A paradox in Maharashtra

Print edition : December 11, 1999

Affluence and extreme levels of poverty co-exist in Maharashtra, thanks to an obsession with industrialisation and the neglect of the agricultural sector. The State needs to evolve broad policy initiatives in order to address the problem.

FOR historical reasons, Maharashtra has emerged as India's most industrialised State. Its capital, Mumbai, is rightly considered the financial and commercial capital of the country. Naturally, other States strive to imitate the development model of Mahar ashtra. Thus it is that hundreds of thousands of people from the rest of the country arrive in Mumbai hoping to have access to some means of livelihood.

In this background, there ought to be a general perception that poverty is less pervasive in Maharashtra than in other States. In reality, however, that is not the case. The coexistence in the State of affluence and disproportionate poverty is particular ly distressing.

In 1997, the per capita income (PCI) of Maharashtra at current prices was as high as Rs.17,666, second only to Punjab's Rs.18,223. It was four and a half times that of Bihar, more than two and a half times that of Orissa, twice that of Kerala, and nearly one and a half times that of Gujarat and Karnataka. But what about poverty? According to an expert (Lakdawala) committee, 38 per cent of the population of the State was below poverty line (BPL) in 1993-94. On the other hand, the extent of rural poverty in Gujarat and Karnataka was 22 and 30 per cent respectively, and rural poverty in Kerala was less than that in Maharashtra by 12 percentage points. Significantly, the extent of rural poverty even in a State like Orissa was nine percentage points less th an that in Maharashtra. At the same time, the extent of rural poverty in Maharasthra was on a par with that in the country as a whole (in fact, it was one percentage point higher) despite the State's PCI being one and a half times higher than the nationa l average.

Maharashtra cannot derive consolation even from Bihar, because though the extent of rural poverty is higher by 20 percentage points in the case of the latter, its PCI was barely 22 per cent of that of Maharashtra.

The reality with respect to urban poverty was not radically different either. Urban poverty in Maharashtra was higher than in Gujarat and Kerala (by seven and 10 percentage points, respectively), while the State has the dubious distinction of being ranke d on a par with Bihar. Even the all-India level of urban poverty was three percentage points lower than Maharashtra's.

Again, in terms of Human Development Index (HDI), Kerala, Karnataka, Gujarat, Orissa and Bihar rank second, fourth, seventh, eighth and 12th respectively, while Maharashtra ranks 14th. The female literacy rate in Kerala is 74 per cent compared to Maharas htra's abysmally low 34 per cent.

THESE facts lead one to three broad conclusions. First, in terms of economic growth (PCI), Maharashtra is very advanced and ranks next only to Punjab. Second, both rural poverty and urban poverty are comparatively more pervasive in Maharashtra and are di sproportionate to the State's profile of economic prosperity. Third, economic growth is only a necessary, but not a sufficient, condition for the alleviation of poverty.

It is now imperative to explain the paradox of the coexistence of affluence and poverty in Maharashtra. First, owing to its obsession with industrialisation, Maharashtra neglected its agricultural sector. Although the agricultural sector ac counts for only one-fifth of the State Domestic Product (SDP), it provides sustenance to between 75 and 80 per cent of the population. In 1981-82, the extent of irrigated area was barely 12 per cent, and that increased to 15 per cent in 1993-94 - that is , by three percentage points in nearly one and a half decades. On the other hand, corresponding figures for Bihar and Orissa were thrice and twice respectively that of Maharashtra. Even Gujarat and Karnataka were way ahead of the State in this regard; so is the country as a whole.

Maharashtra is thus deficit in terms of foodgrain production. Sugarcane and cotton are the two main cash crops of the State. In the case of sugarcane production, the State ranks second, behind Uttar Pradesh. It has successfully built up a cooperative sug ar economy, mainly in the western Maharashtra region. In the case of cotton, the State has been uniquely employing the Monopoly Cotton Procurement Scheme. What is disappointing, however, is that the increase in the production of both sugarcane and cotton has been achieved not through any increase in productivity (yield per hectare) but by progressively enhancing the area under cultivation.

Punjab's productivity in the case of cotton is about two and a half times more than that of Maharashtra. The situation in Maharashtra in respect of sugarcane is more alarming. For instance, during the decade 1981-91, sugarcane productivity in the State d eclined by 1.5 per cent per annum. What is further shocking is the fact that sugarcane on barely 2.5 to 3 per cent of the land under the crop grabs nearly 60 per cent of the total irrigation water. This is socially offending inasmuch as 80 to 85 per cen t of the marginal, small and dry land medium farmers in the State are denied irrigation water even for a single crop. For them, farming has become a distress activity.

OF late, industrialisation has slowed down in the State. In 1980-81, the industrial (secondary) sector accounted for 35 per cent of the SDP, and this declined to 34 per cent in 1995-96. Industrial production grew at an annual rate of about 9 per cent dur ing the decade 1981-91, while during the next six years it decelerated to 6 per cent per annum. As a result, during 1993-1997, Maharashtra's share in the country's industrial production remained stagnant, between 16 and 17 per cent. The same was true of the State's share in the country's aggregate factory employment, which was around 14 per cent and which in all probability may have declined further. There has been a large-scale industrial sickness, which is growing. For instance, the number of sick lar ge units increased from 146 in 1985 to 312 in 1990, while that of small sick units from 8,500 to 20,000.

Industrial sickness must have further increased in the past eight years, worsening the problem of unemployment.

Deteriorating industrial relations and the faulty handling of industrial relations by the State Government are among the main reasons for the industrial deceleration. The State Government handled the 1982 textile mill strike with ineptitude and callousne ss. Even today, the Government is dilly-dallying with the millowners' demand to sell the mills' surplus land. On the other hand, the employment scene in the State is worsening. For instance, at the end of December 1998 there were 41 lakh names on the emp loyment exchange registers: 25 per cent of these persons had not passed the Secondary School Certificate (SSC) examination, 52 per cent had SSC as their qualifications and the remaining 23 per cent were with higher education. Although immediately after c oming to power the Shiv Sena-BJP Government promised to create of 27 lakh jobs, it virtually did nothing in this regard.

In 1973, Maharashtra introduced the Employment Guarantee Scheme (EGS) with a view to giving the guarantee of employment to all unskilled persons in the rural areas within a radius of 5 kilometres. In 1977, the State enacted the relevant legislation and m ade the EGS statutory. The EGS won appreciation not only in India but in the entire developing world as a unique and novel scheme. During the last 25 years or so, there have been a number of studies evaluating the EGS from all possible angles. What, howe ver, has emerged from these studies is that notwithstanding its limitations the EGS proved to be a major source of livelihood for lakhs of unskilled rural people, both men and women, particularly from the poverty-sticken Marathwada region and part of the Vidarbha region.

During the last few years, however, the EGS has been marginalised. For instance, in 1989-90 the Government spent about Rs. 288 crores on the EGS, but in 1991-92 the expenditure fell by about Rs. 100 crores to Rs. 194 crores. During the same period, expen diture on wages fell from Rs. 153 crores to Rs. 108 crores. In 1986-87, employment of about 19 crore person-days was created. In 1991-92, the figure declined to barely 6.5 crores. Although employment increased to about 9.7 crores in 1995-96, it was still half of its volume in 1986-87. Thus wide-scale rural poverty in Maharashtra may partly be attributed to the decline of the EGS.

NOR is the State serious about improving the Public Distribution System (PDS). It is obvious that being a deficit State its rural people depend very much on the PDS. It is, therefore, imperative that the State implements the PDS with commitment and since rity. But this is far from the reality. The gap between the Central Government's allotment of grains (rice and wheat) and the State's purchases is a clear testimony to this. For example, in 1990 the Centre allotted 17.35 lakh tonnes of grains, while the State (fair price shops) lifted 16.58 lakh tonnes. In 1994, however, out of the Central allotment of 18.18 lakh tonnes, barely 8.13 lakh tonnes was lifted (The position improved somewhat between 1994 and 1998). Secondly, nearly 30 per cent of the PDS gra in is offered to the city of Mumbai alone, while the rest of the State has to be content with the remaining 70 per cent. Lastly, unlike other States, Maharashtra does not add its own subsidy on PDS grain to that given by the Central Government, as a resu lt of which PDS prices in Maharashtra have been higher than those in Orissa, Bihar, Rajasthan and Uttar Pradesh. This is despite the State Government's attempt to hold PDS prices for five years.

THE social sectors in the State too have been deteriorating. For instance, the number of public/government-aided hospitals and dispensaries declined from 830 and 1,702 in 1992 to 714 and 1,423 in 1997 and the number of primary health centres increased by a mere 23 in a period of five years - from 1,672 to 1,695 . It is therefore not surprising that the number of beds per lakh of population declined from 144 in 1992 to 141 in 1997. Again, 89 per cent of the rural households do not have sanitary facilitie s.

On the whole, the expenditure on social sectors such as health, education and drinking water and that on the weaker sections such as the Scheduled Castes and the Scheduled Tribes, as also women are grossly inadequate, particularly when compared to the St ate's level of economic development.

Again, the level of real agricultural wages (RAWs) in the State is far from satisfactory. This has made makes the conditions of agricultural workers deplorable. During 1991-92 and 1995-96 the RAWs in the State actually declined. Persistent demands from a gricultural labourers and their organisations for higher wages have been of no avail.

Lastly, the imbalance in regional development has been a formidable problem that the political economy of the State faces. Owing to a series of political agitations in the backward regions of Marathwada and Vidarbha, the State Government formed, a decade ago, the Statutory Development Councils (SDCs) and assigned to them the responsibility of overall economic development of these regions. But owing to several constraints, particularly the gross inadequacy of financial resources, the SDCs have done prett y little, compared to what was expected from them.

AS a way to address the issue of poverty amidst affluence in Maharashtra, one may suggest that the following broad policy initiatives:

(i) Irrigation potential should be developed to the maximum extent, with fair distribution of water among different regions and sections;

(ii) Rural industrialisation and diversification should be given top priority;

(iii) Social sectors such as health, education, provision of drinking water and sanitary facilities, need to be given due attention with emphasis on the development of women and other weaker sections, particularly in the rural areas;

(iv) The EGS should be restructured to make it more viable, with an upward revision of EGS as well as minimum agricultural wages;

(v) The PDS should be properly revamped and sincerely implemented with more attention to the rural poor; and

(vi) The imbalance in regional development should be effectively removed within a reasonable period of time.

If the political leadership of Maharashtra genuinely believes in making economic growth socially relevant, it would be rather obligatory for it to start working immediately on these policies and programmes. But that will require political will of a high order. Do the rulers in Maharashtra have such political will?

Dr. Bhalchandra Mungekar, Professor of Industrial Economics at the University of Mumbai, is a member of the Commission on Agricultural Costs and Prices.

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