Bad Governance Promotes Bad Business

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Bad Governance Promotes Bad Business
[Opinion] Nandigram violence bespeaks inefficient policies of Indian government

Ranjit Goswami (ranjit)

Published 2007-03-18

India is a fascinating, incredible nation -- the more one sees of it, the more one is mesmerized by its sheer diversity. Many of us Indians, seeing the country from within, wonder how it is perceived by the rest of the world.

In the mid-seventies, there was the "Garibi Hatao" ("Abolish Poverty") campaign; in 2004, we had the "Aam Admi" ("Common Man") campaign. Aam Admi was sponsored by the Indian National Congress, the party behind the present ruling coalition government and one that has ruled India for more than 80 percent of the time since independence.

The result of the Garibi Hatao campaign, if it can be concluded after only three decades, can be seen by all: 70 percent of Indians live on less that $2 a day and more than 30 percent of these on less than $1 a day. Recent reports showed that 95 percent of rural India, where 65 percent of 1.1 billion Indians live, lives on less than $1 a day, and 5 percent on less than 2 cents a day. In other words, not much has changed.

Incredible India also showed "results" under Aam Admi, as Indians continued to feature in the global billionaires list published by Forbes.

Japan, with a nominal economy more than five times the size of India's GDP, and a population of less than 1/8th of India's, has 24 billionaires (combined net wealth of $64 billion) whereas India has 36 billionaires (combined net wealth of $191 billion).

When the billionaires' wealth is computed as a percentage of GDP, India probably ranks highest in the world, at around 25 percent (even excluding the wealth of Indian residents abroad), whereas the comparable figure for the world is 6-7 percent. For the U.S., it is 12-13 percent, and for Japan, less than 2 percent. India's share of global GDP is 2 percent. For 17 percent of the population, per capita income is around $700, 1/10th of the global average, and nearly 1/60th of the U.S. average. India's per capita GNI is lower than Sub-Saharan Africa.

So there goes another feather in the cap of the government's "unity in diversity" and "Incredible India" bottom line.

The Indian government, led by Prime Minister Manmohan Singh and Finance Minister P. Chidambaram and their colleagues, pursues policies in a mad race to the bottom for growth, the benchmark being China.

To record a higher growth rate, the present administration is ready to acquire 20,000 acres of land if not more from poor Indian farmers at dictated prices -- acres that will be given to anyone willing to pay $500 million, irrespective of the credibility of the owner. The government will even offer concessions if need be -- in the form of free land, free taxes, subsidized mining and more. You name it, toss down a few million dollars, and it's yours to do with as you please.

In the race to the bottom, a well-researched area in global emerging economics, states export economies deliberately in an attempt to keep their currencies low. When developed and developing giants indulge in this practice, imagine the power that poor Bangladesh or Kenya gain in export competitiveness. So for every winner in this race to the bottom, there will be many more losers. (The real winner is the country that is importing against credit money because in the end it pays less for imports, and thereby contains inflation.)

In the Indian scenario, states are encouraged to indulge in a similar race to the bottom. Like Kenya or Bangladesh, the states of Assam or Bihar have no chance of competing with a Gujarat or a Maharashtra. Thus, along with the bright side of India's economic growth in a few large states, there remains a darker side in many more states.

When the real estate boom hit India a little late, somehow the billionaires' portfolio wasn't filled with 25 percent of India's land. "How unfair," decried Indian policy makers? Billionaires contribute 25 percent of India's GDP in wealth; don't they deserve to own 25 percent of India's land? Present policy makers are slowly reserving up to 25 percent of Indian land for the billionaires' club -- not through the constitution, but through another driver called "inclusive growth." This involves special economic zones (SEZs) that combine the 21st century industrialization drive with the 19th century colonial act of land acquisition.

Just like that, the constitutional reservation fails to make any difference to the millions of the needy poor, some of whom now operate under Maoist-terrorism; on one-fourth of Indian land, there is disenchantment through neglect from administration after administration.

Democracy, economic growth, getting rich, and industrialization, SEZs -- these aren't in and of themselves good or bad for society. It's what one does with them that determine whether they are good or bad.

So we have the latest controversy of forceful land acquisition at a pittance of $25,000 an acre of investment in one proposed capital intensive chemical hub SEZ in Nandigram, in left-controlled West Bengal state: poor villagers (including women and children) of Nandigram were killed or terrorized (including raped) on March 14 by minions of the state administration for their land. The numbers vary from 14 to many more, if local media is to be believed.

Through some simple arithmetic, we can see that at $25,000 per acre of land, the whole of India, including parliament would fall short of attracting 1/15th of the FDI that has gone into China in last 30 years.

If this is not land grabbing in the name of industrialization taking place within Indian states, I don't know what is.

If government looked into governance and improved it by reducing corruption and making business rules friendly to good businesses rather than bad ones, as it stands now, India would not be able to run its race against China but it still might come up a winner in economic growth for society.

©2007 OhmyNews