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Why Is India Still Poor?

India’s development was supposed to be an economic success story. What we can learn from what actually happened.

india garbage by Meena Kadri

Photo by Meena Kadri

In March 2012, the Indian Planning Commission stated that 29 percent of India’s population was poor. These were people who had less than Rs.22.42 (US $0.41) a day if they were living in villages, or Rs. 28.35 (US $0.52) if in a city. The Commission’s happy conclusion was that poverty had fallen from 37 percent since its last measurement in 2004-05.

It is difficult to decide which is the more remarkable figure here. The fact that more than six decades after India gained independence, and after two decades of some of the highest economic growth rates in the world, almost a third of the country was still poor—or the fact that India’s highest planning body actually considers anyone earning more than $0.52 a day as not fitting into their definition of poor. Activists pointedly asked the government economists if any of them could live on that amount in New Delhi; the response, of course, was a resounding silence.

If even slightly more realistic figures are used, the grim reality of poverty in India is revealed. Taking the World Bank criterion of $1.25 (PPP) a day, for instance, there were 456 million “poor” Indians (42 percent of population) in 2005. Estimates that take nutritional and caloric needs into account bump the number in poverty up to 60 – 80 percent.

Development’s failed promise

This is not how it was supposed to be. Post-independence, an industrial model of “development” had promised to eradicate poverty. When this was seen to be clearly failing, partly due to the inefficiencies of a state-led economy, the country was taken into the era of economic globalization with the same promise. It has now been two decades since the introduction of new economic policies in 1991, which included a shift away from an inward-focused model of self-reliance towards a stress on exports and imports, the opening up of various economic sectors to foreign investment, liberalization of regulatory regimes, and a move from public sector investments to privatization.

Not only are vast sections of Indian society being left behind in the globalization race, many of them are actually being further disadvantaged.

Over the 1991-2011 period, the Indian economy has grown at an average annual rate varying between 6 and 8 percent. However, much of this has been jobless growth. In 1991, about 26.7 million people were employed in the formal sector; by 2006, the figure had gone up to only 27 million. Meanwhile, 115 million people had reached working age. Where did they go? They either joined the ranks of the unemployed, or turned to the informal economy, known for its chronic insecurity and exploitative working conditions.

Meanwhile, wealth disparities continue to rise. The richest 10 percent of Indians today own over 53 percent of its wealth, while the poorest tenth have only 0.1 percent.

Not only are vast sections of Indian society being left behind in the globalization race, many of them are actually being further disadvantaged. This is particularly true of those directly dependent on land and natural resources for their survival and livelihoods: small farmers, forest-dwellers, fisherfolk, craftspersons, pastoralists. Rapid economic growth has demanded accelerated growth in infrastructure, industry, and raw material extraction; this has been bad news for forests and coasts, farms and pastures. This process has been aided by the dilution of regulations (e.g. over 30 changes made in the notifications under the Environment Protection Act) to promote industrial growth. Faster and easier take-over by the government of land re-designated for “public purposes” (often to hand over to private corporations) has been facilitated by ambiguities in tenure and land rights over common lands, and the continued use of colonial laws like the Land Acquisition Act. Up to 60 million people have been physically displaced for development projects in the last seven decades. Exports of marine resources, minerals, etc. have jumped manyfold, against all norms of ecological sustainability. For the first time in history, the close-shore marine areas around India are showing signs of resource depletion.

The two basic principles that underlie the search for alternatives are ecological sustainability and social equity. These require a radical form of democracy in which each citizen has a responsible say in decision-making, while being sensitive to ecological and social consequences.

Accompanying this is the increase in the imports of hazardous and toxic wastes from industrialized countries, rendering India one of the world’s biggest dumping grounds. The rapid rise in production of luxury goods, catering to the demands of the elite minority, has also had major ecological consequences.

Although there are some environmental benefits of the current model of globalization—for example, the introduction of new technologies for harnessing renewable energy and controlling pollution, or efficient exchange of ideas and information enabled by the electronics and communication boom—these are far outweighed by the losses. A recent estimate suggested that India now has the world’s third largest ecological footprint (after the United States and China), and is already using twice as much as its natural carrying capacity. No wonder, then, that its companies are acquiring huge tracts of land in Africa and South America, depriving their local communities, in a 21st century version of the colonization that it was itself subject to in the 19th and 20th centuries.

A saner, more equitable future?

Fortunately, an increasing number of people are realizing that the current globalized model of development is socioeconomically and ecologically unsustainable. They are exploring principles and practices of fundamentally different pathways to human well-being.

The two basic principles that underlie the search for alternatives are ecological sustainability and social equity. These require a radical form of democracy in which each citizen has a responsible say in decision-making, while being sensitive to ecological and social consequences. Such a radical ecological democracy would value diverse solutions to suit the varied ecological and socioeconomic conditions across India, build on the best of traditions while embracing the best of modernity, stress decentralized production as the basis of sustainable local and regional economies, build landscape and larger level linkages based on the local, empower all citizens and communities to take part in decision-making, and emphasize equity of opportunity for all.

On the 20th anniversary of the path-breaking Earth Summit in Rio in 1992. Participants at Rio+20 will have a clear choice to make.

There are already thousands of initiatives along these lines in India: sustainable farming, decentralized water harvesting and energy generation, holistic rural development, urban self-sufficiency in water and power, tribal self-rule and panchayat-level planning, community-based conservation, site-specific meaningful education, integrated public health, and so on. These are leading to reduction or elimination of poverty in many communities, without endangering the natural resource base. And they are being given a chance to prove their viability, by some of the world’s most powerful resistance movements against destructive developmental projects, such as those in the south-eastern state of Odisha that have stalled giant steel and mining multinational corporations from taking over their lands and forests.

It is this message that Indians need to carry to the World Conference on Sustainable Development, on the 20th anniversary of the path-breaking Earth Summit in Rio in 1992. Participants at Rio+20 will have a clear choice to make. Either we continue along today’s suicidal path (with or without some tinkering around, such as the so-called Green Economy and market-oriented “solutions” currently being proposed), or we take a fundamentally different path. India’s developmental models are a microcosm of these choices, and it could, if it wants, lead the way towards a saner future.


Ashish Kothari and Aseem Shrivastava wrote this article for YES! Magazine, a national, nonprofit media organization that fuses powerful ideas with practical actions. Ashish is with Kalpavriksh, an Indian environmental action group; Aseem is an independent economist. This article is based on their new book, Churning the Earth: The Making of Global India, published by Viking/Penguin India, New Delhi, 2012.

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