Neoliberalism promotes market-oriented policy making by considering the assumption that market will do good for all based on their value purely estimated by the market. Various theories such as marginal utility theory (considering an assumption that market always remains in equilibrium in terms of the number of jobs and the wages provided) are proposed to back the concept of neo-liberal economy. Simply stating, it expects govt. to behave in accordance with Nozick theory of minimal participation of the state in economic matters. Though free-market opens up a number of opportunities for multi-national trades, it also brings 2 unequal in the same fight, where it is poor farmers on one end, it is the CEO of a Multinational Firm on the other, where one is fighting for his/her sustenance the other is fighting to improve the profit margins, surely the result of such a fight is pre-decided. Hence, it is practically impossible to find an example where the neoliberal theory was followed as it is and the country is still booming with inclusive growth. Though India takes pride for the high growth rates registered under the leadership of Dr Manmohan Singh but same were the years when the difference in the economic pyramid got widened as can very well be concluded from figure 1.
The problem in the current scenario is that these neoliberal policies have made corporates much bigger than Govts. The corporates just by virtue of their economic powers can very well manage/influence the democratically elected representatives which were supposed to work “for the people” as they were elected “by the people”. In today’s India, 63 Billionaires have more wealth than the annual budget of Union of India (30 Lakhs Crore). Between 2006-2013, UPA Govt. gave the tax benefit of Rs 5 Trillion to corporates. As per one of the estimates, a spending of Rs 1.6 Trillion is sufficient to provide all those in need with elementary education, healthcare coverage and food. A spending of 2.5 Trillion can provide accessibility of water and sanitation to them. Within 9 years from 2003-2012, a total of Rs 28 Trillion is illicitly transferred from India. As per one of the most noted economists working in the domain of Black Money, Mr Arun Kumar, India currently have Rs 144 Trillion which is approx. 5 times the annual budget of UOI as the black money.
Can we be next China? Now the question which might trouble you is, whether this economic growth is even sustainable if the system is so flawed? I am afraid to say, but it’s not in the current scenario. In the race to become the next China, we forgot the very basic steps in the initial part. Before opening it to International Market, China spent a handsome amount of money to ensure the accessibility of education and healthcare to each of its citizens, when after opening it up to International Market, the accessibility of healthcare got reduced, it made its objectives very clear and made an aim to again cover all its citizens by 2005. Currently, 97%-98% of its citizens have the accessibility and the coverage of their healthcare.
An attempt to understand the current situation of India:
• Skill: Merely 5.4% of the country’s existing workforce has formal vocational training compared to 80% in Japan and 96% in South Korea (This does not include skill acquisition through informal channels). Currently, VET till 10+2 level engages less than 1% of the students in comparison to 50% in China and 55% in Japan. India spends less than one-tenth of its overall education spending on VET. Efforts are being made to associate with Corporates to set-up industry-led “Sector Skill Councils” to help the workforce build their skills but the path to the aim is very long and require investments, the point of caution for various policymakers is when Foreign Industries train for something, it becomes very specific to their needs and the bubble don’t take long to burst, as is very well witnessed with so many software engineers being un- employed across the nation.
• Healthcare: India takes the pride of having 6th most privatized healthcare system. As a result, Govt. spends only 1.4% of its GDP in the healthcare sector, as per WHO only 16 countries out of 236 across the world spend less than this. As a consequence, private, out of pocket expenditures in India was close to 70% in 2011, which is among the highest in the world, and much higher than Thailand (22%), China (44%) etc. Such an unusually high burden of pushes almost 60 million people into poverty every year. Healthcare has become a money-making business in India, an absence of regulatory policy to control its functioning acts as the icing on the cake for them. The lack of policies to control the prices have made private hospitals which accounts to 93% of the total hospitals, inaccessible to a large section of the society and this resulted into medical practitioner without formal education operating across the country.
• Agriculture: Almost 50% of the workforce of India is still dependent on agriculture for their survival. According to the agricultural census of 2010-11, agricultural land in the country covers about 395 million acres divided into 138 million discrete land parcels; an average of 2.86 acres per holding. In contrast, the average landholding size in France is 110 acres, in the US it is about 450 acres. Almost 70% of Indian farmers own less than 1 hectare of land, obviously denying them the benefits of scale. Be whichever govt. was in power, it was always promoting farmers to grow cash crops with the motivation that it will increase the exports and will bring in the money. The condition of farmers those who grow coffee, vanilla etc which used to provide them with a very high earning at some point of time has taken them on the verge of suicide now. Coupled with the less income is the heavy increase in the expenditure because of the privatization of the firms operating in the domain. In the times of technology, when everything under the sky is developing, for some reason the Govt. has agreed to relax the MoU with the corporates to accept the seed germination rate to be 60% as compared to earlier when it used to be 80%. In the current scenario, almost nowhere in the country you can find an acre of land for less than Rs 10 Lakh, to put it into context compare it with the land rate in the USA, it is $1300 (Less than Rs 1 Lakh) per acre. This is what a highly productive land should cost if the prices are based only on productivity. Hence one can conclude that the prices of farmland are dozen to hundred times higher than what is justified based on the agricultural productivity.
• Economy Generator: For how many years now, India has been attempting to replicate the success of China by being a manufacturing base for the West. The share of manufacturing in GDP has been around 15% since 1965, It reached to a maximum of 19% in 2007 but it again got declined to around 16% by 2015. The share of Indian manufactured exports in global manufactured exports increased from 0.5% to 1.5% between 1991 to 2015, In contrast, China’s manufacturing export increased from 2% to 18% as a result of the higher focus on labour-intensive industries. Various Acts to promote manufacturing are passed by the govt. be it the reduction in the corporate tax for manufacturing firms, based on China model proposal of establishments of Special Economic Zones and now the proposal of establishment of Coastal Economic Zones and what not? but the results are yet not seen. And it is very well-noted now, though SEZs were proposed with an aim to increase manufacturing units to improve the employment rate, eventually, it’s just the service sector firms which are operating there and not to forget the widespread displacement of the citizens who used to live there which it has caused.
With this, it is quite evident that the country is not in its best state to sustain this growth.
Abhishek Singh is a student at IIT Kanpur
This article is Part 2 of a three-part series. You can read Part 1 here
The views expressed in this article are solely that of the author and may not necessarily reflect Qrius Editorial Policy.
Stay updated with all the insights.
Navigate news, 1 email day.
Subscribe to Qrius