[Dec 2007, Volume 4 Quarterly Issue] Pdf File size - The IIPM Think ...

REIMAGINING INDIA
a complex interplay of social, political
and economic factors, can be addressed
only by interventions that hit
hard at the root causes of inequalities,
rather than by the quirks of unregulated
markets that by design are tailored
to suit the conditions of the rich
and the powerful. Given the enormous
amounts of power, influence and resources
that the latter tend to have at
their disposal, often catalyzed by increasing
overlap of political and business
interests in most modern economies,
the only chance for the poorest
people rests on systems of governance
that can be held to account and at least
be subjected to a floor test of popularity
based on electoral performance of
alternative political ideologies.
The message of the poorest people
is loud and clear: governments must
protect them from the vagaries of market!
Their verdict has been communicated
clearly on many an occasion,
evident in the electoral defeat of the
‘India Shining’ campaign in India. The
resurrection of the ‘Aam Aadmi’ (i.e.
the ‘common man’) as a reference
point of current development policies,
at least rhetorically, has been compelled
by lessons learnt from many of
these recent trends. Yet, the poorest of
the poor in countries like India continue
to face unprecedented challenges
to their existence. The markets are
pushing them hard to extinction, by
encroaching upon some of their commonest
avenues of survival, notably
retail trade, artisan-crafts, common
property resources and most alarmingly,
agriculture.
One needs to delve into the basic
Food grain off-take through the PDS declined from 17
million tonnes per year in the early nineties to 12 million
tonnes per year around the end of the decade, endangering
the food security of millions of the poor
character and orientation of markets
to assess their potential role in poverty
reduction. Markets operate on the
laws of supply and demand, and thereby
play a role in fixation of prices and
wages. Theoretically speaking, the
price of a product or service is directly
proportional to the rarity of its supply,
its quality, the cost of production, and
inversely proportional to the bargaining
power of the buyer and degree of
regulation of unfair practices. For
markets to be favourable entities for
the poor (when participating in markets
as sellers), the latter ought to be
able to vie with competing forces towards
suppressing the cost of production,
acquiring greater market share to
limit the range of suppliers and towards
investing adequately in optimizing
the quality of the product. Such
possibilities are likely to be highly infeasible,
given their limited economic
abilities. Similarly, as buyers of products
or users of services, their bargaining
power is often limited on account
of their limited ability to promise continuity
as buyers or users, limited creditworthiness
and lack of effective
mechanisms to hold sellers/service
providers accountable. Profit-seeking
markets are more likely to serve clients
that can offer greater economic returns
to producers and therefore are
likely to exclude the poor. The only
ways to offset this fundamental likelihood
of exclusion is to either regulate
the markets in order that the poor are
compulsorily served on pro bono terms
as a principle of policy, or to create
alternative providers that by mandate
serve the poor. This necessitates a
role for a pro-poor welfare state
or non-profit organizations in
serving the needs and interests of
the poor.
India was one of the fastest growing
economies in the world during the
nineties. The decade also witnessed an
unprecedented scale of entry of market
forces in various sectors of the
economy. Yet, despite a significant
spurt in macroeconomic growth, the
rate of reduction of rural poverty in
India was halted during the 1990s. Estimates
show that the incidence of poverty,
which between 1972-1973 and
1989-1990 fell from 55.4 percent to
34.3 percent in rural India, never went
below the 1989-90 level in subsequent
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