The Hindu Business Line : The DNA of India's poverty

While it would be naïve to argue for any downward revision of the disproportionately high salaries and perks in the government sector, it does seem logical and plausible to expect an honest re-examination of how India's government sector is engaged with the people of India and how we can all work towards moving it to authentic engagement, says G. Ramachandran.

INDIA'S tricolour was designed and adopted with the fervent hope that it would faithfully represent the nation's deep commitment to building a collective and inclusive society that is very caring, very modern and very honest in its dealings with its people.

Saffron symbolises courage, sacrifice, objectivity and fairplay. White symbolises peace, light, enlightenment and truth. Green symbolises faith, prosperity and chivalry. The navy-blue wheel at the centre with 24 spokes symbolises forward movement, dynamism, progress, modernity and growth.

Quite clearly, and rather uniquely, India's national flag reflects the principal characteristics of authentic governance. The hoisting and the unfurling of the tricolour together constitute an `emotional occasion' that may be used to reinforce and restate India's engagement with authentic governance.

Born in India

In the months before the 2004 elections to the Lok Sabha and during the campaign, a major question was asked repeatedly: Is Ms Sonia Gandhi, born in Italy and an Italian by birth, `qualified' to be Prime Minister of India? Many said that Ms Gandhi was not qualified to be Prime Minister of India. Her birth in Italy to Italian parents somehow disqualified her.

Those who asked the question chose to overlook the fact that Ms Gandhi was the leader of the Indian National Congress, a legally recognised political party, and had been a member of the Lok Sabha since 1999. Ms Gandhi had also been the Leader of the Opposition, a position in India's parliamentary democracy that has significance and constitutional validity.

Let us look this issue of birth in India squarely in the eye and ask with total and authentic engagement what being born in India involves and means. Motherland, fatherland and ones own country come to mind at first pass.

The other aspect that comes to mind is whether the parents of Ms Gandhi had paid the necessary bribe in India to acquire a birth certificate. Had Ms Gandhi been born in India, they may have had to pay a bribe to an employee of the government sector to obtain a birth certificate.

The bribe may be very small, but is infinitely big to cause `disengagement'. That is the dispassionate truth, as egged on and encouraged by the national tricolour. The giving and taking of bribes in the context of birth certificates is probably a routine affair in India. But what we may not recognise is that it does not engender authentic engagement between the people and the nation.

At the level of the giver and the taker of bribes, there may be few scars. But at the aggregate level, it points to the quality of the engagement that the government and its employees are involved in.

Quite clearly, it is not about the culpability of the act of taking a bribe or about the illegality of giving and taking bribes. It is actually about the weaknesses and the corrosiveness that describe the engagement between a sovereign republic and its citizens.

It is about the ripping of the volitional but indispensable commitment of an `independent' people to the nation's social and economic programmes. When volitional and willing commitment is ripped, poverty is the inevi table result.

Living poor in India

Consider the following set of data. They point to a nation that is set deeply in a ritualistic engagement with its people. First, the per capita emoluments of employees of public sector enterprises increased by 3,163.59 per cent between 1970-71 and 2001-02, while the consumer price index increased merely by 1,089.58 per cent in the same period (Economic Survey, 2004).

Second, government final consumption expenditure (GFCE) in constant prices (1993-94) has grown from 5.82 per cent of gross domestic product (GDP) in 1960-61 to 12.68 per cent of GDP in 2000-01. That is, relative to the aggregate economy, GFCE has grown annually by 1.96 per cent over the last four decades. But private final consumption expenditure (PFCE) — the source of incomes and sustenance to ordinary citizens — has declined annually by 0.8 per cent.

Moreover, the rate of expansion of GFCE has outstripped gross capital formation (GCF) — the source of funds for investments in infrastructure and other assets — by a factor of 1.21. These data are drawn from the National Income Statistics.

Third, and as an inevitable result of the above, households that derive incomes from India's government and public sector — the government sector — are at least five times better off than all other households.

The ratio of modal incomes in the government sector to modal incomes in the private sector — the modal income ratio — is 5.08, the highest in the world (see Table).

The modal income of a sector is a statistical measure of the most frequently observed income in that sector. By contrast, the modal ratio is 1.19 in France, a staunch follower of the welfare-state model with a significant role for the state. It is 1.02 in the US, an envied practitioner of the market-economy model that views the state with deep suspicion and caution.

Therefore, there is little evidence to support the view that India willingly follows the welfare-state model. Also, there is little evidence to show that India is an enthusiastic practitioner of the market-economy model. The Indian economy comprehensively defies stereotypical descriptions and models.

Fourth, the global rank correlation between the modal income ratio and per capita incomes in purchasing power parity terms is -0.713. That is, the economic well-being of ordinary citizens in an economy is very strongly and inversely proportional to the incomes paid to public servants in that economy.

Economies that pay too much to their government sector employees relative to their private sector tend to be very poor. It is not surprising that France's per capita income in purchasing power parity terms was $26,180 in 2002. Unsurprisingly, the US was ahead at $35,060. Quite explicably, India's per capita income in purchasing power parity terms was merely $2,570 in 2002.

Uncaring colonial phase to caring human face

The self-rule over the last 57 years has been a faithful replication and extension of the colonial model, wherein the spreading of the benefits of the government sector has been confined to a few. Moreover, those belonging to and connected to the establishment have had no need to be too concerned about the ups and downs of the aggregate economy. (For an economic discussion of the modal income ratio, please see `Hope rekindled for the people' in Business Line, July 10, 2003.)

It would be both naïve and futile to argue for and expect any downward revision of salaries, wages, perquisites and post-retirement payouts of benefits and pensions in the government sector. However, it seems logical, plausible and patriotic to argue for an honest re-examination of how India's government sector is engaged with the people of India and how we can all work towards moving it to authentic engagement. The wholehearted movement towards authentic engagement would make ordinary Indians more involved and more prosperous. The flag beckons!

(The author is a financial analyst. Feedback may be sent to indiagrow@yahoo.com)

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