Rajan and Bhajan

One of the world’s top economists diagnoses what’s wrong with India’s development story

rohit

Rohit Bansal | August 30, 2010


Raghuram Rajan
Raghuram Rajan

I write this from Raipur in Chhattisgarh after a chance interface with some 1,100 forest dwellers gathered here. The organisers have them singing bhajans and chaupais from the Ramcharitmanas, and interspersing messages on cultural renaissance and social integration, besides promises that they’ll soon have help in demanding corruption-free PDS and NREGA with the use of RTI.

The vanavasis sit on the floor bare feet, in neat rows with hopeful eyes; women on one side, many of them in saffron saris. The men sit a few respectable feet away. Nearly every one of them is unlettered. Hot food, a precious incentive to travel 300 km, will be served sharp at 1 pm and dispersal will be at 5 in the evening. This would go on for three days. The funding comes from Chhattisgarh’s well-healed mercantile class. These miners and traders sit on chairs upholstered in starched whites. Patronising speeches follow and even to acronyms like PDS, NREGA and RTI, the vanavasis clap politely.

Surendra Jain, a former state CII president, is candid that he contributes handsomely to such activities, because “otherwise there will be a revolution, which I want to avoid.”

The state seems to have abdicated.

Just a few hours ago, I had University of Chicago professor and former IMF chief economist Raghuram G Rajan speak to me on his worries regarding rising inequality and the anger among (rural) communities who have not benefitted from economic reforms. For someone who is formally an economic advisor to the PM, Rajan is surprisingly forthright on the direct link this disillusioned segment of India has with separatists and Naxalites. “In the agriculture and rural areas, there’s definite resentment against liberalisation. They see growth around them but they’re not experiencing it directly.”

Rajan shares his alarm on the level of corruption, “not just at the top but everywhere… something almost ingrained and people getting away with impunity.” Credited to have told the 2005 Jackson Hole conference of top central banks that the global economic system is threatened from within, Rajan doesn’t fail to point towards excessive coziness between businessmen who have access to government and how they seem to be the (only) one’s benefitting from this proximity.

Rajan doesn’t mind wealth per se. But the unfairness with which contracts are being given out, or the government’s habit “of favouring those guys who are already doing well,” reminds him of the relationship between the oligarchs and the Russian state.

There are small mercies too. Rajan assures that these parts of the country are “far, far away from descending into Mobuto’s Congo,” but he warns that “the slope is slippery.”

“India has the people, but the jobs are not where the people are, nor are all the people necessarily capable of undertaking jobs that are being created. Many of the new jobs are in western and southern coastal states that are well connected to the big cities and global economy through rail, roads, and ports; but much of the population growth is taking place in Uttar Pradesh, Madhya Pradesh (read Chhattisgarh too) and Bihar, which have done traditionally a bad job in educating the people, especially women. They have also not created the infrastructure that connects the people to markets or that allows new entrepreneurs to flourish. Then in the poorest states, land and revenue records are poorly demarcated. A number of communities, such as tribal populations, do not have formal title to land. To add to the murkiness of land rights, even those whose names the land is registered may not have the ownership.”

Rajan observes that powerful interests benefit the most from the murkiness of land rights and they are the ones who vehemently oppose clarity of titles. “Even those who fight for the powerless have an incentive to keep things the way they are. The government gives them a readymade cause. If communities could deal with land acquirers firmly, the political wind would be taken out of these groups’ sails.” Clearly, that’s when people like Surendra Jain would need to fund less of singing and more education and genuine employability.

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