In India a budget to be proud of

The free marketers are crying foul. In his budget speech on Monday, Minister of Finance, Pranab Mukherjee disappointed them by not detailing a plan for allowing foreign investment in the insurance sector, for privatization of public sector companies and of education.

Even as Mukherjee was making his budget speech, the Sensex of the Bombay Stock Exchange dropped.

To a large extent, big business led to its own disappointment by its euphoria after the re-election of the government of Prime Minister Manmohan Singh. Share prices soared on the stock markets as investors believed that the UPA, freed of its dependence on the Left parties, would now pursue a reformist agenda.

The term “Reformist” has usually been defined by business and the pro-business media in terms of free market policies that liberalize cross-border capital flows, open new sectors to private investment, and make labor markets more flexible (read ease out labor unions).

The evening after Mukherjee’s speech, the pro-business The Wall Street Journal is making a spectacle of itself, claiming interestingly that Mukherjee’s budget was ” a pretty dreadful spectacle”. Newspapers are expected to report and analyze, and not espouse causes, but that is a subject for another post, another time.

What industry and media like the WSJ mis-understood is that the Congress party, which is the main partner in the coalition government, has traditionally had a stand of its own on social policy, which is social democrat and far from pure capitalist.

Mukherjee used the budget speech to remind viewers that India was protected from the global financial meltdown because its large banks are government controlled and did not expose themselves to speculative activity, and stocking up on CDOs. He credited his former leader, the late Indira Gandhi, for nationalizing the banks when she was Prime Minister of the country.

By his focus on inclusiveness, on rural development, on expanding the economy through stimulus spending, Mukherjee has sent out a strong signal that social democracy is not dead in India.

By refusing to privatize education, and by in fact making a budgetary allocation for new IITs, Mukherjee is making the point that Pt. Jawaharlal Nehru’s strategy to spend on education and research as core competencies is still relevant.

Mukherjee’s budget in fact creates the opportunity for the emergence of more people from out of the pale of poverty, into becoming beneficiaries (and consumers) of the economic boom. The question is; will foreign investors decided this is a good market opportunity for them ? Or will they continue to demand what seems to be quite impossible in a country that is moving to its social democractic roots ?

There is some concern about the deficit in the budget, but at times of economic crises, deficit financing and government spending is the way out to stimulate the economy and create jobs. The challenge for Mukherjee is to rein in inflation when it happens, by a reduction of the deficit, and other appropriate fiscal measures.

There are also issues such as the implementation of the programs that aim to bring India’s vast rural poor into the mainstream of economic development. There will undoubtedly be leakages, corruption, and some of the money will not reach the target group.

But unbridled capitalism won’t solve that problem. Civil society and good politics can.

India needs English education for all

Education is the way out of economic backwardness for India’s large number of poor. Needless to say access to capital at reasonable rates, subsidies, health and other services are as important.

In this post my focus is on education. A number of state governments are enforcing state vernacular languages as the medium of education with scant regard to the relevance of this education in the job market.

They forget that India would not have emerged as an outsourcing hub but for a quirk of history, the decision by the British to introduce English as the language of education in the country.

We should be equally concerned about protecting our local culture and language. The McHomogenization of Indian culture is not at all desirable. But the classroom may not be the place for the protection of culture at this stage of India’s economic development.

The Wall Street Journal in this article has argued that the denial of English education to the masses is in a sense a form of domination, to keep the people subjugated.

“In fact, much of the political class remains opposed to English medium education supposedly because they fear the loss of local culture and language,” WSJ writes. It’s more believable that it’s because an ill-equipped population of voters is a malleable population of voters,” it added.

In the state of Goa in western India, a majority of the people backed Konkani as the mother tongue of the state, because it was the language spoken by most people But when it came down to the implementation of the language as a medium of education, parents fought back in favor of English.

They had by then realized that the official language issue had helped Konkani protagonists to perpetutate their roles as culture czars and educationists.

These protagonists re-wrote the language in the name of standardization, and expected children to learn a language that was by now quite different from what they had been used to speak at home. The script was also different.

Clearly there is a need to separate the politics of language from the relevance of a particular language in the new economic scheme of things. The education system, whether we like it or not, is geared to producing people suitable for employment in our factories and offices.

A few of us may have some discomfort about this mechanistic and production oriented metaphor of education. But to India’s poor, this is right now probably the only education that is relevant.

India’s economic boom is lopsided

It is fashionable among India’s new business elites to talk about the boom in the economy, but a lot of it has been awfully lopsided.

About 600 million people, or 60 percent of India’s population, live off the land, according to CNN. Majority of farmers depend on rainwater for crops — irrigation, electricity are a luxury.

Yet presumably in a bid to attract investors, Indian business and investment analysts have trumpeted India’s economic boom. Their comments often reflect a divide in urban/rural perceptions, a lack of knowledge about what goes on outside the cities.

Rather than provide a counter-balance to such skewed perceptions, the Indian media has by-and-large gone along with the urban point of view.

The same business classes are also planning to get the private sector into education, healthcare, and insurance, little realizing that private services are not a substitute for government. If government services are bad, fix it…….let’s not talk about privatization as a panacea.

The few instances of privatization in these sectors in India have shown that the costs of the new privatized services are way beyond India’s poor who are not only in its villages but also in towns.

The boom in India, which has been largely confined to its cities, and particularly in its outsourcing, retail, and telecom industries has created a new class that demands the best in schooling for its kids, the best in food, the best in healthcare, quite regardless of the price.

But these schools, hospitals, and other services are beyond the reach of the poor both in the cities and the towns, further accentuating the huge economic divide in the cities. School fees in some of the better private schools would add up to over US$3000 a year. That is a cost that is way beyond a woman working as a maid in the city who would earn less than US$500 a year, at the peak of her career.

The moves to have private services in education and healthcare and other areas are therefore designed to serve the new elites, and cannot compensate for government action.

While there is no objection to the elites pampering themselves like their counterparts in the U.S., there is a case for the government to set up more of its services. In these sectors there is case for more government.

The poor also have their aspirations for a better quality of life, and if that is not satisfied by government, it will find other avenues, in some cases in increased loss of faith in the system and criminality.

If the political class, corrupt and suspect, have already contributed to an erosion of faith in the system, self-serving prescriptions from parvenu Indian elites can only increase the alienation.