India’s new political economy

India has a wonderful way of turning traditional theories of economic growth on their head. Take the theory of diversification among sectors (agriculture, industry and services) as the driving force of development. Based on the historical evidence of western societies in the 19th and early 20th centuries, the ‘stagist’ view of development was considered the best way forward.

Once the share of agriculture in a nation’s GDP had dipped in comparison to industry or services, then surely a desirable structural change was afoot.

The trajectory of development meant an inevitable pre-eminence of Services over industry and agriculture.

By that token, the last two decades, we are told, have been testimony to a trajectory of growth appropriate to western societies; judging by GDP numbers at least, India has done exceedingly well.

In the Economic Survey of 2010-11, the Finance Ministry gave us a retrospective view on the change in the relative importance of the three sectors.

In 1950-51, the share of services in GDP was around 30.5 per cent; this jumped to 55.2 per cent in 2009-10. If construction is added, the share climbed to 63.4 per cent.

The “ratcheting up of the overall growth rate (compound annual growth rate or CAGR) of the Indian economy — from 5.7 per cent in the 1990s to 8.4 per cent in the period between 2004-05 to 2009-10 — was in large measure due to an acceleration in the CAGR in services from 7.5 per cent in the 1990s to 10.3 per cent in 2004-05 to 2009-10.”

For policymakers such numbers presaged India’s elevation to emerging-market status; the structural transformation had worked its wonder in India. But had it? The devil lurked in the details and together they painted quite another reality to the one drawn by the CAGR data.

The Economic Survey of 2012-13, for instance, sourly observed that employment had climbed faster and higher in services sector in India than had incomes — unlike in China, the US and other services- oriented economies.

Other sources also point to the rise of employment in services but of the informal kind. Informal employment is rampant in such high profit zones as construction and real estate and is steadily growing in other sectors and sub-sectors as well.

Casualisation of labour has been found to be the best bet against the so-called “rigid” labour laws that encourage unionisation and all the unpleasantness of strikes and “unrest.”

And equally, informal employment keeps costs down, an important factor, perhaps even more important than incremental productivity, in staying competitive.

So, behind the numbers is a reality in which the only structural shift the economy has witnessed is the emergence of services sector as an alternative site to farming for informal employment.

The other reality behind the numbers is, of course, that agriculture has not just slipped to third place in its share to GDP out of some inexorable telos of growth, but on account of neglect and the worship of the accomplished fact by policymakers.

Reforms in agriculture require huge political will, but once the GDP rate had begun to pick up steam the roads to success seemed fairly obvious and easier to follow than attempting a second agricultural reform drive.

Since 1991, the modern economy’s discourse on growth has resonated with the brassy sounds of an idea of India as urbanised and urbane. This idea has found favour with the middle class Indian who is its singular beneficiary.

The village in this discourse of urban-centric growth is a metaphor for backwardness, the farm sector for laziness, both remnants of a past best forgotten or converted into a vast township or gated community. And the farmer hears all the resonances.

The Centre for Studies in Developing Societies (CSDS) survey that found a majority of respondents would give up agriculture for some other work, shows how well farmers are picking up the echoes of the new exclusionary discourse. Depending on your take on modernity, you could say that this lapse of faith is a great psychological moment, a prelude to a discursive leap into a brighter future by farmers who for centuries have been unable to see beyond the horizons of their fields.

But on the other hand, one could also see it as part of an unfolding crisis for a nation that had with such enterprise and determination become self sufficient in food. The CSDS survey shows us the face of impending pauperisation, of a cultivator faced with that prospect and intuitively certain that there are few exits — unless he or she wants to become an informal or casual labourer at a construction site.

The realisation of both the futility of farming and the lack of choices for alternative livelihoods drives farmers to suicide, but it also drives them to a form of enterprise that at first glance appears liberating.

On the outskirts of Pune’s eastern suburb of Hadapsar, the Magars, a rich farming community, decided to give up farming, formed a real estate corporation to which they handed over their lands for a township that has become a model for other farmers.

Pune city and its fringes provide proof of how the new discourse defining our ideas of prosperity is determining the future of villages and farms surrounding them. Land acquires new meanings not for agriculture but as a piece of real estate generating rentier profits.

As urban conglomerates spread and as the demand for new urban entities (such as the proposed townships between Delhi and Mumbai and Kolkata, respectively) increase, land will become the site for violent contesting claims -- as is already evident in the outlying areas of Mumbai, Pune and other towns likely to become epicentres of “growth.”

Land has become India’s geographical dividend as it were, multiplying in value as farm lands are turned into urban-scapes or as cities advance on them.

The temptations to sell out will grow exponentially and a new political economy of land acquisition is already emerging--- not with land mafias as in America but with land monopolies blessed by politicians and businessmen.

The structural transformation of GDP that policy makers wax eloquent about seems to have two stages. In the first, agriculture lost out to Services.

In the second that is upon us, we will see capital from diverse sources — manufacturing and other forms of productive activity such as farming return to the land for its conversion into real estate.

That is what India may become — a piece of real estate.