Economic Liberalization Ignores India's Rural Misery

“Make In India” was Narendra Modi’s campaign slogan in 2014. Increasing India’s industrial production drove his agenda.


The service sector had made India relatively buoyant since it began to liberalize its economy in 1991. But the service sector’s growth was unsustainable and unpredictable. It could also not absorb the large numbers of educated Indians who found themselves unable to find decent work.

Foreign investment would provide a burst of growth but such a strategy would do little to reduce India’s vast oceans of poverty.

But the Make In India campaign spluttered. Industrial growth has plateaued and job creation has been weak. Halfway through this government’s term, Modi has decided to loosen rules on investment and attract foreign direct investment as a strategy for growth. This is the hallmark of the type of neoliberal policy that the International Monetary Fund’s research department recently warned tends to increase inequality. Such foreign investment would give a quick short burst of growth — perhaps just in time for the elections in 2019. But a United Nations study found last year that such a strategy would widen the gaps between classes in India and do little to tackle India’s greatest challenge – its vast oceans of poverty.

A 2014 McKinsey study found that 680 million people – more than half the Indian population – live in deprivation. To ameliorate this, McKinsey advocated job creation, sharing productivity gains and increased public spending and efficiency for basic services (health care, water and sanitation). None of this is going to be taken in hand by the policy that Modi has inaugurated.

About 70 percent of India’s population lives in the countryside. Modi’s predecessors, the Congress-Left alliance, understood the predicament and put in place a rural employment guarantee scheme. That reform has been sharply narrowed, as all of Modi’s policies seek to benefit the urban middle class at the expense of the rural poor. Poor management of the agricultural sector has resulted in food inflation – prices of tomatoes and potatoes have doubled since last year. That over 300,000 Indian farmers have committed suicide since 1995 seems to mean little to this government. Policies for those in deprivation are in short supply.

Transnational firms are not on a mission to eradicate poverty. It is the role of the government to do so. Modi’s government has abdicated its responsibility – as enshrined in the Indian Constitution – to ensure social, economic and political justice to the Indian people.

This article originally appeared in the New York Times.

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