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Jaithirth Rao is wrong. Material wealth and economic apartheid are not Positive Economics

Mammon, the biblical term for riches, is often used to describe the debasing influence of material wealth. Most economists look at what has happened and what is currently happening in a given economy to form the basis of their predictions, also known as the investigative process of Positive Economics. The fact that mammon worship and Positive Economics are poles apart will be evident even to a dimwit. But one cannot count economic wizard Jaithirth Rao among them, who equated both in a recent column and ridiculed those who adhere to the correct definition of Positive Economics. He picked international NGO Oxfam as his target in the column, asking it to “stop looking for inequality in India and go back to distributing blankets”.

Let us look at the reasons for this wrath. A widespread perception exists that in the last eight years, the Narendra Modi-led Bharatiya Janata Party (BJP) government at the Centre has only managed to make India, arguably, the most inequitable country in the world. In an unprecedented trend, the annual income of the poorest 20 per cent of Indian households plunged 53 per cent in 2020-21 from their levels in 2015-16. In the same period, the richest 20 per cent saw their annual household income grow 39 per cent. This is revealed in the latest round of the ICE-360 Survey 2021, conducted by People’s Research on India’s Consumer Economy (PRICE) between April and October 2021, covering about 2,50,000 households spread over 120 towns and 800 villages across 100 districts.

Splitting the population across five categories based on income, the survey shows that while the poorest 20 per cent (first quintile) witnessed the biggest erosion of 53 per cent, the second lowest quintile (lower middle category), too, witnessed a decline in their household income of 32 per cent in the same period. While the quantum of erosion reduced to 9 per cent for those in the middle-income category, the top two quintiles—upper middle (20 per cent) and richest (20 per cent)— saw their household income rise by 7 per cent and 39 per cent, respectively.

To understand the enormity of the situation, let us look at the distressed state of the nation and the economy during the Covid-19 pandemic as revealed by Oxfam’s ‘Inequality Kills: India Supplement 2022′ report.

Poverty: About 230 million more Indians have fallen below the national minimum wage poverty line. India is back to being a ‘country of mass poverty’ after 45 years. Moreover, 63 million Indians are pushed into poverty because of healthcare costs every year — almost two people every second.

Hunger: Approximately 14 per cent of India’s population — about 189 million people — are undernourished and 51.4 per cent of women between the ages 15 to 49 are anaemic. Furthermore, 34.7 per cent of children under the age of five are stunted and 20 per cent suffer from wasting.

Unemployment and household income loss: Unemployment in rural areas is at 14.34 per cent while in urban areas it is 14.71 per cent. The pandemic and the subsequent lockdown caused a 47 per cent decline in the average seasonally adjusted per capita real household income (42 per cent in rural and 53% in urban areas).

MSME: Around 80 per cent of small and medium enterprises across India are “insecure” about their future. A survey of 81,000 self-employed and micro or small businesses found 78 per cent of them incurred losses.

Health: The country also suffers from poor health infrastructure and access to health facilities (rural 95.0 per cent; urban 75.0 per cent) and medicines (rural 36.9 per cent; urban 10.9 per cent).

Education: A total of 320 million learners from 1.5 million schools adversely affected and transitioned to e-learning. Only 15 per cent rural households have internet access while the number stands at 42 per cent in urban areas. Only 13 per cent individuals in rural areas—8.5 per cent of them females—can use the internet. It’s a disaster facing future India.

Informal sector: In the informal economy, where 92 per cent people are employed, about 400 million workers are at risk of falling deeper into poverty. It would take 941 years “for a minimum wage worker in rural India to earn what the top paid executive at a leading Indian garment company earns in a year”, according to the Oxfam report.

Also read: India’s income inequality fell post 2020 lockdown as rich got poorer, US economic study shows

Rich getting richer during pandemic

Meanwhile, to add insult to injury, wealth and luxurious living of the super-rich have boomed in the same period. In its ‘Inequality Kills: India Supplement 2022′ briefing, Oxfam reveals that 84 per cent of households in the country suffered a decline in their income in a year marked by tremendous loss of life and livelihoods, while the number of Indian billionaires went up significantly. “In India, during the pandemic (since March 2020, through to November 30th, 2021) the wealth of billionaires increased from INR 23.14 lakh crore (USD 313 billion) to INR 53.16 lakh crore (USD 719 billion),” the report said.

The Oxfam briefing categorically held that the stark wealth inequality in India is a result of an economic system and violent economic policies rigged in favour of the super-rich over the poor and marginalised. It also pointed out that the number of billionaires in India has increased from 9 in 2000 to 142 in 2021. Their total wealth is higher than the entire Union Budget of India. On average, India is producing 70 new millionaires every day.

Such predatory rigging has led to healthcare becoming a luxury good in India as the government spending on public healthcare ranks among the lowest in the world. Instead of a well-funded health service, it has promoted an increasingly powerful commercial health sector. While the country is a top destination for medical tourism, the poorest Indian states have infant mortality rates higher than those in sub-Saharan Africa. India accounts for 17 per cent of global maternal deaths and 21 per cent of deaths among children below five years.

Oxfam has urged governments across the world to take action to redress the growing divide between rich and poor. In the Indian context, just 1 per cent wealth tax on 98 of the richest billionaire families in India can finance Ayushman Bharat, the national public health insurance fund of the Government of India for more than seven years.

The briefing also advocates a 1 per cent surcharge on the richest 10 per cent of the Indian population to fund inequality combating measures such as higher investments in school education, universal healthcare and social security benefits like maternity leaves, paid leaves and pension for all Indians.

This is Positive Economics at its best — analysing the present circumstances in an economy to form predictions and suggestions for the future. This is what has raised the hackles of mammon worshippers like Rao. His column consists of mostly meaningless ramblings and he rubs it in when he said, “Frankly, I don’t care if my friends Bezos-Ambani-Adani-Zuckerberg see their wealth increase from 100 billion to 150 billion. Judeo-Christian teachings as well as the precepts of Sanatana Dharma tell me that I should not envy those who have been blessed by providence with greater wealth.”

Here is another masterpiece, “Our problem has nothing to do with inequalities. Our problem is the low level of total wealth. We have to pursue artha, as our ancients have advised us and the whole country has to get richer. Targeting the few rich people will not only not help the poor, it will actually hurt all of us, including the poor.”

Does this ex-London honcho even have basic knowledge about the fundamentals of real India?

Also read: Has India fulfilled its moral responsibility? The answers to this question are troubling

Covid and its fallouts

When the Covid pandemic broke out, India was already experiencing the ‘longest economic slowdown since 1991’ with weak employment generation, uneven development and depressed informal economy, which were primarily triggered by the devastating demonetisation announced by Prime Minister Modi on 8 November 2016. And on 24 March 2020, Modi imposed the draconian nationwide lockdown with just four hours’ notice — virtually collapsing the economy. We have already seen the face of the depressed and distressed economy.

In reality, the total number of Indians wallowing in poverty, hunger, unemployment, malnourishment, illiteracy and poor health exceeds the population of the rich countries of Europe and the USA put together. As opposed to this, there has been a phenomenal wealth accumulation taking place in India for a few select oligarchs.

A recent report in The Economist noted that the net worth of Mukesh Ambani and Gautam Adani had gone up by 350 per cent and 750 per cent, respectively, between 2016 and 2020. In 2020-2021, Mukesh Ambani’s daily wealth creation increased by Rs 163 crore and his net worth is Rs 7,18,000 crore. Meanwhile, Gautam Adani’s net worth increased by Rs 1,002 crore daily at a staggering 261 per cent and has reached Rs 5,05,900 crore.

Rao also heralds the “Global Championship” model of Japan and South Korea in his column. Is he ignorant that India is not a corporate state but a welfare state? India is governed by the Constitution, and the Directive Principles of State Policy (Part IV) mandates the State to promote the welfare of the people by securing and protecting as effectively as it may a social order in which justice, social, economic and political, shall inform all the institutions of the national life [Article 38(1)]. Further articles also direct the State to minimise inequalities, ensure equitable distribution of resources and avoid concentration of wealth.

In December 2020, CEO of Niti Ayog Amitabh Kant also turned these constitutional provisions upside down when he openly proclaimed the Modi government’s policies to transform India from a democratic republic into an autocratic oligarchy. “In India we are too much of a democracy so we keep supporting everybody… For the first time in India a government has thought big in terms of size and scale and said we want to produce global champions,” said Kant.

And this is precisely what the central government, its ministers and minions are doing in the last few months with a feverish pitch to sell or alienate public sector enterprises and assets to money-bags by issuing draconian directions and guidelines, threatening CMDs with summary removal and bullying the regulatory authorities to rush through clearances.

These dastardly policies of fattening the super-rich have resulted in a sharp fall in employment. For India’s employment-to-population ratio to be at the global average, nearly 600 million people need to be at work. Currently, only a little more than 400 million are at work which is a massive shortfall of 200 million. This, combined with India fast becoming the most inequitable country in the world, is turning the country into an apartheid nation.

Perhaps this is what ‘mammon worshippers’ like Jaithirth Rao want. No wonder they do not appreciate NGOs like Oxfam being spoilsports by speaking truth to power. Ironically, it is these ‘mammon worshippers’ whom the government has listened to by not taxing the super-rich and facilitating their further enrichment by promoting private investment while hastily selling public assets.

M.G. Devasahayam is a retired IAS officer and chairman of People-First. He also served in the Indian Army. Views are personal.

(Edited by Rachel John)

Source: The Print

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