Tuesday, August 13, 2013

India’s path to prosperity isn’t through cities

It’s time to acknowledge that the Indian elite’s plan to replicate European sequence of modernization is a pipe dream….
Indian leaders often warn that they need to shift the majority of their country’s population—almost 70%—from rural to urban areas. Our salvation, Prime Minister Manmohan Singh claims, lies in moving people out of agriculture. Finance minister P. Chidambaram confirms, “My vision is to get 85% of India into cities.”
These dedicated urbanizers claim to have history on their side: the shift from agriculture to urban industry and manufacturing is how Europe, the US and, more recently, China enhanced their productivity and created capital for broader investments to modernize their economies.
Can India adopt this recipe for prosperity today? For one, Indian cities do not have the infrastructure to accommodate more rural migrants than they already have: a fact reflected in their pollution levels, power cuts, unsanitary conditions, social unrest and crime rates. Infrastructural constraints and political ineptitude and corruption make it unlikely that India can emulate China’s planned urbanization, building entirely new cities to house migrants.
Abandoning a crisis-ridden farming sector, millions of Indians already move from one temporary job to another; their destination can often be other villages. Living part-time in a village in Himachal Pradesh, I have been intrigued by the presence there of migrants from the poorest parts of rural India.
Temporary lives
Over the last 10 years, they have set up temporary lives near building sites across the valley, participating in India’s construction boom, which, even in this largely agrarian, unindustrialized part of the Himalayas, has sprayed residential complexes, private universities, dams and tunnels across green hills.
The labourers arrive bearing all the marks of a destitution depressingly commonplace in the plains, where small, unproductive land holdings and lack of irrigation radically shrink one’s opportunities: They are barefooted, scantily clothed, with rust-haired young children already showing the signs of chronic malnutrition that has made their parents small and painfully thin.
Over the years, I’ve seen their material conditions improve. Wages, suppressed at exploitative levels by their rich employers, began to rise after the government introduced its guaranteed employment programme in 2006. The immigrants managed to send their children to local state-run schools, which are better in Himachal than in most other states in India. Their health seems to have visibly improved.
But the construction boom is nearing its physical limits. In my own village, there is very little scope for developers left. Other potential sites suffer from lack of access to water and power. The recent devastating floods that reportedly killed tens of thousands of pilgrims in the region have highlighted the folly of unchecked construction in the Himalayas. Even the most venal among the politicians who struck lucrative contracts with real estate speculators will balk at approving more large-scale projects.
So the question now is: Where will the migrant labourers go next? Any attempt at an answer must quickly acknowledge that India’s economic trajectory is not following the European or Chinese map of development.
China, for instance, had a flourishing manufacturing sector that could absorb the tens of millions of people—the biggest such move in history—leaving an agrarian economy. And even China is having trouble creating enough jobs for the hundreds of millions its leaders wish to move to urban areas. India’s growth has been led by services, which account for almost 50% of the national GDP. At 28% of GDP, industrial output has barely budged since 1989, when it was 25%. Despite high GDP growth in recent years, employment has actually shrunk in the manufacturing sector, with fewer jobs available for the more than 12 million Indians entering the work force each year.

Stunted model
A recent article in India’s premier intellectual periodical, the Economic and Political Weekly, by Hans P. Binswanger-Mkhize points to the peculiarly stunted nature of India’s economic model: surplus labour in the agricultural sector, a manufacturing sector incapable of generating fresh jobs for workers from rural areas, and a tiny formal sector determined to engage only informal or contract labor.
Jobs are mostly being created in India’s already vast informal sector, where more than 90% of India’s workforce is employed in labour that ranges narrowly between scavenging and sweatshops. They contribute to the country’s GDP, but the degrading working conditions of most workers in the informal sector make their transition from rural to urban areas much less of a sustainable and desirable shift than it seems.
I have seen many young men in my village return from such jobs in cities, convinced that they are better off at home, farming the little land they have, and doing small jobs on the side. Lingering statistically near rather than way above the poverty line, they at least have the luxuries of cleaner air and water, and easier access to their families and friends.
It may be time to acknowledge that the Indian elite’s plan to replicate the European sequence of modernization—rural to urban, agriculture to manufacturing and services—is a pipe dream. No one apart from a few flat-earthers seriously believes that the growth of services will ever be enough to turn 1.2 billion people into well-off urban consumers; and, though India’s Planning Commission is determined to make manufacturing the engine of India’s economic growth, the country may have already lost the chance of creating labour-intensive industries that could absorb its large workforce and boost productivity.
It isn’t just mobile and promiscuous capital in the age of globalization that is to blame. Decades ago, the distinguished American economist Daniel Thorner pointed out that late-modernizing countries with large populations like India face the great disadvantage of industrializing at a time when technology is rapidly boosting output per worker. Greatly accelerated technological innovation now takes away jobs in developed economies as well.
Temporary solution
Theoretically at least, the construction boom in India could be kept going with greater investments. But China is presently weaning itself off this model of growth, revealing its built-in limits. Jobs in the informal non-farm sector are at best a temporary solution for people uprooted from rural areas. And the government’s job guarantee programmes and subsidies to (mostly rich) farmers are basically attempts to avoid a full reckoning with the India’s atypical dilemmas.
It increasingly makes sense for Indian leaders to acknowledge—rather than deny—the fact that they live in a land of small farmers, and start to tackle its fundamental problems of hunger and malnutrition through more productive and diversified agriculture. For this bottom-up approach to work, the government would have to increase its investments in irrigation and efficient water use.

More important, urbanizers will have to radically overhaul their broad vision of India, which is based on outdated and impractical economic models. Such reconsiderations are never easy. Perhaps, the hundreds of millions of uprooted men and women scrambling for poorly paid work on the margins of cities will help focus the strangely isolated minds at work on India’s future.

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