The Congress Party and its allies scored a convincing victory over the BJP and its allies which ruled the country for almost a decade. A host of reasons are being adduced to the defeat of the BJP. But the key reason is the economic neglect of the vast majority of the population, particularly of the rural and urban poor and small farmers.
The adoption of a development strategy involving the economic reforms and policy of liberalization favouring a particular group consisting of urban and rural rich and the emerging wealthy class. Although poverty alleviation was in the BJP's manifesto, no concrete steps were taken to improve the economic lot of the poor and lower middle class.
Being under the Ricardian trap, it was argued by BJP policy makers that the "trickle down" effects will improve the economic condition of the poor and downtrodden. However, this did not happen, the incidence of poverty as a matter of fact, increased. Out of the 400 million youths of India about 40 million were unemployed, another 60 million were underemployed. Starvation was rampant.
Seven thousand farmers are reported to have committed suicide in 2003. The slogan "Shining India," "the high GDP growth of 7 to 8 per cent in the last two to three years, the "pride of building foreign reserves" of $120 billion" and "more than doubling of exports", "the privatisation of profitable enterprises, the achievement of food security based on favourable monsoon, the "slogan of eradicating poverty through IT" and a host of other positive economic indicators could not save the BJP from defeat. In Andhra Pradesh, people wanted "Roti", the government gave them IT which some journalist jokingly converted to "High Tea."
It may be worthwhile to examine, in historical retrospect the strategy for poverty alleviation in India and Pakistan. While analyzing the lessons of economic experience of India and Pakistan since their birth, we find striking similarities and contrasts in their respective strategy for poverty alleviation. To begin with India went ahead of Pakistan in terms of economic planning.
Under the leadership of Pandit Nehru the country opted for a modern welfare state based on democracy and socialism. The first five year plan was launched in the early fifties.
In Pakistan a Planning Board was constituted in 1951 which did produce the draft of the first five-year plan which was scrapped and the First Plan was launched only in the early sixties. In other words, Pakistan lost more than a decade in defining an appropriate economic vision and growth strategy to same period.
In the early 50's and 60's it was widely held by economists that eradication of poverty was dependent on economic growth for which an increase in the levels of domestic saving and investment was considered an essential requirement.
Some economists professed the view that there was a trade-off between growth and equity while others viewed the process as a sequential one. Policy makers in Pakistan gave industrialisation a place of pride and in view of historically observed correlation between growth and industrialisation, industrialisation was emphasised as a major engine of growth even at the cost of agriculture.
Distributional questions were, by no means, ignored on the debates on development strategies, but there was a general feeling that the cake had to first grow in size before it could be distributed. India did not go along wholly with this thinking.
Nehru in the fifties and Bhutto in the early seventies expressed serious doubts as to whether allowing time for the cake to grow without interfering too much with the distributional relationship cannot frustrate both the objectives of growth and a better distribution of the results of growth.
They believed that there is complimentarity between the twin objectives of the economic development, namely growth and equity so that higher equity reinforced the growth promoting process.
They were close to Myrdal's view that growth was probably more closely correlated with the improvement of quality of human labour devoted to production and therefore the classical model was not applicable. More particularly, they argued that institutional reforms, especially relating to land ownership and access to public goods could promote growth with equity.
Both argued that the case for public action was especially strong in relation to areas such as health, availability of foods at prices below the market prices to selected target group, primary education particularly female education as measures which would have favourable effect on life expectancy and social welfare.
Pakistan preceded India in falling into the Ricardian trap. Under Ayub Khan's rule, Pakistan first fell into the Ricardian trap that savings were a precondition for higher capital accumulation and higher rate of absorption of labour into more productive employment ignoring one economic fundamental that "cheap labour" is also capital which Communist China proved in its first three decades of existence.
The main players for creating the predicament of Pakistan were the Harvard Advisory Group, the IMF, and the World Bank. Pakistan could not develop an economic vision of its own because policy making was in the hands of these groups. This continues even today to a large extent.
External agents got hold of Pakistan's economic policy-making because the political framework was mostly undemocratic and therefore fragile. This was not the case in India.
Under the leadership of Nehru, India followed independent foreign and economic policies. Being a leader of the nonaligned group, it could keep foreign interferences at bay. It was only in the last few years under Manmohan Singh that foreign interference started creeping in the garb of economic reform.
It was at this time that India started falling into the Ricardian trap. At the turn of the century under BJP government, it deeply sunk into it. There is nothing wrong with economic reform but in most cases reforms are made part of the financial assistance package to promote the interest of foreign governments and multinationals, ignoring the economic conditions of the poor.
Both Nehru and Bhutto believed that the acceleration of growth per se may not by itself eliminate poverty. Contrary to the advice of the several western economists, India under Nehru adopted a strategy of growth with equity.
Industrialisation was adopted with focus on heavy industries. Agricultural strategy was based on infrastructure development, building a network of large and medium dams, major irrigation network and modernisation of agriculture. Bhutto's strategy envisaged a direct attack on the incidence of poverty and malnutrition.
During 1972-1977 his plan incorporated in the development strategy, quantitative targets for the reduction in the incidence of poverty (or to put it differently, an improvement in the level of consumption of poorer sections of the population) by dovetailing a specific type of production structure along with a desired pattern of household consumption.
Unfortunately, however, this strategy could not be fully implemented because of the inefficient and corrupt administration machinery. The People's Party outlined three approaches.
The first approach, known as the Minimum Needs Programme sought to provide certain basic infrastructure and amenities such as rural roads, drinking water supply, etc. which are essential for improvement in the living conditions of the poor.
The importance of the programme was that in the recognition of the fact that, left to normal development process, a substantial part of the rural population might not have the opportunities to receive such services.
The second approach was to provide large scale employment opportunities to the landless labourer, small and marginal farmers in order to provide income and thereby improve the consumption levels of the rural population.
These programmes were intended to be used for the creation, improvement, and maintenance of public assets such as road and minor irrigation works. The third approach aimed at promoting self-employment through the provision of productive assets that would generate an income stream so that the beneficiaries would cross the poverty line on a permanent basis. All these remained on paper and could not be implemented.
Summing up, one can say that persistent low-end poverty is a complex phenomenon. Nehru and Bhutto's strategy required both modification as well as substantial deepening in some respects, especially in regard to the concept of capital which was earlier treated as mere "wage advance" as in classical models or "machines" more recently.
Both saw the value of human capital. While the expression human capital does not sum up adequately the role of labour in the production process, it at least emphasises a very important dimension which is gaining in importance both as a result of technological change as well as from a receding land base, particularly in Pakistan.
On balance their strategy with equity did not de-emphasise the role of capital accumulation altogether their strategy with equity did not de-emphasise the role of capital accumulation altogether but neither did it exalt it to pivotal role, as Arthur Lewis seems to have done in his work.
They emphasised that accumulation and consumption need not be viewed as exclusive choices as certain types of consumption do have significant production potential.
Both believed that poverty alleviation strategy which do not exploit the human potential fully will not succeed in the long run. Hence the need for poverty alleviation strategy to be viewed not in isolation but within the perspective of restructured growth process.
The new Congress government in India and in particular President Musharaf's government must realise that the issue of growth with equity constitutes a major challenge to our political system in the sense that no policy maker can afford to remain oblivious of the need to provide gainful employment opportunities to the new entrants to the labour force.
Development strategies for growth with equity are then not merely problems of economic or technocratic choices but also to a point problems of political economy. There has to be a proper set of institutional motive forces to promote growth with equity.
This cannot be done solely with the help of market forces. Neither does this imply that there should be no market forces. The fundamental significance lies in realizing that the market in low income countries is a bad master, but can be a very good servant.
It also implies that there cannot be a single prescription irrespective of time and space, as to what should constitute a development strategy for promoting growth with equity.
There might also be several options available but their implications have to be evaluated in concrete terms such as extent of transitional inequalities, disequilibria in the balance of payments and limits of non-renewable resources in the long run.
Sociological and cultural aspects have to be given sufficient importance in the formulation of development strategies since the development process is ultimately the result of interaction between societies and their environment.