Why The World’s Largest Democracy Continues To Push Millions Into Poverty

Why does India’s democracy continue to deliver uneven outcomes?” is one of the many questions Anirudh Krishna raises in his new book “The Broken Ladder: The Paradox and Potential of India’s One Billion”. And it should make all thinking Indians critically reflect upon the content of our democracy even as we complete seven decades of political independence. A logical companion to this question could be “what explains the uneasy co-existence of democracy and extensive poverty in India?

The answer to this perhaps lies in the paradox underlying the two institutions that are indispensable for a liberal society – political democracy and the market. While both these institutions allow individuals to exercise their choice, the former works on the enlightened principle of ‘one person, one vote’ and the latter works differently for different individuals depending on the number of votes they bring in the form of purchasing power. The book under review seeks to unravel the key paradoxes that inform our society.

The first chapter is titled “The Dollar Economy and the Rupee Economy” and it is a telling caricature of the widening gulf between the privileged upwardly mobile lot and the encumbered disadvantaged class. By focusing on education and social mobility, the author shows that layered economic development is a logical upshot of a segmented society. Imposing a globalized economic order on this deeply divided society will invariably result in lopsided development outcomes. Taking wealth data provided by the investment bank Credit Suisse in its “Credit Suisse Global Wealth Report” for the year 2013, the author shows that:

A significant share of India’s population is contained within the top, the bottom and every other 10-per cent segment of world wealth distribution. Few other countries have the same spread between the space-age rich and the stone-age poor.

But this depiction doesn’t fully capture the extent and intensity of inequality in India. The richest 1% of Indians now own 58.4% of the country’s wealth while the bottom 70% of Indians together now own just 7% of the country’s private wealth, according to the “Global Wealth Report 2016” released by the same investment bank’s research wing. The respective shares of the top 1% and the bottom 70% were 36.8% and 13.9% respectively in 2010. The richest 10% of Indians have increased their share from 68.8% in 2010 to 80.7% by 2016. Clearly, India is clocking the highest rates of growth in inequality among all developed and developing countries, save Russia.

Photo by Soumitra Ghosh/The India Today Group/Getty Images

The central issue the book explores and explains is the lack of social mobility among those who are at the bottom, particularly those living in the ‘beyond 5 km villages’, the ones that lie beyond 5 km from the nearest urban centre. The author notes that “nearly 70% of all rural people – i.e. nearly half the population of India – lives in beyond 5-km villages” and it is precisely for these people that “the ladder leading upward is broken in many places. Very few are able to climb high after starting from a low position.” Available empirical evidence lends credence to the author’s observations. Using the India Human Development Survey, 2011-12 data, a recent article by Tadit Kundu in the business newspaper Mint showed that there is very low occupational mobility across generations:

Specifically, there is a one in three chance that a son born to a father who was either a farmer or an agricultural labourer or a construction worker moves out of these three occupations. In our analysis, even a job as a factory worker is counted as an improvement. Despite such a low threshold, the probability for upward mobility is only around 33%. Moreover, this probability has not improved much for sons born in recent decades compared to those who were born in the 1950s, suggesting a high degree of stagnation in society.

One of the most curious and worrisome aspects of the Indian economy is its inability to transfer labour from the agrarian sector to the industrial sector and consequently affect a natural movement of the population from the rural to the urban. This is not wholly surprising when seen in the light of the development strategy India adopted after independence as against the strategy followed by successful East Asian economies. As the author notes, “governments in East Asia, in the 1960s and ‘70s, energetically built high-quality infrastructures in rural areas, both to develop rural talent and draw it into workplaces in cities and to increase the competitive advantage of rural locations.” Indian political leaders and policymakers, given their fascination for big cities, modern industries and cutting-edge science, showed a pro-urban bias in policy focus as well as resource allocation and clearly failed to focus on land reforms, rural infrastructure and high-quality primary education. The result of such a blind spot in the vision of successive generations of leaders is “the different transition that India is undergoing in converting the grandsons of peasant farmers into an army of itinerant mazdoors and their granddaughters into part-time marginal farmers.

The author argues that, given the lack of lucrative employment of opportunities at the high end of the organized sector, the rural migrants who flock the urban centres end up as the precariat, with very dim prospects of improvements in living standards and upward mobility. In his opinion, “the rural question has to be solved in situ“, which requires arresting the outflow of labour by giving them gainful employment in their own villages and according “equal priority in resource allocation between cities and villages and equal standards of infrastructure provision.” That the countryside is in deep distress is so glaringly obvious when one looks at farmers’ agitations in state after state.

Data from different surveys point to abysmal conditions of rural livelihoods: NSSO’s Situation Assessment Survey of Agricultural Households in India for the agricultural year July 2012- June 2013 shows that the average monthly income of a farm household in that agricultural year was estimated at ₹6,426; the SECC 2011 data show that 74% of rural households survived on a monthly income of less than ₹5,000 of its highest earner and the National Crime Records Bureau data reveal that economic distress is a much bigger cause of farmer suicides in most states. The recently released Volume II of the Economic Survey 2016-17 openly concedes that the manifestations of the distress are easy to see.

One of the most insightful chapters in the book is “Preventing Future Poverty” where the author draws our attention to the fact that poverty reduction and poverty creation happen in parallel, which doesn’t get reflected in the official statistics on poverty in India. For instance, when in 2013, the government of the day claimed that poverty rate declined from 37% in 2004 to 22% in 2011, “it could have been, for instance, that a much higher number, 25% rose out of poverty, but simultaneously 10% fell into poverty – leading to the same net change of 15%. But the underlying flows weren’t measured, so officials are not able to tell the difference.” To put it simply, the vulnerable groups of people who are just a shock away from descending into poverty suffer from low prospects of upward mobility and high risk of downward mobility. The author also questions the unfairness in setting the poverty line so low and argues that the existing poverty alleviation measures don’t contend with the challenge of preventing people from falling into poverty. Such measures are palliatives at best, not a panacea.

Connecting talents with the right opportunities and guaranteeing rewards proportionate to the talent is key to fix the broken ladder. The author strongly believes that this can happen only when three things are put in place: high-quality education, institutional provision of information and empowered local bodies. To expect the lowest tiers of the administration to work hand in hand with a thoroughly decentralized polity to bridge the gap between constitutionally guaranteed democratic rights and people’s real-time access to such guarantees isn’t naïve; it is the need of the hour. But one should guard against the possibility of decentralized corruption, which is possible only through collective public action. A lot of ground needs to be covered on that front.

The author makes his position very clear on two important issues: economic growth and role of the state. In his view, economic growth has to be vigorously pursued but it is important to pay attention to the composition of growth and the channels through which the benefits of growth reach those at the lowest rungs of the ladder. He believes that “growth and poverty reduction cannot be bundled together as a single objective.” This idea is similar to the proposal put forward by Kate Raworth in her book “Doughnut Economics”, where she argues that we should learn to become “growth-agnostic”, implying that we should ensure that human beings thrive irrespective of growth trends and dynamics. This is a radical proposal and merits closer examination. In the author’s opinion, the state cannot be wished away because it is “after all the only agency that provides on a large scale the kinds of services that citizens, especially poorer ones, consider most important” and that “it is important to examine how the state machinery at multiple levels can be made accountable and more effective.

The book offers some new insights but what makes the narrative more humane and compelling is the moving accounts of people who have thought up several coping strategies in the absence of institutional support. This is one of the few works in development economics that has looked at the intersection of structural factors, institutions and people’s attitudes to hammer home the point that an individual’s educational and economic attainments depend crucially on her/his starting position, something that is ignored by the welfare theorems of mainstream economics. Maybe it is time to go beyond questions of what, how and for whom to produce and ask – who owns what, who does what and who gets what.

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