Till about 1990 since Independence, our country followed what may be broadly termed an import-substitution strategy for economic growth. This meant high import duties and rigid non-tariff barriers on imports and encouragement to domestic manufacture through a slew of policy measures. This was further buffered by a policy aimed avoiding concentration of economic power as well as at regional diversification of industry. While on one hand, this gave rise to a large number of very small capacity, unviable and inefficient industrial units, it also built an industrial base as also created much larger employment that was well unionized and paid well.
Since the first wave of liberalization in the nineties, things have changed a great deal. The urban middle class has grown massively by then. Post-liberalization and with much reduced import duties, they became a high consuming class. It became almost irrelevant if industry grew by substituting imports for these demanding mass of consumers with money or by actual exports. They had to become equally efficient in either case. In fact, the face of the industry and the character of the dominant classes in it changed from those who specialized in merely managing government regulations — and its officers — to those who could survive global competition due to their inherent technical and production competitiveness.
Farming’s share in economy
The observable reality at the same time is this. Nearly two-thirds of the workforce is engaged in agriculture but produces barely a seventh of the gross domestic product (GDP). This puts the per capita contribution to GDP of the farm household to about a tenth of its urban counterpart. The disparities in living standards perhaps are less stark, though quite bad. Measured in terms of monthly per capita expenditure, a rural household in Bihar spends at best 30% of what an urban household in Maharashtra does.
The result has been an increasing trend of seasonal migration of rural people, from places like rural Bihar to places like urban Maharashtra. Estimates of the number of seasonal migrants vary widely from about 30 million to 120 million, but perhaps the latter number is closer to reality. For instance, the construction sector, which practically runs on the back of migrant labourers, alone employs 40 million people. And then there is a very wide range of so-called informal sector activities, not the least being services to the rich urban middle classes, which employ a vast number of migrants from rural areas and employ them for a pittance. A security guard in Pune earns Rs 7,500 per month for a 12 hour per day shift and is given in addition perhaps a bit of food for breakfast.
Migration of breadwinners
An important question is why are people coming to such jobs? Why are the breadwinners of rural India migrating? Are they being pushed out due to hopeless conditions in rural areas? Or they could live there reasonably well if they wished but they find superior opportunities in cities? Perhaps the reality needs a little nuanced understanding. The best case situation is the say of people in rural Kerala or rural Punjab. They earn reasonably well and have pretty decent conditions when comparators are other rural households. Yet they migrate, to the Gulf in the case of Kerala and to all over the world in case of Punjab. That surely is a case of comfortably off people migrating to tap better opportunities.
But what about people who are living in flood plains of Bihar or drought-prone regions of Rajasthan? Even with the best technology and interventions possible, income from a typical operational holding of a hectare or so would not exceed Rs 50,000 in Udaipur. That makes the per capita income of that region less than Rs 12,000 per year-a sixth of India’s per capita GDP now. This household then is forced to send its breadwinner out.
These masses of migrants who are forced to leave villages simply because there is neither any income opportunity nor any hope left there should be important to all of us. Are they reduced to this state of helplessness due to just collateral damage of the trajectory of economic development we have taken? Or has it been a deliberate if unstated strategy? One may recall that the export-led growth models of the seventies, which countries like Japan, Korea, and Taiwan followed, had these elements — keep food prices high and rural wages low, which will force people to come to urban areas and fight for work even for a pittance.
Reserve army of cheap labor
It meant that you had a reserve army of labor and you could compete in the global market on the back of low labor costs. To complement this, you aggressively push your exports by proactive marketing and state interventions in currency markets etc. China is still following this model, though perhaps with a better-trained labor force.
Has India followed this model since the nineties? Of course, the pro-poor governments with their support base from the self-declared protectors of the poor parties could never say it openly. India sure has sweatshops of all kinds. We are proud of the most prosperous sweat shops that are run in air-conditioned glitzy glass and cement buildings which nurture the hip-hop techies. Since the poor rural brethren cannot enter these, they work in the less conducive settings of dust, noise, and heat in the extreme congestion of the urban hovels in Surat or Delhi.
To be sure, we do have the semblance of equity on paper in the form of cheap food and the rural jobs guarantee scheme. But if you dare, then please see the reality on the ground in places like Uttar Pradesh, Bihar, and the North East to realize that these policies just do not work. People do not get work when they want. They do not get paid full amounts they deserve. They simply do not get the payment in time. And foodstuffs never reach their ration shops. Thousands of helpless people facing starvation are simply pushed out of their villages to go work in far off places merely to survive. Is the implementation failure of these pro-poor policies merely an accident or a part of the conspiracy of the elite to obtain reserve army of cheap labor?
Hence the question — are our rural brothers victims of collateral damage of the economic development process or of a deliberate though unstated strategy?
Sanjiv Phansalkar is Programme Director at Tata Trusts. He was earlier a faculty member at the Institute of Rural Management Anand (IRMA). Phansalkar is a fellow of the Indian Institute of Management (IIM) Ahmedabad.