India ShiningIndia Shining

The country's rulers have actively promoted this notion. Since the The country's rulers have actively promoted this notion. Since the mid-1990s it was the BJP's favourite theme, and even Hindutva was mid-1990s it was the BJP's favourite theme, and even Hindutva was made subsidiary to (in fact merged into) this theme. Thus the 1998 made subsidiary to (in fact merged into) this theme. Thus the 1998 nuclear tests – christened 'Operation Shakti' (Strength) – nuclear tests – christened 'Operation Shakti' (Strength) – occasioned a great display of chauvinistic breast-beating.occasioned a great display of chauvinistic breast-beating.

FactsFacts

Let us recall some obvious facts. There is a yawning gap Let us recall some obvious facts. There is a yawning gap between India and the developed world. According to the between India and the developed world. According to the World Bank, India's Gross National Product (GNP) in World Bank, India's Gross National Product (GNP) in 2003 was $568 billion, compared to the US's $10.95 2003 was $568 billion, compared to the US's $10.95 trillion. India, with 17 per cent of the world's population, trillion. India, with 17 per cent of the world's population, accounts for less than 1.7 per cent of the world's income. accounts for less than 1.7 per cent of the world's income. Thus India's Thus India's per capitaper capita GNP was $530, compared to the GNP was $530, compared to the US's nearly $38,000. Even South Korea's per capita US's nearly $38,000. Even South Korea's per capita GNP was over $12,000. GNP was over $12,000.

Human Dev. IndexHuman Dev. Index

The situation is far worse in terms of 'human The situation is far worse in terms of 'human development'. In the UN's Human Development development'. In the UN's Human Development Index, which claims to be a composite of various Index, which claims to be a composite of various factors such as health, education, and income, factors such as health, education, and income, India ranks 127th among 175 countries. India's India ranks 127th among 175 countries. India's under-five mortality rate per 1,000 live births is under-five mortality rate per 1,000 live births is 93, that is, 93, that is, one in eleven children dies before the one in eleven children dies before the age of five. age of five. Its maternal mortality ratio per Its maternal mortality ratio per 100,000 live births is 540, compared to 56 for 100,000 live births is 540, compared to 56 for China and 380 for even Bangladesh. China and 380 for even Bangladesh.

Levels of HungerLevels of Hunger

No doubt, we are constantly told that poverty in India is No doubt, we are constantly told that poverty in India is declining, and a great industry has sprung up of academic declining, and a great industry has sprung up of academic treatises to show how fast poverty is declining. However, these treatises to show how fast poverty is declining. However, these treatises have reduced poverty by defining the term so that it treatises have reduced poverty by defining the term so that it no longer relates to whether or not people get their minimum no longer relates to whether or not people get their minimum requirements of calories. The official National Sample Survey requirements of calories. The official National Sample Survey of 2000 revealed that three-fourths of India's rural population of 2000 revealed that three-fourths of India's rural population and half the urban population did not get the minimum and half the urban population did not get the minimum recommended calories. This is confirmed by nutritional and recommended calories. This is confirmed by nutritional and health surveys, which reveal the following: more than two-fifths health surveys, which reveal the following: more than two-fifths of the adult population suffer from chronic energy deficiency, of the adult population suffer from chronic energy deficiency, and a large percentage are at the border of this condition; half and a large percentage are at the border of this condition; half India's women are anemic; half its children can be clinically India's women are anemic; half its children can be clinically defined as malnourished (stunted, wasting, or both).defined as malnourished (stunted, wasting, or both). "There is "There is already a sub-Saharan Africa (SSA) within India – half of our already a sub-Saharan Africa (SSA) within India – half of our rural population or over 350 million people are below the rural population or over 350 million people are below the average food energy intake of SSA countries." average food energy intake of SSA countries."

UnemploymentUnemployment

No doubt, one sector of the country's economy has seen No doubt, one sector of the country's economy has seen breakneck growth in the past decade: the provision of breakneck growth in the past decade: the provision of software services and business process outsourcing software services and business process outsourcing services to foreign (principally US) firms. However, that services to foreign (principally US) firms. However, that sector accounts for 0.25 per cent of the labour force. sector accounts for 0.25 per cent of the labour force. Where are the rest? Nearly half of India's total working-Where are the rest? Nearly half of India's total working-age population (15-59 years of age) is unemployed, age population (15-59 years of age) is unemployed, most of it not even counted as part of the labour force.most of it not even counted as part of the labour force.55 While agriculture continues to employ the majority of While agriculture continues to employ the majority of those considered employed, it accounts for less than a those considered employed, it accounts for less than a quarter of the national income, and that share continues quarter of the national income, and that share continues to shrink. to shrink.

GrowthGrowth

The average rate of growth of agricultural production during The average rate of growth of agricultural production during the past decade (1995-96 to 2004-05) is just the past decade (1995-96 to 2004-05) is just 0.6 per cent0.6 per cent per per year , which means production fell sharply in per capita terms. year , which means production fell sharply in per capita terms. The growth rate of industrial production during the decade The growth rate of industrial production during the decade 1995-96 to 2004-05 was only marginally higher than during the 1995-96 to 2004-05 was only marginally higher than during the 1980s 1980s

At any rate, India accounts for less than one per cent of world At any rate, India accounts for less than one per cent of world exports. 'High technology' goods constitute just five per cent of exports. 'High technology' goods constitute just five per cent of its exports. Moreover, India's its exports. Moreover, India's import import bill currently is growing bill currently is growing much faster than its export receipts: thus India's trade deficit much faster than its export receipts: thus India's trade deficit rose from $15.4 billion in 2003-04 to $38.1 billion in 2004-05, rose from $15.4 billion in 2003-04 to $38.1 billion in 2004-05, and is running during just the first and is running during just the first quarter quarter of 2005-06 at nearly of 2005-06 at nearly $16 billion. The sharpest increases in the import bill are not on $16 billion. The sharpest increases in the import bill are not on account of higher oil prices, or imports of machinery; they are account of higher oil prices, or imports of machinery; they are on account of imports of gold and electronic goods. In on account of imports of gold and electronic goods. In consumptionconsumption, no doubt, India's elite sections rival their , no doubt, India's elite sections rival their counterparts anywhere in the world.  counterparts anywhere in the world.  

LiteracyLiteracy

The truth is that adult literacy in India is just 61 per cent; The truth is that adult literacy in India is just 61 per cent; on this score, it ranks on this score, it ranks 146th146th out of 177 countries in the out of 177 countries in the UN's Human Development Index  (that is, many UN's Human Development Index  (that is, many countries with much lower per capita income had much countries with much lower per capita income had much higher literacy levels than India – for example, much of higher literacy levels than India – for example, much of desperately poor sub-Saharan Africa). In recent years, desperately poor sub-Saharan Africa). In recent years, on the recommendation of the World Bank, the Indian on the recommendation of the World Bank, the Indian government has focussed its meagre education government has focussed its meagre education expenditures increasingly on primary education, largely expenditures increasingly on primary education, largely abandoning secondary and higher education (as if they abandoning secondary and higher education (as if they were a luxury). Yet were a luxury). Yet official official data tell us that 42 per cent of data tell us that 42 per cent of children enrolled drop out before completing children enrolled drop out before completing primary primary education (I-V) Another 19 per cent, according to official education (I-V) Another 19 per cent, according to official data, drop out  before completing upper primary data, drop out  before completing upper primary education (VI-VIII). education (VI-VIII).

EducationEducation

Moreover, the quality of education imparted in government Moreover, the quality of education imparted in government schools is so dismal that "half the children in Class IV in schools is so dismal that "half the children in Class IV in government schools in Mumbai cannot do the arithmetic government schools in Mumbai cannot do the arithmetic calculations required of a Class I student. When put to the test, calculations required of a Class I student. When put to the test, 18 per cent of students attending Classes II to V in Andhra 18 per cent of students attending Classes II to V in Andhra Pradesh couldn't do single-digit additions while only 12 per Pradesh couldn't do single-digit additions while only 12 per cent managed single-digit subtractions. In a spot-the-object cent managed single-digit subtractions. In a spot-the-object quiz, only 54 per cent got the results right."quiz, only 54 per cent got the results right."..

Higher education, which the Government has increasingly Higher education, which the Government has increasingly abandoned to a rapacious private sector, is out of the reach of abandoned to a rapacious private sector, is out of the reach of all but a small section. At any rate, the infrastructure and staff all but a small section. At any rate, the infrastructure and staff of many of the new private institutions are appalling, and thus of many of the new private institutions are appalling, and thus the degrees imparted to a large percentage of graduates may the degrees imparted to a large percentage of graduates may not be worth the paper they are printed on.not be worth the paper they are printed on.

ResearchResearch

According to the official publication According to the official publication Research and Development Research and Development StatisticsStatistics (2000-01, the latest edition), India's expenditure on R & D has (2000-01, the latest edition), India's expenditure on R & D has been been fallingfalling as a share of GDP, from 0.91 per cent in 1987 to 0.81 per as a share of GDP, from 0.91 per cent in 1987 to 0.81 per cent in 1998. Let us look more closely at this 'R & D' expenditure. First, cent in 1998. Let us look more closely at this 'R & D' expenditure. First, the Indian private sector does not account for much of it. According to the Indian private sector does not account for much of it. According to official figuresofficial figures,, eighty per centeighty per cent of R & D expenditure was carried out of R & D expenditure was carried out by the Government. This was largely not for productive purposes, but by the Government. This was largely not for productive purposes, but for military purposes: 32 per cent on direct military research, 21 per for military purposes: 32 per cent on direct military research, 21 per cent on space research (much of which actually serves the missile cent on space research (much of which actually serves the missile programme) and 12 per cent on atomic energy (much of which actually programme) and 12 per cent on atomic energy (much of which actually serves the nuclear weapons programme). Even allowing for some serves the nuclear weapons programme). Even allowing for some genuine space and atomic energy expenditures, at least half of R & D genuine space and atomic energy expenditures, at least half of R & D expenditure in India appears to be for military purposes. Yet despite expenditure in India appears to be for military purposes. Yet despite this ample funding, the showpieces of defence R & D – the Main Battle this ample funding, the showpieces of defence R & D – the Main Battle Tank project (started in Tank project (started in 19741974) and the Light Combat Aircraft project ) and the Light Combat Aircraft project (started in (started in 19831983) – have yet not been completed, and, after the ) – have yet not been completed, and, after the expenditure of billions of rupees each, the chances of their actually expenditure of billions of rupees each, the chances of their actually being inducted into the armed forces are dwindling. For example, the being inducted into the armed forces are dwindling. For example, the air force is now in the international market for a mammoth order of 126 air force is now in the international market for a mammoth order of 126 fighter planes, at a cost of over $6 billion. fighter planes, at a cost of over $6 billion.

Research IIResearch II

It is unlikely that the private sector accounted for even 20 per It is unlikely that the private sector accounted for even 20 per cent of R & D expenditure. The latest RBI survey of the private cent of R & D expenditure. The latest RBI survey of the private corporate sectorcorporate sector1414 shows that their R & D expenditures in 2003- shows that their R & D expenditures in 2003-04  account for just 04  account for just 0.3 per cent of sales0.3 per cent of sales. By contrast, these firms . By contrast, these firms spent much more on advertising and promotion (2.1 per cent of spent much more on advertising and promotion (2.1 per cent of sales) – a clear indication of how low R & D figures in their sales) – a clear indication of how low R & D figures in their priorities. Capital goods imports were, at 1.9 per cent of sales, priorities. Capital goods imports were, at 1.9 per cent of sales, over six times R & D expenditure. The figure for these firms' over six times R & D expenditure. The figure for these firms' foreign technology payments is not given separately, but it is foreign technology payments is not given separately, but it is likely to be much larger than the figure for their R & D; likely to be much larger than the figure for their R & D; whereas, to absorb foreign technology properly (in such a whereas, to absorb foreign technology properly (in such a fashion that one can further develop it), R & D expenditures fashion that one can further develop it), R & D expenditures need to be multiples of technology payments. And finally, need to be multiples of technology payments. And finally, much of what passes under the name of R & D in Indian much of what passes under the name of R & D in Indian industry is merely classified so for tax saving purposes, and industry is merely classified so for tax saving purposes, and actually consists of adaptation of products to local conditions, actually consists of adaptation of products to local conditions, or even merely quality control. or even merely quality control.

Research RealitiesResearch Realities

 

Researchers in R & D per million people

Patents granted to residents per million people

Receipts of royalties & licence fees (US $ per person)

United States 4,526 302 $167.2

China 633 5 $0.1

India 120 0 $0.2

Source: Human Development Report 2005, U.N. Figures relate to most recent year for which data are available.

IT IIT I

India's much-vaunted Information Technology (IT) sector is composed India's much-vaunted Information Technology (IT) sector is composed of two parts: the software sector, and the IT-enabled sector (ITES). In of two parts: the software sector, and the IT-enabled sector (ITES). In both cases, work that was earlier done in the developed world, both cases, work that was earlier done in the developed world, particularly the US, has been 'outsourced', or contracted out, to particularly the US, has been 'outsourced', or contracted out, to locations in India. locations in India.

The biggest supply may be of BPO (business-process outsourcing) The biggest supply may be of BPO (business-process outsourcing) workers who do not need to use the telephone much: claims workers who do not need to use the telephone much: claims processors, credit-card administrators, health-insurance workers and processors, credit-card administrators, health-insurance workers and so on. Indian universities churn out 2.5 million graduates a year. so on. Indian universities churn out 2.5 million graduates a year. Perhaps a quarter to half of these have the right skills to do this sort of Perhaps a quarter to half of these have the right skills to do this sort of BPO work, says NASSCOM's president, Kiran Karnik. To improve that BPO work, says NASSCOM's president, Kiran Karnik. To improve that ratio, he is working with India's University Grants Commission to have ratio, he is working with India's University Grants Commission to have three-year degree courses supplemented by one-year technical three-year degree courses supplemented by one-year technical certificates in IT or American accounting standards.certificates in IT or American accounting standards.1818

Thus university education in India is to be tailored to providing labour Thus university education in India is to be tailored to providing labour supply for the requirements of American and British corporations' low-supply for the requirements of American and British corporations' low-value work. As a recent study by the V.V. Giri National Labour Institute value work. As a recent study by the V.V. Giri National Labour Institute has pointed out, the call centre industry "leads to a wastage of human has pointed out, the call centre industry "leads to a wastage of human resources and de-skilling of workers" which will have a high impact on resources and de-skilling of workers" which will have a high impact on Indian industry in the long-term.Indian industry in the long-term.

IT IIIT II India is not competing on the basis of the superior quality of India is not competing on the basis of the superior quality of

services or any technological innovation, but services or any technological innovation, but solely in wage solely in wage costscosts The same applies for the software sector. It is true that The same applies for the software sector. It is true that India's annual production of IT engineers is larger than that of India's annual production of IT engineers is larger than that of the US. However, Indian engineers are employed in relatively the US. However, Indian engineers are employed in relatively low-value work: as low-value work: as Business WeekBusiness Week (1/3/04) points out, "So far, (1/3/04) points out, "So far, the less-creative software jobs are the ones being moved the less-creative software jobs are the ones being moved offshore: bug-fixing, updating antiquated code, and routine offshore: bug-fixing, updating antiquated code, and routine programming tasks that require many hands." The magazine programming tasks that require many hands." The magazine depicts a 'software pyramid', with a few thousand 'architects' at depicts a 'software pyramid', with a few thousand 'architects' at the top, followed at successive levels of skill and pay by the top, followed at successive levels of skill and pay by researchers, consultants, project managers, business analysts, researchers, consultants, project managers, business analysts, and finally basic programmers. This last category are "The foot and finally basic programmers. This last category are "The foot soldiers in the information economy, they write code for soldiers in the information economy, they write code for applications and update and test them". It is a part of this applications and update and test them". It is a part of this lowest category that has been 'offshored', much of it to India.lowest category that has been 'offshored', much of it to India.

IT Low wage EconomyIT Low wage Economy

Indian software firms manage applications of programmes owned Indian software firms manage applications of programmes owned by multinational software giants; but Indian firms produce virtually by multinational software giants; but Indian firms produce virtually no no proprietorialproprietorial software, that is, copyrighted programmes which software, that is, copyrighted programmes which are sold to a large number of customers, and earn a continuing are sold to a large number of customers, and earn a continuing stream of revenue (what Microsoft earns its money from). Rather, stream of revenue (what Microsoft earns its money from). Rather, both the hardware and the software they use are imported. Thus the both the hardware and the software they use are imported. Thus the present prime minister pleaded on his recent visit to the US for present prime minister pleaded on his recent visit to the US for sympathetic treatment:sympathetic treatment:

American investments in India, especially in new technology areas, American investments in India, especially in new technology areas, will help American companies to reduce costs and become more will help American companies to reduce costs and become more competitive globally. Equally, India's earnings from these competitive globally. Equally, India's earnings from these investments will lead to increased purchases from the US. The investments will lead to increased purchases from the US. The information technology revolution is built primarily on US information technology revolution is built primarily on US computer-related technology and hardware. (20/7/05)computer-related technology and hardware. (20/7/05)

India is thus not a 'knowledge economy' but a India is thus not a 'knowledge economy' but a low-wagelow-wage economy, economy, distinguished from other such by its colonial heritage, English. It distinguished from other such by its colonial heritage, English. It does not command increased international status by virtue of its does not command increased international status by virtue of its economic strength; rather, the publicity about its 'emergence' as a economic strength; rather, the publicity about its 'emergence' as a 'power' is an outcome of conscious US policy.'power' is an outcome of conscious US policy.

Allocation for employmentAllocation for employment

  2004-05 RE 2005-06 BE

Sampoorna Gramin Rozgar Yojana 45.90 36.00

National Food for Work (NFFW) Programme

18.18 54.00

Foodgrains component of NFFW* 22.02 56.00

Total 86.10 146.00

As % of GDP 0.28 0.42

Agriculture AllocationsAgriculture Allocations

Agriculture & Allied Activities

1990-91 1.22%

2002-03 0.79%

Irrigation & Flood Control

1990-91 1.25%

2002-03 0.94%

RBI, Handbook of Statistics on State Government Finances, 2004; RBI, Handbook of Statistics on the Indian Economy, 2003-04.

State Economies in TroubleState Economies in Trouble

Grant Loan to be raised by states from

the market

Total

Additional Central Assistance for Externally Aided Projects

5.87 34.00 39.87

Accelerated Irrigation Benefit Programme

-- 48.00 48.00

Accelerated Power Development

6.30 14.70 21.00

Urban Renewal Sub-mission for Slum Development

58.96 14.00 19.90

Urban Renewal Sub-mission for Urban Infrastructure & Transport

10.28 24.50 34.78

SOURCE: Union Budget, 2005-06

Bharat NirmanBharat Nirman

“Bharat Nirman” (“Construction of India”) by 2009?Chidambaram has announced with much pomp a five-point programme for Bharat Nirman. Below are the promises and brief comments.

PROMISE COMMENT

Ten million hectares under assured irrigation

Negligible increase in Ministry of Water Resources, even after underspending last year’s allocation. Increase announced in Accelerated Irrigation Benefit Programme, but zero budgetary allocation made for it.

Connect all villages that have a population of 1,000 (or 500 in hilly/tribal areas) with a road

Official estimate of required funds: Rs 1320 billion. Allocation in 2005-06: 38.1 billion, or less than three per cent.

Construct six million additional houses for the poor

The allocation for Rural Housing is reduced from Rs 26.07 billion (2004-05 Revised Estimates) to Rs 24.98 billion (2005-06 Budget). Most houses in the rural areas are still kaccha, i.e., made of materials such as mud, reeds, bamboo or grass.

Bharat NirmanBharat Nirman IIII

Drinking water to remaining 74,000 habitations that are uncovered

Coverage of “habitation” does not mean coverage of all households within that. The rural population is 800 million, but there are only 3.7 million hand pumps and 173,000 piped water schemes in the rural areas. Seventy-one per cent of rural dwellers and 30 per cent of urban dwellers do not have access to piped water (National Sample Survey 1998).

Reach electricity to remaining 125,000 villages and offer electricity connection to 23 million households

In the 2005-06 Budget Rs 11 billion is allocated for a new scheme of Household Electrification; but Rs 10.5 billion is cut  from various heads of Rural Electrification (Rs six billion from assistance to the states for rural electrification; Rs two billion from Interest Subsidy on Rural Electrification; and Rs 2.5 billion from Rural Electrification Corporation). Moreover, the Electricity Act and impending privatisation of electricity boards (promoted by the Centre) will actually reduce the reach of electricity to rural areas.

Give telephone connectivity to the remaining 66,822 villages

Perhaps one person in 100 in the rural areas has telephone services, compared to five or six nationwide. The 2005-06 Budget has allocated Rs 12 billion for rural telephony from the special USO fund, collected from telecom firms specifically to subsidise rural telephony. But the Government is sitting on an additional Rs 51 billion lying in this fund.

DefenceDefence

The official defence budget comes to Rs 969.52 billion The official defence budget comes to Rs 969.52 billion (including pensions); to this we should add border works, (including pensions); to this we should add border works, border roads, and half the budgets of the Department of border roads, and half the budgets of the Department of Atomic Energy and the Department of Space (this is Atomic Energy and the Department of Space (this is admittedly a very rough measure: the former is admittedly a very rough measure: the former is responsible for making nuclear weapons, the latter for responsible for making nuclear weapons, the latter for the missile programme, but no separate provision is the missile programme, but no separate provision is made for either of those two expensive programmes). made for either of those two expensive programmes). The total, the The total, the unofficial unofficial defence budget, would come to defence budget, would come to well over Rs 1,030 billion. The figure would go even well over Rs 1,030 billion. The figure would go even higher if we add the budgets of various security forces higher if we add the budgets of various security forces such as the Border Security Force. such as the Border Security Force.

Military ExpenditureMilitary Expenditure

Ministry of Defence 15.00

Defence Pensions 124.52

Army 312.43

Navy 60.27

Air Force 90.05

Research & Devt 28.14

Capital Outlay 343.75

Total official defence budget* 969.52

* after adjusting for surplus of defence ordnance factories

Other military-related expenditure (Rs bn)

Indo-Bangla, Indo-Pak Border Works 12.15

Border Roads Development Board 11.49

Dept of Atomic Energy 49.96

Dept of Space 31.48

Police ExpenditurePolice Expenditure

Secretariat 0.72

Narcotics Control Bureau 0.16

Intelligence Bureau 4.23

Civil Defence 2.13

Home Guards 0.44

Special Protection Group 1.04

Police* 125.52

Housing for Police 5.01

Buildings for Police 5.00

Jail modernisation 2.84

Total 147.10

* including CRPF, NSG, BSF, ITBP, CISF, Assam Rifles, SSB, Special Police, etc.

Defense IIDefense II

The sum of Rs 147.1 billion for internal security is larger The sum of Rs 147.1 billion for internal security is larger than the budget for either Elementary Education, Rural than the budget for either Elementary Education, Rural Employment, Health and Family Welfare, or Agriculture Employment, Health and Family Welfare, or Agriculture While state governments have primary responsibility for While state governments have primary responsibility for health and education, police too is a state subject. health and education, police too is a state subject. Indeed state governments too spend heavily on police Indeed state governments too spend heavily on police (Rs 180.72 billion by the states in 2002-03).(Rs 180.72 billion by the states in 2002-03).

Defense Budget-Other SectorsDefense Budget-Other Sectors

Note that the unofficial defence budget comes to nearly Note that the unofficial defence budget comes to nearly three per cent of the projected GDP for 2005-06, and is three per cent of the projected GDP for 2005-06, and is over 35 per cent higher than the Centre’s combined over 35 per cent higher than the Centre’s combined spending on all social services, agriculture and irrigation. spending on all social services, agriculture and irrigation. Indeed even the official figure is about 2.7 per cent of Indeed even the official figure is about 2.7 per cent of GDP, and has risen sharply under the UPA government. GDP, and has risen sharply under the UPA government. The 2005-06 figure is Rs 250 billion larger (nearly 35 per The 2005-06 figure is Rs 250 billion larger (nearly 35 per cent larger) than that of two years ago. Seventy per cent cent larger) than that of two years ago. Seventy per cent of that increase is on account of hiked Capital Outlay – of that increase is on account of hiked Capital Outlay – that is, for the purchase of weapons and technologies, that is, for the purchase of weapons and technologies, largely imported. largely imported.