Manmohan Singhs first official action after becoming prime minister of India in May was to meet families of drought-stricken farmers in the state of Andhra Pradesh.
Many asked him whether Indias poor farmers were suffering despite the economic reforms or because of them. This governments first budget answers emphatically, “despite reforms, not because of them.”
Economic reforms have to continue, but those reforms are compatible with addressing the needs of those whom the economy was leaving behind, comments Pratap Bhanu Mehta, president-designate of the Center for Policy Research in New Delhi, in The International Herald Tribune.
Those who would blame globalization for the plight of Indias farmers point to the fact that government investment in agriculture has fallen considerably over the last decade, affecting irrigation projects and research into new technologies, reports the World Bank press review Wednesday.
Some argue that these cuts were a direct result of the “Washington consensus” that called for a fiscal conservatism whose costs were borne by the poor. In the 1990s, the need to attract foreign investors led the government to make cuts in its spending programs.
To make matters worse, concern over the health of Indian banks was reducing their ability to target loans to the needy. So while Wall Street was being wooed, the Indian farmer was left without help. Or so the story goes.
But the truth is that the plight of these farmers had little to do with a government bent on sending signals to investors. Rather, the indebtedness that was prompting such misery was a product of several vicious cycles.
Many farmers have to rely on informal networks and oppressive moneylenders for their financing needs. And the government itself partly produced the crisis it was responding to.
Sops in the form of free electricity had led to indiscriminate use of water pumps, producing a grave water crisis. Most of the indebtedness came from the need for inordinate expenditures to drill further for water. And cooperative banks, set up to provide cheap credit, made themselves insolvent by lending indiscriminately.
So we have the vicious paradox of a credit crisis having been generated by cheap credit in the past, and a water crisis generated partially by state subsidies.
The new budget demonstrates that globalization, rather than shrinking the power of the state, can enable an expansion of state activity.
Indias government can increase spending in areas relevant to vulnerable farmers without risking financial meltdown or a decline in Indias credit ratings. Remarkably, while the budget attempts to address the needs of rural India, it resists runaway expenditure.
The Fiscal Responsibility and Management Act, passed last year, enjoins the government to eliminate revenue deficits by 2006. With minor modifications, this government has accepted that constraint.
The call to humanize globalization is not just a call to acknowledge the intended recipients of its benefits; it is also a call for a visible human face to reassure the vulnerable that something can be done for them.
Singhs promises to the farmers may yet be derailed by politics as usual, or by state inertia, but his budget was at least an acknowledgement that globalization cannot and does not entail the displacement of responsibility.
Kilde: www.worldbank.org
