On June 4, 2005, the venerated business house of the Tatas signed an agreement to set up a steel plant in Bastar, Chhattisgarh. Virtually on the same day, a private militia known as Salwa Judum (“Peace March” or “Purification Hunt” in south Chhattisgarh’s Gondi language) emerged in Bastar to protect the interests of the investors. Mahendra Karma, the Congress party’s leader in the Chhattisgarh Legislative Assembly, led and controlled Salwa Judum. The State’s BJP government, in a bipartisan consensus with the Congress’ Karma, supported big business over the rights of Adivasis. As more investors piled into Bastar, the new militia, backed by State paramilitary forces, began a bloody battle against the Adivasis and the naxalites fighting for Adivasi rights.
Less than a year later, in April 2006, speaking to the Chief Ministers of the 13 States in which naxalites/Maoists operated, Prime Minister Manmohan Singh declared: “The problem of naxalism is the single biggest internal security threat since Independence.” In framing an economic and social issue as a matter of internal security, Manmohan Singh was taking a side. The scholar and human being in him understood and explained that the Indian state had failed “to deliver social justice to its poorest regions”, which, he said, had “alienated people”. The politician in Manmohan Singh worked for powerful businesses, causing him to emulate Prime Minister Indira Gandhi’s use of police and military forces to quash social protest in the late 1960s.
Salwa Judum’s formation—nearly two decades ago—bears repeating today because it was the moment in post-Independence India when state and business interests aligned almost perfectly. Not only did the state allow big business to march into the environmentally fragile hills to displace the Adivasis eking out a living in those regions, but it deployed its coercive power in favour of business. Invocation of “national security” was the conversation-stopper; who can argue against vaguely defined national interest?
The episode is important also because it marked the grotesque culmination of Indian-style market “liberalisation”, which began with Prime Minister Rajiv Gandhi’s tax cuts in 1985 and was followed by the necessary reduction of import tariffs and industrial regulation in the summer of 1991. In its true essence, however, the so-called liberalisation boosted the interests of capital over labour, a bias seen starkly in the Salwa Judum episode. The pro-capital ideology became unchallengeable, and steadily increased in crassness.
Armed tribal men of Salwa Judum on their way to attend an “awareness programme” against Maoist rebels in Dantewara district, Chhattisgarh, on July 12, 2005. | Photo Credit: AP
Indian policymakers followed the global shift in favour of capital and against labour, which emerged in its most unapologetic form under US President Ronald Reagan in the early 1980s. Known in international discourse as “neoliberalism”, the word still carries a distasteful connotation in India. Instead, its twin sibling “liberalisation” is the Indian mantra. In fact, whether labelled neoliberalism or liberalisation, the ideology violates the core tenets of free-market competitive capitalism as espoused by Adam Smith for it consciously privileges the elite, an outcome Smith would have abhorred. For this reason, whether globally or in India, the ideology is more accurately described as the “elite model of development”. Put simply, it is a model that uses the state’s political power to generate and sustain economic inequalities.
Conscious that the elite model does not deliver for the vast majority, policymakers have attempted to pursue a middle ground: capitalism with a “human face”. Former US President Bill Clinton and former British Prime Minister Tony Blair were two global notables who claimed that middle ground in the 1990s and early 2000s. In like manner, the United Progressive Alliance (UPA) government, which Manmohan Singh headed, advertised itself as a left-leaning champion of social justice. In August 2005, barely two months after unleashing a private militia against the Adivasis, the government fulfilled a campaign promise by providing a rural employment guarantee under the National Rural Employment Guarantee Act (NREGA)—later, with the prefix “Mahatma Gandhi”, widely known as MGNREGA. Although well-intentioned, the programme was miserly from the start. In some States, MGNREGA paid lower than the State’s statutory minimum wage, violating a Supreme Court directive. The government allocated insufficient funds to meet the guaranteed demand for work, leading to delays in wage payment.
Thus, while they nod half-heartedly to social justice, aggressive proponents of elite interests justify their stance as necessary to leverage selfishness for development. Their theme, which they incorrectly attribute to Adam Smith, is that when people single-mindedly pursue their own material gains, they also make life better for everyone else. Translated into policy practice, the message is that the rich deserve all the help they can get because the inequality so generated helps trigger a “trickle-down” prosperity. But because this “inequality-is-good-for-growth” thesis finds little support in historical experience, the selfishness-is-good ideology comes packaged with the invocation of the private morality of hard work and self-reliance: if you are poor, you are not only lazy but you are also immoral.
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Smith, in fact, repeatedly emphasised a public—rather than private—morality. Societies, he said, must adopt a collective ethic to promote the public good. In his 1776 The Wealth of Nations, Smith made it clear that the state’s “dharma” was to promote collective welfare, which, he said, required public schooling, a fair and responsive judicial system, support for labour unions to counter the weight of employers, and safety nets for the poor and vulnerable.
Smith, as former British Prime Minister Gordon Brown argued, was the original social democrat. Today, 250 years after The Wealth of Nations was published, public morality has a broader mandate: investment in public health, humane cities and housing, and, perhaps above all, protection of the environment.
In India though, social democracy is a dirty phrase. Everything must be privatised, including education and health; whatever is not explicitly privatised must in practice be available mainly to those who can afford it, including the judicial system and a clean environment.
Although India has never had social democratic policies, Indian elites have used Jawaharlal Nehru’s fake socialism as their rhetorical punching bag to push the country further away from collective welfare. Since the early 1980s, elite politicians and commentators have juxtaposed their cry for unbridled capitalism as an antidote to Nehru’s misguided heavy-industrialisation strategy—and its corollary, high import tariffs to prevent haemorrhaging of foreign exchange for needed imports.
But while heavy industrialisation was misguided, that error was no reason to continue the neglect of collective welfare. In fact, Nehru himself despaired, in his waning days, that his policies were a far cry from socialism. They had, in fact, created an entrenched oligopoly. Nehru’s policies militated against the foundational tenets of Fabian socialism, as practised by British Prime Minister Clement Attlee in the immediate post-war years. While Nehru neglected job creation and human capital development, Attlee gave primacy to the lived reality of people with laser-like focus on health and education.
Nehru’s daughter, Indira Gandhi, was a power-grabbing, corrupt politician, all too keen to don the fake socialism garb to portray herself as a champion of the poor. As became clear soon, her signature “socialist” policy, nationalisation of banks, quickly turned into an opportunity for rampant corruption.
Despite over three decades of “liberalisation”, agriculture employs almost half of India’s workforce; financially and physically precarious jobs have been the main source of work outside agriculture. The bogey of “excessive state” has perpetuated the neglect of human capital and public health. | Photo Credit: JOTHI RAMALINGAM B
“Socialism” acquired a pejorative taint, which helped legitimise the use of state power to make the rich richer. A vastly unequal development unfolded. Job creation remained poor because big business continued to invest in large, often mega, projects. As a result, despite over three decades of “liberalisation”, agriculture employs almost half of India’s workforce; outside agriculture, financially and physically precarious jobs have been the main source of work. The bogey of “excessive state” perpetuated the neglect of education and public health.
Unsurprisingly, a recent study, with the celebrity economist Thomas Piketty as one of its co-authors, presents evidence of an explosive increase in Indian income and wealth inequalities since the early 1990s. Inequality increased under a series of coalition governments between 1991 and 2014, and then under the BJP, indicating an unmistakeable political unanimity on the elite model of development.
The iron hold of a political consensus
Starting in 2002 and running in parallel with the 10 UPA years at the Centre, the so-called Gujarat model evolved as a cruder, but much venerated, version of the national elite developmental model. Responding to investor threats—especially by the business titan Rahul Bajaj—to starve Gujarat of capital after the 2002 massacre of Muslims, the then Chief Minister, Narendra Modi, began the “Vibrant Gujarat” jamborees.
Local businessmen—prominent among them Gautam Adani—made large investment pledges at the early jamborees. But Modi’s eye was on the prize: Ratan Tata, the man with the shining international brand. In 2008, when Tata announced he was pulling his car manufacturing project out of West Bengal (because he could not compromise with the farmers protesting against his acquisition of their land), Modi, as he himself described it, sent a three-word text message to Tata: “Welcome to Gujarat.” Tata did not disappoint. He became Modi’s brand ambassador, singing his praise to a worldwide audience on Fareed Zakaria’s Sunday morning show on CNN.
Modi’s eye was on the prize: Ratan Tata, the man with the international brand. In 2008, when Tata announced he was pulling his car manufacturing project out of West Bengal, Modi sent a three-word text message to Tata: “Welcome to Gujarat.” Tata did not disappoint. He became Modi’s brand ambassador worldwide. | Photo Credit: PTI
The Tatas are important because they are often thought of as socially responsible. But from J.R.D. Tata’s support of Indira Gandhi’s Emergency to his successor Ratan Tata’s Bastar investment, which triggered a government-supported vigilante force against the Adivasis, and his pandering to the tainted Modi, the Tatas have repeatedly demonstrated that “socially conscious business” is an oxymoron.
While the Tatas always fell short, other businesses cared even less about social responsibility. Indeed, they sank into silliness in their praise of Modi. Anil Ambani, Mukesh Ambani’s younger brother and one of India’s leading businessmen at the time, described Modi as “the lord of men, a leader among leaders, and the king among kings”. Not to be outdone, Ratan Tata added that he had been “stupid” to have not invested more in Gujarat.
The “Gujarat model of development”, when stripped of its hype, was tantamount to looting the state for rich corporates. Businesses got land virtually free, large loans at nearly zero interest rates, generous tax breaks, and no-fuss environmental clearances—all at the taxpayer’s expense. “The major beneficiaries of the government’s largesse”, the Press Trust of India reported at the time, were “big corporate entities like Reliance Industries, Essar Steel and Adani Power”.
The favoured businesses invested in capital-intensive projects with large price tags well suited to flashy announcements at “Vibrant Gujarat”. Petroleum (the fastest-growing industrial sector in Gujarat), steel, chemicals, and pharmaceuticals projects fit that pattern. The projects boosted GDP but created few new jobs. They flagrantly polluted the land and rivers while depleting the State’s groundwater.
Since the State’s budget prioritised giveaways for big business, expenditure on education, health, and other welfare services suffered. As the University of Chicago philosopher Martha Nussbaum emphasised, Gujarat’s human development indicators placed it somewhere at the middle of the range achieved by the Indian States, an unworthy achievement given how poor the general condition of human development in India was. Moreover, in the context of Gujarat’s high GDP growth, the State’s human development performance, including on such measures as life expectancy and female literacy, was, she said, “not just middling but downright bad”.
And this was the development approach around which Indian intellectuals formed a consensus as the 2014 general election drew closer. On the ideological Left, Pratap Bhanu Mehta praised Modi’s decisiveness; on the Right, Jagdish Bhagwati praised Modi’s promotion of “entrepreneurship”. The government-is-evil author Gurcharan Das predicted—alas, with no basis—that Modi would create 8 to 10 million jobs every year. Jim O’Neill, former Goldman Sachs executive and roving global public intellectual, delivered his own quick-fire judgment, declaring that he could not judge Modi’s sectarianism but the man was “good on economics”.
The elite accolades for Indian liberalisation—and the Gujarat model in particular—were grounded in the baseless belief that “inequality spurs growth”. This belief justified endless support for the rich under the pretense that prosperity would “trickle down” to benefit the rest of society. This proposition survives, zombie-like, despite repeated refutation supported by data.
The most impressive refutation of the inequality-drives-growth notion comes from the US between approximately 1935 and 1965, when Presidents from Franklin D. Roosevelt through Lyndon B. Johnson pursued progressive social democratic agendas. During these three decades, tax rates were high, labour unions were strong, and policy directed resources to education and health. Inequality fell amid rapid growth as prosperity spread widely.
America also exemplifies the opposite: rising inequality with slowing growth. Starting in the mid-1960s, but gathering momentum after Ronald Reagan became President in 1981, Americans turned social democracy on its head. They reduced tax rates, gutted labour unions, eroded the country’s proud achievements in education, and left millions of citizens without adequate public health and access to medical treatment. Inequality ballooned, and growth slowed. Bill Clinton tried his hand at the “third way”, his version of capitalism with a human face. But while the elites continued to flourish, the common human face remained blurred.
Manmohan Singh became Prime Minister about the time the “third way” had gained intellectual respectability. And his UPA government’s version of capitalism with a human face was MGNREGA packaged with a macroeconomic and regulatory policy favouring the rich and powerful. The pro-rich commitment was starkly evident in the final act of the Salwa Judum drama.
When legal judgments are not supreme
In 2007, the sociologist Nandini Sundar and colleagues moved the Supreme Court to declare Salwa Judum unconstitutional. In a July 2011 judgment, two Supreme Court judges contextualised their conclusion with a stinging indictment of India’s development strategy. Citing a report commissioned by the Planning Commission, the judges said that violence in the Adivasi areas was unending because the “dominant” elites had “cornered the benefits” of Indian development at the “expense of the poor”.
The benefits of development projects had trickled up, rather than down. The judges concluded that the government had violated the constitutional principles of equality before law and dignity of life. They ordered that Salwa Judum be disbanded. The Chhattisgarh and Central governments ignored the decree. The name “Salwa Judum” disappeared, but state-supported vigilante forces in aid of business interests continued to operate under new names.
Prime Minister Narendra Modi with industrialist Gautam Adani. The “Gujarat model of development”, when stripped of its hype, was tantamount to looting state resources for rich corporates. “The major beneficiaries of the government’s largesse”, the Press Trust of India reported, were “big corporate entities like Reliance Industries, Essar Steel and Adani Power.” | Photo Credit: PTI
This was the Indian version of US President Andrew Jackson’s decision in 1832 to thumb his nose at a US Supreme Court judgment. Jackson reportedly said: “[Chief Justice] John Marshall has made his decision, now let him enforce it.”
Indian governments have continued to ignore Supreme Court orders, especially those that seek to break the nexus between political rulers and businesses. The result: miners and the mafia—the distinction is not always clear—then and ever since have brazenly flouted the court’s ban on mining in the Aravalli hills of Rajasthan; they have especially disregarded the ban on sand mining, which provides an essential input for the national construction boom.
After his election as Prime Minister in 2014, in ways foreshadowed by his Gujarat tenure, Modi transformed the elite-developmental model into one that was more crassly personalised. His triumphal flight from Ahmedabad to Delhi was in Gautam Adani’s personal plane. Embossed on the plane’s right side was the Indian flag; the Adani logo was on the other side. Stock markets read the message: share prices of Adani-held companies rose, soaring well above the broader Sensex.
Modi’s crassness also revealed his authoritarian impulse, often an accompaniment of elite-driven development. Pratap Bhanu Mehta described it as “decisiveness”. Financial Times put it more directly in the run-up to the 2014 election: “Part of Mr Modi’s attraction is that, by sheer force of will, he may be able to override some of the checks and balances of Indian democracy and introduce some of the clear-headedness of growth-driven China.”
“Indian governments have continued to ignore Supreme Court orders, especially those that seek to break the nexus between political rulers and businesses.”
Indian and international elites do not seem to recognise the breathtaking irony of their glorifying Indian democracy while bristling at its institutional checks and compulsions for accommodating multiple interests. Authoritarian governments, they believe, are “clear-headed” and “decisive”, and so can drive the economy harder to scale greater heights.
Once again, statistical studies find simply no evidence for virtuous economic outcomes under authoritarian governments. The examples of Uganda’s Idi Amin and Zaire’s Mobutu Sese Seko come to mind, both of whom pillaged their countries. Ignoring multiple such cases, the elites point to East Asian successes. And it is true that East Asian economies were—and some still are—authoritarian and that they have grown admirably. But when we ask the further question about why East Asia has been such an exception, we are left with a conundrum.
The East Asian Conundrum
East Asian nations simultaneously brutalised large numbers of their people and pursued social democratic economic policy. They emphasised quality education and healthcare and promoted gender equality. In their most dynamic phases, they achieved rapid growth with “decreasing” income inequality, as a 1993 World Bank report first documented. Historians will long ponder how the East Asians juxtaposed authoritarianism with social democratic policies. The key to that conundrum lies in the pursuit of education, the keystone of social democracy. As Princeton University’s Roland Benabou finds, investment in human capital is twice blessed. It promotes growth and reduces inequality by increasing the options for the weak and vulnerable.
Indian and international elites admire East Asian autocracy but disregard its social democratic message. These elites, captivated by their own narrative of India on the move, are unwilling to recognise that India’s economic and social progress is stymied by the poor quality of its human capital. Even Tamil Nadu, a so-called progressive State, fails in this regard. A secret out in the open—a secret because no one wants to call attention to it—is the extremely low learning levels of Tamil Nadu’s primary school students, revealed in the non-profit Pratham’s Annual Status of Education Reports and the government’s surveys conducted by the National Council of Educational Research and Training. On the plus side, Tamil Nadu maintained an effective public health system, one that grew out of a grassroots movement motivated by an ethic that valued the common good. But a similar mobilisation and ethic did not emerge in mass education. Tamil Nadu has failed even more miserably in establishing a collective ethic for protecting the environment.
Much of Indian thinking on environmental pollution focusses (for good reason) on the country’s abominable air quality. But a much more serious, and ultimately devastating, problem is the degradation of the nation’s water supply and quality. Detergents and other toxic chemicals from factories in Coimbatore and Tiruppur have polluted the Noyyal river for decades. Detergent levels wildly in excess of the normal cause the river to froth.
In Chennai, as in every major Indian city, rampant construction encroaching on traditional water bodies such as lakes and tanks, and household effluents and construction debris clogging rivers and canals have rendered the city vulnerable to heavy rainfall—as the city’s floods of 2015 made painfully obvious. And not least, illegal sand mining continues despite occasional law enforcement efforts. The plague of sand mining dries up riverbeds, preventing the natural replenishment of underground water; it damages crop production; and sustains one of India’s largest organised criminal networks. The collective failure to protect water resources hurts the poor most severely as the rich and connected are able to escape the adverse effects of shortage and pollution.
Sand mining dries up riverbeds, preventing the natural replenishment of groundwater. Failure to protect water resources hurts the poor the most as the rich can escape its adverse effects. | Photo Credit: RITU RAJ KONWAR
This imbalance in who bears the costs of environmental degradation is vivid also in Tamil Nadu’s coastal erosion, driven by the State’s port development and coastal highway. These mega infrastructure projects, justified in the name of development, have bulldozed fisherfolk out of their homes and left them without adequate work.
The absence of a collective ethic has damaged the lives and livelihoods of the weak and vulnerable even in Kerala, a State justly renowned for its achievements in health and education. But while health and education emerged from historical forces—including enlightened maharajas, a matriarchal tradition, and a post-Independence communist government that espoused social democratic values—recent history warns that the collective bonds in that State are breaking down. As in Tamil Nadu, coastal erosion is pushing fishing communities inland, away from their livelihood; the loss of pristine forests to “development” in the Western Ghats causes devastating landslides and robs traditional inhabitants of their livelihoods; and, as everywhere in the country, sand mining takes its toll on Kerala.
Kerala’s poster child for unequal development is the Vizhinjam port project. In August 2015, Adani Ports and SEZ Pvt Ltd, as the lone bidder, won the right to construct and operate this proposed project. The State’s Congress government, which awarded the contract, also committed itself to financing two-thirds of the investment in the project. In a scathing report, the Comptroller and Auditor General noted that the revenue-sharing arrangement ensured that the Kerala government would incur a substantial loss while Adani Ports and SEZ would earn a large return.
Worse, local businesses, residents, and activists warned that the project would accelerate coastal erosion and biodiversity losses while many in the fishing community would lose their livelihoods. The essential scientific critique is that when human barriers disrupt the flow of seawater, the formation of beaches and aquatic life is seriously compromised. The government rejected these claims. Although leaders of the Communist Party of India (Marxist) joined the chorus of protest at the time, once in power, the CPI(M) government, despite its claims of being a progressive force, has continued to support the project, sweeping aside environmental concerns and suppressing the fishing community’s protest.
The elites are hanging in, tenuously
For now, India’s unequal development is set to continue. Politicians pay lip service to inclusiveness and equality but on the key issues that matter—such as education, health, functioning cities, a fair and responsive judiciary, and environmental protection and adaption to climate change—they have few ideas and little commitment to substantive goals. And while India has evolved its own version of unequal development, the dominant global ideology continues to support inequality-generating politics.
In Indian politics, Modi as Prime Minister delivered exactly what his Gujarat model had foreshadowed. Gautam Adani prospered. His empire of infrastructure projects grew. Stock prices of Adani’s companies soared. The stock prices of Adani Group companies did take a big hit when the US short-seller Hindenburg accused him of financial fraud. But the Securities and Exchange Board of India (SEBI) and the Supreme Court slow-walked the investigations into the fraud allegations. Bankers and investors read the regulatory and judicial signals as shrugging off the allegations, and stock prices of Adani Group firms recovered. As if to further bolster Adani, the regulator then accused Hindenburg of market malpractice. But that prompted Hindenburg to accuse SEBI’s chairperson of investments in offshore funds with a potential conflict of interest in the Adani investigation. As the two sides trade allegations, one thing is clear: India’s elite live in a world far removed from the lives of the rest of the population.
Meanwhile, Adani’s coal mining projects—flagrantly disregarding local protests and manoeuvering through legal challenges—continue to cut trees in the fragile Hasdeo forests. In keeping with the bipartisan history, the Congress governments in Rajasthan and Chhattisgarh have supported Adani’s Hasdeo operations.
Mukesh Ambani has also prospered, benefiting especially from the Modi government’s decision to disregard sanctions by Western nations on Russia’s oil sales and financial transactions following its 2022 invasion of Ukraine. Ambani stepped up the purchase of Russian oil; his factories process this oil at petrochemical facilities in Jamnagar for export to nations unable to buy directly from Russia. Notably, Ambani celebrated with a $120 million pre-wedding bash for his son Anant at Jamnagar. The event marked the continuation of a corporate dynasty. Anant later attended the Prime Minister’s third swearing-in ceremony, and the Prime Minister was a guest at Anant’s wedding. Power, money, and glamour have blended in Indian society and politics.
As India’s rich have become richer, the sense of collective responsibility has diminished. This is starkly reflected in the continued neglect of mass education, an essential prerequisite for development. Pratham’s post-COVID findings confirm that learning outcomes for school students have dipped from their bottom-of-the-barrel pre-COVID levels.
Highlights
- The so-called liberalisation of the Indian economy boosted the interests of capital over labour, a bias seen starkly in the Salwa Judum episode. The pro-capital ideology became unchallengeable, and steadily increased in crassness.
- The most impressive refutation of the inequality-drives-growth notion comes from the US between approximately 1935 and 1965, when Presidents from Franklin D. Roosevelt through Lyndon B. Johnson pursued progressive social democratic agendas.
- The super-elite have a decisive voice in setting policy priorities. They speak for lower taxation, lighter regulation, and labour and land market reforms. They have no stake in India’s education system or other public goods.
The rot is extending to higher education. Although India is well known for some outstanding institutions of higher education, the vast majority of its colleges and universities churn out large numbers of academically deficient and unemployable students. The decay of Indian universities, which began with the devastation of Allahabad University, has extended to Delhi University. The historian Mukul Kesavan puts it brutally: “The systematic destruction of Delhi University is a case study in elite secession.” Elite Indians have seceded, Kesavan says: they send their children to very expensive private schools and colleges in India or to schools and universities abroad. They could not care less about the decay of Indian education. The result: even students who can ill afford the expense feel compelled to take large (and often difficult-to-repay) loans for foreign education. The inequalities compound.
The elite secession or exit extends broadly to all public goods. Elite Indians live in gated communities, with their own water supply and sewage systems. They have air purifiers in their homes, and increasingly in their cars. They buy expensive medical care in private hospitals in India or abroad. They hire expensive lawyers to shepherd them through the labyrinthine judicial system while millions struggle for years without a fair resolution, often in judicial custody.
Of course, as Kesavan acknowledges, these “super elite” are only a small sliver of the population. But they have a decisive voice in setting policy priorities. And the elite voice speaks for lower taxation, lighter regulation, and labour and land market reforms (euphemisms for easier firing of workers and expropriation of land). The super-elite have no stake in India’s education system or other public goods.
On jobs, two statistics tell the dismal story. Between 2018 and 2023, the share of the workforce employed in agriculture increased, which meant that Indian agriculture has 70 million more workers today than in 2018. This represents a catastrophic regression: people continue piling up in agriculture (the least productive of all economic sectors) because there are so few dignified industrial and service jobs. And while government officials and supporters are anxious to emphasise that the share of working women has increased from its depths, the truth is that virtually all of this increase is due to a rise in “unpaid household work”.
Much is often made of India’s technical talent, but it would be wise to remember the numbers. India has a working-age population of over one billion people, of whom just over 600 million are in the workforce—either in jobs or looking for jobs (the rest do not even bother to look for jobs). Of the 600 million workers, at the peak of the global technology frenzy of the late-COVID phase, India’s IT sector employed about five million. Since then, with the IT frenzy dying out and the advent of AI, finding technology jobs has become a struggle. The bottom rung of IT jobs—in support, maintenance, and basic coding—is disappearing. And if India truly dreams of mass job creation at the high-skill end, is mass education not a prerequisite?
Policy neglect of public goods and job creation, having persisted since Independence under all political dispensations, is supported today by a new political equilibrium. Under this equilibrium, policy favours “visible” projects, which benefit the elite and appease everyone else.
A helicopter about to land on the under-construction Bengaluru-Chennai Expressway near Bengaluru on January 5, 2023. Infrastructure projects such as expressways and flyovers have high political, rather than economic, value. They generate a sense of action even though their developmental value is suspect. | Photo Credit: K. MURALI KUMAR
Visible projects include roads, flyovers, ports, and other (including digital) infrastructure projects. Unlike for education, which is historically tightly tied to economic growth, no statistical or historical evidence links infrastructure investments to sustained improvement in lives and livelihoods. Infrastructure projects have high political, rather than economic, value. They create opportunities for politicians to flaunt achievements at inauguration ceremonies. They generate a sense of action even though their developmental value is suspect.
Other visible actions include handouts to the poor and marginalised. The handouts—subsidised cooking gas and free toilets, foodgrains, electricity, and water—bring relief to many millions of Indians. But the relief is not sufficient to pull people out of vulnerability. The freebies do not change income or power inequalities. Unfortunately, even people who should know better, misleadingly—often cynically—describe handouts as “welfare-enhancing”. In truth, handouts are, at best, like aspirins, which reduce the pain but do not address the causes of the pain. They do not help people stand on their own feet, like education and jobs do. They mainly serve a political purpose of appearing to care without doing the hard work of creating sustainable improvements in livelihoods and higher prospects of intergenerational mobility.
Handouts given, taxes levied; rinse, repeat
Recall also that what the Central and State governments give by way of handouts they take away by way of a highly regressive taxation system. While India aspires to be a modern, advanced nation, it shares with other corrupt and weak-property-rights economies a very low tax/GDP ratio (between 10-12 per cent of the GDP at the national level and an additional 5-6 per cent at the State level). But because almost two-thirds of the tax revenues are in the form of indirect taxes, the implication is that rich Indians pay little by way of income taxes and businesses pay low effective corporate taxes. Instead, the tax burden falls on the vast majority who cannot escape the indirect taxes levied on consumption.
Making matters worse, India has virtually zero property taxes, the quintessential form of collective fiscal responsibility for service provision in towns and communities. In economies committed to equality, revenues from property taxes pay for public education and clean and safe neighbourhoods. The negligible property taxes in India—or even the lack of political discussion about increasing them—symbolises the Indian elites’ scorn for public welfare.
In sum, scarce national and State taxes spent on visible infrastructure and handouts to win political accolades leave little room for “invisible” goods and services of fundamental importance to people’s lives and upward mobility. The invisible goods and services are quintessentially public goods; everyone benefits without diminishing the gains to others.
The most important examples are education and health systems, liveable cities, fair and responsive judiciaries, and especially environmental protection. They are “invisible” in the sense that their progress is hard to detect. They take years, often decades, to reach critical effective mass. And through the years of invisibility, they require the sustained collective work of generations of unsung heroes. Visible goods have many champions eager to showcase themselves at flashy inaugurals. Rarely does any individual get credit for the crucial invisible achievements.
More generations of Indians will receive substandard education and healthcare, suffer in its broken judicial system, and struggle in unliveable cities. | Photo Credit: SHIV KUMAR PUSHPAKAR
The elite bias in policy, plus the focus on visible outcomes (including physical and digital infrastructure and handouts), is a political equilibrium, in part because the electorate has resigned itself to a lack of public good and job opportunities. Voters have inferred that politicians will never deliver on the essentials of development, and so it is best to receive more handouts. This political equilibrium was on full display in the 2024 general election. All parties made outrageous promises of handouts but made only muted statements about working for the public good and jobs because, the simple truth is, no one has a policy programme to advance those causes. It is hard to create jobs and do public good. It is easy for politicians to stick to platitudes. No one has an incentive to change this system.
India’s political equilibrium fits well with the global elite-favouring policy ideology. Starting with Prime Minister Margaret Thatcher in the UK and digging deep roots in the US under Reagan, the ideology achieved dominance when European nations, after the creation of the European Union in 1993, moved from their social democratic traditions to an elite policy bias.
This global ideology has held sway ever since, even when US Presidents from the Democratic Party have tried to dilute it. Conditions were ripe, therefore, for Donald Trump who, in the unabashed promotion of elite interests, awarded them generous tax cuts and gutted environmental and other regulations essential to rein in capitalism’s ravaging tendencies.
The US is often held up as a model of economic success but a cloud hangs over its future. The country has steadily eroded its public goods, especially its proud legacy in education. Today, American schools are closing down, teachers are being fired, and school absenteeism is becoming endemic. And there is no political interest in reviving US education.
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The palpable breakdown of a collective ethic that promotes public good brought Joseph Biden to the US presidency. He began moving his nation toward policies to improve the lives of ordinary people. His signature support of labour unions was a testament to that shift.
Breakdown in collective ethic
What happens next in the US will crucially drive the global benchmarks of economic policy and development strategies. Political partisanship and legislative gridlock limited Biden’s progress, while the US Supreme Court dismantled the state’s regulatory capacity—and, with it, the protections for workplace safety and the environment.
Yet, Americans have not given up hope of a more inclusive polity. Education, health, housing, and dignified jobs were central themes at the Democratic National Convention that nominated Kamala Harris as presidential candidate. As former President Barack Obama said, the aspiration for these common goals reflected not a “policy or programme” but a “yearning for a return to an America where we work together and look out for each other”.
The yearning received a setback, with Trump being elected again as President, revealing how difficult it is to create such collective sensibility, and spelling troubled times for the US and the planet. Time will tell whether this yearning can coalesce into a political and economic programme. Unfortunately for India, until that yearning arises in Indian society and politics, even clever policies and programmes will be subject to distortion and exploitation to the advantage of the rich and powerful.
The elite bias will continue, as the presence of Mukesh Ambani and his son Anant alongside Gautam Adani and his wife at Modi’s third swearing-in as Prime Minister all but ensured. The rich will continue to secede, leaving politicians the one task they perform so admirably: offering palliatives and platitudes in place of public goods and jobs.
More generations of Indians will receive substandard education and healthcare, suffer in its broken judicial system, struggle in unliveable cities, and die early deaths because of air and water pollution. Climate change, with its recurring heatwaves, extreme rainfall events, sea erosion, and melting glaciers, will bear down on the weakest members of society.
India’s ruling elites are uneasily aware that a structural chasm has opened between their rhetoric of unbounded prosperity and the lived reality of hundreds of millions. And, hence, larger and longer-duration handouts are necessary to keep the marginalised at the political table rather than outside, from where they might prepare to invade the elite sanctum.
Rhetorical superstructures can hold together poorly performing and unfair systems such as Reaganism and Stalinism. But Stalinism died a wretched death, and the global cracks in Reaganism—in the US and even more so in the recent French election—are manifest. Nearer home, popular protests that threw out governments in Sri Lanka and Bangladesh are a warning.
For India, two outcomes are possible. As the Bhagavad Gita promised, an avatar of the Lord might magically restore a sense of dharma to politics, inducing a greater sense of collective responsibility for the good of all. Or else, the pressures of joblessness and lack of opportunity will explode into a social revolution. Only one of these outcomes seems plausible, though.
Ashoka Mody recently retired from Princeton University. He previously worked for the World Bank and the International Monetary Fund. He is the author of India is Broken: A People Betrayed, Independence to Today (2023).
