‘A self-contained, happy village is a myth’

In the first of a series of interviews exploring the rural-urban divide, economist Shankar Acharya tells Shantanu Guha Ray why the two must connect.

Why are Bharat and India not connecting?
It is not that they are not connecting. But the connections should be stronger. Two areas that worry me in that dimension are — one, we are not getting a rapid expansion of durable blue-collar jobs. The vast majority of professionals coming into India’s employment exchanges are those who barely finish high school or are dropouts of the school system. It would be good if they get got jobs in the radically growing factory sector; that is the way countries like South Korea, Malaysia, Ireland and of course China have grown rich. The mechanism is very weak in India. Organised sector jobs are stagnant. The other thing where ‘Bharat versus India’ does not work is the failure of government policies and our poor delivery system.
There are two types of infrastructure in question — the hard infrastructure, which we rarely have, and that too is better off in urban localities. In the rural areas it is largely missing. And the other area is of course the so-called social sectors; education and health. Education has a long history of very high spending, both at Central and state government levels. Very few people send their children to government schools because of the state of those schools. And that’s sad. And the role of education is very critical in bridging the potential divide between Bharat and India.
You have said in your book that though initial reforms have happened, all is not hunky dory. 200 million people remain below the poverty line.
Well, one way is rapid growth. I don’t think a solution to mass poverty can be found through anything other than strategy that gives a central role to rapid, sustained economic growth. We need job-creating growth. Why don’t we have large-scale textile factories like China? We have cheap labour and skills that go back hundreds of years, yet our textile exports, for example, are quite small. We should improve labour-intensive employment in manufacturing and change our labour laws, which — in the name of protecting labour — are actually anti-labour. Public services must be more accountable.
What kind of public services?
Education and health. Why is a government school not able to run well? Why aren’t there enough doctors in a rural clinic? We spend the money, but we do not seem to have the accountability. Another concern is poverty.
You call agriculture sluggish. That’s strange.
Our agricultural growth rate in the long run has, except for a very short period, averaged below 3 percent. In the last decade or so, it has dropped to even lower to about 2 percent. There are stagnations in agriculture because crucial issues have not been tackled, whether it is rural infrastructure, irrigation or big dams. The actual development of canals — making sure that the water is actually flowing — is very poor. I think irrigation water must be given away at very low prices. It is a very important resource, but that doesn’t mean it should be free, because we do not have incentives to conserve, rebuild or recharge it.
The impact of money on politics always revolves around industrialisation or the urbanisation model. Why not on agricultural industries?
If you look at the development of countries over time, one way of thinking about it is the development of production, and then of the labour force or employment. From low-productivity agriculture, which is what everybody in a sense starts with, to much higher-productivity industry and services. And that’s the pattern of development all over the world; it is not unique to India. If you look at India’s national accounts, the share of agriculture is dropping. It used to be around 55 percent in 1950, it is now less than 20 percent. We are different from other countries — in a negative way — since the share of our labour force remains 60 percent in agriculture. And that is mainly because expansion of factory jobs in labour-intensive manufacturing in India has been much slower and weaker than in successful countries.
The China comparison. Is it justified? Ours is a very democracy-based government, theirs is a dictatorial regime, so why should there be a comparison?
Well, I would say it’s a natural comparison, because these are two countries with billion-plus populations. Together we account for around one-fourth of the world’s population. We both had roughly the same standards of living in the early 1970s, but today on an average, their standard of living is almost twice as good as ours. Also, we are both Asian countries, we live in the same part of the world, and they are our biggest neighbour. Though they are a totalitarian government, it’s a mistake to think that the Chinese government doesn’t allow different points of views. In fact, India is an open economy with a largely closed mind and China is a closed society with and open mind. They have raised their standards of living, virtually abolished poverty to somewhere between 5 percent-10 percent of the population. Whereas here, around 20 percent-25 percent of people still live in poverty.
Because of China’s larger engagement with the West?
In the late 1970s, they opened up the economy to foreign trade and development. Since the leading economic powers were largely Western, this meant opening up to the West.
Land acquisition for SEZs today is the biggest crisis zone.
I think the idea of a self-contained, happy village is a myth. Development comes from openness to trade, commerce, ideas, technology and capital. Isolation breeds poverty and stagnation. The poorest parts of India today are the parts least connected to commerce in the country and the rest of the world. But isolation is not an answer. The younger generation in villages want well-paid urban jobs.
But why sell off land for a factory that could go somewhere else?
Handling land is definitely a very delicate and critical issue. But I would suggest that one reason why it has got so challenging in India is precisely because our pattern of development in the last 50-60 years has not been sufficiently job-creating. If most of our labour force, which has remained trapped in agriculture, had been pulled into urban, industrial jobs in earlier decades, then this issue would have been much less of a problem today. I think we have to distinguish where land will be used for a public purpose and where it will be given to the private sector. In the latter case, it is much better to allow market forces to work, so that if farmers want to sell their land at a higher price to a company, they can. But the State does have a special right to buy land at a fair price for a public purpose; and it can be handled badly or well.

Apr 14 , 2007

Source: Tehelka