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Is the pattern of growth socially and politically sustainable?

By Aseem Shrivastava

Apart from all the above challenges, insurmountable as many of them might turn out to be, there is the lurking threat of social and political sustainability of the present pattern of growth. In six general elections over the past 18 years, the incumbent coalition has not been returned to office even once. What does this show? Quite simply, that the material needs of the majority of people in the country are not being met. India doesn't shine for everybody. In fact, it may not be shining for most Indians. Poverty, unemployment and growing inequalities will increasingly shape the political scene in the country.

The introduction of SEZs is generating huge tensions in society as people prepare to get uprooted from their lives and traditional livelihoods. Even if there is monetary compensation, it is poor compensation for the upheaval involved. How will people react as the over 400 SEZs planned across India slowly find their way into concrete reality? The recent events in Bengal - including the Naxalite hijacking of a train - might be a foretaste of the future.

Can the manufacturing sector generate employment in India?

"...The Indian manufacturing model, in my view, continues to suffer from three major deficiencies - a lack of infrastructure, a low national saving rate (a little over 20%) and anaemic inflows of foreign direct investment (barely $4 billion in 2003). A serious infrastructure gap

"Of those constraints, the infrastructure gap is the most serious. Not only does it risk crimping the efficiencies of supply-chain management and nationwide delivery capabilities. It also raises serious questions about the transportation requirements of a dynamic export sector.

"Services, by contrast, need none of the above. Moreover, India's new services dynamic plays to some of the nation's greatest strengths - education, entrepreneurial spirit and IT literacy.

"Services also rest on a platform of e-based connectivity - offering an important end-run around a massive physical infrastructure deficiency.

False hopes of job-creation

"But I have long felt that there is another glaring shortcoming of India's manufacturing solution - a mistaken impression of its job-creating potential.

"Two of the plant visits I made in Pune drove this point home. First, there was the Bajaj motorcycle factory - a most impressive facility that was using state-of-the-art technology - Japanese robotics enabled with Indian IT - and Japanese production techniques.

An Indian Detroit

"The factory turns out 2.4 million two-wheel vehicles annually with approximately 10,500 workers.

"By contrast, in the mid-1990s, Bajaj needed a workforce of some 24,000 to produce only one million vehicles. Then there was Tata Motors - a jewel in the crown of one of India's oldest and greatest companies.

"The vast 510-acre Pune facility felt like an Indian Detroit - complete with a university-like training campus, design, engineering and testing facilities and vertically-integrated production and assembly lines for cars, light- and heavy-trucks, buses - and, of course, SUVs.

"Yet, the Tata Motors workforce has also shrunk significantly over the past decade as its vehicle output has soared. In early-2004, about 21,000 workers produced 311,500 vehicles, whereas in early-1999, it took some 35,000 workers to produce 129,400 vehicles.

"These examples are indicative of the tough uphill battle India faces in achieving a manufacturing-led solution to its daunting unemployment and poverty problem-

Stephen Roach, Chief Economist, Morgan Stanley
'Dateline India: From Mumbai to Pune', The Globalist
October 25, 2004

We have already noted that recent growth in India has a very narrow base in a few lead sectors of the economy. Consensually acceptable figures indicate that of the 400-550 million employable people in the country only about 1.3 million (well under 1%) are employed in the IT and BPO segments. If one adds up the number of people employed in all parts of the organised private sector (including manufacturing, mining, transport, energy, services) the number of employed people is still under 10 million. Add to this the almost 20 million Indians employed by the public sector (the Indian Railways being the largest employer in the world) and you end up with about 30 million Indians employed in the entire organised sector of the economy.

How do the other 400 or 500 million help their families survive? We already know that over 60% of the workforce remains engaged (more or less unproductively) in agriculture. A little over 10% are employed in the manufacturing sector. The remainder is absorbed by the black-hole of the informal service sector which is growing rapidly in both urban and rural areas.

In other words, since the formal economy, increasingly organised by the state in favour of corporate interests, is unable to offer them jobs, they set out on their own and set up small shops if they can or simply hawk their wares on thelas or even by hand where they cannot afford one. They are to be found on every street and street-corner of our cities, towns and villages, performing casual construction labour here, small services like guarding, cleaning, washing and carrying things there. India has become a post-industrial economy without the scale of industrialisation associated with such economies.

The failure of state policies to create jobs in the formal, organised sector of the economy also explains in good measure the phenomenal growth in the number of independent enterprises in the country. They number a whopping 42 million according to the Fifth Economic Census of 2005, an almost 20% increase since the last such census in 1998. Not surprisingly, the average number of people employed in each enterprise is 2.35! This data is often seen as a sign of entrepreneurial energy. This interpretation is not incorrect, except that it chooses to overlook the enormous despair and hopelessness which often leads people to fend for themselves.

InfoChange News & Features, January 2007