Why must poor sacrifice?


Why must poor sacrifice?
There are two schools of thought about development. One school of thought believes in a philosophy of development, whereby the poor is kept in the centre of policy making. A model of development where the poor gets opportunities to grow; a production system which generates enough employment; and a distribution system where there are least inequalities in the distribution of income and wealth.

If due to some reasons, the poor lag behind or lose their employment and livelihood; then we can think of adopting strategies to reduce inequalities in income, wealth and consumption; by way of government interventions, such as employment generation schemes like the MNREGA, subsidising essential products and services including food grain, education, health, fuel, housing, etc. Amartya Sen has also been advocating these schemes. Sometimes, policy makers, failing in improving the conditions of poor and deprived sections, make use of these schemes as populist measures to garner public support.

Another philosophy of development is influenced purely by capitalist thinking. Proponents of this school of thought argue that the best way to help the poor is to increase investment, which can help increase output, employment and welfare of masses; and increase revenue, which can ultimately be used to finance infrastructure for the development of the economy. If the government has resources, it can be used to subsidise goods and services required by masses.

For those who believe in this model of development, the only measure of development is growth in real GDP. If GDP grows by 8 to 10 per cent, it is a matter of pride for them. They argue that if, in the process, the poor do not get their due share in growth, let them sacrifice today for better future. They argue that benefits of growth will automatically percolate to poor, what they call ‘percolation effect’.

Basic characteristics of the economic policy and budgetary policies of the governments of various regimes have been that the burden of taxation on corporate has been gradually declining by way of concessions in corporate income tax, excise duty, custom duty etc.
On the other hand, tax burden on the common man has been on the rise. Budget documents every year has a statement, namely, ‘Statement of Revenue Forgone’, which gives details of such concessions to business and corporate. If we leave out the tax concessions to personal income tax payers, revenue foregone to the benefit of business (mostly corporate) was nearly Rs. 5.5 lakh crore in 2014-15.

It is notable that due to tax concessions to the businesses (mostly corporate), the government is not left with sufficient resources to be spent on the welfare of the poor, the deprived and other weaker sections of the society who need the support of the government the most. This is the reason for the government's inability to raise real allocation on welfare schemes and developmental programmes. Therefore, we can say that it is the poor who are sacrificing to boost growth, whereas businessmen and corporates are enjoying the fruits of growth.

Removing controls

However, those who support economic growth even at the cost of the poor, argue that once growth takes place, its benefits will start accruing to the poor too, sooner or later, as their income, employment and consumption will also get a boost. Basic philosophy behind the model of economic growth adopted in the name of the new economic policy is the same.

This model, which is also called ‘Liberalisation Privatisation, Globalisation (LPG)’ model, works by way of liberalising industry of controls. Under the new scheme of things, fiscal incentives are given to businesses and companies and public sector enterprises are privatised. Imports are made free from tariff and non-tariff barriers and controls from foreign investments are lifted to facilitate free flow of foreign capital.

Though it is correct that the nation has witnessed spectacular growth in GDP in the last two decades, the benefit of the same has failed to reach the poor. During the 10th and 11th Plans, GDP grew by nearly 8 per cent annually. However, during the same period, unemployment also increased simultaneously and this growth was termed jobless growth.

According to the data published by National Sample Survey Office, during the last 10 years, employment seekers increased by nearly 12 crore, whereas we could provide employment to only 2 crore people (20 lakh annually) during this period. Between 2004-05 and 2009-10, in merely 5 years, 2.5 crore people went out of self-employment and 2.20 crore joined the army of casual labour, which hints at deterioration in quality of employment.

Deprivation of the poor has further worsened. As per Census 2001, 45 per cent of farmers belonging to scheduled tribes reported that they were working on their own land, which declined to 35 per cent in Census 2011; percentage of farmers belonging to scheduled castes working on their own land declined from 20 to 15 per cent during this period, whereas in 2001, 37 per cent workers in rural areas reported themselves to be landless agricultural labourers. In 2011, this number increased to 44.4 per cent. It is notable that pace of poverty reduction has also declined significantly after the adoption of ‘LPG’ policies.

One can conclude that due to the LPG policy, in the last 25 years, despite the fast rising GDP, the condition of the poor has been worsening; they are losing land and employment (and livelihood). The quality of employment is also going down gradually. Therefore, without denying the importance of GDP growth, the basic question is, why the poor should sacrifice for growth meant only for rich? Why not we make policies where the rich sacrifice for the benefit of poor?

(The writer is Associate Professor, PGDAV College, University of Delhi)

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