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Home > Business > Columnists > Guest Column > T N Ninan

False debate on 'India shining'

June 05, 2004

It is an old trait: lots of people actually like bad news, and they don't treat the good news as a welcome development. Indeed, good news makes many people who run what one might call the "bad news industry" get very upset indeed.

Perhaps breastbeating gives some of us greater satisfaction than the thought of economic well-being. And so it is that if the National Sample Survey tells us that poverty increased in the reform years, a whole army jumps at it as proof that something terrible is going on in the name of reform.

If the NSS says the opposite, that poverty has come down, people think the government is fabricating the statistics. If the stock market drops 3 per cent of its value, the headlines are bigger than when the market climbs by the same percentage.

In the days when the advent of the Indian middle class was still a novel subject, anyone touting the thesis had to counter not just criticism but even hostility.

It is another facet of the same syndrome that makes it politically incorrect now to argue that India is in fact "shining" (to use the ad man's phrase).

To make this claim does not mean that everyone in the country is having a good time, or that all our age old problems have been solved.

But it is fair to say that things are getting better, and as Mr Chidambaram is willing to testify, the economic situation that he has to handle is quite comfortable. But woe betide the old government for having said so. It deserved to lose the election for its effrontery.

The context here is the assumption by the Congress-led alliance that job growth in the reform era has been poor, that unemployment has grown and that something needs to be done about it.

In short, there is bad news and we need correctives. The correctives are spelt out in the ruling alliance's Common Minimum Programme: employment guarantee programmes, possibly job reservation in the private sector, sticking with the existing labour laws (UPA's short-hand being "no hire and fire"), and so on.

Sunil Jain in his columns had punctured this whole "bad news" thesis. He pointed out that if job growth slowed in recent years, so did population growth -- and the wage trends do not suggest rising unemployment.

He also pointed out that job growth has been good in the manufacturing sector, which has seen reform; and poor in the agriculture sector, where there has been no reform.

He quoted both statistics and the experts to show that India has been missing the job growth opportunities that come with more foreign investment in labour-intensive export activity -- which China has capitalised on.

That India's counter-productive policies in areas like weaving and infrastructure have prevented the growth of jobs in these sectors. Indeed, the Left-ruled states (and the Left is in the forefront of the jobs debate) have so far had slower job growth than more capitalist states like Gujarat.

Most of all, there is the bald truth that rapid growth by itself achieves quite a lot on the employment front. All of this could perhaps be short-handed to argue that there is precious little that is wrong with the reform programme, except that there hasn't been enough of it.

This is certainly not to argue that there is no unemployment in India, but to suggest that the UPA's understanding of this very important problem is defective and probably born out of the syndrome that makes people dislike good news.

The result is that it is barking up the wrong tree with its preferred solutions, when the old arguments of reformers probably hold more water: create a flexible labour market instead of trying to protect the high-wage islands, get rid of small-scale reservations so as to allow the growth of labour-intensive industries, reform agriculture and create the infrastructure to support rapid economic growth.

The reformers in the UPA government may have exactly these policies and objectives in mind, but they will be hamstrung by the assertions of the Common Minimum Programme. More's the pity.

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