.4 Household Cooking Fuel Consumption across States: 2004–05

WB

Total Total

Utrn

TN

UP

Raj

Ori

Punj

MP

Mah

Ker

Kar

JK

Kero

WB

Oth Fuel

Jhr

HP

Guj

Har

Bih

Fwood

Chtg

AP

Asm

Distribution of Source of Primary Fuel Rural, 2004–05 100 90 80 70 60 50 40 30 20 10 0

LPG

Distribution of Source of Primary Fuel Urban, 2004–05 100 80 60 40

Fwood

Oth Fuel

Kero

LPG

Utrn

UP

TN

Raj

Ori

Punj

Mah

MP

Ker

Kar

Jhr

JK

HP

Guj

Har

Bih

Chtg

AP

0

Asm

20

244   K.S. Kavi Kumar and Brinda Viswanathan households—for example, Jharkhand and West Bengal report large dependence on coal and Kerala reports dependence on firewood (possibly the coconut waste). Besides access, household income plays an important role in determining the household-level pollution. The aggregate picture reported above masks the differences across MPCE classes though regional differences are captured. Figure 11.5 shows the local and global per capita emissions across MPCE classes1 in India for the year 2004–05. As could be seen in case of local pollution there is a clear invertedU-shape relationship between pollution and household expenditure in rural India, while among the urban households the local pollution declines with income as expected. As far as the global pollution is concerned, there appears to be a non-linear relationship of order higher than two, perhaps a cubic relationship. Overall, the global pollution is likely to increase with household expenditure. The following section econometrically estimates the pollution– income relationship using household-level data.

4. Pollution–Income Relationship: Estimation Approach and Results As outlined in Section 2, a number of studies have explored the relationship between pollution and income in an attempt to test existence of the environmental Kuznets’ curve hypothesis. While analyses involving outdoor pollution are common, a few studies have also attempted to find relationship between indoor pollution and income (see Kumar and Viswanathan, 2007 for an analysis involving Indian data). The analysis reported here follows this strand of literature with some important new features. Since there is no data on pollution directly available at the household level, the same is estimated in the present analysis using the household-level consumption of various fuels and electricity. The household-level information on fuel use, income and other characteristics is obtained from the unit record data of the 61st round of the NSS for the year 2004–05. Based on the insights obtained in the previous section, the econometric specification for the estimation of pollution–income relationship is based on the following equations.

PM h = a1 + a2 yh + a3 yh2 + ∑ b j Chj + eh

 2 3 CO 2 eh = a1 + a2 yh + a3 yh + a4 yh + ∑ b j Chj + eh

(1) 

(2)

0.000

0.200

0.400

0.600

0.800

1.000

1.200

1.400

Particulate Matter (kg/year) - Rural

Figure 11.5 Per Capita Local and Global Emissions across MPCE Classes: 2004–05

MPCE Classes

Figure 11.5 continued

C1 C2 C3 C4 C5 C6 C7 C8 C9 C10 C11 C12 C13 C14 C15 C16 C17 C18 C19 C20 C21 C22 C23 C24 C25 C26 C27 C28 C29 C30 C31 C32 C33 C34 C35 C36 C37 C38 C39 C40 C41 C42 C43 C44 C45 C46 C47 C48 C49 C50

0.000

0.200

0.400

0.600

0.800

1.000

Figure 11.5 continued

MPCE Classes

Particulate Matter (kg/year) - Urban

C1 C2 C3 C4 C5 C6 C7 C8 C9 C10 C11 C12 C13 C14 C15 C16 C17 C18 C19 C20 C21 C22 C23 C24 C25 C26 C27 C28 C29 C30 C31 C32 C33 C34 C35 C36 C37 C38 C39 C40 C41 C42 C43 C44 C45 C46 C47 C48 C49 C50

0.000

0.100

0.200

0.300

0.400

0.500

MPCE Classes

Global Pollution (tons/year) - Rural

Figure 11.5 continued

C1 C2 C3 C4 C5 C6 C7 C8 C9 C10 C11 C12 C13 C14 C15 C16 C17 C18 C19 C20 C21 C22 C23 C24 C25 C26 C27 C28 C29 C30 C31 C32 C33 C34 C35 C36 C37 C38 C39 C40 C41 C42 C43 C44 C45 C46 C47 C48 C49 C50

0.000

0.200

0.400

0.600

0.800

1.000

1.200

Figure 11.5 continued

MPCE Classes

Global Pollution (tons/year) - Urban

C1 C2 C3 C4 C5 C6 C7 C8 C9 C10 C11 C12 C13 C14 C15 C16 C17 C18 C19 C20 C21 C22 C23 C24 C25 C26 C27 C28 C29 C30 C31 C32 C33 C34 C35 C36 C37 C38 C39 C40 C41 C42 C43 C44 C45 C46 C47 C48 C49 C50

Household-level Pollution in India  

249

where PMh are emissions of particulate matter per month from household h; CO2eh are the CO2 equivalent emissions per month2 from household h; yh is the per capita monthly expenditure of household h used as proxy for household income; Chj are control variables including household size, proportion of children, choice of primary fuels expressed as proportion of expenditure on a specific fuel as a ratio of the total fuel expenditure of the household, caste and religion dummies, occupational class dummies and regional/state dummies. The estimations are carried out separately for the rural and urban households using all-India level sample comprising about 67,000 and 38,000 observations, respectively. Equations (1) and (2) have has also been estimated for each of the states separately and the discussion here is largely confined to the all-India level estimations.

Pollution–Income Relationship: Local Pollution Table 11.2 reports the estimated pollution–income relationship for local pollution for both rural and urban households. The estimated pollution– income relationships have several expected features with the adjusted R2 values of about 37 per cent for the rural sample and above 50 per cent for the urban sample. The control variables are statistically significant and have expected impact in all regressions, including the state-level regressions. The household size coefficient is negative in all regressions due to economies of scale reflecting that—keeping MPCE, household compositions and other variables constant—households with larger size tend to consume less cooking fuel and hence could have less indoor pollution. The coefficient for proportion of children capturing household composition is also negative indicating that households with larger proportion of children (keeping everything else as the same) report lower per capita fuel usage. The coefficients of proportion of primary fuel expenditure in the overall fuel expenditure have significant role in the estimated pollution–income relationship. In particular, the coefficients of pry-fwd and pry-othfl are positive and have large magnitudes indicating that the households depending on firewood and other fuels, such as agricultural residue and dung, as primary fuel will have proportionately higher pollution levels. Based on state-level estimations (results not reported here), it is observed that the coefficients of these variables have larger magnitudes (compared to the allIndia average) in states that depend largely on firewood and/or other fuels, especially in the rural areas. This is observed, for instance, in the states like West Bengal, Jharkhand and Orissa due to their greater dependence on coal and firewood; in Haryana and Punjab due to their easier access to

250   K.S. Kavi Kumar and Brinda Viswanathan Table 11.2 Pollution–Income Relationship: Local Pollution Rural

Urban

Income

0.081 (0.00)

–0.005 (0.00)

Income2

–3.9 × 10–5 (0.00)

2.8 × 10–7 (0.14)

Household size

–6.8 (0.00)

–2.2 (0.00)

Proportion of children

–23.4 (0.00)

–4.5 (0.04)

Primary fuel (firewood)

54.2 (0.00)

57.3 (0.00)

Primary fuel (LPG)

–10.1 (0.001)

Primary fuel (other fuel)

148.3 (0.00)

Observations R

2

67,100 0.37

1.3 (0.115) 158.8 (0.00) 37,802 0.52

Note: The dependent variable is per capita PM emissions. The values in brackets indicate the p values.

agricultural residue and dung; and in Kerala and Uttaranchal due to their dependence on firewood. The estimated pollution–income relationship indicates that there is evidence for EKC hypothesis among rural households (at all-India as well as state level), whereas the pollution–income is monotonic among the urban households with income having negative influence on PM emissions. These results are in line with the earlier studies in this field for India (Kumar and Viswanathan, 2007) and other developing countries like Pakistan (Chaudhuri and Pfaff, 2002)

Pollution–Income Relationship: Global Pollution In case of global pollution, as mentioned above, the emissions of three main GHGs (CO2, CH4 and N2O) are considered from both cooking fuels and electricity consumption by the households. The GHGs are aggregated

Household-level Pollution in India  

251

Table 11.3 Pollution–Income Relationship: Global Pollution Rural

Urban

Income

6.732 (0.000)

14.553 (0.000)

Income2

–0.00027 (0.000)

0.00074 (0.276)

Income3

2.48 × 10–9 (0.000)

–2.12 × 10–7 (0.000)

Household size

–1037.8 (0.000)

–1025.6 (0.000)

Proportion of children

–3827.6 (0.000)

–4841.5 (0.000)

Primary fuel (firewood)

–2701.4 (0.000)

–5661.2 (0.000)

Primary fuel (LPG)

1135.1 (0.000)

–2434.6 (0.000)

Primary lighting (electricity)

7582.5 (0.000)

7612.9 (0.000)

Observations R2

68,409 0.46

37,748 0.48

Note: The dependent variable is per capita CO2-equivalent emissions. The values in brackets indicate the p values.

using the 100-year global warming potential of each gas and expressed in CO2-equivalent terms. Table 11.3 shows the estimated pollution–income relationship for the rural and urban households for the global pollution. The estimated pollution–income relationships exhibit healthy goodness-offit with the adjusted R2 values of about 45 per cent for the rural sample and above 48 per cent for the urban sample. Most of the estimated coefficients are significant. As in case of the local pollution, the influence of household size and proportion of children is negative (keeping everything else as the same) on global pollution. Among other control variables, dependence on firewood is likely to bring down the global pollution in both rural and urban households. On the other hand, the coefficient of proportion of expenditure on electricity in the household-level total energy expenditure is positive and

252   K.S. Kavi Kumar and Brinda Viswanathan significantly large reflecting strong linkage between electricity consumption and global pollution. The estimation results show that income, income square and income cube terms have positive, negative and positive impacts, respectively, on global pollution for rural households. In urban areas, on the other hand, the income square term is not significant. Thus, the dataset does not provide evidence for EKC in case of global pollution. Although the overall nature of the estimated pollution–income relationship is similar in both rural and urban areas, the income coefficient is two times higher for the urban households compared to their rural counterparts, indicating relatively large contribution to the global pollution from the urban households. On the whole the estimated pollution–income relationship for the global pollution is in line with the available evidence in the literature, which suggests that lack of alternative low carbon fuels and carbon intensive lifestyles have restricted the pollution–income relationship so far to the upward sloping arm of the EKC.

5. Household-level Pollution: Future Projections Based on the estimated income–pollution relationship discussed in the previous section, an attempt is made here to project future levels of local and global pollution from the rural and urban households in India. The discussions in this section are based on projections made for the year 2026. The choice of 2026 is made keeping in view the availability of population projections for that year, and also allowing the results from this study comparable with other similar studies in the literature (e.g., Mestl and Eskeland, 2009). For the purpose of projections the population is assumed to reach 1.4 billion by the year 2026 in line with the Government of India projections. About 67 per cent of the projected population is assumed to reside in rural areas. The rural and urban incomes are assumed to grow at 2 per cent and 5 per cent per annum, respectively. The pollution projections are made for the following scenarios: • Business-as-usual (BAU): With population and income projected to grow as per the assumptions mentioned, the estimated pollution– income relationship discussed in Section 4 is used to assess the future pollution levels.

Household-level Pollution in India  

253

• Fuel change: Similar to BAU, but the proportion of expenditure on primary cooking fuels and lighting are altered in this scenario. The changes are made in such a way that there is shift towards LPG for cooking and towards electricity for lighting. • Clean stoves: While the population and income projections are similar to those assumed in the previous two scenarios, this scenario attempts to capture the impact of National Biomass Cookstoves Initiative on local and global pollution from the households. Expecting complete transition to the clean cookstoves, the local and global emissions from households using firewood and other biomass-based fuels are estimated using the emission coefficients of LPG. The income–pollution relationship (for both local and global pollution) is re-estimated for rural and urban households using this relatively ‘clean’ per capita pollution as the dependent variable in equation (1). The re-estimated pollution–income relationship for local pollution still exhibits inverted-U shape for rural households, but with a much diminished magnitude for the slope coefficient (results not reported here). The re-estimated relationship for the urban households is similar to the earlier one, again with relatively smaller slope coefficient. The influence of clean stoves in case of global pollution and income relationship is much weaker as expected. Figure 11.6 shows the local and global pollution for the above three scenarios for the year 2026 in rural and urban India. For comparison the 2004 emissions are also shown in the figure. From the projections, the following can be inferred: • The ‘BAU’ scenario projects the local emissions to go up by close to 60 per cent in both rural and urban households. • While both the ‘fuel change’ and ‘clean stoves’ scenarios result in lower local pollution compared to the ‘BAU’ scenario in both rural and urban households, the effects are significantly high in case of rural households and under the ‘clean stoves’ scenario. In case of ‘clean stoves’ scenario the reduction in local emissions compared to the ‘BAU’ is close to 86 per cent in rural India and is about 70 per cent in urban India. Given the large base value, particularly in rural India, these reductions in PM emissions would most certainly lead to significant benefits in reducing health burden. The ‘fuel change’ scenario has relatively higher contribution in reducing pollution in

254   K.S. Kavi Kumar and Brinda Viswanathan Figure 11.6 Local and Global Pollution Projections: 2026

1400 1200 1000 800 600 400 200 0

CO2e Emissions - million tons/yr

PM, 000 tons/year

Local Pollution - Projections

2004 Emi

BAU

Fuel Change Clean Stoves Scenarios R

U

Global Pollution - Projections 400 350 300 250 200 150 100 50 0

2004 Emi

BAU

Fuel Change Clean Stoves Scenarios R U

urban India, especially because of greater penetration of LPG in the peri-urban areas. • In case of global emissions, the ‘BAU’ scenario projects about 45 per cent increase in rural India and close to fourfold increase in urban India. • The ‘fuel change’ scenario has relatively less influence on global emissions in rural and urban India, compared to the ‘clean stoves’ scenario. However, both the scenarios have far lesser effect on global pollution compared to the local pollution. Further, the effects are relatively more pronounced among rural Indian households compared to the urban households (especially the ‘clean stoves’ scenario). In case of ‘fuel change’ scenario, the thrust is on shifting towards fuels that result in lower local pollution. But such shift may lead to higher global pollution as shift from firewood to LPG will result in higher CO2 emissions while leading to lower PM emissions. In case of ‘clean stoves’ scenario,

Household-level Pollution in India  

255

the thrust is on ensuring clean combustion so that the households using firewood, for example, can continue to use that fuel for cooking but safeguard themselves from particulate emissions and related health risks. In other words, the ‘clean stoves’ scenario could, in principle, result in lower local emissions without necessarily increasing the global emissions. The emission projections presented here should be seen from this perspective. While India’s earlier attempt to introduce clean cookstoves has not been very impressive,3 the new initiative with its focus on efficient combustion has the potential to put India on sustainable development path.

6. Conclusions This study based on unit record data of the 61st round of the NSS for the year 2004–05 assessed the local and global pollution profile in rural and urban India and correspondingly estimated the pollution–income relationship. The results provide evidence for EKC in rural India for local pollution corroborating the earlier findings (Kumar and Viswanathan, 2007). Highlighting the significant difference between rural and urban India in terms of access to clean energy, the results also indicate monotonically decreasing pollution–income relationship among urban households for local pollution. The global pollution, on the other hand, is monotonically increasing among both rural and urban households reflecting carbon intensive energy use. The study also projected emissions under various scenarios including clean cookstoves. The results indicate that penetration of clean cookstoves has significantly large potential to reduce both local and global pollution from the household sector in India. The importance of NCI and its ready implementation in India can be further understood through a quick glance at the ever increasing pattern of firewood usage across India. In rural India, the per capita firewood consumption in 2004–05, for instance, has increased in as many as 15 states compared to 1999–2000, and in 11 states compared to 1993–94. In urban India, firewood usage is less pronounced but still significant. The per capita firewood consumption in 2004–05 has increased in as many as 11 states compared to 1999–2000, and in five states compared to 1993–94. The LPG usage correspondingly has not shown significant increase over time and in some states like Gujarat (rural and urban) and Himachal Pradesh (urban) the usage has even declined over time. This can be seen as a reflection of growing energy demand and unmet energy needs, namely energy poverty.

256   K.S. Kavi Kumar and Brinda Viswanathan Although NCI has the potential to put India on sustainable development path, an obvious issue that needs further attention is the scope and feasibility of penetration of the ‘clean stoves’ in India. A few issues in this context are worth mentioning and can also be seen as pointers for further research: • Are ‘LPG-like’ emissions from the ‘clean stoves’ possible? There is not much evidence on the performance of ‘clean stoves’ in the nonlaboratory conditions. The evidence on emissions is further weak when multiple fuels like dung and crop residue are also used along with firewood. • Acceptability—while the global evidence on acceptability of advanced biomass stoves appears encouraging, more studies on Indian households are needed to assess the factors affecting the penetration. • Urbanization—increasing rate of urbanization along with its fast moving lifestyle would necessitate the use of cooking facility that has the switch-on/switch-off features. Hence it could lead to shift towards LPG and in principle undermine the climate co-benefits from NCI. • Fiscal burden—while no estimates have so far been made on the likely fiscal burden due to full-blown implementation of NCI, given the scale of such implementation it is quite likely that the fiscal needs would be significant. If the advanced cookstoves have the potential to reduce about 4 per cent of India’s total annual GHG emissions, then this would be worth around $1.4 billion in the international carbon market. Hence, it could be useful to explore the carbon financing option for the NCI implementation.

Notes 1. For greater clarity of the pollution distribution, the households are divided into 50 equal expenditure classes. 2. Three important greenhouse gases, namely, carbon dioxide, methane and nitrous oxide are included in the calculations of carbon dioxide equivalent emissions. Also, 10 per cent non-renewability factor is assumed in case of biomassbased fuels and hence accounts for net positive carbon dioxide emissions from such fuels. 3. Despite considerable investment by the Government of India, the earlier cookstoves program could penetrate only about 15 per cent of Indian homes between 1980 and 1992 (Parikh et al., 1999).

Household-level Pollution in India  

257

References Andreoni, A.J. and A. Levinson (2001), The Simple Analytics of the Environmental Mental Kuznets Curve, Journal of Public Economics, Vol. 80, No. 2, pp. 269–86. Antonette, D’sa and K.V.N. Murthy (2004), Report on the Use of LPG as a Domestic Cooking Fuel Option in India, International Energy Initiative, Bangalore. Balakrishnan, K., S. Mehta, P. Kumar, P. Ramaswamy, S. Sambandam, K.S. Kumar and K.R. Smith (2004), Indoor Air Pollution Associated with Household Fuel Use in India, ESMAP, World Bank. Chaudhuri, S. and A.S.P. Pfaff (2002), Economic Growth and the Environment: What Can We Learn from household data? Working Paper No. 0102-51, Economics Department, Columbia University, New York. ESMAP (2003), Access of the Poor to Clean Household Fuels in India, Energy Sector Management Assistance Programme, Report 263/03, The World Bank, Washington, D.C. Ezzati, M., A.D. Lopez, A. Rodgers and C.J.L. Murry (eds.), Comparative Quantification of Health Risks: Global and Regional Burden of Disease Attributable to Selected Major Risk Factors, World Health Organization, Geneva. Filippini, M. and S. Pachauri (2004), Elasticities of Electricity Demand in Urban Indian Households, Energy Policy, Vol. 32, pp. 429–36. Gundimeda, H. and G. Kohlin (2006), Fuel Demand Elasticities for Energy and Environmental Policies: Indian Sample Survey Evidence, Working Paper No. 9, Madras School of Economics, Chennai. Kumar, K.S.K. and B. Viswanathan (2007), Changing Structure of Income Indoor Air Pollution Relationship in India, Energy Policy, Vol. 35, pp. 5496–504. Mestl, E.A.S. and G.S. Eskeland (2009), Richer and Healthier, but not Greener? Choices Concerning Household Energy use in India, Energy Policy, Vol. 37, pp. 3009–19. Parikh, J., K. Balakrishnan, V. Laxmi and H. Biswas (2001), Exposure from Cooking with Bio-fuels: Pollution Monitoring and Analysis for Rural, Tamil Nadu, Energy: The International Journal, Vol. 26, No. 10, pp. 949–62. Parikh, J., K.R. Smith and V. Laxmi (1999), Indoor Air Pollution: A Reflection on Gender Bias, Economic and Political Weekly, Vol. 34, pp. 539–44. Parikh, J.K., H. Biswas and S. Karmarkar (2003), Cooking with Bio-fuels: Risk Factors Affecting Health Impact on Rural Women, Economic and Political Weekly, Vol. 38, 28 June, pp. 2681–92. Patil, B. (2010), The Status of Rural Energy Access in India: A Synthesis, Energy Technology Innovation Policy Discussion Paper Series, Discussion Paper No. 2010–09, Belfer Center for Science and International Awards, Harvard Kennedy School, available at www.hks.harvard.edu Pfaff, A.S.P., S. Chaudhuri and H.L.M Nye (2004), Household Production and Environmental Kuznets Curves? Examining the Desirability and Feasibility of Substitution, Environmental and Resource Economics, Vol. 27, No. 2, pp. 187–200.

258   K.S. Kavi Kumar and Brinda Viswanathan Smith, K.R. and S. Mehta (2000), The Burden of Disease from Indoor Air Pollution in Developing Countries: Comparison of Estimates, Background Paper for USAID/ WHO Global Consultation on the Health Impact of Indoor Air Pollution and Household Energy in Developing Countries, Washington, DC. Smith, K.R, R. Uma, V.V.N. Kishore, J. Zhang, V. Joshi and M.A.K. Khalil (2000), Greenhouse Implications of Household Stoves: An Analysis for India, Annual Review of Energy and Environment, Vol. 25, pp. 741–63. Smith, K.R., S. Mehta and M. Maeusezahl-Feuz (2004), Indoor Air Pollution from Household Use of Solid Fuels, in M. Ezzati, A.D. Lopez, A. Rodgers and C.J.L. Murry (eds.), Comparative Quantification of Health Risks: Global and Regional Burden of Disease Attributable to Selected Major Risk Factors, World Health Organization, Geneva. Venkataraman, C., A.D. Sagar, G. Habib, N. Lam and K.R. Smith (2010), The Indian National Initiative for Advanced Biomass Cookstoves: The Benefits of Clean Combustion, Energy for Sustainable Development, Vol. 14, pp. 63–72. Venkataraman, C., G. Habib, A. Eiguren-Fernandez, A.H. Miguel and S.K. Friedlander (2005), Residential Biofuels in South Asia: Carbonaceous Aerosol Emissions and Climate Impacts, Science, Vol. 307, pp. 1454–56. Viswanathan, B. and K.S.K. Kumar (2005), Cooking Fuel Use Patterns in India: 1983–2000, Energy Policy, Vol. 33, No. 8, pp. 1021–36. Wilkinson, P., K.R. Smith, M. Davies, H. Adair, B.G. Armstrong, M. Barrett, N. Bruce, et al. (2009), Public Health Benefits of Strategies to Reduce Greenhouse Gas Emissions: Household Energy, The Lancet, Vol. 374, No. 9705, pp. 1917–29. World Bank (2001), Health and Environment, Background Paper for the World Bank Environment Strategy, Washington, DC. World Bank (2008), Residential Consumption of Electricity in India: Documentation of Data and Methodology, Background Paper for India: Strategies for Low Carbon Growth, World Bank, Washington, DC. Zhang, Y. and R. Vanneman (2008), Economic Growth and the Environment: A Household Perspective from Cooking Fuel Choices and Indoor Air Pollution, Paper Presented at the Annual Conference of Population Associate of America (2008) Annual Meeting, available at http://paa2008.princeton.edu/download. aspx?submissionId=80097 Zigova K., R. Fuchs, L. Jiang, B. C. O’Neill and S. Pachauri (2009), Household Survey Data Used in Calibrating the Population-Environment-Technology Model, IIASA, Interim Report IR-09-046, International Institute for Applied Systems Analysis: Vienna.

12

Market-based Institutional Reforms for Water Allocation in India: Issues and the Way Forward L. Venkatachalam

Introduction

E

xisting literature on economics of water scarcity revolves mainly around three major themes namely, physical scarcity of water (Rosegrant, 1995) that constrains development, financial scarcity affecting investment in water sector (Winpenny, 2003) and institutional scarcity leading to poor water governance (Saleth and Dinar, 2004). The literature suggests that water-related issues, in one way or other, arise largely due to ‘government failure’. Depletion and degradation of water resources and the resulting social costs in the economy may be attributed to myopic or misguided policies of the government in the relevant sectors (Sterner, 2002). This implies that the water sector policies in future should adopt more innovative and comprehensive institutional approach which facilitates the government, market and other institutions to play their respective roles in water use efficiency. As the government fails, a modern economic philosophy in water management is to use appropriate market-based instruments (MBIs) with limited

260   L. Venkatachalam government intervention. There are two profound issues here: (a) what type of economic instrument is conducive for managing water and its services in a particular socio-economic and political context; and (b) what role the government should play. In the case of former, tradable water rights (Thobani, 1997) has been proposed as an efficient economic instrument in terms of allocating scarce water; the answer for the latter issue depends on the associated transaction costs of role of government in the overall domain of water governance. As empirically demonstrated, there are several incremental benefits with tradable water rights system which comes with inbuilt incentive and disincentive mechanisms to promote water use efficiency and conservation especially in the irrigation sector. Tradable water rights could generate right incentives to the farmers to use the scarce water more efficiently, generate surplus water wherever possible and trade the surplus with other users on the basis of the ‘scarcity value’ (see Rosegrant, 1995). There are, however, problems with the tradable water rights as well (Bauer, 1997), and we will discuss some of them later.

Advantages with Tradable Water Rights There are potential economic and environmental gains from specifying property rights in surface irrigation (Thobani, 1998, 1997; Rosegrant and Binswanger, 1994). When water transfer is coordinated by the markets under the tradable water rights regime, the problem of asymmetric information among sellers, buyers and bureaucrats is reduced significantly; much of the information about the preferences of sellers and buyers is transferred from the private individuals to the public domain reducing the transaction cost of water transfer significantly. Under tradable water rights regime, the production system is expected to adjust automatically to a new scarcity regime due to free flow of information across the buyers and sellers of water. With an improved efficiency level in the water use system, the economic system is also expected to adjust to a higher efficient level of equilibrium. Similarly, for each level of water scarcity appearing on the time scale the system is expected to adjust adequately provided the transaction cost of adjustment is negligible. As Coase (1960) theorem suggests, introducing ‘tradable water rights’ would bring in an efficient equilibrium by equating the demand for and the supply of scarce water with the corresponding WTP (willingness to pay) and WTA (willingness to accept) compensation of the buyers and sellers,

Market-based Institutional Reforms for Water  

261

respectively. The economic welfare resulting from the voluntary exchange is maximized because of the fact that the gainers of water transfer could adequately compensate the losers by still remaining the gainer; this produces a ‘win–win’ outcome for the buyers and sellers from trading the surplus water. As we have already pointed out, the voluntary exchange is being facilitated by low or negligible level of transaction cost; if the transaction cost is high, then efficient institutions are supposed to emerge to minimize it. As the efficient institutions could thrive, water allocation at macro level would reach a point where no further movement would lead to superior outcomes. When change in quantity or quality of water causes either positive or negative externalities, the underlying pay-off structure would also change. In this case, the individuals would revise their WTP and WTA values bringing equilibrium according to the level of scarcity. In a world of ever-increasing absolute water scarcity, the water transforms itself from a ‘free-good’ into an ‘economic commodity’1 (Hanemann, 2006; Rogers et al., 2002). Along with this transformation, the allocation regime should also change from government dominated one to a more market-dominated one. This is justified on the ground that an obvious institution that could allocate an economic commodity more efficiently is the market. Many economists put forward different types of economic arguments to support this normative stand. One such argument derives from ‘big-bills theory’, propounded by mainstream economists. This theory, when extended to the water sector, implies that a substantial amount of benefits in this sector remains unexploited and it is usually the market forces which provide appropriate incentives and disincentives for the rational users to utilize these benefits appropriately. The maximized producer and consumer surpluses as well as the minimized transaction costs2 under the market regime produce an efficient outcome not only to the direct users involved in water trade but also to other stakeholders, including the government (see Biswas, 2008). As we have already seen, many empirical studies aimed at estimating the farmers’ WTP for additional irrigation have also provided strong evidence to strengthen the ‘big-bills theory’. Moreover, studies on informal water markets suggest that the farmers are already incurring a significant amount of their farm income on buying water from ‘monopoly’ sellers and therefore, introducing tradable water rights system is assumed to: (a) transfer a substantial portion of this expenditure to the government, leaving the farmers still better-off; (b) reduce the transaction cost of the governments on operations and maintenance of irrigation system; and (c) reduce the transaction cost to the farmers in terms of increasing the

262   L. Venkatachalam reliability of water supply. Moreover, indirect benefits in terms of reduced impact of negative externalities could also be enhanced significantly under the tradable water rights regime. It should be noted that the market-based instruments cannot be perfect substitutes for the command-and-control method. Rather, there is a right mix between these two methods, which is determined mainly by the socio-economic, political, institutional and geographical factors prevailing in a particular region. Indeed, one of the major challenges in the ongoing water sector reforms in many of the developing countries is to identify this right mix between government and market, for a given set of factors governing water management at the regional level (see Williamson, 2005). As the new institutional economics (Williamson, 2000) suggests, the right mix of institutions is to be determined mainly by the transaction costs involved in it.

Institutional Reforms in Water Sector: International Experience There exists a relatively rich empirical literature that deals with countryspecific studies on market-based institutional reforms in general and tradable water rights in particular (e.g., Griffin, 1998; Hearne and Easter, 1998; Horbulik and Lo, 1998; Howe, 1998; Saleth, 1998; Brennen, 2001; Bjornlund, 2004; Backeberg, 2005; Doukkali, 2005; McKay, 2005; Peterson et al., 2005 and so on). These case studies provide useful insights into issues including nature of reforms carried out in the respective countries and regions, types of institutional arrangements established for reforming the water sector, factors influencing those reforms and the cause and effect relationship between reforms and the associated net benefits. One of the conclusions emerging from the empirical literature is that defining or creating user rights over water is one of the major objectives underlying these reforms—although the degree of control over these rights by the users differs across different countries. The US and Australia pioneered in introducing tradable water rights to transfer water from less valued use to a high valued use. The nature and intensity of these formal markets differs between surface and groundwater, and between different regions depending on the level of water scarcity and nature of the law facilitating water trade (Griffin, 1998; Howe, 1998). In the western US where the formal markets are active, water transfer takes place mainly between agriculture and urban sectors, although few transfers

Market-based Institutional Reforms for Water  

263

are effected within agriculture (Brewer et al. 2008). In the US, the traditional focus on common law and statutory remedies failed to address the problems of inadequate incentives for conservation, lack of environmental protection and other problems arising from increased scarcity of water (Thompson, 1993). Water scarcity has been a major driving force behind the emergence of water markets and the governments played a facilitating role by way of enacting and implementing appropriate policies and laws (Griffin, 1998). For example, the 1987–91 droughts in California state led to creation of government operated ‘water bank’ which facilitated transfer of 1025 m3 water from low-value agriculture to high-value urban and municipal uses. Water purchase for the bank came from three source: (a) half of the surface water was purchased from the farmers who found more profit in transferring water to the water bank than using it for the low valued crops; (b) one-third came from farmers who sold surface water by substituting the groundwater for crop production; and (c) 17 per cent came from ‘excess water’ (Howitt, 1994). The water bank example in California suggests that increase in scarcity does not spontaneously lead to transfer of water from one use to another use; what is required is the government initiative with a right approach at right time that would generate win–win outcomes for the users. Australia is another pioneering country where the ongoing institutional changes are essentially tuned to provide an integrated approach to water management where the role of market, the government and the community are recognized as instrumental in managing scarce water resources (Crean and Young, 2001; McKay, 2005). While the exogenous factors (e.g., economic reforms at the macro level) provided conducive institutional environment for water sector reforms, it is the endogenous factors (e.g., water scarcity) which provided impetus to implement the tradable water rights regime in Australia. Also, the political structure at the federal level and the social structure in relation to water use at micro level have also been adequately incorporated in the water reform measures in that country in order to make the reforms successful (McKay, 2005). The Chilean experience suggests that water reforms with market instruments became an integral part of overall economic reforms at macro level (Hearne and Easter, 1998; Hearne and Donoso, 2005). The institutional arrangements were made in such a way that the farmers could continue to trade water rights while the government holds overall property rights over the entire water resources (Crase et al., 2001). It should be noted that in Chile, relevant institutional arrangements have been put in place, prior to reforming water sector. For example, special law providing exclusive rights

264   L. Venkatachalam for water use has been enacted in 1981; water user associations (WUAs) have been created exclusively for managing water at local level and the irrigation administration has been strengthened adequately to provide overall support; appropriate regulation and conflict resolution mechanisms were established so that full potential of the markets could be adequately tapped; and, in order to gain additional knowledge to correct the mistakes committed, a step-by-step approach has been adopted to introduce reform measures at the river basin level (Hearne, 1998). However, Chilean water markets still experience problems like unregistered markets adversely affecting the efficient transfer and use of water. In Morocco, historical and colonial factors played a role in institutional reforms initially, while economic and political factors strengthened such reforms in the latter period (Doukkali, 2005; see also Saleth and Dinar, 2005). Similar to other developing countries, it is the macroeconomic crises which influenced water sector reforms in Morocco in the latter years (Saleth and Dinar, 2005). Experience in South Africa also reveals that reforms have been influenced mainly by the macroeconomic reforms carried out during the 1990s; the endogenous factors namely, drought and conflicts over water sharing with other neighbouring countries, also provided strong justification for such reforms in the water sector (Backeberg, 2005). In order to achieve maximum benefits from reform measures, the government took certain specific initiatives, such as amending the constitution, formulating water policies and water legislation and integrating water policy with the policies of other sectors (Backeberg, 2005). In Mexico, the water reform measures initiated in a comprehensive manner progressed over 20 years with mistakes being corrected regularly; the reform measures are characterized by government regulations of private property rights over water (Shah et al., 2004a). Reforms in China are lauded for their ability to provide market-like incentives for the communities to participate in water management effectively, although the government has overall control over the water resources (see Shah et al., 2004b). The stage-based institutional reforms in water sector in Sri Lanka are considered an integral component of the macroeconomic reform measures initiated in this country (Samad, 2005). In the first stage of reforms, a micro-based approach has been adopted in which the irrigation reforms were given more priority and this yielded substantial benefits in the agriculture sector with minimum political risk; the macro-based second stage of reforms focused mainly on the entire water sector, which, apart from attracting political risk, generated low level of net gains than expected. However, present reform measures in Sri Lanka focus mainly on overcoming the

Market-based Institutional Reforms for Water  

265

issues encountered in the past and this provides a lot of scope for making these measures more effective in the coming years (Samad, 2005). Other countries in Asia, such as Thailand and Vietnam, have also ventured into reforming the water sector in a rigorous manner, especially in recent years. In Thailand, for example, water reform measures embody Integrated Water Resources Management (IWRM) approach at the river basin level, which includes substantial amount of economic and institutional reforms. Similarly, water reform measures with more market orientation are being carried out at specific river basins in Vietnam (Turrol and Malano, 2001). Countries like Namibia which adopted water reforms very recently are learning through their experience since adequate institutions and skills have not yet been developed to support full-fledged reforms (Heyns, 2005). From the empirical results, it is understood that the degree of control over property rights depends mainly on the political set-up, historical factors and the nature of institutions prevailing in a particular country or region. In certain countries, the user rights are strictly regulated by the governments (e.g., China), while in certain other countries the users have liberty to enjoy more power over these rights (e.g., US). Another aspect to be noted is that the major objective of the water sector reforms in developing countries has been to reduce enormous transaction costs of managing water resources, currently borne by the governments, and not to address water scarcity per se. This being the case, it might have so happened that even the efficiently run irrigation systems in some of these countries would have been brought under the market domain. Similarly, the institutional models used across different countries are found to adopt ‘one-size-fits-all’ type approach, with ‘institutional changes’ that accommodate insufficient regional and local level socio-economic, political and other region-specific factors (see Meinzen-Dick, 2007). The models used, in many cases, are found to have been prescribed by the external funding agencies; this is evident from the fact that almost all water sector reform measures were preceded by macroeconomic reform measures promoted by such agencies. The link between macro-level water sector reforms and micro-level water use behaviour is also not very clear. Moreover, the failed cases of institutional reforms are not reported in the mainstream, scientific literature. The studies that report institutional failure are available mainly from the popular literature and, therefore, using the results of these studies in reviews is constrained by lack of scientific validity. It is important that in future, comprehensive scientific studies should be initiated to analyze the failure cases so that we can understand under what circumstances some models fail.

266   L. Venkatachalam

Case for Tradable Water Rights in India It should be noted that the problem of water scarcity in India has reached to such an extent where it constraints—both directly and indirectly—the economic development in general and agriculture development in particular, ultimately affecting sustainability of the regional economies. India adopted macroeconomic reforms in the middle of 1980s and subsequently, reform measures were initiated in the water sector during the 1990s (see Gulati and Narayanan, 2001). The initial reforms focused mainly on eliminating huge amount of subsidies given to the agriculture sector, which contributed to negative consequences, such as overexploitation of groundwater (Dubash, 2008; Gulati and Narayanan, 2001). The initial reforms focused on ‘pricing’ of irrigation water and reforming electricity use in agriculture became part of this initiative. The focus gradually moved from the visibly ‘unsuccessful’ measures towards other ‘demand-based measures’, such as introducing WUAs under the Participatory Irrigation Management System (PIMS) (Marothia, 2005). It should be noted that the existing institutional reforms are vague and not adequate to manage India’s scarce water resources; indeed, it is argued by Shah et al. (2004a) that India’s water sector is still crying for real institutional reforms. A meaningful institutional reform to address acute water scarcity in different parts of India comes in the form of introducing market-based instruments for water allocation with adequate support from government and local-level institutions. Like many other countries in South Asia, one of the unique features of India’s water sector is the presence of a large-scale informal water markets (Saleth, 1996; see also Meinzen-Dick, 1998), especially in the groundwater sector. These markets, emerged as a response to cope up with water scarcity in different agricultural regions of India (Saleth, 1996), were influenced by factors like technological improvements in water extraction, introduction of high-yielding crop verities and increased electricity and fuel subsidy for pumping groundwater. A good summary of economics and institutional aspects of these markets is available in Saleth (1998). An intriguing question here is why informal markets continue to be in the informal domain, rather than transforming themselves into the ‘formal domain’ so that efficient water allocation at a macro level can take place on a long-term basis. Within the Coasian framework, the answer would be that the informal markets are relatively more efficient than the formal one and if the transaction costs of moving from informal to formal domain had been lower, such movement would have already occurred. But this does not necessarily mean that the transaction costs are minimum under the

Market-based Institutional Reforms for Water  

267

informal market domain either. These markets, for example, are not competitive because of monopoly power of sellers who indulge in both price as well as non-price discriminations; the markets are localized and highly fragmented in nature; characteristics that include trade on the basis of surplus supply, trade being influenced by social factors, variation in payment across regions and across time scale, and inefficient use and overexploitation of groundwater (Mohanty and Gupta, 2002) do contribute largely to increase the transaction cost rather than minimizing it. Since the price prevailing in these markets is usually greater than the competitive price, exploitation of ‘consumer surplus’ becomes a predominant strategy of the sellers. Electricity subsidies for water extraction benefit mainly the resource rich farmers, redistributing the agricultural benefits unfavourably to resource poor farmers. Moreover, unregulated, informal markets lead to overexploitation of groundwater, causing environmental externalities that increase the social cost in the regional economy; subsidized electricity in different parts of the country intensifies the existing adverse impacts (see Dubash, 2000). So, even though the transaction cost under the informal market regime is high it may be concluded that moving towards formal market would impose additional transaction costs and, therefore, it is argued that informal market that has come to exist is efficient in nature (Coase, 1960). The implication is that formal market could work efficiently only if supported by ‘transaction cost minimising’ institutions. As far as India is concerned, no concrete policy exists to facilitate formal markets (Mohanty and Gupta, 2002) in the water sector. Rather, the existing polices dealing with water allocation are highly fragmented, embedded in piecemeal approach and are highly ad hoc in nature. The IWRM approach adopted in India’s Water Policy 2002 prescribes introducing ‘water rights’ for managing water resources at the river basin level (see Shah and van Koppen, 2006). So, it provides scope for introducing formal markets for surface water transfer. However, very few states in India have adopted the IWRM approach and that to also, only partially. The approach is also subject to various criticisms (e.g., Dharmadhikary, 2007). For example, Shah and van Koppen (2006) argue that implementing permits for groundwater withdrawal requires effective monitoring; the very presence of informal water extraction on a large scale makes monitoring of such extraction more difficult and economically costly. Moreover, IWRM will be effective in those areas where the primary water diverters are large in size, corporate bodies are few in number, most water users are supplied by organized water providers and capital accumulation in terms of infrastructure creation is already high (Shah and van Koppen, 2006). Effective implementation of IWRM in the Indian

268   L. Venkatachalam context is hindered by existence of a large number of households who are the primary water diverters from the natural sources and generate very low level of capital accumulation in the water sector (Shah and van Koppen, 2006). Another major issue that has not been properly addressed in the IWRM approach relates to pricing of irrigation water based on scarcity value so that water transfer could be efficient and could generate larger net benefits. Improper pricing would become counter-productive in nature. At present, no proper institutional mechanism is available for generating adequate information required for pricing of water. For example, Maharashtra Water Resources Regulatory Authority (MWRRA) created to implement IWRM in that state has been assigned with the task of creating tradable water entitlements. The MWRRA is responsible for distributing the entitlements between various users so that these entitlements can be transferred, bartered, bought or sold on annual or seasonal basis. However, due to lack of information and guidance, the prospect of the authority to effectively regulate the water markets has become grim (Dharmadhikary, 2007). Also, many fear that tradable water rights suggested in the IWRM approach will lead to allocation of water to economically powerful people and, therefore, they argue that water rights approach will be stiffly resisted especially by the resource poor (Kumar, 2003). No institutional component is available in the IWRM approach so that unwarranted fears and the associated resistance could be dealt with adequately (see Ferenadez and Rodrik, 1991). Similarly, implementation of IWRM requires local or regional level institutions in India, similar to Catchment Management Institutions (CMAs) existing in countries like South Africa. Formation of CMAs, involving water user associations with appropriate technologies, is one of the challenges in implementing the IWRM in the Indian context (Shah and van Koppen, 2006). From the above analysis, one could get an impression that introducing formal markets in the Indian scenario is a difficult task, although not an impossible one. While discussing institutional options for water management in India, Saleth (1998) argues that …a legally instituted and locally managed water quota system defined within an ecologically consistent overall withdrawal limit could eliminate the negative effects of markets and magnify their positive efficiency and conservation benefits. While the magnitude of benefits from observed water markets is tremendous, their contribution is only a fraction of the efficiency, equity, and sustainability gains possible from formal markets emerging within well-managed water quota system. The prevailing institutional vacuum thus makes the currently observed water markets only a distant second-best option. (Saleth, 1998)

Market-based Institutional Reforms for Water  

269

The Way Forward How to make the distant, second-best option as a practicable, ‘first-best option’ in the near future is an important question that we have to address adequately. As we have already discussed, the need for moving to the firstbest option arises from the fact that water scarcity under the existing institutional and policy regime in India is becoming acute and generates huge social cost which is invisible in nature. This being the case, the importance of establishing tradable water rights—especially for managing the groundwater in India—has been already underlined by many researchers (e.g., Kumar, 2007; Saleth, 1996). However, we have no acceptable blueprint on how to introduce formal water markets in India; we lack knowledge of additional institutional arrangement required for formal markets to function in an efficient, sustainable and equitable manner under the tradable water rights regime. Since the ‘bounded rationality’ on understanding the required level of institutions poses greater difficulty (Conlisk, 1996), the experience from other parts of the world is expected to help achieving the goal. We have seen that many countries have introduced various kinds of institutional and policy measures at the macro level creating conducive environment for trade in water rights. However, effectiveness of these measures at the micro level depends mainly on the micro institutions that provide appropriate incentives and disincentives to the stakeholders to use, manage and transfer water (Thompson, 1993). In Texas, for example, water districts or river authorities play an important role in facilitating market operations. While partial ownership is exercised over the surface water, farmers enjoy ‘absolute ownership’ over the groundwater. In California, the local institutions formed by private and public bodies help to obtain, distribute, transfer and regulate water rights effectively (Thompson, 1993). In Spain, trading of water takes place at community level and it has been claimed that if the trade is allowed to take place across larger communities instead of individual communities the gains from water trade would be more (Easter et al., 1998); this implies that active involvement of individual communities has the key to achieve benefits across larger communities. In Canada, introducing water markets across sub-basins is found to result in increased benefits (Horbulik and Lo, 1998) than at the macro scale. In the developing country context, the institutional arrangements at regional and local level are somewhat different. In China, for example, the ‘irrigation service providers’ play a major role in allocating water at regional level (Shah et al., 2004b). In Thailand, the ‘basin working committees’

270   L. Venkatachalam consisting of different stakeholders take up overall responsibility of managing water at the river basin level, while the local water user associations control the allocation of water through market exchange (Patamatamkul, 2001). In one way or other, the micro-level institutions are critical to make the water rights to work efficiently. In the Indian context, both the central and the state governments have initiated both macro- and micro-level institutional reforms in the water sector. As we have already seen, the IWRM approach has been adopted in the national water policy, recognizing river basin as planning unit, water as an economic commodity and WUAs as micro units. The IWRM approach, however, does not adequately address certain profound issues in the water sector. For instance, how to generate adequate information about the opportunity cost of water use so that water could be allocated on the basis of economic principles has not yet been properly spelt out in the approach. In the case of groundwater, many state governments have introduced laws to curb the overexploitation of aquifers. But these laws do not provide any incentive for the farmers to conserve water because they restrict farmers’ freedom of opportunities to use the groundwater efficiently. Moreover, the transaction cost of monitoring and controlling groundwater exploitation is prohibitively high and, therefore, the resource-crunch governments could not enhance the supply of measures to monitor overexploitation. On top of everything, electricity subsidy provided to the farmers also intensifies the overexploitation in already water scarce areas, apart from causing inequality among different categories of farmers. As we have already seen, some of the state governments like Maharashtra have established regulatory authorities in the water sector to guide water allocation (Dharmathikary, 2007). But these authorities are not effective because their roles and functions are not properly defined and they do not have access to required information for water allocation decisions. In some other states like Tamil Nadu, river basin boards have been created for some specific river basins like Palar and Thambirabharani. These boards consist of various kinds of stakeholders and the major aim of these boards is to resolve water scarcity problem at the basin level through efficient conflict resolution mechanisms. However, these boards are also not functioning well because of lack of ‘political will’ and lack of information available for decision making. In many state governments, WUAs have been created for managing water at local level under the umbrella of PIMS. However, the results are not satisfactory here as well (see Marothia, 2005). Apart from these bodies which are directly involved in managing water resources at regional level, other organizations at local level namely,

Market-based Institutional Reforms for Water  

271

village panchayats and non-governmental organizations (NGOs) are also involved in water managements, especially in watershed management in dry regions. The outcomes of these arrangements are also not satisfactory, on an average. Altogether, it should be noted that the governments in India have established more than adequate level of institutions to manage water but in a fragmented manner. Therefore, if at all water scarcity needs to be addressed properly in the Indian context, an integrated approach is warranted for. One of the important aspects that is completely missing in the existing institutional arrangements is that there is no proper guiding principle on the basis of which the institutions could function efficiently. One can bring in numerous institutional changes but if the overall policy guiding water allocation is still guided by the conventional norms, then the outcomes would be counter-productive. The existing fragmented institutions suggest that the transaction cost of creating and operationalizing these institutions are enormous and in the present form, all these institutions are scarcity enhancing rather than scarcity minimizing. Keeping this in view, it is argued that there is a need for redesigning water policies in such a way that more market-based instruments especially, tradable water rights, can be introduced in the future so that the existing institutions can be appropriately integrated for achieving the goal of efficient, equitable and sustainable water management. Once the appropriate policy regime has been created, then other practical problems related to water trade may crop up in the system. For example, at what level the trade in water should take place, what kind of trade is transaction cost minimizing, who has to be responsible for regulating water trade, what kind of infrastructure is required for facilitating water trade, etc., are some of the questions which need to be answered. It should be noted that the answers for these questions will have to come from the regional and local level factors affecting water trade. For example, although water trading may not be possible between individual farmers or between individual farmers and urban buyers, such trading can be effective across sub-command areas or across WUAs in a canal system within the subcommand. Similarly, trading may take place between WUAs and urban water supply authorities, rather than on individual to individual basis. However, when the markets mature gradually the individual level trade becomes a viable option. In the case of groundwater, Kumar (2007) suggests that assignment of equal property rights over water irrespective of the size of the land will lead to equitable allocation of water since large farmers needing water over and above their own quota will end up buying water from small farmers who have got surplus water to sell. It may be noted

272   L. Venkatachalam that even if small farmers do not have adequate infrastructure to pump their own share of water, large farmers can pump water and share it with small farmers in case doing so is beneficial to both of them. At local level, the individual tradable permits may be issued on the basis of renewable amount of water (Kumar, 2007) so that overexploitation of aquifers will be avoided, especially in the scarce regions. In case the water trade causes negative externality, it is suggested that village-level institutions, watershed committees and aquifer management committees can be established exclusively for addressing it (Kumar, 2007). The overall regulation of water trading to avoid any conflict or negative externalities at regional or basin level may lie with the basin water boards or with the water regulatory authority. Sometimes, the standard economic prescriptions that include enacting laws and formal institutional arrangements within a broader model applied in one region may not be effective in another region because of huge amount of uncertainties about appropriate institutions and their impact on the behaviour of the economic agents. At this level, the market operations may sometimes be affected by non-conventional behavioural factors. Adequate inputs on these aspects need to be generated through scientific studies and should be incorporated in the design of instruments for water allocation so that valid predictions on market outcomes can be generated. On top of everything, different types of institutional arrangements and their effectiveness need to be assessed in terms of the net gains achieved through transaction cost minimization. Studies within the new institutional economics frameworks—including bounded rationality framework—is warranted for assessing net gains from market-based institutions for managing water at the river basin level, in the coming years.

Notes 1. An economic commodity can be both a public and a private good. While there is a consensus that allocation of private good can be efficiently coordinated by the markets, there is a debate on which institution is best to allocate the public good in an efficient manner. Recent studies on Payment for Ecosystem Services (PES) categorically demonstrate that some of the local public goods can be efficiently allocated by the market mechanism (see Engel et al. 2008). For an excellent critical review on water as an economic commodity, see Hanemann (2006). 2. Saleth and Dinar (2004) define transaction cost as follows: ‘The transaction costs cover both the real and monetary costs of altering the regulatory, monitoring and enforcement mechanisms related to water development, allocation and management’ (p. 5).

Market-based Institutional Reforms for Water  

273

References Backeberg, G.R. (2005), Water Institutional Reforms in South Africa, Water Policy, Vol. 7, No. 1, pp. 107–23. Biswas, D. (2008), Willingness to Pay for Improvements in Irrigation Water: A Case Study, in the Malaprabha Basin in Karnataka, Proceedings of the Interdisciplinary Research Methodology Workshop 2008, Madras Institute of Development Studies, Chennai, pp. 115–30. Bjornlund, H. (2004), Formal and Informal Water Markets: Drivers of Sustainable Rural Communities, Water Resources Research, Vol. 40, No. 9, p. W09S07. Brennan, D. (ed.) (2001), Water Policy Reform: Lessons from Asia and Australia, Proceeding of an International Workshop, Bangkok, Thailand. Coase, R.H. (1960), The Problem of Social Cost, Journal of Law and Economics, Vol. 3, pp. 1–44. Conlisk, J. (1996), Why Bounded Rationality? Journal of Economic Literature, Vol. 34, No. 2, pp. 669–700. Crean, J. and R. Young (2001), Modelling the Farm Level Implications of Water Reforms in NSW, Australia, in D. Brennan (ed.), Water Policy Reform: Lessons from Asia and Australia, Proceedings of an International Workshop, Bangkok, Thailand, pp. 299–318. Dharmadhikary, S. (2007), A Flawed Model for Water Regulation, India Together, available at www.indiatogether.org/2007/may/env-mwrra.htm. Doukkali, M.R. (2005), Water Institutional Reforms in Morocco, Water Policy, Vol. 7, No. 1, pp. 71–88. Dubash, N. (2000), The Electricity-Groundwater Conundrum: Case for a Political Solution for a Political Problem, Economic and Political Weekly, Vol. 42, No. 52, pp. 45–55. Engel, S., S. Pagiola and S. Wunder (2008), Designing Payments for Environmental Services in Theory and Practice: An Overview of the Issues, Ecological Economics, Vol. 65, No. 4, pp. 663–75. Fernandez, R. and D. Rodrik (1991), Resistance to Reform: Status Quo-Bias in the Presence of Individual-specific Uncertainty, American Economic Review, Vol. 81, pp. 1146–55. Griffin, C.W. (1998), The Application of Water Market Doctrines in Texas, in K.W. Easter, M.W. Rosegrant and A. Dinar (eds), Markets for Water: Potential and Performance, Kluwer Academic Publishers, Boston, pp. 51–64. Gulati, A. and S. Narayanan (2001), Subsidies and Reforms in Indian Irrigation, in D. Brennan (ed.), Water Policy Reform: Lessons from Asia and Australia, Proceedings of an International Workshop, Bangkok, Thailand, pp. 131–48. Hanemann, W.H. (2006), The Economic Conception of Water, in P.P. Rogers, M.R. Llamas, and L. Martinez-Cortina (eds), Water Crisis: Myth or Reality? Taylor & Francis, London. Hearne, R.R. and G. Donoso (2005), Water Institutional Reforms in Chile, Water Policy, Vol. 7, No. 1, pp. 53–69.

274   L. Venkatachalam Hearne, R.R. and K.W. Easter (1998), Economic and Financial Returns from Chile’s Water Markets, in K.W. Easter, M.W. Rosegrant and A. Dinar (eds), Markets for Water: Potential and Performance, Kluwer Academic Publishers, Boston, pp. 159–71. Heyns, P. (2005), Water Institutional Reforms in Namibia, Water Policy, Vol. 7, No. 1, pp. 89–106. Horbulik, T.M. and L.J. Lo (1998), Welfare Gains from Potential Water Markets in Alberta, Canada, in K.W. Easter, M.W. Rosegrant and A. Dinar (eds), Markets for Water: Potential and Performance, Kluwer Academic Publishers, Boston, pp. 241–58. Howe, C.W. (1998), Water Markets in Colorado: Past Performance and Needed Changes, in K.W. Easter, M.W. Rosegrant and A. Dinar (eds), Markets for Water: Potential and Performance, Kluwer Academic Publishers, Boston, pp. 65–76. Howitt, R. (1994), Empirical Analysis of Water Market Institutions: The 1991 California Water Market, Resource and Energy Economics, Vol. 16, pp. 1–15. Kumar, D.M. (2003), Demand Management in the Face of Growing Water Scarcity and Conflicts in India: Institutional and Policy Alternatives for Future, in K. Chopra, C.H.H. Rao and R.P. Sengupta (eds), Water Resources, Sustainable Livelihoods and Ecosystem Services, Concept Publishing Company, New Delhi. ———. (2007), Towards Evolving Institutional Arrangements for Managing Groundwater, in M.D. Kumar with O.P. Singh (eds), Groundwater Management in India: Physical, Institutional and Policy Alternatives, SAGE Publications, New Delhi, pp. 288–320. Marothia, D. (2005), Institutional Reforms in Canal Irrigation System, Economic and Political Weekly, Vol. 40, No. 28, pp. 3074–84. McKay, J. (2005), Water Institutional Reforms in Australia, Water Policy, Vol. 7, No. 1, pp. 35–52. Meinzen-Dick, R. (2007), Beyond Panaceas in Water Institutions, Proceedings of the National Academy of Sciences of the United States of America, Vol. 104, No. 39, pp. 15200–05. Mohanty, N. and S. Gupta (2002), Breaking the Gridlock in Water Reforms through Water Markets: International Experience and Implementation Issues for India, Working Paper Series, Julian L. Simon Centre for Policy Research, New Delhi, India. Patamatamkul, S. (2001), Integrated Water Resources Management for a Small Basin: Huai Yai Basin, North-eastern Thailand, in D. Brennan (ed.), Water Policy Reform: Lessons from Asia and Australia, Proceedings of an International Workshop, Bangkok, Thailand, pp. 177–88. Peterson, D., G. Dwyer, D. Apples and J. Fry (2005), Water Trade in the South Murray-Darling Basin, The Economic Record, Vol. 81, pp. S115–27. Rogers, P., R. de Silva and R.R. Bhatia (2002), Water is an Economic Good: How to Use Prices to Promote Equity, Efficiency and Sustainability, Water Policy, Vol. 4, No. 1, pp. 1–17.

Market-based Institutional Reforms for Water  

275

Rosegrant, M.W. (1995), Dealing with Water Scarcity in the Next Century, 2020 Vision Brief 21, International Food Policy Research Institute, Washington, DC. Rosegrant, M.W. and H.P. Binswanger (1994), Markets in Tradable Water Rights: Potential for Efficiency Gains in Developing Country Water Resource Allocation, World Development, Vol. 22, No. 11, pp. 1613–25. Saleth, M.R. (1996), Water Institutions in India: Economics, Law and Policy, Institute for Economic Growth, Commonwealth Publishers, New Delhi. ———. (1998), Water Markets in India: Economic and Institutional Aspects, in K.W. Easter, M.W. Rosegrant and A. Dinar (eds), Markets for Water: Potential and Performance, Kluwer Academic Publishers, London, pp. 187–205. Saleth, M.R. and A. Dinar (2004), The Institutional Economics of Water: A Crosscountry Analysis of Institutions and Performance, Edward Elgar, Cheltenham, UK. ———. (2005), Water Institutional Reforms: Theory and Practice, Water Policy, Vol. 7, No. 1, pp. 1–19. Samad, M. (2005), Water Institutional Reforms in Sri Lanka, Water Policy, Vol. 7, No. 1, pp. 125–40. Shah, T. and B. van Koppen (2006), Is India Ripe for Integrated Water Resources Management? Fitting Water Policy to National Development Context, Economic and Political Weekly, Vol. 41, No. 31, pp. 3413–21. Shah, T., C. Scott and S. Buechler (2004a), Water Sector Reforms in Mexico Lessons for India’s New Water Policy, Economic and Political Weekly, Vol. 39, No. 4, pp. 361–70. Shah, T., M. Giordano and J. Wang (2004b), Irrigation Institutions in a Dynamic Economy: What Is China Doing Differently from India? Economic and Political Weekly, Vol. 39, No. 31, pp. 3452–61. Sterner, T. (2002), Policy Instruments for Environmental and Natural Resource Management, Resource for the Future, Washington, DC. Thobani, M. (1997), Formal Water Markets: Why, When, and How to Introduce Tradable Water Rights, World Bank Research Observer, Vol. 12, No. 2, pp. 161–79. ———. (1998), Meeting Water Needs in Developing Countries: Resolving Issues in Establishing Tradable Water Rights, in K.W. Easter, M.W. Rosegrant and A. Dinar (eds.), Markets for Water: Potential and Performance, Kluwer Academic Publishers, London, pp. 35–50. Thompson, B.H., Jr. (1993), Institutional Perspectives on Water Policy and Markets, California Law Review, Vol. 81, No. 3, pp. 671–764. Turral, H. and H. Malano (2001), Water Policy in Practice: A Case Study from Vietnam, in D. Brennan (ed.), Water Policy Reform: Lessons from Asia and Australia, Proceedings of an International Workshop, Bangkok, Thailand, pp. 189–205. Williamson, O.E. (2000), The New Institutional Economics: Taking Stock, Looking Ahead, Journal of Economic Literature, Vol. 38, No. 3, pp. 595–613. Winpenny, J. (2003), Financing Water for All: Report of the World Panel on Financing Water Infrastructure, available at www.worldwatercouncil.org/fileadmin/wwc/Library/Publications_and_reports/CamdessusSummary.pdf

13

Millennium Development Goals: How Is India Doing? Sudipto Mundle*

1. Introduction

T

his chapter evaluates the Millennium Development Goals (MDGs) as a framework for measuring development and, subject to qualifications arising from that evaluation, assesses how India is doing in terms of the MDGs. In September 2000 the 191 member countries of the United Nations adopted the Millennium Declaration, committing themselves to universal development and poverty eradication. The declaration was spelt out in eight broad goals that came to be known as the MDGs. Each goal was translated into one or more targets, totalling 18 targets to be achieved by 2015 (see the Appendix). Of these, Goal 8 is mainly relevant for the role of the developed countries and the special problems of the least developed countries, land-locked countries and island economies. Of the seven targets linked to this goal, only one is relevant for India. Furthermore, for each target one or more (mostly) measurable indicators were specified for monitoring progress, * This paper was originally presented at a seminar in honour of Professor C.T. Kurien on the theme of Indian Economy in Transition in early 2011. More recent data has become available since then. However, in order to preserve the integrity of the original paper, the data on which its arguments were based have not been revised. Nevertheless, it can be asserted that any updating of the data would not make any material difference to the main conclusions of the paper. Research Assistance from Satadru Sikdar is gratefully acknowledged.

Millennium Development Goals  

277

adding up to as many as 53 indicators of which 35 are relevant for India. In 2009, the Central Statistical Organization (CSO) produced an India country report on the MDGs (CSO, 2009). This report is largely based on data on different indicators available between 2006 and 2008, that is, approximately the mid-point of the period from 2000 to 2015 during which the MDG targets are supposed to be achieved, and is therefore a mid-term benchmark of the Indian MDG track record. This chapter uses the data reported in the CSO report to assess India’s MDG record, embedding this assessment in a critical evaluation of the MDG framework itself. This evaluation is presented in Section 2. Section 3 presents an assessment of India’s performance on the different MDG goals and targets, with qualifications as required by the evaluation of the MDG framework in Section 2. The method used for the assessment in the CSO report is to fit a timeline from the initial conditions in 2000 to the target point in 2015 for each indicator, which in effect traces the paths different indicators should follow to stay on track to achieve the MDGs by 2015. The path an indicator is actually following is then traced, and compared with the required path to indicate whether that particular indicator is ahead of track, on track or falling short. Section 4 concludes with some lessons from success and failure.

2. The Millennium Development Goals: An Evaluation Ever since the UN adopted the MDG framework, it has become the main frame of reference for all global discussions on development and also development assistance. At the same time, it has attracted considerable critical scrutiny, precisely because it now anchors the development dialogue. Critical evaluations of MDGs fall broadly into two categories, critiques of a technical nature and political–economic critiques. There is little dispute about the eight, or rather seven, broad goals. However, the technical critiques argue that the targets and, more importantly, the indicators are often unduly narrow interpretations of the goals, arbitrarily defined sometimes in terms of relative changes, sometimes absolute changes, and sometimes levels of the different variables, which bias the assessments of performance. Also, even data are not available for some of the chosen indicators (Bourguignon, 2003; Chen and Ravallion, 2004; Attaran, 2005; Lopez and Serwen, 2006; Saith, 2006; Clemens et al., 2007; Easterly, 2009). Some of these authors have even argued that intentionally or otherwise the choice of specifications systematically biases the assessments against the poorer

278   Sudipto Mundle countries or poorer sub-national regions within countries (Clemens et al., 2007; Easterly, 2009). For instance, consider a target is specified as a relative improvement on a negative indicator, such as, percentage reduction in maternal mortality. Here the base level is likely to be much higher in a poorer country compared to a better-off country. Hence, the same level of relative improvement will require a much larger absolute improvement compared to the richer country. Conversely, for positive indicators such as literacy, where the level is likely to be higher in richer countries, an absolute improvement in levels will entail a smaller relative increase in richer countries compared to the poorer countries. Similarly, if incomes are log normally distributed, as is often the case, a relative target of reduction in the percentage of population below a poverty line, for example, ‘reduce by half’, will require a much larger percentage reduction in poverty in the poorer countries, simply because the initial percentage of population below the given poverty line will be larger in a poorer country. Consequently it matters a great deal how targets are specified to determine whether or not the targets are biased against the poorer countries or sub-regions. Easterly provides a very compelling demonstration of this with regard to the African countries, but the same would apply to poorer states within India, compared to the better-off states. The technical critique, such as the significance of the specification bias, is discussed further in the context of India’s performance on specific targets in the following section. At this stage it should suffice to point out in defence of those who established the targets that they were initially set up as global targets, not targets for individual countries, still less for sub-regions within countries (Vandemoortele, 2007). Although it has since become quite conventional to apply these targets at national and sub-national levels, the blame for biases appearing in such applications probably cannot be laid at the door of the original authors of these targets. The political economic critique of the MDGs has mainly come from the left of the ideological spectrum. These critics accept that most of the goals are reasonable. Their complaint is that the amplification of these goals is vague, without focus, and not translated into actionable policies except the appeal to public–private partnerships, liberalization and globalization. The MDGs, they claim, are a veil of motherhood statements under which the G7 seek to push their own agenda for the developing world, without any concrete commitments on their part for which they can be held accountable. Amin (2006) even claims that the MDGs were drafted by a CIA consultant and imposed on the UN General Assembly by the G7 hegemony without much discussion or debate. Personalities apart, this claim is clearly at variance with the facts. Fukuda-Parr (2004) described the main intellectual benchmarks

Millennium Development Goals  

279

since the 1970s that led up to the specification of the MDGs. Saith, a strong critic of the MDGs, has also traced in detail the long route that led to the MDGs through several prior meetings spread over several years (Saith, 2006). Apart from reservations about individual targets, discussed elsewhere in the chapter, Saith’s main complaint is that the MDGs lack an underlying strategic framework to inform development policy, and that this can actually derail the ongoing development process in different countries. He also believes, like Amin, that the MDGs are linked to pushing the agenda of liberalization and globalization. This reading of the MDGs flows from goal 8, which does refer to public–private partnerships, the need for opening up markets, etc. Limitations of the MDGs notwithstanding any objective evaluation must also recognize the positive achievements.1 First, the very fact that 191 member countries of the UN could agree on a set of concrete goals, targets and indicators that go far beyond general platitudes is itself a historic achievement. Anyone familiar with the power play and tortuous negotiations that go on behind such international agreements will understand that some of the vagueness or arbitrariness found in the MDGs are, at least in part, the adhesives that were necessary to make the agreement stick. Second, these countries have collectively agreed to a concept of development that goes beyond growth and poverty reduction to include other aspects of human development such as education and health outcomes, protection of the environment, etc. This consensus on a broad concept of development that goes beyond growth is also a historic achievement. It is particularly important since some of the social and other development goals are not much correlated with growth, implying that development requires a multi-faceted effort along a broad front as opposed to a narrow focus on just growth. A third major achievement is that amplification of the goals into quantitative targets and indicators, however imperfect, enables actual measurement and monitoring of development performance along this broad front. This is a huge move forward compared to the past, and it is always possible to address and correct the technical limitations of the various indicators that have been pointed out. Tracking of performance in turn enables us to draw lessons from the success stories about what works, while also helping to focus on the failures and what does not work. Of particular relevance in this context is the contrast between, on the one hand, the Asian ‘overachievers’ in terms of growth and poverty reduction that have not done so well in terms of the other social outcomes related MDGs, and the Latin American or MENA countries that have performed less impressively in terms of growth and poverty reduction, but performed much better in education and health-related outcomes.

280   Sudipto Mundle Typically, the high-growth performers are also poorer countries in per capita income terms, suggesting that growth and poverty reduction are the first priorities for the poorest countries, with education and health outcomes emerging as priorities only when a country is by and large past the basic survival threshold. Of course, there are some well-known exceptions to this pattern, for example, Sri Lanka. Equally important, the comparisons of success and failure in terms of the MDG framework have generated a whole slew of governance-related lessons. These include the key role of coordination between policies aimed at broad economy-wide goals and those directed at specific MDGs; the need to squarely face tradeoffs between different MDGs in resource allocation and the so-called failure syndrome. The latter includes four conditions under which the MDGs take a back seat: excessive state ownership and regulation; use of the state to redistribute resources in favour of interest groups that have voice; inter-temporal policy mismanagement, commitments to unsustainable levels of public spending based on past economic buoyancy; and state breakdown, when the state is unable to provide even basic security and there is generalized breakdown of law and order, possibly even civil war (Ndulu et al., 2007; Bourguignon et al., 2008). The MDGs have also been very helpful in focusing international attention on the challenges of poverty reduction and mobilizing more aid. Atkinson (2005) points out that while Official Development Assistance from the developed countries was stagnating during the 1990s, it started increasing significantly post-2000, following the adoption of the MDGs, and the Monterey accord on developed country commitments to help achieve the MDGs. Devarajan et al. (2002) estimated that achieving the MDBs could cost up to $76 billion in aid. This figure is not very different from Atkinson’s estimate of around $80 billion at 2003 prices. While official aid has not reached such magnitudes, having goals that are also costed sets a target that can anchor the aid discussion and hopefully guide aid policy. Finally, it has to be said that the political economic critique of Amin and others, however well intentioned, seems over simplistic for at least two reasons. First, they suggest that the MDGs are a cover for the G7 countries to impose their agenda on the developing countries. However, the notion of a unified G7 conspiracy or strategy is at variance with the evidence. For instance, the background paper prepared by Bourguinon and others for the European Union Development Report, that was cited earlier, is highly critical of the so-called Washington Consensus. It argues eloquently that what the developed contribute by way of aid they then take away through the manipulation of trade prices, that is, high import prices for protection and

Millennium Development Goals  

281

low (subsidized) export prices. This is an argument that the critics on the left would whole heartedly support. Similarly, in a recent address to the Belgian Development Council, Daniel Kauffman of the Brookings Institution, an establishment think-tank in the United States, has blamed governance failures in the advanced countries, especially the United States, for the 2008 financial crisis that has offset the beneficial effects of aid and adversely affected poverty reduction in the developing world (Kaufman, 2010). The second reason is that critics like Amin have viewed liberalization and globalization as an unmitigated disaster for the developing countries, drawing on the centre–periphery model of globalization developed during the 1970s by Furtado (1970), Frank (1971), and Amin (1976), among others. This perspective may have been a useful lens for understanding backwardness in the twentieth century, but it seems to be very much at odds with realities of the twenty-first century. The eclipse of the G7 by the G20 is compelling evidence that the greatest beneficiaries of globalization have been China, India and other emerging economies in Asia, Latin America and increasingly Africa. Contrary to predictions of the centre–periphery model, it is the advanced Organisation for Economic Co-operation and Development (OECD) countries that are now in retreat in the wake of globalization. Similarly, liberalization and market-friendly reforms within countries have accelerated growth and poverty reduction in most of these countries, although other social indicators have lagged behind. These market-friendly policies may well have contributed to increased inequalities between sub-national regions as well as among social classes or income groups, but the jury is still out on that. Such evidence that we have indicate that poverty has continued to steadily decline in countries like China and India, and there is no evidence of sharply increasing inequalities in either country. Of course, some would argue, including this author, that at least in India even if inequality has increased, this would not be captured by the NSS consumer expenditure surveys because of increasing non-response to survey enquiries by the richer households. This has now resulted in a discrepancy of around 50 per cent between national accounts estimates of consumption expenditure and that estimated on the basis of the consumer expenditure surveys. That apart, policy makers have to make hard choices when they are confronted with policy options that reduce poverty in a sustainable manner via growth and other policies that may reduce inequality at the cost of lower growth, and hence a slower pace of poverty reduction. A policy that rapidly reduces poverty via high growth, and at the same time reduces inequality may sound ideal conceptually, but is quite difficult to identify in practice (Kanbur, 2005). Even inclusive growth, which

282   Sudipto Mundle disproportionately benefits the poor in a country, need not necessarily reduce inequality for the economy as a whole. To summarize, the political economic critique of the MDGs seems to be somewhat fragile, and it ignores many of the positive achievements of the MDGs. However, some of the technical limitations of the targets used, and the biases they build in when applied at the national or sub-national level, are important. The discussion of India’s MDG performance in the following section needs to be suitably nuanced to take account of these limitations.

3. India’s MDG Performance: An Assessment This assessment of India’s MDG performance is primarily based on the CSO report (CSO, 2009), which is in effect a mid-term review of India’s performance, based as it is on data available up to the years 2006–08, which is the middle of the MDG reference period 2000–15.

Goal 1. Eradicate Extreme Poverty and Hunger The main target for this goal is the poverty headcount ratio, though other indicators like the poverty gap ratio and share of the poorest quintile in national consumption are also included in the monitoring framework. The target is to halve between 1990 and 2015 the proportion of population with income below $1 a day at constant prices. The CSO report (CSO, 2009) has replaced this with the national poverty line.2 Although this makes international comparisons of poverty incidence more difficult, the national poverty lines are in fact much more realistic relative to the domestic cost of living in individual countries. Indeed Deaton (2003), the original author of the $1 a day line for international comparisons, also proposes that as this $1 line is adjusted to national currency-based poverty lines on purchasing power parity basis, those adjustments should approximate national poverty lines to the extent feasible. As regards the headcount ratio, it was noted earlier that with a lognormal distribution of income (or expenditure), which is quite typical, the poverty elasticity of growth rises as we move from lower to higher per capita income levels (Bourguignon, 2003; Chen and Ravallion, 2004; Lopez and Serwen, 2006; Clemens et al., 2007; Easterly, 2009). The simple reason is that a larger proportion of the lower end tail of income distribution lies

Millennium Development Goals  

283

below any specified poverty line, and that proportion is smaller the higher the level of per capita income. Hence, any relative target such as halving the proportion of people below the poverty line requires a much larger percentage reduction in the below poverty population in poorer countries, or states, compared to countries/states with higher per capita income. The CSO projections indicate that at the current rate of poverty reduction India is well on track to reduce the head count poverty ratio to 18.6 per cent (traditional definition) by 2015. However, at the sub-national level as many as seven states are likely to miss the target, most of them being the poorer states. Neither of these two outcomes should surprise us. Recall that the MDGs were originally designed as global targets, not meant for application at the national level, and still less at the sub-national level (Vandemoortele, 2007). When they are so applied, then outcomes on target achievement will reflect the higher poverty elasticity of growth higher per capita income levels discussed above. India has considerably moved up the per capita income scale compared to 1990, and continues to do so at a very rapid rate as one of the fastest growing among the major economies of the world. Within India, the poorest states with the lowest per capita incomes will find it most difficult to achieve this target, which is actually biased against them. The other main target for this goal is to halve between 1990 and 2015 the proportion of people who suffer from hunger. The main indicator used for this is percentage of underweight children. India had an initial burden of underweight children of nearly 54 per cent in 1990, and India is going to miss this target with a projected outcome of 40.7 per cent in 2015 compared to the target of 26.8 per cent. Again, a relative target like this on a negative indicator implies that the absolute reduction in percentage of hungry children required in those countries where the initial incidence of underweight children is high will be more, and therefore more difficult, compared to the required percentage reduction in countries with a lower initial incidence of underweight children. That being said, the fact that more than 40 per cent of India’s children will suffer from hunger and undernourishment in 2015 is indeed a matter of shame. At the level of states, only three states will achieve the target and another six will be close to the target (less than 6 per cent shortfall). However, in the poorest states the incidence of hungry, underweight children will remain as high as 50 per cent to 65 per cent.

Goal 2. Achieve Universal Primary Education The main target for this goal is to achieve a Net Enrolment Ratio of 100 per cent by 2015 at the primary education level, that is, percentage of children in age group 6–11 years enrolled in grades I to V.3 Projections based on the

284   Sudipto Mundle district information system on education (DISE) suggest that India will achieve this target before 2015. While it is a good news that 100 per cent of children of the primary school going age will be attending school in the near future, the main challenge here is the quality of their learning. There is a great deal of evidence from across Asia, Africa and Latin America, mostly drawn from the Program for International Student Assessment (PISA) test scores that learning outcomes are very poor even in countries that are set to achieve the MDG enrolment target (Filmer et al., 2006). A comparison with children in OECD countries shows that reading maths and science skills in Indonesia, Brazil and Peru are comparable to the bottom 5 per cent to 7 per cent in France, Denmark and US, respectively. The learning shortfalls compared to enrolment in a class noted above are very similar to the pattern in India. The 2010 Annual Status of Education Report for rural areas (ASER, 2010) indicates that 36 per cent of children in grades III to V cannot read a standard I text. Over 65 per cent of them cannot do a simple subtraction.4 Clearly, the focus on quantity, the percentage of children enrolled, has deflected attention from actual learning outcomes, and this MDG goal reinforces the bias. Indeed, it is often argued that learning outcomes have slid further since enactment of the Right to Education Act. It has put a great deal of pressure on the bureaucracy to achieve 100 per cent enrolment, and this may have further diverted attention from learning outcomes, for which there are no targets. Since learning is found to improve with the number of years in school, primary school completion rates or the number of children in grade I who complete grade V may be a better indicator for target setting than the current enrolment rate (Easterly, 2009). DISE data reported in the CSO report (CSO, 2009) indicates that this rate peaked at 81 per cent in 2002, and then declined to 72 per cent by 2007–08.

Goal 3. Promote Gender Equality and Empower Women The target set for this goal is to eliminate any gender disparity in primary and secondary education preferably by 2005, but no later than 2015.5 As Easterly (2009) points out, elimination of gender disparity in primary education is a redundant target since achieving universal primary education, Goal 2, also ensures elimination of gender disparity in primary education. But it is an effective additional target for secondary-level education. India did not achieve this target by 2005, but is set to achieve it by 2015. Gender parity will also be achieved in literacy by 2015; however, it is projected to remain well below parity at the tertiary level.

Millennium Development Goals  

285

Gender parity in education is of intrinsic value, but it also has instrumental value for other MDGs, since women’s or mother’s education is known to have positive impacts on growth, hence poverty reduction, reduction of fertility rates and also infant mortality rates (Abu-Ghaida and Clausen, 2004). However, feminists are reported to have been very critical of the narrow interpretation of women’s empowerment in setting the gender parity target only in terms of gender parity in primary and secondary education (Saith, 2006). There seems to be strong justification for such criticism in the Indian context where the other indicators show a vast shortfall in gender parity. Thus, the share of women in non-agricultural wage employment is expected to remain below 25 per cent even in 2015, and women’s share of seats in the National Parliament is only around 10 per cent at present (CSO, 2009).

Goal 4. Reduce Child Mortality The target set for this goal is to reduce under-five mortality by two-thirds between 1990 and 2015.6 As pointed earlier, setting a relative target on a negative indicator biases the target against those countries that have a high initial burden of disadvantage to begin with. They need a much larger absolute reduction in the burden compared to countries that had a lower initial burden, the base to which the relative target ratio is applied. In India’s case, the target requires reduction of the under-five mortality rate to 42 per thousand live births, against which the expected outcome is 70. In the worst performing states like Uttar Pradesh, Madhya Pradesh, Chhattisgarh, Orissa, Bihar and Jharkhand, the expected outcome is more than 90 per thousand live births. The main component underlying child mortality is really high infant mortality, especially neonatal mortality. The non-availability of medical facilities, lack of quick road connectivity in remote or rural areas in case of emergencies and poor public health infrastructure appear to be to be the key factors accounting for this in India. It is also consistent with international experience, which suggests that apart from the standard traditional factors like income–wealth status, maternal education, and prompt access to health care facilities, poor public health infrastructure, such as piped water supply and proper sanitation is a key factor behind high child or infant mortality rates (Fay et al., 2005).

Goal 5. Improve Maternal Health The target here is reduction of the maternal mortality rate (MMR) by three quarters between 1990 and 2015. As against the required rate of 109 per 100,000 live births, the projected outcome is 135. The main factor

286   Sudipto Mundle underlying this shortfall is the lack of trained, professional medical personnel for institutional deliveries. Even by 2015 only 62 per cent of deliveries are expected to be covered by trained personnel. The states lagging behind the most are Madhya Pradesh, Uttar Pradesh, Bihar and the north-eastern hill states of Arunachal Pradesh, Assam, Meghalaya, and Nagaland. The caveat about setting a relative reduction target for a negative indicator has been mentioned several times above. That qualification notwithstanding, India’s failure to improve the MMR remains one of the weakest aspects of its MDG performance.

Goal 6. Combat HIV/AIDS, Malaria and Other Diseases One of the targets here is to halt and begin to reverse by 2015 the spread of HIV/AIDS. The outcome has been quite satisfactory for this target. The spread of AIDS among the general population has indeed been halted. However, it is still spreading among high-risk groups. The other target for this goal is to halt by 2015 and begin reversing the incidence of malaria and other major diseases. This too is on track since the incidence of malaria has started declining and so also the evidence of tuberculosis and tuberculosisrelated deaths. However, malaria mortality is not yet declining. Two related points are worth noting. Stuckler et al. (2010) have shown statistically that both for biological reasons (co-morbidity) as well as economic reasons, high incidence of HIV/AIDS and even non-communicable diseases can lead to higher child mortality, higher incidence of tuberculosis, etc. Hence, public health strategy should keep in view the economic value of treating one ailment in terms of spill over effects to other MDGs. It has also been pointed out for much the same reason that disease specific or service specific interventions may not be ideal for achieving the MDG health outcomes. Instead, it is important to focus on improving the delivery system as a whole (Travis et al., 2004).

Goal 7. Ensure Environmental Sustainability This goal has three targets, the first being integration of the principles of sustainable development into country policies and programs and reversing the loss of environmental resources. India’s performance has been good on this count. Loss of both tree cover and forest cover has been reversed. Over a decade forest cover has increased at roughly 0.46 per cent per year.

Millennium Development Goals  

287

The second target is to reduce the proportion of population without drinking water and basic sanitation by half by 2015. This requires access to safe drinking water for 84 per cent of the population. That target has already been achieved. However, the target for sanitation will be missed; about 46 per cent of the population will not have access to safe drinking water as compared to the target of 38 per cent. The third target here is to significantly improve the lives of at least 100 million slum dwellers. Since no description has been provided of what constitutes ‘significant improvement’, the status on this particular target remains unclear.

Goal 8. Develop a Global Partnership for Development As noted earlier, this goal is mainly for the developed countries, small island economies, land-locked countries, etc. However, one target that is relevant for India under goal 8 of the MDG framework is to make available in cooperation with the private sector the benefits of new technologies, especially information and communication. In India, telephone density has increased from only 0.67 per cent in 1991 to 36.98 per cent in 2009. Internet subscribers has gone up from 0.21 million in 199 to 13.5 million in 2009, and it is expected to go up to 100 million by 2014. To summarize, India’s performance has been mixed. Out of 12 targets spread over eight goals, India’s performance has been high for three targets, meaning on track or ahead on all indicators; and it has been good for another five indicators, implying the country is on track for the main or most of the indicators. As against this, India’s performance has been weak, meaning off track for most indicators, in two target areas, that is, child mortality and maternal mortality reduction. Performance has been poor, off track on all indicators, in the case of one target—reduction of hunger.

4. Conclusion: Some Lessons of Success and Failure India’s MDG performance having been mixed so far, there are lessons to be learned from both our successes as well as failures. The most important lesson from the success stories is the need to guard against premature complacency. The MDG for education is a case in point. Although India will

288   Sudipto Mundle achieve the specified net enrolment ratio target, we have observed deficits with regard to learning outcomes, where our record has been poor as in many other developing countries of Asia, South Africa and Latin America. For the learning outcome, the survival rate of grade I students to grade V is a much better target, since learning does improve with years of schooling, but here our performance has been declining. This requires revisiting what we focus on, even in the areas of success. Indeed, there is a view that focusing on numbers, the enrolment target under the Right to Education Act, may actually have lead to deterioration in learning outcomes because of a thinner spreading of resources. The lessons from our failures are a richer harvest, since they point to the numerous ways in which we can improve our performance. It is true that setting the targets as relative improvements of negative indicators overstates failures, as Easterly (2009) convincingly argued in the case of Africa. However, there is nothing to be gained from taking refuge in this caveat when more than 40 per cent of our children will still be going to bed hungry in 2015. This is a national shame, and our collective moral agony. Hopefully, the Right to Food Act currently under discussion will finally put an end to it once and for all. Some of the other failures, especially those related to health outcomes, such as child mortality and maternal mortality, seem to be concentrated in the poorer states. This is partly attributable to the relative target setting problem cited earlier, but the failures would remain even if targets were set in terms of absolute changes. The poorer states suffer from some real capacity constraints. One is the lack of infrastructure, not just road connectivity that can improve access to health facilities and also improve supplies of medical provisions, but also public health infrastructure such as access to drinking water and sanitation. Here again Indian experience is very much in line with international experience in other developing countries (Fay et al., 2005). However, the role of infrastructure applies to a wider set of MDGs than just the health outcomes. These range from overall growth-mediated poverty reduction to rural connectivity and agricultural growth, rural roads easing access to schools for both students and teachers, and reduction in urban pollution and quality of life for slum dwellers due to more efficient urban transport systems (African Union, UNECA, AfDB, World Bank, EU, 2005). The other factor, which may be experienced more starkly in the poorer states but cuts across both rich and poor states, is the quality of governance. This ranges from quality of personnel to poor delivery systems, shortage of resources and rent seeking by state functionaries who have power over the citizens.

Millennium Development Goals  

289

Notes 1. See, among others, Fukuda-Parr (2004) and Bourguignon et al. (2008). 2. The CSO report uses the traditional official poverty line, not the new poverty line proposed by the Tendulkar committee, and since adopted by the Planning Commission. 3. The other indicators monitored for this target include the percentage of children in grade I who reach grade V, and the literacy rate for the population in age group 15–24. 4. The other indicators monitored for this goal include ratio of literate women to men in 15–24 age group, share of women in wage employment in the non-agricultural sector, and proportion of seats held by women in the National Parliament. 5. See note 1 above regarding the use of latest available data. On learning outcomes, more recent ASER reports confirm that the learning deficit persists though the actual numbers may have changed. 6. The other indicators being monitored here are the infant mortality rate and proportion of one-year-old children immunized against measles.

References Abu-Ghaida, D. and S. Klasen (2004), The Costs of Missing the Millennium Development Goal on Gender Equity, World Development, Vol. 32, No. 7, pp. 1075–1107. African Union, UNECA, AfDB, World Bank, EU (2005), Transport and the Millennium Development Goals in Africa, Africa Union and UN Economic Commission for Africa, with the collaboration of the African Development Bank, World Bank and EU, February 2005. Amin, S. (2006), The Millennium Development Goals: A Critique from the South, Monthly Review, Vol. 57, No. 10, p. 3. Amin, S. (1976), Unequal development: An Essay on the Social Formation of Peripheral Capitalism, Translated by Brian Pearce, The Harvester Press, New York. Atkinson, A.B. (2004), Global Public Finance and Funding the Millennium Development Goals, Netherlands Institute for Advanced Study, NIAS, 2005/10. ASER (2010), Annual Status of Education Report (Rural) 2010, http://www. pratham.org/aser08/ASER_2010_report.pdf Bourguignon, F., A. Bénassy-Quéré, S. Dercon, A. Estache, J.W. Gunning, R. Kanbur, S. Klasen, S. Maxwell, J.P. Platteau, A. Spadaro (2008), Millennium Development Goals at Midpoint: Where Do We Stand and Where Do We Need to Go?, Centre D’études Prospectives et D’Informations Internationales, No. 2008–03, November. Background paper for the European Report on Development.

290   Sudipto Mundle Central Statistics Office (2009), Millennium Development Goals—India Country Report 2009—Mid-term Statistical Appraisal, Central Statistics Office, Ministry of Statistics and Programme Implementation. Clemens, M.A., C.J. Kenny and T.J. Moss (2007), The Trouble with the MDGs: Confronting Expectations of Aid and Development Success, World Development, Vol. 35, No. 5, pp. 735–51. Deaton, A. (2003), How to Monitor Poverty for the Millennium Development Goals, Journal of Human Development, Vol. 4, No. 3, p. 6. Devarajan, S., M.J. Miller and E.V. Swanson (2002), Goals for Development: History, Prospects, and Costs, World Bank Policy Research Working Paper, WPS 2819, April 2002. Easterly, W. (2009), How the Millennium Development Goals Are Unfair to Africa, World Development, Vol. 37, No. 1, pp. 26–35. Fay, M., D. Leipziger, Q. Wodon and T. Yepes (2005), Achieving Child Health Related Millennium Development Goals: The Role of Infrastructure, World Development, Vol. 33, No. 8, pp. 1267–84. Filmer D., A. Hasan and L. Pritchett (2006), A Millennium Learning Goal: Measuring Real Progress in Education, Centre for Global Development, Working Paper Number 97, August 2006. Frank A.G. (1971), Capitalism and Underdevelopment in Latin America, Pelican, London. Furtado C. (1970), Economic Development of Latin America, Cambridge University Press, Cambridge, UK. Kanbur R. (2005), Growth, Inequality and Poverty: Some Hard Questions, Journal of International Affairs, Vol. 58, No. 2, pp. 223–32, p. 5. Kaufmann D. (2010), To meet the Millennium Development Goals Think Governance, Key Note address, Belgium Development Council 2010, States General Conference. Mattson S. (2010), Millennium Development Goals and Global Women’s and Infants’ Health, Journal of Obstetric, Gynecologic & Neonatal Nursing, Vol. 39, No. 5, pp. 573–79. Ndulu, B.J., A.A. O’connell, R.H. Bates, P. Collier and C.C. Soludo (eds). (2007), The Political Economy of Economic Growth in Africa, 1960–2000, Cambridge University Press, Cambridge, UK. Saith, A. (2006), From Universal Values to Millennium Development Goal: Lost in Transition, Development and Change, Vol. 37, No. 6, pp. 1167–99. Sakiko, Fukuda-Parr (2004), Millennium Development Goals: Why They Matter, Global Governance, Vol. 10, No. 4, pp. 359–402. Stuckler, D., S. Basu and M. McKee (2010), Drivers of Inequality in Millennium Development Goal Progress: A Statistical Analysis, PLoS Medicine, Vol. 7, No. 3, p. e1000241. Travis P., S. Bennett, A. Haines, T. Pang, Z. Bhutta, A. Hyder, N.R. Pielemeier, A. Mills, T. Evans (2004), Overcoming Health-Systems Constraints to Achieve the Millennium Development Goals, Lancet, Vol. 364, pp. 900–06. Vandemoortele, J. (2007), The MDGs: ‘M’ for misunderstood? WIDER Angle. United Nations World Institute for Development Economics Research, pp. 6–7.

Millennium Development Goals  

291

Appendix: MDG Appraisal Framework Goal 1. Eradicate Extreme Poverty and Hunger Target 1:

Halve, between 1990 and 2015, the proportion of people whose income is less than one dollar a day Indicator 1A: Poverty headcount ratio (percentage of population below the national poverty line) Indicator 2: Poverty gap ratio Indicator 3: Share of poorest quintile in national consumption Target 2: Halve, between 1990 and 2015, the proportion of people who suffer from hunger Indicator 4: Prevalence of underweight children under three years of age

Goal 2. Achieve Universal Primary Education Target 3: Indicator 6: Indicator 7: Indicator 8:

Ensure that by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary education Net enrolment ratio in primary education Proportion of pupils starting Grade 1 who reach Grade 5 Literacy rate of 15- to 24-year-olds

Goal 3. Promote Gender Equality and Empower Women Target 4:

Eliminate gender disparity in primary and secondary education, preferably by 2005, and in all levels, no later than 2015 Indicator 9: Ratio of girls to boys in primary, secondary and tertiary education Indicator 10: Ratio of literate women to men, 15- to 24-years-olds Indicator 11: Share of women in wage employment in the non-agricultural sector Indicator 12: Proportion of seats held by women in National Parliament

Goal 4. Reduce Child Mortality Target 5:

Reduce by two-thirds, between 1990 and 2015, the underfive mortality rate Indicator 13: Under-five mortality rate Indicator 14: Infant mortality rate

292   Sudipto Mundle Indicator 15: Proportion of one-year-old children immunized against measles

Goal 5. Improve Maternal Health Target 6:

Reduce by three quarters, between 1990 and 2015, the maternal mortality ratio Indicator 16: maternal mortality ratio Indicator 17: Proportion of births attended by skilled health personnel

Goal 6. Combat HIV/AIDS, Malaria and Other Diseases Target 7:

Have halted by 2015 and begun to reverse the spread of HIV/AIDS Indicator 18: HIV prevalence among pregnant women aged 15–24 years Indicator 19: Condom use rate of the contraceptive prevalence rate (ratio of condom use to overall contraceptive use among currently married women, 15 years, per cent) Indicator 19A: Condom use at high-risk sex (condom use rate among nonregular sex partners 15–24 years) Indicator 19B: Percentage of population aged 15–24 years with comprehensive correct knowledge of HIV/AIDS Target 8: Have halted by 2015 and begun to reverse the incidence of malaria and other major diseases Indicator 21: Prevalence and death rates associated with malaria Indicator 22: Proportion of population in malaria-risk areas using effective malaria prevention and treatment measures (percentage of population covered under use of residuary spray in highrisk areas) Indicator 23: Prevalence and death rates associated with tuberculosis Indicator 24: Proportion of tuberculosis cases detected and cured under DOTS

Goal 7. Ensure Environmental Sustainability Target 9:

Integrate the principles of sustainable development into country policies and programmes and reverse the loss of environmental resources Indicator 25: Proportion of land area covered by forest

Millennium Development Goals  

293

Indicator 26: Ratio of area protected to maintain biological diversity to surface area Indicator 27: Energy use per unit of GDP (rupee) Indicator 28: Carbon dioxide emissions per capita and consumption of ozone-depleting chlorofluorocarbons (ODP tons) Indicator 29: Proportion of households using solid fuels Target 10: Halve, by 2015, the proportion of people without sustainable access to safe drinking water and basic sanitation Indicator 30: Proportion of population with sustainable access to an improved water source, urban and rural Indicator 31: Proportion of population with access to an improve sanitation, urban and rural Target 11: By 2020, to have achieved a significant improvement in the lives of at least 100 million slum dwellers

Goal 8. Develop a Global Partnership for Development Target 12:

In cooperation with the private sector, make available the benefits of new technologies, especially information and communication Indicator 47: Telephone lines and cellular subscribers per 100 people Indicator 48A: Internet subscribers per 100 people Indicator 48B: Personal computers per 100 people

14

Social Discrimination in India: A Case for Economic Citizenship* Barbara Harriss-White and Aseem Prakash

1. Introduction

T

hrough India’s Constitution, the state promises equality to all its citizens. The various provisions of the Constitution elucidated in the chapters on Fundamental Rights (justiciable) and on Directive Principles of State Policies (non-justiciable) lay out the state’s obligation to provide equal opportunities to all its citizens in the social, political and economic spheres.1 Yet the prevalence of stark inequalities continues to counter the idea of India envisioned by the Constitution makers. Furthermore, poverty and deprivation, the legacy of a deep-rooted class bias spanning centuries, persist along with caste and gender discrimination. While accepting this social fact, our chapter explores the reasons whereby individuals * The paper was commissioned by Oxfam India and was originally intended to provide Oxfam a perspective on understanding social discrimination in India. The authors are grateful to Avinash Kumar from Oxfam India for his support during the course of preparation of this paper. Usual disclaimers apply.

Social Discrimination in India  

295

with the same endowments (assets, entitlements, rights, skills, education, experience) but differing in social status-groups (caste, religion, gender, ethnicity, etc.) command different tangible returns (income, development benefits, realized entitlements) and less tangible ones (such as dignity and respect). Social discrimination is the experience of comparable endowments and widely differing treatments and outcomes.2 It is necessarily an inter-group social phenomenon transcending class differentiation—visible when one or few social groups, command and practises social sanctions against other social groups. For the purposes of this chapter, a ‘social group’ is defined as a group of individuals having a shared socio-economic history and cultural practices, which not only impart group identity to them but also distinguish them from other social groups. Social and cultural norms, therefore, become the basis for defining inter-group relationships, which, in turn, govern status relationships (social rank, domination–subordination), the division of labour in the economy and sanctions (rewards and punishments).3 In this chapter, we analyse social discrimination and its manifestations, and suggest possible conceptual strategies to tackle it. The task of realising such strategies is well beyond the scope of this chapter. Prior to this conceptual task, however, the chapter elaborates the normative understanding of discrimination and of a regime of discrimination. This helps us explain how the ideology of discrimination develops and is sustained by the state, markets and civil society. The third section suggests that social discrimination can only be addressed if formal and substantive equality is guaranteed to citizens, which necessitates the development and naturalization of a series of institutions. In other words, codified state/social obligations, the means of claiming them, and claiming redress of wrongful denial, the means of adjudicating such claims and enforcing judgements about them have to be provided for all citizens. Since markets cannot by themselves establish such guarantees and institutions, we argue that civil society has a central role to play in this development project alongside the state. Further, one of the most crucial means of achieving formal and substantive equality among different social groups is to graduate from a conception of political citizenship to that of economic citizenship. Economic citizenship can provide the conceptual and practical rigour to differentiate between simple exclusion on one hand and exclusion due to discrimination, on the other. It can help in the identification of policies and their preconditions, and in social mobilizations that may lead to the inclusion of social groups hitherto excluded from development.

296   Barbara Harriss-White and Aseem Prakash

2. The Normative Understanding of Discrimination Social discrimination takes several forms. Discrimination can be either direct or indirect. Direct discrimination4 involves the implementation of a deliberate and explicit policy to exclude a specific individual or a social group from some possible opportunities. Indirect discrimination5 occurs when supposedly neutral provisions or practices disadvantage individual(s) due to their social status or due to capabilities differentiated by social status.6 Discrimination as an ideology has three aspects: (1) as a principle for organizing social relationships, (2) as capillary power, and (3) as a set of political practices affected through formal and informal institutions in the realm of the state, market and civil society. Together, the ideology of discrimination and the institutions through which it is operationalized constitute a regime of social discrimination.

3. A Regime of Social Discrimination in India A few caveats are in order before the concept of a regime of discrimination is discussed. First, the three specific social groups that this chapter is concerned with are Dalits, Adivasis and Muslims.7 Without intending any disrespect for these groups or for their heterogeneity but simply for the sake of convenience, we use the acronym DAM for them. Second, discrimination in India is commonly practised in both forms as a syndrome of instituted practices, which are historically recognized as having effects in inverse proportion to peoples’ position in the class system, caste/ religious status groups8 and the gender hierarchy.9 Gender-based social discrimination is accentuated if the woman belongs to a lower caste10 or to a religious community associated with ‘low’ social status (see Rowena, 2005). However, this does not imply that each social group under DAM faces the same form and content of discrimination. While acknowledging the distinctive nature of discrimination faced by each social group constituting DAM, evidence supports the proposition that the ‘regime of discrimination’ can provide a broad but robust framework to capture the array of discriminatory practices against DAM. Third, all social discrimination, even when practised by individuals against individuals, needs to be understood not only as an individual piece of behaviour, but rather

Social Discrimination in India  

297

as social behaviour expressing aspects of an ideology maintaining social hierarchy. The regime of social discrimination is based on a set of core features, the first of which comprises principles for the maintenance of hierarchy in relationships between different social groups. For hierarchy to be socially legitimized, the status quo in relationships between different social groups also has to be retained through a normative framework of socio-cultural, political and economic relationships and practices.The normative framework for caste privileges naturalizes the rights of the upper caste(s) over those of lower caste(s).11 The normative framework for religion not only distinguishes but also differentiates religions; for instance, the discourse of Hindu nationalism considers adherents of the Hindu religion to be full citizens while other social groups, especially Muslims and Christians, are subordinate citizens.12 Adivasis are discriminated against in a similar way.13 The normative framework of hierarchy also denies the need for any consent from social groups constituting DAM for the social relationships imposed on and practised between them. The subordination and marginalization which results from discrimination is thus internalized and accepted as ‘the’ defining, ‘natural’, and even ‘just’ principle of the socio-cultural, political and economic order. The second feature of the regime of discrimination is the practice of these principles of hierarchy in the form of capillary power. India’s norms of social order support the capacity of the ‘dominant’ social groups to act in a vast range of ways and with many kinds of authority against the interests of social groups constituting DAM. Acts of agency on the part of those discriminated against are seen as deviant behaviour and punished.14 Reactions to their opposition to the normative framework range from the competitive to the coercive and violent. These two features of the regime of discrimination are opposed to the formal principles of any democratic society. Blatant discrimination as espoused by different ideology(ies) of discrimination (see Rowena, 2005, and notes 11, 12) along with the practices of capillary power, mean that social discrimination is not difficult to sustain. So, while the second aspect of the regime of discrimination, capillary power, provides a repertoire of practices, immediate day-to-day affairs have to be dexterously crafted and carefully pursued. The third feature of the regime of discrimination is the politics of discrimination, through which social discrimination is crafted in the face of laws and movements to the contrary. The politics of discrimination charts the course of the advance of ‘dominant’ social groups in the face of consistent democratic assertion by the deprived social groups that constitute

298   Barbara Harriss-White and Aseem Prakash DAM. It tries to ensure that practices of capillary power flowing from the hierarchical norms of social order are not dissipated by the rationalities of market exchange or of state planning. Thus, the politics of discrimination formally forges a space for DAM, giving them a socially sanctioned voice in society, polity and economy. However, the politics of discrimination also ensures that this ‘space’ and ‘voice’ fail in practice to be transformative. It seeks to ensure instead that emerging voices do not translate into effective social and economic engagement; and that striving for representation is not transformed into practical control over socio-political and economic resources. The politics of discrimination is developed in practical ways. Despite the rationalities of state and market being widely predicted to replace discriminatory practices, the ideology and politics of discrimination respond dynamically to economic change without surrendering the capacity to sustain hierarchical relationships—when not practising outright domination (Harriss-White, 2003). The regime of discrimination is therefore institutionalized through formal and informal organizations and institutions of the state, market and civil society. The next section contains an account of the manner in which India’s regime of discrimination is sustained through the institutions of the state, market and civil society.

The Indian State and Discrimination Social discrimination was accepted as a fact in the scheme of constitutional development, and has been reflected in the positive discrimination policies of independent India. These policies were initially limited to reservations in education and the provision of public sector jobs for Dalits and Adivasis. Certain proportions of seats were also reserved for these groups in India’s Parliament and state legislative assemblies. Later, reservations in jobs and educational institutions were extended to Other Backward Classes (OBCs).15 How has the Indian state addressed the socio-economic concerns of social groups constituting DAM? Has it managed to address long-standing and sometimes religiously sanctioned discriminatory actions against them? To answer these questions, we offer some stylized facts before explaining the role of the state in sustaining social discrimination. One of the primary roles of the state is to chart out a trajectory of economic development to provide decent livelihoods for its citizens. The outcome of this duty is reflected in the spectrum of employment and earnings in the /formal/‘organized’ and the /informal/‘unorganized’ sectors of the economy. In the latter sector, most, though not all, activities bring low

Social Discrimination in India  

299

returns, and all labour below the meagre official poverty line works in the informal sector. Available evidence clearly reveals that Dalits, Adivasis and Muslims are highly under-represented in better paid and higher status work, and disproportionately concentrated among those drawing lower salaries/wages in the informal sector. The Formal Sector Registered formal sector jobs constitute a mere 8 per cent of the total employment available in the country. The downsizing of the state since the beginning of the 1990s not only resulted in caps on the creation of newer organized-sector jobs, but also saw existing jobs being sub-contracted to informal sector firms. In providing employment to historically deprived social groups and Muslims both the past and present track records of the Indian state have left the constitutional goals severely unfulfilled. As regards Muslims in the public sector, the Prime Minister’s High-level Committee on the Social, Economic and Educational Status of Muslim Community in India (hereafter SCR)16 documents the under-representation of Muslims in terms of their share in the population in all categories of jobs in all departments of the central government as well as state governments, public sector undertakings, and banks and financial institutions. A majority of the jobs for Muslims are concentrated in Group C and D class jobs (see Appendix, Table 14.A.1). The situation of Adivasis in the public sector is marginally better than that of Muslims. In proportion to their population, they are vastly underrepresented in all departments of the central government, banks and financial institutions. They are proportionately represented in the central government-owned public sector units, largely because they are over-represented in the lowest paid Group D jobs.17 As regards Dalits, most jobs offered by the modern Indian state correspond to the position sanctioned to them in the Hindu social order. In other words, Dalits are grossly over-represented as sweepers and sanitary workers in various central ministries, public sector undertakings and banks, financial institutions, state governments, and local municipal governments. The proportion of Dalit sweepers to total sweepers in various central government departments ranges from 55 per cent to 75 per cent.18 Dalit representation is less than proportionate to their population in Group A and Group B. In Group C jobs, they constitute slightly more than their proportion in the population.19 Commentators argue that this fourfold classification often hides the real truth. Each group has 8–10 grades and Dalits are mostly at the lowest grade of each group (Ghosh, 1997).

300   Barbara Harriss-White and Aseem Prakash The Informal Sector Kannan (2009) argued that under the neoliberal model of development in India, the dualism20 between subsistence production for use and surplusproducing factory-based wage work for the market has been eroded and a new work regime involving complex forms of labour flexibility is being developed.21 Crucial legal provisions protecting formal sector workers have been eroded in hitherto protected economic sectors. A new class of informal workers has emerged in the formal sector. Workers are pushed from the rural (largely informal22) economy to petty production and wage work in the urban informal economy. The informal economy is a danger zone where legal protection or social security for workers is violated or lacking. It is riddled with casual and flexible employment practices, oppressive working conditions, low wages, low bargaining power and regulation by social norms instead of formal rules and institutions. It is shaped and segmented by social institutions—such as caste, ethnicity, religion, gender, age and locality/language as well as by private collective action in the form of guilds, trade associations and chambers of commerce. Drawing largely from microlevel case material, these attributes were initially theorized as a structure of accumulation in the book India Working (Harriss-White, 2003). The various reports of the National Commission for Enterprises in Unorganized Sector (hereafter NCEUS23) document and analyse this segmentation at the macro level. Kannan’s most recent research into identity and poverty in the informal economy confirms the outcome of this regulative structure (Kannan, 2009). In terms of income, the four poverty groups—the extremely poor, poor, marginal and vulnerable—cover about 88 per cent of the Dalits/Adivasis; 84.5 per cent of Muslims and 80 per cent of the OBCs, whereas only 55 per cent of the population belonging to ‘Others’, who are not Muslims, OBCs, Dalits and Adivasis (read upper-caste Hindus and a small minority of other social groups) are situated in these four poverty–income groups. In the high-income categories, Dalits/Adivasis, Muslims and OBCs constitute only 1.0 per cent, 2.2 per cent, and 2.4 per cent, respectively, while 11.2 per cent of ‘Others’ (other social groups) find their place in this top-income bracket (see Appendix, Table 14.A.5). In the informal sector workforce, Dalits and Adivasis constitute the highest proportion of the population—89 per cent—situated in the four poverty group categories. Out of the total Muslims in the informal sector workforce, 85 per cent find themselves in the lowest four income groups, as do 80 per cent of the total informal sector OBCs. In contrast, only 59 per cent of ‘Others’ are in the poverty groups. Further, the share of ‘Others’

Social Discrimination in India  

301

in the informal sector workforce earning middle and high incomes is relatively high—about 42 per cent. In comparison, the proportions of Dalits/ Adivasis, Muslims and OBCs in the middle- and high-income brackets notch up 11.5 per cent, 15.3 per cent and 19.9 per cent, respectively (see Appendix, Table 14.A.6). More than 95 per cent of the female labour force finds work in the informal sector. Most of their labour is unaccounted for in the national accounts, in part because it is home based. As the shift from the rural informal economy to the urban economy gains momentum for men, agricultural work is increasingly left to women, whose labour is again largely unaccounted for. Women invariably command lower wages than their male counterparts, even if the quantity, quality and productivity of work done is identical or indistinguishable. Kannan (2009) also finds that even in the twenty-first century, wages correspond to the hierarchy of the Hindu social order: the social group classified as ‘Others’ earns the highest wages, and Dalits and Adivasis earn the least. OBCs’ wages are below those of the ‘Others’, followed by Muslims. Wages are further segmented along gender lines. But women’s wages do not correspond to the social hierarchy reflected in the male wage rates. Muslim women earn most, followed by Dalit and Adivasi women (see Appendix, Table 14.A.7). This is hard to explain. Kannan conjectures that upper-caste women do not get higher wages because of their unwillingness to work outside the home and under an employer, whereas Dalit and Adivasi women are found to be engaged in all kinds of work, including hazardous and oppressive tasks.24 Does Political Regime Matter? The India literature on the relationship between political regimes and discrimination, deprivation and marginalization begs many questions. The study of four states undertaken by Kohli (1987) provided evidence showing that political regimes with Left or Left of Centre ideology fare better in delivering pro-poor policies and programmes. Later, John Harriss classified pro-poor political regimes on the basis of the relation between party politics and class formation and its politics (Harriss, 2009). Recent research by Harriss-White and Vidyarthee (2010), studying the entry of Dalits and Adivasis in the economy as owners of businesses, finds that the regionalization emerging from Harriss’ analysis does not account for the specificities of the incorporation of Dalits and Adivasis into India’s business economy. They reveal inverse spatial relationships between the relative density of Dalits and Adivasis in the population and their relative participation in the non-farm economy as owners of firms. This research shows that India has a

302   Barbara Harriss-White and Aseem Prakash series of distinctive regions of relative advantage and disadvantage for SCs and STs. The evidence gathered by Kannan and the SCR suggests that social identities over-determine the results of the operation of labour markets and other segmented markets in the informal economy. The SCR evidence for formal sector employment suggests that in no state25 does the representation of Muslims match their population share. Using data on income inequality, Kannan concludes that for socially advantaged groups, regional location is ‘less of a constraint, if not irrelevant’. The economic status of DAM thus appears incongruent with the classification of political regimes where they are lumped into the sweeping category of ‘the poor’ and ‘lower castes and classes’, classifications which do not pay attention to the specific politics of DAM incorporation.

Why is Discrimination Perpetuated through State Institutions? Evidence shows that DAM face the brunt of the unequal outcomes of the processes of implementation of state policies. State policies that exclude people who have been made capability-poor and asset-less by the process of development on account of their identities have the most severe impact on DAM because their exclusion is reinforced by discrimination. To develop this argument, we need to understand the state’s role at the macro level and its implications at the micro level. At the macro level, the Indian polity has witnessed increasing tension between what are called the forces of market economics (or capitalist development), on one hand, and those of the politics of democracy, on the other. The former is revealed in the long list of policy measures whose purpose is to galvanize growth through private capital. These policies have resulted in new institutions, such as for instance, the regional stock exchanges, Special Economic Zones (SEZs), sophisticated infrastructure, new urban forms and (virtual) Technology Parks. In the absence of institutions that can distribute the benefits of growth equitably across regions, social groups and classes, such policy measures disproportionately benefit the new professional classes and the capitalist elite. At the same time, India is witnessing fierce political mobilization. India’s electoral democracy not only enhances popular aspirations and expectations but also forces the state to adopt ‘development’ measures aiming to weaken opposition and/or minimally protect the victims of development. These measures include the Public Distribution System (PDS), the Mahatma Gandhi National Rural Employment Guarantee Act

Social Discrimination in India  

303

(MGNREGA), the Tribal Bill, etc. However, policies supported by ‘market economics’ reveal political commitment, urgency, fast-track implementation, and the capacity to enforce, whereas initiatives impelled by the politics of democracy languish at the stage of reports of commissions of enquiry. At best, they hobble towards implementation26 (for instance, the processes leading to not one but three draft social security bills for informal sector workers) and at worst, they are abandoned or left in a limbo (for instance, several of the recommendations of the NCEUS, such as, for example, public employment programmes for unorganized sector workers, especially in urban areas, the formulation of a National Labour Code, etc. and the recommendation of N.C. Saxena Committee Report which advocated the automatic inclusion of social groups like designated primitive tribal groups, most backward and discriminated amongst Dalits, single women and minor-headed households, destitute households, and bonded labourers among other criteria in the Below Poverty Line [BPL] population). The effective implementation of pro-market policies benefits and reinforces social groups with which are strong in capabilities and assets, and perpetuates the exclusion and deprivation of social classes and groups lacking them. We have already shown how closely the distribution of income and hierarchies of identity converge even after 63 years of independence. This macro level structural constraint results in a capability deficit inside the state itself, which prevents it from embarking on an inclusive policy regime. Still, how do we explain the plethora of government policies and schemes dating continuously from the early 1970s which aim to rescue people from abject poverty, and deprivation and social discrimination? Indian planning and policy processes have never given serious consideration to exclusion originating in social identity. All characteristics of identity (except gender) were subsumed under universal categories derived from political citizenship (Fernandez, 2009)— drought-prone and desert areas, small and marginal farmers, pregnant and lactating women and their children, ‘poor’ (for the PDS), ‘poor’ (for the IRDP), as also ‘famine’-affected regions and ‘emergencies’. This is not to deny that funds are earmarked under specific schemes for deprived social groups such as the SCs and STs. But these schemes have faltered for both structural and functional reasons. Structural factors are at work when these schemes push for specific causes within a general framework of development without considering the institutional ramifications and multiple pre-conditions required for integrating DAM in the development process. Functional factors emerge when vested interests wishing to contain these schemes benefit from the absence of any institutionalized regulation (such

304   Barbara Harriss-White and Aseem Prakash as penalties) wherein funds earmarked for special schemes are left unutilized (like the money left unspent in MGNREGA). The capacity of the state to deliver and enforce has always been under erosion and attack. Most social development schemes are captured by entrenched interests. The state seems to be losing its autonomy on this front through two inter-related processes. The first is the existence of enormous and complex rent-seeking processes making the boundaries of the state porous to private interests.27 The exchanges across boundaries should not be seen merely as the autonomous institution of ‘rent-seeking’ and ‘rentgiving’ (side-stepping official rules for private gain or purchasing eligibility to defraud the state); they are also a product of wider socio-economic and political processes. Mushtaq Khan stylizes it as generalized patron–client relationships, and argues that patron–client networks emerge as the most rational form of organization for faction leaders who use the network to reinforce their position in the political power structure. What political factions seek is not the construction of a coalition that can mobilize votes to allow a transparent renegotiation of taxes and subsidies, but a coalition that can mobilize organizational power at the lowest cost to the faction leader, to achieve a redistribution of assets and incomes using a combination of legal, quasi-legal, or even illegal methods. (Khan, 2005: 719)

While private individuals need the state to pursue their interests, the political elite controlling the state also requires rents to carry out their political objectives (see Harriss, 2009). But political funding and social status are not the only means of developing proximity to the institutions of the state. Other social institutions like caste networks, networks formed through religious/regional identity, family or clan contacts and marriage alliances also facilitate access or proximity to state power to articulate kin, caste or other collective interests through the apparatus of the state (Prakash, forthcoming). The second process is the loss of the state’s executive autonomy to enforce development policy through compromises to the Weber-rational bureaucratic framework. While executing development policies, state officials also reflect the wider social structure, and since there is little to stop their ideological beliefs from colouring their official actions, they may deliberately act against the interests of DAM. Policies directed towards disadvantaged social groups may be neglected, under-funded, selectively implemented or completely sabotaged. A telling insight comes from the research of Mendelsohn and Vicziany (2005), who conclude that despite more than

Social Discrimination in India  

305

half a century of ‘anti-’ and ‘compensatory’ discrimination policies by the central and state governments, respectively, the major progress for Dalits has come from policies aimed at the entire population and not from ones focused specifically on ‘untouchables’.

Markets and Discrimination The liberal/normative understanding of the market as an institution is that it is neutral between individuals and that it determines outcomes at the intersection of demand and supply (Sen, 1999). Theoretical formulations on markets—from Neo-classical Economics or New-institutional Economics28—suggest that the expression of social identity subverts market competition in the long run because it results in sub-optimal market outcomes. Economic exchanges structured through ascribed social identity are thus expected to wane in importance in favour of secular transactions grounded in acquired skills, competence and reliability. Against this backdrop, we analyse the Indian evidence. An individual’s agency in entering the market can take two forms. First, s/he may work as wage labour. Second, s/he may be an own-account worker/self-employed and carry out economic activity as an owner of capital, seeking to earn returns on investment in various kinds of production, trade and services. As wage earners, the social groups constituting DAM are discriminated against and marginalized. Now we outline the terms and conditions of operation of these social groups when they enter the market as owners of capital. In both initial entry and subsequent operation, the most important requirement is the availability of credit, both formal and informal. As far as formal credit is concerned, the following facts need consideration: According to the SCR, Muslims have far less access to credit from banks and other formal financial institutions in proportion to their population share. Even when Muslims are able to get loans sanctioned, the average amount obtained is small in comparison to other social groups. More importantly, when it comes to access to finance from the Small Industries Development Bank of India (SIDBI), Muslims face a double disadvantage. First, they account for a significantly smaller percentage in the amount sanctioned and disbursed than non-Muslims; and second, the amount sanctioned and disbursed per account is about one-third of the average ratios. Loans from the National Agriculture Bank for Rural Development (NABARD) are no different. The SCR report notes that credit from NABARD, even in minority-concentrated districts, is plagued by inadequate targeting (Government of India, 2006b).

306   Barbara Harriss-White and Aseem Prakash Singh (2008), in his review of credit extended to Dalits and Adivasis for the period 1997–2005 by various public sector banks and financial institutions, concludes first that credit is not flowing either fairly or adequately to them, and second that their priority sector credit targets are mostly not met. The credit extended to deprived groups in relation to their deposits neither matches the aggregate credit–deposit ratio nor corresponds to their share in the population. Even the SC and ST Finance Development Corporations do not seem to have disbursed their full budgets in recent years. Informal credit for DAM is even more difficult to access, as it is largely controlled by caste/clan/religious networks and groups. Market entry by DAM is typically discouraged and resisted. Credit is either denied or extended at relatively higher interest rates than for higher castes and classes, even if adequate collateral is offered. In the purchase of goods from wholesalers, the time allowed for repayment is relatively short or the price charged is higher (see Prakash, 2010; Ahmed, 2009). These networks also mediate access to state officials and other sources of power needed in the daily transactions of DAM businesses (see Prakash, 2010). This collective action thus contributes towards the promotion of persistently instituted market practices, which, on one hand, enhance the advantages of dominant players (belonging to higher social status groups), and on the other hand, result in adverse outcomes for marginalized social groups. The crucial question is how to understand the presence and domination of informal institutions (caste, clan, religion, gender) in the formal institutions of the state through which market exchange is regulated? How do we understand the work of apparently impersonal market institutions (like credit agencies) when they practise discrimination and exclusion by making credit available for higher status clients, while constraining liquidity for low-status groups, thereby drastically affecting outcomes in the market? To answer these questions, we need to understand the factors contributing to the ‘blurring of boundaries’ or the protection of a specific kind of political space between informal and formal institutions governing markets. In India Working Harriss-White contends that market exchange and competition are impossible without collective regulative action. In the absence of state regulation, this is in turn grounded in caste and other local-level socially exclusive market institutions. The latter perform several essential tasks. They form the basis of a social network; regulate market exchange and the spatial arrangements of marketplaces; define contracts, entry and necessary skills; insure and provide occupational guarantees; organize modest redistributive philanthropy; represent occupational associations to the state; woo the state for concessions; and

Social Discrimination in India  

307

repel the state’s own attempt to regulate them. Individuals are excluded or adversely included on grounds of both economic and social exclusivity. If ideology persists as the basis for collective action against other social groups in the market economy, how do we explain the fundamental changes occurring in India under the official ideology of the Indian state, namely modernization? India Working takes the example of caste to analyse this question— acting here as a paradigm for market transactions wherever the state does not enforce its own regulatory laws. Without denying the enormous changes witnessed in the caste system, India Working argues that the elements of the caste system are often re-arranged, leaving the principles intact (Harriss-White, 2003). The ideology of caste is part of the social structure of accumulation.29 Thus, the caste-cum-business association provides a basis for the consolidation of networks in the market; it thwarts competition, mobilizes resources and controls labour; it structures the regulation of the market (Harriss-White, 2003). Finally, caste helps support the politics of markets,30 which govern the operation of market exchange. It thus blurs the clear theoretical boundaries between the state, market and civil society. The politics of markets involves: (i) ushering in non-competition with the help of social networks through which market exchange is construed, (ii) defending economic interests with the active help of social contacts in the state, (iii) manipulating party politics, (iv) enforcing market contracts through social rules rather than state sanctions, and (v) running small acts of philanthropy or service provision in parallel to the transfers of the state. However, the social structure of accumulation—supporting and sustaining discrimination in market exchange—is forged and reproduced in the realm of civil society. This brings us to the final sphere through which the ideas, power and politics of the regime of discrimination operate.

Civil Society and Discrimination If discrimination is operationalized through the state and in market exchange, it is born, nurtured and acquires its deepest roots in the realm of civil society. This is also the domain wherein any resistance to discrimination is met with violence. What is the nature of civil society in India, which engenders and sustains discrimination? Four kinds of roles may be distinguished: formal and informal, open and hidden. First, with respect to the formal role of civil society, despite a massive wave of party political assertion by Dalits and other oppressed people, the

308   Barbara Harriss-White and Aseem Prakash securing of space for political pluralism has not been translated into coherent projects of economic inclusion (for workers or petty producers) or of social plurality. Given an electoral mandate to question both regional and social marginalization, regional parties have succeeded much better in political terms than they have in relation to the economy. The social groups constituting DAM are concentrated at the bottom end of the economic ladder, and their exclusion is further reinforced by discriminatory trends rampant in society. The project of Inclusive Development is replacing economic marginalization by identity and seems to be restricted to limited wage work projects and the expansion of reserved state employment. Second, new social movements have organized themselves to demand the inclusion of social groups left out of both state-led and market-based development. They lay claim to economic citizenship and to the guarantee of livelihood resources currently at their command, but threatened by development-induced displacement, for example, Narmada Bachao Aandolan (Gadgil and Guha, 1994; Kala, 2001), many movements against SEZs (see Banerjee-Guha, 2008), etc. Even these movements have not been able convincingly to articulate an alternative development agenda for the protection—let alone the promotion—of the mass of informal self-employed and of wage workers. So this numerically significant part of the workforce continues to remain at the periphery of development and political ‘discourse’. ‘At best’, sporadic political agitations now demand new guarantees to gain access to state-supported livelihood opportunities and development resources (for instance, the Gujjars—in Rajasthan, Haryana and UP in 2008—who have been incorporated into the market-based accumulation process and now demand reservation privileges under the category of STs), see Sahni (2009). Third, civil society has strengthened, rather than dissolved, religion and caste in what Satish Saberwal called its ‘cellular’ organization, or it has done both simultaneously, leading to not just passive exclusion but also active expulsion. Caste collectives, in both urban (Prakash, 2007) and rural areas (Prakash, 2008), play an increasingly powerful role in intragroup and inter-group political affairs, while also facilitating the relationship with the local state. Often, members of such social collectives have an influential formal presence in the state wherever kinship spans state, market and civil society. Fourth, dominant castes/religious groups are growing intolerant of assertion from the lower caste groups. Civil society and the economy have been sites of both physical and latent violence. An attempt to claim equality is often met with open violence (Mohanty, nd), and open assertion by the

Social Discrimination in India  

309

religious minorities may result in blatant violence by the majority community. Several riots against Christians and Muslims during the last decade stand testimony to this fact.31 These four macro political–economic trends in the development of civil society throw up one common analytical point. Powerful civil society associations are increasingly articulating the socio-political agenda of locally dominant social and economic collectives.32 All of them appear to be creating the political and social basis for the exclusion of people with less assets and capabilities, in general, and the discriminatory exclusion of DAM, in particular. This is India’s regime of discrimination.

4. Economic Citizenship: A Way Forward for Substantive Equality In India’s regime of discrimination, citizens belonging to disadvantaged social classes have fewer claims on the state and society, in the course of their daily livelihood struggles, than individuals belonging to dominant classes. As seen at the start, this social reality contrasts dramatically with the promise of the Indian Constitution: guaranteeing equality before the law as well as substantive equality to all its citizens,33 a concept further expanded by the Directive Principles to include equality in the socioeconomic sphere.34 The demand of equality is not only an individual moral claim to respect as a human being but also a political claim on the state by a citizen because the state sets out to provide certain socio-economic and political rights to its citizens and also gives a formal guarantee to protect them. In the case of violation(s) of his/her rights, the citizen can resort to various institution(s) established for this purpose.35 Has the Indian state fulfilled its democratic mandate and duty? This chapter suggests it has been selective on these counts,36 allowing the rights of many citizens to be routinely infringed and sometimes blatantly violated. Why does this happen? Is there a problem in governance or with our theory of the relation of the state to its citizens? Retrieving the concept of economic citizenship and developing a project for it would allow citizens to lay claim to several socio-economic rights enumerated in the Directive Principles of State Policy.37 What is economic citizenship and how can it help address the constraints emanating from the regime of discrimination? These issues are discussed in the next section.

310   Barbara Harriss-White and Aseem Prakash

A Brief Survey of Concepts of Citizenship In order to understand the concept of economic citizenship and to distinguish it from other competing agendas, we contextualize it in other concepts of citizenship. The most influential theory of citizenship was developed by Marshall (1950) who argued that citizenship is an institution ensuring that every individual is treated as a full and equal member of society. Marshall divided citizenship rights into three. First, civil rights, which were necessary for an individual’s freedoms, included freedom of speech, the right to own property and the right to justice. Second, political rights included the right to participate in the exercise of political power, particularly the rights to free elections and a secret ballot. Finally, Marshall set out social rights that provided for social welfare and human development. He argued that these dimensions of rights developed slowly over time, that they penetrated society unevenly through class formation and struggle, and that they can only acquire full expression in a liberal democratic state. This theory has been subjected to much criticism from the neo-Right, which claimed that Marshal’s conception of citizenship promoted passive citizenship and fostered dependency on the state due to the latter’s obligation to provide social protection. To this, the Left critics responded that the real-world project of the neo-Right has created a social underclass, and that far from having access to social protection, the working poor have been ‘disenfranchized’ from participating in the ‘new’ economy. Critical scholars have further argued that citizenship involves responsibilities as well as rights, though rights should precede responsibilities. Later, both schools moved towards convergence over social citizenship. For different reasons, both the Right and Left supported the decentralization and democratization of the welfare state, the Left for further deepening democracy and decentralising control over decision-making, and the Right, for facilitating the state’s withdrawal either by handing over the local management of social development to the community or by allowing them to raise taxes at the local level. Meanwhile, civil society theorists argued that neither market nor political participation is sufficient to embed the virtues of civility—a hallmark of citizenship. Instead, it is in the voluntary organization of civil society that citizens learn the virtue of mutual obligation. Against this, it has been argued that joining a particular association like a religious or ethnic association may signify withdrawal from the mainstream of society than learning how to participate in it.38

Social Discrimination in India  

311

All these arguments about citizenship abide by the logic of universalism in which ‘secular’ citizenship becomes the primary attribute of individuals in the social and spatial territory of the nation. We have seen how such universalist concepts are difficult to sustain and that the notion of universal secular citizenship is remarkably weak in ‘India’. Indeed, social identity forms the basis of India’s persistent regime of discrimination just as it forms the social structure of accumulation in the informal economy. However, we cannot discard the crucial notion of citizenship, which is usually seen as a derivative of democracy and justice, that is, a citizen is someone who has a democratic right and claim to justice (Kymlicka and Norman, 1994). We need to explore ways by which an individual has not only formal but also substantive equality, consistent with India’s Constitution. We argue that economic citizenship can be one of the crucial means of pushing this ‘governance’ and political agenda.

5. Towards a Conclusion: Principles of Economic Citizenship and the Governance39 Agenda In the final section, we summarize the facts flowing from our earlier analyses of India’s regime of discrimination and the social structure of market regulation and accumulation in the informal economy, and then contextualize them in the principles of economic citizenship.

Fact I Citizenship rights and responsibilities do not always follow the universal norms privileged by the constitution of a liberal democratic state. They are developed in specific social, political and cultural contexts. Members of particular social groups may be both politically and economically excluded not only because of their low economic status but also due to their sociocultural identity.40

The Case for Economic Citizenship I The concept of economic citizenship recognises the existence of a plurality of social classes. But all ought to have equal as well as substantive claims to public and social resources. Every individual, irrespective of their

312   Barbara Harriss-White and Aseem Prakash social identity, has the right to lay claim to processes that ensure equality of opportunity and equality in outcomes. A regime of equality of opportunity and equality in outcomes requires public policy to strive for—and enforce—substantive equality. The governance regime does not only have to ensure non-discrimination but also has to play an active, positive role in creating parity of circumstance.41

Fact II The present phase of capitalist development in India is informalizing what was already an overwhelmingly informal workforce. Work opportunity in the informal sectors is largely shaped at the intersection of class, caste, gender, ethnicity, religion, age and locality. Returns from self-employment and wage labour persist in corresponding to the Hindu hierarchical social order: the upper castes are the highest earners and Dalits/Adivasis are at the lowest ladder of earnings. In between lie the OBCs and Muslims. As regards the self-employed/own account workers, evidence shows that it is quite hard for DAM to enter the marketplace and even more difficult for them to compete, accumulate and re-invest productively.42

The Case for Economic Citizenship II The project of economic citizenship calls for state-led and supervised political and social arrangements, which guarantee the economic rights of the disadvantaged in the market, and ensure equality of opportunity. Clearly, this project has to keep a consistent and supportive watch on social groups that are excluded or adversely included in the market in order to ensure parity of circumstances at work, in production and in economic arrangements surrounding social reproduction. The project of economic citizenship must also be vigilant so that the rights of the discriminated and marginalized people/citizens/political citizens are preserved by the state in the ‘new’ economy where state-led development been replaced by market-led growth.

Fact III Historically disadvantaged social groups find themselves devoid of a powerful political voice to articulate their economic interests. Even when Dalits have found political articulation, their economic interests have yet to be articulated. India’s political process does not have a well worked-out decent work agenda for informal sector petty producers and wage workers who constitute 92 per cent of the workforce. Civil society is largely dominated

Social Discrimination in India  

313

by social collectives, which acquire their primary identity through ascriptive attributes, are instrumental in creating exchanges that cross the boundaries between state, market and civil society.

Case for Economic Citizenship III The project of economic citizenship also requires a consciously designed struggle for political space to enable civil society actors to work in the interests of the social groups constituting DAM. Only sustained pressure from below can ensure the prioritization, legitimization and sustenance of the agenda of economic citizenship. The formidable challenge for social movements and other civil society actors is to empower the victims of capitalist transformation, and to create ‘rights’ for resource transfers and economic claims both at work and in social reproductive time and space. This will need strategic contestations, tactical struggles and protracted negotiations.

6. Coda What Economic Citizenship Is Not Economic citizenship does not imply that previously recognised citizenship rights—civil, social and political rights—are not required for development. Economic citizenship is an analytical tool to push for the substantive equality promised by the Indian Constitution. Economic citizenship is not a call for differentiated multi-layered citizenship, which implies that members of certain groups are incorporated into the political community not only as individuals but also through their group. Their rights then partly depend on their group membership—a condition manifested in much social exchange in contemporary India (Young, 1989). When the family is the building block of the economy, as it is in India, this aspect of economic citizenship is going to be an extremely difficult project in the absence of authoritative state regulation of all expressions of economic, provisioning activity.

Notes   1. For a very good review of these rights and directive principles in the context of equal opportunity to all citizens, refer to Government of India (2008).

314   Barbara Harriss-White and Aseem Prakash   2. The presence of social discrimination has been accepted by all successive plan documents of the Government of India as well as a number of committees/ commissions established by the government. Recently, two important bodies—the Prime Minister’s High Level Committee on Social, Economic and Educational Status of Muslim Community in India and the National Commission for Enterprises in Unorganized Sector (NCEUS) established by Government of India—produced extensive data and in-depth analyses on the social exclusion of historically deprived social groups and the Muslim minority community in India.   3. As and when the norms are respected or violated.   4. For instance, the use of prenatal tests for selective abortion of female babies is a good example of direct discrimination against women.   5. For instance, many housing societies do not intend to discriminate against religions or castes but at the same time, they firmly uphold the policy of not selling or renting any property to non-vegetarians. The net result of this policy is that it excludes potential buyers/tenants who belong to certain castes or practise religions other than Hinduism.   6. The practice of social discrimination (whether direct or indirect) is not limited to India but is prevalent across the world in different forms; for instance, discrimination on racial grounds in the United States. However, certain forms of discrimination (for instance, caste-based discrimination) are unique to India because they derive their origin from religious texts.  7. Discrimination against women is developed elsewhere. For instance, for understanding discrimination against Dalit women, see Rao (2003) and Rege (2006). For studying discrimination against Muslim women, see Hasan and Menon (2005). The discrimination against Adivasi women has been captured by Mohanty and Biswal (2007). Similarly, a few aspects of discrimination embedded in the State response to women’s issues can be grasped through the work of Anges and Fernandez (see Fernandez, 2009; Agnes, 1999). Similarly, Chhachhi (2009) captures the discrimination against women in the contemporary labour restructuring under the impact of ongoing economic globalization. Likewise, discrimination resulting in violence against women by the immediate family and community has been studied by Patel and ICRW/UNPF respectively (see Patel, 2007; International Center for Research on Women, 2004). Women in rural India have also faced the repercussion of low agricultural growth (see Vepa, 2009).   8. For instance, during the course of the Tsunami Rehabilitation Project in Tamil Nadu, one of the most important criteria of aid was compensation for the destruction of property (houses, boats, shops, etc.). In this sense, the entitlement of a citizen for accessing relief funds was defined through property rights. In the course of rehabilitation, the men and women working in the unorganized sector as loaders (mostly Dalits) for fishermen were left out from benefits from the State’s rehabilitation. This can be cited as a good example of indirect discrimination. The Dalits, comprising mostly unorganized sector labour, who

Social Discrimination in India  

  9.

10.

11.

12.

315

lived on encroached land or leased out plots, were the worst affected in terms of their livelihood chances. However, they did not have any legal avenue (lack of entitlement to property) to claim state rehabilitation benefits. For instance, poor women are caught in the cycle of lack of education or marketable surplus with no chance for a reasonable occupation. They bear the double burden of domestic labour and underpaid external labour in the unorganized sector. The world of low-caste women is generally shaped at the intersection of class, caste and patriarchy. For instance, women in Dalit families face the same limitations and marginalization, though in a much more severe form. There is a strong linkage between caste and patriarchy both within the household as well as beyond. In the household, the woman has to stay and survive under the overall domination of social rules and customs controlled and defined by men, while in the public domain, Dalit women experience atrocities, violence, rape and oppression by men of other castes more than other women. The caste system, as theorized by Ambedkar (1916) is an economic as well as social organization of roles and responsibilities in society. In its pure form, it not only fixes the economic rights (occupation) and social position of each caste by birth, but also delineates socio-economic penalties if an individual transcends occupational boundaries. The occupations are classified as ‘pure’ and ‘polluted’, wherein the former becomes the domain of upper caste(s) and the latter a preserve for the lower caste(s). Thus, each individual caste is linked with the other in such a hierarchical manner that the privileges of high caste, in both the economic and social domains, become the reason for the subordinate position of the lower caste. Further, these debilitating features for the lower castes acquire sanction and legitimacy through Hindu religious texts (also see Fuller, 1996). We are primarily concerned here with the position of the largest minority community in India, namely the Muslims. Their socio-economic status itself amply elucidates the regime of discrimination experienced by them in postcolonial India (Government of India, 2006a). The basis for discriminating against Muslims can be better understood from the writings of Savarkar (1969) and Golwalkar (1939), who argued for making India a Hindu rashtra (Hindu nation). They pointed out that the nation-state cannot be conceived in universalistic terms, where individuals staying within a common geographical territory decide to bind themselves under a common authority. It was argued that the primacy of the wills of the individuals, that is, the society, deciding to be a part of the body politic (social contract) always has the possibility of the adherence being withdrawn. Therefore, they argued for moving beyond the conception of the nation defined in terms of territory, to a conception understood and defined in terms of culture (read Hindu culture). Here, they employ the most reactionary understanding of race. Race is understood as being passed down by common cultural traditions. Common culture—comprising rituals, social rules, religious festivals, common mythology and language—instead of some

316   Barbara Harriss-White and Aseem Prakash vague ‘social contract’ provides an organic unity and allows every individual to become a living limb of the corporate personality of the society. Further, the notion of racial purity is not emphasized. Savarkar stresses that the ‘Others’— descendants of invaders of Central and Western Asia—can convert to Hinduism as was done by their predecessors, the Huns and Shakas. This notion minimizes the importance of the internal divisions because of the primacy given to ‘common blood’, and thereby draws out a basis for a new pan-Indian religion that would be classical Vedantic Brahmanism, while ignoring the ‘little cultures’, and seeks their integration within the Hindu/national mainstream. In other words, the efforts of Savarkar and Golwalkar towards conceptualizing the basis for the establishment of a Hindu nation derived their strength from a matrix of all castes woven into a single organic social block. This organic unity is achieved not by challenging the hierarchy within. Instead, hierarchy was preserved and legitimized by invoking the dharma (universal law) that governs Hindu social rituals and customs—the bedrock for maintaining social hierarchy. The absence of common culture makes Muslims and Christians different. Savarkar argues that they consider Arabia and Palestine as their holy land, and hence their love is divided. Golwalkar argues that foreign races should hold in reverence the Hindu religion, race and culture or accept a secondary status of subordinate citizenship, with no rights of a full citizen. 13. Adivasis have been primarily identified as those who either do not belong to Indian civilization or are outside Indian society (see Xaxa, 2005). They are culturally and socially stereotyped as lazy, thriving on state doles, drunkards, having unethical morals, etc., by the dominant social groups. The successive discourses—colonial discourse, discourse in the Constituent Assembly and post-colonial policy discourse consistently did not recognize Adivasis and a distinct socio-cultural identity and invariably attempted to integrate them in large Indian society through paternalistic policies (see Prakash, 2001). 14. For instance, Dalit gentlemen in Haryana, while getting married, started using the horse-drawn carriage in their marriage procession. The upper caste violently reacted and claimed that only the upper castes have the prerogative to use this particular cultural practice. Similarly, the violence against Adivasis (mostly Christians) in Kandhamal district primarily takes place because they emerge from exclusion and discrimination, and because of their assertion for dignity and right to development. Second is the issue of the demand by Panas (a Dalit community) of a few blocks in Kandhamal district, for inclusion in the Kui tribe, and, therefore, for making them eligible for ST status. These two separate issues were mobilized in 2007 to whip up religious and fundamental passions, imparting it a communal colour, resulting in large-scale violence on Pano Christians, Pano Hindus and other Adivasi communities. 15. This is not to negate the fact that a certain proportion of funds in the developmental programmes are exclusively earmarked for the Dalits, women and

Social Discrimination in India  

16. 17. 18. 19. 20.

21. 22. 23. 24. 25. 26. 27.

317

Adivasis. Further, in the scheme of things, the social and economic backwardness of Muslims was apparently never realised and acknowledged. It was after the appointment of the Sachar Committee and the publication of its report that some marginal developmental schemes have been introduced for the welfare of Muslims. See Government of India (2006b), pp. 92–94 and 164–75. See Government of India (1999–2001), pp. 182–85. Also see Tables 14.A.2, 14.A.3 and 14.A.4. See Government of India (1999–2001). Also see Tables 14.A.2, 14.A.3 and 14.A.4. See Government of India (1999–2001). Also see Tables 14.A.2, 14.A.3 and 14.A.4. Dualism refers to the analytical concept that divides the economy into a subsistence (agriculture) sector and a surplus-generating sector (industry). The main focus of the definition was the low labour productivity in the subsistence sector. It was posited that a process of development entails the expansion of the high productivity sector, by absorbing more and more labour from the subsistence sector, that is, from agriculture. The acknowledgement of dualism also meant that the state actively intervenes in investment in infrastructure as well as industry and services. The state also generates savings and propels the private sector to complement the private sector. One of the important features of this model was the role of deficit financing for financing development, in general, and investment, in particular (see Kannan, 2009). See Lerche (2010), for evidence of the classes of labour in India. Also see Messadri (2008), who supplies evidence about the variety of production conditions giving rise to labour-unfriendly garment-making industrial clusters throughout India. The informal economy provides work and livelihoods to 92 per cent of the workers and their families, and also contributes over half of India’s GDP. For instance, refer to Government of India (2007b). Kannan does not explain the remarkable positioning of Muslim women workers. SCR analysed the data of 12 states. The numerous case studies of NREGA corroborate this point. With Khan and Jomo, we see rents as universal. There are far more types of rents than recognized in standard theories of good governance or corruption: monopoly rents, natural resource rents, Schumpeterian rent, information and learning rents, management rents and political transfer rents. The latter, in turn, work downwards (minimally assuaging the victims of industrial capitalist development) cross-wise (ceding to opponents of the process) and upwards (the major stream—providing for and protecting productive investment). Some are necessary for efficiency and growth. Some are counter-productive. States have to create, defend, manage and differentially phase out structures of rents in the context of severe path dependence once the structure is in place and severe contestation (Khan, 2001, pp. 1–140).

318   Barbara Harriss-White and Aseem Prakash 28. For a review of these schools, see Prakash (2010). 29. The theory of social structure of accumulation analyses the relationship between capital accumulation processes and the set of social institutions that affect those processes. The central idea is that capital accumulation over a long period of time is the product of the stabilising role played by supporting social institutions. 30. The school of ‘social embeddedness’ makes a distinction between markets as politics and politics of markets. The former implies that the state plays an important role in the formation of institutions of the market—property rights, establishment of state institutions for private trade, rules of exchange, credit facilities and other conditions under which economic agents compete, cooperate and exchange. 31. See the economic analysis of the Gujarat pogrom in Harriss-White (2005). 32. The progressive civil society actors of various shades still try and react to the agenda of the dominant social groups rather than setting the agenda. 33. Formal equality is a principle of equal treatment of individuals. In other words, individuals who are alike should be treated alike. However, the claim of formal equality is limited to the treatment in relation to another, similarly situated individual or group and does not extend beyond same-treatment claims to any demand for some particular, substantive treatment. 34. For a good discussion on the provisions of the Indian Constitution, extending formal equality before the law, substantive equality in socio-economic sphere, see Chapters I and II of the Report of the Expert Group on Equal Opportunity Commission, Government of India (2009). 35. Grievance redressal can be through petitioning, approaching court of law, coal mining, to the police. It can also be through strikes and protests or giving a negative vote against the government of the day. 36. The persistence of discrimination in India is now formally accepted. The government recently appointed an Expert Group on Equal Opportunity and Diversity Index in order to seek an expert opinion on ways of addressing various forms of discrimination. 37. Of course, such an approach to citizenship will also require democratic institutions for maintaining an appropriate check and balance. Further, this concept was primarily defined for a capitalist economy. 38. A good review of theories and debates on citizenship is available in Kymlicka and Norman (1994). 39. Governance as a concept recognizes that there are pluralities of institutions, which shape the public policy regime. It includes government, civil society actors and think tanks pursuing conceptual as well as evidence-based research. 40. Under an authoritarian regime, it is theoretically possible to have equal economic rights, irrespective of ascriptive identity, but then it will lack political rights.

Social Discrimination in India  

319

41. For a relationship between discrimination, equality of opportunity and substantive equality, refer to Chapter II of the Report of the Expert Group on Equal Opportunity Commission, Government of India (2009). 42. It is true that there are scores of Muslim clusters (self-employed Muslims undertaking diverse economic activities). However, they mostly find themselves used and economically exploited by Hindu middlemen (for instance, chikan [embroidery] workers in Lucknow, or brass workers in Moradabad).

References Agnes, F. (1999), Law and Gender Inequality: The Politics of Women’s Rights in India, Oxford University Press, New Delhi. Ahmed, Z. (2009), Querashi Biradiri in Chandni Chowk, CSE, Mimeo, New Delhi. Ambedkar, B.R. (1916), Caste in India: The Mechanism, Genesis and Development, Annihilation of Caste, Bheema Patrika Publication, Jullander City (reprinted 1936). Banerjee-Guha, S. (2008), Space Relations of Capital and Significance of New Economic Enclaves: SEZs in India, Economic and Political Weekly, Vol. 43, No. 47, pp. 51–59. Chhachhi, A. (2009), Gender and Labour in Contemporary India: Eroding Citizenship, Taylor and Francis, London. Fernandez, B. (2009), Engendering Poverty Policy in India, in B. Pal et al. (eds), Gender Bias: Health, Nutrition and Work, Oxford University Press, New Delhi. Fuller, C.J. (ed.) (1996), Caste Today, Oxford University Press, New Delhi. Gadgil, M. and R. Guha (1994), Ecological Conflicts and the Environmental Movement in India, Development and Change, Vol. 25, No. 1, pp. 101–36. Ghosh, P.S. (1997), Positive Discrimination in India: A Political Analysis, Ethnic Studies Report, Vol. XV, No. 2, http://www.ices.lk/publications/esr/articles_ jul97/Esr-Ghosh.PDF. Golwalkar, M.S. (1939), We, or Our Nationhood Defined, Bharat Prakashan, Nagpur. Government of India (1999–2001), National Commission for Scheduled Castes and Scheduled Tribes, Sixth Report, 1999–2000 and 2000–2001, pp. 182–85. ———. (2006a), Social, Economic and Educational Status of Muslims in India: A Report, Cabinet Secretariat, New Delhi. ———. (2006b), The Prime Minister’s High Level Committee on Social, Economic and Educational Status of Muslim Community in India, Government of India, New Delhi, pp. 123–36. ———. (2007a), National Commission for Enterprises in Unorganised Sector, Report on Conditions of Work and Protection of Livelihood in the Unorganised Sector, Government of India, New Delhi.

320   Barbara Harriss-White and Aseem Prakash Government of India (2007b), National Commission for Enterprises in Unorganised Sector, Report on Social Security of Unorganised Sector, Government of India, New Delhi. ———. (2008), Report of the Committee to Examine and Determine the Structure and Functions of Equal Opportunity Commission, Ministry of Minority Affairs, Government of India, New Delhi. ———. (2009), Report of the Expert Group on Equal Opportunity Commission, Ministry of Minority Affairs, Government of India, New Delhi. Harriss, J. (2009), Comparing Political Regime across Indian States, Economic and Political Weekly, Vol. 30, No. 8, pp. 3367–77. Harriss-White, B. (2003), India Working: Essays on Society and Economy, Cambridge University Press, Cambridge. ———. (2005), India’s Market Society, Three Essays Press, New Delhi. Harriss-White, B. and K. Vidyarthee (2010), Stigma and Regions of Accumulation: Mapping Dalit and Adivasi Capital in the 1990s, in B. Harriss-White and J. Heyer (eds), The Comparative Political Economy of Development: Africa and Asia, Routledge, London, pp. 64–86, 319–49. Hasan, Z. and R. Menon (2005), Unequal Citizens: A Study of Muslim Women in India, Oxford University Press, New Delhi. International Center for Research on Women (2004), Violence against Women in India: A Review of Trends, Patterns, and Responses, United Nations Population Fund, India, New Delhi. Kala, P. (2001), In the Spaces of Erasure: Globalisation, Resistance and Narmada River, Economic and Political Weekly, Vol. 36, No. 22, pp. 1991–2002. Kannan, K.P. (2009), Dualism, Informality and Social Inequality: An Informal Economy Perspective of the Challenge of Inclusive Development in India, Indian Journal of Labour Economics, Vol. 52, No. 1, pp. 1–32. Khan, M. and K.S. Jomo (eds) (2001), Rents, Rent-seeking and Economic Development in Asia, Cambridge University Press, Cambridge. Khan, M.H. (2005), Markets, States and Democracy: Patron–Client Networks and the Case for Democracy in Developing Countries, Democratization, Vol. 12, No. 5, pp. 704–24. Kohli, A. (1987), State and Poverty in India, Cambridge University Press, Cambridge. Kymlicka, W. and W. Norman (1994), Return of the Citizen: A Survey of Recent Work on Citizenship Theory, Ethics, Vol. 104, No. 2, pp. 352–81. Lerche, J. (2010), From ‘Rural Labour’ to ‘Classes of Labour’: Class Fragmentation, Caste and Class Struggle at the Bottom of the Indian Labour Hierarchy, in B. Harriss-White and J. Heyer (eds), The Comparative Political Economy of Development: Africa and Asia, Routledge, London, pp. 64–86. Marshall, T.H. (1950), Citizenship and Social Class and Other Essays, Cambridge University Press, Cambridge. Mendelsohn, O. and M. Vicziany (2005), The Untouchables: Subordination, Poverty and the State in Modern India, Cambridge University Press, Cambridge.

Social Discrimination in India  

321

Messadri, A. (2008), The Rise of Neo-liberal Globalisation and the ‘New–Old’ Social Regulation of Labour: A Case of the Delhi Garment Sector, Indian Journal of Labour Economics, Vol. 52, No. 4, 603–18. Mohanty, M. (nd) (2007), Kilvenmani, Karamchedu to Khairlanji: Why Do Atrocities on Dalits Persist? Mimeo, Institute for Human Development, New Delhi. Mohanty, R.P. and D.N. Biswal (2007), Culture, Gender and Gender Discrimination: Caste Hindus and Tribals, Mittal Publications, New Delhi. Patel, T. (ed.) (2007), Sex-selective Abortion in India: Gender, Society, and New Reproductive Technologies, SAGE Publications, New Delhi. Prakash, Amit (2001), Jharkhand: Politics of Development and Identity, Orient Longman, Hyderabad. Prakash, Aseem. (2008), Social Conflict, Development and NGOs: An Ethnographic Analysis, Oxfam Policy Paper, Ahmedabad. ———. (2010), Dalit Entrepreneurs in Middle India, in B. Harriss-White and J. Heyer (eds), The Comparative Political Economy of Development: Africa and Asia, Routledge, New Delhi, pp. 219–316. ———. ( 2014), Social Collectives, Political Mobilisation and the Local State: A View from the Field, Journal of South Asian Studies, Vol. 2, No. 1. ———. (forthcoming), Dalit Capita: State, Markets and Civil Society in Urban India, Routledge, New Delhi. Rao, A. (ed.) (2003), Gender and Caste: Issues in Contemporary Indian Feminism, Kali for Women, New Delhi. Rege, S. (2006), Writing Caste, Writing Gender: Narrating Dalit Women’s Testimonies, Zuban, An Imprint of Kali for Women, New Delhi. Rowena, R. (2005), Tremors of Violence, Muslim Survivors of Ethnic Strife in India, SAGE Publications, New Delhi, pp. 113–53. Sahni, B. (2009), Economic Citizenship in India: A Socio-legal Comparison of Two Cases, Heidelberg Papers in South Asian and Comparative Politics, No. 46, April. Savarkar, V.D. (1969), Who is a Hindu? S.S. Savarkar, Bombay. Sen, A. (1999), Development as Freedom, Oxford University Press, New Delhi, pp. 111–45. Sengupta A., K.P. Kannan and G. Raveendran, India’s Common People: Who Are They, How Many Are They and How Do They Live? Economic and Political Weekly, Vol. XLIII, No. 11, 15 March 2008. Singh, S. (2008), Financial Exclusion and the Underprivileged in India, in A. Prakash (ed.), Towards Dignity: Access, Aspiration and Assertion of Dalits in India. Mimeo, Institute for Human Development, New Delhi. Srinivas, M.N. (1996), Caste: Its Twentieth Century Avatar, Viking, New Delhi. Vepa, S.S. (2009), Bearing the Brunt: Impact of Rural Distress on Women, SAGE Publications, New Delhi. Xaxa, V. (2005), Tribe and Justice, in R. Bhargava, M. Dusche and H. Reifeld (eds), Justice: Political, Social, Juridical, SAGE Publications, Delhi. Young, I.M. (1989), Polity and Group Difference: A Critique of the Ideal of Universal Citizenship, Ethics, Vol. 99, pp. 250–74.

2,31,619

1,22,551

14,86,637

6,59,113

Group A

Group B

Group C

Group D

–

–

–

4.8 (36.8)

Civil Services

5.0 (37.3)

4.9 (36.6)

3.4 (25.4)

2.5 (18.7)

Railways Telegraph

5.3 (39.6)

4.8 (36.6)

4.4 (32.8)

3.8 (28.4)

Post and Services

4.3 (32.1)

4.8 (35.8)

3.9 (29.1)

3.1 (23.1)

Security

2.5 (18.7)

1.7 (12.7)

Banks

5.4 (40.3)**

3.7 (27.6)*

Universities

3.9 (29.1)

2.8 (20.9)

2.3

PSUs***

Source: Government of India (2009). Note: Figures in parentheses are ratios (in percentage terms) of Muslims’ share in employment of a specific department to their share in total population, which is 13.4. * Teaching faculty, ** non-teaching faculty. *** For PSUs, Group A includes Higher Managerial Staff, Group B, Managerial Staff, and Groups C and D, Workers. # For employment number under Group A PSUs, Railways, Security Agencies, Postal, Civil Services are shown for Group B PSUs, Railways, Security Agencies, Postal; for Group C, Railways, Security Agencies, Postal; and for Group D Railways, Security Agencies, Postal department are indicated.

Total Number of Employees#

Category/ Level of Employment

Table 14.A.1 Share of Muslim Employees in Selected Central Government Department and Institutions

Appendix

Social Discrimination in India  

323

Table 14.A.2 Representation of SCs/STs in Services of All Central Ministries/ Departments as on 1 January 1999 SCs

Per Cent

A

Group

93,520

10,558

11.29

3172

3.39

B

1,04,963

13,306

12.68

3512

3.35

C

23,96,42,694

3,78,115

15.78

1,45,482

6.07

9,49,353

1,89,761

19.99

66,487

7.00

65.57

D (Excluding sweepers) Sweepers

Total

STs

%

96,435

63,233

5314

5.51

Total excluding sweepers

35,44,262

5,91,740

16.7

2,18,653

6.17

Total including sweepers

36,40,697

6,54,973

17.99

2,23,967

6.15

Source: Government of India (1999–2001), p. 182. Table 14.A.3 Representation of SCs/STs in Services of All Central PSEs as on 1 January 2000 Group

Total Employees

SCs

%

STs

%

A

2,04,127

21,125

10.35

6057

2.97

B

1,75,159

19,355

11.05

7317

4.18

C

10,13,917

1,91,931

18.93

85,744

8.46

4,07,425

91,729

22.51

46,463

11.40

18,00,628

32,41,40

18.00

145,581

8.09

27,903

20,412

73.15

878

3.15

18,28,531

3,44,552

18.84

146,459

8.01

D (Excluding Safai Karmacharis (Conservancy Staff)) Total Safai Karmacharis Grand Total

Source: Government of India (1999–2001), p. 183.

324   Barbara Harriss-White and Aseem Prakash Table 14.A.4 Representation of SCs/STs in Public Sector Banks and Financial Institutions

Officers

Total SCs % STs %

Clerk

Total SCs % STs %

Sub-staff excluding sweepers

Total SCs % STs %

Sweepers

As on 1 January 1998

As on 1 January 1999

As on 1 January 2000

2,52,072

2,54,511

2,54,692

29,956

30,857

31,871

11.80

12.12

12.51

10,098

10,412

10,749

4.00

4.09

4.22

4,65,780

4,60,909

4,56,802

69,902

70,160

67,975

15.00

15.22

14.88

22,416

22,321

21,755

4.81

4.84

4.76

1,83,061

1,79,606

1,78,428

42,567

42,766

43,653

23.25

23.81

24.46

11,275

11,138

11,154

6.15

6.20

6.25

Total

43,509

43,508

39,406

SCs

22,864

22,707

20,086

%

52.55

52.18

50.97

STs

2449

2386

2422

%

5.62

5.48

6.14

Source: Government of India (1999–2001), p. 185.

19.3 4.0

5. Middle Income

6. Higher Income

100.0

100.0

12.2

87.8

1.0

11.2

33.0

22.4

21.5

10.9

SCs/STs

100.0

15.5

84.5

2.2

13.3

34.8

22.3

19.2

8.2

Muslims

100.0

20.2

79.9

2.4

17.8

39.2

20.4

15.1

5.2

OBCs

100.0

45.2

54.8

11.0

34.2

35.3

11.1

6.4

2.1

Others

100.0

21.3

78.7

2.7

18.7

38.4

19.6

15.0

5.8

Informal Workers

Note: The official poverty line (PL) is the benchmark used for determining different levels of poverty status. Extreme poverty means those below 0.75PL, Poor means 1PL, Marginal means between 1PL and 1.25PL, Vulnerable means between 1.25PL and 2PL, Middle Income means between 2PL and 4PL and High Income means above 4PL. For details, see the Appendix in Sengupta, Kannan and Raveendran (2008). The data on consumer expenditure computed for determining poverty status is from the consumer expenditure schedule attached to the Employment and Unemployment Survey of National Sample Survey (NSS), 61st Round. The incidence of poor and vulnerable using the detailed survey works out to 75.3, as against 76.7 using the abridged schedule.

9. All

23.3

36.0

4. Vulnerable

8. Middle and High Income (5+6)

19.0

3. Marginal

76.7

15.4

2. Poor

7. Poor and Vulnerable (1+2+3+4)

6.4

Total

1. Extremely Poor

Poverty Status

Population

Table 14.A.5 Percentage Distribution of Population and Unorganized Workers by Poverty Status and Social Groups

326   Barbara Harriss-White and Aseem Prakash Table 14.A.6 Percentage Distribution of Informal Workers by Socio-religious Groups within Different Poverty Status (2004–05) (in millions) Socio-religious Category Poverty Status

SC/ST

Muslim

OBC

Others

Total

Share of Workers in Each Social Group Extremely poor and poor, marginal and vulnerable

88.5

84.7

80.1

58.8

78.7

Middle and high income

11.5

15.3

19.9

41.2

21.3

100.0

100.0

100.0

100.0

100.0

Total

Share of Social Groups in Total Workers Extremely poor and poor, marginal and vulnerable

34.3

11.3

38.7

15.6

100.0

Middle and high income

16.5

7.6

35.6

40.4

100.0

Total

30.5

10.5

38.1

20.9

100.0

Source: Computed from NSS, 61st Round. Table 14.A.7 Average Daily Earnings of Casual Workers (` per day), 2004–05 Informal Sector Male

Female

Others

54.7 (100)

30.9 (100)

OBCs

53.7 (98)

31.9 (103)

Muslims

53.5 (98)

36.7 (119)

SCs/STs

48.8 (89)

32.7 (106)

Source: Computed from NSS 61st Round. Note: Tables 14.A.5–14.A.7 are reproduced from Kannan (2009).

15

‘Rural Poverty: Policy and Play Acting’ Revisited. Why Doesn’t the Indian State Do Better in Regard to Poverty Reduction? John Harriss

E

arly on in the history of the Madras Institute of Development Studies, under the directorship of Dr C.T. Kurien, in the early months of 1980 our colleague the late S. Guhan undertook an evaluation of the Integrated Rural Development and related poverty-focussed programmes in the districts of Ramanathapuram and Dharmapuri. It was on the basis of this work that he published in the Economic and Political Weekly a paper entitled ‘Rural Poverty: Policy and Play Acting’ (Guhan, 1980), in which he offered an evaluation of the policy towards rural poverty set out in the Sixth Plan Framework. Much has changed, of course, in the 30 years that have elapsed since then. Yet much of Guhan’s argument that had to do with the gap between policy and plans, and their implementation, remains relevant even now. He documented many failures of implementation of the programmes which meant that benefits from them often ‘trickled up’ to relatively wealthy and powerful people. These failures often had to do with the perverse incentives to which the bureaucrats entrusted with the implementation of policy were subject, but more fundamentally with the failure of the

328   John Harriss state to address the structural, political problems that ultimately account for the persistence of poverty. Tackling the problem of poverty, he thought, required redistributive land reform, decentralization and co-operation, all of which he saw as being inter-related. And, as he said, ‘Movement on any or all of these three fronts has to be a political process to be politically brought about’ (1980; 1982, emphasis in the original). He saw little signs that such a political process was taking place, and in these circumstances believed that bureaucratically administered poverty alleviation programmes amounted to nothing more than play-acting, with no real chance of success. In the essay that follows—presenting a synthesis of the findings of recent research on what has come to be called ‘governance’ in India1—I show that much of Guhan’s analysis remains valid.

Bureaucratic Pathologies and the Indian Paradox Government in India presents a number of striking paradoxes. India is—as we are quite often reminded—both the largest and one of the more robust parliamentary democracies in the world. Political participation, as given by such indicators as turn-out rates in elections at different levels of government, compare favourably with those in most other democracies, and in some parts of the country at least, and at some times, the turn-out is inversely related to measures of socio-economic status (Alam, 2004, chapter 2). This is to say that India is unique amongst parliamentary democracies in that poorer, more disadvantaged people often seem to be more likely to turn out to vote than their wealthier and more highly educated neighbours. Both state-level and national elections in India have more often than not been characterized by ‘anti-incumbency’—incumbent governments have tended to be turned out of office by voters, even if they have had a reasonable record of public service. Survey evidence shows that Indians generally still expect their state to supply solutions to common public problems, such as those of access to electricity and to water, to sanitation, or to decent roads, to health care and to education (see Chandhoke, 2005, citing data from a survey in Delhi). Yet the quality of service delivery, across the country, is very often abysmal. Studies show, for example, that although the country has a welldesigned system of public health care, staffed by quite well trained and technically competent personnel, able to provide care more cheaply than private medical practitioners, the public system is widely distrusted by

‘Rural Poverty: Policy and Play Acting’ Revisited  

329

people. People, even very poor people, prefer to seek health care from private providers, even though (research shows) the private practitioners whom they seek out may be technically less competent than those in the public system as well as costing more. An important part of the reason for this is the very high levels of absenteeism that prevail amongst doctors and nurses, so that people cannot rely on local health centres being open when they should be, or on actually having access to a doctor when they go to higher level primary health care centres. Research has shown that absenteeism may be institutionalized with health service managers actually conniving with junior staff to sanction and so to perpetuate absenteeism (Banerjee and Duflo, 2009). It is part of a whole system of payments of rents in various forms that connect higher and lower levels of the bureaucracy in much the same way that Robert Wade, in several by now classic papers (1982, 1985), showed to happen in the irrigation bureaucracy of Andhra Pradesh. This is a structural problem, no doubt, but the moral responsibility of all the officials concerned for the failures of public service is also clear. The erosion of a sense of ‘the public interest’ amongst even senior bureaucrats in India, according to a recent account by one of them (Chowdhury, 2012), has social causes, for sure, but we should not discount individual agency. These are aspects of the failure of the Indian state that are strangely omitted in the well-known anthropologist Akhil Gupta’s recent book Red Tape: Bureaucracy, Structural Violence and Poverty in India (2012). Gupta’s central thesis is that the unnecessary deaths of large numbers of people in India, resulting from poverty—he provides a plausible estimate that the figure may be as high as 2M persons a year over the period of India’s independence—comes about ‘not because of the indifference of bureaucrats but because of the fact that bureaucratic action repeatedly and systematically produces arbitrary outcomes in its provision of care’ (2012: 6). The arbitrary outcomes generated by the bureaucracy are implicit in what he wants to call ‘structural violence’, meaning that unnecessary deaths are caused by structural factors. In this case there is a ‘crime’, as he puts it, but no clearly identifiable ‘criminal’: ‘no matter how noble the intentions of the programmes, and no matter how sincere the officials in charge of them, the overt goal of helping the poor is subverted by the very procedures of bureaucracy’ (2012: 23). Both recent evidence on the significance of absenteeism—which Gupta entirely ignores—and Guhan’s observations from 30 years ago, show this argument to be at best half right. The ostensible goal of helping the poor is subverted by the procedures of bureaucracy—as Guhan showed—but public servants cannot be absolved of responsibility, even if it is also necessary to locate bureaucratic action in the context of the structures of power in the wider society.

330   John Harriss The question then is—and this is what may be described as ‘the Indian paradox’—how and why is it possible that voters, in what is in many ways a vibrant democracy, should be ready to tolerate such failure? How is it possible that they should tolerate a public education system that fails to teach very large numbers of children who have come through several years of schooling to read even a very simple text, or to perform the most basic arithmetic (Banerjee et al., 2008)? Why are even poor people ready to pay for private schooling rather than exercising their voice to demand a better public service (Jeffrey et al., 2008)? Why do voters apparently tolerate high levels of corruption in these and other public services, and on the part of their politicians—quite a high proportion of whom have criminal records?

‘Patronage Democracy’ and the ‘Flailing State’ India is of course a long way from being a ‘failing state’, and in regard to many of its functions the Indian state performs very well indeed. What Devesh Kapur (2010) refers to as the ‘macro-state’, responsible for the major instruments of economic policy, has generally done very well indeed even in the period of low rates of economic growth when India at least avoided the disasters of high rates of inflation that so badly affected other ‘developing’ economies. This is the sphere of the meritocratically recruited and often highly competent upper echelons of the Indian Administrative Service (of which, of course, S. Guhan had been a distinguished member). India does well, too, in regard to indicators of democracy. But the Indian government, as we have pointed out, actually performs very badly in regard to the delivery of services, even by comparison with its poorer and economically less dynamic neighbours. The ‘Failed States Index’ for 2010 shows Pakistan at 10th (i.e., there are only nine countries that do worse on this Index), Bangladesh at 24th, Sri Lanka at 25th and Nepal at 26th, while India is ranked 87th. In regard to the criterion (included in the Index) of ‘progressive deterioration of public services’, however, India does little better (with a score of 7.2, where 10 would mean complete breakdown) than its neighbours Pakistan (7.3) and Nepal (7.6), and worse than Sri Lanka (6.4) (see Foreign Policy, August, 2010). The ‘micro-state’ has, for example, launched a long series of programmes to address different dimensions of poverty but with very little to show for most of them (Kapur, 2010; Guhan, 1980). These characteristics of the Indian state—high levels of competence

‘Rural Poverty: Policy and Play Acting’ Revisited  

331

and performance at the centre, but a distressing inability to deliver programmes and services to the mass of the people—have led Lant Pritchett to describe it, memorably, as a ‘flailing state’ (by analogy with a flailing human body when the brain loses control of the limbs (see Pritchett, 2009). What accounts for this state of affairs? An answer to this critical question comes from work by Kanchan Chandra, who describes India as a ‘patronage democracy’. What she means by this is that India is formally a democracy, with free and mostly reasonably fair elections under a universal franchise, but one in which the state monopolises access to very substantial resources. The allocation of these is subject to a high degree of individual discretion: ‘elected officers have discretion in the implementation of laws allocating the jobs and services at the disposal of the state’ (Chandra, 2004: 6). Though under the impact of policies of economic liberalism the growth of public sector employment has been contained, there still are very many jobs in the public services and they continue to be very much sought after—Jeffrey et al. (2008) have explained with regard to wealthier rural people in western Uttar Pradesh. The allocation of most of these jobs is subject to the discretion of individual bureaucrats, usually influenced by politicians—rather than being regulated by open and meritocratic process.2 The state, through its street-level bureaucrats, continues to control access to important inputs for agriculture, such as water and public sector credit, and to loans, rations of essential commodities (through the Public Distribution System) and to employment in public works (now through the National Rural Employment Guarantee Act [NREGA])—and the allocation of these resources, too, is subject to political discretion. Politicians are able to exercise power over bureaucrats—even sometimes those at the highest levels of the civil service—through the mechanism of ‘transfers’. Governments, and consequently politicians, have almost unfettered power to transfer a civil servant from one post to another, and to promote and to demote them (Krishnan and Somanathan, 2005: 292–99). This, as Wade showed, opens up huge possibilities for securing rents, on the parts of both officials and especially of politicians (Wade, 1982, 1985)—as officials seek to avoid difficult postings and to secure ones in which there are significant opportunities for graft. It also means that even the most competent and uncorrupted officials—often especially them—are unlikely to remain in one position for very long. Guhan noted in 1980 that in the study districts, ‘[t]he middle and higher officials were frequently transferred. In one of the districts, we encountered three Collectors during the seven month span of the study’ (Guhan, 1980; 1981). There are senior IAS officers who have seldom remained in a post for much more than a year, and there are

332   John Harriss notable cases where even, for instance, a Chief Secretary to a state government has been removed from his post quite arbitrarily when he stood in the way of senior politicians. From the point of view of the politicians, being able to control selective benefits through patronage using the resources of the state seems to be a more reliable way of ensuring continued support—and of realising rents for themselves, of course—than standing on a policy platform including promises about the delivery of public goods. As Guhan wrote, the politician is not interested in long-term answers to rural poverty [or, we may add, to problems of service delivery]; his stakes in the game are limited to the next elections. Meanwhile he does not wish to rock the boat by initiating or implementing reforms that will upset existing power structures (1980; 1982).

Even where public spending has not been directed at the supply of individual benefits, it has been focussed on delivering transfers to particular interest groups—as Pranab Bardhan has shown in his studies of the political economy of India, describing how public resources have been massively frittered away in often unproductive transfers (Bardhan, 1984/1998). Notable recipients, as well as private business groups, have been those labelled as ‘farmers’ who have been and continue to be the beneficiaries of public subsidies for fertilizers, irrigation water and electricity, and of subsidized prices for at least some of their output. It has been particularly the wealthier farmers who have benefited from such subsidies, and not so much the very many poor peasants of the country. There remains a puzzle, therefore, as to why voters—who include large numbers of poor people, who would greatly benefit from better provision of public health, education and other services—apparently go along with these practices, and do not hold the politicians (and through them the street-level bureaucrats who are immediately responsible for service delivery) democratically accountable for poor public provisioning. Philip Keefer and Stuti Khemani have answered this question by suggesting that it is due to the lack of credibility of political promises to provide broad public goods. They attribute ‘the differential credibility of promises related to public goods versus private transfers’ (2004: 935) to three factors—the history of electoral competition, the extent of social fragmentation of voters and to the limited information among voters about the quality of services. The first of these points involves an argument about historical path dependency. There are states—Keefer and Khemani give the familiar example of Kerala—where there is a history of governments being

‘Rural Poverty: Policy and Play Acting’ Revisited  

333

held to account because voters have been highly mobilized (in Kerala by the communist parties) over service issues. In the absence of such a history, as in Uttar Pradesh, it is difficult for any political leader or party to break from a path that has been determined by competition around selective benefits. The argument then shows up the significance of the second factor—that of social fragmentation. Public provisioning has generally been better in those states in which poorer people have been mobilized collectively, as by the communist parties in Kerala, or by the Dravidian parties in Tamil Nadu (see Harriss, 2003). And this factor in turn ties up with the one to do with information. The point here is that it is easier for people to judge whether politicians have delivered on subsidies rather than on provision of health and education, and Keefer and Khemani offer a number of practical suggestions about how voters may be better informed about service provision— for example, through the use of the ‘report cards’ that was pioneered in Bangalore. The argument is made in work by Tim Besley and Robin Burgess (2000) on variations in government responsiveness across the major Indian states. They examined public food distribution and calamity relief expenditure as measures of government responsiveness and showed that differences between states in their regard are only weakly related to variations in economic development, but that states with historically higher electoral turnouts and more competitive politics, and those with higher newspaper circulation are distinctly more responsive than others. It seems clear that higher levels of information among voters and higher levels of collective political mobilization are mutually supportive and interrelated. The data that are given by Besley and Burgess show that the most ‘responsive states’ according to their measures are Kerala, Maharashtra, Tamil Nadu and West Bengal, which are also the states with the highest newspaper circulation, and states in which the lower classes have historically been most highly mobilized politically. This evidence and argument goes to bear out the main thrust of Guhan’s argument in ‘Policy and Play Acting’, which was—contra Akhil Gupta’s core argument in his more recent study—that while bureaucratic action is implicated in the reproduction of poverty, this has to do more fundamentally with the failure of the state address structural, political problems. Both politics and the structural question of the class character of the state are remarkably absent from Gupta’s analysis. Their significance is clearly brought out once note is taken of the differences between Indian states in terms of the responsiveness of government to poor people. There can be no question that the state of Uttar Pradesh—the site of Gupta’s research—has been much less responsive to poor people than have the states of Kerala and

334   John Harriss Tamil Nadu (which in regard to some human development indicators, has done even better than its southern neighbour3). In Gupta’s terms, Uttar Pradesh has done more ‘killing’ of people than the two southern states, and some others. What accounts for the difference? The answer to this question is to be found in the long history of the political mobilization of lower castes/classes in the two southern states (Harriss, 2003), and perhaps in the development of strong sub-nationalisms in them (Singh, 2011). The significance of these long-run trends of political mobilization poses a further question: why is it that poorer people have not been mobilized collectively to any great extent around public provisioning in most Indian states? We may turn back to Chandra’s analysis, couched in the frame of rational choice making. She asks how benefit-seeking voters in a patronagedemocracy like India select politicians to vote for, and how politicians on the other hand decide which groups of electors to pitch for. The decisions both of voters and of politicians are subject, she says, to severe information constraints, and that these ‘force voters and politicians to favour coethnics in the delivery of benefits and votes (resulting in) a self-enforcing and reinforcing equilibrium of ethnic favouritism’ (2004: 12). What matters to voters is not what a party or a political leader says, but who it or she is. The basis for such ethnic favouritism may be caste, language or religion, or a sense of a ‘national’/regional identity that is perhaps only rather loosely linked to linguistic difference (as in the Telengana region of Andhra Pradesh), and it is always subject to reconstruction. This is the reason why, according to Chandra’s analysis, ethnic voting does not lead to permanent electoral majorities, because rival politicians can reconstruct salient identities (as, e.g., ‘Rajput’ politicians in Gujarat—from a numerically small group—succeeded in extending the category of ‘Kshatriya’ to a very wide group, see Chandra (2004: 289). Ethnic parties are likely to succeed when they have competitive rules for intra-party advancement, and so are open to elites from across the possible sub-divisions of the ethnic category around which they are organized, and when voters from the target category are sufficiently numerous to take the party to a winning or at least to an influential position. Once the equilibrium of ethnic favouritism is established it is not easily broken down. With the decline of the Congress party as an ‘encompassing interest’, embracing many different actually or potentially self-conscious groups of people, so Indian politics has become much more of a field of contestation over ethnic identities—often involving claims about dignity or ‘selfrespect’ as well as over resources (see Jayal, 2013)—which has reinforced

‘Rural Poverty: Policy and Play Acting’ Revisited  

335

government failure. As Abhijit Banerjee and Rohini Pande have shown in a test using data from Uttar Pradesh, if voters are concerned about the group identity of political candidates, then if this group has a majority in a particular political jurisdiction the quality of the candidates can be very poor and yet they will still win. In such circumstances ‘a strengthening of group identity on citizens’ political preferences worsens the quality of political representation’ (Banerjee and Pande 2009: 2). The two authors developed a data set, from a field survey covering a sample of 102 jurisdictions, on legislator corruption in Uttar Pradesh over the period 1980–96, when it is generally recognized that ethnic voting became increasingly significant (the standard source on this is Yadav, 1996). They then demonstrate both that increased legislator corruption over this period can be attributed to legislators from the party that shared the ethnic identity of the dominant population group in a jurisdiction (Congress or BJP for upper-caste voters and Samajwadi Party or Bahujan Samaj Party for lower-caste voters), and that increased corruption was largely concentrated in those jurisdictions with substantial high or low caste domination. Jurisdictions with the more biased caste distributions showed the greatest increases in corruption. In circumstances such as these attempts at bringing about administrative reform as the way of improving the delivery of public services are likely to be set at nought. Only for so long can there be maintained a gap between the actions of politicians and those of administrators. As a distinguished senior civil servant, N.C. Saxena, once wrote: ‘the model in which the politics will continue to be corrupt, casteist and will harbour criminals whereas civil servants continue to be efficient, responsive to public needs and change agents, cannot be sustained indefinitely’ (cited by Pritchett, 2008). There are other factors, too, that make for India’s character as a ‘flailing state’. With regard to measures to reduce poverty, in particular, there is a problem of the proliferation of programmes, all of which have their own often onerous reporting requirements that take up large amounts of the time of public servants. New administrations at the centre and in different states are eager to become identified with particular programmes (even if people, in the end, benefit from them through discretionary allocations), and this has contributed to proliferation. As new programmes are introduced old ones, even if they had very similar objectives, are rarely if ever closed down. And there are now very many schemes sponsored by central government, which makes grants for their implementation to the states— but as Devesh Kapur says, ‘Few states have the administrative capacity to access grants from 200 plus schemes, spend money as per each of

336   John Harriss its conditions, maintain separate accounts and submit individual reports’ (2010: 453). This capacity is most limited where most it is needed—as I observed in the course of a most distressing visit to defunct and decaying health centres in Bihar some years ago, when I learnt that the state had simply not claimed many of the resources available from the central government for primary health care. Large amounts of budgeted central state expenditures actually go unspent—not only in Bihar (Kapur, 2010: 453). It is a somewhat ironic fact, too, that over-bureaucratized though it is in so many ways, the Indian state(s) are often chronically under-staffed in key departments. The factors discussed here relate mainly to the supply side of public services. On the demand side, adding to the limitations that follow from the significance of clientelism in India’s ‘patronage democracy’, there is the fact that middle-class people, usually those most capable of ensuring the accountability of politicians, have increasingly withdrawn from using public services at all—going to private clinics and hospitals and sending their children to private schools. They have little interest, as a result, in exercising their voice in the cause of improved public services. They may be withdrawing, too, from participation in electoral politics. Javeed Alam maintains that middleclass people are increasingly withdrawing from what he refers to as ‘the politics of din’—as he puts it ‘the core of civil society has turned against democracy’ (2004: 122ff)—though the National Election Survey at the time of the 2009 General Election showed comparable levels of participation on the parts of members of middle and lower classes. But as Alam also says his assertion calls for careful interpretation. Many of the most articulate members of the Indian middle classes are deeply committed to democratic values but find they are corrupted by the way that democratic politics work in their country—and they have turned instead to activism in civil society. It is members of the middle classes who have brought about the important innovations in government (through the Right to Information Act) and in social provisioning (notably through NREGA and now through continuing activism over food security) through their campaigning and lobbying, sometimes through the legal instrument of public interest litigation. Such litigation has led the Supreme Court to order the government to act—as, for example, over the use of stocks of cereals in the granaries of the Food Corporation of India. There is a sense, then, in which there is a ‘judicialization of politics’ taking place in India, with rather ambiguous implications for the functioning of India’s democracy. It may mean that some of the negative implications of patronage democracy are overcome—as we perhaps see in the implementation of the Right to Education and of NREGA—but it

‘Rural Poverty: Policy and Play Acting’ Revisited  

337

can also mean that technocratic measures that are ultimately most favourable to middle and upper class interests are implemented, rather than democratic solutions being sought for public problems. It contributes to what is becoming recognized as a critical problem for the future of the Indian polity—that of the increasing powers of the Supreme Court, and the consequent tensions between the legislature and judiciary. The Court threatens to become an ‘imperium in imperio, the creation of which the drafters of the Constitution specifically wished to avoid’ (Rajamani and Sengupta, 2010: 93). These, then, are reasons why the Indian state has not, hitherto, generally done better in regard to poverty reduction. It remains to be seen whether the new programmes instituted by the UPA government after 2004, amongst which the Mahatma Gandhi National Rural Employment Guarantee Scheme, and now the provisions of the ordinance on Food Security signed by the President in July 2013, are most significant, will finally overcome the ‘play-acting’ of anti-poverty programmes over the years. Clearly, because government has decided against the principle of universalism in regard to food security, the targeting that will be involved in the implementation of the Food Security Bill (now Ordinance), will expose it to the sorts of pathologies that Guhan identified. And the identification of those who are ‘below poverty line’, and who should be eligible for cheap food grains, is subject to all manner of arbitrariness—the bureaucratic arbitrariness, exactly, that Gupta holds responsible for the failures of the state in regard to poverty. The implementation of the new policies imposes additional responsibilities onto the lower tiers of government. The remainder of this essay considers the performance hitherto of decentralized local government.

Are Decentralization and ‘Participation’ the Answer to the Problems of the Flailing State? Is There a ‘Silent Revolution’ Taking Place in India Today? Decentralization and ‘participation’ have become watchwords in the language of government in India. The first of these is expected to make government more responsive, by bringing it closer to the people, improving information flow both ways (from government to people and people to government), and the second—related to it—to empower ordinary people

338   John Harriss in relation to the state so as to make it work better for them, so tackling the sorts of problems that are discussed in the first parts of this essay. Both fit, more or less comfortably, however, into policy ideas about governance that are associated with economic liberalism, because they represent alternatives to the centralized state (see Harriss, 2000). Decentralization, legislated for in India through the 73rd and 74th Amendments to the Constitution of India that entered into effect in 1993, involving the delegation of some authority to local levels of rural and of urban government, respectively, is expected to make critical decision-making better informed about local needs and circumstances, and to make both politicians and bureaucrats more directly answerable to the people. Local governments should be much better able than bureaucrats appointed by central government to monitor and control the delivery of discretion-andtransactions-intensive services. These arguments led senior policy makers in the later 1980s to look to revitalising and strengthening the panchayati raj system of local government that had been initiated in the 1950s. The new legislation, as well as requiring state governments to establish local councils and to ensure the representation of women and members of the Scheduled Castes and Tribes, also includes provisions that are ‘discretionary’. States are called upon, but not explicitly required to devolve powers and resources to local bodies (including also the gram panchayats or assemblies that constitute the electorate of a village panchayat) so as to enable them to play a central role in the provision of public services and in the planning as well as in the implementation of development programmes and the securing of social justice. This means that the idea of ‘local self-government’ may be severely circumscribed in its practice, and that state governments may actually continue to exercise considerable power in regard to the local bodies. In practice, in most states, district officials, magistrates or collectors have the authority to interfere in the functioning of local government, and MPs and MLAs exercise a lot of influence in the workings of the second and third tiers (Chaudhuri, 2007). The political scientist James Manor, drawing on his experience of research on democratic decentralization (which is what panchayati raj is expected to establish) in a number of other countries as well as in different Indian states, argues that the three essential conditions for it to work well are: (i) that the elected bodies should have adequate powers; (ii) be provided with adequate resources; and (iii) be provided with adequate accountability mechanisms (so that bureaucrats are accountable to the elected representatives and the representatives to the people). He writes of his regret that most Indian states have failed to satisfy these conditions and that they have

‘Rural Poverty: Policy and Play Acting’ Revisited  

339

consequently lost significant opportunities—given that in so many other ways India is well prepared for decentralized government by comparison with many other countries (Manor, 2010). There is, in fact, a great deal of variation between the states—because of what the legislation leaves to their discretion—in the way in which the 73rd (and the 74th) Amendments have been implemented. Shubham Chaudhuri’s detailed review (2007) showed that more than 10 years after the passage of the 73rd Amendment fewer than half of the major states had satisfied the mandate regarding the holding of regular elections, and that some had failed to meet the requirements regarding the representation of women and of members of the Scheduled Castes and Scheduled Tribes. The limited evidence then available also showed that very little progress had been made in regard to functional and financial devolution to the local bodies, which continued to be characterized by high levels of dependency for their revenues on the higher levels of government. He writes, ‘It is hard to see how tax efforts [of local bodies] could get any worse’ (2007: 185), and concludes that ‘even when functions have been statutorily or even administratively transferred to panchayats, in most states the funds and personnel necessary for meaningfully carrying out the functions remain under the administrative control of the state-level bureaucracy’ (2007: 177). Exceptions are Kerala and West Bengal—which according to Chaudhuri’s analysis are the only states in which there has been any significant devolution of powers—and, to some extent, Karnataka (the state which, along with West Bengal, had a functioning panchayat system before the passage of the new legislation in 1993) and Maharashtra. The only other states in which Chaudhuri found that progress with devolution of powers had been other than ‘minimal’ are Madhya Pradesh and Rajasthan. Indian politicians have long resisted the transfer of resources and authority to local bodies, because of the loss that it would entail of some of their powers of patronage (as Guhan noted, indeed, in the 1980 paper, p. 1982). The political changes of the last two decades, which have seen regional political parties acquiring much greater influence, have increased the powers of the states in relation to the central government and changed the character of Indian federalism (see Mitra and Pehl, 2010), but they have certainly not increased the incentives for state politicians to decentralize. Indeed, if anything, the increasing volume of resources coming from the centre to state governments has increased the incentives for state politicians to control local administration (Kapur, 2010: 454). Further, as Chaudhuri points out, even apart from problems of political will and of bureaucratic resistance, decentralization is also extraordinarily complex administratively.

340   John Harriss The story thus far, therefore, of democratic decentralization in India, does not encourage one to think that it can have had very much of an effect on the quality of administration or the delivery of services. There is no authoritative analysis of its impact across the country as a whole—and given the variations in implementation such an analysis is scarcely feasible. We have to rely, therefore, on studies of particular states. Those by Pranab Bardhan and Dilip Mukherjee of the panchayat system in West Bengal show that there it has increased the voice of women and of Dalits and Adivasis—though they all still participate only at low levels—and increased their share of public resources. Bardhan and Mukerjee also find, however, that the inter-village allocation of resources is subject to high levels of discretion and report that [v]illages with greater landlessness, land inequality, or low-caste status among the poor received substantially fewer resources as a whole. Anecdotes and case studies indicate that the allocation of benefits followed party lines. Those that do not belong to the party locally in power get severely discriminated against. (2007: 219)

Somewhat similarly, Tim Besley and his co-researchers, who studied panchayats drawing on a large sample from across the four southern states, found that having a reserved panchayat chairman does improve targeting towards SC/ST households, but they were also concerned about bias in the allocation of resources to benefit chairmen’s own villages. They also thought it possible, however, from their findings, that poorer people may participate actively in gram sabhas, and that this may have a positive influence on targeting towards the poor (Besley et al., 2007). Two other scholars, Crook and Sverrisson, having studied analyses of decentralized government in several countries, and in West Bengal, concluded that decentralization has been most successful in regard to poverty alleviation in the Indian state largely because in this case state-level politicians have intervened at local levels in support of poorer people against local power-holders (Crook and Sverrisson, 2003). Clearly—as was often the case in India’s earlier experiments with local government through panchayats—democratic decentralization may easily go to enhance the opportunities of those who are already locally powerful, and work against the interests of the poor and the excluded. There is indeed a ‘paradox of decentralization’—which is that effective decentralized government may actually require those in power at the centre to intervene more than before at local levels against the manipulations of those who are locally powerful.4

‘Rural Poverty: Policy and Play Acting’ Revisited  

341

The same point has been made in regard to decentralization in Madhya Pradesh in the time of the government of the Congress Chief Minister Digvijay Singh (between 1993 and 2003) by Patrick Heller, drawing in part on research by James Manor (2010). In this state decentralization has had most effect in the sphere of primary education, through the Education Guarantee Scheme (EGS) established under Digvijay Singh’s government. The goal of the EGS was ‘to provide community-centred, rights-based primary education to all children in a quick and time-bound manner’ (Anderson, quoted by Heller, 2011: 167). By 2001 the primary education system in the state was entirely decentralized, with the panchayats charged with recruiting and monitoring teachers—and, it appears, with very positive outcomes, for a nation-wide study found teacher absenteeism in Madhya Pradesh to be well below the national average, while the 2001 census showed that literacy levels had been remarkably improved. The Singh administration worked quite like the progressive administrations of Ceara in Brazil, described by Tendler (see note 4), devolving resources in such a way as to bypass the patronage channels of local bosses; and Singh relied significantly for the implementation of this, and other programmes, on a cadre of talented bureaucrats whom he kept in post and insulated from the pressures of patronage politics through the setting up of special delivery mechanisms called ‘Rajiv Gandhi Missions’. In order to build and maintain political support Digvijay Singh sought to break with his party’s reliance on upper castes and local bosses, reaching out to the historically marginalized Dalits and Adivasis. As Heller notes, however, the limits of this top-down process of reform have to be recognized, and ‘critics, including Singh, have complained that Panchayats in Madhya Pradesh have been dominated by sarpanches [chairmen]’ (2011: 168) and that the panchayats have been ineffective in holding bureaucrats and local elites to account. The dangers of elite capture remain acute—and in Madhya Pradesh, indeed, Digvijay Singh finally lost power, in spite of the successes of his administration in regard to the delivery of some public services, substantially because of losing the support of local elites and of information from them (Manor, 2010: 69–70; Pai, 2010). Still, the story of the relative success of the EGS in Madhya Pradesh, and even more so, that of the People’s Campaign for Decentralized Planning in Kerala, also analysed by Heller (2011) encourages him to argue that panchayati raj is bringing about a ‘silent revolution’—in spite of the severe limits thus far on its implementation, with little having happened at all in so many states. Indeed, the histories of Kerala and Madhya Pradesh, and perhaps those of West Bengal and of Karnataka, have both shown up the existence of groups of progressive state reformers in different parts of

342   John Harriss the country and—more significantly—that ‘[o]rdinary citizens have been afforded opportunities to engage with public authority in ways that simply did not exist before’ (2011: 169). As Stuart Corbridge and his co-authors have also argued in their work on ‘Seeing the State’ in India (2005), based on research in part on the much less propitious terrain of Bihar, the very language of participation ‘resonates with popular aspirations and can readily be turned against a non-performing state’ (Heller, 2011: 169). Support for this positive view of the potentials that have been opened up both for the deepening of democracy in India, and for making the state more accountable to the people, comes from the mounting evidence—to some of which I have referred—about the changing social character of political participation in the country, as members of lower castes and classes, and women too, have begun to take part more actively at all levels of politics. Other scholars are less sanguine about the prospects of this ‘silent revolution’. Abhijit Banerjee and his co-researchers, for example, reach quite pessimistic conclusions from their study of participatory initiatives in regard to primary education in Uttar Pradesh. In this state, as in others, Village Education Committees (VEC) have been set up—or are supposed to have been set up. These bodies in Uttar Pradesh formed by head teachers and the heads of local government (usually panchayat chairmen), together with three parents, are expected to improve the functioning of schools through the involvement (or ‘participation’) of ‘beneficiaries’ (here children and their parents). The researchers’ baseline surveys, however, showed both that parents were unaware of the existence of the committees and that VEC members were unaware of their powers. They then experimented with three different innovations designed to enhance participation in this case, but found—sadly—that none of them had a positive impact on community involvement in schools, or on teacher effort, or on learning outcomes. The one innovation that did have an impact was that of the setting up of reading camps, which both showed that parents are interested in their children’s education and had some success in teaching reading. The researchers concluded that ‘citizens face substantial constraints in participating to improve the public education system, even when they care about education and are willing to do something to improve it’ (Banerjee et al., 2008). The research in part brings out the familiar problems of collective action: in this case parents’ involvement in their children’s schooling certainly can have positive outcomes, but how and why—or under what conditions—should people get involved? The fact that there can be benefits from participation in bodies like VECs does not automatically mean that people will get involved in them—because participation also entails costs, not least in terms of time.

‘Rural Poverty: Policy and Play Acting’ Revisited  

343

My conclusion, then, is that while decentralization and other ways of organising ‘participation’ can, in principle, serve both the cause of democratic deepening and that of improving the responsiveness of government in India so that public services are delivered more efficiently and more equitably, their practical achievements thus far are quite limited, certainly outside two or three states. Beyond this factual conclusion, I recognize that there is continuing debate between those scholars like Patrick Heller and others who believe that there is reason for thinking that a kind of a ‘silent revolution’ is taking place, as the language and practice of democratic decentralization increase the capacities of poor people to express themselves and their grievances, and on the other hand sceptics who find in the actual practices of participation vehicles for the interests of the dominant and middle classes of India that leave largely undisturbed the dependence of the labouring classes upon locally powerful intermediaries, so allowing the reproduction of ‘patronage democracy’, and the persistence of ‘play acting’ in regard to the delivery of services that should be instrumental in the reduction of poverty.

Notes 1. Parts of the text of this essay are taken from a chapter drafted by the author for the jointly-written book India Today: Economy, Politics and Society (2013). By Stuart Corbridge, John Harriss and Craig Jeffrey. Polity Press, Cambridge. 2. I have emphasized the point about meritocratic recruitment into the public service in this and the preceding paragraph, in the light of research showing that those developing countries that have meritocratically recruited bureaucracies do tend to have better records of performance (Rauch and Evans, 2000). India, famously, has a higher-level bureaucracy which is quite fiercely meritocratic in terms of recruitment, and—as I have said in the text—has many senior officials of exceptionally high calibre, though career paths in the civil service are much less clearly determined in the same way, as the text explains. The recruitment of the very large numbers of lower level civil servants is rarely meritocratic, being subject to a great deal of personal and political discretion (Chandra, 2004, chapter 6; Krishnan and Somanathan, 2005). 3. The recent success of Tamil Nadu in combining one of the best records amongst major states in regard to economic growth with an exceptional performance in social development has only just begun to be recognised—as it has been by Professor Pranab Bardhan in recent conference presentations. 4. This argument emerges very clearly from Judith Tendler’s studies of ‘Good Government in the Tropics’ (the title of her book, 1997), in the state of Ceara in North-eastern Brazil.

344   John Harriss

References Alam, J. (2004), Who Wants Democracy? Orient Longman, Delhi. Banerjee, A. and E. Duflo (2009), Improving Health Care Delivery in India, http:// economics.mit.edu/files/5172. Accessed July 2010. Banerjee, A. and R. Pande (2009), Parochial Politics: Ethnic Preferences and Politician Corruption, http://economics.mit.edu/files/3872. Accessed July 2010. Banerjee, A., R. Banerji, E. Duflo, R. Glennerster and S. Khemani (2008), Pitfalls of Participatory Programmes: Evidence from a Randomized Evaluation in Education in India, National Bureau of Economic Research, Working Paper No. 14311. Bardhan, P. and D. Mookherjee (2007), Decentralization in West Bengal: Origins, Functioning and Impact, in P. Bardhan and D. Mookherjee (eds), Decentralization and Local Government in Developing Countries: A Comparative Perspective, Oxford University Press, Delhi. Bardhan, P. (1984/1998), The Political Economy of Indian Development. Second Edition, Oxford University Press, Delhi. Besley, T. and R. Burgess (2000), The Political Economy of Government Responsiveness: Theory and Evidence from India, STICERD Working Paper, London School of Economics. Besley, T., R. Pande and V. Rao (2007), Political Economy of Panchayats in South India, Economic and Political Weekly, Vol. 42, No. 8, pp. 661–66. Chandhoke, N. (2005), ‘Seeing’ the State in India, Economic and Political Weekly, Vol. 40, No. 11, pp. 1033–40. Chandra, K. (2004), Why Ethnic Parties Succeed: Patronage and Ethnic Head Counts in India, Cambridge University Press, New York. Chaudhuri, S. (2007), What Difference Does a Constitutional Amendment Make? The 1994 Panchayati Raj Act and the Attempt to Revitalize Local Government in India, in P. Bardhan and D. Mookherjee (eds), Decentralization and Local Government in Developing Countries: A Comparative Perspective, Oxford University Press, Delhi. Chowdhury, J. (2012), The Insider’s View: Memoirs of a Public Servant, Penguin, Delhi. Corbridge, S., G. Williams, M. Srivastava and R. Veron (2005), Seeing the State: Governance and Governmentality in India, Cambridge University Press, Cambridge. Corbridge, S., J. Harriss and C. Jeffrey (2013), India Today: Economy, Politics and Society, Polity Press, Cambridge. Crook, R. and A. Sverrisson (2003), Does Decentralization Contribute to Poverty Reduction?, in P. Houtzager and M. Moore (eds), Changing Paths: International Development and the New Politics of Inclusion, University of Michigan Press, Ann Arbor. Guhan, S. (1980), Rural Poverty: Policy and Play Acting, Economic and Political Weekly, Vol. 15, No. 47, pp. 1975–82.

‘Rural Poverty: Policy and Play Acting’ Revisited  

345

Gupta, A. (2012), Red Tape: Bureaucracy, Structural Violence and Poverty, Duke University Press, Durham, NC. Harriss, J. (2000), Depoliticizing Development: The World Bank and Social Capital, Leftword, Delhi. ———. (2003), Do Political Regimes Matter? Poverty Reduction and Regime Differences Across India, in P. Houtzager and M. Moore (eds), Changing Paths: International Development and the New Politics of Inclusion, University of Michigan Press, Ann Arbor. Heller, P. (2011), Making Citizens from Below and Above: The Prospects and Challenges of Decentralization in India, in S. Ruparelia, S. Reddy, J. Harriss and S. Corbridge (eds), Understanding India’s New Political Economy: A Great Transformation? Routledge, London. Jayal, N.G. (2013), Citizenship and its Discontents: An Indian History, Permanent Black, Delhi. Jeffrey, C., R. Jeffery and P. Jeffery (2008), Degrees without Freedom? Education, Masculinities and Unemployment in North India, Stanford University Press, Stanford. Kapur, D. (2010), The Political Economy of the State, in N. Gopal Jayal and P. Bhanu Mehta (eds), The Oxford Companion to Politics in India, Oxford University Press, Delhi. Keefer, P. and S. Khemani (2004), Why Do the Poor Receive Poor Services? Economic and Political Weekly, Vol. 39, No. 9, pp. 935–43. Krishnan, K.P. and T.V. Somanathan (2005), Civil Service: An Institutional Perspective, in D. Kapur and P.B. Mehta (eds), Public Institutions in India: Performance and Design, Oxford University Press, Delhi. Manor, J. (2010), Local Governance, in N. Gopal Jayal and P. Bhanu Mehta (eds), The Oxford Companion to Politics in India, Oxford University Press, Delhi. Mitra, S. and M. Pehl (2010), Federalism, in N. Gopal Jayal and P. Bhanu Mehta (eds), The Oxford Companion to Politics in India, Oxford University Press, Delhi. Pai, S. (2010), Developmental State and the Dalit Question in Madhya Pradesh: Congress Response. Routledge, New Delhi and London (with Nehru Memorial Museum and Library). Pritchett, L. (2009), A Review of Edward Luce’s ‘In Spite of the Gods: The Strange Rise of Modern India,’ Journal of Economic Literature, Vol. 47, No. 3, pp. 771–80. ———. (2008), Is India a Failing State? Detours on the Four Lane Highway to Modernization, Harvard Kennedy School, unpublished paper. Rajamani, L. and A. Sengupta (2010), The Supreme Court, in N. Gopal Jayal and P. Bhanu Mehta (eds), The Oxford Companion to Politics in India, Oxford University Press, Delhi. Rauch, J.E. and P. Evans (2000), Bureaucratic Structure and Bureaucratic Performance in Less Developed Countries, Journal of Public Economics, Vol. 75, No. 1, pp. 49–71.

346   John Harriss Singh, P. (2011), We-ness and Welfare: A Longitudinal Analysis of Social Development in Kerala, World Development, Vol. 39, No. 2, pp. 282–93. Tendler, J. (1997), Good Government in the Tropics. The Johns Hopkins University Press, Baltimore and London. Wade, R. (1982), The System of Administrative and Political Corruption: Canal Irrigation in South India. Journal of Development Studies, Vol. 18, No. 3, pp. 287–328. ———. (1985), The Market for Public Office: Why the Indian State Is not Better at Development. World Development, Vol. 13, No. 4, pp. 467–97. Yadav, Y. (1996), Reconfiguration in Indian Politics: State Assembly Elections in 1993–95, Economic and Political Weekly, Vol. 31, pp. 2–3.

About the Editors and Contributors Editors S. Janakarajan is Professorial Consultant at Madras Institute of Development Studies (MIDS) and Professorial Research Associate, Centre for Water and Development, SOAS, University of London. He was a Visiting Professor at the Queen Elizabeth House, University of Oxford. He specializes in the areas of water, environment and climate change. He has authored/co-authored/ edited several books and published many articles in national and international journals. Currently, he is the President of South Asia Consortium for Interdisciplinary Water Resources Studies (SaciWATERs), Hyderabad and is an active member of the Global Water Partnership. L. Venkatachalam is Associate Professor, MIDS, Chennai. He has been a visiting faculty at the Indian Institute of Technology, Madras School of Economics (MSE) and Indian Maritime University, Chennai. He works on environmental economics with a focus on non-market valuation, environmental policy and climate change. He has held Fulbright-Nehru Senior Research Fellowship, Indo-French Scholars’ Exchange Fellowship and Indo-Canadian Faculty Research Fellowship and won the Japanese Award for his outstanding Research on Development. R. Maria Saleth is Director, Loyola Institute of Business Administration (LIBA), and former Director, MIDS, Chennai. He has earlier worked at the International Water Management Institute, Colombo; Institute of Economic Growth, Delhi; and the Institute for Social and Economic Change, Bengaluru. He works in the areas of water resource management, institutional reform and agricultural development. He has been the editor of Review of Development and Change and an Associate Editor of Water Policy and Water Resources Research.

348   Indian Economy in Transition

Contributors Venkatesh B. Athreya is a well-known economist on Indian economy in general and agriculture in particular. He is currently an Advisor to the M.S. Swaminathan Research Foundation, Chennai. He has been the Professor and Head of the Department of Economics, Bharathidasan University, Tiruchirapalli. Earlier, he has also been a faculty member at the Madras Institute of Development Studies, Chennai. He has authored/co-authored several books and published many scholarly papers in national and international journals. S. Chandrasekhar is Associate Professor at Indira Gandhi Institute of Development Research, Mumbai. He got his doctoral degree in Economics from the Pennsylvania State University in 2004. His research interests are in the areas of urban livelihoods, migration and urbanization, and nonincome dimensions of well-being such as education and skills, health and housing. On these subjects, he has published several papers in national and international journals and also contributed for many edited volumes published both in India and abroad. Apart from his research and publications, he is also teaching postgraduate courses in Microeconomics, Development Economics, Econometrics and International Trade. He has been the Coordinator of the In-service Training Programme on ‘Econometrics: Theory and Applications’ for Indian Economic Service officers conducted on behalf of the Indian Econometric Society in 2011. Padmini Desikachar was formerly Principal Economist, Asian Development Bank, Manila Philippines, where she had worked in several transition economies focusing on their macroeconomic, poverty and country strategy issues. She also has experience formulating ADB-wide strategies and policies. She has been Visiting Fellow at MSE on sabbatical from ADB. Prior to joining ADB, she served as an officer in the Indian Administrative Service. Her educational qualifications include a PhD in Business Economics (Cornell University, New York), a Master’s degree in Business Administration (Case Western Reserve University, Ohio) and a Master’s degree in Economics (Jawaharlal Nehru University, New Delhi). Barbara Harriss-White is Emeritus Professor of Development Studies and Senior Research Fellow, Oxford University, where she directed Queen Elizabeth House and also founded the Contemporary South Asian Studies Programme in Area Studies. Her research in political economy is grounded

About the Editors and Contributors  

349

in fieldwork and has two principal foci—rural capitalism and aspects of disadvantage. She is the (co)author and (co)editor of over 40 books and monographs and published over 200 papers/chapters. She has guided and supervised 35 doctoral students during her career. Her book Rural Commercial Capital won the 2009 Edgar Graham Prize for originality in Development Studies. In 2013, she was elected to the Academy of Social Sciences of the United Kingdom. John Harriss is an internationally known social anthropologist, who has worked for most of his professional life in the interdisciplinary field of International Development Studies. He is an expert on South Asia in general and India in particular. Currently, he is the Director the School for International Studies at Simon Fraser University in Vancouver, Canada. Earlier, he has taught at the London School of Economics and has affiliation with Australian National University, Singapore National University and MIDS, Chennai. He has been an advisor to a number of development agencies including the Department for International Development, International Labour Office and the United Nations Research Institute for Social Development. He has written 12 major books and published several articles in journals and edited volumes. K.S. Kavi Kumar is Professor at MSE, Chennai, coordinating the Centre of Excellence in Environmental Economics supported by the Ministry of Environment and Forest, Government of India. He has over 17 years of experience in research, teaching and industries. He is a well-known expert on environmental economics, especially the impact of climate change on agriculture. He has been associated with various international and national institutions including the World Bank, International Institute for Applied Systems Analysis, Potsdam Institute for Climate Impact Research, Tata Energy Research Institute, and Institute of Economic Growth. He has also successfully completed a number of research projects funded by various organizations including the British High Commission, Global Development Network, South Asian Network for Development and Environmental Economics, and Central Pollution Control Board. Sudipto Mundle is Member, 14th Finance Commission, and Emeritus Professor at the National Institute of Public Finance and Policy, New Delhi. He was the Economic Adviser to the Ministry of Finance during 1986–88. He has been a Director of Strategy and Policy Department of the Asian Development Bank until 2008. He was also India Chief Economist and

350   Indian Economy in Transition Deputy Director at ADB’s India Resident Mission, New Delhi. Earlier, he has also worked at the Indian Institute of Management, Ahmedabad and Centre for Development Studies, Trivandrum. He was a Fulbright Scholar at Yale University and Visiting Professor at Cambridge University. M.N. Murty is former Professor of Economics, Institute of Economic Growth, Delhi. He is currently the Fellow, South Asian Network for Development Economics and Environment (SANDEE) and Visiting Professor, TERI University, New Delhi. He specializes in Public Economics and Environmental and Resource Economics. He has published 10 books, including six books in Environment and Resource Economics. He has contributed a large number of research papers to reputed national and international journals of Economics. A. Narayanamoorthy is the NABARD Chair Professor and Head, Department of Economics and Rural Development, Alagappa University, Karaikudi, Tamil Nadu. He specializes in the area of irrigation, including micro irrigation and watershed management. He has published five books, three mimeographs and over 100 research papers in international and national journals. He received the prestigious Professor Ramesh Chandra Agrawal Award of Excellence for his outstanding contribution in the field of agricultural economics by the Indian Society of Agricultural Economics. He has also contributed to the policy process by serving as an expert member in several of the committees constituted by the Government of India in irrigation and agriculture. Aseem Prakash is an Associate Professor and Chairperson, School of Governance and Public Policy, Tata Institute of Social Sciences, Hyderabad. He obtained his doctorate from the Centre for Political Studies, Jawaharlal Nehru University, New Delhi. He has nearly 10 years of experience in research and teaching which also includes a stint at the University of Oxford as a Fell Fund Fellow. His research interests include the interface between the state and markets, sociology of markets, study of formal and informal institutions and human development. Currently, he is focused on studying the regulation of small-town capitalism. His forthcoming book is entitled Dalit Capital: State, Markets and Civil Society in Urban India. S. Irudaya Rajan is currently the Chair Professor of the Research Unit on International Migration at the Centre for Development Studies, Thiruvananthapuram. He is a well-known expert on demographic chal-

About the Editors and Contributors  

351

lenges facing India, especially in population and development, international migration, gender and aging. He has published two major books and several articles in professional journals. U. Sankar received PhD in economics from University of Wisconsin, Madison in 1967. He was at University of Wisconsin Milwaukee, 1967– 77, University of Madras, 1977–95 and MSE since 1995. He was President, Indian Econometric Society, 1994, National Fellow, ICSSR 2003, 2004 and received the National Swami Pranavananda Saraswati Award for Economics for 2006 from the University Grants Commission. His books include Environmental Economics (2001), Trade and Environment (2006), Economics of India’s Space Programme (2007), Eco-taxes on Polluting Inputs and outputs (Co-author) and Development and Public Finance (Co-editor) (2012). Abhirup Sarkar is Professor of Economics and has obtained his Master’s from the University of Calcutta and PhD from the University of Rochester. He has spent most of his academic career at the Indian Statistical Institute, Calcutta. He has also taught at various other places in India and abroad, including the University of Florida and Brigham Young University, US; Concordia University, Canada; International Centre for Economic Research, Italy; and the Indian Institute of Management, Calcutta. The primary areas of his research interests are International Trade and Economic Development. He is the Chairman of the Fourth State Finance Commission of West Bengal, a member of the West Bengal State Planning Board and the Chairman of the Expert Committee on Higher Education of West Bengal. M.H. Suryanarayana is Professor at Indira Gandhi Institute of Development Research, Mumbai. He obtained his doctoral degree in Economics from the Indian Statistical Institute, New Delhi in 1986. His research interests are in the areas of development economics, applied econometrics and consumer demand analysis. He has authored/co-authored several books and published many scholarly papers in national and international journals in the area of his specialization. He is currently working on the conceptual and measurement aspects of inclusive growth and the fiscal dimension of economic reform and safety net programmes. Brinda Viswanathan is Associate Professor at MSE, Chennai. Her broad area of research is development economics and applied econometrics with particular interest in nutrition security, gender and labour market, and inter-

352   Indian Economy in Transition nal migration. She has published articles in several national and international academic journals and presented papers in national and international seminars/workshops. She teaches statistics, econometrics and development economics for the master’s students at MSE, Chennai. She has also conducted workshops and training programmes for government officials, college lecturers and bank managers on statistical and econometric techniques.

Index access and benefit sharing (ABS) regimes, 37 Adivasis, 296–301, 306, 312, 316n13, 340–41 adult literacy rate, 2 ageing population, 2, 7–8. See also elderly persons, India economic growth, impact on, 156 global, 157–58 reductions of fertility, 156, 160 agrarian crisis, 90, 104–5, 107n3, 108n10 distress, 6, 94 agricultural assets in Magaral and Palayaseevaram village, Chennai, 199 agricultural employment in Magaral and Palayaseevaram village, 192–93 agricultural sector in India, 57–58 cost of cultivation survey (see cost of cultivation survey) crops, analysis on returns (see crops, analysis on returns) impact of stagnation, 7, 14 loan waiver scheme by government in 2008–09, 90 production of food grains, increase of, 88–89 profit from crop cultivation, importance of, 89 stagnation reasons, 4, 6 suicide by farmers (see suicide by farmers)

air pollution, 180, 216–21 Alternate and Innovative Education (AIE) centres, 142 73rd Amendment of the Constitution, 12 American Depository Receipts/Global Depository Receipts (ADR/GDR), 29 Annual Status of Education Report 2010, 144, 154 Arjun Sengupta’s National Commission for Enterprises in the Unorganized Sector (2009), 2 Bahujan Samaj Party, 335 balance of payments (BoP), 32–33 1991 crisis, 22 capital account, 27 Banerjee, Abhijit, 335 basin working committees, Thailand, 269–70 behavioural response to labour market risks, 119–20 Belgian Development Council, 281 below poverty line (BPL), 303, 337 benevolent government, 223, 228 Besley, Tim, 333 big-bills theory, 261 bio fuels, 232, 234. See also solid fuels Biological Diversity Act, 2002, 37 biomass fuels, 234–35, 253 BJP, 335 ‘Blackboard Battle’ initiative, Chile, 141

354   Indian Economy in Transition black carbon (BC), 241 ‘black carbon’ particles, 234–35 bureaucracy, corrupt, 222–27 bureaucratic pathologies and Indian paradox, 328–30 Burgess, Robin, 333 business-as-usual (BAU) scenario, 252–54 capital account convertibility, 35 capital flows, 27–36 capitalist development in India, 312 carbon dioxide (CO2), 9, 234, 241–42, 256n2 carbon monoxide (CO), 241 carbon neutral, 234 caste system, 307, 315n11 caste-wise average net assets in Magaral and Palayaseevaram village, Chennai, 201 casual labour, 114 casual workers, average daily earnings of, 326 catchment area, 50. See also dam irrigation Catchment Management Institutions (CMAs), 268 cellular organization, 308 Central Statistical Organization (CSO), 277 Chennai methodology to collect data on water, 181–82 Magaral village, 182–83 Palayaseevaram village, 183–84 water demand in, 180–81 Chennai Metro Water Board, 203 child continuing in school, probability of, 149 Chilean water markets, 263–64 Christians, 151, 297, 309, 316 citizenship, concept of definition of, 310

Marshal’s conception of, 310 rights of, 310 civil rights of citizen, 310 civil society, 190, 204, 295–96, 298, 310 dominated by social collectives, 312–13 and social discrimination, 307–9 clean cookstove programs, India, 233 cleaner fuels, 233, 235–36 clean stoves scenario, 253–56 climate change, 4–5, 39, 233, 235 Coasian framework, 266 command-and-controls (CAC) for pollution abatement, 208–9, 223 command area, 50. See also dam irrigation Commission for Agricultural Costs and Prices (CACP), 90–92, 94, 103, 108n4 Committee on Fuller Capital Account Convertibility (2006), 35 common culture, 315–16n12 Congress party, 334–35 cooking fuels distribution across regions and years, 240 primary source of energy for, 239 Copenhagen Conference (2009), 39 corruption, 4, 11, 16, 223–24, 228n2, 229n7, 317n27, 330, 335 cost of cultivation survey. See also crops, analysis on returns from data and methodology, 91–92 declining of profit, 102–4 Cox proportional hazard model, 150 crops, analysis on returns from, 92 cotton, 100–101 gram, 96–97 groundnut, 97–98 paddy, 93–94 sugarcane, 99–100 wheat, 94–96

Index   cross-border migration, 18 trade, 25 crude birth rate, 160 cultivation status in Magaral and Palayaseevaram village, Chennai, 186–87 current account deficit (CAD), 26 current daily status (CDS), 117–18, 124 current weekly status (CWS), employment by, 117, 127, 133 Dalits, 296, 298–301, 303, 305–7, 312, 314–16, 340–41 Dalits, Adivasis and Muslims (DAM), 296–97, 300, 302–3, 305–6, 308–9, 312–13 dam irrigation, 49–50 Dantwala Committee, 112 Decade of Education for All (2000), 142 decentralization, 310, 328, 337–43 democratic governance, 16 development process, 1, 70 diffusion of knowledge, 18 direct discrimination, 296 discrimination, 10–11 disproportionate benefits of globalized trade, 5 Doha Round of trade negotiations (2001), 22 domestic liberalization process, 22 domestic water supply in Magaral and Palayaseevaram village, Chennai, 184–85 East Asian crises (1997 and 1998), 33 economic citizenship, concept of, 295, 308–13 economic exchanges, 305 economic globalization, 18–19 economic instruments for pollution control, 209 economic liberalization, 5, 13

355

economic transformation process, 16 economy, Indian, 57 annual trend rates of growth of GDP, 66 issues and challenges facing, 1–2 education, 11–12, 84, 121, 131, 135, 141. See also school life expectancy (SLE) gender disparity in, 15 NSSO survey on ‘Participation and Expenditure in Education’, 145 plan policy for, 142–44 policy evaluation perspective, 144–45 policy response, Karnataka case study, 151–54 Education Guarantee Centre (EGS), 142, 341 elderly persons, India, 157 age pyramids from 2001–2101, 169–70 age structural transition from 20012101, 168 emerging ageing scenario from 1961–2101, 168–69 expectation of life at 60 and 70 years, 161 growth rate among, 160 indices as per 2001 census, 166–67 living arrangement of, 173–75 marital status of (see marital status of elderly persons in India) number and proportions by age groups, 159 as per census, 159 population of, increase in, 167, 171 sex ratio among, 159–60, 164–65 state-wise analysis, 161–67 employed distribution of persons in usual status, 133 rural persons, 114 employment, 7. See also Dantwala Committee

356   Indian Economy in Transition by current weekly status (see current weekly status [CWS], employment by) non-agricultural (see non-agricultural employment) rates in Tamil Nadu, 65 rural (see rural employment) environmental Kuznets curve (EKC) hypothesis, 3, 236–37 environmentally corrected net national product (ENNP), 218 environmental resources, 9, 207–9, 216, 228n1, 286, 292 environmental standards, 2, 22, 209, 212–14, 217, 223–25, 227–28 European Union (EU), 22, 26 European Union Development Report, 280 export of world, 5 external debt, 5, 31–32 Failed States Index (2010), 330 financial globalization, 18 financial liberalization, 58 flailing state, India, 330–43 Food Corporation of India, 336 food price inflation, 2, 5–6, 14 demand and supply side factors, 41–45 government role to curb problems of in long run, 45–51 in short run, 51–55 Food Security ordinance (2013), 337 foreign capital market, 21 foreign direct investment (FDI), 1, 5, 21, 27–28, 30, 37–38 inflows and outflows 1990-2009, 29 Foreign Exchange Management Act 2000, 29 foreign exchange reserves, 1, 5, 32 foreign institutional investors (FIIs), 28 foreign portfolio investment (FPI), 27–28, 30–31 foreign trade, share in services, 5

foreign trade 1990-91 to 2009-10, India in goods, 23–24 in services, 26–27 formal equality, 318n33 fuel consumption, 9 G7, 278, 280–81 G20, 281 gender-based social discrimination, 296 gender disparity(ies), 15, 141, 154, 169–70, 284, 291 General Agreement on Tariffs and Trade (GATT), 19–20, 23 General Agreement on Trade in Services (GATS), 19–20, 25–26 global demography of aged, 158 global emissions of pollutants, 9, 232– 33, 235, 238, 241–43, 245, 253 globalization economic (see economic globalization) of economies, 5 factors contributed to, 18 global pollution, 250–52, 254 global recession/meltdown (2008–09), 30, 33–34 Indian economy growth after, 1 reasons for regulation, 36 global warming, 4 governance, 10–11 gram panchayats, 338 gram sabhas, 340 greenhouse gas (GHG), 235–36, 241, 250–51, 256 greening India’s national accounts initiative, 4 grievance redressal, 318n35 gross cropped area (GCA), 72, 74 gross irrigated area (GIA), 77 gross state domestic product (GSDP), Tamil Nadu, 72 rate in, 66–68 sectoral composition, 69

Index   groundwater, 8, 13, 16, 49–50, 106, 183, 266 status in Magaral and Palayaseevaram village, Chennai, 185–86 growth rate at 1980-81 prices, Tamil Nadu, 67 Guhan, S., 327, 329–33, 337 Harriss, John, 301 Hindu nationalism, 297 Hooda, Bhupinder Singh, 105 household distribution, 256n1 emissions, profile of, 238–44 energy, 232 (see also environmental Kuznets curve [EKC] hypothesis) demand of, 235–36 trends and patterns of use, 237–38 health burden due to solid fuels, 234–35 income, 233, 244, 249 -level pollution, future projections, 252–55 pollution, 9, 237–38 human development index (HDI), 16 Human Development Report (2010 and 2011), 2, 4, 145 hunger, 10, 47, 282–83, 287, 291 indebtedness among farmers households, 89–90, 105 India Working: Essays on Society and Economy (Harriss-White, B.), 300, 306–7 indirect discrimination, 296 infant mortality rate, 2 informal workers, distribution by socio-religious groups, 326 information and communication technologies (ICTs), 18–19, 38 information and learning rents, 317n27

357

Integrated Environmental and Economic Accounting, UN methodology, 216, 227 Integrated Water Resources Management (IWRM) approach, 265, 267–68, 270 intellectual property rights (IPRs), 20, 36–37 international cooperation, factors hindering, 39 international economic agencies, 19 International Monetary Fund (IMF), 21, 38 International Task Force on Global Public Goods (2006), 39 Iyer, V.R. Krishna, 190 Kapur, Devesh, 335–36 Karnataka child continuing in school in, 153 head count ratio of poverty in, 153 SLE in rural and urban, 151–52 students currently attending education at primary level, 152 Kauffman, Daniel, 281 Keefer, Philip, 332–33 kerosene, 236, 238–40 Khemani, Stuti, 332–33 Krushi Mitras, 107n1 Kurien, C.T., 57, 327 labour force distribution of rural persons in, 135 participation rates in Tamil Nadu, 60 status dimension, 117–18 labour market insecurity, 112. See also Dantwala Committee behavioural response to labour market risks (see behavioural response to labour market risks) dataset, 115 definition of, 115 econometric approaches, 115–16

358   Indian Economy in Transition index, 125–27 variations in, 127–31 previous research on, 113–15 results of survey on probit estimations, 120–25, 137–40 variables of, 116–17 classification scheme, 119–20 labour time utilization, 118–19 life expectancy at birth, 2, 145 liquefied petroleum gas (LPG), 233, 235–36, 238, 243, 254–56 literacy rate, 7, 15n11, 85n2, 278, 284, 341 of adults, 2 in rural areas, 85n2 in Tamil Nadu, 59 livelihood status in Magaral and Palayaseevaram village, perception on, 192–203 adaptive strategies and sustainability of, 204 sustainability of, 202–4 loans, 27–28, 305 local pollution, 249–50, 254 Maharashtra Water Resources Regulatory Authority (MWRRA), 268, 270 Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), 113–14, 302–4, 336 Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNEGS), 42, 113, 337 management rents, 317n27 Manor, James, 338 marginal cost of pollution abatement (MCA), 209–10, 213–15, 219 marginal damage (MD) cost of abating pollution, 210–11, 214–15 marginal workers in Tamil Nadu, 62 marital status of elderly persons in India, 169–72

market-based instruments (MBIs), 259–60 Market Intervention Scheme (MIS), 105 markets and social discrimination, 305–7 middle class population, changes in lifestyle of, 13 migration(s), 14–15, 156, 203 cross-border (see cross-border migration) internal and international, 157 rural–urban (see rural–urban migration) in South Asian countries, 178 Millennium Declaration, 10, 15, 276 Millennium Development Goals (MDGs), UN, 3, 10, 15, 38, 141, 276. See also Millennium Declaration appraisal framework of goals, 291–93 failure syndrome, 280 India’s performance assessment of goals, 282–87 lessons of success and failures, 287–88 limitations of, 279 political economic critique of, 277–78, 280–82 technical nature critique of, 277–78 Minimum National Standards (MINAS), 217 minimum support prices (MSPs), 94, 107 monopoly rents, 317n27 monthly per capita expenditure (MPCE), 124–26, 128–29, 233, 244–45, 249 most favoured-nation (MFN), 20, 36 multilateral trading system (MTS), 20–21, 25 multiple correspondence analysis (MCA), 132n1

Index   multiple work activities of labour, 118 Muslims, 296–97, 299 earning of women, 301 employees in Central Government department and institutions, 322 in informal sector, 300 lower levels of schooling among children of, 151 middle-and high-income brackets, 301 Narmada Bachao Aandolan, 308 Nash non-cooperative game, 226, 228 National Agriculture Bank for Rural Development (NABARD), 305 National Biodiversity Authority, 37 National Biomass Cookstoves Initiative (NCI), 235, 255–56 National Commission for Enterprises in Unorganized Sector (NCEUS), 300, 303, 314n2 National Commission on Farmers (NCF), 90, 105 National Election Survey (2009), 336 National Family Health Surveys, 167 National Labour Code, 303 National Rural Employment Guarantee Act (NREGA), 331 National Sample Survey Organisation (NSSO), 7, 113, 145, 154 natural resource rents, 317n27 N.C. Saxena Committee Report, 303 neo-classical economics, 305 net sown area (NSA), 72, 74 new-institutional economics, 305 new liberalized world process, 11 non-agricultural assets in Magaral and Palayaseevaram village, Chennai, 199 non-agricultural employment, 6, 14, 84 in Magaral and Palayaseevaram village, 192–93

359

non-benevolent government behaviour in water pollution abatement, 223, 225–28 non-manual work (NMW) of labour, 119 distribution of persons, 135 non-methane volatile organic compounds (NMVOC), 241 non-price incentives, 105 non-resident deposits, 28 non-tariff barriers (NTBs), 20, 24 occupational characteristics of population in Magaral and Palayaseevaram village, Chennai, 190–92 off take of rice and wheat, 52 organic matter (OM), 241 Organisation for Economic Co-operation and Development (OECD), 281 other backward classes (OBCs), 124, 128, 143, 150, 279, 298, 300–301, 312 out-migration, 84 panchayati raj institutions/system, 12, 338 Pande, Rohini, 335 participation, 337–43 participatory irrigation management system (PIMS), 266, 270 particulate matter (PM), 241, 254 patronage democracy, 330–37, 343 patron-client relationships, 304 People’s Campaign for Decentralized Planning, Kerala, 341 peri-urban areas/villages, 8, 16, 178, 180–81, 198, 202–6, 254 Pigouvian tax on polluter, 209–10 Pinera, Sebastian, 141 Planning Commission, 14 political participation, 310, 328, 342 political rights of citizen, 310

360   Indian Economy in Transition political transfer rents, 317n27 politics of markets, 307 pollutants, 213, 241 industrial, 217 shadow prices of, 217, 219–22, 227 polluted occupation, 315n11 pollution, 2, 9, 13, 207 abatement community action or people’s participation for, 214–16 estimation of taxes for air, 216–22 instruments and institutions for, 208–11 mixed instruments for, 212–14 air (see air pollution) collection action of affected to control, 222–23 corruption in bureaucracy and bribes, 223–24 –income relationship estimation approach and results, 244–49 global pollution, 250–52, 254 local pollution, 249–50, 254 penalties imposition for corruption and bribes, 223–24 public perception of damages and penalties, 225 soil (see soil pollution) taxes, 219–25, 227 water (see water pollution) Pollution Control Boards, 212, 228n2 population, 2, 4, 6, 13, 15, 46–47 ageing (see ageing population) growth of, 178–79 labour market insecurity among rural adult, 112, 115 school-age, 145 in Tamil Nadu, 58–65, 179–80 urban (see urban population) poverty in Indian states, 2–3, 10, 12, 47–48, 151–52, 202, 205, 325–26, 328

power generation, cost of environmentally sustainable, 217–18 price-based instruments for pollution control, 209–11 price incentives, 105 price movement of food and non-food, relative, 44 primary education, 10, 141–43, 154 students currently attending education in rural and urban areas, 146–48 Prime Minister’s High-level Committee on the Social, Economic and Educational Status of Muslim Community in India (SCR), 299, 302, 305, 314n2 principal component analysis (PCA), 116, 125–26, 132n1 private schooling, 11 procurement of rice and wheat, 52–54 production of cereals and food grains, 43, 47–48 pro-poor political regimes, 301 public distribution system (PDS), 302–3, 331 public provisioning, 333 public spending, 332 pure occupation, 315n11 quantity-based Instruments for pollution control, 211 Radhakrishna, R., 108n10 Rajiv Gandhi Missions, 341 Rao, V.M., 108n6 Red Tape: Bureaucracy, Structural Violence and Poverty in India (Akhil Gupta), 329 Registrar General of India, 167 Report of the Committee of Experts on Unemployment Estimates (1970), 112. See also Dantwala Committee Report of the Committee on Capital Account Convertibility, 1997, 35

Index   request-offer approach, 25 Reserve Bank of India, 28, 34–35 respirable suspended particulate matter (RSPM), 234 Right of Children to Free and Compulsory Education Act, 2009, 144, 288, 336 Right to Information Act, 336 Rio Conference on Environment and Development, 39 rural employment, 15, 61 rural indebtedness, 4 rural poverty, 15, 89, 178 rural–urban migration, 2, 7, 177–78 Sachar committee report, 125 Samajwadi Party, 335 scheduled castes (SCs), 129, 143, 150, 182–83, 192–98, 200–201, 302–3, 306, 323–26, 326, 340 scheduled tribes (STs), 59, 124, 128–29, 143–44, 150, 182–83, 192–94, 196–99, 201, 302–3, 306, 308, 316, 323–26, 339–40 school life expectancy (SLE), 7, 15, 154 definition of, 145 estimation of, 146–51 in rural and urban Karnataka (see Karnataka, SLE rural and urban in) Schumpeterian rent, 317n27 service delivery(ies), 11, 178, 206, 328, 332 silent revolution in India, 337–43 Singh, Digvijay, 341 Situation Assessment Survey (SAS), 104–5 Small Industries Development Bank of India (SIDBI), 305 social discrimination, 11, 15, 314n2. See also economic citizenship definition of, 295 forms of, 296 ideology, aspects of, 296

361

in India, 298–99 and civil society (see civil society and social discrimination) in formal sector, 299 in informal sector, 300–301 and markets (see markets and social discrimination) perpetuated through state institutions, 302–5 political regimes, 301–2 regime, features of, 296–98 social embeddedness school, 318n30 social groups, 8, 11, 128, 145, 178, 180, 200, 204–5, 295, 325 definition of, 295 dependency on wage employment in urban areas, 198 profile across rural and urban areas, 150 social rights of citizen, 310 social structure of accumulation theory, 318n29 soil pollution, 180 solid fuels, 232, 237–38, 240–41 burden on health due to, 234–35 regional differences in consumption of, 238 ‘special and differential treatment’ (S&DT) provisions, 20–22 special economic zones (SEZs), 302, 308 stage-based institutional reforms in water sector, Sri Lanka, 264–65 statutory minimum support (SMP) price, 99 stock holding of food grains by FCI, 51–52 strategic behaviour of active groups in water pollution abatement, 225–27 suicide by farmers, 89, 94, 107n1 Suresh Tendulkar Committee report, 2 suspended particulate matter (SPM), 217 pollution abatement function for, 220

362   Indian Economy in Transition Tamil Nadu agricultural economy, changes between 1980-2005, 72–74 agriculture scenario between 200510, 81–82 area, production and productivity of paddy, 76–80 decline in agriculture share, 58 economic growth since 1980, 66–72 growth rate of area, production and yield of major crops, 74–76 population and employment of, 58–65, 178–79 state policies and rural economy, 82–83 tank irrigation, 77 Taxes-Standards method, 219. See also pollution taxes thermal power generating plants, Andhra Pradesh, 9, 217–19, 227 tradable water rights advantages of, 260–62 case study on India, 266–68 trade in goods and services, 22–27 Trade-related Intellectual Property Rights (TRIPS), 20, 22, 28, 36–37 transaction costs, 9–10, 37, 105, 215–16, 223–24, 227, 260–62, 265–67, 270–72 Tribal Bill, 303 Tsunami Rehabilitation Project, Tamil Nadu, 314n8 underemployment, 64, 112 invisible, 113 visible, 114 unemployed, 8, 63, 114, 117–19, 124, 128, 131, 137–38, 191–92, 203 distribution of persons, 134 unemployment, 57–58. See also Dantwala Committee on all seven days, 117 rates in Tamil Nadu and All India, 64

UN General Assembly, 278 United Nations Development Programme (UNDP), 2 United Nations Framework Convention on Climate Change, 39 universal primary education, 10, 141 unorganized workers, distribution by population and poverty status, 325 upper-middle class population, changes in lifestyle of, 13 urban expansion, 8 urbanization, 2, 8, 16, 59, 73, 157 in developing countries, 177–78 in India, 178–79 urban population, 16 value of output (VOP), 102, 104 cotton, 101, 103 gram, 97, 103 groundnut, 98, 103 paddy, 93, 103 sugarcane, 100, 103 wheat, 95, 103 Village Education Committees (VEC), 342 Washington Consensus, 280 waste disposal services, 207, 209–10, 216–17, 228n1 Water Policy 2002, India, 267 water supplies, status in Magaral and Palayaseevaram village, Chennai, 184–85 water transport history in Magaral village, 187–88 in Palayaseevaram village, 189–90 water user associations (WUAs), 264, 266, 270–71 water/water sector, 3–4, 8–9, 73, 77 demand in Chennai (see Chennai, water demand in) exports from peri-urban to urban areas, 205 governance, 9

Index   institutional reforms in, international experience, 262–65 -intensive commercial crop, cultivation of, 99 pollution, 180 abatement, 225–27 scarcity, 14, 182, 187, 189, 259–63, 265–66, 269–71 tradable water rights (see tradable water rights) transfers, 202, 260–63, 267–68 widowhood among females and males, incidence of, 172 willingness to accept (WTA), 260–61 willingness to pay (WTP), 260–61 workers and workforce in Tamil Nadu distribution by employment status, 63

363

participation rate, 61 by residence, 71 by sex, 71 World Bank, 38 global economic prospects, 2 World Commission on Dams (2000), 49 World Declaration for Education for All, 141 World Investment Report 2010, 30 World Trade Organization (WTO), 19–21, 38 Trade Policy Review, 2006 and 2007, 23–24 world trading regime, 19–22 yields of crops in Tamil Nadu, 79