An IDC Analysis 


New Delhi, 09 January 2003

Continuing the analysis of the Indian Economy in the New Year we present below the second part of Mohan Guruswamy’s treatise which makes interesting if somewhat alarming reading!

A Burdensome Beast!

By Mohan Guruswamy


Under the weight of a system of government that now costs the people Rs.9 for every Rs.1 of capital expenditure, development as an integral activity of the State has practically ceased. Take irrigation for instance. In 1990–91 government canals provided irrigation to 17 million hectares or 34.5% of all irrigated lands. In 1997–98 these were 16.6 million hectares or 30.4% respectively. On the other hand wells and tubewells, which are mostly privately owned, which irrigated 24.7 million hectares or 51.5% in 1990–91, irrigated 30.9 million hectares or 56.6% in 1997–98. During the same period the net irrigated area grew from 48 million hectares to 54.6 million hectares. The inference is only too obvious. The State has effectively ceased to make any new investments in providing irrigation and has abdicated this responsibility to individual landowners who accounted for 6.2 million of the 6.4 million hectares added to the irrigated acreage.

Railways Network

If this does not convince you, lets take a look at another parameter. In 1980–81 the railway network spanned 61,200 kilometers. Twenty years later in 1999–2000 it grew by a mere 1600 kilometers. When the British left India, the truncated India had a network of nearly 53,600 kilometers making it very clear that the major expansion of the rail network took place in the Nehruvian era. On the other hand in 1980–81 the Indian Railways carried 220 million tons of freight; 209 billion passenger/kilometers; and earned Rs.828 crores. In 1999–2000 these were 478 million tons; 431 billion passenger/kilometers; and Rs.9,581 crores respectively. Very clearly not only was the Indian Railways hauling more than twice as much freight and carrying twice as many paying passengers, it was earning twelve times more. Despite this only a negligible length of new track was added. We know how unsafe and obsolete the railway system has become with train accidents occurring with monotonous frequency. At a time when average train speeds have increased dramatically even in much of the developing world, the increase in the average speeds of our trains seems only matched by the increase in the length of the network! One can go on and on in this manner citing figures from different sectors.

Cost of Government

The reality is staring at us in the face. As our government is expanding it is becoming increasingly inconsequential to the well being of the people. To this extent the state is truly withering away!

Take a look at the cost of government. Last year the Revenue Expenditure of the Central and State Governments together was Rs.5,35,000 crores of which salaries alone accounted for Rs.1,10,000 crores. The total Capital Expenditure was a mere Rs.60,000 crores. As if this were not bad enough the Revenue to Capital Expenditure ratio that was 31% in 1990–91 dropped to a mere 13% in 2001–02. It has become fashionable now to decry even government capital expenditures as wasteful and even more fashionable to keep prattling about how private capital and efforts will meet not just the growing needs but also the increasing aspirations of the Indian people. It would seem that the reality of the Indian nation eludes these people.

The Stark Reality

This consequently is the reality of the Indian nation. Call it the profile of its human misery if you will. The richest 10% of the population accounts for 46% of the national income: the poorest 10% a mere 8% of the national income; those living in poverty i.e. earning less than US$1 per day at purchasing power parity (PPP) terms, account for 44%; while using the GOI’s more self serving index, 35% are below the poverty level (BPL); 17% of the population cannot expect to live beyond the age of 40 years; while 44% are illiterate. By comparison even Pakistan and Bangladesh do better in terms of income inequality, while China is well ahead in the social parameters –– with 19% of the population in poverty with US$1 in terms of PPP, 5% BPL, 8% not living beyond 40 years, and 17% illiterate.

National Income Profile

While the profile of our human misery remains largely unchanged the profile of our national income is changing dramatically. The GDP (at 1993–94 prices) that was Rs. 1,48,503 crores in 1950–51 has grown to Rs.1,266,723 crores in 1999–2000 with the annual per capita income almost trebling from Rs. 4,121 to Rs. 12,665. Even more dramatic has been the change in sectoral shares. The Agricultural sector that contributed 55.4% in 1950–51 now accounts for only 27.5%; while the industrial sector’s share has grown from 16.1% to 24.6%; and the contribution of the services sector has gained impressively from 28.5% to 47.6% for the same period. But the sad truth that makes a mockery of these achievements is that the number of persons employed in agriculture, either as cultivators or laborers has remained static at almost 70% of the total workforce. The rural areas today account for an infinitesimal percentage of the households with annual incomes of over Rs.45,000 suggesting that the impoverishment of the rural population is almost absolute. If one factors in the fact that even today over two-thirds of the agricultural areas are dependent on the monsoons, the disparities within the rural sector are also quite great. The notion that direct taxes can be extracted from the agricultural sector not only betrays enormous ignorance but also extreme callousness. It has a quality akin to Marie Antoinette’s suggestion that the poor should consider eating cake if bread was not available!


At the macro level these facts testify to the brutality of the reality. The huge government, the huge inequalities and worse of all the unthinking and uncaring debates might even somehow become more tolerable if the micro reality was not even more brutal. I cannot find any words that can as compellingly state this as the figures extracted from the Report of Mr. Banna Lal, Deputy Secretary (Audits), Department of Finance, Government of Rajasthan. The Rajasthan Government constituted a committee under Banna Lal to investigate allegations of fraud in the development works done in the Kumbalgarh Panchayat Samiti in the Rajsamand District of Rajasthan. Between 1994 and 2000, 141 works with a total expenditure of Rs.12, 764,400 were sanctioned. The Banna Lal Committee’s investigations disclosed that only 21 works were found on the sites, while 49 did not exist at all. Of the rest 56 were incomplete and in 20, expenditures were made violating norms. Of the Rs.1.27 crores spent as much as Rs.70.43 lakhs or 55% of the funds were misappropriated. This period spanned the heydays of the BJP government of Bhairon Singh Shekhawat, now Vice-President, and the current Congress government.

When the Mazdoor Kisan Shakti Sanghatan (MKSS) headed by Aruna Roy a former IAS officer and Magsaysay Prize winner demanded transparency in rural development expenditures, the Bhairon Singh Shekhawat government fought the MKSS’s efforts tooth and nail. It was the succeeding Congress government of Ashok Gehlot that accepted the citizens Right to Information and enacted a path breaking legislation in that state. Now all over Rajasthan, government offices list details of the developmental works being undertaken by various departments. Not only this they have to show on demand to the people employment registers and details of persons to whom contracts have been awarded. A beginning has been made but even so in Rajasthan things are not very much better. Indian ingenuity honed by centuries of survival under alien and exploitative regimes has elevated the act of looting the public exchequer into a fine art with few peers elsewhere in the world. Registers can be falsified, benami contractors can always be found and as a last resort the courts can be relied upon to stall the process of investigation.

Corruption Perception Index

Transparency International, a NGO based in Germany, has evolved a corruption perception index (CPI), which has now become a popular yardstick to measure the corruptibility of a state. On a scale of 0–10, with the higher the better, Finland comes best in the world with 9.7 and Singapore comes best in Asia with 9.3. Of the nearly one hundred countries evaluated India comes with a score of 2.7 giving it the 71st rank, just ahead of Pakistan which scores 2.6 and ranks 76th. India is tied in the 71st position with Honduras, Ivory Coast, Russia and Tanzania. Any wonder then why India gets the rank of 124 out of 173 countries evaluated by the UNDP for its Human Development Index? On a scale of 0–1 India gets 0.5777 as opposed to Norway, which scores 0.942 to give it the first place.

The Burdensome Beast!

Our condition is increasingly paradoxical. While it does seem that the ability of the state to do any good is fast withering away, the state is far from withering away and the nation is now groaning under its dead weight. Our founding fathers had the notion of a public administration system that would be the beast of burden that would carry the nation forward towards all round well-being and prosperity. It now seems that the beast of burden has become a burdensome beast!       

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