EVOLUTION IN INDIA AND CHINA’S AGRARIAN ECONOMIES

The palpable sense of anticipation and excitement with regard to the Indian elections, has now moved to wondering about the composition of the cabinet, and the durability of any government that the Congress party will form.  

While the results were somewhat sharply unexpected, the setback that the ruling coalition suffered in the parliamentary elections, and for certain key states’ assemblies, is being attributed to the anti-incumbency factor - that catch-off phrase that is convenient whenever an existing government is defeated.  The real factors are yet to be ferreted out, as the voting arithmetic is analysed, state by state. Certain overwhelming trends and tendencies can be quickly identified. First,  that the rural economy has once again, asserted itself in India. As a wit put it amusingly, “while India may have been shining a little bit internationally, Bharat (the domestic name for India) is still emerging from the dark ages”! There is some validity in this pronouncement. For instance, Mr. Chandrababa Naidu was revered globally for his prowess as a CEO of a state, his reformist approaches, his zeal for speed of action and positive outlook.  Appreciation by external observers do not matter. Even the voters in urban Hyderabad (the city) on which he lavished so much attention and developmental funds, failed to embrace him enthusiastically; choosing instead the  Telangana Rashtriya Samiti (TRS), that stood for an independent  Telangana state, divorced from Andhra Pradesh. 

On the other hand, the Congress party in the state, focused on promising free electricity and abundance of water. Its leader, Dr. Y.S. Rajasekhara Reddy took a walk to every village in the state (padayatra), and appeared to have galvanized the rural masses in his favour with the largesse and personal rapport. He has now become the Chief Minister and while he may not jettison the IT investments or jobs that they create, and the technology upgradation of his state, his priorities will firmly be on enhancing the lot of the rural masses.

The preponderance of the agrarian economy is what India shares with China as a commonality. China has also had a somewhat lopsided growth in this context - what with its cities mirroring some of the best infrastructural development around the world and yet there is abject poverty in rural China.  Both countries have a legacy of sharply lower standards of living, lack of jobs, and poor sustenance farming. Eking out an existence in the agrarian economy becomes difficult, as it is periodically ravaged by climatic conditions, drought, snow and its rivers in spate on the one hand, and sheer poor and inefficient methods adopted in farming or agricultural machinery on the other. 

Because of the communist regime, China can keep a tight lid on any discontent in the rural areas. To be fair, China has diverted significant amount of funds to its rural belt, but it still has a long way to go, to remedy the divide or the deep chasm that exists between a prosperous, vibrant, industrial and urban China and a somewhat primitive but vast agrarian hinterland. Rural China has not yet come to terms with the multiple digit growth that China has experienced, and which is palpably visible in a fashionable city such as Shanghai, and to a lesser extent in Beijing, groaning under the heavy cloud of its centralized bureaucracy.

Another interesting aspect of the recent parliamentary poll in India, is the performance of the Left parties. Not only have they retained their two strong holds, nay stranglehold over the two eastern states of Kerala and West Bengal, they have picked up new  pockets of support. They have now graduated to become a decisive ‘third force’. Given that both the Congress and the BJP-led coalitions are not able to muster a majority on their own steam, the third force is no longer a spent force!

In that sense, the election results do indicate an unmistakable left-ward shift. The populace in India are  tired of the pouting of reforms that do not appear to improve their lot. The reform slogans often translate in Delhi and in Mumbai, to little more than “market reforms” i.e. in capital / stock markets and making the economy wide open to enable overseas investors to cherry-pick, what and where they wish to invest in. Therefore, this whole debate about reforms has been very much a darling subject of the media and the intellectual gentry in India, who might be highly visible and voluble, but represent a fractional minority in the body politik. That is perhaps a damning but relevant indictment dealt by the poll outcome.

Many observers may well have “suspended their disbelief”, and held out strongly for the previous government to be re-elected, little realising that the silent majority of voters,  by and large, are at or near poverty line, and not the affluent and articulate minority. 

This dichotomy between the masses in the agrarian economy and the miniscule urban intelligentsia will deepen over the years; unless there is a significant shift of resource allocation to the rural sector. This  can well be done through joint private / public sector institutions, both in China and in India. The classic model and mould of large urban conglomerates or governmental organizations, attempting to do justice to the rural poor, ends up as a contradiction(s) in terms; let alone, a suitable proposition per se.

A great deal can be achieved through fiscal policies. This may be anathema to the classic economists. For instance, free electricity as promised or free food or subsidies. But all of these can be bartered as wages in kind, in any national service activity. For example, to undertake huge rural infrastructure projects, certain minimum levels of nutrition, transport, electricity and water can be delivered to the work force as payment of wages in kind.  This may be thinking ‘out of the box’, but are eminently feasible propositions.

Neither India nor China can follow the model of city-states, such as Singapore, Dubai,  Monaco or Luxembourg. They will have to evolve on the lines of Russia, Brazil, Indonesia and Mexico and can take a leaf out of the United States of America’s achievements in uplifting its rural and the agrarian economy to such vibrant and prosperous levels. The U.S. is large but the disparity is minimal, and except for the trappings of modern conveniences, all are available in plenty in its rural areas. The U.S. divide is therefore, minimal. Indeed, there is  perhaps a greater quality of life, outside the cities, especially given the ghettoes in its urban areas. 

This is the lesson that those in power in China and the politicians in India need to quickly grasp. The latter have fewer than five years to deliver results, which might well nigh be impossible. But if they were seen to be exerting efforts in the right direction, they will be rewarded with additional time at the hustings.    

 As one wag put it “the absence of adequate water supplies and power-cuts during the summer months, made the people cut the power that Mr. Naidu and Mr. Vajpayee enjoyed”. That may be an intended pun and play on words, ensuring that the feel-good factors are as strong in the rural areas. Good governance, at the corporate, economic and political level, will remain a slogan, to impress the intelligentsia, but will fall flat in attaining the echelons of power, unless there is atleast “feel-better”; be it in India or China. 

 The author is General Manager of Emirates Bank.  However, the views expressed in this article are not necessarily shared by the Bank.

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