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Two Decades of Neo-Liberal Reforms in India: The Worsening Employment Situation

Two decades after neo-liberal economic reforms started in India as part of the agenda of imperialist globalisation, the condition of the masses of the labouring poor is worse in every part of the country except where some positive intervention has taken place to stabilise livelihoods.  The richest minority at the top of the income pyramid is far richer than ever before, better off even than advanced country middle classes for they command extremely cheap services from the mass of the labouring poor whose bargaining position is lowered owing to rising unemployment and the resulting constant addition to the reserve army of labour.  The three issues which most concern the masses today are, the increasing levels of unemployment as high GDP growth fails to translate into increasing jobs; the high rate of inflation in prices of basic necessities which is eroding their already low purchasing power; and in rural areas, the attempt to take over their lands and resources by corporate entities, usually actively aided by governments.

The ruling classes in this country have long forgotten that ‘development’ means improving the wellbeing of ordinary people.  They have long subscribed to the ideology of finance capital which continues to play a hegemonic role despite global economic and financial crisis, and which entails an obsession with the rate of growth of GDP to the exclusion of any concern about how this growth takes place, how it is distributed and who it benefits.  They seem to subscribe to a crude form of ‘trickle-down’ theory in which, if the rich get richer, automatically the poor are supposed to benefit through the increased demand for goods and services on the part of the rich.

What is actually happening is a dangerous combination of two trends — first, there has been a fairly drastic slowing down of the expansion of material production especially in the vital primary sector, agriculture and allied activities, and in particular the key crop, foodgrains, has seen falling per capita output.  This has happened because for the best part of two decades through its new public reform policies, the State has actively attacked the small producers and created an agrarian crisis which has by no means ended but is intensifying into the struggle for retaining land.

Second, the type of growth which has taken place and given high numbers for GDP expansion has been acutely lopsided, with services now accounting for three-fifths of GDP and agriculture as well as manufacturing being relegated to contributing less than a fifth and less than a quarter respectively.  Enrichment of the minority has meant a boom in construction and in eating out and travelling on their part including foreign travel.  Construction and the so-called hospitality sector are the only ones generating some employment while in the material producing sectors the job situation is dismal.  Minority enrichment has produced speculative real estate operations and an attack on the small property of farmers — in the name of development projects or of Special Economic Zones which are but a front for real estate speculation, a pittance is paid for taking over farmers’ lands, a process which the farmers have at last now started resisting actively.

As we know, high GDP growth has not been producing jobs.  This is bound to happen under capitalist production in the long run since capitalists are motivated by profitability and are prepared to dispense with hiring labour completely if a machine can do the job and give them higher profits.  The very fact of technological change and higher labour productivity means higher joblessness and this is added to when the State misguidedly cuts back on development spending in the name of fiscal discipline.  Between 1993-4 and 2004-5 the National Sample Survey (NSS) data showed that unemployment for both men and women had risen in both rural and in urban India.  With the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) being implemented it was expected that the rural unemployment situation would improve.  In India as a whole, the recent 66th Round, 2009-10 Employment and Unemployment Survey of the NSS shows a rise in rural unemployment rates with a much steeper rise for women compared to men.

Table 1: Rural Unemployment Rates 1993-4 and 2009-10

RURALMALES
WeeklyDailyUsual
StatusStatusStatus
1993-94305620
2009-10326419
RURAL FEMALES
WeeklyDailyUsual
StatusstatusStatus
1993-94305614
2009-10378024

Source: NSS 66th Round, 2009-10 Key Indicators of Employment and Unemployment in India
Note: Unemployment rates are the number of persons/days unemployed per thousand persons/days of labour force, namely employed plus unemployed.  Usual (principal) status is a measure of chronic unemployment since the reference period is one year while the shorter reference period for weekly and daily status give correspondingly higher rates of unemployed days.

There are problems with obtaining the rate of growth of employment by applying the participation rates of the NSS to the Census population totals, as is usually done.  The NSS samples households and asks questions to households alone while the population includes additionally lakhs of unemployed families migrating in search of work, and people in non-household institutions.  Still if this method is used in the absence of data permitting anything better, we see a collapse of employment growth in recent years as a previous article in the July 31, 2011 issue of People’s Democracy has established, particularly in rural India.  While between 1999-2000 and 2004-05 rural employment is estimated to have grown at 2.2 per cent annually, in the period 2004-5 to 2009-10 it grew at only 0.42 per cent annually.  Given the impact of global recession since 2008 combined with inadequate revival of public spending, the outcome is not surprising and would have been even worse without the MGNREGS which has helped in the states where it has been implemented properly.

The significance of the rise in rural unemployment and the lack of concern with it has to be understood in the context of the fallacious official view that it does not really matter if people are unable to find work within the primary sector because in any case they should be moving out into more productive occupations outside agriculture.  Development has always meant a fall in the share of the population dependent on agriculture and a rise in the share drawing their income from manufacturing and services and India will follow the same route, or so it is claimed.  This argument is also presented to justify the displacement of peasant producers from the land through processes of primitive accumulation such as land acquisition by the State for setting up SEZs or for handing over to the corporate sector.  The argument is logically unsound since countries with large labour reserves like India and China can never solve their employment problem without active measures to support peasant production and follow labour-intensive growth strategies, which are anathema to capitalists.  In today’s advanced countries the problem of unemployment owing to technical change and the inability of capitalism to provide rational labour-absorption strategies was historically ‘solved’ through a process of massive grabbing by Europeans of land and resources from indigenous peoples mainly in the Americas, and large-scale out-migration of their own displaced workers — 50 million Europeans migrated in the century after 1821 in one of the greatest land-grabs in history.  Needless to say quite apart from the ethics of such a solution, it is not open to our country today.

To think complacently that displaced peasants will automatically find livelihoods elsewhere within our economy is a mistaken idea.  This dismal employment situation is the result of a combination of expenditure-contracting fiscal policies in the neo-liberal era and technological change.  In the first four decades after Independence however growth was spurred by large-scale public spending under the Plans and was much more socially broad based.  The State followed expansionary fiscal policies spending a great deal on rural development projects and on building up a manufacturing base in the public sector.  The NSS data showed that employment was growing much faster than the labour force hence unemployment was declining — this is the main reason that land acquisition for development did not face the bitter resistance it does today.  This is not to say that there were no problems — there was distress.  But those whose land was acquired could on the whole be absorbed into other jobs, mainly as wage paid labour.

Since economic reforms started two decades ago, the general job situation has become much worse.  Retrenchment of employees in the public utilities, large reductions in development spending and privatisation all contributed to job loss.  The Indian State cut back sharply on development spending and the results are there to see from successive National Sample Survey studies — a sharp reduction in material growth indicators, a rise in unemployment for male and female workers both rural and urban.  The net change in employment between 1993 and 2009-10 therefore has been adverse as the table shows, and would have been even worse if the MGNREGS had not been implemented.  The actual employment loss is greater than the figures show as people losing regular jobs have to get by somehow with petty low-productivity activities and report themselves as being ‘self-employed’.

In such a situation of disappearing job alternatives, the rural producer with a bit of land will naturally cling to it and will resist any attempt at dispossession.  That bit of land is security against unemployment and destitution.  No matter if the neo-liberal attack on agriculture combined with exposure to global price volatility, has caused acute agrarian distress and made farming so unviable especially in the case of many export crops, that lakhs of farmers have been driven to suicide owing to indebtedness.  It is highly significant that farmers and rural communities are struggling against land acquisition because it means that from passive forms of protest — suicide — they have turned at last to active forms of resistance.  A decade ago this author, when drawing attention to the agrarian crisis long brewing in the countryside, was told that if things were actually that bad then peasants themselves would be protesting which they were not.  No one can put forward such an argument for ignoring agrarian distress now.  Peasants are slow to move, but when they do start moving then no force can hold them back.


Utsa Patnaik is a Marxist economist in India.  This article was first published in People’s Democracy on 23 August 2011; it is reproduced here for non-profit educational purposes.


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