states of matter. Beneath layers of rhetoric

Whatever potion Rahul Gandhi imbibed on his 56-day vacation from politics, its effect has been miraculous. His new bravura spirit has been a striking contrast to the diffidence the ruling party has suddenly been overwhelmed by.

The ‘maximum campaign’ the BJP ran to gain power was obviously not cost-free. But under the aura of Prime Minister Narendra Modi, the BJP may have chosen the wrong way of requiting its obligations to the lobbies that funded its campaign.

It was just 2013 that a law on land acquisition was adopted with cross-party support. Yet, a sweeping amendment — indeed evisceration — of the law was among the Modi government’s first legislative priorities.

The amendments passed the Lok Sabha, but Rahul was quick to pounce at the first sign of the government floundering to overcome a numerical deficit in the Rajya Sabha. Facing the Lok Sabha the day after unfettering the spirit of combat at a farmers’ rally, Rahul berated Modi for aiming an axe blow at farm livelihoods and ignoring a sector that was the ‘foundation of the country’.

Rahul quoted a mountain of statistics. Ruling party spokespersons responded with equally robust figures: that agriculture’s share in total national income had shrunk so low that the limits of its viability had been reached. The Indian economy could not survive without a mass transfer of workers out of agriculture. All unexceptionable so far; but then, does either side have a strategy about how this is to be accomplished? Perhaps not.

The disproportion that is today the starkest feature of the Indian economy originated rather early. In 1979, the economist and early pioneer of national accounts statistics, VKRV Rao, drew attention to the increasing share of industry and services in national income, consistent with the derived template of modernisation. Occupational change, though, had been ‘in the opposite direction’. This was a sign of ‘structural retrogression’, which constituted both ‘the problem and the paradox of Indian economic development’. It had led to ‘controversy about growth and employment’ and a degree of ‘disillusion with modern industrialisation’.

Close to a decade later, Ashok Mitra drew attention to a further accentuation of this structural oddity. Underlying the curiosity of larger shares of national income originating in services while its contribution to employment stagnated, was a quirk in accounting conventions. Output in industry and agriculture was measured in actual value. In services, the procedure was the obverse. Income earned here was taken as additional output and registered in national accounts statistics as such.

Some components of service sector growth were essential to support material production. In 1990, the economists BB Bhattacharya and Arup Mitra concluded that “income from (the) services sector (was) growing much in excess of the demand generated (for services) by the commodity sector”. Irrespective of causes, this disproportion embodied a likely risk of inflation and balance of payments difficulties.

There have been suggestions that this rather curious growth pattern afforded India the opportunity to ‘leapfrog’ one stage in the sequence of development and achieve high living standards on the basis of services. Others have dismissed this as an idle reverie, since employment growth in services has never been near adequate.

Indeed, for almost the entire decade since liberalisation became an official policy in 1991, aggregate employment growth was dismal because agriculture simply failed to absorb any of the labour entering the market.

The following years brought about an improvement but the best performing category was ‘self-employment’, accounting for no less than 83 per cent of new jobs. This could be considered as advertisement for the virtues of enterprise, or as the last recourse of those without any other means.

Behind this pattern of employment and growth, there are hidden layers of power and its distribution. The source of inequity indeed, may lie in the education sector and perhaps much deeper. Amartya Sen, among others, has argued that India’s priorities have extended undue privileges to education at the higher level at the cost of the basic and secondary stages. The consequence was a vast disparity between those who had access to the full spectrum of education and those who could not cross even the primary threshold.

In a milieu where higher education is a privilege, there is a tendency for its beneficiaries to aggregate in services employment, which enjoy higher cachet in terms of traditional caste values and offer moreover, significant rent-seeking opportunities. Perhaps on this account, India’s services sector has attracted much of the limited pool of the country’s educational capital. Once aggregated in the organised sector of employment and particularly in government services, those endowed with educational capital have further skewed the balance of advantage in their favour.

Voice and agency are key. For long years, agriculture was regarded as a ‘bargain sector’ where any manner of decision could be imposed, since it was peopled by inert matter devoid of will. Terms such as ‘surplus labour’ and ‘disguised unemployment’, both of hoary vintage within the economics discipline, reinforced this mode of thought.

The law on land acquisition passed in 2013 was rich in symbolism, even if there has yet been no occasion to evaluate its substantive impact. From being passive recipients of ‘development’ as others chose to impose it, the farm sector was given the right of refusal, when it found these ambitions in conflict with its own.

Obsessively focused on shibboleths of modernity, the Modi government seems intent on reversing that minor concession. A quick retreat may be the prudent course in the weeks ahead, even if the consequence is a massive loss of face.

S ukumar Muralidharan is a fellow at the Indian Institute of Advanced Study at Shimla

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