Warped policies

Print edition : April 14, 2001

IF the initial phase of liberalisation and market-centred policies marginalised the poor and the destitute, the acceleration of the policies has alienated the not-so-poor but vulnerable sections.

Proof that only a minuscule section gains from the liberalisation process at the expense of the vast majority of the people can be had from the experience of the weavers and farmers of Andhra Pradesh. In the case of textiles, the initial policy of encouraging powerlooms weakened the handloom sector, which provides livelihood for lakhs of weavers. The crisis in the handloom sector further deepened with the policy-driven increase in yarn prices, the non-availability of hank yarn, the withdrawal of the Janata cloth scheme and the scuttling of the Andhra Pradesh Handloom Cooperative Society, almost wiping out the sector.

The intensified implementation of the policies of liberalisation and globalisation also led to the dereservation of powerlooms from the small sector, throwing it open to bigger and powerful players; indiscriminate import of cheap fabrics; and a sharp increase in power tariffs as a result of reforms in that sector. The textiles crisis is drawing more sectors into its vortex. The issue, thus, is no longer of handlooms versus powerlooms as both are now equally affected.

IN the case of agriculture, in the initial phase of liberalisation the larger policy of providing state support was withdrawn lending to precipitous fall in public capital formation that undermined the sustainability of the farm system itself. The opening up of the agricultural sector to the world markets was accompanied by an increase in the prices of inputs such as fertilizer and power. Little wonder then that the farm crisis is no longer confined to the bottom rung of the socio-economic ladder but has also affected the not-so-poor. The problem has been compounded by financial sector liberalisation which has spelt the end of direct credit to poor farmers and households and small industries and the vulnerable sections.

Thus it is the systematic erosion of entitlements - a simple but extremely powerful concept developed by Nobel laureate Amartya Sen in his analysis of families (Hunger and Public Action by John Dreze and Amartya Sen; Clarendon Press, Oxford;1989) - that has pushed hundreds of weavers and farmers to commit suicide or die of starvation. According to Sen, given the socio-economic, political and legal arrangements in any system, every person can establish command over some alternative commodity bundles, which are his entitlements. And if some economic change makes it impossible for him to acquire any commodity bundle with enough food to survive, which he is entitled to, he can be reduced to starvation. Sen argues that this "entitlement failure" can happen either because of a fall in his endowment (such as alienation of land) or due to unfavourable shift in his exchange entitlement (such as loss of employment and fall in wages). It is the latter which seems to have happened in the case of Andhra Pradesh's weavers and farmers.

What can the government do now? In the short term, it can subsidise inputs and buy the agricultural produce and the weavers' products. But from the long-term perspective, it raises some basic questions about the socio-economic development the country has embarked upon.

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