MARCH 4, 2017 Vol LII No 9

` 80

A SAMEEKSHA TRUST PUBLICATION www.epw.in

EDITORIALS Post-Taliban Pakistan

 When Hate Trumps Tolerance While democracy has grown in Pakistan, the political
 Right to Safe Abortion Care leadership has limited control over the military which
 How ‘National’ Beat ‘Regional’
protects particular militants. page 27
MARGIN SPEAK
 Robbing Rohith of His Dalitness
HT PAREKH FINANCE COLUMN Reservation for Naga Women
 Twin Balance Sheet Problem
A socio-historical look at land tax, customary law and
COMMENTARY reservation for women in urban local bodies
 Neither Moral Nor Policing in Nagaland page 20
School Textbooks: Sublime to Ridiculous
Naga Women and Customary Law

State Level Debt–Deficit Dynamics

Pakistan in Post-Taliban Present Twin Balance Sheet Problem

BUDGET 2017–18 The suggestion made in the Economic Survey to set
 Erroneous Understanding of up a “bad bank” will not resolve this deep-rooted
Macroeconomic Challenges problem. page 12
Once More on ‘Humbug of Finance’

And more…
BOOK REVIEWS Unequal Urbanisation
 Divided We Govern: Coalition Politics
 Populism and Power: Farmers’ Movements
While urbanisation in India has accelerated, hypotheses
on the growth pattern among large, medium and small
PERSPECTIVES
cities can be questioned. page 90
 The Mirage of Caste-less Society
SPECIAL ARTICLES
 Economic Reforms and Agricultural Growth
Healthcare Consumption in Uttar Pradesh
Equity in Oral Healthcare in India BUDGET 2017–18
NOTES A series of seven articles critically examines different dimensions of
the Union Budget and certain unrealistic assumptions that have
 Unequal Process of Urbanisation
been made. page 30 onwards
CURRENT STATISTICS
 MARCH 4, 2017 | vol LII No 9

Robbing Rohith of His Dalitness EDITORIALS

10 Rohith is gone and the state is bent on robbing him of his Dalitness, which he When Hate Trumps Tolerance............................. 7
espoused and died for. — Anand Teltumbde Right to Safe Abortion Care .................................. 8
How ‘National’ Beat ‘Regional’ .............................. 9
Twin Balance Sheet Problem FROM 50 YEARS AGO............................................. 9
12 The Public Sector Asset Rehabilitation Agency will face the same hurdles as public
MARGIN SPEAK
sector bank managements in dealing with corporate debt. — T T Ram Mohan Robbing Rohith of His Dalitness
Neither Moral Nor Policing —Anand Teltumbde ........................................... 10
14 In Kerala, the police and “concerned civil society” now hunt young people who HT PAREKH FINANCE COLUMN
they suspect of sexual deviance and who are searching for pleasure. — J Devika Twin Balance Sheet Problem—T T Ram Mohan ..12
COMMENTARY
School Textbooks: From Sublime to the Ridiculous Neither Moral Nor Policing—J Devika .............. 14
16 A Class XII Sociology textbook in Maharashtra reinforces regressive School Textbooks: From Sublime to the Ridiculous
social practices. — Disha Nawani —Disha Nawani ................................................ 16
Land Tax, Reservation for Women and Customary
Taxes, Women and Customary Law in Nagaland Law in Nagaland—Jelle J P Wouters ................ 20
20 A socio-historical account of the protests in Nagaland over implementing 33% State Level Debt–Deficit Dynamics
reservation for women, the imposition of land taxes, and the primacy of Naga —Lekha Chakraborty,Manish Gupta,
customary law — Jelle J P Wouters Pinaki Chakraborty ........................................... 24
Pakistan in the Post-Taliban Present
State Level Debt–Deficit Dynamics —S Akbar Zaidi ................................................. 27
24 Some of the larger states are expected to slip into revenue deficits as per the
2016–17 budget estimates. — Lekha Chakraborty, Manish Gupta & BUDGET 2017–18
Pinaki Chakraborty Erroneous Understanding of Macroeconomic
Challenges—C P Chandrasekhar ...................... 30
Pakistan in the Post-Taliban Present Once More on the ‘Humbug of Finance’
27 Rather than blaming India or Afghanistan for terrorist attacks, the political —Prabhat Patnaik ............................................ 33
leadership in Pakistan must look deeper within if it wants to meaningfully Business as Usual—M Govinda Rao .................. 36
address terrorism. — S Akbar Zaidi What Does the Rural Economy Need?
—Amit Basole.................................................... 40
Mirage of a Caste-less Society in India
Emerging Issues in Union–State Fiscal Relations
61 A caste-less society is a mirage, and the mirage is moving further away. —Pinaki Chakraborty ....................................... 44
— A M Shah Not for Growth: Analysing Union Budget 2017–18
Economic Reforms and Agricultural Growth in India —J Dennis Rajakumar ...................................... 46
67 Even after 25 years of liberalisation there has been no significant movement An Examination of Revenue Generation
in the terms of trade in favour of agriculture. — Shantanu De Roy —Ajit Karnik, Mala Lalvani............................... 50

Healthcare Consumption in Uttar Pradesh BOOK REVIEWs

73 Per capita public healthcare expenditure in Uttar Pradesh is amongst the lowest in Divided We Govern: Coalition Politics
in Modern India—E Sridharan ...........................55
the entire world. — C S Verma, Shivani Singh, Alok Ranjan & T Sundararaman
Populism and Power: Farmers’ Movement in
Equity in Oral Healthcare in India Western India, 1980–2014
—V Krishna Ananth .......................................... 58
82 Oral health needs to be considered a part of general health by the provider
and seeker of care. — Chandrashekar Janakiram, Rajeev B Rudrappa, PERSPECTIVES
Farheen Taha, Venkitachalam Ramanarayanan, Harikiran G Akalgud & The Mirage of a Caste-less Society in India
Sushi Kadanakuppe —A M Shah ........................................................61
SPECIAL ARTICLES
An Unequal Process of Urbanisation Economic Reforms and Agricultural Growth in India
90 Larger towns and cities have grown uninterrupted, whereas smaller- and —Shantanu De Roy ........................................... 67
medium-sized towns have grown slower. — Judhajit Chakraborty Healthcare Consumption in Uttar Pradesh:
Iniquitous Growth and the Social Factors
Budget 2017–18 Contributing to Impoverishment—C S Verma,
Seven articles analyse key aspects of fiscal policy in the Union Budget. Shivani Singh, Alok Ranjan, T Sundararaman ....... 73
Equity in Oral Healthcare in India:
Erroneous Reliance on Supply-side Responses A Review on Health System Analysis
30 The government chose contraction over fiscal expansion. This reflects a deep —Chandrashekar Janakiram, Rajeev B Rudrappa,
misreading of India’s economic needs. — C P Chandrasekhar Farheen Taha, Venkitachalam Ramanarayanan,
Harikiran G Akalgud, Sushi Kadanakuppe .......... 82
Once More on the ‘Humbug of Finance’ NOTES
33 The fact that finance is globalised while the state remains a nation state, An Unequal Process of Urbanisation
strips contemporary capitalism of any potential instrument for achieving —Judhajit Chakraborty ....................................90
even a semblance of social rationality. — Prabhat Patnaik
CURRENT STATISTICS ......................................... 95
What Does the Rural Economy Need? appointments/programmes/
40 If there is a political will to revive the rural economy, there is also a fiscal announcements ...............................................97
way. This government shows no will. — Amit Basole Letters .................................................................4
 LETTERS
Issn 0012-9976
Ever since the first issue in 1966,
EPW has been India’s premier journal for Muzzling Media, Sector-wise gross value added (GVA)
comment on current affairs
Killing Tribals growth rates (in %) (Statement 5 of the
and research in the social sciences.
It succeeded Economic Weekly (1949–1965), Central Statistics Office’s press release)

T he ruse of muzzling the media, espe- are as shown in the table:

which was launched and shepherded
by Sachin Chaudhuri,
who was also the founder-editor of EPW. cially the BBC, has been unsuccess- Sector Q3 2015–16 Q3 2016–17 Growth (+)
As editor for 35 years (1969–2004) fully tried by Indian governments several Decline (-)
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gave EPW the reputation it now enjoys. times in the past. But murder will out, as Agriculture forestry
they say. The Ministry of Environment, and fishing -2.2 6.0 8.2
editor
Paranjoy Guha Thakurta Forest and Climate Change (MoEFCC) Mining and quarrying 13.3 7.5 -6.2
Manufacturing 12.8 8.3 -4.5
EXECUTIVE Editor must come clean and let everyone know
Construction 3.2 2.7 -0.5
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Trade hotels transport 9.6 7.2 -2.4
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Bernard D’Mello Financial, real estate and
shoot fellow-citizen tribals found in the professional services 10.4 3.1 -7.3
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lubna duggal
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activities have been undertaken in the other services 7.5 11.9 4.4
copy editor
jyoti shetty past with total failure. When Prince Five out of the seven sectors, includ-
Assistant editorS Bernhard of the Netherlands was the ing manufacturing (-4.5%), construction
P S Leela
SANGEETA GHOSH
President of the World Wildlife Fund In- (-0.5%) and financial and real estate
ternational, Special Air Service com- have seen a decline in growth rates. The
ASSISTANT Editor (DIGITAL)
SHIREEN AZAM mandos in helicopter gunships were agricultural sector’s rebound is from a
EDITORIAL Assistant used to arrest rhino poaching in Africa. low base of -2.2%. The growth of 4.4% in
Advait Rao Palepu Poor Africans were killed but poaching public administration is due to inclusion
production continued. A few years ago the Andhra of Seventh Pay Commission salaries and
u raghunathan
s lesline corera Pradesh government callously murdered arrears. GVA in this sector is measured
suneethi nair some poor Tamil woodcutters in Chit- by the income method. If this is netted,
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gling cannot be stopped by such killings, pact on growth increase is 0.59, which
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for these illegal trades are committed is 4.4% weighted by 0.13, the sectoral
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Gauraang Pradhan by contractors protected by powerful share of public services and defence).
Publisher politicians. The MoEFCC must not be For April–December 2016, estimated
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editorial confidence of tribal communities and 7.7% for 2015–16 at 2011–12 prices. If the
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Advertising the world keep committing genocide December 2016 would fall to 6.18% im-
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Economic and Political Weekly lost—forests, biodiversity, water, and real terms. Here, disaggregates do tell
320–321, A to Z Industrial Estate land. Nothing will be left to sustain the the truth and support the sound eco-
Ganpatrao Kadam Marg, Lower Parel
Mumbai 400 013 rich in their gated safe havens. nomic logic advanced in the article that
Phone: (022) 4063 8282
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epwrf@epwrf.in
Printed by K Vijayakumar at Modern Arts and Industries,
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Lower Parel, Mumbai-400 013 and
published by him on behalf of Sameeksha Trust
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4 MARCH 4, 2017
retical Perspectives” (EPW, 4 March
2017), are logical and are now substan-
tiated by the figures released by the
government, in which, disaggregated
data reveal what the aggregate has
sought to hide.
O
n 5 September 2012, the Reserve
Bank of India (RBI) issued a circular
to all scheduled commercial banks,
except regional rural banks (RRBs), in
the country to provide banking facilities
to customers with disabilities at par
vol lII no 9 EPW Economic & Political Weekly

with non-disabled persons. The circular
stated that persons with disabilities
(PWDs) are legally entitled to enter into
contracts, and therefore cannot be
denied banking facilities on grounds of
disability. Despite the RBI’s guidelines, a
majority among PWDs experience hu-
miliation in the banks. A majority of
commercial banks have archaic rules in
their statute books, which debar PWDs
from opening independent accounts.
The bank managers and other officials
knowingly violate the RBI’s circular and
harass disabled customers with impu-
nity. PWDs are compelled to produce
witnesses every time they visit banks
to make an online transaction through
the real time gross settlement (RTGS)
and national electronic funds transfer
(NEFT) systems.
Banks in India often construe PWDs as
ineligible for banking facilities. In a
growing technological age, banks have
embarked upon a slew of innovative
strategies to woo the general public. We
have been witnessing a lot of tailor-
made financial products and services for
general customers. Contrary to this,
there is a common perception among
bank officials that PWDs do not require
banking products and services, and
hence most of the bank websites are
inaccessible. The majority of bank websites
require usage of graphical captcha to
proceed on their websites, which makes
it impossible for a blind person to access
equipped manpower to understand or
interpret sign language. Persons with
psychosocial disabilities are the worst
hit, as they require a guardian to con-
tract on their behalf. The norms are that
such persons can open only joint ac-
counts, with a guardian, who will oper-
ate and maintain the account, including
signing of cheques.
The launch of the Pradhan Mantri Jan
Dhan Yojana (PMJDY) in August 2014
provided an impetus to banks’ financial
inclusion drive. Under the PMJDY, the
mandate is not restricted to opening ac-
counts. The aim is to provide easier ac-
cessibility through issuing RuPay cards,
which, incidentally, carry an inbuilt
accident insurance cover of `1 lakh.
Providing small-value overdrafts based
on satisfactory conduct of a person’s
account, availability of low-cost life insur-
ance (Pradhan Mantri Jeevan Jyoti Bima
Yojana), accident insurance (Pradhan
Mantri Suraksha Bima Yojana), and pen-
sion scheme (Atal Pension Yojana) are
also part of the PMJDY initiative. PWDs
are, however, denied loan facilities. A
majority of banks restrain from offering
insurance to PWDs. The call for financial
inclusion, thus, becomes illusory for dis-
abled people.
The recent demonetisation move an-
nounced on 8 November 2016 by Prime
Minister Narendra Modi has further
compounded the miseries of disabled
people, whom he patronises by naming
LETTERS
attitude of bank officials and long queues
at banks have made it difficult for PWDs
to avail banking services. Moreover, the
rationing of `500 and `1,000 notes and
the short supply of new currency in the
rural hamlets are making the daily liv-
ing of PWDs more arduous. The govern-
ment has proposed that separate queues
be set up for the disabled and the senior
citizens, but on the ground the reality is
different. They are invisible sufferers
whose miseries remain unattended in
the countryside.
The call for “financial inclusion” is a
distant dream for PWDs who face undocu-
mented harassment from financial insti-
tutions. Banks and companies that offer
insurance policies are not yet ready to
accept PWDs as respected clients. The
RBI and the government thus need to
take punitive action against those
errant officials and the banks which
contravene RBI’s guidelines for provid-
ing banking facilities to PWDs. The gov-
ernment is duty-bound to ensure justice
and equality to customers with disabi-
lities. The RRBs need to be made ac-
countable towards the disabled demog-
raphy. The call for financial inclusion by
the Prime Minister is bound to backfire
if it does not ensure parity of partici-
pation for a vulnerable community such
as PWDs.
Avinash Shahi
Jawaharlal Nehru University,
New Delhi

their services. Moreover, disabled cus-
tomers are construed as dependent on
their family members and “lacking inde-
pendent agency” to take decisions. For
instance, if a visually-impaired person
walks into a branch for opening a bank
account, instances abound that most of
the bank branches do not open their cur-
rent/savings bank account, particularly
in rural areas. Bank officials often insist
that they should open a joint bank ac-
count with a sighted person, or open a
bank account with no ATM card/cheque
book facility, or both. The denial of
banking facilities is a graver issue for
people with hearing impairment and
those who have intellectual disabilities.
If a person who is deaf visits a bank
branch for availing benefits of a scheme
or service, the branch does not have the
Economic & Political Weekly EPW MARCH 4, 2017
them as divyang. According to the 2011
Census, “over 18 million disabled people
reside in the rural areas.” A majority Errata
among them struggle from pillar to post In the article “An Examination of Revenue
for subsistence. The sudden scrapping Generation,” in this issue, on page 53, the
of `500 and `1,000 notes left them vul- figure by which the expenditure on the
nerable to greater discrimination. Despite Pradhan Mantri Fasal Bima Yojana scheme
the RBI’s circular issued on 9 September in 2016–17 (RE) exceeded the 2016–17 (BE)
2014 for making ATMs barrier-free, most should have been `7,740 crore.
of the ATMs remain inaccessible and lack The corrected version is available on our
ramps. Post-demonetisation, the apathetic website.
Web Exclusives
The following articles have been published in the past week in the Web Exclusives section of the
EPW website.
(1) Some Concerns Regarding the GST in India—Surajit Das
(2) Demonetisation through Segmented Markets: Some Theoretical Perspectives—Parag Waknis
(3) Court Restrains Water Sale from Tamirabarani in Tamil Nadu—S Rajendran, S Ramaswamy
Articles posted before 25 February 2017 remain available in the Web Exclusives section.
vol lII no 9 5
LETTERS
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6 MARCH 4, 2017 vol lII no 9 EPW Economic & Political Weekly

 march 4, 2017
When Hate Trumps Tolerance
In India and the US, the government is fertilising the fields of hate.
I
t was decidedly odd that a government that has remained
silent about hate crimes in its own country, India, should
demand that the head of another country, the United States
(US), denounce such crimes just because the victim was an Indian.
On 22 February, Srinivas Kuchibhotla was shot dead in Olathe,
Kansas by a white man who shouted at him and another
Indian to get out of “our country.” The fact that both were legal
immigrants made no difference. For a week there was not a
word of condemnation by the US government of what was
clearly a hate crime. It was passed off as “disturbing” by White
House Press Secretary Sean Spicer. Then on 28 February, in his
joint address to the US Congress, President Donald Trump men-
tioned the Kansas shooting in his opening remarks. The press
in India went into overdrive, using adjectives like “slam” and
“condemn” to describe his mild comments. All Trump said was
that the threats and vandalism against Jewish community
centres and Jewish cemeteries, and the shooting in Kansas
“remind us that while we may be a nation divided on policies,
we are a country that stands united in condemning hate and
evil in all of its very ugly forms.” What he did not say or
acknowledge was that his administration’s policies and
pronouncements, including the ban on immigrants from
seven Muslim majority countries that has since been with-
drawn because of legal interventions, have created the climate
for such hate crimes. Although no country, including the US, is
bereft of deep prejudice and anger between social groups, in
every country governments can and do exacerbate societal
divides by their refusal to acknowledge the fallout of some of
their policies.
What is happening today in the US is mirrored in events in
India in the last two and a half years. After May 2014, when
Narendra Modi and the Bharatiya Janata Party (BJP) won the
Lok Sabha elections, we have seen a steady rise of not just hate
crimes targeting individuals, but the deliberate and diabolic
“othering” of the Muslims in India. From lynchings and accusa-
tions of “love jihad,” to Modi’s thinly veiled communal rhetoric
during the current election campaign in Uttar Pradesh, there is
a visible increase in the sense of insecurity in growing numbers
of Muslims about their place in Indian society. This cannot be
achieved by the actions of stray individuals who are full of
hate, or small groups and organisations that believe in the
Economic & Political Weekly EPW march 4, 2017 vol lII no 9
same Hindutva agenda as the party in power. It happens when
the message goes out from the top that actions against the mi-
nority in whatever form will not be frowned upon, or dis-
owned, or condemned. After each incident of a hate crime,
such as the lynching of Mohammad Akhlaq in Dadri in Uttar
Pradesh, there has been a thunderous silence from the top.
Even the little that Trump has said now is a lot more than any-
thing that Modi has uttered after hate crimes.
The parallels between developments in India and the US do
not stop here. Another is the definition of “nation.” Trump
speaks repeatedly about making America great again. But what
is this America? Do the migrants from a multitude of nations,
including Muslims, have space in this America? Or will they be
viewed as a threat to this grand plan of restoring America to its
so-called past glory? In the same speech where Trump touched
upon the Kansas shooting, he also proposed the setting up of
VOICE (Victims of Immigration Crime Engagement), a body
that will serve “American” victims of crimes by immigrants. He
extolled the virtues of various police officials allegedly killed by
immigrants but did not spell out whether such crimes were pro-
portionately higher than crimes by people he views as Ameri-
cans. By choosing to use the word “immigrant” without any
qualification, Trump was playing into the hands of people like
the man who shot Kuchibhotla. For such people, anyone who
looks different, has a different colour of skin, speaks a different
language, dresses differently is an “illegal immigrant,” an
“outsider,” a threat to “America.”
In India, this government had set the agenda of what it con-
siders the “nation” and “nationalist.” While all Indian Hindus
are “nationalists” unless proven otherwise, all Indian Muslims
must prove their “nationalistic” credentials. In addition, the
“anti-nationals” are all those who question the government and
its policies, who support the rights of Kashmiris to determine
their own future, who condemn violence by security forces in
Kashmir, Bastar or the North East, who insist that the right
to freedom of speech guarantees every Indian the right to
dissent. According to Union Minister of State for Home Affairs,
Kiren Rijiju, the recent attack by members of the BJP’s student
wing, the Akhil Bharatiya Vidyarthi Parishad (ABVP) on
students and faculty attending a seminar of “Cultures of Protest”
in Ramjas College, Delhi University, was an ideological clash
7
EDITORIALS
“between ultra-leftists and nationalists.” Clearly, only ABVP
members qualify as “nationalists.”
These are dangerous binaries being endorsed by the govern-
ment in India and the US. Here they are giving a licence to
groups like the ABVP to enforce their version of “nationalism.”
Right to Safe Abortion Care
The much-awaited amendments to the Medical Termination of Pregnancy Act should be adopted.
T
he recent spate of cases being heard at the Supreme
Court seeking permission to conduct abortion in preg-
nancies that have passed 20 weeks, is indicative of the
urgent need to amend the Medical Termination of Pregnancy
(MTP) Act, 1971. These cases land up at the doors of the judiciary
because of the clause in the act that permits abortions after 20
weeks only if the life of the pregnant woman is in danger. The
act does not consider foetal abnormalities or danger to the phys-
ical and mental health of pregnant women, or the fact that it has
been possible for some time now to detect foetal abnormalities
beyond 20 weeks. In such situations, the judiciary is ap-
proached, and has to adjudicate on a case-by-case basis with the
recommendation of a panel of doctors.
The proposed amendments to the act, pending passage in
Parliament since 2014, state that the length of the pregnancy
has no bearing on the need for an abortion in the case of
substantial foetal abnormalities (to be listed in the rules under
the act), in addition to the endangerment of the life of the pregnant
woman. These amendments, if passed, would make judicial
appeal unnecessary as abortions would be permitted based on
the opinion of a registered healthcare provider.
The amendments also define “termination of pregnancy,” dif-
ferentiate between medical and surgical methods of abortion,
and include ayurveda, unani, siddha and homeopathy practi-
tioners, nurses, and auxiliary nurse midwives in the definition
of “registered healthcare provider.” There has been some resist-
ance to their inclusion by allopathic practitioners who argue
that allowing such healthcare providers to conduct abortions
could lead to medical malpractice. However, the government
proposes to allow them to conduct only medical abortions
with the necessary training and certification. Studies have
shown that mid-level healthcare providers have been success-
ful with training.
Although such a provision could widen the accessibility
of abortion care, it should not happen in a vacuum. On an
average, 10 women die every day in India due to unsafe abortion
procedures. An estimated two-thirds of all abortions in India
are unsafe, conducted outside the regulated and authorised
hospital and clinic system. The reasons range from lack of access
to and denial of services from registered healthcare providers,
to myriad social factors, like pressure or lack of support from
family, social stigma, financial constraints, and lack of awareness
and access to information. These factors drive women to seek
illegal or unsafe abortion care, leading to misuse of emergency
8 march 4, 2017
In the US, armed individuals and representatives of the state
can now hunt down, and even kill, those considered “illegal”
and a danger to “the nation.” Ultimately, such governments are
responsible for fuelling and fertilising the fields of hate in our
societies and destroying spaces for tolerance and dialogue.
contraceptives, procuring and using of medical abortifacients
like mifepristone and misoprostol without prescription or a
visit to the doctor, and opting for unsafe back-alley abortion
services. Not surprisingly, India is one of the few countries
where the legalisation of abortion, 46 years ago, has not trans-
lated into access to safe abortion care. The widening of the
scope of the act needs to be accompanied by access to safe
authorised and regulated abortion care.
The legislation of the provisions in the MTP Act in 1971
was guided either by concerns about population control, or
preventing high mortality in women resorting to non-qualified
and non-regulated abortion service providers. The proposed
amendments, in addition to this, are finally addressing the
previously neglected aspect of women’s choice and autonomy.
The amendments will allow for abortions on-demand up to
12 weeks, and will extend the previous 20-week limit to
24 weeks in cases where the health of the pregnant woman
and abnormalities in the foetus, physical and mental, are to be
considered by the healthcare provider in deciding to conduct
an abortion. Another welcome amendment is the one that
detaches the marital status of women from citing contracep-
tive failure as the reason for seeking abortion. With social and
medical circumstances having undergone drastic changes
since 1971, a law such as the MTP Act cannot remain a
static law.
As Rosalind Petchesky has contended, “Abortion is the ful-
crum of a much broader ideological struggle in which the very
meanings of the family, the state, motherhood and young
women’s sexuality are contested.” While these amendments
may be a step in the right direction, there are larger questions
that need to be addressed. Many women are not even aware of
their options for contraception and that they have a legal right
to opt for abortion. The role of the healthcare providers is key
here in informing women about their options and providing
them the required care in a safe and humane manner. Abortion
care and access to contraception is a public health issue and
must be treated as such. Women should be treated as autono-
mous individuals in their own right, and best capable of under-
standing and taking decisions about their bodies, sexuality,
and reproductive choices.
The Medical Termination of Pregnancy (Amendment) Bill,
2017 is slated to be tabled in the current session of Parliament. It
is about time our lawmakers, and indeed the rest of us, have a
frank and open conversation on abortion.
vol lII no 9 EPW Economic & Political Weekly
 EDITORIALS

How ‘National’ Beat ‘Regional’

The BJP’s victory in Maharashtra’s local elections exposes the weakness of regional parties.

T
he Bharatiya Janata Party’s (BJP) unexpected and spec-
tacular showing in the elections to urban and rural local
governing bodies in Maharashtra holds out many lessons
for other “national” parties aiming to dominate states where
regional parties are strong. Despite its break with the Shiv Sena,
its long-standing partner on whose back the BJP has made deep
inroads into Maharashtra, it surpassed the Sena. In large meas-
ure, this was also due to a weak and near-absent opposition
comprising mainly the Congress, the Nationalist Congress Party
(NCP) and the Maharashtra Navnirman Sena (MNS).
An important aspect of the strategy of the BJP was to “welcome”
in its fold a number of heavyweights from the NCP, the Congress
and MNS at the opportune time. This helped the party to increase
its total seats. Another ploy was the projection of Chief Minister
Devendra Fadnavis throughout the campaign as the “face” of the
BJP alongside Prime Minister Narendra Modi’s in hoardings and
posters. This helped, as Fadnavis is not viewed by people in the
state as the “typical politician.” The party was also successful in
distancing itself from the actions of the Shiv Sena, notably in the
Brihanmumbai Municipal Corporation (BMC), and in other political
spheres where it has been a long time ally. Another factor that
helped the BJP might have been the mobilisation of the Maratha
community in late 2016 over the issue of reservations and
the scrapping of the Scheduled Castes and Scheduled Tribes
(Prevention of Atrocities) Act. While the Marathas face agrarian
distress and joblessness, they are still seen as an influential
section in the state’s political and economic life. Apprehensive
non-Maratha voters gravitated towards a party that is not viewed
as Maratha dominated. Fadnavis is among the few non-Maratha
chief ministers to have led Maharashtra. On his part, Fadnavis
has been reassuring the Marathas since the protests began and
is attempting to be “all things to all people.”
It would also appear that the anger generated by demonetisa-
tion did not go against the BJP. Apart from the Shiv Sena, which
broke away from it to fight the elections on its own, neither the
Congress nor the NCP succeeded in using this anger for electoral
gain. The Congress–NCP coalition had been voted out of office
in 2014 in a blaze of ignominy due to a number of scams coupled
with its arrogant indifference to farmer suicides. These parties
were also in no position to challenge the BJP as the latter has
benefited from Fadnavis’s clean image and his promise of devel-
opment appeared to have worked. Rural Maharashtra faces
many long-pending issues like poor supply of potable water, erratic
power, bad roads, dismal public healthcare facilities, corruption
in selecting beneficiaries for welfare schemes, the high-handed-
ness of panchayati raj functionaries among others. And Maha-
rashtra’s capital city Mumbai, despite a budget of `37,052 crore,
is straddled with crumbling infrastructure and misgovernance
on practically every aspect of urban development.
Although the Shiv Sena managed to beat the four-term
incumbency factor in Mumbai and even increased its total by
nine seats, it is clear that it will not be able to continue harping on
its regional identity. Young Mumbaikars, including Maharashtrians,
are less focused on regional and linguistic identities and much
more on educational and job aspirations. The party has been
trying to craft a broader appeal but has yet to adjust its strategy
to enhance its appeal to this section. It is also trying to strike a
balance between its traditional appeal to sons of the soil and to
the growing population of people it considers to be “outsiders.”
Despite its efforts, however, it lost the Gujarati and North Indian
votes as well as those of Maharashtrian youth to the BJP in
Mumbai. The Shiv Sena also continues to be seen as an urban-
centric party, reinforced this time by the fact that its campaign
focused almost entirely on Mumbai and Thane.
As for the Congress, the NCP and the MNS, the writing on the
wall is clear. In the case of the first two, they can no longer keep
drawing on the goodwill generated by the “pro-poor” image
and the work done by erstwhile leaders. Considering the anger
against their corruption and arrogance, these parties will have
to go back to the electorate, cap in hand and rebuild their sup-
port from the grass roots. The internecine dissidence, airing of
differences in public and taking their traditional vote banks for
granted will have to change, and quickly. As for the MNS, its near-
total wipeout is a result of a lazy reliance on appeals to chauvinism
rather than solid work for people. Yet, for Maharashtra, the re-
vival of these parties is imperative as a victorious ruling party at
the centre and in the state without a strong opposition does not
bode well for the future of the state.

From 50 Years Ago
Vol II, No 9 march 4, 1967
EDITORIALS
Fundamental Rights
The historic judgment of the Supreme Court that
in future Parliament cannot abridge the Funda-
mental Rights guaranteed in the Constitution by
resort to the procedure prescribed for Constitu-
tional amendment raises grave issues regarding
the nature of the Constitution—issues which
though immediately juristic are potentially of
great political import. Formally the Court has
rejected the petition challenging the validity of
the Seventeenth Amendment. But the majority
judgment of the Court given by six Judges, with
five Judges dissenting, has declared that Parlia-
ment has no power to amend the Fundamental
Rights ...
… These Rights constitute a limit on the pow-
er of the State, and the Supreme Court has often
in the past asserted that the Fundamental Rights
are a fetter on the competence of the Legislature
as well as the Executive …
The importance of safeguarding the citizen’s
Fundamental Rights cannot be overemphasised and
any tendency on the part of the Executive to abridge
them, frequently and without sufficient social justi-
fication, has to be resisted. Yet the Supreme Court’s
judgment attributes to these Rights transcenden-
tal relevance and immutability which the framers
of the Constitution did not intend for them. …
The attitude taken by the Court cannot but
lead sooner or later to the development of a gulf
between the Fundamental Rights as declared and
interpreted by the Courts and the felt needs of a
changing society. A Constitution which is so rigid
as to render any change impossible contains the
seeds of tension between the Constitution which
provides the framework of the State and the Leg-
islatures which represent the will of the people.

Economic & Political Weekly EPW march 4, 2017 vol lII no 9 9

MARGIN SPEAK
Robbing Rohith of His Dalitness
Anand Teltumbde
The basic question that the Rohith
Vemula case raises is about the
existence of the rule of law in
India. If his mother Radhika
Vemula was rich, there would
have been no issue about Rohith’s
caste and all people named in the
FIR for abetting his suicide would
have been in jail. But her fault is
that she lived off the pittance
that Rohith sent her from his
paltry fellowship!
Anand Teltumbde (tanandraj@gmail.com) is a
writer and civil rights activist with the
Committee for the Protection of Democratic
Rights, Mumbai.
10
T
his January saw the first anniver-
sary of Rohith Vemula’s martyr-
dom. Throughout 2016 there were
concerted agitations to get justice for
Rohith and these efforts still continue.
On his first death anniversary (17 Janu-
ary), the Kula Nirmulana Porata Samiti
(KNPS), Telangana, which has spear-
headed one of these agitations in Hydera-
bad, had organised a public meeting in
the city. After the meeting the KNPS
activists accompanying Rohith’s mother
Radhika and his younger brother Raja
wanted to pay their homage to his shrine
in Veliwada in the Shopcom plaza of the
Hyderabad Central University (HCU), which
was Rohith’s home, along with four of his
comrades when they were ousted from
their hostels by the university authori-
ties. However, the police did not allow
them to enter and instead detained them.
They were released several hours later
because of public pressure. When Rohith
died, the police had filed a first informa-
tion report (FIR) under the Scheduled
Castes (SC) and Scheduled Tribes (ST)
(Prevention of Atrocities) Act against
Apparao Podile, the controversial vice
chancellor of the HCU, Union Minister of
Labour Bandaru Dattatreya, and N Sushil
Kumar, the Akhil Bharatiya Vidyarthi
Parishad (ABVP) leader, whose false stat-
ments had been at the root of the epi-
sode, for abetting Rohith’s suicide. The
act warrants that the persons are imme-
diately arrested but the police did not do
so. They took shelter under the contro-
versy raked up by the Bharatiya Janata
Party (BJP) about Rohith’s caste based
on the allegation that he was not a Dalit.
Caste of the Cunning
To prevent the arrest of Dattatreya, Appa-
rao and Kumar, the BJP slyly sparked off
this controversy about Rohith’s caste. The
party’s leaders like union ministers Sushma
Swaraj and Thawar Chand Gehlot whip-
ped it up. After a fact-finding committee
MARCH 4, 2017
of the National Commission for Sched-
uled Castes (NCSC) established the res-
ponsibility of the university for Rohith’s
death, the then Union Minister of Human
Resource Development (HRD) Smriti Irani,
set up a one-member judicial commis-
sion comprising former Allahabad High
Court judge A K Roopanwal on 28 Janu-
ary 2016 to probe the circumstances
leading to his suicide. This judge forgot his
brief and instead observed that Rohith
was not a Dalit. Roopanwal was very
well aware that the Guntur district col-
lector Kantilal Dande, who is the compe-
tent authority in this matter, had already
confirmed in his report to the NCSC that
Rohith was a Dalit.
P L Punia, chairman of the NCSC, also
reiterated that all records and his inves-
tigations proved that Rohith indeed was
a Dalit. Not to be unnerved, and with its
characteristic perseverance, the BJP
commissioned one Darsanapu Srinivas,
a Dalit, but belonging to the Hindu Dharma
Rakshak Sangh to complain to the Guntur
collector against Rohith’s brother, Raja
Vemula. The complaint was that Raja
had fraudulently obtained a caste certifi-
cate saying he was a Dalit. The collector,
having already confirmed Rohith as a
Dalit, could have dismissed the com-
plaint but he forwarded it to the District
Caste Scrutiny Committee. This com-
mittee expectedly enough gave a report
that Raja was not a Dalit. Raja in his
response has dismissed the contention.
Interestingly, the case law in the mat-
ter is clear that in inter-caste marriages
between a SC/ST woman and an upper-
caste man, the caste of the offspring
shall be decided upon by the circum-
stances of the child’s upbringing. In a
judgment defining the rights of children
born out of inter-caste marriages, the
Supreme Court bench comprising Jus-
tices Aftab Alam and R P Desai held that
“the determination of the caste of such a
child was essentially a ‘question of fact’
to be decided on the basis of evidence in
each case.” The child can claim the
mother’s caste if he or she is brought up
by the mother as an SC or ST.1 This land-
mark judgment held that the appellant
who was born of a tribal mother and
vol liI no 9 EPW Economic & Political Weekly

Kshatriya father would get tribal status
since he was brought up in the mother’s
environment. This judgment was subse-
quently cited by many high courts in
granting children the SC or ST status on
the basis that they were brought up by
their mothers in their environment.2 In
Rohith’s case his mother belongs to the
Mala community (a Dalit sub-caste), had
separated from her husband who is a
Vadera (Other Backward Classes–OBC)
and brought up her children in a Dalit
colony. The fact that Rohith grew up
with Dalit consciousness, lived, suffered
and even died as a Dalit, exemplarily
confirmed to the circumstances the
Court depicted. It could be doubted only
by ignoramuses or rogues.
Monumental Injustice
The entire episode is fraught with institu-
tional caste bias, blatant injustice and
incompetence of the powerful people
involved like the vice chancellor of the
HCU and the then HRD minister. It is actu-
ated by the BJP’s stratagem to capture
power. The then HRD minister, engulfed
in a controversy about falsifying her
educational qualifications, assumed her
mission was to saffronise the higher edu-
cation institutions. While she could man-
age to instal people with discernible
connections to the Sangh Parivar and
with questionable academic credentials
to head prestigious institutions of learn-
ing, when it came to students it was not as
easy. The appointment of Gajendra Chau-
han, a small-time actor in third-rate mov-
ies, by another ministry was doggedly
resisted by the students of the Film and
Television Institute of India (FTII).
Through her, the BJP planned to capture
prestigious campuses for its student wing,
the ABVP. This was to be done by pliant
administrations headed by the party’s
confidants and by suppressing the leftist
student unions. It is significant that the
first action on this course was taken
against the Ambedkar Periyar Study Cir-
cle (APSC) in the Indian Institute of Tech-
nology (IIT), Madras. When there were
widespread condemnations and protests,
it swiftly back-tracked and shifted its tar-
get to the HCU, known for the activism of
its Dalit students. The APSC was accused
of casteist politics besides spreading
Economic & Political Weekly EPW MARCH 4, 2017
hatred against Prime Minister Narendra
Modi. The caste accusation squarely boo-
meranged. Therefore, the government
added the accusation of anti-nationalism,
the winning theme from its fascist reper-
toire, when it opened its new front target-
ing the Ambedkar Students Association
(ASA) in the HCU. The actions of the uni-
versity authorities from the time that the
clash between the ABVP and the ASA occur-
red and which eventually took Rohith’s life
to the present when it is terrorising stu-
dents and faculty who are demanding jus-
tice are blatantly partisan, biased, unlaw-
ful, and politically motivated.
In this case the NCSC, which is the con-
stitutional body to protect the interests
of the Dalits, is itself agitated against the
prejudicial acts of commission and omis-
sion by the government. Invariably, in
most cases whenever it took up the cudg-
els for the Dalits, which is its duty, it
found itself utterly helpless. This being
the state of the constitutional entity, the
plight of ordinary Dalits can be imag-
ined! By now it is clear that the present
dispensation at the centre would protect
its executioners at any cost. But the Tel-
angana state, for the creation of which
hundreds of thousands of Dalits shed
their blood, bared its fangs too while
being an accomplice in the BJP’s mali-
cious design. The vehemence and feroc-
ity with which its police have been acting
against protesters exposed the fact that
the Telangana Rashtra Samithi that rode
to power exploiting the sentiment of the
poor is no less anti-Dalit than the BJP.
Going by the conduct of its Chief Minis-
ter K Chandrashekhar Rao who shame-
lessly makes costly offerings to the
Hindu gods at the cost of the poor people
of Telangana, it is clear that he is more
saffron than anybody around. When
such naked acts of the state in utter dis-
respect of the Constitution meet with
mere whispers from the mainstream
media, one wonders what nadir the peo-
ple of this country is waiting for.
No Rule of Law
The basic question that the Rohith Vem-
ula episode raises is about the existence of
the rule of law in India. If Radhika Vem-
ula had tons of money, there would be no
issue relating to Rohith’s caste and all the
vol liI no 9
MARGIN SPEAK
people named in the FIR would have been
in jail. But then, she lived off the pittance
Rohith sent her from his paltry fellow-
ship! The law in India is inaccessible to
the poor. The money-driven judicial sys-
tem forces over 90% of Indians to silently
endure injustice. As for the Dalits, they
are blinded by the notion that it is their
Babasaheb Ambedkar’s Constitution that
runs the state. They refuse to see the real-
ity that right from Kilvenmani in 1968
which marks a distinct genre of caste
atrocities in modern India, there has not
been any conviction in major crimes.
Even in the cases of infamous massacres
of poor peasants in Bihar in the 1990s and
early 2000s, most of whom were Dalits,
by the private armies of landlords, the
Patna High Court is acquitting all culprits
with cut-and-paste judgments in case
after case. The problem is not confined to
the Dalits alone, it largely relates with the
class of the people.
It is tom-tommed that India is the largest
democracy in the world but in reality it
acts as the worst form of plutocracy. The
rich in India can buy justice at every mode
of its delivery. The misdemeanour of the
police vis-à-vis poor is legend. But the
legal system is also not immune to the
influence of money. The recent cases of
Salman Khan being acquitted from all
crimes and Jayalalithaa managing to com-
plete her two and half terms as chief min-
ister after getting convicted by the court
are glaring examples. Even after convic-
tion in some grave cases like Sanjay Dutt’s,
money can buy one special treatment. The
nakedness of this injustice becomes stark
when you see innocent Dalits, Adivasis
and Muslims being incarcerated for years
in jail and even sent to the gallows.
Rohith is gone. Justice to him will
never be done. But why torment him by
robbing him and his family of the Dalit-
ness that he espoused and died for?
Notes
1 Rameshbhai Dabhai Naika v State of Gujarat &
Ors on 18 January 2012, in the Supreme Court
of India—Civil Appellate Jurisdiction, Civil
Appeal No 654 of 2012, arising out of S L P
(CIVIL) NO 4282 of 2010.
2 See for instance, High Court of Kerala, WP(C)
No 17399 & 11184 of 2011 (Y): Dr K P Jaya v Uni-
versity of Kerala, 2015; Andhra Pradesh High
Court, justice V Ramasubramanian and Justice
Anis, Writ Petition No 24880 of 2016, etc.
11
HT PAREKH FINANCE COLUMN
Twin Balance Sheet Problem
Causes, Consequences, Remedies
T T Ram Mohan
F
inance Minister Arun Jaitley’s
budget proposed a measly `10,000
crore towards recapitalisation of
public sector banks (PSBs). The budget
thus steered clear of the biggest cons-
traint to growth today: what the latest
Economic Survey labels the “twin bala-
nce sheet (TBs) problem.”
India’s leading corporates have too
much debt on their balance sheets; this
keeps them from making fresh invest-
ment. Banks are weighed down by a
mountain of bad loans; this comes in
the way of credit growth. TBs impacts
growth by affecting both the demand
for credit and the supply of it.
The Survey presents an excellent anal-
ysis of how this problem arose. It punc-
tures commonly held notions of the cul-
pability of India’s much-maligned PSBS.
It contends that the consequences thus
far have been surprisingly benign, given
the magnitude of the bad loan problem.
It also outlines a way towards resolution
of the bad loan problem.
Three points in the analysis are worth
highlighting. One, the non-performing
asset (NPA) problem at PSBS cannot be
ascribed primarily to mismanagement
or bad governance. Two, India has not
faced the sort of recession that results
from TBs, thanks largely to government
ownership of banks. Three, resolution
is impossible without significant debt
write-offs.
(Mis)Management Not the Cause
The Survey argues convincingly that
the TBs problem has arisen primarily
because of irrational exuberance on
the part of investors, commensurate exu-
berance amongst banks flush with funds
and factors that banks could not have
bargained for when they made the loans.
As the world economy boomed in
the mid-2000S and the Indian economy
12
along with it, Indian firms embarked on
an investment spree. Much of the invest-
ment went into infrastructure and related
areas such as telecom, power and steel.
Banks vied with each other to finance
these projects. This resulted in a credit
boom: non-food credit doubled in the
period 2004–05 to 2008–09. Companies
raised record levels of debt from the
international markets as well. As a result,
the debt to equity ratio in Indian com-
panies shot up above normal levels.
Companies were taking on risk in antic-
ipation of huge growth opportunities.
Alas, growth opportunities diminished
considerably with the onset of the global
financial crisis in 2007. Projects that
had been built around the assumption
of double-digit growth were suddenly
faced with growth rates half that level.
Indian companies faced delays in securing
land and environmental clearances and
this caused project costs to soar precisely
when revenues were falling. The Reserve
Bank of India (RBI) increased interest
rates to deal with double-digit inflation,
so financing costs rose. The combina-
tion of lower revenues, higher project
costs and higher financing costs played
havoc with companies’ cash flows and
hence their ability to service debt.
Soon, other factors exacerbated the
situation. The Survey mentions the col-
lapse in world steel prices following
China’s slowdown. It does not mention
Supreme Court judgments that impacted
the mining and telecom sectors or the
failure of Coal India to meet commit-
ments to supply coal. In the power
sector, spot prices for electricity fell
even as the break-even tariffs for power
projects increased on the back of
inflated project costs.
This analysis should provide an anti-
dote to narratives that see the bad loan
problem at PSBS as arising from poor
march 4, 2017
governance and management. With the
benefit of hindsight, one can say that banks
should not have taken the exposures
they did. But when a boom is on—
whether in the credit market or the
equity market—managers have to be
extraordinarily brave not to want a
piece of the action.
It is worth underlining that leading
private banks are exposed to the very
sectors and projects to which PSBS are
exposed. It is not as if private banks
demonstrated superior expertise in
appraising projects. You could argue
that private banks did a better job of
spreading risk between corporate and
retail lending and hence are impacted
to a lesser extent by the woes of corpo-
rates. But, then, in the mid-2000S, infra-
structure was the big opportunity and
PSBS had the means to fund it.
The banking system was awash in
liquidity and banks had to find avenues
for their funds. If PSBS had focused
on retail loans as much as private banks
did, we would have, perhaps, ended
up with a housing bubble (as in the
United States) instead of an infrastruc-
ture bubble!
The bottom line should be clear
enough. There may have been acts of
corruption but, for the most part, the bad
loan problem has arisen on account of
the exuberance of investors and factors
extraneous to banking.
No Banking or Economic Crises
The Survey touches upon an intriguing
aspect of TBS in India. A TBS typically
results in a recession. This has not hap-
pened in India despite the fact that the
ratio of NPAS to gross loans in India
today is higher than in South Korea at
the peak of the East Asian crisis. Growth
has slowed down to 7%, but if this is
what TBS means, many advanced coun-
tries would love it.
The Survey mentions three possible
reasons. First, despite the high level of
NPAS, there has been no banking crisis.
Elsewhere, there would a failure of
public confidence in banks and several
banks would fail. The contraction in
credit would result in a recession. There
vol lIi no 9 EPW Economic & Political Weekly

has been no banking crisis in India
because the banks most affected are
PSBS. Depositors have the confidence
that the government will ensure safety
of deposits. Investors in PSB bonds know
that the government will ensure that the
minimum capital needed is made avail-
able. High NPA levels have not translated
into a loss of creditor confidence.
Second, the additions to infrastruc-
ture that have happened—more roads,
ports, power stations, airports, better
telecommunications—may have created
headaches for investors and banks. At the
macro-level, however, they have eased
supply constraints and helped growth.
Third, Indian banks did not respond to
companies’ woes by forcing bankruptcy.
This would have meant seizing assets
and trying to liquidate them. In India,
this is a time-consuming process and
results in poor recovery. So, wherever
there is hope of a turnaround, banks pre-
fer to keep the firm afloat. They reckon
that, once growth accelerates, the firm’s
cash flows and debt servicing will improve.
The Survey notes that this approach
worked for banks in the early 2000s.
They hoped the same would happen
this time. So, they restructured existing
loans and extended fresh funds to help
them cope until demand recovered. By
2014–15, restructured loans accounted
for 6.4% of loans outstanding. Despite
tighter checks by the RBI, banks con-
tinue to evergreen loans (market esti-
mates of unrecognised bad loans are 4%
of the total). NPA s and restructured
assets are 12.6% of all loans. Adding
unrecognised loans, bad loans are
16.6% of total loans. At PSBs, the figure
is around 20%.
Such a “financing strategy,” the Survey
notes, can help under one of two condi-
tions. One, companies’ cash flows improve
and this enables them to eventually
service debt. Two, even if particular pro-
jects and companies do not recover, the
Indian economy could, and NPA s as a
proportion of gross domestic product
(GDP) could fall. This would render
the problem manageable. Unfortunately,
neither has happened.
From 2012 to 2015, the earnings
before interest and tax (EBIT) of IC1 com-
panies (that is, those with an interest
Economic & Political Weekly EPW march 4, 2017
coverage ratio of less than one) remained
steady at `25,000 crore per quarter.
However, by the end of 2015 EBIT had
fallen to `20,000 crore per quarter. By
September 2016, earnings had fallen to
`15,000 crore per quarter. These compa-
nies have had to continue borrowing in
order to continue their operations. Stress
has spread from large corporates to micro,
small and medium enterprises (MSMEs).
Hopes that the bad loan problem
would be resolved by rapid economic
growth have also not been borne out.
Private investment has contracted as
companies with high debt are in no
position to invest and public investment
has not risen sufficiently to offset the
contraction.
With bad loans eroding profitability,
banks have chosen to increase their
margins in order to offset some of the
stress arising from their bad loan port-
folio. The spread between the average
term deposit rate and the base rate
increased from 1.6 percentage points in
January 2015 to 2.7 percentage points in
December 2016. The increase in spread
is causing the better borrowers to seek
resources from outside the banking
system. At the same time, MSMEs, which
do not have the same access to non-
bank resources, are facing higher lend-
ing rates.
Is a ‘Bad Bank’ the Answer?
The “financing strategy” has run its
course. What do we do now?
The Survey thinks that leaving it to
individual banks to resolve the bad loan
will not work. Bank management is
reluctant to write off debt for fear of fac-
ing the wrath of investigating and over-
sight agencies. There are problems in
getting banks to agree on the level of
write-off in a given case. Banks do not
have the capital to make the necessary
write-offs.
The Survey, therefore, proposes the
creation of a Public Sector Asset Reha-
bilitation Agency (PARA) to tackle bad
loans. The government will have a 49%
stake in PARA. This should help over-
come the incentive problems that man-
agers at PSBs face. Moving all bad loans
to one agency should help overcome the
coordination problems we now face.
vol lIi no 9
HT PAREKH FINANCE COLUMN
Alas, matters are not that simple.
Managers at PARA may not have to look
over their shoulders while making
write-offs. But the government, as the
dominant investor, cannot avoid scrutiny
and the inevitable controversy where
large corporates are involved. Setting a
sale price for the transfer of bad loans
can pose problems of coordination
amongst banks as formidable as the
ones we face now.
A better course would be to create a
mechanism that enables PSB manage-
ment to resolve bad loans without fear of
a witch-hunt. The Banks Board Bureau
has created an oversight mechanism for
vetting loans but this is said to be meant
only for “Scheme for Sustainable Struc-
turing of Stressed Assets (S4A)” resolution.
We need three changes. First, the
authority must be empowered to approve
any type of resolution. Second, the
authority must be backed by an act of
Parliament as otherwise the vetting
authority itself could be exposed to
investigation. Third, the government
must infuse capital into PSBs necessary
to cover write-offs.
The government’s dithering on recap-
italisation rests on the premise that the
bad loan problem owes primarily to bad
governance and mismanagement. The
Survey shows that the premise is erro-
neous. The government must move
ahead swiftly on recapitalisation in the
knowledge that India’s recapitalisation
cost—at 0.5% of GDP—over two dec-
ades is among the lowest in the world.
You cannot have a banking system that
demands less of the exchequer and
impacts growth so lightly when things
go wrong.
T T Ram Mohan (ttr@iima.ac.in) teaches at the
Indian Institute of Management, Ahmedabad.
Permission for Reproduction of
Articles Published in EPW
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should be reproduced in any form without
prior permission of the author(s).
A soft/hard copy of the author(s)’s approval
should be sent to EPW.
In cases where the email address of the author
has not been published along with the articles,
EPW can be contacted for help.
13
COMMENTARY
Neither Moral Nor Policing
J Devika
The police surveillance on young
people in Kerala seems to have
risen to new heights with active
monitoring of youth lifestyles,
which the police perceive to be
linked to youth crime. These
micro-fascisms only reveal the
growing weakness of the pillars
of 20th century Malayalee
social disciplining. It is up to the
politicised youth, however, to
turn this into an opportunity for
democratic transformation.
J Devika (devika@cds.edu) is with the Centre
for Development Studies, Thiruvananthapuram.
14
A
mong the new coinages that have
gained currency in public debate
in the Kerala of the new millen-
nium, the most prominent one, undoubt-
edly is sadaachaara policing, or “moral
policing.” The coinage gained velocity
of circulation in and through the anti-
Hindutva “Kiss of Love” protests in 2015,
when young people protested at the rock-
solid sexual conservatism that dominates
public spaces in the state, reinforced by
religious conservatisms. The “Kiss of Love”
struggles gave a name to the widespread
surveillance imposed and violence per-
petrated against especially young people,
or more broadly, against all those who
transgress conservative sexual norms—
and it quickly became a part of youth
vocabulary, as a synonym for a dirty
practice. However, this practice is not new
at all, though the sudden rise of media
attention towards incidents of moral po-
licing may convey the impression that it
has suddenly reached grave proportions.
Indeed, if there is anything that is
characteristic of Kerala’s moral policing,
it is its very normality, its banality—it is
certainly not something that follows in
the wake of a moral panic. Also, moral
policing need not involve the state at all,
though both the police and judiciary here
are enthusiastic proponents of moral
policing, even in violation of the law.
Typically, the perpetrators are gangs of
men (though women are equally capable
of it, particularly school and college
teachers, and in a very recent incident,
policewomen) who accost couples or
groups, allege sexual impropriety, and
go on to publicly humiliate, assault, or
threaten them. Often they incarnate as
naattukaar (local people)—civil society,
so to say, zealous of protecting “decency”
and even the “security” of women in their
localities. But the vigilante brigades may
also be political party activists keen to
target the leaders or prominent members
of their rivals. So common, so normal,
MARCH 4, 2017
were these acts that they were even
counted as evidence for the “goodness”
of rural people, rescuing others and
their localities from vice.
Ugly Underside
It is common to find non-Keralites
express surprise that social life can be so
constrained in a society where literacy is
nearly universal and the penetration of
the media is remarkably high. What they
fail to see is that Kerala’s fabled “com-
munal road to secularism” had an ugly
underside, and it is precisely that clearly-
drawn social borders that made for its
stability. These borders had to be con-
stantly policed, and for that, strict endo-
gamy and curbs on romantic interaction
of young people across communities
were surely necessary. The communist
movement did not challenge these bor-
ders significantly; in any case, it partici-
pated fully in the suppression of sexual
and romantic expression in public under
the Victorian–Brahminical patriarchy hege-
monic in 20th century Kerala.
Nevertheless, conditions at present are
such that sexual surveillance and moral
policing are acquiring virulent dimen-
sions, leading to suicides by young peo-
ple (the most recent victim was 23-year-
old Aneesh, who was assaulted by five
men at a beach in Kollam while on a stroll
with a woman friend on Valentine’s Day
(14 February)). Though the police arrest-
ed them, they circulated a video of the
couple on social media, and the dis-
tressed young man committed suicide a
few days later. Perhaps it is important to
view this intensification in the light of
the emergence of young people as a
prime target of social and police surveil-
lance in recent years. This trend in Kerala
seems to have risen to new heights with
active policing of youth lifestyles, which
the police perceive to be linked to crime
committed by the young. Several such
instances have been reported of late.
Nearly a year ago, police action against
cannabis users focused on attacking
wearers of Bob Marley T-shirts and other
accessories, explicitly arguing that Marley
was a promoter of drug use. This cam-
paign was supported by the Kerala State
vol lIi no 9 EPW Economic & Political Weekly

Youth Commission, which, according to
news reports, called for a complete ban on
Marley accessories. Police in Kerala now
also actively monitor teenage students,
rounding up truants and reporting them
to school authorities: for example, the
police rounded up students who had
played truant at school and college to
watch the hit movie Premam. That this
was a serious affair is indicated by the
fact that the police had even code-named
this swoop “Operation Gurukulam.”
Sartorial codes of young people have
also invited police disciplining: low
waist jeans and fancy haircuts, especial-
ly by young people were targeted as
“Operation Vidyalaya.” Disciplinary efforts
originating outside the immediate con-
texts of particular educational institutions
include more generalised measures like
the ban on cinematic dance. Needless to
say, the policing of young women, com-
mon and culturally entrenched in Kerala
in the 20th century, continues to mani-
fest in increasingly insidious forms in the
face of growing resistance by young wom-
en, especially women students. The lat-
est in this series of struggles were at the
University of Calicut and more recently,
the Kerala Law Academy, and the University
College, Thiruvananthapuram, wherein
women students protested against moral
policing and double standards.
Boundary Violations
What do these incidents tell us about the
category of the marginal in contemporary
Kerala? Clearly, moral policing in Kerala
seems to be triggered by perceived
boundary violations offending the hetero-
normative order that underlies both
society and politics in the state. Young
people, who challenge these boundaries,
especially are rendered abject (though
older people are not necessarily spared).
Denied not just voice but even full pres-
ence, these abjects become visible only
within police, medical, and governmental
discourses, as targets of power, outside
the pale of reformist efforts, hinting at a
domain of abnormality. The increasing
policing of youth in Kerala by both the
state and civil society perhaps indicates
that young people form a new category of
abjected marginals who are sexualised
and demonised in and through mainstream
Economic & Political Weekly EPW MARCH 4, 2017
discourses and projected as objects of
constant surveillance.
What is striking about the present
political moment in Kerala, however, is
the open and widespread resistance that
is being offered to abjection. This is not
surprising perhaps because unlike sex
workers and people of non-heteronorma-
tive sexualities, who are also materially
deprived besides being culturally and
socially marginalised, the present tar-
gets—young people, cutting across class,
gender, and community divides—are
much better endowed with the many
kinds of resources needed for struggle.
For example, there is little doubt that sex
workers’ mobilisations in Kerala openly
combated abjection, but the possibility of
organising through social media was very
dim then, and the possibility of shaping
a broader counter-public around the ab-
jection of the body is more real now.
The Larger Context
The broader context, definitely, is of
the post-demographic-transition scenario,
combined with a heavily migration-
dependent economy. The number of
children per family has fallen across
communities and classes, but the costs
of raising them have increased enor-
mously, especially in the context of de-
clining welfare and the shift of educa-
tion and healthcare from social sectors
to profit-making sectors of the economy
since the early 1990s.
At the receiving end of such enormous
investment, youth in Kerala across gen-
der, caste and class today are among the
most politically oppressed sections of
the population. While there is little rig-
orous research available on this, young
people in Kerala do suffer considerable
violation of human rights, as revealed
in the recent public discussion on the
rights violations rampant in the private
sector “self-financed” technical institutes.
Besides the widespread justification of
corporal punishment as the means to en-
sure efficient learning in classrooms de-
spite efforts to end it (Kumar 2010), in
senior high schools, there is severe repres-
sion of students, harsh sexual policing and
extremely demeaning modes of punish-
ment are not only frequent but also
socially-sanctioned.
vol lIi no 9
COMMENTARY
While this is still not rigorously re-
searched, there may be a reason to believe
this pressure, which at times borders on
the pathological, is connected to the fact
that human power is now Kerala’s largest
export. In other words, in the recent
decades, the Malayalee family as an
institution has been drawn closer to the
global market: the affective labour of
parents, along with their material invest-
ment in education and training, plays a
central role in shaping children from
“raw labour power” to saleable labour.
In any case, even a preliminary inquiry
into the educational network in present-
day Kerala would reveal that now there
is an entire apparatus—in which homes,
schools, tuition centres, skill-building
programmes, coaching classes, self-financ-
ing and government institutes of technical
education, placement centres, and the
regulatory machinery of the government
form interconnected sites and nodes—
which is now fully entrenched in our
growing market economy. In other
words, there are enormously powerful
vested interests that would actively
work to suppress young people’s citizen-
ship impulses through an array of in-
struments and turn them into docile
bodies and tamed procreative beings,
saleable labour power.
Given the historical trajectory of the
modern Malayalee family, the present-
day context of migration dependence,
and aspirations of ever greater sections
towards upward mobility, the heightening
pressure to mould children into the sale-
able professions is something that would
follow. Or, take for instance, reports of
increasing physical and mental violence
against children from their parents and
from school. This, again, may be hypoth-
esised to be a predictable consequence
of the tendency mentioned above, to
treat children more as “raw material” and
less as human beings. The frequently
voiced issue of the neglect of child rights,
especially their sexual rights, in Kerala,
also makes sense—for sexuality may be
understood only as an attribute of active
and living beings, and not of inert “raw
material.”
However, the primary civil institutions
of such disciplining—the family, the caste
or religious community, and educational
15
COMMENTARY
institutions—are all facing crises with
information technology and the rise of
social media which complicates their
boundaries and makes a watertight
“inside” nearly impossible. Social surveil-
lance was always gendered in Kerala,
with young women subjected to it from
very early in life. There are fears now,
with the growing influence of satellite
television, the internet and the new
possibilities of consumerism, that young
women are increasingly sexualised and
greedy for money and luxury. The misgiv-
ings over young elite women’s preference
for and identification with images of
desire, pleasure and freedom mediated by
such discourses, have been conspicuous
in contemporary Kerala. But this applies
to representations of non-elite women as
well. For instance, in a series of sensa-
tional sexual violence (“sex-racket” cases
that erupted in Kerala after the mid-1990s
(Sreekumar 2009), the youthfulness of
School Textbooks
From Sublime to the Ridiculous
Disha Nawani
A Class XII Sociology textbook of
the Maharashtra State Board of
Secondary and Higher Secondary
Education was found to have
written on a number of social
practices and trends as if it were
explaining the legitimacy of
such practices rather than
encouraging reflection on their
regressive features.
Comments on an earlier draft by
Suresh K Reddy proved helpful.
Disha Nawani (dishanawani@yahoo.com) is
chairperson, Centre for Education, School of
Education, Tata Institute of Social Sciences,
Mumbai.
16
the victim of trafficking—and her face-
lessness—were particularly prominent.
While these tendencies seem to be
unabated in the present even as young
women increasingly resist and counter
it, the tendency to set up the young per-
son wronged by the law as the “infantile
citizen” seems to be fading. This sort of
critique of violent state power, which
sets up a naive, trusting citizen who did
not attempt to question or challenge the
authority and the legitimacy of the
state—and yet had to die because of
state neglect/violence, was articulated
until recently in Kerala, notably in the
discussions around the police murder of
a young worker, Udayakumar who was
projected as a childlike citizen frozen in
innocence through death, and marked
as untainted by sexuality (Devika 2013).
Instead, the police and “concerned civil
society” now hunt young people who they
suspect of sexual deviance and the defiant
I
n early February, a sentence linking,
“ugliness” of a girl to “demands of
dowry,” in a Class XII Sociology text-
book of the Maharashtra State Board of
Secondary and Higher Secondary Edu-
cation, produced and distributed by the
Maharashtra State Bureau of Textbook
Production and Curriculum Research,
made news headlines. The book which
has six authors, lists “ugliness” as the
12th cause of dowry. “If girl is ugly and
handicapped, then it becomes very dif-
ficult for her to get married. To marry
such girls bridegroom and his family
demand more dowry. Parents of such
girls become helpless and pay dowry as
per the demands of bridegroom family”
(p 78). Other causes listed for dowry are
equally random and absurd, such as,
expectations of suitable bridegroom (usually
parents expect suitable, well-educated, well
matched, better earning, good character and
well cultured bridegroom for their daughter.
They also expect well-to-do in-laws, so that
MARCH 4, 2017
search for pleasure and space. Needless to
say, these micro-fascisms only reveal the
growing weakness of the pillars of 20th
century Malayalee social disciplining, but
the outcomes are not predictable. Surely,
there are possibilities: it is up to the po-
liticised youth to turn this into an oppor-
tunity for democratic transformation.
References
Devika, J (2013): “Bodies Gone Awry: The Abjec-
tion of Sexuality in Development Discourse in
Contemporary Kerala,” Sexuality Studies, San-
jay Srivastava (ed), New Delhi: Oxford Univer-
sity Press, pp 94–120.
— (2014): “Is Standing with Young People Yet An-
other Fad? Reflections on the Young and Kiss
Protests in Kerala,” Kafila https://kafila.on-
line/2014/12/11/is-standing-with-young-peo-
ple-yet-another-fad-reflections-on-the-young-
and-kiss-protests-in-kerala/, accessed on 27
February 2017.
Kumar, Ratheesh (2010): Classrooms and Playgrounds:
Mapping Educational Change, Kerala, Newcas-
tle-on-Tyne: Cambridge Scholars Publishing.
Sreekumar, Sharmila (2009): Scripting Lives: Nar-
ratives of Privileged Women in Kerala, New Delhi:
Orient Blackswan.
she can live happily after marriage. Hence
they are prepared to spend more money at
the time of marriage); compensation princi-
ple (parents of bridegroom demand more
dowry at the time of their son’s marriage in
order to compensate for the dowry amount
they have paid for their daughter’s marriage);
social prestige and help to newly married
life. (MSBHSE 2016)
It is clearly written in a manner to
explain the legitimacy of the practice of
dowry rather than reflect on its discri-
minatory and regressive social character.
At several other places in the textbook,
the authors exhibit brilliant sociological
insights while explaining the social pheno-
mena under study. For example, “the
women having high status prefer to give
birth to few children. Because they con-
sider that having more children will ob-
struct their career development” (p 69).
This point, “improvement in the status
of women” is listed as a measure to con-
trol population growth. This section
also claims that,
many people, especially the rural and tribal
people do not have sufficient means of rec-
reational facilities. Their only form of enjoy-
ment is indulging in sexual activity, without
even considering its outcomes. If these peo-
ple are provided with certain recreational
facilities, then the number of births would
definitely come down. (pp 69–70)
vol lIi no 9 EPW Economic & Political Weekly

At another place, under “problems of
working women,” the book, with an air of
certainty asserts that “family tensions” is
one such problem—“if wife is also more
ambitious she concentrates on her career
and attempts to get promotion. She
becomes somewhat negligent about her
home and so her husband expresses his
anger. Children are somehow neglected
if both husband and wife are in service
and as a result children can become de-
viant. For that they both blame each
other. Many of the working women are
not in a position to take care of their
husbands or even some of them are not
willing to take care of in-laws. As a re-
sult husband becomes angry” (p 75).
The content and tenor of this section al-
most establishes the miserable lives that
working women lead on account of their
working outside home. The problems
are stated more as consequences of
working (strain of dual roles, economic
exploitation, injustice-harassment and
separation, etc) rather than as probable
challenges faced by working women.
It can be said with conviction that even
if one were to randomly select any page
from this textbook, one would come
across several such “insights.” This, for
example, a “social problem is different
from personal problem. A problem which
is faced by the person or his/her family
is considered as a personal problem. A
problem, on the contrary which is faced
by the numerous persons, is considered
as social problem. Suppose a person has
no employment, it is his/her personal
problem” (p 62). Prostitution is listed as
a social problem thus “many poor help-
less women take up prostitution to fulfil
their basic needs. Some women undertake
it for luxurious life. Some women are
forced to take this profession by unscru-
pulous gangsters/agents. Men who live
alone in the city go to prostitutes for
sexual satisfaction and some go to them
for enjoying diversity of sexual pleasure”
(p 33). Following a similar logic, prob-
lems of unemployment, poverty, food,
inflation and environmental degrada-
tion, etc, are all listed as consequences
of population growth. The questions at
the end of each chapter are equally in-
ane. For example, “Social Problems are
... (personal, local, regional, universal),
Economic & Political Weekly EPW MARCH 4, 2017
Social problems are inconsistent with …
(norms and values, signs, symbols, be-
lieves).” One can assume that amidst
several problems that this book suffers
from, the brutal ease with which social
phenomena have been dissected, judged,
and dismissed seems to be its most obvi-
ous drawback and is therefore, a matter
of grave concern.
The decision to publish its own text-
books was taken by Maharashtra Board
in 2008. It published Class XI textbooks
for Science and Commerce in 2011–12
and Languages and Social Sciences in
2012–13. After, “teachers and students
appreciated those textbooks very much
and were satisfied with the content and
presentation,” the board started produc-
ing textbooks in different subjects for
Class XII as well. These books have ap-
parently been “reviewed by experts”
(Preface). Lest it be misunderstood that
the purpose of this article is to condemn
the aforementioned textbook alone, it
must be made clear that there is every
probability that there are many such text-
books in use, which unabashedly promote
a prejudiced and completely distorted
view of the social reality and people living
therein. Examples from this book are
simply being highlighted since it caught
media attention. There are several such
books, published both by state and private
bodies which are read by millions of stu-
dents across states, which make similar
assertions but go unnoticed. For exam-
ple, the Economics textbook for Class IX
(Goel 2017), under “social discrimination
against women” states, “as women earn
more money—as has been repeatedly
shown—they spend it on the further
education and health of the children, as
opposed to men, who often spend it on
drink, tobacco or other women” (p 131).
Textbooks in School Systems
In India, since textbooks are often pre-
scribed by schools/examination boards,
they represent the curriculum, syllabus
and in a nutshell, encapsulate the entire
school education. They enjoy an unenvi-
able position not only in the pedagogic
interactions of the classroom and the
dreaded but supremely sacred examina-
tion papers but also the lives of school-
teachers and students. They dictate
vol lIi no 9
COMMENTARY
practices of both teaching and learning
to such an extent that each and every
word listed therein becomes infinitely
superior, demanding its rigorous memo-
risation and reproduction, especially in
examinations. Most teacher education
programmes also often focus on making
the teacher competent in teaching the
grade-appropriate textbook.
Developing Textbooks
Textbook development in independent
India has been a complex process and
has involved several agencies, with no
singular state agency entrusted with the
task. The nationalisation of books started
in 1941–42 with Uttar Pradesh but it was
only in 1961 with the setting up of the
National Council of Educational Research
and Training (NCERT) that textbook
development gained momentum. It was
given the responsibility of preparing
model textbooks for the entire period of
schooling in languages, social sciences,
natural sciences and mathematics. Soon
it began to develop detailed criteria for
textbook evaluation, relating essentially
to the academic and physical aspects of
textbooks. The focus of the NCERT has
also been on promoting national integra-
tion through its books and identifying and
eliminating approaches which perpetuate
untouchability, racialism, casteism and
communalism. It also designs a National
Curriculum Framework (NCF), the last of
which was in 2005. Though the NCF does
not list the criteria which can be used to
evaluate textbooks, it suggests a list of
foundational assumptions that can help
in evolving criteria for evaluating mate-
rials. These assumptions pertain to the
nature of society one would like to live
in, role of education in achieving it, as-
sumptions about learning, children and
their contexts (Nawani 2010).
The various state governments started
producing textbooks after the Education
Commission (1964–66) drew attention
to factors contributing to the neglect of
this area like lack of interests by scholars,
unscrupulous publishers and unafford-
able prices, irregularities in the selection
and prescription of books, etc. Most
states since then have created bodies
through legislation for the preparation
of syllabi and textbooks and all have
17
COMMENTARY

established varied mechanisms for the
preparation and approval of textual
materials. However, these procedures are
followed mechanically without really
addressing the core curricular concerns
defined in the National Policy of Education
(NPE), 1986. There is no way of assessing
whether the textbooks actually adhere
to the aims of education policy and
there appears to be little application of
mind with regard to the selection of ma-
terial. This is mainly because of the
overwhelming emphasis on form with
very little attention to the content of
textbooks and supplementary materials
(CABE 2005).
There are significant differences in the
quality of textbooks developed by the
NCERT and other state bodies, which is not
to say, that the former are always inher-
ently superior than the latter. The text-
book development team at NCERT consists
of members from a large pool of national
institutions, the regional institutes of edu-
cation and state and central universities.
Unfortunately, most states neither have
the institutional capacity to develop re-
flective textbooks, which are conceptu-
ally strong and pedagogically sound nor
have they established procedures for
monitoring their quality. So most often, a
number of states simply model and adapt
their books to the ones developed by the
NCERT. While the books produced by
NCERT are used in schools affiliated to the
Central Board of Secondary Education
(CBSE), those developed by the states are
used only in schools affiliated to the state
boards. A few states are trying to refrain
from adopting NCERT textbooks in toto and
some have developed their own State
Curriculum Frameworks (though exhibit-
ing huge dependence on NCF), including
textbooks that are more suited to their
sociocultural context and hence more
appropriate for the children (Dewan and
Dwivedi 2016).
Besides textbooks produced by govern-
ment institutes, there is a huge private
industry producing textbooks, handbooks
for teachers, question banks and guides.
Very few states have mechanisms to ap-
prove books developed by private pub-
lishers which are used by many schools
to supplement or as substitute for govern-
ment books or to teach subjects for which
government books may not be available,
like moral science. Similarly, textbooks
and curricula in schools run by religious
and social organisations and schools not
aided by the state are not regulated in any
form by the state agencies. Some of them
openly promote ideologies that contra-
dict the basic principles and vision of the
Constitution and educational policies
(Dewan and Dwivedi 2016).
In precolonial India, while the evalua-
tion of textbooks was not necessarily in-
formed by various theoretical frame-
works, there were clearly articulated
principles for writing them. However, it
was during the British period, that most
of the infrastructure for selection, pre-
scription, improvement and evaluation
of textbooks was developed (Goel and
Sharma 1984). An important landmark
of this period was the setting up of
the Textbook Committee in 1877. Before
this there were separate textbook com-
mittees in the provinces whose role
was to select and approve textbooks of
private publishers for use in govern-
ment and government-aided and recog-
nised schools. The Textbook Committee
was perhaps the first committee that
examined exhaustively the position of
textbooks in various subjects in the
provinces (Goel and Sharma 1984: 82).
This was a reflection of the concern for
some kind of uniformity of criteria
across regional differences. At present,
we have no such body at either the
national or state level.

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Textbook Content
It has been pointed out by several studies
and committees that since textbooks in
India bear a huge burden of transmitting
knowledge (read information) to children,
they are often dense and incomprehen-
sible. This is because they present infor-
mation as per the demands of the sylla-
bus in prescribed (often limited) number
of words or pages. They are rarely writ-
ten as one of the resources to knowledge
but carry an authoritative tone, making
them didactic and closed to questioning.
The language is often terse with little
humour or use of language which children
use in their daily lives. Most social science
and language textbooks portray a skewed
view of the world in which achievements
of males, middle class, upper caste, urban
city dwellers are highlighted. Voices and
perspectives of females, members of the
working class, Dalits, minorities and
tribals are mostly absent or ridiculed
and presented in a manner as to rein-
force existing social inequalities.
Ensuring Better Textbooks
Several policy documents have high-
lighted textbook development as a con-
tinuous and rigorous process with a
need to review it regularly. The NPE 1986
highlighted that concerns such as India’s
freedom movement, common cultural
heritage, egalitarianism, democracy, pro-
tection of environment and the inculca-
tion of scientific temper, should be refl-
ected in our education system. One
would imagine that textbooks, out of all
the curricular resources, should defi-
nitely fall within this value framework
which is in alignment with our constitu-
tional values. The Education Commis-
sion (1964–66) recommended that the
textbooks should be revised regularly
after every five years. However, this rarely
happens except perhaps at the NCERT.
At the outset, one must recognise that
the task of developing textbooks is a
tedious, time-consuming, reflective and
rigorous enterprise. For the textbook to
be in sync with constitutional values and
goals, specificities of contexts of individual
states, disciplinary requirements and
children’s developmental needs, etc, it is
important that the teams entrusted with
the task of developing them are carefully
Economic & Political Weekly EPW MARCH 4, 2017
constituted, representing a wide spectrum
of interest and competencies. The team
needs to consist of those who have a
command over the subject and those
who understand children’s needs as well
(Dewan and Dwivedi 2016). The point of
involving a large number of enlightened
and innovative teachers who should be
provided training in book writing was
emphasised very strongly by the report,
“Learning without Burden” (MHRD 1993).
The Central Advisory Board of Educa-
tion (CABE) on textbooks, in 2005 cau-
tioned that the current diversity of avail-
able curricular resources is potentially
enriching but risks compromising on the
liberal, secular and democratic principles
of Constitution. It recommended:
(i) Procedures for approving curricular
materials should include a serious
appraisal by academic experts for their
adherence to the core constitutional values.
(ii) Institute a National Textbook Council
(NTC) to monitor textbooks. This body
must be independent of any organisation
involved in textbook preparation and also
be fully autonomous so as to genuinely
represent civil society and academia. It
can also serve as a forum where ordinary
citizens can register complaints regard-
ing textbooks which would be followed
up by investigation by the Council.
(iii) Set up a standing committee to be
guided by NTC. The committee should be
empowered to prepare guidelines and
outline the parameters for periodic and
timely reviews of textbooks. Reviews must
examine social content of books as well
as assess their standards, relevance and
suitability for the desired age group.
Reviews to be submitted to the government
and widely publicised through the media.
(iv) NCERT and all State Councils of Edu-
cational Research and Training (SCERT)
to set up academically autonomous units
dedicated to research on textbook prep-
aration and evaluation. These units could
work in conjunction with CABE Standing
Committee for curricular review and the
Ministry of Human Resource and Deve-
lopment (MHRD) to earmark funds for
this purpose.
(v) Besides establishing formal bodies to
investigate specific complaints, civil so-
ciety must strengthen initiatives in this
area and adequate funding must be
vol lIi no 9
COMMENTARY
made available to concerned agencies to
carry out research on textbook content.
All institutions of higher learning should
support research in school textbooks.
Conclusions
Development of textbooks is a serious
business and given their supreme impor-
tance in the Indian education system, it
is absolutely imperative that rigorous
mechanisms are in place to supervise
and monitor their form and content.
Once the guidelines have been laid and
bodies ensuring adherence to them have
been set up, any textbook violating those
norms should be either banned or sent
for revision. These mechanisms should
be applicable to all textbooks produced
not just by private bodies but govern-
ment ones as well, both at the centre and
states. Recommendations pertaining to
regulation and use of textbooks have al-
ready been made by CABE which is the
highest advisory body on education to
the Government of India. They could
perhaps be re-examined in the light of
present circumstances and then execut-
ed without further delay. It is pointless
to set up committees and ignore their re-
ports/recommendations, which are at
most then referred to by scholars like me
to write papers on issues relating to re-
forming/regulating textbooks.
References
CABE (2005): Regulatory Mechanisms for Text-
books and Parallel Textbooks, Taught in Schools
Outside the Government System, New Delhi:
Committee of the Central Advisory Board of
Education, MHRD, Government of India.
Dewan, H K and R Dwivedi (2016): “Development
and Production of Textbooks: Some Insights,”
Teaching–Learning Resources for School Education,
D Nawani, (ed), New Delhi: Sage Publications.
Goel, B S and J D Sharma (1984): A Study of Evolu-
tion of Textbooks, New Delhi: NCERT.
Goel, J P (2017): ICSE Economics Part I for Class IX,
New Delhi: Goyal Brother Prakashan.
Government of India (1986): National Policy on
Education, New Delhi: MHRD, GOI, https://
thewire.in/105146/maharashtra-sociology-
textbook-blames-ugliness-dowry/accessed on 15
February 2016.
MHRD (1993): Learning without Burden: Report of
the National Advisory Committee, appointed by
the MHRD: New Delhi.
Maharashtra State Board of Secondary and Higher
Secondary Education (2016): Sociology Stand-
ard, XII, Maharashtra State Bureau of Textbook
Production and Curriculum Research, Pune.
Nawani, D (2010): “School Textbooks: Understand-
ing Frameworks for Analysis,” Contemporary
Education Dialogue, Vol 7: 2, pp 157–92.
NCERT (1966): Report of the Education Commis-
sion, 1964–66, New Delhi: NCERT.
19
COMMENTARY
Land Tax, Reservation for
Women and Customary Law
in Nagaland
Jelle J P Wouters
Can elected urban local bodies in
Nagaland levy taxes on land and
buildings when Naga lands and
its resources are, under Article
371A of the Constitution, the
domain of customary bodies and
laws? Should women be allotted
33% reservation of electoral seats
in these urban local bodies, as
sanctioned by the Constitution,
when customary institutions
and practices did not envision
political leadership for women?
These are divisive questions in
Nagaland. A socio-historical
background is offered.
Jelle J P Wouters (jjp.wouters@gmail.com)
is a PhD candidate in the Department of
Anthropology, North-Eastern Hill University,
Shillong.
20
I
nfluenced by Verrier Elwin’s views
on tribal lifeworlds, Jawaharlal Nehru
wrote in his foreword to Elwin’s A
Philosophy for NEFA (1959), that tribal
communities in India’s North East “should
develop along the lines of their own genius
and [that] we should avoid imposing any-
thing on them. We should try to encourage
in every way their own traditional arts
and culture.” It was in part a follow-up
on this philosophy, but primarily as an
envisaged (but failed) political compro-
mise in relation to the Naga demand for
independence that Nehru assented not
only to the enactment of a Nagaland state
in 1963, but also to the crafting of Article
371A of the Constitution, which reads:
Notwithstanding anything in this Consti-
tution, no Act of parliament in respect of
religious or social practices of the Nagas,
Naga customary law and procedure, ad-
ministration of civil and criminal justice
involving decisions according to Naga cus-
tomary law, ownership and transfer of land
and its resources, shall apply to the State of
Nagaland unless the Legislative Assembly of
Nagaland by a resolution so decides.
More than five decades later, the legal
implications of this amendment contin-
ue to be debated with some insisting
that, to the letter, Article 371A almost
makes Nagaland a “foreign country
within the Indian Union,” as no laws or
policies designed in Delhi apply to Naga-
land unless Nagas—here represented by
the state legislature—adjudge it as ap-
propriate to Naga traditions, customs,
and cultural proclivities. Interpreted
thus, Nagas, truly, were allowed to de-
velop themselves “along the lines of
their own genius.”
However, the benevolence of this
Naga genius, as reflected here through
its customary laws and practices, is now
contested by (female) voices within Naga
society, claiming that, deep down, Naga
customary law is shaped by a culture of
MARCH 4, 2017
subjugation and gender inequality. Such
sentiments are hardly new, but recently
erupted in full force in relation to the
proposed implementation of (an amend-
ed version of) the Nagaland Municipal
Act 2001. At issue, are taxes on land and
33% reservation for women, as proposed
by the 2001 act (which itself was a much-
delayed response to the 74th amend-
ment to the Constitution, which came
into force in 1993 to provide a common
framework for the mandate and struc-
ture of urban local bodies). The question
is whether these provisions contravene
and encroach on the spirit and jurisdic-
tion of Naga customary law, as safe-
guarded by Article 371A.
While the battle lines are not always
so clearly drawn, the fault line, broadly,
is between the Nagaland government and
the Naga Mothers Association, which
both desire the implementation of the
municipal act because central funds flow
in for urban development (the release of
which remains conditional to the hold-
ing of municipal elections, and which,
because of these controversies, have been
several years overdue) and the broader
issue of women’s empowerment. The op-
position benches are made up of a host
of tribal apex bodies, which staunchly
oppose the municipal act for infringing
on Naga customary law, which does not
recognise both taxes on land and a reser-
vation system for political representation.
The pages that follow do not engage
hands-on with the public protests and
violence that recently took place in
Nagaland, the bandhs imposed by tribal
bodies, the subsequent deferral of the
scheduled municipal elections, and the
political aftermath of this crisis. Many
journalists and commentators have al-
ready done so. What I aim to do instead
is to sketch the wider socio-historical
context against which the current con-
troversy unfolds.
Land and Taxes
“Taxes,” the Naga writer Charles Chasie
explains, “has always been an abhorrent
issue where Nagas are concerned. It led
to the killing of the first British Political
Officer in the Naga Hills in 1879 and the
war against the British that followed …
Taxation was again a large part of the
vol lIi no 9 EPW Economic & Political Weekly

reason for the rise, and sustenance, of
Naga nationalism although other reasons
were there” (cited in 5 February 2017,
Morung Express). Today, taxes, once more,
are at the forefront of societal unrest.
While most people hate taxes (who likes
giving away part of one’s income and as-
sets?), Nagas seem to hate these more
than most. They hate taxes in the fear
that the imposition of taxes on land sig-
nals the beginning of the end of Nagas’
absolute control over their land and its
resources.1
For A Z Phizo, who captained the Naga
National Council (NNC) into its struggle
for independence, the idea of sovereignty
itself was always less about state, courts,
and a Weberian monopoly on violence,
but crucially hinged on Nagas’ uncondi-
tional ownership over their land and its
resources, cattle and other possessions,
and communitarian ethics (Wouters
2016: 103–07). Phizo (1951) spoke thus:
[Among Nagas] land belongs to the people
as private property, and every family pos-
sesses land. We uphold every person as sov-
ereign: men and women alike. Every family
is a landlord; but, there is no landlordism
in Nagaland … land being so owned by the
people who are in their person sovereign …
We do not pay even land tax, which is always
a crushing burden to the mass of citizens in
many other countries.
This “taxless” Naga customary arrange-
ment Phizo contrasted with the position
of farmers across India. “What is the lot
of Indian cultivators?,” he asked, then an-
swering himself: “They are mere tenants
in their own soil and not the sovereign
owners of their own land as in our
[Naga] country.” It was the urgency for
Nagas to protect their age-old landhold-
ing system—as evident in the popular
local axiom Ura Uvie! (our land is ours)—
that Phizo preached as he moved from one
Naga village to the next rallying people
behind his political movement. An elder
in a Chakhesang Naga village recalled
Phizo’s visit to his village:
He spoke about socialism, the Naga Nation
and that we had been an independent peo-
ple since time-immemorial. I did not under-
stand all of what he said that time, but we
of course supported that all our land, cattle
and possession should remain ours, and ours
alone. Phizo explained that the Indians, if
we would not resist them, would count our
land and cattle and make us pay taxes over
Economic & Political Weekly EPW MARCH 4, 2017
them, and that we would so lose our freedom.
(Cited in Wouters 2016: 105)
While the sonority of Phizo’s voice has
now dwindled, treatises detailing the
Nagas’ intimate connections with their
ancestral land have flourished since. Au-
thorities on the set-up of Naga society
variously detail their relationship with
their land in terms of “stewardship” and
“reciprocal co-dependency” (Vamuzo
2012: 9), as “the core of culture,” “origin
of ethnic identity” (Varah 2013: 249),
and “symbol of identity” (Longchar
1996: 22), as based on a “triune concept
of God-Land-People” (Imsong 2011: 14),
and, in general, shaped by “a deep sense
of supernatural, spiritual and ancestral
attachment” (Jamir 2015: 108). What is
emphasised too is that whereas in places
across the country “all land belongs to
the government,” in Nagaland “land be-
longs to landowners and the communi-
ty” (Imkongmeren 2015: 61). In fact, the
history of post-statehood governance in
Nagaland can be read as a history of
tussles between the state government,
which requires land to effectuate devel-
opment, and Naga landowners who
hesitate to give up even a square inch of
their land.
But while land and identity are every-
where intimately connected, not every
Naga, under customary law, has equal
access to land. To begin with, roughly half
of the Naga populace comprising women
are proscribed from inheriting ancestral
land. They are now calling for change
and “gender justice” within the Naga
landholding system (Jamir 2015: 112–14).
But not only are women landless, so-
called “late-comers” in several villages,
that is, those Naga villagers and clans
thought to have settled in the village
after its initial establishment, may be
restricted in owning land (George and
Yhome 2008: 7). Moreover, some Naga
villages were traditionally ruled by
hereditary and aristocratic chiefs who
were the “Lord of the manor” (Hutton
1921b: 150) and presided over a “feudal
mode of production” (George and Yhome
2008: 8).
But if such qualifications undermine
the singular notion that every Naga is a
landowner, they do not negate the deep
triangular connection between Nagas,
vol lIi no 9
COMMENTARY
land and identity, as well as the long-
standing apprehensions over imposition
of taxes on land. True, the Nagaland
Municipal Act only applies to urban set-
tlements, of which traditionally Nagas
had none, but where exactly the urban
ends and the rural begins is not always
clear. It is further feared that once taxes
on urban lands are in place, this system
might gradually be extended to villages,
in the process forever altering Nagas’
absolute ownership over their land and
its resources. The Nagaland government
has now recognised this sentiment and in
the Nagaland Municipal (third Amend-
ment) Bill (2016) omitted the clause on
taxes. The government stated:
all references and operative provisions relat-
ing to ‘tax on lands and buildings,’ wherever
these occur in the Nagaland Municipal Act
2001, shall be deemed to have been omitted.
Among many Nagas, however, the
worry of a legal loophole remains, and
they wonder whether “shall be deemed”
means the same as “actually removed”
and whether “omitted” implies “deleted.”
“Nagas are not legally minded,” Phizo
(cited in Nuh 1986: 89) once explained,
but statesmen and politicians, he warned,
are: “[They] search for a flaw in the legal
system and try to produce one when
there is none.” While Phizo spoke these
words long ago, the fear of such a “legal
ambiguity” ran through the recent public
protests against the proposed implemen-
tation of the municipal act.
Women’s Empowerment
While the issue of taxes on land has
seemingly been resolved, at least acc-
ording to the government, the question
of women’s reservation has turned ever
more volatile. What is advocated by
Naga women’s organisations, in brief, is
that customary law not just privileges
Naga males, but is deeply patriarchal in
its outlook, and so prevents women from
receiving their dues. For them, it is the
dark side of customary law that restricts
and restrains women from inheriting
land and from acquiring positions of
public and political leadership.
Gender is of course a multidimensional
concept, and the status and standing of
women in any society can, and should,
be measured along multiple axes. At times
21
COMMENTARY
making gender comparisons between
different communities and cultures is a
problematic undertaking. What can
nevertheless be argued is that in various
domains Naga women outdo their counter-
parts across India. If the safety of women
can be interpreted, or at least in part, as
a reflection of their social status, the
Hindu, basing itself on data from the
National Crime Records Bureau, declared
Nagaland as the safest state for women in
India: “With an estimated female popu-
lation of over 11 lakhs (in 2014), the rate
per lakh population comes to six. In fact,
it is the only State in our country to have
rates of crime against women in a single
digit” (cited in the Hindu, 22 August 2015).2
Nagaland also enjoys a female literacy
rate that is well above the national aver-
age, while the female workforce participa-
tion rate is “fairly better than the National
average” (Sashimatsung 2015: 31).
Statistics, however, can conceal as much
as they reveal; female literacy, after all,
does not necessarily equate empower-
ment, while the female workforce partici-
pation rate does not tell us about levels
of job seniority, equal pay, and prevail-
ing gender divisions on the work floor.
That said, as early as the 1960s Elwin
(1961: 104) commended on the status
Naga society bestows on women:
Although there is no matriarchy among the
Nagas, women hold a high and honourable
position. They work on equal terms with
men in the fields, and make their influence
felt in the tribal councils.
If, in the past, Naga women, while not
actually part of customary bodies, at
least possessed the agency to “influence”
decisions, present views that Naga women
are wholly excluded from decision-making
bodies, would suggest that, in recent
decades, patriarchy has strengthened.
Dolly Kikon (2002: 174) offers a partial
explanation for this. The marginalisation
of women, she argues, has deepened due
to the particularistic “socio-legal inter-
action between the Naga people and the
State apparatus” in the context of pro-
tracted political conflict. It was amidst the
Indo–Naga conflict, the spiralling violence,
and the militarisation of the hills, that,
Kikon writes, women became “the main
targets of State oppression.” This led to
the “shrinking of the social space” for
22
women and impelled a “significant
transformation” within the “internal
dynamics of Naga society, where women
have had to engage with the strengthen-
ing of patriarchal modes of control,”
resulting “in the legitimising of processes
of exclusion or marginalisation of women
from decision-making and political power”
(Kikon 2002: 176–77). While Kikon is up-
front in identifying the patriarchal hierar-
chies at the base of Naga customary law,
she cautions against “any piecemeal at-
tempt at segregating the status of women
in Naga society from the political and
militaristic development within society
itself” (Kikon 2002: 181).
What remains evidently clear is that in
the post-statehood era, Naga women have
had little or no role to play in Nagaland’s
political arena. Amer (2013: 93) writes:
While improvements in women’s educational
and professional status [as the statistics
cited above indicate] may be a stimulus for
women’s empowerment this is clearly not
sufficient to win elected office. In the elec-
toral history of Nagaland, spanning a period
of more than four [five] decades, fifteen
women candidates have contested, but all
were repeatedly defeated.
Of all political contestants in Nagaland
only 0.76% (Amer 2013) were female
with a zero success rate. Democratic poli-
tics across Nagaland, plainly, has been a
men’s game. Given that roughly half of
Nagaland’s voters are female, this would
also imply that females themselves do
not wish to vote for other females or,
alternatively, that they are stripped from
the autonomy to adjudicate on their own
votes. For Amer (2013: 94) the absence
of women in Nagaland’s political arena
remains best understood as a reflection
of the patriarchal set-up of Naga cus-
tomary law: “The traditional institu-
tions around which Naga social and po-
litical life revolves have never recog-
nized the rights of women as primary
decision makers.”
Across India, and in multiple domains
of social life, reservations have been
applied—with varying degrees of success
and with countless side-effects—to trans-
form society in ways that did not grow
organically. Female voices within Naga
society now insist that reservation for
women is the only way to improve women’s
public and political power and standing,
MARCH 4, 2017
as the spirit of Naga customary law is un-
likely to adapt to modern times. This view
is understandable. Another angle to this
debate, however, is that, if anything, his-
tory shows that Naga customary law is not
necessarily rigid and conservative, but
willing to adapt and change—albeit only
gradually so—over time.
Naga Customary Law
Perhaps contrary to popular knowledge,
Naga customary law is not an ancient
fossil or commandments hewn in stone.
Customary law permits a certain drift in
form, content, and emphasis, and when
moral values, religious beliefs, ideas of
justice, and the political context changed,
Naga customary law usually followed
suit. Notwithstanding the regular rhe-
torical invocation of “since time imme-
morial” to explain and justify the status
quo, a closer look reveals that much of
what is now considered traditional Naga
customary law and procedures has its
genesis in Nagas’ modern history, a his-
tory strongly shaped by colonialism,
massive conversions to Christianity, and
enclosure into the Indian nation state.
While, for instance, dobashi courts
are today (rightly) celebrated as the
personification and repository of Naga
customary law, the institution of
dobashi (whose literal translation is
“interpreter”) is, technically speaking,
not a Naga tradition, but was created by
the colonial government in its political
scheme to extend colonial authority and
control deep into the Naga uplands.
Dobashis were bequeathed with power
and privileges, but conditional on them
assisting colonial offices and officers in
upholding law and order, communicat-
ing colonial decrees to villagers, and in
settling disputes. And if, at village
levels, gaonburas (village headmen) are
nowadays an intrinsic part of customary
proceedings, they too were initially
village-wise British appointees roped in
to effectuate the collection of “house
tax,” and for which they received a com-
mission and a red woollen shawl that
signalled their standing and loyalty to
the colonial government. While British
colonialism transformed the workings
of Naga customary law, the entrance of
Christianity, from the late 19th century
vol lIi no 9 EPW Economic & Political Weekly

onward, altered its character and sub-
stance. Christianity’s influence is seen
not just in the prayers that nowadays
precede and conclude most customary
proceedings, but can also be read in the
ideas of “forgiveness,” “compromise,”
and “divine judgment” that seemingly
have become hallmark values of Naga
customary law.
That such values are modern altera-
tions is not always recognised. Shimray
(2011: 12) characterises Naga customary
conceptions of justice as “a means of
building amity and unity through con-
sultations and mentoring [in which] the
arbiter takes the role of a mediator
between the parties in dispute in order
to reconcile them and encourage a heal-
ing in their social relations.” Naga cus-
tomary law, Shimray concludes, “clearly
prioritizes reconciliation and social har-
mony over redress and punishment.”
While this might be an apt reading of the
spirit of contemporary Naga customary
law, it is nevertheless one far removed
from the customary laws colonial officers
encountered and wrote about in detail
when they first climbed the Naga inhab-
ited hills.
Back then, it was the rule of retribu-
tion that reigned supreme. Colonial
officers, for instance, observed how
thieves were “customarily beaten by the
kindred of the victim” (Hutton 1921a:
148) or “trussed up like a pig ... [and laid]
on a bed of nettle-leaves” (Mills 1926:
194). In other parts of the hills, not
only was “the thief killed on the third
offence (he is let off twice), but his
wife and children are killed as well, an
effective way of stopping hereditary
tendencies in crime” (Hutton 1921a: 148).
Female thieves, however, were dealt
with less “harshly”; they “were rolled
in a mud-hole and stamped upon in
the mud” (Hutton 121a: 149). Yet other
Naga villages and tribes allowed both
thieves and debtors to be sold as “slaves”
(Mills 1922: 111).
Before proceeding, it must be quali-
fied here that Naga customary law is
inherently plural. It differs not only from
tribe to tribe, but also from village to
village, and, as such, Naga customary
law, as a singular body of law, does not
exist. However, any suggestion today of
Economic & Political Weekly EPW MARCH 4, 2017
having a culprit beaten, killed, stamped
upon in the mud, or sold as a slave would
be immediately objected to by village
and tribal bodies, precisely because this
would contravene the spirit of Naga
customary law. Clearly, something has
changed, and, most would agree, for the
better. What drove these alterations
were changing perceptions of the cos-
mos, and of what constitutes the good
moral and social life.
Naga customary law, then, was never
frozen in time. Contrary to state laws,
which, once written down and ratified,
make a sort of orthodoxy possible—
hence the concept of “archaic laws”—
customary laws are processual and
potentially flexible. It is for this reason
that Justice D M Sen (Directorate of Arts
and Culture 1976: v) spoke with pro-
found wisdom when he objected, in the
mid-1970s , against a proposal by the Na-
galand government to codify Naga cus-
tomary law, arguing:
I am very much against codification. The mo-
ment you codify you make it final and firm
and rigid. The societies, the tribal societies are
developing much faster than any other soci-
eties and you yourself do not know what you
are going to retain and what are you not. So
codification means binding yourself.
To be sure, while the form and sub-
stance of Naga customary law adapted
and reinvented itself in the passing from
the precolonial to the postcolonial, and
post-statehood era, it always did so in
ways that remained distinctively Naga
in custom and culture. In fact, it seems
its very capacity to adapt and change
explains Naga customary law’s remarkable
resilience as well as reveals its genius.
At this juncture, with the call for inclu-
sion of women in public and political
life, Nagas have been given yet another
opportunity to invoke their genius in
deciding the present and future outlook
of customary law.
notes
1 Through a special constitutional provision
Naga tribes, as well as other resident tribes in
parts of the region, are exempted from paying
income-tax.
2 While crimes against women are, on the whole,
comparatively low in Nagaland, it must be
qualified that cases of crime against women,
when they occur, are regularly dealt with by
customary bodies, and are therefore not
always officially reported.
vol lIi no 9
COMMENTARY
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Amer, M (2013): “Political Status of Women in
Nagaland,” Journal of Business Management &
Social Science Research, Vol 2, No 4, pp 91–95.
Chasie, C (2017): “Naga Society Lies Wounded
Again,” Morung Express, 5 February.
Directorate of Arts and Culture (1976): Proceed-
ings of the Seminar on Naga Customary Laws,
Kohima, 21–23 November 1974, Kohima: Naga-
land Government.
Elwin, V (1959): A Philosophy for NEFA, Shillong:
North-East Frontier Agency.
— (1961): Nagaland, Shillong: Research Depart-
ment Adviser’s Secretary.
George, J and K Yhome (2008): “Community Forest
Management: A Case Study of Nagaland,
India,” paper presented at 12th Biennial Con-
ference of the International Association for the
Study of Commons: 1–13.
Hindu (2015): “Women Are Safest in Nagaland,”
22 August.
Hutton, J H (1921a): The Angami Nagas: With
Some Notes on Neighbouring Tribes, London:
Macmillan.
— (1921b): The Sema Nagas, London: Macmillan.
— (1965): “The Mixed Culture of the Naga Tribes,”
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Imsong, M (2011): God-land-people: An Ethnic Naga
Identity, Dimapur: Heritage Publishing House.
Imkongmeren (2015): “Land Resources and Indige-
nous Identity in the North East India: Constitu-
tional Provisions Towards Tribal Communities
as Colonial Legacy,” Challenges of Land Devel-
opment in Nagaland, Takatemjen (ed), Mokok-
chung: lark entre for Peace Research and
Action, pp 50–71.
Jamir, T (2015): “Women, Land and Identity in Naga
Society: A Sociological Viewpoint,” Challenges of
Land Development in Nagaland, Takatemjen (ed),
Mokokchung: lark entre for Peace Research
and Action, pp 106–15.
Kikon, D (2002): “Political Mobilization of Women
in Nagaland: A Sociological Background,”
Changing Women’s Sstatus in India: Focus on
the Northeast, W Fernandes and S Barbora (eds),
Guwahati: North-Eastern Social Research
Centre, pp 174–82.
Longchar, W (1996): “Dancing With the Land:
Significance of Land for Doing Tribal Theology,”
Indian Journal of Theology, Vol 38, No 3,
pp 16–28.
Mills, J P (1922): The Lotha Nagas, London: Macmillan.
— (1926): The Ao Nagas, London: Macmillan.
Nuh, V K (1986): Nagaland Church and Politics,
Kohima: V K Nuh.
Phizo, A Z (1951): “Plebiscite Speech,” viewed on 19
February 2017, www.neuenhofer.de/guenter/
nagaland/phizo.html.
Sashimatsung (2015): “Workforce Participation Rate
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Shimray, G (2011): “Foreword: Legal Pluralism in
Southeast Asia—Insights from Nagaland,”
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Rights of Indigenous Peoples in Southeast Asia,
Colchester, M and S Chao (eds), Chiang Mai:
ST Film & Plate.
Vamuzo, M (2012): “Narratives of Peace: Naga
Women in the Self-determination Struggle,”
Tensions Journal, 6, pp 1–23.
Varah, F (2013): “Situating the Human’s Relationship
with Nature in the Tangkhul Naga’s Lifeworld,”
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Wouters, J J P (2016): “Sovereignty, Integration or
Bifurcation? Troubled Histories, Contentious
Territories and the Political Horizons of the
Long Lingering Naga Movement,” Studies in
History, Vol 32, No 1, pp 97–116.
23
COMMENTARY

On the other hand, ex post analysis

State Level Debt–Deficit Dynamics captures the effect of interest rates, mat-
urity composition of debt, inflation, and
Emerging Issues growth in real gross domestic product
(GDP) on the changes in the pattern of
the debt–GDP ratio. How much did the
Lekha Chakraborty, Manish Gupta, Pinaki Chakraborty growth in GDP contribute to the changes
in the debt–GDP ratio? What impact did

An analysis of the debt and deficit
of states based on the budget
estimates of 2016–17 shows that
almost half of them have a fiscal
deficit target higher than the limit
set in the Fiscal Responsibility
and Budget Management Act.
These states need to focus on
the quality of expenditure and
elimination of revenue deficit
as per the framework proposed
by the Fourteenth Finance
Commission to enhance
state-level capital spending.
A
fter the presentation of the report
of the Fourteenth Finance Com-
mission (FFC), the debt–deficit
dynamics of states can be analysed in
two ways—ex ante and ex post. The
ex ante analysis involves identifying policy
changes which can create an impact on
debt and deficits through the very design
of interventions. The introduction of Ujwal
Discom Assurance Yojana (UDAY) scheme
and increase in the borrowing powers of
states to a maximum of 0.5% of the gross
state domestic product (GSDP) by the
FFC1 are examples of such ex ante policy
interventions that would have an impact
on the debt and deficit of states.
Figure 1: Revenue Deficit in 2016–17 BE
Arunachal Pradesh
inflation have on the size of the debt?
Did high/low primary deficits (deficits
net of interest) lead to an upward/down-
ward bias in the debt–GDP ratio?
An ex post analysis is not feasible at
the moment (based on 2016–17 budget
estimates) as we do not have enough
data points to answer these questions.2
Alternatively, we have tried to analyse
the emerging debt and deficit scenarios
in states based on the 2016–17 budget
estimates. We also examine the emerg-
ing debt–deficit scenario post-FFC, tak-
ing into consideration the flexibility for
higher borrowing recommended by
the FFC.
(% of GSDP)
9.83

Mizoram 8.47
Tripura 5.70
Jammu and Kashmir 4.80
Manipur 3.98
Nagaland 3.49
Bihar 3.03
Jharkhand 2.52
Uttar Pradesh 2.13
North-eastern and
Himalayan states 1.96
Chhattisgarh 1.57
Assam 1.48
Sikkim 1.40
Meghalaya 1.33
Odisha 0.99
Telangana 0.56
Madhya Pradesh 0.53
Goa 0.33
Gujarat 0.27
All states 0.13
Karnataka 0.04
Uttarakhand 0.01
West Bengal 0.00
This article is a part of an ongoing larger study Maharashtra -0.16
on intergovernmental fiscal relations in India, Himachal Pradesh -0.35
funded by the International Development Andhra Pradesh -0.71
Research Centre, Canada. Rajasthan -1.12
Lekha Chakraborty (lekha.chakraborty@ Tamil Nadu -1.14
nipfp.org.in), Manish Gupta (manish.gupta@ Punjab -1.71
nipfp.org.in) and Pinaki Chakraborty (pinaki. Kerala -1.88
chakraborty@nipfp.org. in) are with the Haryana -2.08
National Institute of Public Finance and Policy,
-3.50 0.00 3.50 7.00 10.50
New Delhi.
Source: 2016–17 Budget Documents of State Governments and Central Statistics Office (CSO), Government of India.

24 MARCH 4, 2017 vol lIi no 9 EPW Economic & Political Weekly

 COMMENTARY

Figure 2: Fiscal Deficit in 2016–17 BE (% of GSDP) the fiscal deficit, all states’ combined
-0.15 Mizoram deficit is expected to be below 3% of
-1.51 Maharashtra GSDP as mandated under the Fiscal
-1.57 West Bengal Responsibility and Budget Management
-1.63 Arunachal Pradesh (FRBM) Act. However, 14 states have
-2.03 Jharkhand budgeted to show fiscal deficits above
-2.07 Gujarat 3% of GSDP. States budgeted to have a
-2.10 Karnataka fiscal deficit of more than 4% of GSDP are
-2.10 Nagaland Tripura, Haryana, Rajasthan, Goa, and
-2.53 Chhattisgarh
Jammu and Kashmir.
-2.65 Assam
If we consider IP/RR, it is the highest
-2.76 Punjab
in Punjab, followed by West Bengal,
-2.87 All states
Haryana, Gujarat, and Kerala, with an
-2.90 Tamil Nadu
-2.91 Uttarakhand
interest outgo of more than 15% of
-2.98 Himachal Pradesh
revenue receipts (Figure 3). There are
-2.99 Andhra Pradesh seven states with average ratio of 11.3%
-3.23 Manipur (other than those above 15%). There are
-3.23 Sikkim 17 states with below 10% IP/RR ratio,
-3.31 Bihar including some of the major states like
-3.33 Kerala Karnataka, Uttar Pradesh, Madhya Pra-
-3.39 Meghalaya desh, Bihar, Odisha, and Assam. The
-3.51 Telangana outstanding debt to GSDP ratio for
-3.72 North-eastern and
Himalayan states all states is estimated at 22.7%. For
-3.74 Madhya Pradesh Northeastern and Himalayan states,
-3.78 Uttar Pradesh
this ratio is expected to be around 28%
-3.89 Odisha
(Figure 4).
-4.24 Tripura
-4.25 Haryana
Enhanced Debt Limit
-5.48 Rajasthan
and Eligibility
-6.80 Goa
-9.24 Jammu and Kashmir The FRBM Act mandates that subnational
-10.00 -8.00 -6.00 -4.00 -2.00 0.00
governments in India maintain a zero
Source: 2016–17 Budget Documents of State Governments and CSO, Government of India.
revenue deficit or revenue surplus and a
fiscal deficit threshold of 3% of GSDP.
Figure 3: IP–TRR Ratio in 2016–17 BE
The FFC envisaged that the quality of
0.215

0.25
0.202

deficits is as significant as the levels.

0.167

0.20 The FFC prescribed the following condi-

0.150
0.149
0.138
0.142
0.129

tions for enhanced borrowing limits

0.128
0.121
0.114
0.112
0.113

0.15
0.097
0.097

of states:
0.094
0.080
0.081
0.079
0.078
0.075
0.076
0.072
0.067

0.10 (i) Fiscal deficit of all states will be an-

0.066
0.061
0.060
0.048
0.042
0.039

0.051

chored to an annual limit of 3% of GSDP.

0.05
The states will be eligible for flexibility
0.00 of 0.25% over and above this for any
Nagaland

Uttar Pradesh

Maharashtra

Punjab
Chhattisgarh
Assam
Manipur
Odisha
Meghalaya
Bihar
Sikkim
Mizoram
Jharkhand
Telangana
Tripura

North-eastern and
Himalayan states
Madhya Pradesh
Jammu and Kashmir
Karnataka

All states
Goa
Uttarakhand

Tamil Nadu
Rajasthan
Kerala
Gujarat
Haryana
West Bengal
Arunachal Pradesh

Andhra Pradesh

Himachal Pradesh

given year, for which the borrowing

limits are to be fixed if their debt–GSDP
ratio is less than or equal to 25% in the
preceding year.
(ii) States will be further eligible for an
Source: 2016-17 Budget documents of State Governments and CSO, Government of India. additional borrowing limit of 0.25% of
GSDP in a given year for which the
Deficit and Interest Payment: to have a revenue deficit in 2016–17 borrowing limits are to be fixed if the
Statewise Analysis (budget estimates). These states are interest payments are less than or equal
Statewise revenue deficit, fiscal deficit, Maharashtra, Himachal Pradesh, Andhra to 10% of the revenue receipts in the
and interest payment to revenue receipts Pradesh, Rajasthan, Tamil Nadu, Punjab, preceding year.
(IP/RR) ratio are presented in Figure 1 Kerala, and Haryana. However, the com- (iii) The two options under these flexi-
(p 24) and Figures 2 and 3. As is evident bined revenue account of all states is bility provisions can be availed of by a
from Figure 1, eight states are expected expected to be in surplus. With regard to state either separately, if any of the above
Economic & Political Weekly EPW MARCH 4, 2017 vol lIi no 9 25
COMMENTARY
Figure 4: Outstanding Liabilities in 2016–17BE (% of GSDP) (budget estimates), may slip into a reve-
60
nue deficit if there is a revenue shortfall

47.9
50 or increase in revenue expenditure more

38.0
than what is budgeted. Since almost

34.6
33.2
40

32.3
33.0
30.7
29.6
half of the states have fiscal deficits

27.0

29.0
26.1

28.0
26.6

27.1
25.3
24.9
24.0
22.7
30

22.4
22.5
22.3
target higher than the FRBM limit in
21.0
20.7
18.3
16.9

18.4
18.0

18.8
16.2
14.3

20 2016–17 (budget estimates), fiscal con-

10 solidation at the state level under the
new framework of borrowing proposed
0
by the FFC should focus on the quality of
Maharashtra

Uttar Pradesh

Nagaland
Chhattisgarh
Karnataka

Telangana
Odisha
Assam
Tamil Nadu
Gujarat
Uttarakhand

Madhya Pradesh

Haryana

West Bengal
Tripura
North-eastern and
Himalayan states
Meghalaya
Punjab

Rajasthan

Goa
Manipur
Mizoram
Andhra Pradesh

Jharkhand
All states

Sikkim

Kerala
Bihar
Arunachal Pradesh

Himachal Pradesh
expenditure and elimination of revenue
deficit. A major concern emerging out of
this analysis is that some of the major
states (in terms of GSDP) are expected to
Source: 2016–17 Budget Documents of State Governments and CSO, Government of India.
slip into revenue deficits as per the
Figure 5: First Year Ex Post to FFC—Final States with Combined Eligibility for Enhanced Debt 2016–17 budget estimates. The rationale
Procedure for 2015–16 (parameters fixed for 2013–14) of the new framework of borrowing is
30 to provide fiscally prudent states with
Debt/GSDP 24.79
22.02
21.76 22.12 additional borrowing for higher capital
20 expenditure. According to the FFC’s assess-
IP/TRR 16.38
10.00
ment, state-level capital outlay during
8.75 8.44
10 5.90 its award period is expected to increase
4.83
from 3.83% of GDP in 2015–16 to 4.61%
0 of GDP in 2019–20. The success of this
Jharkhand Karnataka Madhya Pradesh Odisha Sikkim
enhanced borrowing would be judged
Source: Finance Accounts and Budget Documents of States (various years) and CSO, Government of India.
both by the increase in the number of
criteria is fulfilled, or simultaneously if period in the first year of assessment states qualifying for this facility and by
both the above stated criteria are ful- (2015–16) revealed that only five the increase in capital expenditure at
filled. Thus, a state can have a maximum states—Jharkhand, Karnataka, Madhya the state level.
fiscal deficit–GSDP limit of 3.5% in any Pradesh, Odisha, and Sikkim—have
given year. successfully managed the FRBM thresh- Notes
(iv) The flexibility in availing the addi- olds of deficits and the criteria of 1 FFC has provided flexibility to states for higher
tional limit under either of the two outstanding debt to GSDP below 25% borrowing under following conditions: states
should have no revenue deficit, fiscal deficit
options or both will be available to a and IR/RR ratio below 10% (Figure 5). should not be more than 3% of GDP, interest
state only if there is no revenue deficit in Therefore, they are eligible for the payment to revenue receipt ratio below 10%
and debt to GSDP ratio below 25%.
the year in which borrowing limits are to enhanced debt procedure as suggested
2 The ex post analytical framework of debt–
be fixed and the immediately preceding by the FFC to 0.5% of GSDP. Gujarat, deficit dynamics is also within the intertemporal
year (Finance Commission of India 2015). Meghalaya, and Uttarakhand were eli- (the intertemporal budget constraint equation,
Bt/Yt = (˜rt−1,t − πt−1,t − gt−1,t) Bt−1/
We examine the eligibility of states gible for a partial enhanced borrowing Yt−1+deft/Yt+Bt−1/Yt−1 which accounts for
for additional borrowing powers based procedure, as either of the IR/RR or how a nominal interest rate ˜rt−1,t, net infla-
tion πt−1,t, net growth in real GDP gt−1,t, and
on the FFC condition in the first year debt/GSDP was maintained within the the net-of-interest deficit debt combine to
of assessment, that is 2015–16. The stipulated limits. As this recommenda- determine the evolution of the government
enhanced market borrowing of states tion was implemented from the fiscal debt–GDP ratio; where Yt is real GDP at t and
Bt is the real value of government debt) budget
for 2015–16 is analysed based on the year 2016–17, these states did not benefit constraint equation (Hall and Sargent 2010),
four criteria proposed by the FFC. A from this enhanced borrowing facility. which is beyond the scope of the article at
the moment.
two-step methodology is followed for As per information obtained from the
identifying the states eligible for an Ministry of Finance, in 2016–17, only six
enhanced borrowing procedure. Step states have become eligible for en- References
one is to identify the states within the hanced borrowing limit. Budget Documents of State Governments (2016–17
and 2015–16): “Finance Accounts of State Gov-
fiscal deficit upper bound of 3% of GSDP ernments,” (various years), Comptroller and
and with no revenue deficit. Step two is Conclusions Auditor General of India, New Delhi.
Finance Commission of India (2015): “Report of the
to find out that states are within the To conclude, we need to emphasise that Fourteenth Finance Commission,” Government
subset with IP/RR ratio below 10% and all states’ revenue account is expected of India.
debt-to-GSDP ratio below 25%. to have a deficit in 2015–16 (revised Hall and Sargent (2010): “Interest Rate Risk and
Other Determinants of Post-WWII US, Govern-
The analysis of outstanding debt and estimates). The revenue surplus, esti- ment Debt/GDP Dynamics,” NBER Working
deficits of all states ex post to the FFC mated at 0.13% of GSDP in 2016–17 Paper 15702.

26 MARCH 4, 2017 vol lIi no 9 EPW Economic & Political Weekly


Pakistan in the Post-Taliban
Present
S Akbar Zaidi
The political leadership in
Pakistan, even when democracy
has grown and strengthened,
has limited writ over what it
can do regarding what the
military considers its terrain. The
Taliban may have been partially
eliminated, but other equally
odious militants continue to
find protection through some
organisations and individuals in
the military. Dealing with the
threats to Pakistan’s future and
stability entails a deeper look
within rather than blaming
India or Afghanistan.
S Akbar Zaidi (sakbarzaidi@gmail.com) is
a political economist based in Karachi, who
teaches at Columbia University in New York.
Economic & Political Weekly EPW MARCH 4, 2017
I
t might not immediately make sense
to make the claim, given the eight
terrorist suicide attacks across Paki-
stan in a matter of five days in February
which resulted in over 120 deaths, that
Pakistan has actually entered into its
post-Taliban present. This is not to imply
that whatever groups are branded under
a very broad, often internally contradic-
tory, banner called the “Taliban,” have
all been wiped out, but Pakistan for
many months now, has moved on from
the numerous earlier phases of Taliban
suicide insurgency since the middle of
the last decade. Moreover, despite the
presence of numerous militant Islamic
jihadi organisations still active in Paki-
stan, the strength of the Taliban in its
many manifestations is now quite dilut-
ed and dispersed. (Since this article was
written, at least 10 people were killed
and 30 others injured on 23 February
after a powerful bomb ripped through
the Z Block market of Lahore.)
It must be remembered that, whatever
populist and popular form the original
Taliban started out with in the late
1990s, the present nature of the Taliban
in its various offshoots, is neither popu-
lar nor populist. The belief still held by
some (younger) Pakistani academics
and scholars, many of whom live in the
West who seem to have inadequate
understanding of history, that the Tali-
ban movement was (and still continues
to be) a reaction to imperialism, is revo-
lutionary, that it harboured aspirations
reflected by the people whom it may
have wanted to benefit, that there was
widespread support for the Islamic jus-
tice system meted out by these groups
and that it was an indigenous uprising,
no longer hold currency. Perhaps such
impressions and wishful thinking may
have been true for a few years two dec-
ades ago (although such premises are
also quite incredulous), the changing
politics of the region, aggressive military
vol lIi no 9
COMMENTARY
action, and splits and differences within
some entity which could claim to repre-
sent the original Taliban, have resulted
in these groups becoming more like ma-
fias, rather than ideologically motivated
Islamic groups believing in some obscure
and outdated notion of Islamic jihad.
This is perhaps even so, despite the
emergence of ISIS/DAISH (Islamic State
of Iraq and the Levant) and other larger
groupings in the region. One could even
make the somewhat provocative sugges-
tion that the emergence of DAISH in
Pakistan is actually the swan-song of the
Taliban as it has been known.
Historical Context
To understand the genesis of what the
Taliban once was one needs to go back
four decades. The 1979 invasion by the
Soviet Union of Afghanistan gave rise to
the regional phenomenon of the mujahi-
deen, the Muslim and Islamic fighters
from Pakistan, Afghanistan and the Arab
world, fighting against infidels in the
name of Islamic jihad. These mujahi-
deen were backed tooth and nail by the
Ronald Reagan administration in the
United States (US), supported and advised
by the Central Intelligence Agency (CIA),
with Saudi money and interests, and
perhaps most importantly, by the Paki-
stani Army and its Inter Services Intelli-
gence (ISI). There is a huge amount of
academic, scholarly and journalistic
research which very clearly shows this
nexus of money, Western/capitalist ide-
ology, arms, and training by all the three
main countries and actors involved.
Reagan even hosted these “gentlemen”
at the White House, whom he referred to
as “the moral equivalent of the founding
fathers.” While the US had its interests in
undermining Soviet expansionism in the
region, and is given credit for bringing
about the collapse of socialism in the
Soviet Union, the role played by Pakistan
and its army, was pivotal in bringing an
end to Soviet expansion in Afghanistan.
General Zia-ul-Haq, Chief of the Army
Staff and then President of Pakistan
from 1977 onwards, after undertaking
a coup against Pakistan’s first, and
perhaps most popular, elected Prime
Minister, Zulfiqar Ali Bhutto, called
himself a “fundamentalist.” In those
27
COMMENTARY
days a fundamentalist was simply some-
one who, as in this case, believed in what
he perceived to be the core, albeit anti-
quarian, notions of what Islam was. After
ousting Bhutto on the back of a popular
conservative movement, Zia imposed
his Islamisation agenda on Pakistan. In
his first two years of power, he initiated
numerous Islamic laws based on stern
Sunni interpretations of what an Islamic
system should look like. He received
some support, particularly from Islamic
political parties, notably the Jamaat-e-
Islami. Since he was also the head of the
military which ruled Pakistan under
martial law, the military dictator was in a
position to counter any opposition to his
Islamisation programme which was
challenged by different sections within
Islam, as well as by different sections of
the Pakistani public which did not en-
dorse the state-led move to Islamise
laws. Given his supreme, ruthless, dicta-
torial position in authority, all opposi-
tion to his dominant narrative was easy
to suppress, but there was always dis-
sent and opposition present.
Perhaps the history of the world, and
most certainly of the region and of Paki-
stan, would have been very different
had a fundamentalist Islamist military
dictator not been in power in Pakistan
when the Soviet Union invaded Afghani-
stan at the end of 1979. As it happened,
the Islamic fundamentalist military
dictator quickly accepted the huge largesse
offered by the US President, turning
Pakistan into global capitalism’s “front-
line state,” in the first war against Soviet
terror. Pakistan received an undisclosed,
and unaccounted for, amount running
into billions of dollars for helping US and
Saudi efforts to fight against the Soviet
military in Afghanistan. Thousands, if
not hundreds of thousands of Pakistanis
and Afghans were supplied weapons
through the CIA, and were trained by the
Pakistani Army and the ISI to wage a jihad
in Afghanistan. As a consequence, the
mujahideen won, and the Soviets were
annihilated in Afghanistan. Perhaps three
million Afghan refugees crossed into
Pakistan during the seven-year war, and
most found refuge in what was then
called the North West Frontier Province
(NWFP, now called Khyber Pakhtunkhwa)
28
in Pakistan. While this war may have Many of the earlier and original Taliban
achieved its purpose, the resulting con- were those who had fought against the
sequences affecting Pakistani society Soviet Red Army a decade earlier. Mak-
caused permanent social and political ing the most of the mayhem in Afghani-
damage. stan, these Taliban, led by Mulla Omar,
The mujahideen, after their victory in took over parts of the Pashtun areas of
the mid and late 1980s, returned to Paki- Afghanistan. By September 1996, the
stan and sat idly for some years. Second- Taliban were in a position to declare
generation Afghan refugees entered the parts of Afghanistan as the Islamic Emir-
madrasas of the NWFP, to learn about a ate of Afghanistan, where some draco-
particularly austere interpretation of nian version of a so-called shariah was
Islam. Since the post-Soviet settlement enforced. Only three countries officially
did not hold in Afghanistan, with differ- recognised the Taliban Emirate—Saudi
ent victors and commanders and leaders Arabia, the United Arab Emirates, and of
of different factions claiming warlord- course, Pakistan. These Taliban gave ref-
ship over particular terrains, the condi- uge to many global Islamic militants, one
tion in Afghan was always volatile and of whom was Osama bin Laden, who
unstable. The Afghan and Pakistan was the leader of al-Qaeda.
mujahideen were largely Pashtuns, and Following the events of 9/11 and the
in Afghanistan after the post-Soviet deci- invasion of US and the North Atlantic
mation, Tajiks and other groups under Treaty Organization (NATO) troops into
the broad Northern Alliance led by Ahmad Afghanistan, much of al-Qaeda, which
Shah Massoud, emerged as a counter-force was the target of US forces, was wiped
in ethnically divided Afghanistan. The out. Many al-Qaeda operatives, along
original Taliban was a conglomerate of with Taliban fighters, were able to cross
former Pakistani-madrasa-trained students over the open Afghan–Pakistan border
(from, talib, a student, taliban, students). and embed themselves in safe-houses,
It was Prime Minister Benazir Bhutto, being welcomed as “anti-Imperialists”
in her second term of office (1993–96), by sections of Pakistan’s right wing, mili-
who successfully initiated a policy to tant Islamists. Many Pakistanis had also
gain “strategic depth” and influence in joined the Taliban, as they had joined
a post-Soviet Afghanistan. The Taliban the mujahideen. They were often pro-
were supported by her government, tected by Pakistani handlers and if
trained by veteran mujahideen and the evidence is to be believed, by individuals
Pakistani Army, and encouraged and in the Pakistani military. The fact that
supported to take control of Afghanistan. Osama bin Laden had been living in
Dr Arun Kumar Banerji Fellowship Programme
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Fellowship has been named after the late Dr Arun Kumar Banerji, a well-known economic historian
and former Executive Director of the Reserve Bank of India.
The programme has been funded by a generous endowment provided by Mrs Usha Banerji.
Under this Programme, two students pursuing postgraduate (PG) or Doctoral degree in economics
or public policy are awarded summer internship at the EPW Research Foundation, Mumbai, for a
period up to three months each starting from April 2017.
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assigned work, they will be encouraged to do research on an issue bordering on any aspect of India’s
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have to make own arrangements for their stay at Mumbai, travel expenses (by train, 3rd AC) will be
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MARCH 4, 2017 vol lIi no 9 EPW Economic & Political Weekly

Pakistan for five years and was eventu-
ally killed in 2011, has given rise to am-
ple speculation and some journalistic
accounts that some senior members of
the Pakistani military knew about his
whereabouts.
Post 9/11 and Zarb-e-Azb
There have been three critical factors
which have resulted in the original Tali-
ban having lost ground in Afghanistan
and Pakistan. The first has been on
account of the US occupation of Afghani-
stan, where not just al-Qaeda was
attacked, but also what was once known
as “the Taliban” have been targeted.
Very often such alignments and affilia-
tions were overlapping and obscure. Hun-
dreds of drone attacks under the Obama
administration also took out numerous
leaders of al-Qaeda and the different
groupings under the Taliban franchise.
While some groupings which emerged
from the original Taliban still hold power
over parts of Afghanistan, a coordinated
Taliban force may no longer exist. On the
Pakistani side, as the Tehrik-e-Taliban
Pakistan (TTP) emerged distancing itself
from the Afghan Taliban, the Pakistani
military, finally, started its many forays
into the border areas with Afghanistan
and started military action against these
many groups under the banner of the
TTP. A more formal and more extensive
military operation was started in June
2014, to gather considerable force and
pace after an attack by the TTP on the
Army Public School in Peshawar killing
137 students and teachers in December
2015. The third key factor in breaking up
the Taliban, has been internecine warfare
and the deaths of many of the original
leaders. Some have been targeted by
drones, like Baitullah Mehsud, while
others, such as Mulla Omar, may have
died under different circumstances. The
death of prominent leaders has led to in-
fighting amongst claimants to leadership,
resulting in numerous breakaway groups
being formed. To talk about “the Taliban”
is no longer relevant nor correct.
The Problem in Pakistan
The problem of militancy, insurgency,
suicide bombings and suchlike within
Pakistan, might have had some roots
Economic & Political Weekly EPW MARCH 4, 2017
in what was previously called “the
Taliban,” but can no longer provide
sufficient explanation to the nature of
terrorism in Pakistan. Gone also is the
once popular differentiation, articulated
by political leaders, including Imran
Khan, between the “good” Taliban and
the “bad” Taliban, quickly put to rest
after the massacre of schoolchildren in
Peshawar in December 2015. Since that
particular incident, there has been con-
siderable support from politicians, the
public, and perhaps even the military,
to eliminate any extremist, militant
group of the Taliban variety. These
groups have been targeting the Paki-
stani people in violent ways since at
least June 2007, when Pakistan’s army
raided and demolished the Lal Masjid
(Red Mosque) in the middle of Islama-
bad—not in some remote tribal areas—
where according to various accounts,
hundreds of “militants” were killed.
Much of the earlier attacks within Paki-
stan emanated as a result of revenge
suicide attacks following the Lal Masjid
military action authorised by the then
President Pervez Musharraf. Hundreds
of Pakistani soldiers—and tens of thou-
sands of Pakistani citizens—have been
killed by these militant jihadi groups. It
was the military which had to deal with
threats to its own personnel, which
eventually led to military action within
Pakistan, targeting different gangs of
Islamic militants.
In a television interview on 18 Febru-
ary from the comforts of his home
in London, military dictator, undertrial
and absconder, former President of
Pakistan, General Pervez Musharraf
said that Pakistan—he must have
meant the military—needs to distin-
guish bet ween militants in Pakistan
targeting its own people—“bad mili-
tants”—and those fighting and helping
the Kashmiri people in India, the
“good militants”—Pakistan’s “strategic
assets.” He distinguished between
Maulana Masood Azhar, a bad militant
since he had attacked Pakistanis in
Pakistan, and the Jamaat-ud-Dawa Chief,
Hafiz Saeed, who was helping the
so-called Kashmir liberation move-
ment. This is clearly where Pakistan’s
problem lies.
vol lIi no 9
COMMENTARY
If, as academics and scholars have
reiterated, those sections of Pakistan’s
military have created, harboured, nur-
tured and protected Islamic militants in
and around Pakistan for decades,
whether it was the many wars in Af-
ghanistan or some Kashmir “cause,”
then they hold all responsibility for all
acts called terrorism within Pakistan.
While the Taliban may have been par-
tially eliminated, other equally odious
militants continue to find protection
through such organisations and indi-
viduals in the military. Political leader-
ship in Pakistan, even when democracy
has grown and strengthened, has limit-
ed writ over what it can do regarding
what the military considers its terrain.
This does not simply mean that the mili-
tary needs to “go after” the militants
and kill as many as it has following the
most recent attacks across Pakistan.
Moreover, the Punjab government of
the Nawaz Sharif-led Pakistan Muslim
League is also complicit, to blame and
not above reproach for protecting mili-
tants in the Punjab, often sharing the
same political podium with elected
officials.
The year 2016 saw the least number of
terrorism-related casualties in Pakistan
since 2008, officially because the gov-
ernment and the military were said to be
“on the same page,” which effectively
meant that the military decided that
enough was enough, and that it was
losing too many of its own and had to
eliminate militants. Numerous political
and administrative problems still persist,
and include the reluctance to “main-
stream” or incorporate FATA, the Federally
Administered Tribal Areas, bordering
Afghanistan into the Khyber Pakhtun-
khwa province, and the closing down of
madrasas which still preach and train
for jihad, to name just two. Pakistan
may have entered its post-Taliban pre-
sent, but the Taliban are no longer the
main threat to Pakistan’s future and sta-
bility. Blaming India’s Research and
Analysis Wing (RAW) and the Afghanistan
National Directorate of Safety (NDS)
for terrorist attacks might not be the
best way of dealing with these problems.
Perhaps one needs to take a deeper
look within.
29
BUDGET 2017–18
Erroneous Understanding of
Macroeconomic Challenges
Reliance on Supply-side Responses
C P Chandrasekhar
The government chose not to
adequately expand budgetary
expenditure to stimulate
aggregate demand due to
an erroneous understanding
of India’s macroeconomic
challenges. It relies heavily
on imagined fiscal gains
from demonetisation and the
introduction of the Goods and
Services Tax regime. The Union
Budget 2017–18 was a missed
opportunity for the government
and our economy.
C P Chandrasekhar (cpchand@gmail.com)
teaches at the Centre for Economic Studies
and Planning, Jawaharlal Nehru University,
New Delhi.
30
E
ven for those sceptical about the
government’s declared policy inten-
tions—varying from cleaning the
Ganga to doubling farmers’ incomes by
2022—the subdued and insubstantial
Union Budget 2017–18 was a surprise. The
circumstances in which the budget was
presented were exceptional. In the midst
of a slowdown in growth with signs of
the onset of deflation,1 the government
had chosen to withdraw and declare
worthless more than 80% of the value of
currency in circulation by demonetising
“higher value” notes. But new notes to
replace the ones withdrawn were slow
in coming and had to be rationed, be-
cause the indefensible measure had
been poorly designed and its implemen-
tation unplanned. The consequence, as
should be expected, was the expropria-
tion of purchasing power, even if for a
few months. Demand shrank, produc-
tion was disrupted and well before
budget time the economy was mired in
recession and deflation, as the sudden
shrinking of demand for lack of cash
aggravated the earlier slowdown and
depressed prices.
If the budget is meant to be an exer-
cise that takes the immediate macroeco-
nomic situation into account and lays
out the government’s spending decisions
and their financing for the coming year,
this was a perfect moment to expand
spending, since growth was slow and
inflation on the decline. A proactive fiscal
policy was also necessary because it was
a central government decision that shrank
growth and inflicted much pain on the
most vulnerable in the population, in
pursuit of a completely misguided attempt
to combat graft, black money, and counter-
feiting through demonetisation. These
are reasons why the government should
MARCH 4, 2017
have opted for fiscal expansion. There was
also a political reason why it was expected
that the government would announce an
expansionary budget. Elections in crucial
states, the results of which would make
much of a difference to the political
standing of the central government,
warranted promises of expenditure in-
creases. In fact, sections of the opposition
feared that the Budget Speech had been
brought forward by a month to be able to
exploit this opportunity to influence vot-
ers. Being a democracy with periodic
elections at central and state levels India
should be subject to its own version of
the political business cycle.
Choosing Contraction
What surprised many was that despite
these circumstances, the central theme
of Union Budget 2017–18 was not expendi-
ture expansion but fiscal consolidation.
The Budget Speech made a virtue of being
fiscally “prudent” irrespective of circum-
stances and set the fiscal deficit for 2017–18
at 3.2% of gross domestic product (GDP):
just one-fifth of 1 percentage point higher
than the government’s medium-term
target announced when the current eco-
nomic situation could not have been
expected. This is the same as the figure of
the deficit in the revised estimates (RE) for
2016–17. Finance Minister Arun Jaitley has
not even given himself the liberty to follow
the suggestion of the official committee
to review the targets set by the Fiscal
Responsibility and Budget Management
Act. That committee had conservatively
argued that, if needed, the deficit could
be allowed to increase by up to 0.5% of
GDP relative to the recommended target
of 3% for the next three years.
In sum, the defining feature of the
Bharatiya Janata Party (BJP)-led govern-
ment’s fiscal stance is to set an upper
bound to the deficit and then decide on
expenditures and means of financing
them. This conservative fiscal stance of
the government has had one important
implication. The budget is unashamedly
contractionary. Implicit in the budget’s
numbers and arithmetic is the projection
that the ratio of the centre’s expenditure
to GDP, which had fallen from 15.8% in
vol lIi no 9 EPW Economic & Political Weekly

2015–16 to 13.3% in 2016–17, would be
even lower at 12.6% in 2017–18. Even
this reduction may be an underestimate,
since revenues and receipts in the budget
have definitely been overestimated, as
discussed subsequently.
This contraction in expenditure was
completely unnecessary, even if the gov-
ernment was unwilling to go in for a dose
of additional resource mobilisation in
the context of a recession, the existence
of which it does not publicly recognise.
Demonetisation had two consequences of
relevance here. It had squeezed private
consumption and investment. It also
swelled the deposit base of the banks,
which were unwilling to lend to the private
sector because of the uncertainties gen-
erated by demonetisation and because
they were already burdened with large
volumes of non-performing assets (NPA s)
in advances made to the corporate sector
and infrastructural projects. In the event,
the government would do well to borrow
at reasonable costs from banks with in-
flated deposits, restrict lending opportu-
nities and finance capital expenditures
that would counter the recessionary con-
sequences of depressed private invest-
ment and consumption. This would have
raised output and revenues for the govern-
ment, and created an environment where
it could look to mobilising additional re-
sources when the economy had overcome
the consequences of demonetisation. Fiscal
expansion was thus not just what was
needed, but also what was feasible.
Conservative Neo-liberal Route
Instead of going down that route, the
government has opted for a “hard version”
of a neo-liberal fiscal policy, which must
control the deficit while meeting three
other requirements. The first is that deficit
control cannot be based on reliance on
additional resource mobilisation from
direct taxation, since the aim of fiscal
policy is to incentivise and facilitate pri-
vate investment. The norm is to reduce
direct tax slabs and rates, on grounds of
encouraging compliance, and to match
corporate tax rates in the most lenient of
countries abroad, so as to attract foreign
investors. In budget 2017–18, Finance
Minister Arun Jaitley has refrained from
additional resource mobilisation through
Economic & Political Weekly EPW MARCH 4, 2017
direct taxation and provided minor con-
cessions for medium and small enterpris-
es with a turnover below `50 crore and
on taxes on incomes in the lower tax
brackets. Direct tax revenues, therefore,
are projected to register a nominal in-
crease of just 13.4% in budget 2017–18
relative to the RE for 2016–17, as com-
pared with a 16.1% increase of RE 2016–17
relative to the actuals for 2015–16. Even
indirect taxes are expected to register a
much slower growth in 2017–18 of just
8.8% (budget estimate or BE relative to
RE) as compared with 20% in 2016–17 (RE
relative to BE). Thus, if expenditures are
to increase, the government is dependent
on non-tax revenues or non-debt creat-
ing miscellaneous capital receipts.
Which brings us to the second require-
ment of a neo-liberal fiscal stance that
the government must contend with. The
tasks of facilitating private investment
and attracting foreign capital require
large investments in infrastructure. In-
vestments in private or public–private
partnership projects financed by credit
from the public sector banking system
were an important way in which this
was sought to be achieved in the recent
past, which took the share of commercial
bank credit to industry diverted to infra-
structure from around 3% in 2002–03 to
more than a third by the beginning of
the next decade. But this was accompa-
nied by a large build-up of NPAs in bank
advances to the infrastructural sector.
Banks, therefore, are withdrawing from
lending to such projects. This requires the
government to step in with budgetary
expenditures. Budget 2017–18 does claim
that it is engaged in such an effort,
stating that it is making a “total alloca-
tion for infrastructure development” of
`3,96,135 crore. The Budget Speech
2016–17 had stated that the “total outlay
for infrastructure in BE 2016–17” was
`2,21,246 crore.
If these numbers refer to the same
combination of expenditures it would
mean that there would be a huge 79%
increase in nominal terms. This is, of
course, not the budgetary allocation, and
it is not at all clear that this would be a
comparison of like with like. If we restrict
ourselves to budgetary allocations for
important items of capital expenditures
vol lIi no 9
BUDGET 2017–18
in the railways, roads and highways and
allocations for the Pradhan Mantri Gram
Sadak Yojana, the expenditure as per
the BE 2017–18 is `1,28,177 crore as com-
pared with `1,01,106 crore as per the BE
2016–17, which points to a much smaller
nominal increase of 26.8%. The increase
between BE 2017–18 and RE 2016–17 is
even smaller at 20.6%. In sum, while the
government has made a modest effort at
raising budgetary allocations for capital
investment in infrastructure, it expects
much of the spending to come from
internal or extra budgetary resources of
the agencies involved. Not enough has
been done here even within the require-
ments set by a neo-liberal agenda.
The third prerequisite of a neo-liberal
fiscal policy is that the government needs
to allocate resources for targeted welfare
expenditures and schemes aimed at pro-
viding some employment, social services,
and social security support for the poor
who are not fully included in a develop-
ment strategy of this kind. It needs to
give what is a regressive trajectory a
“human face.” It is here that budget
2017–18 falls particularly short.
The total allocations for the principal
programmes for school education (the
Sarva Shiksha Abhiyan, the Rashtriya
Madhyamik Shiksha Abhiyan, the Teacher
Training Schemes and Saakshar Bharat
Mission and the Kendriya and Navodaya
Vidyalayas) have fallen in real (inflation-
adjusted) terms. Allocations for the Inte-
grated Child Development Services (ICDS),
which were reduced over the last two
years, have been raised by just 13% in
nominal terms over the RE for 2016–17,
when there is a crying need to increase
the “honorarium” given to anganwadi
workers and helpers, which is at present
much less than minimum wages. The pro-
vision for the mid-day meals programme
in budget 2017–18 is, at `10,000 crore,
only marginally higher than the RE of
`9,700 crore in 2016–17 and lower than
the `10,918 crore spent in 2013–14. Finally,
though the allocation for the Mahatma
Gandhi National Rural Employ ment
Guarantee Act (MGNREGA) of `48,000
crore for 2017–18 is higher than the BE for
2016–17, it is more or less equal to what
was spent on this scheme in 2016–17 (RE).
This freeze in allocation would in the final
31
BUDGET 2017–18
analysis force a delay in payments and
denial of resources to the states actually
implementing the programme, in what
is by law a demand-driven scheme.
Thus, the government’s adherence to a
hard neo-liberal strategy has meant that
even the moderate increase in budgetary
allocations for infrastructure has been
based on a reallocation of expenditures,
given the expenditure reduction visible
in the aggregate figures. In fact, the ag-
gregate may even be worse. Even the re-
alisation of the reduced level of expendi-
tures projected in the budget is based on
the assumption that the tax-to-GDP ratio
that had fallen from 12.8% in 2015–16 to
11.2% in 2016–17, would remain at that
level despite the adverse effects on tax
collections of demonetisation and the
small concessions given to personal in-
come taxpayers in the lower tax brackets
and to small and medium enterprises.
Grave Macroeconomic Misreading
One reason why the government did not
rethink its fiscal strategy in the wake of
demonetisation may be its erroneous
belief that demonetisation in itself would
deliver fiscal benefits. There was a strong
opinion circulating in the immediate
aftermath of demonetisation that the
government would benefit fiscally, because
of the existence of cash hoards linked to
unreported incomes, whether legally or
illegally acquired. Since those who had
been holding such cash hoards were
threatened with stringent action, the
government expected one of two conse-
quences. The first was that they would
declare these black money hoards to
avail of the Pradhan Mantri Garib Kalyan
Yojana (PMGKY), under which if they paid
50% tax before 31 March 2017, they were
free of prosecution. In addition, 25% of the
declared undisclosed income had to be
deposited under the PMGK Deposit Scheme
2016 for four years without interest. This
partial amnesty scheme was possibly
expected to bring in significant revenues
to the government in fiscal 2016–17, and
give it access to zero-interest credit there-
after, to help keep down the fiscal deficit
while expanding expenditures. Second,
those fearful of identifying themselves
under this scheme were expected not to
return the cash they held in the form of
32
the demonetised notes, even if they were
to lose the 50% they were eligible for
under the PMGKY. Since there was a
deadline for exchange or deposit of the
demonetised notes, they would be worth-
less after that date, and, it was argued,
no more a liability of the Reserve Bank of
India (RBI). If the latter is authorised by
law to extinguish those liabilities from its
balance sheets, it would have assets in
excess of liabilities that, it was assumed,
could be transferred as dividend to the
government. This too was expected to
swell the coffers of the government in
2017–18, allowing it to increase expendi-
tures without breaching the deficit bound.
In practice, these escape routes, which
would have improved the government’s
fiscal manoeuvrability, were not available
or did not open up. Neither were decla-
rations under PMGKY large, nor was the
demonetised currency that was returned
to the banks and the RBI significantly
short of what was expected, reducing
the liabilities of the central bank (if that
were possible at all). In fact, the unwill-
ingness of the RBI to declare how much
of the demonetised currency was received
by it is seen as suggesting that it may
even have received more than what was
expected because of its failure to detect
counterfeit currency or because of wrong
estimation of notes in prior circulation.
If despite the absence of windfall revenues
from these sources the government and
its finance minister sought to make fiscal
consolidation the principal “achievement”
of the budget, it can only be explained as
being the result either of a deep ideologi-
cal conviction that deficit spending must
be abjured, or a belief that curtailed
deficit spending allows for the strengthen-
ing of other factors that can spur growth.
The Budget Speech of Jaitley does put
forward a set of arguments suggesting
where he expects dynamism to come
from. It argued that the government’s
optimistic projection of a
pick-up in our economy is premised upon
our policy and determination to continue
with economic reforms; increase in public in-
vestment in infrastructure and development
projects; and export growth in the context
of the expected rebound in world economy.
So growth was to be delivered by an odd
mix of the supply-side effects of reform
MARCH 4, 2017
and public investment in infrastructure,
and the demand-side effects of export
recovery. As we have seen the government
is hoping to ensure an infrastructural push,
but the sums provided from the budget for
the purpose are to register only moderate
increases. The possibility of exports
stimulating growth can be discounted
right away since it is based on an opti-
mistic reading of the signs of recovery
in the world economy, and on an even
more optimistic extrapolation of a recent
mild recovery of India’s exports from a
decline that lasted for many months
and quarters.
So “reform” is the crucial stimulus for
future growth in the “macroeconomic”
analysis underlying the budget. Sprinkled
across the Budget Speech are references
to the kind of reform the finance minister
has in mind. Of importance are the shift
to the Goods and Services Tax (GST)
regime, a foreign-investment friendly
policy environment, accelerated privati-
sation, a shift from cash-based to digital
transactions, and above all, fiscal con-
solidation. The last of these no doubt
conflicts with the role attributed to public
investment in infrastructure.
But the finance minister glibly assumes
that the GST will help matters, even though
there is a clear acceptance that the states
would have to be compensated for reve-
nue losses. The other source of optimism
is receipts from privatisation. Thus, budget
2016–17 had assumed that receipts from
privatisation in different forms would
yield the government `56,500 crore, up
from `42,132 crore in 2015–16. The RE
put the amount to be actually garnered
in 2016–17 at `45,500 crore (though actual
receipts till end December were only
`23,529 crore). But that does not hold
back Jaitley. Receipts from privatisation
are projected to be `72,500 crore. Reve-
nues too are assumed to remain buoyant
and relatively unaffected by the decelera-
tion in growth. If these projections prove
false, inflexible fiscal conservatism must
involve a curtailment of expenditures.
A final source of optimism identified is
surprisingly, demonetisation itself. Demon-
etisation is seen as benefiting growth
through routes other than any direct fiscal
impact. According to the finance minister,
“the surplus liquidity in the banking
vol lIi no 9 EPW Economic & Political Weekly

system, created by demonetisation, will
lower borrowing costs and increase the
access to credit,” which “will boost eco-
nomic activity, with multiplier effects.” So,
the expectation is that an expansion in
credit induced by demonetisation would
be exploited by the private sector and not
the government. This discounts the effect
that recession would have on investment
and ignores the impact that NPAs have
had on the willingness of the government
to lend. Banks have indeed been pres-
sured to offering better rates on personal
loans, especially for housing. But here too
credit offtake is by no means booming.
Once More on the
‘Humbug of Finance’
Prabhat Patnaik
While an expansionary monetary
policy acts by respecting private
rationality, an expansionary fiscal
policy, involving larger government
expenditure financed by a fiscal
deficit or taxes on capitalists,
implicitly highlights the
limitations of private rationality.
Finance capital not surprisingly
opposes the latter, even though
the proffered arguments for
“fiscal responsibility” have no
theoretical validity. Given the
current world economic crisis, a
spate of beggar-my-neighbour
policies are on the horizon.
Prabhat Patnaik (prabhatptnk@yahoo.co.in) is
Professor Emeritus at the Centre for Economic
Studies and Planning, Jawaharlal Nehru
University, New Delhi.
Economic & Political Weekly EPW MARCH 4, 2017
Whether the unfounded belief that
reform would deliver growth rather than
recession is based on ignorance and bad
judgment, or because the expectations
of the government regarding the fiscal
effects of the drive against black money
and of demonetisation have been belied,
is not clear. But the reliance on supply-
side triggers such as reform, in a period
when demand is depressed and private
sector confidence low, is nothing more
than wishful thinking.
Note
1 The Sixth Bi-monthly Monetary Policy State-
ment, 2016–17 Resolution of the Monetary
T
he renowned economist Joan Rob-
inson (1962) had referred to the
view that the government’s budget
should always be balanced, as the “hum-
bug of finance,” namely, as a false propo-
sition with no theoretical merit which was
nonetheless promoted by finance capital.
These days, of course, the insistence is not
exactly on balancing the budget as was
the case during the pre-second world war
years. A certain amount of fiscal deficit
relative to gross domestic product (GDP),
usually 3%, is considered “permissible,”
though it is not clear what is so sacrosanct
about the figure 3 and why 3 is better than
zero. But this shift from zero to 3% does
not signify any change in theoretical
position: it still invokes the same logic
that underlay the insistence on balanc-
ing the budget. In Robinson’s words, it
still constitutes “the humbug of finance,”
though with a slightly, and inexplicably,
different number for the percentage of
fiscal deficit to the GDP.
The argument which the insistence on
balancing the budget advances is that a
fiscal deficit “crowds out” private invest-
ment. Now, for this to happen there
must be a fixity of supply of some eco-
nomic variable, so that the government
taking more of it (via a fiscal deficit)
vol lIi no 9
BUDGET 2017–18
Policy Committee (MPC), Reserve Bank of
India, released on 8 February 2017, noted:
“In the fifth bi-monthly statement of Decem-
ber, headline inflation was projected at 5%
in Q4 of 2016–17 with risks lower than before
but still tilted to the upside. The decline in
headline CPI inflation in November and Decem-
ber has been larger than expected, but almost
exclusively on the back of deflation in vegeta-
bles and pulses. While the seasonal ebb in the
prices of vegetables that usually occurs with
the onset of winter as well as some demand
compression may have contributed to this
outcome, anecdotal evidence points to
some distress sales of perishables having ac-
centuated the decline in vegetable prices, with
spillovers into January as well.” Can be viewed
here: https://rbidocs.rbi.org.in/rdocs/Press-
Release/PDFs/PR21164542C3DF7F-
C944278648E394CAF8D68E.PDF.
leaves less for the private sector. What
exactly is this variable? Pre-Keynesian
theory believed that this given variable
(assuming for simplicity, a closed econo-
my) was the magnitude of “savings”: a
fiscal deficit, by drawing more “savings”
towards the government would leave less
“savings” for the private sector, and hence
reduce private investment via a rise in the
interest rate. (Even if the rise in the interest
rate itself contributed towards an increase
in “savings” so that their magnitude was
not exactly fixed, this would still mean a
partial crowding out of private investment
because of the rise in the interest rate.)
This argument, however, was obviously
false, since “savings” depended not just
on the interest rate but also upon the
level of income (and on the distribution
of income too, though we shall not go
into the question of distribution of
income here). Since a fiscal deficit in an
economy that was demand-constrained—
namely, had unemployed labour and
unutilised capacity—raised the level of
income, it also increased “savings.” In
fact at any given interest rate (as Rich-
ard Kahn’s famous proposition on the
multiplier showed), a fiscal deficit (in a
closed economy) generated an amount
of private “savings” in excess of private
investment that was exactly equal to
itself. Hence private investment did not
get “crowded out;” additional private
savings got generated. And to believe
otherwise was to subscribe to Say’s
Law—that there could never be a defi-
ciency of aggregate demand—which
was absurd.
33
BUDGET 2017–18
The other economic variable whose
fixity is invoked these days to argue the
“crowding out” proposition (since none
can seriously profess a belief in Say’s
Law today) is money supply. A rise in the
fiscal deficit raises income; but, if money
supply is fixed, then the interest rate rises
which “crowds out” private investment.
But, even leaving aside the fact of the
endogeneity of money supply—namely,
the fact that in a modern economy mon-
ey supply simply adjusts to the demand
for it at a given interest rate—and ac-
cepting this assertion for argument’s
sake, such a situation can only arise if a
government that is pursuing an expan-
sionary fi scal policy is simultaneously
pursuing a tight monetary policy. This is
a mistake in policy and not any inherent
flaw of the fiscal deficit itself.
There is therefore no logical reason
why in a situation of deficiency of aggre-
gate demand the government should not
resort to a fiscal deficit to boost demand
and hence output and employment.1 To
be sure, a fiscal deficit is not the best
way to finance larger government ex-
penditure for stimulating demand in
such a situation. Larger government ex-
penditure financed by a tax on profits
even within a balanced budget is better
than a fiscal deficit for overcoming a de-
ficiency of aggregate demand, for one
obvious reason, namely, that it keeps
down wealth inequality. Since a fiscal
deficit generates an amount of private
savings in excess of private investment
exactly equal to itself, taxing away this
excess rather than leaving it in the hands
of capitalists, who are primarily the sav-
ers, keeps down wealth inequality (as
savings constitute addition to wealth).
But increasing government expenditure
financed by a fiscal deficit is better than
keeping down government expenditure
and balancing the budget, as the “hum-
bug of finance” would advocate.
A new consideration however intrudes
here. Even though there may be nothing
wrong with a fiscal deficit, and the view
that the budget must be balanced (or
nearly balanced with at most a 3% fiscal
deficit) is no more than the “humbug of
finance,” since finance capital does not
like fiscal deficits, whatever the reason,
in an economy open to cross-border
34
financial flows, running such a deficit
would lead to an outflow of finance that
is obviously harmful to the economy.
Hence the fiscal deficit has to be con-
trolled, even though the arguments adv-
anced for doing so are wrong, simply in
deference to the caprices of globalised
finance. Let us explore the implications
of this argument a little further.
Opposition to State Intervention
The basic proposition established by the
Keynesian Revolution was that in a
capitalist economy, where all economic
agents acted “rationally” in the sense of
maximising some objective function
subject to certain constraints that are
given, the overall outcome could be
socially “irrational” in an obvious sense,
namely, that it could be characterised
by both unemployment and unutilised
capacity. In such a case, the outcome,
quite apart from the fact that it did not
satisfy Pareto-optimality, would not even
satisfy private “rationality.”
What Keynes suggested, therefore,
was that the state should intervene in
the economy in order to realise social
rationality, in the sense of an avoidance
of what he called a state of “involuntary
unemployment.” Implicit in this sugges-
tion was the assumption that the state it-
self was free to act according to its own
wisdom, unconstrained by the demands
or pressures from any agency acting in
accordance with its private rationality.
The state, in other words, could fulfil its
role of being an agency for realising so-
cial rationality only if it was external to
the world of private rationality and was
unconstrained by, and non-imitative of,
the agents belonging to this world. (The
Marxist critique of Keynesianism argued
that this was not possible, but let us
leave this aside for the present.)
The state’s being non-imitative of pri-
vate agents, which is an obvious condition
for its intervening successfully to achieve
social rationality (for otherwise it will
simply replicate the same result that is
achieved through the mere agglomeration
of private decisions), implies a funda-
mental break from a certain analogy
that is often drawn. This analogy states
that just as an individual cannot go on
accumulating debt, likewise, the state
MARCH 4, 2017
too cannot simply go on piling up debt;
that the state too has to tighten its belt in
order to ensure that it does not fall irre-
deemably into debt. This analogy is doubly
wrong: it is wrong in the sense that the
state, because it has sovereign powers of
taxation, is on a different footing from
individuals; and it is also wrong in the
sense that if the state acted like any indi-
vidual does, then it would be incapable of
achieving social rationality by overcom-
ing the deficiency of aggregate demand.
Forcing the state to bow to the caprices
of globalised finance, by making it “fis-
cally responsible” (namely, by keeping it
within a fiscal deficit ceiling), makes it
constrained by private rationality, and
hence prevents it from being an instrument
for the achievement of social rationality.
Fiscal responsibility legislation enacted
by the state, to which the state adheres,
amounts therefore, to robbing capitalism
of any means of achieving social ration-
ality, particularly in the sense of over-
coming “involuntary unemployment.”
The question immediately arises: since
overcoming “involuntary unemploy ment”
represents a Pareto-improvement in the
sense that everybody stands to gain
from it—the capitalists through obtain-
ing higher profits and the workers
through obtaining higher employment
(and hence incomes)—why should fina-
nce capital be opposed to state interven-
tion by fiscal means which serves this
end? This opposition incidentally is not
something that arises only in the age of
globalised finance, it existed even before
finance capital became globalised. The
globalisation of finance only means that
the demands of finance necessarily get
accepted by the nation state, for fear
that otherwise there would be a capital
flight; but the demand for “sound fina-
nce” itself is characteristic of finance
capital per se. This is the reason why
Keynes’ proposal in 1929, put forward by
Lloyd George, the leader of the Liberal
Party to which Keynes belonged, for a
scheme of public works financed by a fiscal
deficit to alleviate unemployment in
Britain, was turned down by the British
Treasury under pressure from the City of
London, the seat of British finance capital.
The question therefore is, why is finance
capital so opposed to fiscal deficits even
vol lIi no 9 EPW Economic & Political Weekly

when there are no palpable ill-effects of
such deficits, other than those that might
be caused by its own opposition to them?
The answer, I believe, lies in the fact
that accepting the need for intervention
by an agency entrusted with upholding
“social rationality” undermines the social
legitimacy of the economic system pre-
sided over by finance capital. Any demon-
stration that the universal pursuit of pri-
vate rationality, which is what capital-
ism entails, leads to a socially irrational
outcome, subverts the power of financial
interests, which is why they vehemently
deny the need for such direct state inter-
vention. They would rather have the
state intervening by creating a better
situation for the play of private rational-
ity. In short, indirect instead of direct
intervention, or jogging private rational-
ity instead of acting independently of it,
is what they prefer.2
Monetary policy is the pre-eminent
means for such indirect intervention, apart
of course from other means like guaran-
teed rates of return, tax concessions to
the capitalists (which also enlarge the
fiscal deficit but which are not frowned
upon by them). Monetary policy acts
through inducing the capitalists to invest
more (or generally through making the
affluent who constitute the “creditworthy”
segment of the population to spend
more). Changes in monetary policy as the
means of overcoming “involuntary un-
employment” do not give the impression
of there being something intrinsically
wrong with the system; they rather give
the impression of creating the right at-
mosphere for its smooth functioning.
Indeed a focus on monetary policy goes
much further; it even suggests that if there
is “involuntary unemployment” then the
reason for it lies not with the system
itself but with the central bank whose
monetary policy happens to be out of
sync with the needs of the situation. The
culpability for involuntary unemployment
is thus neatly shifted from the system
itself whose functioning is flawed, to the
shoulders of the central bank.
The absurdity of such inverted think-
ing becomes particularly clear in times
like the present, when in the United
States (US), for instance, the long-term
rate of interest has been pushed down
Economic & Political Weekly EPW MARCH 4, 2017
close to zero, and yet there is no sign of a
recovery from a state of substantial in-
voluntary unemployment. In Europe, the
central bank is even charging negative
interest rates on loans to banks, provided
these are given out as credit for certain
purposes by the banks; and yet there is
no sign of a recovery from the crisis that
afflicts Europe. So inadequate has mon-
etary policy become for stimulating the
economy that some authors are now say-
ing that pervasive negative interest rates
even on deposits (and not just on central
bank lending to banks) are the need of
the hour, and, for achieving this, there
must be an abolition of cash altogether,
since the possibility of holding cash in
lieu of bank deposits puts a floor to the
interest rate at zero (Rogoff 2016).
This amounts to carrying the inver-
sion of thought to an extreme degree:
the flaws of the system are according to
this argument blamed on the very exist-
ence of cash; and rather than having
direct state intervention through fiscal
means, including a fiscal deficit, as a
way of achieving “social rationality,”
what is advocated is “sound finance”
combined with the very abolition of cash.
The lengths to which reified thinking can
be carried can be imagined from this.
What globalisation of finance has
achieved, in short, is that the opposition
of finance to fiscal deficits, or more gener-
ally to direct state intervention for in-
creasing the level of activity, has become
effective once again. This had been over-
come, albeit temporarily, in the context of
the changed correlation of class forces in
the post-war period with the emergence
of a militant (pre-Blairite) social demo-
cracy. The fact that finance is globalised
while the state remains a nation state,
ensures that the writ of finance runs; and
this strips contemporary capitalism of any
potential instrument for achieving even a
semblance of social rationality.
There are only two possible ways that,
even potentially, a semblance of social
rationality can be achieved in contempo-
rary capitalism. One is through a global
state, or through a set of nation states
globally coordinating their actions, pro-
viding a fiscal stimulus to the world econ-
omy by overcoming the opposition of
globalised finance. The other is through
vol lIi no 9
BUDGET 2017–18
individual states providing such a fiscal
stimulus within their own particular
economies by delinking themselves from
the vortex of financial flows and thus
withdrawing from the entanglements
that contemporary globalisation entails.
In either case, however, the opposition of
globalised finance has to be overcome,
and this requires a broad class alliance of
working people which has to be organised
in a manner appropriate to each case.
Whether such a class alliance can
achieve a semblance of social rationality
within the confines of capitalism itself,
that is, whether capitalism will adapt
itself to the new situation by making
appropriate concessions, as it had done
over large stretches of the capitalist
world in the post-war years, or whether
it will transcend capitalism in the pro-
cess of introducing a semblance of social
rationality, is a matter for the future. But
the point is that until such an effort is
made, world aggregate demand will
remain constricted, and the world eco-
nomic crisis will persist, apart from pos-
sible occasional “bubbles” that may
cause temporary revivals, to be followed
by collapses into crisis once more.
Legitimacy Crisis
Donald Trump’s economic strategy has
to be understood in this context where
he remains as tied to fiscal conservatism
as other governments in advanced capi-
talist countries. Committed to increas-
ing employment in the US, but unwilling
to do so by expanding government expen-
diture, he is taking recourse to protec-
tionism, which, in a situation where
world aggregate demand is not increas-
ing, amounts to a “beggar-my-neighbour”
policy, that is, a policy of exporting un-
employment to other countries.
True, Trump has said that he is not
averse to increasing the fiscal deficit; but
he is willing to do so only as a means of
effecting a tax cut on the corporate sec-
tor (from 35% to 15%). This amounts to
increasing the fiscal deficit for the sake
of putting more purchasing power in the
hands of capitalists. But putting more
purchasing power in the hands of capi-
talists hardly increases aggregate demand:
their marginal propensity to consume
out of income is small, and they do not
35
BUDGET 2017–18
invest more, even if they have larger
post-tax profits, as long as the market is
not expanding. Hence, the Trump strat-
egy really amounts not to an increase in
aggregate demand in the US, but to a
beggar-my-neighbour strategy imposed
upon the rest of the world.
This strategy presupposes that the rest of
the world would simply sit tight and toler-
ate an import of unemployment from the
US: its success, in other words, depends
upon the US action not facing any retalia-
tion, that is, upon the US being able to im-
pose “one-way free trade” upon the rest of
the world, as Britain had done in the colo-
nial period. But if other countries do retali-
ate, then competitive “beggar-my-neigh-
bour” policies would ensue, which would
increase uncertainties associated with in-
vestment, and hence aggravate the crisis.
But if the US individually or several (or
all) countries on their own increased the
fiscal deficit to expand government ex-
penditure, and imposed protection only
to the extent of preventing a leakage
Business as Usual
M Govinda Rao
The global situation is tense,
marked with protectionism.
The domestic environment is
constrained by the twin balance
sheet crisis. The dull investment
climate was further jeopardised
by the note ban. The budget has
failed to create a policy
environment to kick-start a
virtuous investment cycle. It has
failed to address critical issue of
accelerating employment.
M Govinda Rao (mgrao48@gmail.com) is
Professor Emeritus at the National Institute
of Public Finance and Policy, New Delhi and
Chief Economic Adviser, Brickwork Ratings.
36
outwards of the additional demand so
generated within their economies, with-
out actually curtailing their imports in
absolute terms, namely, without export-
ing any unemployment to other coun-
tries, then all countries would be Pareto-
wise better off. No one country’s employ-
ment increase in such a case would be at
the expense of some other country.
What comes in the way of such a move
which would improve the employment sit-
uations in all countries without their ad-
versely affecting one another, is the opposi-
tion of finance to fiscal deficits and to taxes
on capitalists (taxes on workers would not
raise aggregate demand as they already
have a high propensity to consume). Un-
less finance capital’s hostility to fiscal defi-
cits is overcome, which in turn requires
that unless the hegemony of finance capi-
tal on the world economy is overcome, the
world would remain mired in crisis.
Either way, therefore, world capitalism
will be facing a legitimacy crisis in the
coming days: on the one hand, if it remains
T
he presentation of the Union Budget
in India, unlike in most other
countries, is a big event. The reason
for this has to be found in the legacy of a
planned development strategy in which
the budget was not merely a financial
statement required to be placed in Parlia-
ment under Article 112 of the Constitu-
tion, but became a mechanism to trans-
mit policy directions to the economy. The
legacy has continued even as the plan-
ning process itself has got diluted. From
that perspective, excessive focus on the
budget is somewhat misplaced as policy
pronouncements and decisions are taken
not just through the budget announce-
ment, but throughout the year.
Even from purely a fiscal policy stance,
the Union Budget in India accounts for
only a little more than a half of the
deficits, 68% of outstanding debt, 60% of
taxes collected, and 58% of actual spend-
ing are undertaken at the state level.
MARCH 4, 2017
committed to the “humbug of finance”
then its legitimacy is threatened because
of the persistence of the economic crisis,
and with it of high unemployment; on the
other hand, if it “permits” direct state inter-
vention through fiscal means for overcom-
ing the crisis, then its legitimacy is threat-
ened because the flawed nature of the
system gets exposed, thereby, opening the
prospects of growing state intervention.
Notes
1 For an elaborate presentation of this argument
see Patnaik (2003).
2 As Michal Kalecki (1971) had put it: “The social
function of the doctrine of ‘sound finance’ is to
make the level of employment dependent on
the ‘state of confidence’.”
References
Kalecki, M (1971): “Political Aspects of Full Employ-
ment,” Selected Essays on the Dynamics of
the Capitalist Economy 1933–1970, Cambridge:
Cambridge University Press.
Patnaik, P (2003): “The Humbug of Finance,” A
Retreat to Unfreedom, Delhi: Tulika Books.
Robinson, J (1962): Economic Philosophy, London:
C A Watts.
Rogoff, K (2016): The Curse of Cash, Princeton:
Princeton University Press.
Nevertheless, the Union Budget provides
important signals on the extent of gov-
ernment interventions in the market, and
has macro- and micro-economic impli-
cations from its stance on deficits and
debt, tax and expenditure proposals,
and intergovernmental finance.
New Features
In many ways, the Union Budget 2017–18
had a number of new features. First, the
budget presentation has been advanced
by a month to complete the process of
passing it in Parliament within the fi-
nancial year. Second, the merger of the
railway budget with the main budget
helps to plan and develop the transport
sector as a whole. Hopefully, the com-
mercial character of the railways will be
retained, and eventually, it will be cor-
poratised, and its social obligations will
be taken account of by providing explicit
subventions from a consolidated fund.
Third, the abolition of the plan and non-
plan distinction, which in fact was the
recommendation of the Expert Group on
Efficient Management of Public Expen-
ditures chaired by C Rangarajan in 2013,
helps to look at each of the sectors in a
vol lIi no 9 EPW Economic & Political Weekly
 BUDGET 2017–18

holistic manner, and avoids distortions
in allocating resources between mainte-
nance of existing assets and creation of
new assets.
The budget this year has been pre-
sented in a difficult international and
domestic economic environment. The
international environment is marked by
growing protectionism, particularly after
the United States (US) elections, and is
likely to constrain service sector exports
to add to stagnant commodity exports.
As the US is set to raise interest rates, the
net capital outflow is likely to exert
greater pressure on the exchange rate.
The possibility of an increase in crude
oil prices along with the pressure on ex-
change rate has the potential to affect
domestic prices as well as fiscal and cur-
rent account balances.
On the domestic front, the Central
Statistics Office’s (CSO) estimate shows
that even without taking into account
the effect of demonetisation, the growth
rate of the economy has decelerated to
7.1% in the current year from 7.6% in the
last year, and in fact, every sector of the
economy, except agriculture and public
administration, has slowed down by
varying magnitudes.
Gross fixed capital formation (GFCF) is
estimated to decline from 29% in 2015–
16 to 26% in the current year. The Eco-
nomic Survey 2016–17 acknowledges the
negative impact of demonetisation, but
asserts that the slowdown is likely to be
limited to 25 to 50 basis points, which con-
sidering the disruption in both produc-
tion and consumption caused by the
note ban seems to be a clear underesti-
mation. The Centre for Monitoring Indi-
proposed to be lower than the current
year’s estimate of 3.5% and the revenue
deficit contained at 1.9%. Although the
fiscal deficit estimate for 2017–18 is high-
er than the target of 3% set by the Fiscal
Responsibility and Budget Management
(FRBM) Committee, in the prevailing
environment the slippage should not be
grudged. Even as the committee recom-
mended a relaxation of 0.5% for excep-
tional exigencies, the finance minister
has continued the path of austere fiscal
stance by not invoking this clause.
Unfortunately, the report of the FRBM
Committee is still not available in the
public domain to make any informed
observations on it. However, it appears
that the committee has set debt to gross
domestic product (GDP) ratio as a target
and derived the fiscal consolidation
path from it. In other words, the fiscal
deficit of 3% was derived to achieve the
consolidated debt–GDP target of 60%
and the union government’s debt–GDP
ratio target of 40% from the prevailing
level of 47%.
Conceptually it is difficult to justify
taking debt–GDP ratio as the target, and
fiscal deficit as a means of achieving this
target as it is difficult to define and meas-
ure optimum debt. In fact, debt–GDP
ratio can be brought down without
reducing the fiscal deficit by simply in-
flating the economy! While it makes
sense to target the primary deficit going
by the debt-dynamics equation, and as
persuasively argued in the Economic
Survey, it must be noted that interest
payments at the union level constitute
Table 1: Summary of the Budget
2014–15
over 36% of the revenues, and therefore,
it is important to bring down both the
fiscal deficit and the outstanding debt.
In fact, the consolidated fiscal deficit
target of 6% set by the 12th Finance
Commission was based on the size of the
household sector’s financial saving. The
argument was that as the household
sector’s financial saving relative to GDP
was 10% and foreign inflow was 1.5%
pre-empting 6% to the government (3%
each to centre and states) and 1.5% to
the public sector enterprises will leave
4% borrowing space to the private sector.
An important aspect of the budget
this year is that the projections have
not been too optimistic, and therefore,
risks to achieving the fiscal deficit tar-
get are not substantial. The most impor-
tant source of risk, however, is the disin-
vestment estimate of `72,500 crore as
against current year’s revised estimate
of `45,500 crore.
Apart from this, it appears that the
budget has not adequately factored in
the impact of demonetisation in the
revised estimate of the current year, par-
ticularly with respect to personal and
corporate income taxes. The budget
simply reproduces the budget estimates
for these taxes as revised estimates at
`3,26,463 crore and `4,93,923.5 crore,
respectively. In the case of personal
income tax, the projections for 2017–18
are higher than the revised estimate (as
well as the budget estimate) by almost
25%. Perhaps, this is predicated on the
assumption that the “surgical strikes”
on suspicious bank accounts in which
(% of GDP)
2015–16 2016–17 BE 2016–17 RE 2017–18

an Economy’s (CMIE) estimate of new in- I Revenue receipts 8.86 8.74 9.06 9.44 9.00
a Tax revenue—Gross 10.01 10.60 10.73 11.26 11.29
vestment during the last quarter at `1.25
b Tax revenue—Net 7.27 6.90 6.94 7.22 7.28
trillion was virtually a half of the aver-
c Non-tax revenue 1.59 1.84 2.13 2.22 1.71
age investments recorded during the II Non-debt capital receipts 0.41 0.44 0.46 0.37 0.50
nine previous quarters. a Recovery of loans 0.11 0.07 0.15 0.07 0.07
b Disinvestment receipts 0.30 0.37 0.31 0.30 0.43
Fiscal Austerity and Risks III Total receipts (excluding borrowings) 9.27 9.20 9.51 9.82 9.50
The finance minister must be compli- IV Total expenditure 13.38 13.09 13.02 13.36 12.74
mented for continuing the process of Revenue 11.80 11.24 11.39 11.51 10.90
Grants for capital 1.05 0.96 1.10 1.14 1.16
fiscal consolidation. He has showed the
Capital 1.57 1.85 1.63 1.86 1.84
intention not only to reduce the overall
Revenue deficit 2.94 2.51 2.33 2.06 1.91
fiscal deficit but also improve the quality
Effective revenue deficit 1.89 1.54 1.23 0.93 0.75
of deficit by compressing both revenue Fiscal deficit 4.11 3.90 3.51 3.54 3.24
and primary deficits (Table 1). The esti- Primary deficit 0.87 0.67 0.27 0.34 0.14
mate of fiscal deficit in 2017–18 at 3.2% is Source: Budget at a Glance 2017–18.

Economic & Political Weekly EPW MARCH 4, 2017 vol lIi no 9 37

BUDGET 2017–18

deposits of more than `5 lakh were
made will yield substantial revenues
next year.
There has been a clamour to imple-
ment a universal basic income (UBI)
scheme in the run-up to the budget, and
the finance minister has eschewed the
temptation of accepting the idea. As dis-
cussed in the Economic Survey, this is an
idea whose time for implementation has
not yet come. In particular, this cannot
be an additional scheme and requires
discontinuing various subsidies and
transfers to release the required resources.
At the same time, the budget has done
precious little to rationalise explicit sub-
sidies, which at `2.7 trillion constitute
1.6% of GDP. In fact, subsidies claim as
much as what has been allocated to
defence and is just a little lower than
capital expenditures. Food and fertiliser
subsidies alone constitute `2.4 trillion.
Reviving Investment Climate
The difficult international environment
and the poor domestic climate marked by
the twin balance sheet crisis required a
strong impetus, and in this task, the
budget has failed. The growth so far has
been sustained only by private consump-
tion and even public consumption is not
likely to be important as the impact of
pay revision wanes. As regards exports,
it has merely started in the positive terri-
tory after several months of decline.
Private investment activity is completely
stalled and as mentioned earlier, the
CMIE’s estimate of investment during the
last quarter at `1.25 crore is virtually
half of the average investment during
the previous nine quarters. The GFCF at
26% of GDP in 2016–17 has fallen to the
lowest level during the last 15 years.
In a situation where the growth scenario
is severely hampered by a poor invest-
ment climate, the most important initia-
tive the government should have taken
to revive the investment climate is to
substantially step up public investment.
There is no possibility of private invest-
In this situation, it is not certain that
the virtuous cycle of investment will kick
in even at low rates of interest. The
demonetisation adventurism has only
complicated the investment climate fur-
ther. The only viable option to revive the
investment climate at present is to sub-
stantially increase public spending on
infrastructure, and that would require
phasing out unproductive subsidies and
transfers on the one hand, and increas-
ing tax–GDP ratio on the other. On either
count, the budget has failed.
Enhancing public investment in infra-
structure would have helped to crowd in
private investment and create a virtuous
cycle. Although the revised estimate of
investment spending in 2016–17 at 1.8%
of GDP was marginally higher than
budgeted (1.6%), the capital expenditure
remains at the same level at 1.8% in
2017–18 and this is just about 10.7%
higher than the revised estimate of the
previous year. In fact, even within this,
the capital expenditure under defence is
about 0.5% of GDP, the impact of which
will spill over through imports. Thus, the
capital expenditure planned for next year
at 1.8% of GDP is only marginally more
than the subsidies (1.6%), and almost a
half of the interest payments.
Tax Measures
As mentioned earlier, the revised estimate
of both personal income and corporate
income taxes for 2016–17 are exactly the
same as the budget estimate of the year
up to the last number! This implies that
either the tax departments have acquired
unforeseen skills in forecasting, or that
given the uncertainty following the note
ban, the government simply decided to
repeat the budgeted numbers in the
revised estimate. The problem is that the
revenue from personal in- Table 2: Trends in Tax Revenues
come tax is assumed to in-
crease by 31% in 2016–17 over Corporation tax
the previous year, and in Income tax
2017–18, it is assumed to in- Customs
crease further by 25%. The Union excise duty
there is strong suspicion that the budget
estimate could be optimistic.
On tax proposals, the picture is mixed.
Reduction in the rates of tax for compa-
nies with less than `50 crore turnover to
25% from 30% potentially benefits 96%
of the companies. However, the measure
is not likely to improve the investment
climate because only a fraction of the
companies below `5 crore turnover earn
profits and after demonetisation, quite a
few of them have joined the ranks of
loss-making firms. At the same time,
very little has been done to rationalise
tax preferences and reduce the tax rate
to 25% for all corporates by 2019, which
was promised by the finance minister in
the 2015–16 budget.
On personal income tax, the reduc-
tion in the tax rate to 5% for individuals
with up to `5 lakh income does provide
some relief. At the same time, the scope
of the surcharge has now been expanded
to people earning taxable income of `50
lakh to `1 crore at 10%, and the present
surcharge on those earning more than
`1 crore at 15% will continue. Interest-
ingly, the loss of revenue due to a reduc-
tion in the tax rate is shared between the
union and states, whereas the gain from
levying the surcharge on incomes accrues
only to the union government!
On indirect taxes, given that the
Goods and Services Tax (GST) is scheduled
to be rolled out in July 2017, some ration-
alisation in excise duty could have helped
to make the transition smoother. There
are 300 commodities exempt from excise
duties and the list could have been pruned.
Similarly, there are several rates of tax,
some of them specific, and these could
have been aligned to the rates decided
by the GST council. It would also have
been useful to increase the threshold for
(% of GDP)
2014–15 2015–16 2016–17 BE 2016–17 RE 2017–18
3.44 3.31 3.28 3.28 3.20
2.06 1.98 2.34 2.34 2.62
1.51 1.54 1.53 1.44 1.45
1.52 2.11 2.11 2.57 2.42

ment kicking anytime soon because of increase in the tax–GDP ratio Service tax 1.35 1.55 1.53 1.64 1.63
UT taxes 0.03 0.03 0.03 0.03 0.03
the twin balance sheet crisis. The cor- during 2016–17 and 2017–18
Total 9.99 10.60 10.82 11.26 11.29
porates are burdened with the overhang (Table 2) is primarily predi-
States’ share 2.71 3.83 3.78 4.03 4.00
of indebtedness and poor returns, and cated on the strength of this Net central tax 7.25 6.73 6.99 7.22 7.28
the banks are unwilling to lend due to assumption. Without having States’ share in total 27.14 36.15 34.97 35.83 35.47
surging non-performing assets (NPAs). an authentic revised estimate, Source: Budget Documents.
38 MARCH 4, 2017 vol lIi no 9 EPW Economic & Political Weekly
 BUDGET 2017–18

service tax to `20 lakh, the threshold for states. A close look at the table shows that are Prime Minister’s Awas Yojana (38.7%)
GST decided in the council. the transfers to states as a ratio of cen- and Rashtriya Krishi Vikas Yojana
tral gross revenues are lower in 2015–16, (32.6%). Perhaps, sustained advocacy to
Transfers to States the first year of the FFC award, as com- increase the allocations to social sector
The total current transfers to the states pared to 2011–12, the second year of the schemes seems to have had their effect
as a ratio of GDP show an increase after Thirteenth Finance Commission’s award in enhancing outlays for ICDS and the
the implementation of the Fourteenth (Table 3). In fact, the trend in transfers health sector.
Table 3: Transfers to States shows a decline in the share of
Percent of GDP Percent of Gross states, and this is partly due to Concluding Remarks
Central Tax Revenues
Tax Dev Grants Total Tax Dev Grants Total the practice of raising addi- On the whole, this is a “business as usu-
2011–12 2.89 3.43 6.32 28.70 34.06 62.76 tional revenues from taxes by al” budget which could have passed the
2012–13 2.91 2.99 5.90 28.10 28.87 56.97 levying cesses and surcharges. test in ordinary times. These are unusu-
2013–14 2.78 2.46 5.24 27.95 24.67 52.62 While the share of tax devolu- al times and much was expected in the
2014–15 2.71 2.74 5.45 27.14 27.39 54.53 tion increased in 2015–16 sub- budget to kick-start a virtuous invest-
2015–16 3.70 2.36 6.06 34.91 22.29 57.20 stantially owing to the FFC’s ment cycle. It does well to be prudent in
2016–17 RE 4.03 2.50 6.53 35.83 22.20 58.04
recommendations, there was a proposing to control the fiscal deficit. A
2017–18 BE 4.00 2.41 6.41 35.47 21.38 56.85
sharp reduction in the grants, marginal relaxation in the target by 20
Finance Commission’s (FFC) award. The thereby reducing the overall share of the basis points may not be grudged in the
increase in 2015–16 over the previous states in central tax revenues. prevailing difficult economic climate.
year was by about 60 basis points (from A careful analysis of major centrally However, it does very little to revive the
5.5% to 6.1%) and the revised estimate sponsored schemes shows that in 2016– investment climate in the country.
for 2016–17 shows an increase of another 17, signifi cant additional allocations are The capital expenditure as a ratio of
50 points due to both higher estimate of made for Mahatma Gandhi National GDP is static and the promised clean-up of
tax devolution and grants. However, the Rural Employment Guarantee Act (24.7%), tax preferences to reduce corporate tax
realisation of this will depend on whether National Health Mission (NHM) (30.7%), rates is yet to be initiated. The finance
or not the actual collection of revenues Integrated Child Development Services minister has lost the opportunity to prune
is equivalent to the revised estimate. As (ICDS) (27.6%), and Swachh Bharat the exemption list and align the excise
mentioned earlier, the revised estimates (44.8%) over the budget estimate. Some duty rates in preparation of implementing
do not seem to have taken account of the of these sectors, particularly NHM (20%), the GST. Finally, the measures to reduce
adverse effects of demonetisation and ICDS (25.2%), and Swachh Bharat (26.9%) cash donations and introduction of bonds
the actual could well be lower. received substantially higher allocations to political parties are more cosmetic and
There has been a vociferous claim in 2017–18 budget over the revised esti- unlikely to have any impact on cleaning
that the FFC has been overly generous in mate of the previous year. Other sectors up political funding as long as anonymity
recommending higher transfers to the receiving higher allocations in 2017–18 of donors is assured.

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Economic & Political Weekly EPW MARCH 4, 2017 vol lIi no 9 39

BUDGET 2017–18
What Does the Rural
Economy Need?
Analysis of the Promises for Rural India
Amit Basole
The agricultural sector has
performed worse than the other
sectors over the years. The shares
of non-agricultural employment
and output have increased, while
70% of agricultural households
cannot meet their low consumption
needs even after diversification
of sources of income. An analysis
of budgetary provisions for the
rural economy suggests that
the government has not done
enough to address some of these
well-documented problems, and
does not have the required vision
to substantially increase rural
employment opportunities.
Amit Basole (amit.basole@apu.edu.in) teaches
Economics at the School of Liberal Arts, Azim
Premji University, Bengaluru.
40
A
fter the high economic drama of
demonetisation and the resulting
shocks to the economy, the 2017–
18 budget, the fourth one presented by
Finance Minister Arun Jaitley, could be
seen as an attempt to regain some credi-
bility for the government and calm the
general populace as well as international
investors. It has been seen as a “routine”
budget but also a “pro-growth” one, prom-
ising large increases in public investment
in social and physical infrastructure and
cutting taxes, while being fiscally prudent.
Like the previous budget, this one has
also been seen as giving a “push” to the
rural economy. Is there a vision implicit
in the budget commensurate with the
challenges that the rural economy is facing.
Here, I will speak of one of the biggest chal-
lenges, that of generating livelihoods
capable of providing regular, living in-
comes for every household in rural In-
dia. Two major prongs can be recognised
in the budget to raise rural incomes and
create employment opportunities: rais-
ing agricultural productivity and creating
non-farm employment. This is comple-
mented by provisioning of public services
such as health, roads, and housing.
Structure and Performance
India is going through a well-documented
employment creation crisis. Interestingly,
the employment problem is often thought
of as an urban issue, whether one speaks
of open unemployment among educated
youth or disguised unemployment in the
informal sector. But it is equally, or per-
haps more, a crisis of the rural economy.
Before discussing the budget itself, it is
useful to cast a glance at the state of the
rural economy.
Three salient features are immediately
apparent in the aggregate data. First, the
primary sector has performed much worse
than the other two sectors consistently
MARCH 4, 2017
for the past several years. Second, the
shares of non-agricultural employment
and output have increased steadily. And
third, there is an ongoing severe crisis of
quality of livelihoods in the rural sector
to the extent that 70% of agricultural
households cannot meet their (low) con-
sumption needs even given diverse
sources of income.
Figure 1a (p 41) shows the well-known
fact that for the past few years rates of
growth of gross value added in agricul-
ture have been below those in all other
sectors of the economy. Going further
back reveals a similar story (Figure 1b,
page 41).1 The basic point remains the
same: the single largest sector of the Indian
economy, in terms of employment, has
performed worse than the economy as a
whole for the past decade and a half.
Consistent with the poor performance
of agriculture, there has been a signifi-
cant shift in the rural occupational dis-
tribution away from this sector. The 2015
Labour Ministry Employment–Unemp-
loy ment Survey (EUS) (Government of
India (GoI) 2016) reveals that, as per the
National Sample Survey Office’s (NSSO)
“usual principal status” definition, 58.1%
of workers are in agriculture, followed
by construction (11.6%), manufacturing
(7.9%) and, trade and repair (7.1%) (GoI
2016: p 70, Table 22.4).2 The share of the
non-agricultural sector in rural employ-
ment has been steadily increasing, even
accelerating from 27% in 2005 to 32% in
2010 to 42% in 2015 (GoI 2006, 2016). On
the output side, the non-farm economy
already contributed 62% of rural net
domestic product (NDP) even as early as
2005 (Papola and Sahu 2012).
Consistent with the declining impor-
tance of agriculture in supporting de-
cent livelihoods, even within households
that are considered “agricultural” as per
the NSSO definition, Labour Bureau data
shows that 22% report wage employment
and 4.7% report non-agricultural enter-
prises as their principal source of income.
On average, of total income from all sourc-
es, 32% is contributed by wages or salaries.
But despite diversification of income
sources, total income still falls short of
total consumption. In fact, according to
NSSO data, income exceeds consumption
only for farm households with access to
vol lIi no 9 EPW Economic & Political Weekly

Figure 1a: Sectoral Growth Rates, 2012–13 to 2015–16
12
10
8 Trade, etc
Growth rate (%)
6
4 GVA
2
0 to earn incomes approximating what an
-2
2012–13 2013–14
FIRE (Finance, Insurance and Real Estate); GVA: Gross Value Added.
Source: Reserve Bank of India (RBI), Database of Indian Economy (DBIE).
Figure 1b: Sectoral Growth Rates, 2000–01 to 2011–12
20
15
10
Growth rate (%)
5
GDP
0
-5
-10
2000–01
2001–02
2002–03
Source: RBI, DBIE.
more than 2.5 acres of land (GoI 2014a).
This means that fully 70% of agricultur-
al households do not earn enough to
support (low) levels of consumption. It is
not a surprise, therefore, to see that 52%
of agricultural households are indebted
with an average outstanding loan of
`47,000 per household (the number is as
high as 93% for Andhra Pradesh).
On the bright side, however, it should
be noted that in 2002–03, the previous
Situation Assessment Survey of Farmers
round of the NSSO had reported that one
had to reach into the category of agricul-
tural households owning 10 acres and
more to find income exceeding con-
sumption expenditure (GoI 2005). By this
measure, agricultural households with
small landholdings have improved their
lot over the 10-year period (2003–13).
On average, nominal consumption grew
by 125% over this period but nominal in-
comes grew by 204%. However, signifi-
cantly, this improvement has come much
more from incomes arising out of live-
stock (738%) than cultivation (218%)
Economic & Political Weekly
FIRE
Manufacturing
Construction
Agriculture
2014–15
FIRE
Manufacturing
Construction
Agriculture
2003–04
2004–05
2005–06
2006–07
2007–08
2008–09
2009–10
(author’s calculations based on GoI 2005,
2014a).
But it should be emphasised that
despite these encouraging signs, abso-
lute levels of income as well as expendi-
ture remain very low. Average monthly
consumption of agricultural households
in 2012–13 was reported to be `6,223.
Average monthly income (including net
receipts from cultivation, livestock,
non-farm business, and wages/salaries)
was estimated at `6,426 (author’s calcu-
lations based on GoI 2005, 2014a). Lest
one think that this is a problem peculiar
to only agricultural households, it
should be noted that according to the
Labour Ministry’s EUS (which is inde-
pendent of the NSSO), 76.9% of rural
households earn `10,000 a month or
less, and 93% earn `20,000 or less (GoI
2016: p 19, Table 2.5). Recall here that
the Seventh Pay Commission recom-
mended that minimum government
pay, based on basic food, fuel, clothing
and other daily necessities, and adjust-
ed for a skill component, should be
EPW MARCH 4, 2017 vol lIi no 9
BUDGET 2017–18
`18,000 per month (GoI 2015). Thus,
nearly 90% of rural households, most
of them skilled farmers, artisans, and
other workers, earn less than what the
GoI considers a minimum living wage,
and as many as three-quarters of rural
households earn half of this minimum
wage. To put it simply, as per the NSSO
data, an agricultural household would
have to possess 10 acres of land or more
office peon in government service
2015–16 would earn. Even allowing for a down-
ward bias in earnings data from house-
hold surveys, this paints an alarming
picture of deprivation in the country-
Trade, etc side and offers an easy explanation for
the intense hunger for government jobs.
Thus, it is clear that whether in the
farm or the non-farm sector, the rural
economy is not a remunerative one. A
worrying trend in this respect is that
manufacturing, which accounted for
32% of rural non-farm employment in
1994, has declined steadily in impor-
tance, down to 22% in 2010 and now
stands at 17% (Papola and Sahu 2012;
2010–11
2011–12
GoI 2016). While manufacturing has lost
its share, the gainers have been con-
struction and trade. The former incre-
ased its share from 11% in 1994 to 28%
in 2015 (GoI 2016). As is well-known,
construction, including public works
under the Mahatma Gandhi National
Rural Employment Guarantee Act
(MGNREGA), has emerged as the most
significant source of non-farm employ-
ment. Since manufacturing has rightly
been seen as important for a revival
of the rural economy, there is an urgent
need to refocus attention on rural
industrialisation.
Thus, two large salient facts emerge
about the process of structural change in
India. First, the movement of workers
from the primary to secondary and ter-
tiary sectors, though occurring, remains
slow, largely because gross domestic
product (GDP) growth in industry and
services has been accompanied by very
weak growth of employment, whether
of the formal or the informal kind.
And second, perhaps more alarmingly,
whatever occupational change and di-
versification of livelihoods have oc-
curred are of the kind that have left the
41
BUDGET 2017–18
vast majority far below even the mini-
mum government standards.
Budgetary Provisions
The centrepiece of discussion on the
Union Budget undoubtedly should be
the aim declared by the Prime Minister
last year to double the income of farmers
by 2022. The Indian Council of Food and
Agriculture’s special report on doubling
farmers’ incomes notes, drawing on the
same NSSO data reported above, that the
average monthly income per household
(the report erroneously says “per capita”)
from farming (cultivation plus livestock)
increased from `1,060 in 2003 to `3,844
in 2013 in nominal terms, a compounded
annual growth rate of 13.7%. It goes on
to note that a further doubling by 2022,
in nominal terms, would require a 15%
growth rate, with the rate required
being higher, of course, for a similar rise
in real terms. In order to achieve this,
the report demands restructuring of
agriculture processes and policy inter-
ventions, since, as we saw earlier, the
rate of growth of agricultural output has
been far lower in recent years.
It is unexceptionable to say that the
aim of agricultural policy should be that
the sector perform better in terms of
output, but it is important to note that
growth rate of agricultural output is not
the same as growth rate of income of
farming households. Incomes may in-
crease even when output does not, and
output may increase even if incomes do
not. First, income diversification means
that a rapid rise in non-farm incomes
can help achieve this goal even with a
slow rise in incomes from cultivation
and livestock. And going beyond incomes
to quality of life, better delivery of public
goods such as roads, housing, and
healthcare can contribute to this goal
without necessarily impacting the agri-
cultural output figures. Second, output
figures do not reflect the share of value
actually going to farmers.
Hence, in considering the budgetary
provisions for the rural economy, it will
be helpful to divide it into three broad
areas, namely, the farm sector, the non-
farm sector, and general infrastructure.
The total allocation for the rural sector is
`1,87,223 crore in 2017–18, substantially
42
higher (24%) than the previous year.
This can be divided into two major heads,
Ministry of Rural Development (`1,28,560
crore) and Ministry of Agriculture and
Farmers’ Welfare (`52,655 crore). Over-
all, there seems to be a significant “rural
push” as seen in the fact that the alloca-
tion for the Ministry of Rural Develop-
ment has seen a substantial increase
(42.5%) over two years going from actual
spending of `90,235 crore in 2015–16 and
`1,14,947 crore in 2016–17 to projected
spending of `1,28,560 crore in 2017–18.
The major items in the rural develop-
ment budget are MGNREGA (`48,000
crore), Pradhan Mantri Awas Yojana
(PMAY) (`23,000 crore), Pradhan Mantri
Gram Sadak Yojana (PMGSY) (`19,000
crore), National Social Assistance Pro-
gramme (`9,500 crore), and National
Rural Livelihoods Mission (NRLM)
(`4,500 crore). Of these the items that
have seen major increases over the past
two years are MGNREGA, PMAY (more
than doubled in nominal terms since
2015–16), and NRLM (again just short of a
doubling in nominal allocation com-
pared to spending in 2015–16).
The big-ticket items in the Ministry of
Agriculture and Farmers’ Welfare bud-
get are green revolution (`13,741 crore,
a 40% increase over 2015–16 spending),
irrigation (`7,377 crore), and crop insur-
ance (`9,000 crore). In this respect, it is
to be noted that the allocation for the
Pradhan Mantri Krishi Sinchayee Yojana
(the irrigation scheme) while increasing,
compared to previous year spending,
has actually barely been restored to
2015–16 levels (when it was `7,781). It is
not clear whether this is because of a
separate allocation of `5,000 crore for
micro-irrigation through National Bank
for Agriculture and Rural Development
(NABARD). The crop insurance scheme
has also seen a substantial increase in
allocation (up from `5,500, though actu-
al spending in the previous year far ex-
ceeded allocation due to drought situa-
tions and the like).
The finance minister chose to headline
the rural section of the Budget Speech
with the substantially increased target
for agricultural credit in 2017–18 at
`10 lakh crore. This together with the
modernisation of the rural credit system
MARCH 4, 2017
proposed at a budget of `1,900 crore
does suggest that the government is seri-
ous about credit for agriculture. But one
cautionary note here is that 30% of agri-
cultural households still depend on
moneylenders and traders for credit.
And this number has barely changed in
10 years (between the 2003 and 2013
surveys by the NSSO).
Finally, the rural emphasis is also seen
in the fact that spending on the National
Rural Health Mission (`21,189 crore) con-
stitutes the bulk of the National Health
Mission budget (`27,131 crore) and the
NRLM (`4500 crore) is the bulk of the Na-
tional Livelihoods Mission (NLM) budget
(`4,849 crore).
Thus, for the farm sector one sees ma-
jor commitment to credit, insurance,
and green revolution technologies, but
not enough on irrigation. There is also a
notable lack of emphasis on ensuring
remunerative prices for farmers, a long-
standing demand of farmers’ unions
across the country. For the non-farm
sector, the emphasis is rightly on em-
ployment generation via MGNREGA and
NRLM, but again not enough (more on
this later). On infrastructure, we see a
push towards rural housing, health, and
roads. Thus, while everything depends
on implementation and there is many a
proverbial slip between the cup and the
lip, it should be acknowledged that
several key areas have been covered and
even improved at least in terms of
budgetary allocation.
Given the rapidly increasing impor-
tance of non-farm employment, the two
policies of special interest are the NRLM
and MGNREGA, the latter of course being
several times larger than the former.
The NRLM follows a self-employment-,
self-help group-based model that has
long been the favourite of “entrepre-
neurial” microfinance-type interventions.
It is not easy to get good official data on
how effective it has been in creating
decent livelihoods and there is a real
paucity of research on it as well, specially
compared to MGNREGA. That the Naren-
dra Modi government has been making
many noises about rural skill upgrada-
tion and employment is not in doubt, but
there needs to be a lot more work done
by economists and others on what has
vol lIi no 9 EPW Economic & Political Weekly

been the impact so far of policies such as
NRLM or Skill India.
Closer inspection of the MGNREGA
numbers also reveals something troubling.
The substantial increase in budget from
`38,500 crore to `48,000 crore was high-
lighted by the finance minister in the
Budget Speech and was welcomed. But
the fact to note here is that while the
budget estimate for 2016–17 was `38,500
crore, the revised estimate for the past
year (the money actually spent) is `47,499
crore. This is a huge increase over the ac-
tual spending for 2015–16, which was
`37,341 crore. Thus, the new budget allo-
cation is merely keeping up with the de-
mand for employment in the countryside.
Reviving the Rural Economy
In addition to raising agricultural pro-
ductivity and ensuring remunerative
prices, robust growth in rural non-farm
employment opportunities, and in par-
ticular, livelihood generation in manu-
facturing and public services (health
and education) are important to raising
rural incomes and breathing life into the
rural economy. The positive externalities
in terms of relieved pressure on cities
are too obvious to need elaboration. In
this respect, the budget does contain
several promising moves. The question
is, are they enough in quality and quan-
tity terms?
One clear lacuna is a bold vision for
rural industrialisation. The broad picture
from rural India is one of diversification
of livelihoods from agriculture to con-
struction (including MGNREGA) and oth-
er low-paying service jobs. Manufactur-
ing job growth has been comparatively
weak and as we saw, its share is declining.
In part, this is explained by a national
and global trend of “premature deindus-
trialisation” highlighted by Rodrik (2016)
and Amirapu and Subramanian (2015).
Peak industrialisation is occurring at
lower levels of per capita output across
the world, except in East Asia. Fighting
this trend requires coordinated public
action.
A beginning can be made using
MGNREGA itself. From calling this scheme
“a testament to the failure of the UPA
[United Progressive Alliance],” the Modi
government has clearly moved to
Economic & Political Weekly EPW MARCH 4, 2017
embrace it, perhaps out of necessity.
While many problems of implementa-
tion exist, the scheme has been a suc-
cess. It may be time to consider expand-
ing it beyond public goods like roads,
ponds, and so on. Indeed there is already
a provision under the programme for
farmers to undertake construction of
private goods (such as wells on private
land). In such cases the government
pays for the labour input. This idea can
be carried forward to an extended wage
subsidy programme for the rural private
sector. This will allow people to work
in occupations that they are already
trained for, rather than on construction
and other putatively “unskilled” work.
Indeed, reports from rural areas indi-
cate that, in addition to farmers, skilled
weavers and other workers are taking to
MGNREGA work due to distress. Observ-
ers have noted that this is skill-destroy-
ing (Sharma 2015). One such proposal
for MGNREGA expansion is outlined in
Basole and Jayadev (forthcoming).
This also brings to light a relatively un-
deremphasised aspect of MGNREGA, the
output side. This government has always
stressed the asset creation aspect of MGN-
REGA and rightly so. There are now stud-
ies to indicate that, despite wide regional
variability, at least a few states have suc-
ceeded in creating functional assets that
will aid the growth of productivity in ag-
riculture. The clear challenge now is how
MGNREGA can be expanded to become a
more meaningful employment guarantee
programme that utilises the skills widely
available in rural India and enables work-
ers to build on those skills.
Apart from the usual objections of
corruption, leaky buckets, etc, an imme-
diate objection to the above suggestion
is likely to be that this will run afoul of
fiscal consolidation. This of course begs
the question that should be raised every
budget season: why are we so obsessed
with the fiscal deficit and international
ratings? Paying inordinate attention to
ratings is consistent with the insistence
on foreign domestic investment as a
path to development. But India is capa-
ble of financing its own development
path. The only other reason for the em-
phasis on fiscal prudence is the popular
yet flawed “crowding out” argument
vol lIi no 9
BUDGET 2017–18
that has been challenged many times in
academic literature as well as popular
media and that the government also
does not believe in, as indicated by the
argument that public spending will
boost private investment. Thus, there
are no other good reasons for insisting
on such arbitrary targets such as 3% or
3.2% for fiscal deficit. If there is political
will, there is also a fiscal way.
notes
1 The Reserve Bank of India sectoral growth
series changed base years in 2011, hence the
data are shown separately for the period be-
tween 2000 and 2011. Some sectors have been
omitted to avoid clutter. These are mining,
electricity, and personal and public services.
But in all these cases too growth rates general-
ly exceed those in agriculture.
2 This agrees with the most recent available
NSSO data (57.8% agricultural households
among all rural households). But it should be
noted that this number varies widely across
states from a high of 78% in Rajasthan to a low
of 27% in Kerala (GoI 2014a).
References
Amirapu, A and A Subramanian (2015): “Manufac-
turing or Services? An Indian Illustration of a
Development Dilemma,” Center for Global
Development Working Paper (408).
Basole A and A Jayadev (forthcoming): “Employ-
ment Guarantee in the Age of Precarity: The
Case of India’s NREGA,” Welfare and Inequality,
Joseph Stiglitz and Kalle Moene (eds), Cam-
bridge, UK: Cambridge University Press.
Government of India (2005): Income, Expenditure
and Productive Assets of Farmer Households,
Report No 497, 59th Round, National Sample
Survey Office, Ministry of Statistics and
Programme Implementation.
— (2006): Employment and Unemployment Situa-
tion in India 2004–05, Report 515, 61st Round,
National Sample Survey Office, Ministry of
Statistics and Programme Implementation.
— (2014a): Key Indicators of Situation of Agricul-
tural Households in India, Report KI 70/33,
70th Round, National Sample Survey Office,
Ministry of Statistics and Programme Imple-
mentation.
— (2014b): Employment and Unemployment Situa-
tion in India 2011–2012, Report 554, 68th
Round, National Sample Survey Office, Minis-
try of Statistics and Programme Implementa-
tion.
— (2015): Report of the Seventh Central Pay Com-
mission.
— (2016): Report on Fifth Annual Employment-
Unemployment Survey, 2015–2016, Labour
Bureau, Ministry of Labour and Employment.
Papola, T S and P P Sahu (2012): Growth and Struc-
ture of Employment in India: Long Term and
Post Reform Performance and the Emerging
Challenge.
Rodrik, D (2016): “Premature Deindustrialization,”
Journal of Economic Growth, Vol 21, No 1, pp 1–33.
Sharma, A (2015): Rights-based Legal Guarantee as
Development Policy: The Mahatma Gandhi Na-
tional Rural Employment Guarantee Act, Tech-
nical Report, eSocialSciences.
43
BUDGET 2017–18
Emerging Issues in
Union–State Fiscal Relations
Pinaki Chakraborty
The restructuring of
non-Finance Commission
Grants is an improvement when
it comes to scheme-related
transfers. However, when 10
schemes constitute 90% of core
grants, there is further scope for
rationalisation of these schemes.
The implications of following a
sustainable debt path under the
new Fiscal Responsibility and
Budget Management framework
in the budget indicate a larger
fiscal correction at the
state level vis-à-vis the
union government.
The author gratefully acknowledges the
invaluable research assistance provided by
Shatakshi Garg.
Pinaki Chakraborty (pinaki.chakraborty@
nipfp.org.in) is with the National Institute of
Public Finance and Policy, New Delhi.
44
I
n a multilevel fiscal system, the fed-
eral dimensions of the Union Budget
cannot be ignored. Though discus-
sions have so far concentrated on the
macro-stabilisation aspects of the budg-
et in terms of levels of deficits, debt and
allocations for key sectors, including in-
frastructure, nothing much has been
said about the implications of the Union
Budget 2017–18 on transfers to states and
on union–state fiscal relations. There are
two specific aspects I would like to address
in this article: First, what is the big pic-
ture emerging in union–state fiscal rela-
tions and the quantum of transfer with
the abolition of the plan and non-plan
distinction in the budget? Second, what
are the likely implications of new Fiscal
Responsibility and Budget Management
(FRBM) framework indicated in the budg-
et for states’ borrowings?
Quantum of Transfers
This budget has done away with the dis-
tinction between plan and non-plan ex-
penditure. Thus, transfers under the five
year plan have been discontinued. In the
absence of the plan, a significant part of
the total transfer has become scheme
specific. Total transfers now comprise tax
devolution recommended by the Finance
Commission, Finance Commission Grants,
and a new category called Schemes Related
Table 1: Central Transfer to States
I Devolution of states’ share in taxes 5,06,193
II Finance Commission Grants
III Other Central Transfers to States 2,38,572
Total transfer to states (gross) (I+II+III) 8,29,344
GDP (at current prices)* 1,36,75,331
Composition of transfers
Share of Tax Devolution (%)
Share of FC Grants (%)
Share of Scheme Related and Other Transfers (%)
Total transfers as % of GDP
Share of Tax Devolution (%)
Share of FC Grants (%)
Share of Scheme Related and Other Transfers (%)
* GDP figures for 2015–16 (first revised estimates) are from Central Statistics Office (CSO), RE for 2016–17 and BE for
2017–18 are from budget 2017–18.
Source: Union Budget 2017–18.
MARCH 4, 2017
and Other Transfers. In the Union Budget
2017–18, aggregate transfers to the states
have increased from `9,84,764 crore
(2016–17 revised estimates or RE) to
`1,081,078 crore (2017–18 budget esti-
mates or BE), an increase of `96,314
crore (Table 1). An increase of `66,565
crore in tax devolution, `3,986 crore in
grants recommended by the Finance
Commission and `25,763 crore in other
central transfers constituted this overall
nominal increase.
However, it is interesting to see the
change in the composition of this aggre-
gate transfer of resources from the centre
to the states. While the share of Finance
Commission Grants and Other Central
Transfers has declined from 10.07% and
28.19% in 2016–17 (RE) to 9.54% and
28.06% in 2017–18 (BE) respectively, the
share of Tax Devolution to States has in-
creased from 61.74% in 2016–17 (RE) to
62.40% in 2017–18 (BE). Thus, if we take
tax devolution and Finance Commission
Grants, their combined share in total
transfers is expected to be around 72%.
It is thus evident that Finance Commis-
sion transfer is the route through which
most funds are being transferred to the
states. This increase in unconditional
flow of resources to states is the most sig-
nificant development after the Four-
teenth Finance Commission (FFC) award.
While in nominal terms the aggregate
transfers to states and union territories
have increased, transfers as a percentage
of gross domestic product (GDP) have de-
clined marginally to 6.41% in 2017–18 (BE)
from 6.53% in 2016–17 (BE). At a disag-
gregated level, this overall decline can be
seen coming from a decline in all three
(All figures in ` crore)
2015–16 (Actuals) 2016–17 (RE) 2017–18 (BE)
6,08,000 6,74,565
84,579 99,115 1,03,101
2,77,649 3,03,412
9,84,764 10,81,078
1,50,75,429 1,68,47,455
61.03 61.74 62.40
10.20 10.07 9.54
28.77 28.19 28.06
6.06 6.53 6.41
3.70 4.03 4.00
0.62 0.66 0.61
1.74 1.84 1.80
vol lIi no 9 EPW Economic & Political Weekly
 BUDGET 2017–18

components of total transfers, namely, out of 22 Core Schemes account for reforms in the economy with unanticipated
devolution of states’ share in taxes (from around 90% of total outlay on the Core fiscal implications’ as one of the factors.
4.03% to 4.00%), Finance Commission Schemes. However, when it comes to This budget announcement relating to
Grants (from 0.66% to 0.61%) and, other scheme-related transfers in the absence new FRBM framework should be studied
central transfers (from 1.84% to 1.80%). of five year plans, there is a need for a in light of the fiscal road map laid out by the
As is evident from Table 2, with respect framework for predictability and cer- FFC. The deficit path in the cases of states,
to the outlay on major Centrally Sponsored tainty of transfers. In the long run, in a as recommended by the FFC, has provided
Schemes (CSS), there is an increase in dynamic and competitive federal system, a flexibility of up to 0.5% of gross state
the outlay from `2,45,435 crore in 2016– all transfers, including scheme-related domestic product (GSDP) under the follow-
17 (RE) to `2,78,432 crore in 2017–18 (BE). transfers require a framework. It is true ing conditions: (i) zero revenue deficit,
An increase of `1,215 crore in Core of the that scheme-related transfers are discre- (ii) fiscal deficit not exceeding 3% of GSDP,
Core Schemes (CCS) and `31,782 crore tionary transfers and reflect central gov- (iii) interest payment to revenue receipt
on Core Schemes constitutes the total in- ernment priorities in select sectors. But ratio not exceeding 10%, and (iv) debt-to-
crease of `32,997 crore outlay on CSS one cannot ignore the fact that states GSDP ratio not exceeding 25%. In the
from 2016–17 to 2017–18. While there has make matching contributions to most of FFC’s assessment of union and state fi-
been a nominal increase, there has also these schemes and state resources get tied nances, the combined debt-to-GDP ratio
been an increase in the total outlay on to central programmes. This top-down should be brought down to 58.24% of GDP
CSS as a percentage of GDP, albeit margin- approach to conditional grants has not by the end of 2019–20. The debt adjust-
al in magnitude (Table 2). However, the changed despite restructuring of trans- ment path proposed by the FFC shows an
composition of CSS reveals that the share fers, including abolition of plan grants in increase in the debt-to-GDP ratio of all
of CSS under Core Schemes has in- budget 2017–18. The restructuring of states from 21.9% to 22.38% (Table 4, p 45)
creased from 71.5% of total CSS to 74.2%. scheme-related and other transfers from between 2015–16 and 2019–20. At an ag-
It is interesting to note that out of the the centre to the states has placed a larg- gregate level, state debt-to-GDP ratio for
six CCS, roughly two-thirds of the total er burden on the latter to finance these 2016–17 (BE) stood at 22%, well within the
outlay is on the Mahatma Gandhi National schemes, thus reducing the untied fiscal target set by the FFC. State-specific debt-
Rural Employment Guarantee Scheme space to the states due to the higher tax to-GSDP ratios are shown in Table 4.
(`48,000 crore out of `71,756 crore in devolution recommended by the FFC.
2017–18). Amongst the 22 Core Schemes, Table 3: State-specific Debt-to-GSDP Ratio (%)
States 2014–15 2015–16 RE 2016–17 BE
10 schemes constitute around 90% of the New FRBM Framework
Andhra Pradesh 22.9 24.0 24.0
total outlay, with the top five within these Finance Minister Arun Jaitley in his budget Arunachal Pradesh 34.8 39.1 4.3
—National Education Mission (14.30%), speech mentioned that the FRBM Review Assam 19.4 19.3 20.1
the Pradhan Mantri Awas Yojana (14.05%), Committee has recommended a sustain- Bihar 25.8 25.2 25.3
the National Rural Health Mission (13.13%), able debt path which should be the macro- Chhattisgarh 14.0 15.2 15.5
the Integrated Child Development Services economic anchor of our fiscal policy. Goa 27.2 28.9 30.6
(10.04%), and the Pradhan Mantri Gram The Committee has favoured a Debt to GDP Gujarat 24.6 24.2 23.3
Sadak Yojana (9.19%)—accounting for ratio of 60% for the General Government by Haryana 20.5 21.5 21.3
around 60% of the total outlay. While 2023, consisting of 40% for Central Govern- Himachal Pradesh 41.0 40.3 38.8
ment and 20% for State Government. Within Jammu and Kashmir 51.2 54.0 52.3
the restructuring of non-Finance Com- this framework, the Committee has derived Jharkhand 21.9 21.2 20.9
mission Grants to states following the and recommended 3% fiscal deficit for the
Karnataka 22.6 22.5 24.1
FFC recommendations is a major impro- next three years. The Committee has also
Kerala 31.7 28.5 28.1
vement over the previous arrangements provided for ‘Escape Clauses,’ for deviations
upto 0.5% of GDP, from the stipulated fiscal Madhya Pradesh 22.2 21.5 20.3
of scheme-related transfers, particularly deficit target. Among the triggers for taking Maharashtra 20.5 20.5 20.1
with respect to CSS, there is further scope recourse to these Escape Clauses, the Com- Manipur 49.5 44.6 41.9
for rationalisation given the fact that 10 mittee has included ‘far-reaching structural Meghalaya 30.0 29.6 28.5
Table 2: Outlay on Major Centrally Sponsored Schemes (All figures in ` crore) Mizoram 60.4 51.4 48.3
2015–16 (Actuals) 2016–17 (RE) 2017–18 (BE) Nagaland 47.1 41.5 34.7
I Core of the Core Schemes (CCS) 58,142 70,541 71,756 Odisha 18.5 19.1 18.8
II Core Schemes (CS) 1,45,806 1,74,894 2,06,676 Punjab 32.2 32.4 31.4
Total (I+II) 2,03,948 2,45,435 2,78,432 Rajasthan 24.8 25.8 26.0
GDP (at current prices)* 1,36,75,331 1,50,75,429 1,68,47,455 Sikkim 27.0 25.6 24.7
Composition of outlay on CSS Tamil Nadu 21.0 21.0 21.2
Share of Core of the Core Schemes (%) 28.51 28.74 25.77
Tripura 32.6 30.0 29.6
Share of Core Schemes (%) 71.49 71.26 74.23
Uttar Pradesh 30.9 30.5 30.1
Total outlay on CSS as % of GDP 1.50 1.63 1.65
Uttarakhand 24.7 24.5 24.4
Share of Core of the Core Schemes (%) 0.43 0.47 0.42
West Bengal 36.7 35.5 32.9
Share of Core Schemes (%) 1.07 1.16 1.23
* GDP figures for 2015–16 (advance estimates) are from CSO, RE for 2016–17 and BE for 2017–18 are from budget 2017–18. All states 21.9 22.3 22.0
Source: Author’s compilation from Union Budget 2017–18. Source: State Budget Documents 2016–17.

Economic & Political Weekly EPW MARCH 4, 2017 vol lIi no 9 45

BUDGET 2017–18
Table 4: Consolidated Fiscal Road Map Recommended by the FFC In the case of the union
(All figures as % of GDP)
government, the FFC
2015–16 2016–17 2017–18 2018–19 2019–20
Debt stock–union 43.60 41.41 39.49 37.79 36.30 recommended a larger
Debt stock–states 21.90 22.06 22.21 22.30 22.38 correction in the debt-to-
Outstanding union loan to states 0.97 0.81 0.66 0.54 0.44 GDP ratio, and the cor-
Consolidated outstanding debt 64.53 62.67 61.03 59.55 58.24 rection is expected from
Source: Report of the Fourteenth Finance Commission.
43.6% in 2015–16 to
As is evident from Table 3 (p 44), the 36.3% in 2019–20. This asymmetric cor-
debt-to-GSDP ratio path is asymmetric rection path is primarily to ensure fiscal
across states. Among the major states, West discipline for the union government, giv-
Bengal has the highest debt-to-GSDP ratio en its large deficit and debt (above the
of 32.9%, followed by Punjab (31.4%), FRBM target) (Table 4). In the new FRBM
Uttar Pradesh (30.1%) and Kerala (28.1%). framework, this seems to have been re-
On the other hand, Chhattisgarh has the versed with union government reducing
lowest debt-to-GSDP ratio of 15.5% fol- its debt stock to 40% of GDP by the end of
lowed by Odisha (18.8%), Madhya Pra- 2023, while states are undertaking a big-
desh (20.1%) and Maharashtra (20.3%). ger correction in debt ratios to reach
Given this asymmetry in the debt profile 20% of GDP by the end of 2023.
of states, it is important to calibrate In view of the FFC recommendation, it
state-specific sustainable fiscal deficit is pertinent to acknowledge that if the
targets to achieve the targeted debt-to- FRBM paths proposed up to 2023 for both
GSDP ratio of 20% by the end of 2023. union and states are to be adhered to,
Not for Growth
Analysing Union Budget 2017–18
J Dennis Rajakumar
I
Sticking to the firm commitment to n a departure from the regular prac-
contain fiscal deficits, the reduced tice of relying on advance estimates
of gross domestic product (GDP) pro-
thrust on government spending
vided by the Central Statistics Office
does not seek to be countercyclical (CSO), the Union Budget 2017–18 has
given that economic growth is relied on its own revised estimates of GDP
falling. There is vast scope to step for 2016–17. In early January, the CSO
released the first advance estimates of
up collection of corporate taxes by
GDP which stood at `1,51,92,588 crore for
widening the tax base through 2016–17 (CSO 2017). The budget however
greater compliance. revised the GDP to `1,50,75,429 crore;1 a
reduction in the absolute size of the GDP
by `1,17,159 crore by 0.8%.
Compared to the 10% growth regis-
tered in 2015–16,2 nominal GDP is ex-
pected to grow by 11.1% in 2016–17 ac-
cording to the CSO’s advance estimates
and by 10.2% as per the budget’s revised
estimates. Against 7.9% recorded in
The author wishes to thank R Krishnaswamy 2015–16, the real GDP growth rate is ex-
for his valuable suggestions on an earlier pected to fall in 2016–17 to 7% and
version of this article.
6.2%, respectively, as per the CSO’s
J Dennis Rajakumar (dennisraja@epwrf.in) is advance estimates and the budget’s
Director, EPW Research Foundation, Mumbai.
revised estimates.
46 MARCH 4, 2017
states may have to undertake a larger fis-
cal correction than what is envisaged in
the FFC report. Targeting debt as a policy
anchor instead of deficit is certainly an
improvement. Given the subdued eco-
nomic environment and the decline in
GDP growth rate predicted in the Eco-
nomic Survey 2016–17, realising the
debt-to-GDP ratio targets would have to
happen through fiscal contraction. It is
another issue as to whether there should
be fiscal contraction when the economy
is contracting. However, it needs to be
emphasised that in the present context,
the burden of fiscal adjustment should
squarely fall on the central government
as states are already under the FRBM
framework proposed by FFC and imple-
mentation of which is monitored by the
union government. Any change in that
framework in between would be ad hoc
and arbitrary.
The CSO relied primarily on lead
indicators, mostly covering the period
April–October 2016, while arriving at its
advance estimates. As the finance ministry
would have used the latest data available,
we may consider the revised estimates
of GDP as somewhat firmer, in lieu of the
CSO’s first advance estimates. Thus, the
expected real GDP growth rate of 6.2%
in 2016–17 is lower by a considerable 1.7
percentage points than the 7.9% achi-
eved in 2015–16. Such a huge fall in the
growth rate between two years has not
been witnessed in recent years.
If this is any indication, it is clear that
the upward growth momentum3 has run
its course and demonetisation has had a
deleterious impact on both the level and
the growth rate of GDP. While the budget
makes a cursory mention of the impact
of demonetisation, it does not explicitly
recognise how severely the economy is
ailing on account of it.
Moreover, the budget assumed a nom-
inal growth rate of 11.8% for the ensuing
fiscal year. Despite the downside risk on
account of rising commodity prices, even
if we make a conservative assumption of
an inflation rate of 4% for 2017–18, the
economy is expected to record a real GDP
growth of 7.8% in 2017–18, which is 1.6
percentage points higher than the 6.2%
vol lIi no 9 EPW Economic & Political Weekly
 BUDGET 2017–18

expected in 2016–17. This raises a vital plan and non-plan expenditure, it has con- The share of tax revenue in total revenue
question on whether or not the budget tinued the practice of categorising ex- receipts, although dominant, has gradu-
has done enough to stimulate growth to penditure as revenue and capital expenses. ally come down from 83.8% in 2011–12
the extent required at this time. These items are now classified into two to 76.5% in 2016–17 and is to go up
major heads, namely, Scheme Expendi- to 81% in 2017–18. Simultaneously, the
Shrinking Size of Government ture and Other than Scheme Expenditure. share of two major sources of non-tax
Admittedly, the economy is not doing Since such a classification has been made revenue such as dividends and profit, and
well, but is expected to rebound in the available only from 2015–16, it is difficult “other communication services”4 went up.
coming year. Fiscal activism is advocated to make comparisons over the years. Together these two items accounted for
at a time when the economy slows down, As a percentage of GDP, total revenue 13% of total revenue receipts in 2011–12
like it has now. Expansionary fiscal policy receipts went up by 0.7 percentage and this rose to 22% in 2016–17. However,
as a tool of economic policy is deployed points from 8.7% of GDP in 2015–16 to these are to go down to 17.5% in 2017–18.
when a government prioritises growth. 9.4% of GDP in 2016–17. At 9% of GDP, Capital receipts have been on the de-
In our case, the policy goal of the budget this upward trend is expected to reverse cline from 6.5% of GDP in 2011–12 to 3.9%
is to stimulate growth, but trends in gov- in 2017–18. The share of revenue re- in 2016–17. This is budgeted to go down
ernment finances do not suggest such ceipts in total receipts went up from further to 3.7% in 2017–18. Borrowing
fiscal activism (Table 1). 56.9% in 2011–12 to 70.7% in 2016–17 and other liabilities (equivalent to the
The budget has done away with the and is budgeted to remain the same in fiscal deficit) comprise the dominant share
presentation of expenditure in terms of 2017–18. in capital receipts, and so the overall
Table 1: Trends in Central Government Finances
Sl No Major Heads As % of GDP at Market Price Growth Rate
2011–12 2012–13 2013–14 2014–15 2015–16 2016–17RE 2017–18BE 2015–16 2016–17RE 2017–18BE
1 Revenue receipts (2+3) 8.6 8.8 9.0 8.9 8.7 9.4 9.0 8.5 19.1 6.5
2 Tax revenue 7.2 7.5 7.3 7.3 6.9 7.2 7.3 4.4 15.4 12.7
3 Non-tax revenue 1.4 1.4 1.8 1.6 1.8 2.2 1.7 27.0 33.2 -13.7
Of which:
4 Interest receipts 0.2 0.2 0.2 0.2 0.2 0.1 0.1 6.6 -28.5 4.8
5 Dividend and profits 0.6 0.5 0.8 0.7 0.8 1.0 0.8 24.8 36.7 -7.0
6 Other non-tax revenue 0.5 0.6 0.7 0.7 0.8 1.1 0.7 35.8 44.2 -22.9
7 Other communication services 0.2 0.2 0.4 0.2 0.4 0.5 0.3 80.0 42.8 -43.7
8 Capital receipts (9+10+12) 6.3 5.3 4.8 4.5 4.4 3.9 3.7 6.0 -0.8 6.8
9 Recoveries of loan 0.2 0.2 0.1 0.1 0.2 0.1 0.1 51.7 -46.9 7.8
10 Other receipts 0.2 0.3 0.3 0.3 0.3 0.3 0.4 11.6 8.0 59.3
11 Of which: disinvestment receipts 0.2 0.3 0.2 0.3 0.3 0.3 0.4 29.2 -5.1 35.2
12 Borrowing and other liabilities 5.9 4.9 4.5 4.1 3.9 3.5 3.2 4.3 0.3 2.3
13 Total expenditure (14+17) 14.9 14.2 13.9 13.4 13.1 13.4 12.7 7.6 12.5 6.6
14 Revenue expenditure 13.1 12.5 12.2 11.8 11.2 11.5 10.9 4.8 12.8 5.9
Of which:
15 Interest payments 3.1 3.1 3.3 3.2 3.2 3.2 3.1 9.7 9.4 8.3
16 Grants in aid for creation of capital assets 1.5 1.2 1.2 1.1 1.0 1.1 1.2 0.8 30.1 13.9
17 Capital expenditure 1.8 1.7 1.7 1.6 1.9 1.9 1.8 28.6 10.6 10.7
18 Revenue deficit (14–1) 4.5 3.5 3.2 2.9 2.5 2.1 1.9 -6.2 -9.3 3.3
19 Effective revenue deficit (18–16) 3.0 2.5 2.0 1.9 1.5 0.9 0.7 -10.1 -33.9 -9.8
20 Gross fiscal deficit (13-(1+9+10)) 5.9 4.9 4.5 4.1 3.9 3.5 3.2 4.3 0.3 2.3
21 Gross primary deficit (20–15) 2.8 1.8 1.1 0.9 0.7 0.3 0.1 -15.8 -43.8 -54.2
GDP at current and market price 100.0 100.0 100.0 100.0 100.0 100.0 100.0 10.0 10.2 11.8
RE stands for revised estimates; and BE stands for budget estimates.
Source: Author’s estimates based on data extracted from Union Budget 2017–18.

Table 2: Sources of Major Gross Tax Revenue

Sl No Major Heads As % of GDP at Market Price Growth Rate
2011–12 2012–13 2013–14 2014–15 2015–16 2016–17RE 2017–18BE 2015–16 2016–17RE 2017–18BE
1 Gross tax revenue 10.2 10.4 10.1 10.0 10.6 11.3 11.3 16.9 17.0 12.2
2 Corporation tax 3.7 3.6 3.5 3.4 3.3 3.3 3.2 5.7 9.0 9.1
3 Taxes on Income other than corporation tax 1.9 2.0 2.1 2.1 2.1 2.3 2.6 11.3 22.8 24.9
4 Customs 1.7 1.7 1.5 1.5 1.5 1.4 1.5 11.9 3.2 12.9
5 Union excise duties 1.7 1.8 1.5 1.5 2.1 2.6 2.4 53.1 34.5 5.0
6 Service tax 1.1 1.3 1.4 1.4 1.5 1.6 1.6 25.9 17.1 11.1
Major direct taxes 5.6 5.6 5.6 5.5 5.4 5.6 5.8 7.8 14.3 15.7
Major indirect taxes 4.5 4.8 4.4 4.4 5.2 5.7 5.5 30.5 20.0 8.8
Major direct taxes include corporation tax and taxes on income other than corporation tax.
Major indirect taxes include customs, union custom duties and service tax.
Sources: Same as in Table 1.

Economic & Political Weekly EPW MARCH 4, 2017 vol lIi no 9 47

BUDGET 2017–18
decline in the fiscal deficit is reflected in
the reduction in capital receipts. Receipts
from disinvestment, including strategic
disinvestment, are expected to remain at
0.4% of GDP in 2017–18. There is hardly
any other major source of capital receipts.
Revenue receipts are expected to grow
at 6.5% in 2017–18 against 19.1% recorded
in 2016–17, largely due to the expected
fall in the growth of non-tax revenue on
account of dividends and profits, and
“other communication services.” How-
ever, tax revenue is budgeted to grow at
12.7% in 2017–18 compared to 15.4% in
2016–17. In sharp contrast to the experi-
ence of the last few years when tax revenue
grew at a slower rate than GDP, the growth
rate of tax revenue in 2017–18 is expect-
ed to remain higher than that of GDP.
On the expenditure side, total expendi-
ture is dominated by revenue expenditure.
While capital expenditure remained be-
tween 1.6% and 1.9% of GDP over the last
few years, the size of the revenue expend-
iture declined from 13.1% of GDP in
2011–12 to 11.5% in 2016–17, and is budg-
eted to go down further to 10.9% in
2017–18. The marginal rise seen in total
receipts by 0.3 percentage points in
2016–17 had been nearly compensated
by a rise in revenue expenditure of the
same magnitude.
The gradual reduction in total expe-
nditure from 14.9% of GDP in 2011–12 to
13.4% in 2016–17 and further to 12.7% in
2017–18 is an indication of the shrinking
size of the government in the Indian econ-
omy. Contrary to the experiences of pre-
vious years, total expenditure in 2016–17
grew at 12.5%, marginally higher than
that of GDP. But it is expected to grow at
6.6% against the assumed GDP growth rate
of 11.8%. Concurrently, fiscal deficit has
gone down by 2.4 percentage points, from
5.9% of GDP in 2011–12 to 3.5% in 2016–17.
During the last few years, successive
finance ministers have been in a race to
achieve fiscal consolidation, as mandat-
ed under the Fiscal Responsibility and
Budget Management (FRBM) Act 2003,
which sought to cap the fiscal deficit at 3%
of GDP. Though this target still remains
unattained, the gradual reduction in
the fiscal deficit as a percentage of
GDP over the years signifies the govern-
ment’s commitment to fiscal consolidation.
48
However, this has resulted in a larger Tax buoyancy coefficients (that is, the
reduction in the size of the government. ratio of rate of the growth in tax collec-
The reduced thrust on government tion to the rate of growth in GDP) of gross
spending defies fiscal activism that may tax revenue are budgeted to come down
be called for as a countercyclical meas- to 1.0 in 2017–18 from the current level
ure when economic growth is falling, as of 1.7 (Table 3). As for individual catego-
is the case at this time. ries, the buoyancy coefficient of corpo-
ration tax continues to remain less than
Income Tax Powered Revenue one, but that of income taxes remains
It has already been noted that the pro- higher at 2.1 in 2017–18. More impor-
portion of tax revenue to total revenue tantly, the buoyancy coefficient of union
receipts is budgeted to increase in 2017–18. excise duties is expected to go down sharp-
The collection of tax revenue in 2017–18 ly to 0.4 from 3.4 recorded in 2016–17.
is expected to grow by 12.7% and to remain While the buoyancy coefficient of direct
at about 7.3% of GDP (Table 1). Direct taxes is budgeted to remain above one in
taxes used to constitute a major portion 2017–18 due to higher income taxes other
of total gross tax revenue in 2011–12 as than corporation tax, the coefficient of
compared to indirect taxes (Table 2). indirect taxes is likely to remain less than
Taxation policies of the last three years one due to an expected reduction in the
have reduced the gap between direct collection of union excise duties. The
and indirect taxes through increased surge in union excise duties was consid-
collection of union excise duties. As a re- ered regressive (Rajakumar and Krishnas-
sult, collection of indirect taxes has mar- wamy 2015), and it appears to have been
ginally outpaced that of direct taxes in corrected, but by passing the burden on
2016–17. The major direct taxes and to individuals.
Table 3: Buoyancies Coefficient of Major Taxes
Sl No Major Heads 2012–13 2013–14 2014–15 2015–16 2016–17RE 2017–18BE
1 Gross tax revenue 1.2 0.8 0.9 1.7 1.7 1.0
2 Corporation tax 0.7 0.8 0.8 0.6 0.9 0.8
3 Taxes on income other than corporation tax 1.4 1.6 0.8 1.1 2.2 2.1
4 Customs 0.8 0.3 0.9 1.2 0.3 1.1
5 Union excise duties 1.5 -0.3 1.0 5.3 3.4 0.4
6 Service tax 2.6 1.3 0.8 2.6 1.7 0.9
Major direct taxes 1.0 1.1 0.8 0.8 1.4 1.3
Major indirect taxes (4+5+6) 1.5 0.4 0.9 3.0 2.0 0.7
Note and Sources: Same as in Table 2.
indirect taxes accounted for 5.6% and Unlike all other taxes, the buoyancy
5.7% of GDP, respectively. An examination coefficient of income taxes other than
of the composition of gross tax revenue corporation tax nearly doubled from 1.1
for 2017–18, however, reveals the incre- in 2015–16 to 2.2 in 2016–17 and is ex-
ased emphasis on income taxes (Table 2). pected to remain at that level. The higher
The relative importance of corporation growth in the collection of income taxes
taxes has been on the decline from 3.7% during 2016–17 may partly be attributed
of GDP in 2011–12 to 3.3% in 2016–17, and to black money disclosures. The finance
is budgeted to go down further to 3.2% minister has interestingly made an attempt
in 2017–18. However, the proportion of in the budget to experiment with the
income taxes other than corporation taxes validity of Laffer curve in the Indian
that had remained at about 2.1% of GDP context by halving tax liability of those
till 2015–16, has gone up to 2.3% of GDP with taxable income up to `5 lakh. The
in 2016–17, and is expected to go up fur- Laffer curve posits an inverse relation-
ther to 2.6% in 2017–18. Amongst indirect ship between tax rates and tax revenue
taxes, the collection of union excise duties beyond a certain point.
peaked in 2016–17 at 2.6% of GDP and is The reduction in the personal tax rate
pegged at 2.4% of GDP in 2017–18. In the is expected to fetch more tax revenue, as
budget, direct taxes have become more lower tax rates may incentivise tax com-
important largely due to rising collection pliance, thereby helping broaden the tax
of income taxes that are expected. base. By the same token, one could
MARCH 4, 2017 vol lIi no 9 EPW Economic & Political Weekly

Table 4: Corporate GVA and Tax Burden
Year GVA at Basic Prices
Total
(1)
2011–12 81,06,656
2012–13 92,05,315
2013–14 1,03,66,266
2014–15 1,14,70,416
2015–16 1,24,51,938
Source: CSO (2017a) for GVA at basic prices.
Table 5: Effective Corporate Tax Rates
Number of Sample Average Statutory
Companies$ Tax Rate
2011–12 2,78,982 32.445
2012–13 3,34,109 32.45
2013–14 3,10,716 33.217
2014–15 3,10,730 33.84
2015–16 3,21,770 34.47
$ refers to those companies who filed returns on income
electronically and have reported profit. Effective tax rate is
total taxes to profit before taxes.
Source: Union Budget, various ossues.
argue why the buoyancy of corporate
tax collections should not increase when
corporate tax rates have been slashed to
25% for companies with an annual turn-
over of up to `50 crore. What is more, the
relative share of the corporate sector5 in
the country’s gross value added (GVA) at
basic prices has gone up from 44.7% in
2011–12 to 46.8% in 2015–16 (CSO 2017a),
whereas collection of corporate taxes has
come down from 8.9% of the sector’s
GVA to 7.8% during the same period
(Table 4). Though the effective tax rate
of corporate sector has steadily gone up,
it is still well below the statutory corpo-
rate tax rate (Table 5).6 There is thus a
vast scope to step up collection of corpo-
rate taxes. While the aforementioned
reduction in tax rates faced by small-
sized companies is a welcome step, it is
surprising to see why the budget does
not expect any discernible change in the
collection of corporate taxes.
Yet another point is that those in the
high-income group (that is, those with
taxable income exceeding `50 lakh) will
pay additional taxes on account of the
increased surcharge.7 If those in this
income bracket choose not to absorb the
additional tax burden arising from the
newly imposed surcharge, they would
demand a higher executive compen-
sation or expect a higher profit margin
(if their pay structure is performance-
linked). So the surcharge would only
add to costs that would eventually be
passed on to customers.
Economic & Political Weekly EPW MARCH 4, 2017
BUDGET 2017–18
(Values in ` crore) The main category of services include (i) Basic
Service, (ii) Cellular Mobile Telecom Services
Corporate Sector Corporation Tax Col (2) as % of Col (1) Col (3) as % of Col (2) (CMTS), (iii) Unified Access Services (UAS),
(2) (3) (4) (5) (iv) Unified Licences (UL), (v) Very Small Aper-
ture Terminal (VSAT) Services, (vi) International
36,23,095 3,22,816.0 44.7 8.9 Long Distance Services (ILD), (vii) National
41,25,779 3,56,326.0 44.8 8.6 Long Distance Services (NLD), (viii) Public Mo-
bile Radio Trunk Services (PMRTS), (ix) Cap-
46,36,603 3,94,678.0 44.7 8.5 tive Mobile Radio Trunk Services (CMRTS).
52,48,204 4,28,925.0 45.8 8.2 See Revenue Budget.
58,30,926 4,53,228.0 46.8 7.8 5 Corporate sector here is defined to include public
non-financial corporations, public financial corpo-
rations, private non-financial corporations and
private financial corporations. See (CSO 2017a).
To sum up, the observed contraction 6 Differences between statutory tax rate and
Effective effective tax rate are attributable to various tax
Tax Rate
in the size of the central government
incentives such as accelerated depreciation,
22.85 due to its firm commitment to contain investment allowance, profit-linked and invest-
the fiscal deficit provides little fiscal ment-linked deductions. Information on tax
22.44 rates were collected from “the Statement of
23.22 stimulus to growth recovery. The budget, Revenue Impact of Tax Incentive under the
24.67 devoid of fiscal activism, places a huge Central Tax System” which is part of Receipts
Budget from 2016–17 onwards. Prior to that, it
28.24 expectation on monetary policy for growth used to be a separate document titled “State-
recovery. Do the monetary authorities ment of Revenue Foregone under the Central
Tax System.” The main objective of this state-
have that option? At the moment, growth ment is to quantify the revenue impact of tax
incentives proposed by the central government.
recovery is not in sight.
7 A surcharge of 10% of tax payable has been
levied on categories of individuals with taxable
income between `50 lakh and `1 crore and a
Notes surcharge of 15% on those with taxable income
1 See Footnote No 1, Budget at a Glance 2017–18, exceeding `1 crore continues. The finance min-
p 1. ister expects to mop up additional tax revenue
of `2,700 crore in 2017–18 on account of this.
2 The GDP at market price till 2015–16 have been
taken from the CSO’s Press Note dated 31 Janu-
ary 2017 (CSO 2017a). For deflating the revised References
estimates of GDP for 2016–17, we have used
CSO’s GDP deflator value of 125 which is 3.8% CSO (2017): “First Advance Estimates of National
higher than the corresponding deflator value of Income 2016–17,” Central Statistics Office,
Press Note, 6 January.
120.4 in 2015–16.
3 Real GDP at market price grew at 5.5% in
— (2017a): “First Revised Estimates of National
Income, Consumption Expenditure, Saving
2012–13, 6.5% in 2013–14, 7.2% in 2014–15 and and Capital Formation 2015–16,” Central Sta-
7.9% in 2015–16 (CSO 2017a). tistics Office, Press Note, 31 January.
4 This comprises revenue collected by the Depart- Rajakumar, J Dennis and R Krishnaswamy (2015):
ment of Telecom, including recurring licence fees “Surge in Union Government Revenues: Indi-
from Telecom Services Providers licensed by it rect Tax Collection Leads Growth,” Economic &
and one-time entry fees from new operators. Political Weekly, Vol 50, No 50, pp 82–85.
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vol lIi no 9 49
BUDGET 2017–18
An Examination of
Revenue Generation
Ajit Karnik, Mala Lalvani
The revenue side of the budget is
scrutinised to understand if the
government is being realistic
about revenue generation in
2017–18. Clearly, there is
over-optimism, given that
economic growth will be slow.
Too much is expected from
voluntary disclosure and
penalties, while incentives are not
in place. It would make sense to
allow some slippage in the deficit
targets in order to revive the
economy. In addition, the
increasing problem of cesses is
discussed with reference to the
Krishi Kalyan Cess to assess
whether cesses serve the purpose
for which they are introduced.
Ajit Karnik (ajit.karnik@gmail.com) teaches
at Middlesex University, Dubai. Mala Lalvani
(mala.lalvani@gmail.com) teaches at the
Department of Economics, University of
Mumbai.
50
due in 2019, the next two budgets will be
framed to secure the re-election of the
government as the overriding objective.
The focus of this article is the revenue
side of the budget, which has received
relatively less attention. The ability of
the government to meet its expenditure
targets depends crucially on generating
T
he Union Budget 2017–18 was revenues as has been envisaged in the
presented under the shadow of the budget. This is especially important
impact of demonetisation that was because the government has sought to
sprung on the Indian economy in Novem- remain on the path of fiscal consolida-
ber 2016. The consensus among most tion and bring down the fiscal deficit to
economists is that demonetisation will gross domestic product (GDP) ratio to
impose significant costs on the economy 3% by 2018–19. We examine some of
(Basu 2016; Gopinath 2016; Rogoff 2016). the underlying assumptions of revenue
The Economic Survey 2016–17 (2017: 2) generation. In addition, we also seek to
itself recognises this: “Short-term costs examine whether the various cesses that
have taken the form of inconvenience and have been imposed by the government
hardship, especially those in the informal have been used for the purpose for
and cash-intensive sectors of the economy, which they were introduced.
who have lost income and employment.”
The Survey also recognises that the in- State of the Economy
formal sector has suffered substantially While presenting the budget for 2015–16,
more than the formal sector. Of course, the the finance minister had, rather enthu-
Survey does hold out the promise of the siastically, proclaimed that “Aiming for
long-term benefits of demonetisation, a double-digit rate seems feasible very
but it is far more circumspect about this soon.” However, the reality of the GDP
than the budget, which states, “We firmly growth rates has turned out to be disap-
believe that demonetisation … will have pointing as Figure 1 shows.
Figure 1: GDP (Market Prices)—Annual Rate of Growth (%)
9
4
2012–13Q1
2012–13Q2
2012–13Q3
2012–13Q4
2013–14Q1
2013–14Q2
2013–14Q3
2013–14Q4
2014–15Q1
2014–15Q2
2014–15Q3
2014–15Q4
2015–16Q1
2015–16Q2
2015–16Q3
2015–16Q4
2016–17Q1
2016–17Q2
an epoch-making impact on our econo- The rate of growth during 2016–17 has
my and the lives of our people” (Budget turned out to be even more lacklustre
Speech 2017–18: 6). than that experienced during 2015–16. It
Despite the bravado, the budget seems needs to be remembered that the effects
clearly designed to mitigate the adverse of demonetisation have not been fac-
effect of demonetisation and alleviate tored in the growth rates presented in
the distress of those who suffered its Figure 1. Figure 2 (p 50) looks at the
consequences the most. Much has been quarterly growth rates of gross value
written about the rural and infrastruc- added (GVA) by sector.
ture focus of the budget, though one does Agriculture seems to have performed
get the feeling that the opportunity of un- better during 2016–17, though the perfor-
dertaking bold reforms has now been mance of mining and quarrying has
lost for the rest of the term of the present turned negative. Disturbingly, the perfor-
government. With the Lok Sabha elections mance of manufacturing and electricity
MARCH 4, 2017 vol lIi no 9 EPW Economic & Political Weekly
 BUDGET 2017–18
Figure 2: Quarterly Growth Rates has slipped. Overall, the performance
of GVA at basic prices in the first
2015–16Q2 2016–17Q1
two quarters of 2016–17 was quite com-
2015–16Q1 2016–17Q2 parable to the rates observed in the
previous years.
The components of GDP at market
prices, however, paint a worrying picture
as Figure 3 shows. Note that the data for
2016–17 has been presented for the two
halves of the year, that is, H1 and H2.
The latest data for 2016–17 (Economic
Survey 2016-17: Table 2, p 141) shows a
fall in private final consumption expendi-
ture (PFCE), possibly due to the curtail-
Figure 3: Growth Rates: GDP ment of incomes due to demonetisation,
2016–17H2 along with a compensatory increase in
35
2016–17H1
30 government final consumption expendi-
2015–16Q4
25
2015–16Q3
ture (GFCE) in 2016–17H2. The perfor-
20
2015–16Q2
mances of gross fixed capital formation
15 (GFCF), exports and imports point to fur-
2015–16Q1
10
ther weaknesses in the economy.
5
Another indicator of the performance
0
of the economy shows an even more
-5
-10
dismal picture. The rate of growth of
-15 the Index of Industrial Production (IIP)
PFCE GFCE GFCF Export of Goods Import of Goods GDP at Market for 2016–17 has been poor so far. The
and Services and Services Prices
sudden increase in the rate of growth of
Figure 4: Annualised IIP Rate of Growth the IIP in November 2016 is deceptive
since it is computed from a low base. To
get a proper perspective of the dismal
performance of IIP during 2016–17, we
report in Figure 5 the month-on-month
rate of growth of the IIP.
The various figures presented so far
indicate an economy that is growing
sedately despite significant underlying
weaknesses. As the Survey 2016-17 (p 141)
points out, “It is the 23.8 per cent growth
in government final consumption expen-
diture that is the major driver of GDP
April–16 May–16 June–16 July–16 August–16 September–16 October–16 November–16 growth in the current year from the de-
Figure 5: Month-on-Month Rate of Growth of IIP
mand side.” The most worrying aspect
of the economy from the point of view of
future growth is the declining fixed
investment to GDP ratio, which fell from
29.3% in 2015–16 to 26.6% in 2016–17.
Further, the growth in fixed investment
at constant prices has turned negative
(Survey 2016–17: 141). In addition, the
impact of demonetisation must be fac-
tored in.
The demonetisation shock to the eco-
nomy has already destabilised the cur-
rent fiscal year and there is a strong pos-
sibility that its effects may spill over into
April–16 May–16 June–16 July–16 August–16 September–16 October–16 November–16 the next year as well. For 2016–17, the
Economic & Political Weekly EPW MARCH 4, 2017 vol lIi no 9 51
BUDGET 2017–18

government has revised its estimate of is certainly not borne out by our results may not be realised as taxes if the black
the GDP growth rate down to 7.1%, but in Table 1. While excise duties do have income declarant is able to explain the
this is on the basis of data available only higher buoyancy than other items in the source of his income. Meanwhile, the
till September 2016. It is very likely that table, whether this is enough to enhance government has enacted one more Tax-
when the effects of the demonetisation the fiscal space for the government is ation Laws (Second Amendment) Act,
on the economy are fully realised, the very doubtful. Even if we compute tax 2016 (Government of India 2016). It was
rate of growth might fall by one percent- buoyancies on a year-on-year basis, which passed in the Lok Sabha as a follow-up
age point or more (George 2017). The is what the fiscal strategy statement measure to the demonetisation annou-
consequence of this will be that reve- seems to have done, the results do not ncement of 8 November 2016. As per the
nues for the current year will fall and, seem too hopeful. amendment, a taxpayer may declare
though the government has claimed that Further, as a result of the adverse effects undisclosed income, possessed either in
fiscal deficit ratio will fall to 3.2% of the of demonetisation, even the buoyancies the form of cash or deposited in banks,
GDP (as against a target of 3.5%), it Table 2: Tax Buoyancies (Annual computations)
seems unlikely that this will happen. Year Personal Corporate Direct Excise Customs Indirect Tax Non-tax Revenues
Income Tax Income Tax Taxes Duties Duties Taxes Revenues Revenues Receips
The reduction of the fiscal deficit ratio is
2005–06 1.99 1.78 1.85 0.87 0.83 1.16 1.45 -0.39 0.96
premised on a 19.12% rise in revenue 2006–07 2.37 2.57 2.50 0.43 2.13 1.31 1.84 0.51 1.55
receipts. This rate of growth of revenues 2007–08 2.36 2.21 2.26 0.24 1.24 0.91 1.56 1.42 1.53
seems doubtful in the aftermath of demo- 2008–09 0.04 0.87 0.56 -1.15 -0.63 -0.48 0.07 -0.41 -0.02
netisation since lower GDP growth would 2009–10 0.58 0.66 0.63 0.20 -0.86 -0.35 0.20 1.32 0.40
make revenue collection less buoyant. 2010–11 0.41 0.91 0.76 1.52 3.08 1.92 1.23 4.36 1.87
This is likely to be true for both direct 2011–12 1.75 0.99 1.08 0.62 0.93 1.33 1.19 -5.03 -0.53
and indirect taxes. 2012–13 1.35 0.89 1.12 1.55 0.70 1.48 1.28 0.93 1.22
2013–14 1.55 0.89 1.12 -0.17 0.34 0.32 0.75 3.37 1.16
Tax Buoyancy 2014–15 1.04 0.83 0.91 1.06 0.53 1.11 1.00 -0.05 0.79
2015–16 -0.40 -0.85 -0.70 4.88 -0.05 2.12 0.56 3.53 1.09
The Fiscal Policy Strategy Statement
2016–17 1.60 0.82 1.12 1.16 0.93 0.92 1.02 2.25 1.28
(2016–17) states in paragraph 5 the fol-
lowing: reported above might be overly optimis- post offices, etc, before a notified date
The additional fiscal space permitting en-
tic. For 2017–18, the government itself (PRS Legislative Research 2016). Addi-
hanced expenditure allocations in the re- has downgraded its forecasts of rate of tional taxes and a variety of penalties
vised estimates of 2016-17, materialised growth of GDP to lie in the band 6.75% to have been proposed under the act.
broadly on account of buoyant tax revenues, 7.5%. Given that this year’s growth rate Karnik (2017) gives details of these.
particularly in the Indirect tax side and spe-
reported in the budget is 7.1%, which is It is moot whether black money hold-
cifically on account of Excise duty collections.
the lower end of the band set for 2015–16, ers would volunteer to disclose their
This statement needs to be qualified there is every likelihood that the next incomes. Whether they do so or not de-
that this can hardly represent a change year’s rate might be 6.75% or even lower. pends on the incentives they expect.
in the economy whence an enhanced fis- This is likely to depress revenue genera- More specifically, what is the probabili-
cal space will be available in the years to tion even further. If the government sticks ty that their undisclosed incomes would
come. We have carried out a variety of to its target of 3% fiscal deficit to GDP ra- be discovered at all? Karnik (2017) has
estimates of tax buoyancy to examine this tio for 2017–18, expenditure compression shown that only if P (probability that
issue. In the first instance we employed a is inevitable in view of the likely sluggish undisclosed income will be found dur-
regression equation to estimate various revenue generation. A further problem ing a search) exceeds 0.5385, will the
buoyancies. Table 1 presents these results: would arise if, as has been the experi- black money holder have an incentive to
The claim in the fiscal strategy state- ence, the government is unable to meet disclose his or her income. With a poor
ment regarding buoyancy of tax revenues its disinvestment target which has been record of enforcement of the various
Table 1: Tax Buoyancies (Regression Approach) placed at a massive 59% above what was legal provisions aimed at prevention of
Tax Component Buoyancy achieved as per the revised estimates of economic crimes (Bhattacharjee 2016),
Personal income tax 0.9502 (0.000) 2016–17. The government should, more it seems very unlikely that P, the pro-
Corporate income tax 0.5856 (0.003) sensibly, allow some slippage in the defi- bability of being caught in a search, will
Direct taxes 0.7702 (0.000)
cit targets in order to revive the economy. ever exceed 0.5385. Hence, any rational
Excise duties 1.3011 (0.015)
black money holder will have little
Customs duties 0.7527 (0.000)
Taxation of Black Money incentive to voluntarily declare their
Indirect taxes 0.9239 (0.000)
Tax revenues 0.9064 (0.000) The government hoped to raise `30,000 undisclosed incomes. Consequently,
Non-tax revenues 0.9299 (0.000) crore as taxes from the `65,000 crore any expectation that taxes levied on
Revenue receipts 0.9365 (0.000) declared under the income disclosure undisclosed incomes will swell the
(1) P-values in brackets.
(2) All regressions equations have an intercept (not
scheme that ended in September 2016. revenue kitty substantially is unlikely
reported here) and are free of serial correlation. It is, of course, likely that `30,000 crore to materialise.
52 MARCH 4, 2017 vol lIi no 9 EPW Economic & Political Weekly
 BUDGET 2017–18

Case of Krishi Kalyan Cess 2015–16 at 0.5% on all taxable services Department of Agricultural Research
Not having to share the revenues and its proceeds were to be exclusively and Education (by `382 crore) and Prad-
mopped up via cesses with state govern- used for financing initiatives relating to han Mantri Krishi Sinchayee Yojana, a
ments, has opened up a backdoor route “improvement of agriculture and wel- flagship programme of the government
for central governments to increase fare of farmers.” (lower by `239 crore) and over-spending
their kitty. To borrow the words of Rao In budget 2017–18 we find that the en- by the Department of Agriculture, Coop-
(2016), cesses are “a major violation of tire premium of `9,000 crore on crop eration and Farmer Welfare (higher by
the spirit of cooperative federalism.” insurance (Pradhan Mantri Fasal Bima `3,857 crore).
Hence, an important parameter to as- Yojana) is to be met from KKC and the Having discerned that the major in-
sess the performance of the government remaining `1,800 crore will go towards crease in the excess expenditure on Agri-
would be to see what it is doing with this interest subvention for short-term credit culture and Allied Activities of `4,249
source of revenue, which accrues exclu- to farmers. Details are given in Table 4. crore has been incurred by the Depart-
sively to the central government. Revenue collections from KKC in ment of Agriculture, Co-operation and
The first thing that surfaces from the 2016–17 (RE) exceeded that in 2016–17(BE) Farmer Welfare we further investigated
data related to revenue collection via by `4,000 crore. We find that spending the allocations for this specific depart-
cesses is that the saga of cesses contin- on Agriculture and Allied Activities in ment and found that the major reason
ues. The share of cesses and surcharges 2016–17(RE) has exceeded 2016–17 (BE) for this increased spending is only on
in total receipts has increased substan- Table 4: Schemes to Be Funded by Krishi one scheme, namely, Pradhan Mantri
tially from 4.7% in 2015–16 to 7.9% in Kalyan Cess Fasal Bima Yojana (or PMFBY on crop
(`crore)
2017–18 (budget estimates or BE). In 2017–18 (BE)
insurance). The expenditure on this
nominal terms, it has increased from Pradhan Mantri Fasal Bima Yojana 9,000 scheme in 2016–17 (RE) has exceeded the
`83,998 crore to `1,69,662 crore, that is, Transfer of Krishi Kalyan Cess to 2016–17 (BE) by `77,400 crore. In fact, in
an increase of 102%. Table 3 below gives Krishi Kalyan Kosh 9,000 order to take care of this excessive spend-
Met from Krishi Kalyan Kosh -9,000
the different cesses, which are currently ing many other schemes of the depart-
Interest subsidy for short-term
in existence. credit to farmers 15,000 ment have been short-changed and we
An issue highlighted by the Comptrol- Transfer to Krishi Kalyan Kosh 1,800 notice underspending particularly on
ler and Auditor General of India (CAG) is Met from Krishi Kalyan Kosh -1,800 Centrally Sponsored Schemes, which
the underutilisation of various cesses. In Source: Expenditure Budget, Vol 2. are transfers to state governments (the
centrally-sponsored schemes faced a cut
Table 3: Cesses and Surcharges (`crore)
2015–16 2016–17 (BE) 2016–17 (RE) 2017–18 (BE)
of `2,550 crore as seen in Table 5). Even
Education cess–corporation tax 12,704 14,386 14,386 15,692 the allocation on interest subsidy for
Education cess–income tax 8,445 9,663 9,663 9,663 short-term credit made with great pride
Education cess–customs 3,687 4,150 3,700 4,200
Table 5: Excess/Underspending 2016–17 (RE) over
Secondary and higher education cess–customs 1,779 2,075 1,850 2,100 2016–17 (BE) (`crore)
Surcharge–corporation tax 17,754 51,379 43,594 47,550 Head of Expenditure Amount
Surcharge–income tax 1,565 7,650 7,650 9,348 Pradhan Mantri Fasal Bima Yojana 7,740.04
Krishi Kalyan cess–income tax - - 2,000 2,000 Interest subsidy for short-term credit
Cesses on exports 122 120 150 160 to farmers -1,380.87
Surcharge on pan masala and tobacco 1,562 1,190 3,200 3,400 National Institute of
Plant Health Management -6.98
Total cesses administered by department of revenue 29,277 40,749 49,850 51,550
National Institute of
Net-Cesses administered by other departments 1,838 1,670 1,869 1,900
Agricultural Extension Management -2.57
Education cess–service tax 917
Total-autonomous bodies -9.55
Secondary and higher education cess–service tax 421
Pradhan Mantri Krishi Sinchayee Yojana
Swachh Bharat cess–service tax 3,926 10,000 12,500 13,300 (PMKSY)- Per drop more crop -350
Krishi Kalyan cess–service tax - 5,000 7,000 8,800 Rashtriya Krishi Vikas Yojana -1,850
Total–cess and surcharge 83,998 1,48,031 1,57,412 1,69,662 National Food Security Mission -420
Total receipts 17,77,604 19,64,865 19,74,180 21,33,891 National Project on Organic Farming -2.5
Cess and surcharge as percent of total receipts 4.73 7.53 7.97 7.95 Rainfed Area Development and
BE=budget estimates, RE=revised etimates. Climate Change -35
Paramparagat Krishi Vikas Yojana -177
fact, the CAG (2015: 44) report says, “the by `4,249 crore. Thus it would appear
National Project on Agro-Forestry -25
possibility of the diversion of funds for that the extra spending under this
National mission on Oil Seeds and Oil Palm -124
purposes not mandated under the board was on account of the revenue
Sub -mission on Agriculture Extension -44.5
Finance Act cannot be ruled out.” We bonanza from KKC. Information technology -42
look in some detail at one specific cess, A look at the composition of this extra Integrated Scheme on Agriculture Census
the Krishi Kalyan Cess (KKC), which has spending of `4,249 crore, by comparing and Statistics -22
been levied from 1 June 2016. This cess the figures for 2015–16(RE) over 2015–16 Total green revolution -2,199.9
was introduced in the Budget Speech (BE), shows underspending by the Total centrally-sponsored schemes -2,549.9

Economic & Political Weekly EPW MARCH 4, 2017 vol lIi no 9 53

BUDGET 2017–18
by the finance minister in the budget
of 2016, shows underspending to the
extent of `1,380 crore.
Our analysis so far suggests that allo-
cations for some of the publicised flag-
ship programmes of the government,
such as crop insurance, are potentially
problematic. The scheme on crop insur-
ance is demand-driven and, being im-
plemented, without a well-defined up-
per limit necessarily means that the
government does not have full control
over the expenditures that might be in-
curred. In 2016–17 the government met
this pressure partly because of the reve-
nue improvement from KKC and partly
by cutting down on other welfare-
oriented schemes of the department,
which are meant for the farming com-
munity at large. It is not clear how simi-
lar situations might be handled in the
future.
In budget 2017–18, the allocation for
PMFBY is `9,000 crore, which is higher
than the budgeted amount in 2016–17
(`5,500 crore) but lower than the 2016–
17 (RE) of `13,240 crore by 47%. So once
again if demands for crop insurance
exceed allocations, either KKC will have
to come to the rescue or other schemes
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54
of the Ministry of Agriculture will face
the axe.
Conclusions
With economic growth having been jolt-
ed by the demonetisation shock and the
economy not having embarked on the
recovery path as yet, we find that the
growth assumptions underlying the
revenue collections are indeed over-
optimistic. The bonanza received from ex-
cise tax collections may not be available
in the year ahead with crude oil prices
on the rise. Also, if history is to serve as a
guide, the disinvestment target seems
far from realistic. The government expects
to raise revenues via tax realisation from
income declared under voluntary disclo-
sure schemes and from penalties and taxes
on undisclosed black income. However,
the incentives to declare under the volun-
tary disclosure scheme are not in place.
All these factors point to revenue targets
being set on the higher side. To add to this
the revenue side of the budget continues
to be plagued with the bad habit of raising
central government revenues via the back-
door route of cesses. Our examination of
the utilisation of the KKC shows that
while it was undoubtedly used by the
MARCH 4, 2017
Department of Agriculture, it certainly did
not serve its intended purpose of bene-
fiting the farming community at large.
References
Basu, K (2016): “In India, Black Money Makes for
Bad Policy,” New York Times, 27 November.
Bhattacharjee, S (2016): “Why No One has Gone to
Jail for Money Laundering,” Business Standard,
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CAG (2015): Report of the Comptroller and Auditor
General of India for the Year 2014–15, Union Fi-
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— (2016): Report of the Comptroller and Auditor
General of India for the Year 2015–16, Union Fi-
nance Report 34.
George, V K (2017): “Demonetisation has Hit India’s
Growth: IMF,” Hindu, 16 January, viewed on 20
February 2017, http://www.thehindu.com/
business/Economy/Demonetisation-has-hit-I-
ndia%E2%80%99s-growth-IMF/article17045-
995.ece.
Gopinath, G (2016): “Demonetisation Dos and
Don’ts,” Project Syndicate, 24 November.
Government of India (2016): The Taxation Laws
(Second Amendment) Act, 2016, The Gazette of
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(Black Money): One More Voluntary Disclosure
Scheme,” http://ajitkarnik1.blogspot.ae/2017/
02/to-disclose-or-not-to-disclose-black.html.
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Taxation Laws (Second Amendment) Bill, 2016,”
Institute for Policy Research Studies, New Delhi.
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cial Express, 26 May.
Rogoff, K (2016): “India’s Currency Exchange and
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Features
Presents All-India
and state-wise
annual data from
1980 onwards.
Structured in six
major sections :
• Demography
• Health Status
• Infrastructure
• Human Resources
• Health Education
• Health Finance
vol lIi no 9 EPW Economic & Political Weekly
Analysing Coalition Politics
through a Narrative Lens
E Sridharan
T
he aims of this excellent book are
to challenge existing empirical
accounts of the Janata Party, the
National Front (NF) and the United Front
(UF) (consisting of the NF and the Left
Front [LF])—three important coalition
governments in Indian political history—
and analyse the history of the “third
force” or “third front” (non-Congress,
non-BJP [non-Bharatiya Janata Party]),
with a view to generate new theoretical
insights in Indian political science.
The book begins by differentiating the
author’s methodology from the standard
rational choice-inspired studies of coali-
tion politics worldwide. The author argues
that “political agency” and “quality of
judgment” are especially salient for
determining the trajectory of the third
force (p 7). He opts for a “fine-grained
analytical narrative” for studying the
dynamics of national coalition politics,
which he argues is an excellent tech-
nique for a “moving picture” of “politics
in time” (p 8). In contrast to most
studies, Ruparelia focuses not on the
episodes of the formation and demise
of coalitions, but on the dynamics, that
is, the actions of senior party leaders—
because parties are not unitary organi-
sations, they are weakly institution-
alised and are driven by internal power
struggles.
Critique and Literature
He critiques the three standard theoretical
approaches, all of which are underpinned
by a Downsian utility-maximising con-
ception of politics, which includes power
maximisation theories, policy realisa-
tion theories and vote-seeking theories.
Ruparelia argues that power maximisa-
tion theories are not empirically sup-
ported and also they tend to obscure
the substantive differences between
parties. He argues that decisions are
Economic & Political Weekly EPW march 4, 2017
book reviewS
Divided We Govern: Coalition Politics in Modern
India by Sanjay Ruparelia; New Delhi: Oxford University
Press, 2015; pp 520, `995.
driven, not just out of power maximisa-
tion considerations but, by a range of
other motivations, including vanity, po-
litical career or corruption, patronage to
identity groups, protecting home turf in
states, blocking rival social groups and
other factors.
He critiques policy realisation theories
for being based on two assumptions—
that policy goals correspond to party
ideology and to particular social inter-
ests. This is contestable. There are struc-
tural constraints to choice, so ideologi-
cal differences do not automatically di-
rect policy choices. We need to investi-
gate bargaining complexity to under-
stand choices. Pure coalition theories
overstate the polarity between compet-
ing political motivations within a coali-
tion bargaining situation.
The comparative findings of the litera-
ture are that: (i) policy realisation theo-
ries best explain government formation;
(ii) random exogenous shocks lead to
termination of governments; (iii) mini-
mum-winning, or minimum–connected
winning coalitions tend to be the logical
outcome of power maximisation and
policy realisation theories. India has not
neatly met these theoretical expecta-
tions, in that most coalition govern-
ments in India have been large, minority
coalitions far more diverse than those
found in the West, including coalitions
in federal parliamentary democracies.
Ruparelia argues that “Sustaining a
diverse, multiparty government … espe-
cially a minority coalition of diverse
state-based parties seeking to create a
Third Front became exceedingly difficult”
vol lIi no 9
(p 29). Rather than just “enacting scripts”
derived from institutional constraints
and incentives, “political actors may
seek to acquire power or challenge the
boundaries of authority by playing the
rules as if they were instruments”
(p 30). Rules are partial and ambiguous.
Political agency matters. That is, to under-
stand the evolution of coalition politics
we need to analyse the exercise of politi-
cal judgment by political actors amidst
conflicting incentives, opportunities and
constraints. Political judgment is both
necessary and difficult. Good political
judgment requires a focus on particulars,
pragmatism, strategic reasoning and a
degree of detachment. Analysing politi-
cal judgment poses its own difficulties,
among which are, context-dependency
and the difficulty of establishing the
true intentions of political actors. Also, it
is difficult to draw wider theoretical in-
ferences, since good political judgment
requires contextual reasoning.
Narrative Retelling of History
Articulating a detailed narrative offers a
way out from the limitations of rational
choice. As a technique, narratives offer
internal evidence and critical plausibility
tests to examine presuppositions under-
lying competing theories. They facilitate
process-tracing and link causes, mecha-
nisms and effects.
The author’s methodology is the con-
struction of a fine-grained analytical
narrative, regarding the evolution of the
third force in Indian coalition politics,
based on dozens of in-depth semi-struc-
tured interviews, reportage and com-
mentaries in the press, the Centre for the
Study of Developing Societies/Lokniti
electoral data, the writings of various
politicians, party manifestos and gov-
ernment documents.
The bulk of the book consists of an
extremely detailed analytical narrative
depicting the formation, dynamics, vicis-
situdes and demise of the various third
force coalitions in India—that are the
Janata Party and the Janata Dal (JD)-led
NF supported externally by both the BJP
and the LF, and the UF coalition gov-
ernments. The major focus of the book
55
BOOK REVIEW
is on the UF, with the author somewhat
problematically equating the third force
with the broader Indian left, including
the socialists, communists and other
regionalist parties.
Ideology and Cooperative Politics
While space constraints do not permit a
blow-by-blow account of the book’s nar-
rative, its main findings and inferences
are as follows. Coalition politics origi-
nated in the coalescing of non-Congress
opposition parties in the states after
1967, and gathered momentum in the
1970s particularly in response to the
Emergency, and in the 1977 elections
with the formation of the Janata Party.
Its victory represented the rise of socialist
and agrarian forces in North India and
indirectly, it led to the rise of the inter-
mediate and backward castes, with the
upper castes for the first time constitut-
ing less than 50% of the total elected
Members of Parliament (MPs) from the
Hindi belt; also reflected in the setting
up of the Mandal Commission. There
were three cleavages within the Janata
Party that led to its split in July 1979—
caste, socialist ideology and the communal
question. The split of 1979 and the “re-
markably myopic” judgment of Charan
Singh, that he could rely on Congress sup-
port, led to the downfall of his govern-
ment and the Janata Party experiment.
The next round of coalition politics
and of the third force was the Janata
Dal-led NF government from 1989 to
1991, which was externally supported
by the BJP and the LF. This government
formation was preceded by the rise of
regional parties during the 1980s, in several
states, including Tamil Nadu, Andhra
Pradesh, Assam, Punjab and Jammu and
Kashmir—besides the consolidation of the
LF in West Bengal, Kerala and Tripura. The
trend towards greater assertion by the
lower castes and classes also continued
during the 1980s, along with a greater
federalisation of the polity. The NF,
formed in 1988, was an alliance of largely
state-based parties, including explicitly
regionalist parties, along with the domi-
nant JD. Unlike the Janata Party, the NF
kept the BJP outside and the NF primarily
being a coalition of populists/socialists,
agrarians and regionalists/federalists,
56
had a greater affinity with the left than
they did with the BJP.
When the NF came to power there
were bipolar party systems in a number
of states—which were increasingly be-
coming the locus of electoral choice in
national elections. It was also the start
of the “second democratic upsurge” with
a higher voter turnout by subaltern
groups over the next decade. However,
the JD and the NF governments were
hobbled by disunity, as was the Janata
Party, and it was a minority coalition
government dependent on both the BJP
and the left. The national economic policy
was also a potential fissure between the
left and the others, as was the Mandal
Commission report between the lower-
caste political forces and others. The
communal question was the other major
fissure between the BJP and the rest of
the broad coalition.
There was a marked weakness in the
coordination mechanisms of the NF coa-
lition, particularly with its external sup-
porters. V P Singh did not institute either
a common minimum programme or a
steering committee, preferring to coor-
dinate with the leaders of the BJP and
the left over weekly dinners. The state
assembly elections of 1990 increased
tensions between the JD and the BJP.
The government fell initially, due to the
BJP’s withdrawal of support over the
rath yatra’s stoppage, but the coalition
collapsed ultimately because, the imple-
mentation of the Mandal Commission
report clashed directly with the coali-
tion’s political agenda and its social
base’s interests; which led to a backlash
among the upper castes in North India.
The rump Chandra Shekhar govern-
ment repeated the same political mis-
judgment which Charan Singh made in
1979, relying on Congress support for its
survival; the Congress pulled its support
within months after Chandra Shekhar
was sworn in.
Conditional Politics
The third force as a combination of the
NF and the LF, a broad coalition of
socialists, communists and regionalist
federalists crystallised during the Con-
gress government of 1991–96, after the
NF’s break with the BJP. The third force
march 4, 2017
came to power as the UF minority coali-
tion government in 1996–98, supported
from the outside ironically by the Con-
gress and by the Communist Party of
India (Marxist)—CPI(M)—in order to keep
the BJP out of power. The CPI(M) opted
out of participation in the government
and declined to make Jyoti Basu the coa-
lition’s Prime Minister. The UF empha-
sised secularism, social justice (in Mandal
terms) and federalism against the BJP as
well as the Congress. However, the UF
was driven by internecine struggles,
both vertical and horizontal, on a range
of issues. In addition, unrestrained per-
sonal ambitions on the part of its leaders
added further strain to the coalition.
It was essentially a post-election coali-
tion put together by the regional parties
(Telugu Desam Party [TDP], Dravida
Munnetra Kazhagam [DMK], Trinamool
Congress [TMC], Asom Gana Parishad
[AGP], JD and Samajwadi Party) sup-
ported by the LF, with the Communist
Party of India (CPI) joining the govern-
ment, and with the Congress making a
decision to support such a coalition out
of the short-term calculus of keeping the
BJP at bay.
The UF government, for the first time in
coalition political history adopted a com-
mon minimum programme and a steer-
ing committee. The UF government was
marked by internal tensions in the JD, as
well as tensions between the coalition
and its principal external supporter, the
Congress. There were also tensions be-
tween members of the coalition on ques-
tions of economic policy. The politics of
the UF reflected a “complex balancing of
multi-level games.” Ultimately the suspi-
cions between the UF and the Congress,
led the latter to withdraw support to the
Deve Gowda government, leading to the
installation of I K Gujral as the new Prime
Minister. A second edition of the UF was
formed remarkably, due to the coalition
remaining firm and none of its constitu-
ent’s crossing over and supporting the
Congress in its bid for power. The Con-
gress rejected the President’s suggestion
to set up a coordination committee to
manage relations between itself and the
UF, as did some regional parties in the UF
since the Congress was the principal
opponent in their home states.
vol lIi no 9 EPW Economic & Political Weekly
 BOOK REVIEW

The Gujral government too, was a short-
lived arrangement with the Congress.
After leaks from the interim report of
the Jain Commission indicated that the
DMK had played a role in sheltering the
LTTE (Liberation Tigers of Tamil Eelam)
prior to Rajiv Gandhi’s assassination, the
Congress withdrew support over the
presence of the DMK in the govern-
ment—after the UF rejected the allega-
tions against the DMK. Again, not a
single member of the UF crossed over to
the Congress camp or BJP camp at
the time.
Elections and Party Institutions
The author argues that the UF was a
remarkable experiment in a minority
coalition government formation. He
finds progress in third force experiments:
(i) in that they showed greater coher-
ence and unity over time, from the
Janata to the UF, (ii) to introducing coa-
lition management measures like a com-
mon minimum programme and a steer-
ing committee, as well as (iii) giving
voice to intermediate and lower caste,
lower class and regional interests, usu-
ally neglected by both the Congress and
the BJP, and (iv) of having significant
achievements to their credit in foreign
affairs particularly in the region, centre–
state relations and in economic policy—
in which the policy of liberalisation was
broadly continued. Yet they failed to
endure. Why?
The author’s answer to this is com-
plex. He does not reduce it to a single
overarching explanation: whether intra-
coalition squabbles, irreconcilable policy
differences or personal ambition was the
main cause for failure. He argues, first,
that the First Past the Post (FPTP) system
in a progressively regionalised federal
polity made stable and horizontal, that
is, cross-state alliances hard to build and
maintain since issues, including caste,
varied statewise and party systems were
also distinct state-to-state. Also, the dis-
proportional swings in seats when com-
pared to votes, a property of the FPTP sys-
tem, tested the unity between parties in
the various third front coalitions. Second,
weak party organisations and factional
disputes led to an unparalleled, bargain-
ing complexity both within parties and
between parties in the coalitions. It al-
lowed ambitious individuals to under-
mine party and coalition unity.
However, he adds that the evolution
of third force coalitions, at the time
of the UF government holds political
lessons in the emergence of: local pacts,
joint state-level campaigns, friendly
electoral contests, common minimum
programmes and steering committees
being stabilising mechanisms, and in the
unprecedented unity shown by the UF
coalition, both times, when Congress
withdrew support to Deve Gowda and
Gujral, respectively. Third, he argues, that
from the dynamics unveiled by his nar-
rative methodology throughout the
book, that in addition to seeking office,
policy and votes as per the rational choice
approach, other distinct motives emerge
from the behaviour of party leaders—
personal vanity, partisan interest and the
desire to represent distinct social identity
groups. These emerge as key drivers of
a third force coalition politician’s drive

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Economic & Political Weekly EPW march 4, 2017 vol lIi no 9 57

BOOK REVIEW
for office and are the key findings of
Ruparelia’s narrative approach.
The richness of the book lies in pre-
cisely the author’s “fine-grained analyti-
cal narrative” methodology to uncover
the behavioural drivers of the actions
A History of the Farmers’ Movement
V Krishna Ananth
I
t is not very common to find scholar-
ship in social sciences that straddles
with ease history, sociology and po-
litical science. D N Dhanagare, however,
belongs to that league of scholars to
whom this remains a matter of convic-
tion, so much so that they resisted being
lured into postmodernism in the guise of
breaking disciplinary barriers. If his
seminal work of the 1980s, Peasant
Movements in India (1983), constituted
an epistemological break insofar as
studies on the Indian peasantry were
concerned (on the same lines as did
Jean Chesneaux’s [1973] study on the
Chinese peasantry), the book under
review, Populism and Power: Farmers’
Movement in Western India, 1980–2014,
on the farmers’ movement is as much a
breakthrough. Dhanagare establishes with
clarity that such shibboleths that guided
scholarship on the farmers’ movement
as kulak (rich peasant) movements,
drawn from the lexicon of conventional
Marxism, are not adequate to make
sense of the subject matter.
Dhanagare’s premise is the transfor-
mation, in the 1980s, of the peasant into
the farmer. The marked feature of this
transformation, he explains, was that the
producer ceased to be dependent on the
landlord and instead was now dependent
on the market. Although a majority of
the producers in this new regime were
subsistence farmers, they nevertheless
found themselves in league with the
minority, who controlled large tracts of
land and cultivated predominantly for
the market. This unity, according to
Dhanagare, may be understood from the
premise of Louis Althusser’s structural-
ist Marxist approach, thus recognising a
58
of political leaders and their political
judgments or misjudgments at crucial
moments. This is what makes this book
an indispensable reference for future
work on coalition politics in India, even
for those working within the rational
Populism and Power: Farmers’ Movement in
Western India, 1980–2014 by D N Dhanagare,
Routledge, Oxon, London and New York, 2016,
pp xvii + 264, `895.
significant role for “ideology” in mould-
ing the course of a social movement—by
domination without hegemony or domi-
nation with hegemony.
With this, Dhanagare rejects the sub-
altern approach, which insists on treating
movements as spontaneous rather than
driven by a common agenda. The farm-
ers’ movement in Maharashtra led by
the Shetkari Sanghatana was a mass
movement bound by a common agenda
and Sharad Joshi indeed played the
architect for building the movement
and the agenda. This approach is then
substantiated by Dhanagare by way of
documents he had obtained over the
years from the Shetkari Sanghatana, his
own interviews with the leaders of the
movement, and detailed notes as a par-
ticipant observer in the various meet-
ings/events and confabulations of the
Shetkari Sanghatana. Dhanagare makes
it clear that his approach is that of
“sociological intervention,” and this
certainly makes the work relevant and
important. In this sense, Dhanagare
shall be credited for having set out the
first draft of the history of the farmers’
movement in Maharashtra.
While historians remain sceptical
about undertaking studies on events and
movements after 1947, and contempo-
rary history remains a forbidden ground
for historians—given the shoddy manner
in which official documents are pre-
served, and denied as a matter of right
by those in power to be kept in the
march 4, 2017
choice tradition and not just on the
third front.
E Sridharan (upiasi@del2.vsnl.net.in) is the
Academic Director of the University of
Pennsylvania Institute for the Advanced Study
of India, New Delhi.
archives—Dhanagare has shown the
way to recording the history of our own
times. History may have been described
as the study of another time, but then
the short 20th century is neither another
time in the conventional sense, nor is it
the present and, hence, best left to the
profession of anthropology or sociology,
much less to political science.
Shetkari Sanghatana
Populism and Power sets out from the
framework where it holds the farmers’
movement in Maharashtra, as led by
Sharad Joshi and under the banner of
the Shetkari Sanghatana, as belonging
to the category of “populist movements.”
Dhanagare justifies this categorisation
on the basis of such movements (the
Narodniks in late 19th century Russia
and Peronism in the 1940s in Argentina)
being both anti-theoretical and anti-
intellectual at the same time, even while
being united in an ideological sense and
uniting a cross section of the community
(in this case, the agrarian groups) across
economic strata; the marginal and mid-
dle farmer joining the movement even if
the demands seem guided by the inter-
ests of the rich farmer. In an endeavour
to reach closer towards theorisation,
Dhanagare holds it necessary to document
the various aspects of the movement,
and this indeed has been achieved.
The farmers’ movement in the 1980s
certainly was not specific to Maharashtra.
The post-green revolution era had two
distinct features: a rise in agricultural
productivity thanks to high-yielding
seeds, use of chemical fertilisers, and
improvements in irrigation techniques,
and prices of farm produce not increas-
ing commensurate with the increasing
costs of production. This crisis could
have been averted by a shift in the terms
of trade towards agriculture, which did
not take place. The Shetkari Sanghatana
in Maharashtra, the Bharatiya Kisan
vol lIi no 9 EPW Economic & Political Weekly

Union (BKU) in Punjab first and in west-
ern Uttar Pradesh subsequently, the Kar-
nataka Rajya Raitha Sangha and similar
organisations in Tamil Nadu were all the
outcome of this crisis and all of them
achieved a considerable measure of suc-
cess, in that agitations by them got political
parties across the spectrum to acknow-
ledge that there was a crisis. This, how-
ever, ended with the qualitative shift in
the economic policy after July 1991.
Dhanagare manages to straddle across
the movements in various parts of the
country even while his focus is on Joshi’s
Shetkari Sanghatana in Maharashtra.
The account clearly shows that even
while the movement, the shape its de-
mands took, as well as the agitational
forms were moulded by the context of
the crisis—demanding higher prices for
agricultural produce and waiver of
loans and power tariffs, etc—the author
delves deep into the personality of Joshi
in the various stages of the movement
and his own attempts to shape the Shet-
kari Sanghatana’s position on such im-
portant aspects as gender relations and
caste-based discrimination in a larger
political mosaic. While Joshi’s interven-
tions in these and his attempts to turn
the Shetkari Sanghatana into a move-
ment is outlined, Dhanagare’s formula-
tion is that Joshi’s ideology was essen-
tially that of “economistic populism,” as
distinct from the “apoliticist populism”
that guided Mahendra Singh Tikait’s
BKU in western Uttar Pradesh.
This, in a sense, was indeed the neces-
sary fallout of the realities thrown up by
the post-green revolution phase and,
hence, the farmers’ movements, Dhana-
gare argues, ought to be studied from
outside the orthodox Marxist positions
determined by antagonism between
classes and on the basis of dominant
class character. He stresses upon the
need for accounting for non-class con-
tent by way of interpellations and con-
tradictions that constitute the raw mate-
rial on which class ideological practices
operate. Dhanagare’s attempt, it ap-
pears, is to locate the Joshi-led move-
ment in this framework. But, then, he
seems to have decided not to see that
Joshi failed as miserably as Tikait did in
contesting the rising tide of Hindutva. In
Economic & Political Weekly EPW march 4, 2017
BOOK REVIEW
a similar way, the farmers’ movement see whether Joshi’s precepts in the 1980s
collapsed in the context of the post-1991 and his own perception of the Dunkel
shift away from Nehruvian socialism. Draft and the World Trade Organization
were reflected in that report. The book,
A Potential Area of Study however, stops with a simple mention
Dhanagare could have persisted in his that the report was never discussed
attempt to theorise the 1980s phase of since the government lost power soon.
the movement while trying to under- Similarly, there is a lot of scope to dis-
stand its collapse in the two decades cuss as to whether Joshi, with his prox-
after 1991 by attempting to locate its weak- imity to more than one Prime Minister
ness in the dynamics of the interpella- (which the author outlines) could have
tions. Instead, he seems to rest his case brought about a difference in the lives of
for the weakening of the movement and farmers in Maharashtra, or whether the
its collapse eventually in Joshi’s some- crisis was of a systemic nature and be-
what ambivalent attitude towards par- yond the precepts held out by Joshi in
ties and politics in the parliamentary the 1980s.
system, his own entry into the business This, indeed, is a potential area where
of power politics, and the decimation in the study could be developed and an-
due course of the movement. Being a col- swers looked for as to whether the pre-
lection of articles and papers presented sent condition—a collapse of the move-
over a period of time, compiled into a ment and farmers’ suicides haunting the
book, the rigour shown by Dhanagare in conscience of the nation—can be attrib-
terms of conceptualisation and methodo- uted to some misplaced hopes by Sharad
logy seems to be missing in the last cou- Joshi on the miracles that the market
ple of chapters wherein the movement’s holds for the farmers and whether he
decline and collapse is discussed. For ex- goaded the farmers in this direction.
ample, he attributes the leadership of the This is only to stress that Dhanagare,
Nav Nirman movement in Gujarat to through this work, has laid the road map
Jayaprakash Narayan, whereas Narayan for further studies in this area.
had himself thanked the students of
Gujarat for showing him the way. V Krishna Ananth (krishnananth@gmail.com)
is Associate Professor in History, Sikkim
Similarly, Dhanagare could have elab-
University, Gangtok.
orated on the contents of the report by
Joshi to the NF government in 1990 (in REFERENCES
his capacity as chairman of the commit- Chesneaux, Jean (1973): Peasant Revolts in China,
tee for drafting the agricultural policy 1840–1949, London: Thames and Hudson.
Dhanagare, D N (1983): Peasant Movements in India,
appointed by the then Prime Minister, c 1920–1950, New Delhi: Oxford University
V P Singh) and delved deeper into it to Press.
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march 4, 2017 vol lIi no 9 EPW Economic & Political Weekly
PERSPECTIVES
The Mirage of a Caste-less
Society in India
A M Shah
The goal of creating a caste-less
society in India, written into
the Constitution, has become a
mirage. And the mirage is moving
further away.
The author thanks Satyakam Joshi for
providing useful data, and Lancy Lobo,
P J Patel, M N Panini, and N R Sheth for
comments on the draft of this article.
A M Shah (arvindmshahdse@gmail.com) is
former Professor of Sociology, Delhi School
of Economics.
Economic & Political Weekly EPW march 4, 2017
W
hen I was a high school stu-
dent in Gujarat in the 1940s,
the issue of abolition of caste
was an important part of our discussions.
These discussions took place among
students, between students and teachers,
in institutions such as the Seva Dal and
Vidyarthi Parishad, and also in the
newspapers. In 1950, the Constitution of
independent India, under Part III on
Fundamental Rights, declared discrimi-
nation on the ground of caste unlawful
(Articles 15 and 16), and abolished
untouchability (Article 17). Under Part IV
on Directive Principles of State Policy, it
provided for promotion of rights of the
Scheduled Castes (SCs) and Scheduled
Tribes (STs) (Article 46). These constitu-
tional provisions raised hopes of progress-
ing faster towards the goal of creating a
caste-less society. Let us examine how
far Indian society has progressed in this
direction. I am asking substantially the
same question as my teacher M N Srinivas
asked, “Castes: Can They Exist in India
of Tomorrow?” at a seminar1 in Delhi in
1955, and his teacher G S Ghurye asked
in a chapter, “A Casteless Society or a
Plural Society?” in the fifth edition of
his celebrated book, Caste and Race in
India, in 1969.
Endogamy and Hypergamy
First of all, we should be clear about the
meaning of the term “caste.” Modern
sociological work since 1951 has establi-
shed that caste is different from varna,
the term used for the fourfold division of
Hindu society, namely, Brahmin, Kshatriya,
Vaishya, and Shudra, in ancient Hindu
texts. Castes are numerous, and words
such as jati, jat, gnati, gnat, nati and nat
are used. It is often said that jatis
emerged by divisions within each varna
but this is a myth, not a proven historical
fact. Available evidence shows that jatis
vol liI no 9
existed along with varnas since the
Vedic times (Thapar 1984: 50–51, 86,
166, 172; Shah 1986). Usually, a jati
claims to belong to a particular varna,
but that does not mean that it has come
into existence by division of that varna.
Every caste is a community with a
name. Its members are spread over a
number of villages and towns in an area;
hence sociologists call it a horizontal
unit. The relations between various castes
in the context of a village, town, or local
area are hierarchical and therefore
called vertical. These vertical relations
dominate thinking on caste so much that
the entire caste system is usually consid-
ered as the extreme form of inequality in
the world. In social sciences also these
inter-caste relations have received over-
whelming attention while the horizontal
unit has been relatively neglected.
When the law courts in British India
began to adjudicate on matters of caste
in the early 19th century, they searched
for certainty about the definition of caste.
They consulted indigenous scholars
(pandits and shastris) of ancient Hindu
law, and concluded that every caste is an
entity rigidly defined by the practice of
endogamy, that is, marriage within the
boundaries of caste. This definition has
prevailed in legal thought, and in Indo-
logical scholarship that began to develop
in the early 19th century. However,
modern sociological work has found two
major complications.
The first complication arises out of
divisiveness in castes (jatis). In every
region of India, the Hindu population is
divided into a number of what I have
elsewhere (1982) called caste divisions
of the first order: for example, there are
Brahmins, Banias, Rajputs, Patidars,
Kolis, etc, in Gujarat. Each of these divi-
sions is divided further into divisions
of the second order: for example, the
Banias are divided into about 40 divisions,
such as Khadayata, Modh, Nagar, and
Shrimali. Most of these are further
divided into divisions of the third order,
called ekdas (units) or gols (circles).
Traditionally, the ekda or gol is the most
effective endogamous unit, although the
caste divisions of the other two orders
61
PERSPECTIVES
also play an important role. As every
division of a higher order is susceptible
to divisions of a lower order, the bound-
aries of both in the divisive process are
indeterminate. The boundaries of a
caste may appear to be fixed at any point
of time, but they are not so fixed over a
longer period. People use the word jati
or caste indiscriminately for divisions of
all the three orders—which has been a
source of confusion in every census of
caste population since 1871.
Another major complication about the
term “caste” is due to the prevalence of
the custom of hypergamy, that is, mar-
riage of a woman of a lower status group
with a man of a higher status group. The
term “hypergamy” was coined by an
official of the 1881 Census of Punjab
(Ibbetson 1883: 356), and elaborated by
Herbert Risley, the Commissioner of the
1901 Census of India, in his monumental
work, The People of India (1915), using
information from different parts of
India. Subsequently, a few sociologists
studied hypergamy intensively. Never-
theless, it remains one of the least exp-
lored institutions in India.
Called anuloma marriage in ancient
Indian law books, hypergamy has pre-
vailed since the ancient times (Ghurye
1969: 221–29). The law books also refer
to pratiloma marriage (hypogamy, the
opposite of hypergamy), that is, marriage
between a woman of a higher caste and
a man of a lower caste. While hypergamy
was tolerated, hypogamy was frowned
upon and prohibited. The concept of
varnasankara (miscegenation or inter-
breeding of varnas), used often in literary
as well as popular discourse, is a conse-
quence of hypergamy and hypogamy.
Hypergamy is related to prevalence of
heterogeneity and hierarchy within every
caste. Although in Indology as well as in
law a caste is viewed as a homogeneous
group, in reality every caste is heteroge-
neous. In every part of India there are
large, widely spread castes, for example,
the Rajput in western India, the Patidar
and Koli in Gujarat, the Maratha in
Maharashtra, the Jat in north India, the
Okkaliga and Lingayat in Karnataka,
and the Yadava in Bihar and Uttar Pradesh,
every one of which is highly differenti-
ated. It has big landlords and even royal
62
families at one end and landless families
at the other. It is differentiated in customs
also. The upper strata would practise
dowry, and prohibit divorce, and mar-
riage of widowed and divorced women,
while the lower strata would practise
bride price, and permit divorce, and
marriage of widowed and divorced
women. In almost every such caste there
is preference for marriage of a woman of
lower status with a man of higher status.
As families of every lower stratum try to
get their daughters married upward, a
surplus of marriageable women is created
at the upper end of the hierarchy. In the
past, such hypergamy led to polygamy
as well as female infanticide at this end.
At the lower end, shortage of marriage-
able women prevails, aggravated by
adverse sex ratio at birth. The shortage
is minimised to some extent by the
marriage of widowed and divorced
women, and, in a family of two or more
sons, one son remaining unmarried.
An important consequence of hyper-
gamy in such a caste is a tendency
among its men, especially at its lower
end, to marry women from acceptable
lower castes and tribes. Such a marriage
should not be seen merely as a union
between one man and one woman. The
lower caste or tribal woman would of
course get integrated into the husband’s
caste over time. The upper caste husband,
on the other hand, acquires many new
relatives in a lower caste or tribe, such as
his wife’s father, mother, brother, sister,
brother’s wife, sister’s husband, and so
on. Similarly, the couple’s child acquires
such important relatives as the mother’s
father and mother, the mother’s brother
and his wife, the mother’s sister and her
husband, and so on in the same lower
caste or tribe. This network of relatives
might grow large in course of time, and
claim inclusion in the caste above it in
the hypergamous hierarchy. Full accept-
ance and inclusion would take time. Till
then they would use two caste names
depending upon context, a process David
Pocock (1957) aptly called “exclusion
and inclusion.” This is another source of
confusion in a caste census. Hypergamy
entails violation of the rule of endogamy
over a short period of time, but also
inclusion of a lower group into the
march 4, 2017
higher endogamous group over a longer
period—an avenue for upward mobility
of a section of a lower caste or tribe into
an upper caste. Inter-caste hypergamy
may also be seen as an extension of intra-
caste hypergamy, and vice versa. It is not
negation of caste, however.
Two major complications discussed
above, namely, existence of several orders
of caste divisions, and hypergamous
hierarchies within and between castes,
make the definition of caste as a clearly
demarcated endogamous group ques-
tionable. They make any caste-based
census or survey inaccurate. The census
enumerators in villages and towns
calmly enter in their schedules an indi-
vidual’s or her/his household’s varying
caste names. This happened at every
periodical census from 1871 to 1931. One
has to read the chapter on “caste claims”
in every census report to realise this;
leave alone the petitions for caste claims
that did not reach the census office.
Sometimes the census officials also disa-
greed in resolving a claim, whereupon a
senior official imposed his verdict arbi-
trarily. L J Sedgwick, Superintendent of
Census Operations in Bombay Presidency
in 1921, in an article in 1924, has narrated
with unusual candour the role of chance,
luck, caprice and idiosyncrasy at every
level from the census enumerator to the
census commissioner in the colonial
census of caste, tribe and religion (see
also Shah 2010). Thus, the lists of castes
printed in census reports from 1871 to
1931 and the figures of their population
are highly questionable, and should not
be quoted at present as if they are abso-
lutely correct. The widely accepted defi-
nition of caste as a rigid and closed
group is an ideal. In reality, every caste
has loose boundaries, especially at its
lower end. This flexibility enables caste
to perpetuate itself.
Amalgamation of Castes
During the independence movement a
view had developed that the best way to
create a caste-less India was to slowly
remove the sub-castes and amalgamate
them. In other words, the idea was to
eliminate first the boundaries of what I
have called the caste divisions of the
third order and amalgamate them into
vol liI no 9 EPW Economic & Political Weekly

those of the second order, then to amal-
gamate these into those of the first order,
and finally eliminate these and create
one integrated society. Such a process
was set in motion in some parts of the
country, and is still going on. The net re-
sult, however, is a society of castes with
ever increasing size. Ghurye wrote in his
seminal book on caste in 1952 (199–200):
To propose to abolish caste by slow consoli-
dation of the smaller groups into larger ones
is to miss the real problem … The sub-castes
that join together to create a super organi-
sation retain their internal feelings of exclu-
siveness with undiminished vigour. The new
orgnisation takes up a rather militant atti-
tude against other castes, especially those
which are popularly regarded as immedi-
ately higher or lower than the caste it rep-
resents … [C]aste-consciousness becomes
more definite and virile.
Prophetic words indeed! Modern India
has been witnessing such virile caste
consciousness all the time. Even the first
two decades of the 21st century have
witnessed violent agitations by the
Gurjars in Rajasthan, the Jats in Haryana,
and the Patidars in Gujarat.
Backward Classes and Caste
It is well known that the resentment of
the lower castes against the higher ones,
especially against the Brahmins, took an
organised form in the name of the back-
ward class movement in the first decade
of the 20th century in south India and
then spread to other parts of the country.
The vicissitudes of this movement are
well documented (Srinivas 1996). The
British government and a few princely
states conceded the demands of these
castes for reservations in government
jobs and in legislative bodies, and for
several other privileges. The Constitution
continued to provide these privileges,
classifying the backward classes into
three categories, SCs, STs, and Other
Backward Classes (OBCs) (Article 340,
under Part XVI: Special Provisions Relat-
ing to Certain Classes).
When the Constitution was promul-
gated in 1950, it was relatively easy to
decide which castes should be considered
as SCs and which tribes as STs because of
two reasons. One, there was broad
consensus about criteria to be applied in
defining them, and two, the governments
Economic & Political Weekly EPW march 4, 2017
in the British provinces and some prince-
ly states had already been giving certain
privileges to these castes and tribes,
thus enabling continuity.
Scheduled Castes
The term SC used in the Constitution
has been the end result of evolution of
terms used since the 1871 Census of
India to grapple with the reality of what
has long been known as the asprishyas
or untouchables in Indian society (see
Charsley 1996 for a well documented ac-
count of this evolution). A total of 1,280
SCs have been listed in the Constitution
until 2013, and with a total population of
more than 201.4 million, comprise 16.6%
of the population of India.2 There is huge
deficit of sound sociological research on
this vital section of Indian society. If, as
mentioned earlier, the study of the
horizontal dimension of caste in general
has been relatively neglected, the study
of this dimension of the SC is even more
neglected. However, I may state from
bits and pieces of available information
that every SC is internally divided into
sub-castes and sub-sub-castes just like
other castes (Shah 1987, 2002, 2007).
The SCs in every part of India are diff-
erentiated in various ways, contrary to
the popular tendency to view them as
homogeneous—especially as if all of
them practise menial occupations. Often
there is sharp conflict between two or
more of them. The conflict between the
Malas and Madigas, the two SCs of Andhra
Pradesh, for example, is well known.
They have been fighting legal battles all
the way to the Supreme Court since 2000
(Balagopal 2005). In Gujarat, besides
the Valmiki, another major SC is Vankar
(weavers) which played an important
role in the premodern textile industry. I
may also mention the Garoda or Garo
(derived from Sanskrit guru), an SC of
priests performing Sanskritic rituals for
other SCs. The Bombay Gazetteer, com-
piled in the 1870s, writes about them:
Most of them can read and a few understand
Sanskrit, reciting and explaining hymns and
passages from the Purans. They teach their
boys privately. … [They] draw up and use
horoscopes. (1901: 345)
Nowadays they get training in karma-
kand (the corpus of Sanskritic rituals) in
vol liI no 9
PERSPECTIVES
schools and colleges, helped by scholar-
ships awarded by the government (Shah
2009). They call themselves Brahmins,
and use such Brahmin surnames as Dave,
Joshi, Pandya and Vyas. They have a high
literacy rate and are in government jobs
in a proportion higher than their propor-
tion in the SC population in Gujarat. The
term Dalit thus overlooks differentiation
among the SCs.
Whatever be the economic and social
status of 1,280 SCs, every one of them is
an endogamous group. If a member of an
SC wants to get the benefits of reservation,
she/he must obtain a certificate of its
membership from a competent authority.
We do not know if there is a movement for
inter-caste marriage between the various
SCs, as also whether there is hypergamy
between a lower status SC and a higher
status one. However, they too have formed
caste associations, which organise many
activities for the members of the caste,
including marriage melas (fairs) to enable
their young boys and girls, especially in
urban areas, to have freedom of spouse
selection within the caste.
Other Backward Classes
The Constitution does not define OBCs,
but provides for the appointment of a
commission to recommend a definition
and to list these “Classes” accordingly
(Article 340). The first Backward Classes
Commission was appointed in 1953 with
Kaka Kalelkar as chairperson. It was
confronted with the problem as to
whether the term “backward class”
should be used in the sense of backward
caste. It could not come to an unanimous
conclusion. Moreover, while submitting
its report to the government in 1955
Kalelkar wrote a letter expressing his
anguish at caste being made the criterion
of backwardness. The report therefore
became infructuous. The issue was re-
vived in 1979 with the appointment of
the second Backward Classes Commis-
sion, well known as the Mandal Com-
mission as it was headed by parliamen-
tarian B P Mandal. It submitted its
report in 1980, recommending caste as
the basic unit for backward class status.
Its implementation was announced in
August 1990. While the Kalelkar Com-
mission had identified 2,394 OBCs, the
63
PERSPECTIVES
Mandal Commission identified 3,743
OBCs, reserving 27% of government jobs
for them (Srinivas 1996: xxvi–xxviii). The
Backward Classes Commissions in the
states also resolved to apply the caste
criterion. If any state commission disa-
greed, as did the Rane Commission in
Gujarat in 1981, the government did not
accept its report. In 2013, the total number
of OBCs recognised by all the states was
2,449, of which 2,342 were approved by
the National Commission for Backward
Classes. In 2015, the number of approved
OBCs has gone up to 2,418.3 As the Census
of India does not recognise OBC as a
special category, there are no officially
recognised figures of its population.
There are only estimates based on the
1931 Census figures, which are unreliable.
The semantic equivalence between
“class” and “caste” is controversial.4 These
two words do not have the same mean-
ing in the social sciences or among
educated Indians. Of course, there is no
unanimity about the meaning of the
word “class” in the social sciences, but
no social scientist would stretch it to
mean “caste.” The judiciary also consid-
ered this question. Its position may be
summed up as stated in the Supreme
Court’s judgment in the case of P Rajen-
dran v State of Madras (1968): “A caste is
also a class of citizens.” The word “class”
is used here in a very wide and general
sense, meaning a number of persons
possessing common attributes and
grouped together under a general or
“class” name. In this sense, women, chil-
dren, fathers, mothers, doctors, advocates,
etc, are also classes. One suspects here
what Zechariah Chafee (1941) said long
ago in a paper, “The Disorderly Conduct
of Words” in the judicial process.5
However, the class factor could not be
held back. The Constitution itself uses
the designation “Socially and Education-
ally Backward Class” (Article 340), which
has led to considering differences in
social and educational backwardness.
The government and the judiciary have
responded by dividing the OBCs into
“backward,” “more backward” and “most
backward” sections, and denying bene-
fits of reservation to a class called the
“creamy layer” in every caste (Srinivas
1996: xxviii–xxxi).6 Thus, the class factor
64
now operates under the umbrella of
caste, allowing the latter to be the domi-
nant force. If an individual wants to get
the benefits of reservation as a member
of an OBC, she/he must be a member of a
particular caste included in the lists of
OBCs, and obtain a certificate of mem-
bership from a competent authority.
With 2,418 castes receiving benefits of
reservation irrespective of economic
and social differentiation within them,
many of the castes that were left out
have begun to demand reservation,
arguing that they too have many eco-
nomically and socially disadvantaged
members. The castes with large popula-
tions are especially vociferous, such as
the Gurjars in Rajasthan, the Jats in
Haryana, and the Patidars in Gujarat,
because they wield considerable clout in
electoral politics. Certain castes with
somewhat smaller populations and
occupying higher status in traditional
social hierarchy also do not wish to be
left behind in the competition for bene-
fits of reservation. “Backward class” is
no longer an odious epithet. These
castes too project radical postures.
The Brahmins hold all-India confer-
ences, where they invoke the ancient
Brahmin warrior Parashuram who, ac-
cording to legend, eliminated all
Kshatriyas from the surface of the earth
(Shah 2005). A large sub-caste among
the Banias in Gujarat has been announc-
ing for the last few years, on the cover
STATEMENT about ownership and other particulars of newspaper ECONOMIC AND POLITICAL
WEEKLY as required to be published in the first issue of every year after the last day of February.
FORM IV (See Rule 8)
1 Place of publication:
2 Periodicity of its publication:
3 Printer’s name:
Whether citizen of India:
Address:
4 Publisher’s name:
Whether citizen of India:
Address:
5 Editor’s name:
Whether citizen of India:
Address:
6 Name and address of individuals who
own the newspaper and partners or
shareholders holding more than
one per cent of the total capital:
I, K Vijayakumar, hereby declare that the particulars given above are true to the best of my
knowledge and belief.
Mumbai
March 4, 2017
march 4, 2017
page of their mouthpiece, that it is en-
dowed with virility. The artisan and
craftsman castes such as blacksmiths,
carpenters and potters hold conferences
where they invoke Vishwakarma, the
creator of the universe. Recently they
held a conference in Ahmedabad, which
was addressed by an internationally
reputed technocrat. Similarly, a celebrity
participated in the all-India conference
of Kayasthas held in another city in
Gujarat. These new demands for reser-
vation are opposed by the castes that are
already receiving the benefits of reserva-
tion, leading to violent demonstrations by
both on the streets.
Both the central and the state govern-
ments are faced with the problem of
dealing with these new demands for
reservation. Since the executive has
to deal with this problem within the
contours set by the judiciary, the prob-
lem reaches the portals of the high
courts and the Supreme Court. The
courts order the governments to get
these claims examined by committees
of experts, and submit relevant data.
Hardly has any committee been able to
provide satisfactory data. The judiciary
had asked the government to carry out
a caste census all over India. It has been
reported that the National Commission
for Backward Classes and the Registrar
General and Census Commissioner of
India expressed their inability to conduct
the caste census, whereupon the job
Mumbai
Weekly
K Vijayakumar for Sameeksha Trust
Yes
504, G-2 Sphene, Moraj Residency, Sector 16,
Sanpada, Navi Mumbai - 400 705
K Vijayakumar for Sameeksha Trust
Yes
As above
Paranjoy Guha Thakurta
Yes
Flat 2001, Daffodil, Neelkanth Gardens,
Bhaktakavi Shivjibhai Devshi Road, Govandi (E),
Mumbai 400 088
Sameeksha Trust,
320-321, A to Z Industrial Estate,
Ganpatrao Kadam Marg
Lower Parel, Mumbai 400 013
(K Vijayakumar)
Signature of Publisher
vol liI no 9 EPW Economic & Political Weekly

was handed over to the Ministry of Rural
Development, which is even less compe-
tent than the other two for this job. No
results have been published so far. As
discussed earlier, so many complex issues
are involved in conducting a caste cen-
sus that it has not been possible to con-
duct it accurately since 1871. Let us hope
the judiciary, the government and the
social scientists recognise this reality.
Inter-caste Marriage
It is often argued that inter-caste mar-
riages will soon bring about a caste-less
society. Surely, since inter-caste marriages
began to take place roughly at the begin-
ning of the 20th century, their number
has been increasing. However, their
nature requires careful examination.
First of all, as discussed earlier, it is nec-
essary to recognise that there have been
several orders of caste divisions, that is,
caste, sub-caste, and sub-sub-caste. The
rule of caste endogamy worked well
even in the smallest castes as long as the
parents and other elders controlled the
arrangement of marriages of young boys
and girls. But, with the age at marriage
increasing, and consent of young boys
and girls in arranging their marriage
gradually becoming the norm, the endo-
gamous boundaries of small caste units
became unviable. Consequently, there
developed movements to merge these
units and form larger endogamous units
as the effective units of endogamy, so
that boys and girls—as well as their
elders—get wider fields for arranging
marriage. Most of the so-called inter-
caste marriages are therefore in fact
inter-sub-caste marriages. The larger
castes persist. This is another dimension
of the movements for amalgamation of
castes discussed earlier.
In the past, repressive means were
used to enforce caste endogamy. The
law does not permit these repressive
means now, though cases of such repres-
sion get reported in the media from time
to time, like the penalties imposed by
the khap panchayats on adult boys and
girls and their families in parts of north
India. Such repressive measures are
declining gradually. However, those be-
longing to different castes are deve-
loping all kinds of “soft” stratagems to
Economic & Political Weekly EPW march 4, 2017
restrict spouse selection within caste
boundaries. The caste associations orga-
nise a number of activities for the chil-
dren of the caste to inculcate in them
the ideology of caste. For adult boys and
girls, spouse selection has become a
cooperative exercise involving the net-
work of close kin and friends, marriage
bureaus, and modern means of commu-
nication such as caste journals, newspa-
pers, magazines, and the internet. The
caste associations organise activities for
marriageable boys and girls of the caste
to interact closely. Most important, they
organise elaborate “marriage melas.”
The main point is that the basic idea of
arranged marriage persists along with
the individual’s freedom of choice. The
elders do not also mind if their child
“falls in love” as long as love is within
the caste. Actually, it is freedom of choice
within a caste. Even if it is called “love,”
it is love shackled by the bonds of caste.
The children accept this method of spouse
selection with two main arguments: one,
“we wish to keep our parents happy,” and
two, “common culture provided by caste
is necessary for success of marriage.”
The idea of caste endogamy persists in
the Indian diaspora. Caste associations
which are active in the US, Australia,
Africa, Britain and Canada, promote
caste endogamy. These associations are
in active interaction with caste associa-
tions in India. And all kinds of stratagems
are employed to arrange intra-caste
marriages across continents.
In the case of marriages that have
taken place breaking major caste barriers,
it is necessary to observe them over at
least two generations. Often a child born
out of such a marriage identifies herself/
himself with the kin and caste of one of
the parents and eventually marries into
this caste. This leads to what one may
call a reversal to the caste order.
The number of marriages crossing
the boundaries of major endogamous
units is of course increasing. But, most
of them occur in large cities and that
too in certain sections of urban society.
Marriages take place between members
of the caste in the village and the city,
often hypergamously. It would be a
mistake to think that caste does not
exist in the city, or that the idea of caste
vol liI no 9
PERSPECTIVES
endogamy has disappeared from the
castes that exist in the city. In fact, the
city is the centre of activities of caste
associations, and provides leadership to
the members of the horizontal unit spread
in villages and towns all over the country.
A new social category of people that
appears to be free from the bonds of
caste has indeed emerged in the country.
However, it is quite small, compared to
the size of the country. It claims to be
liberal, cosmopolitan and global. But, it
is necessary to assess its capacity to
influence the rest of this vast society.
It does not appear to be even loosely
organised, compared with the tight organ-
isation of castes. Often the claim to being
caste-less is skin deep, and caste surfaces
all of a sudden in mysterious ways.
Reservations and Endogamy
Every caste included in the SC and OBC
lists is endogamous. Its membership
carries with it the entitlement of claim-
ing benefits of reservation. If it wants to
retain this entitlement for its members,
it has to guard its boundaries, for which
it has to mobilise itself to promote
endogamous marriage. This is a chal-
lenge its leadership faces in view of its
younger generation demanding freedom
of spouse selection. Those castes which do
not have reservations but are demanding
them have also to face this challenge,
if they are not already facing it. As
mentioned earlier, since the law does
not allow repressive measures to enforce
endogamy, every caste is inventing “soft”
ways to promote it.
Traditionally, every caste has of course
been trying to maintain its endogamous
boundaries. But if it acquires the statu-
tory status of an SC or OBC, and there-
fore entitlement to the benefits of reser-
vation, maintenance of that entitlement
requires it to maintain it even more
rigorously. The size and nature of the
caste-less category is therefore depend-
ent on the number of castes free from
this nexus between caste endogamy and
caste-based reservation. If we take into
account the number of castes already
enjoying the privileges of reservation
and the number of castes now demanding
reservation in the country as a whole,
the total number of such castes would be
65
PERSPECTIVES

huge, and so would be their total popu-
lation. The space for a caste-less society
is thus shrinking. A caste-less society
is a mirage, and the mirage is moving
further away.
Postscript
A few days after this article was submit-
ted for publication, massive demonstra-
tions were held by Marathas all over
Maharashtra to press for several dema-
nds, especially reservations.
Notes
1 The seminar participants included S Radha-
krishnan, Jagjivan Ram, Gobind Ballabh Pant,
V K R V Rao, Kaka Kalelkar, Jivaraj Mehta,
Hansa Mehta, A R Wadia, Irawati Karve, and
many others.
2 The total number of SCs in India has been
compiled by taking the numbers of SCs listed in
the orders for different states and union terri-
tories issued by the Ministry of Social Justice
from time to time. The population figure is
taken from the Census of India 2011.
3 See National Commission for Backward Classes,
Annual Report for 2012–13, www.ncbc.nic.in
(retrieved on 13 September 2016).
4 I discussed this issue in detail in my I P Desai
Memorial Lecture, “The Judicial and Socio-
logical View of Other Backward Classes”
(1992).
5 For an analysis of this issue in the judicial pro-
cess in a tribal society in Africa, see Gluckman
(1955: 305–11, 327–56).
6 “Creamy layer” is a nice picturesque term. The
judges and lawyers are reluctant to use terms
like “higher class,” “upper class” and “elite
class” used in social sciences.
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Dalits: All the Ghosts Resurface,” Economic &
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Bombay: Government Central Press.
Chafee, Jr, Zechariah (1941): “The Disorderly Con-
duct of Words,” Columbia Law Review, Vol 41,
No 3, pp 381–404; also Canadian Bar Review,
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Charsley, Simon (1996): “‘Untouchable’: What Is in
a Name?,” Journal of the Royal Anthropological
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Ghurye, G S (1952): Caste and Class in India, New
York: Philosophical Library.
— (1969): Caste and Race in India, Bombay: Popular
Prakashan.
Gluckman, Max (1955): The Judicial Process among
the Barotse of Northern Rhodesia, Manchester:
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Ibbetson, Denzil Charles Jelf (1883): Report of the
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Pocock, David F (1957): “Exclusion and Inclusion: A
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Books Reprint Corporation, 1969.
Sedgwick, L J (1924): “Is the Retention of the Term
‘Animism’ as a Main Religion Head in Our Census
Tables Justified?” Journal of the Anthropological
Society of Bombay, Vol XII, No 4, pp 389–402.
Shah, A M (1982): “Division and Hierarchy: An
Overview of Caste in Gujarat,” Contributions to
Indian Sociology (ns), Vol 16, No 1, pp 1–33,
reprinted in his Structure of Indian Society:
Then and Now, Delhi: Routledge, 2010.
— (1986): “Towards a Sociological Understanding
of Ancient India,” Contributions to Indian Soci-
ology, Vol 20, No 1, pp 17–33, reprinted in his
Sociology and History: Dialogues Towards Inte-
gration, Delhi: Orient Blackswan, 2016.
— (1987): “Untouchability, the Untouchables and
Social Change in Gujarat,” Dimensions of Social
Life: Essays in Honor of David Mandelbaum,
Paul Hockings (ed), Berlin: Mouton de Gruyter,
reprinted in his, The Structure of Indian Society:
Then and Now, Delhi: Routledge, 2010.
— (1992): “The Judicial and Sociological View of
Other Backward Classes,” Surat: Centre for
Social Studies, reprinted in Srinivas (1996),
pp 174–94.
— (2002): “The Dalit Category and Its Differentia-
tion,” Economic & Political Weekly, Vol 37, No 4,
pp 1317–18, reprinted in his, The Structure of
Indian Society: Then and Now, Delhi: Routledge.
— (2005): “Parashuram: Icon of New Brahminism,”
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pp 390–91.
— (2007): “Purity, Impurity, Untouchability: Then
and Now,” Sociological Bulletin, Vol 56, No 3,
pp 355–68, reprinted in his The Structure of In-
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The Problem of Caste

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Caste is one of the oldest concerns of the social sciences in India that continues to be relevant even today.
The general perception about caste is that it was an outdated concept until it was revived by colonial policies and
promoted by vested interests and electoral politics after independence. This hegemonic perception changed irrevocably
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• Katherine S Newman • Marc Galanter • Sundar Sarukkai • Gopal Guru • D L Sheth • Anand Chakravarti • Carol Upadhya • Ashwini Deshpande
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66 march 4, 2017 vol liI no 9 EPW Economic & Political Weekly
SPECIAL ARTICLE
Economic Reforms and Agricultural Growth in India
Shantanu De Roy
It was argued that economic liberalisation would ensure
a favourable shift in the terms of trade for agriculture in
India, enabling producers to plough back surplus from
cultivation to make long-term improvements on land,
and raise agricultural productivity and growth rate.
Contrary to expectations, there was no noticeable
improvement in the terms of trade for agriculture
during the reform period. Moreover, decline in capital
formation in agriculture, inadequate expenditure on
irrigation and extension services in rural areas, and a
dearth of cheap institutional credit, resulted in a
slowdown of agricultural growth and heightened
livelihood insecurity for a substantial proportion of those
dependent on agriculture.
Shantanu De Roy (shantanudr2004@gmail.com) teaches at the
Department of Policy Studies, TERI University, New Delhi.
Economic & Political Weekly EPW march 4, 2017 vol liI no 9
I
t was argued that the initiation of reforms, liberalisation of
external trade and corresponding price incentives would
lead to enhanced investment, availability of crucial inputs,
and increased output in agriculture. Moreover, it was expect-
ed that a shift in the terms of trade in favour of agriculture will
improve agricultural exports and increase growth rate (Ahlu-
walia 1994). Favourable terms of trade were expected to have
a positive impact in terms of raising agricultural production
and private investment in India (Misra 1998: 2105–09). These
expectations notwithstanding, policy measures adopted fol-
lowing the initiation of economic reforms, did not lead to
increased rate of agricultural growth.
Economic liberalisation entails a set of measures that are
inimical to petty production in general, and agriculture in par-
ticular. In that sense, these policies have a distinct class bias
against petty producers and the poor. These policy pursuits
resulted in a reduction of public investment in rural infrastruc-
ture, including irrigation, agricultural research and extension
services and a decline in the supply of rural credit to small and
poor cultivators, and the pursuit of agricultural trade liberali-
sation. In this paper, I have analysed how each of these policies
have affected the agriculture sector in India.
Growth Rate of Agriculture
High growth of the agricultural sector is crucial for overall
development of economy. In India, its importance is height-
ened with a substantial section of the population dependent
on agriculture for employment. As per the National Sample
Survey Office (NSSO), about 59% of male workers and 75% of
women workers were dependent on agriculture in 2011–12
(NSSO 2014: 14). High agricultural growth is important to re-
duce rural poverty. It was argued that doubling of the rate of
agricultural growth from 2% to 4% along with 9% rate of
growth of the economy will reduce income disparities bet-
ween the agricultural and non-agricultural sectors (Planning
Commission 2006). In this context, it will be worthwhile to
analyse growth rates of the agricultural sector, and evaluate
its performance in the context of the overall economy, after
the initiation of the reforms in 1991–92.
Table 1 (p 66) shows that the growth rate of gross domestic
product (GDP) of agriculture has declined since the initiation of
economic reforms in India. However, during this period, growth
rates of GDP have been increasing except for the two years bet-
ween 2010–11 and 2013–14. The table shows an increasing diver-
gence between growth rates of GDP of agriculture and economy
between 1990–91 and 2009–10, thereby indicating the declin-
ing importance of agriculture in the growth trajectory of India.
67
SPECIAL ARTICLE

Declining contribution of agriculture is also reflected in It can be argued that increase in the acreage under wheat
terms of a steady decline in the share of agriculture in overall and rice cultivation has taken place at the expense of coarse
GDP. Table 2 shows that the share of agricultural output in GDP cereals. The decline in area under cultivation of coarse cereals
had declined by half between 1989–90 and 2013–14. This did not translate into a steep decline in production due to
decline had started in the 1980s; however it was sharper in the growth registered in yield rate in all the sub-periods. Accord-
1990s and in the new millennium since 2000. The share of ing to Dev and Pandey (2013: 82), growth in yield rate of
agricultural output in GDP had declined by 4.4 percentage coarse cereals can largely be attributed to adoption of the
points in the 1980s, the corresponding figures in the 1990s and new seed technology.
post 2000 were 5.6 and 7.3 percentage points, respectively. There was a sharp rise in the production of oilseeds in the
This shows that the agricultural sector is losing its importance late 1980s and early 1990s due to quantitative restrictions on
as an income generating activity at a faster pace with the onset imports and technological modernisation programme of the
Table 1: Growth Rates of GDP of Agriculture of reforms in India. government as part of Technological Mission on Oilseeds. Due
Sector and GDP of the Economy, 1981–82 to
2013–14 (%) Expectations regarding to an increase in imports as part of trade liberalisation meas-
Periods Growth Rate GDP Growth performance of the ag- ures, there was a sharp decline in the area under cultivation
of Agriculture Rate riculture sector as high- and production of oilseeds. This can be seen from Table 3
1981–82 to 1989–90 2.9 4.7
lighted in the approach where expansion in area under cultivation and growth rate of
1990–91 to 1999–00 2.8 5.3
paper of Eleventh Plan output of oilseeds had declined drastically in the 1990s as
2000–01 to 2009–10 2.4 6.8
(Planning Commission compared to the preceding decade. With the reintroduction of
2010–11 to 2013–14 2.1 3.7
Source: Handbook of Statistics, Reserve Bank of India, 2006) have not been import duties on imports of oilseeds in 2001, and more favour-
various years. realised. able prices in the domestic market, there was an increase
Table 3 shows that the growth rates of production and yield in the area and production, post 2000 (Ramachandran 2011).
of most of the major crops have declined in the years following Import duty on crude edible oil was eliminated in 2010–11,
the initiation of economic reforms as compared to the 1980s. from a high of 75% in 2004. This adversely affected domestic
Exceptions to this general trend were observed for pulses and oilseed producers. Table 3 shows the decline in area, produc-
cotton (2000–01 to 2009–10) for which growth rates of pro- tion and yield of different varieties of oilseeds between 2010–11
duction and yield have increased, and sugar cane and wheat and 2014–15 (Sharma 2013).
(1990–91 to 1999–2000) whose production increased marginally Of all the major crops studied in Table 3, cotton has registered
as compared to the 1980s. the highest rate of growth in the post-reform period, specifi-
Growth in production of foodgrains between 1981–82 and cally between 2000–01 and 2009–10. Trends in cotton produc-
2014–15 was largely due to the growth rate of the yield. In the tion show that increases in yield were the main factors for
period under study, highest growth rates in the yield of foodgrains growth of output in the 1980s and in the 2000s; increases in
were in the 1980s, the second phase of green revolution. Since area under cultivation were mainly responsible for the growth
the 1990s, growth in production of Table 2: Share of Output of output in other periods. Sharp increases in the yield rate
from Agriculture in GDP,
foodgrains was mainly driven by rice 1981–82 to 2013–14 (%) between 2000–01 and 2009–10 were due to the adoption of
and wheat. The increase in growth rate Year Share Bt cotton technology in cotton growing areas in India. How-
of production of wheat, more pro- 1981–82 29.6 ever, growth of yield rate and production of cotton declined
nounced since 2000–01, was largely 1989–90 25.2 between 2010–11 and 2014–15. It was argued that the high
1994–95 23.5
due to expansion in area under culti- costs and risks associated with Bt cotton technology, particu-
1999–2000 19.6
vation. The decline in area under 2004–05 16
larly for subsistence farmers in low yield areas made cotton
coarse cereals in all the sub-periods 2009–10 12.3 cultivation unviable. Also, increased use of pesticides even
between 1981–82 and 2014–15, has 2013–14 11.8 with the adoption of Bt cotton meant that pests (like boll-
been sharper with the onset of reforms. Source: Same as Table 1. worm) that were not major threats in Indian varieties of
Table 3: Growth Rate of Area, Production and Yield of Major Crops, 1981–82 to 2014–15 (%)
Crops 1981–82 to 1989–90 1990–91 to 1999–2000 2000–01 to 2009–10 2010–11 to 2014–15
Area Production Yield Area Production Yield Area Production Yield Area Production Yield
Foodgrains -0.2 2.8 3.02 -0.37 1.75 2.13 0.02 1.03 1.01 -0.75 0.66 1.4
Rice 0.39 3.66 3.25 0.56 1.9 1.33 -0.64 0.47 1.12 0.46 1.77 1.31
Wheat 0.66 3.23 2.55 1.3 3.31 1.99 1.01 1.49 0.47 1.27 0.47 -0.7
Coarse cereals -1.31 1.25 2.58 -2.1 -0.75 1.4 -0.88 0.77 1.67 -3.15 -0.77 2.46
Total cereals -0.2 2.95 3.15 -0.12 1.94 2.05 -0.26 0.9 1.19 -0.26 0.8 1.07
Pulses -0.2 1.24 1.43 -1.53 -0.6 0.94 1.35 2.85 1.47 -2.63 -0.12 1.5
Oilseeds 2.1 3.81 1.67 0.05 1.07 1.02 1.32 3.04 1.69 -1.12 -3.85 -2.76
Groundnut 1.78 1.29 -0.49 -1.88 -3.51 -1.64 -1.78 -1.6 0.14 -4.35 -4.5 -0.16
Rapeseed and mustard 1.36 6.31 4.9 0.42 1 0.6 2.24 4.66 2.38 -3.45 -5.06 -1.67
Soyabean 18.73 20 0.87 9.28 10.54 1.15 4.25 6.55 2.22 2.93 -3.73 -6.47
Cotton -0.52 4.2 4.75 1.59 1.6 0 1.73 9.7 7.8 3.07 1.46 -1.6
Sugar cane 0.84 2.14 1.31 1.35 2.19 0.82 -0.33 -0.12 0.2 1.04 0.97 -0.06
Source: Computed from the Handbook of Statistics, Reserve Bank of India, various years.

68 march 4, 2017 vol liI no 9 EPW Economic & Political Weekly

 SPECIAL ARTICLE
Figure 1: Share of Agriculture and Allied Sectors in Gross Capital Formation, that diverting 1% of resources from subsidies to public invest-
1966–67 to 2013–14 (%)
20 ment raises output by more than 2%, and is highly desirable in
ensuring growth of agriculture GDP (2004: 5611–16). The trend
15 of aggregate capital formation in agriculture since 1981–82 is
shown in Table 4.
10 Table 4 shows that aggregate capital formation remained stag-
nant in the 1980s. Private and public capital formations moved in
5 divergent directions. Decline in public capital formation continued
well into the 1990s, and it was only in 2004–05 that public invest-
0
ment exceeded the levels attained in 1981–82. Private investment
1966–67

1970–71

1974–75

1978–79

1982–83

1986–87

1990–91

1994–95

1998–99

2002–03

2006–07

2010–11
was increasing at a faster rate than public investment in the
1990s, and it was instrumental in raising total investment during
Source: Planning Commission of India and Agricultural Statistics at a Glance (2015).
this decade. Private and public investments had registered in-
cotton started to have an adverse impact on the yield rate of creases from 2004–05 to 2012–13, though the former increased
cotton (Gutierrez et al 2015). at a faster rate than the latter. While public investment doubled,
there was almost an eightfold increase in private investment
Non-price Factors Affecting Agricultural Growth over the three decades between 1981–82 and 2012–13. The share
of public capital formation in total capital formation in agricul-
Capital formation in agriculture: Capital formation is neces- ture had gone down from 52% in 1981–82 to 21% in 2012–13.
sary for improving long-term growth potential in agriculture. Table 5: Productivity of Irrigation for Foodgrains in Indian Agriculture
Figure 1 shows that the share of agriculture and allied activities (growth rates in %)
Year 1981–82 to 1990–91 to 2000–01 to 2010–11 to
in gross capital formation in the economy was increasing in the 1989–90 1999–2000 2009–10 2012–13
mid-1960s, and this trend continued till the late 1970s. Higher Growth rate of gross irrigated area 2.07 2.28 1.11 1.36
Table 4: Capital Formation in Agriculture, growth rates of agriculture Growth rate of output of foodgrains 2.8 1.75 1.03 0.66
1981–82 to 2013–14 (`crore, 1999–2000 prices)
witnessed in the 1980s Productivity of irrigation 0.73 -0.53 -0.08 -0.7
Year Public Private Total
were due to the lagged im- Source: Same as Table 3.
Investment Investment
1981–82 12,723 11,549 24,272 pact of increases in the The agricultural sector will have a long-term adverse impact
1982–83 12,665 13,467 26,132 share of agriculture and al- on growth rates with declining importance of public capital
1983–84 12,962 14,816 27,778
lied sector in gross capital formation (Chand and Kumar 2004). There is a difference in
1984–85 12,488 12,938 25,426
formation during the late the nature of public and private capital formation and contri-
1985–86 11,248 12,960 24,208
1986–87 10,667 13,051 23,719 1960s and 1970s (Tables 1 bution in the production processes, in which the former is
1987–88 10,981 17,816 28,797 and 3). However, since the mainly in the nature of public goods such as irrigation projects
1988–89 10,302 15,564 25,866 1980s, the share has shown and road networks. These will not be provided by private capital.
1989–90 8,909 17,132 26,041 a declining trend. There Thus, in terms of contribution to the production process, decline
1990–91 8,938 29,116 38,054
was a mild recovery during in public capital formation till 2004–05, is not adequately com-
1991–92 7,901 16,634 24,535
the late 1990s till 2001–02, pensated by an increase in private investment in agriculture
1992–93 8,167 22,862 31,030
1993–94 8,907 19,230 28,137 and then the share de- (Balakrishnan et al 2008).
1994–95 9,706 17,183 26,890 clined again. The declining In India, irrigation accounts for 90% of gross capital forma-
1995–96 9,560 17,777 27,336 trend since the 1990s im- tion in agriculture. Table 5 shows productivity of irrigation for
1996–97 9,225 20,589 29,814 plies that there has been foodgrains in Indian agriculture. It was argued that increase in
1997–98 7,812 24,692 32,504 lesser investment in agri- the irrigated area under foodgrains was largely responsible for
1998–99 7,949 24,956 32,905
culture as compared to the increase in foodgrains output, and hence growth of foodgrains
1999–2000 8,668 41,483 50,151
2000–01 8,085 37,395 45,480 non-agriculture sector. output with respect to growth of irrigation is a good measure of
2001–02 9,712 47,266 56,978 Chand and Kumar changes in the productivity of irrigation water (Rao 2002).
2002–03 8,734 46,934 55,668 (2004) argued that public Table 5 shows that productivity of irrigation was highest in
2003–04 10,805 42,737 53,542 capital formation has a the 1980s. It was a period when green revolution was broad-
2004–05 16,187 38,309 54,496 long-term beneficial impact based, with the inclusion of rice growing regions in eastern
2005–06 19,940 42,629 62,569
on agriculture as compared India. Growth rate of irrigated area increased marginally in
2006–07 22,987 44,167 67,154
2007–08 23,257 52,745 76,002 to subsidies whose impact the 1990s as compared to the 1980s; growth rate of output of
2008–09 20,572 68,137 88,709 is short-term. They esti- foodgrains declined during this period. Decline in productivity of
2009–10 22,693 70,640 93,333 mated that a rupee spent irrigation in the 1990s was due to a loss of momentum in the
2010–11 19,854 72,181 92,035 on public sector capital development of yield-increasing technologies such as cultivation
2011–12 21,184 86,958 1,08,142 formation contributes to of drought-resistant crops. This loss of momentum is directly
2012–13 23,886 88,371 1,12,257
GDP growth in agriculture related to the decline in public expenditure on research. Also,
2013–14 23,191 72,446 95,637
Source: Planning Commission of India and
by `35.21 over a period of the political economy of irrigation from groundwater sources
Agricultural Statistics at a Glance (2014). 58 years. They contended had a significant role in reducing productivity of irrigation in
Economic & Political Weekly EPW march 4, 2017 vol liI no 9 69
SPECIAL ARTICLE
Figure 2: Proportion of Rural Bank Branches in Total Branches, 1981–2014 (%) Figure 3: Credit–Deposit Ratio of Commercial Bank in Rural Areas, 1986–2014
80 (%)
branches of commercial banks (%)

120
Share of rural branches in total

60
100
40
80
20
60
0
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
2015
40

Source: Computed from the Handbook of Statistics, Reserve Bank of India, various years.
20
the 1990s. As Rao noted that, “there was a sharp decline in agri-
cultural growth in east UP on account of severe cuts in the supply 0

1986

1990

1994

1998

2002

2006

2010

2014
of power for pumping water, which was diverted to west UP to
Source: Computed from the Handbook of Statistics, Reserve Bank of India, various years.
satisfy the powerful farm lobby” (2002: 1743). From 2000–01,
growth rates of gross irrigated area and output declined Figure 4: Shares of Priority Sector and Agriculture in Total Outstanding
Credit of Commercial Banks (%)
sharply as compared to the preceding decades. 50
Although, the fact that assured supply of water is crucial for
Priority sector
high agricultural growth is acknowledged in policy circles, the 40

response of the government in terms of allocation of resources

for extension of irrigation facilities in India has been inade- 30

quate. Table 6 shows the decline in the share of outlays on

irrigation in GDP over time from the already low levels of the 20
Agriculture
1980s. Given the increase in GDP over this period, this means
that lesser proportion of the income generated in the economy 10

is ploughed back to enhance facilities of an input crucial for

the agricultural growth. The decline in this ratio shows that in 0
1981

1986

1991

1996

1998

2000

2002

s004

2006

2008

2010

2012

terms of allocation on irrigation, the policy pronouncements
were not really implemented in practice.
Table 6: Share of Outlays on Irrigation and Flood Control in GDP
Year 1981–82 1990–91
Share 1.4 0.7
Source: Computed from the Economic Survey of India, various years.
Role of credit: The policy of social and development banking,
initiated with the nationalisation of commercial banks in the late
1960s, was rolled back on account of financial liberalisation.
Reduced emphasis on priority sector lending with financial liber-
alisation had led to reduction in the availability of credit to small
and marginal cultivators and made cultivation more expensive.
Credit, particularly from the formal sector, is useful for farmers
whose income is tied to the harvest, to smoothen consumption
for the entire year. Reduction in bank branches in rural areas
and declining credit–deposit ratios led to increased dependence
of smaller cultivators on private moneylenders at exploitative
conditions. These had made agriculture a loss-making activity
and reduced the ability of farmers to reinvest surplus, thereby
adversely affecting capital formation in agriculture (Dev 2009).
Figure 2 shows that the share of rural branches in total num-
ber of branches increased from 36.3% in 1975 to 58.2% in 1990.
It declined from 57.2% in 1994 to 38.6% in 2014. Thus, by 2014,
the share of rural branches had declined to a level very similar
to that of 1975.
Figures 3 and 4 show the trends in credit–deposit ratio and
shares of priority sector and agriculture in total outstanding
credit of commercial banks respectively. Both declined in the
1990s as compared to the 1980s. Since 2001, however, there has
70
2014
Source: Computed from the Handbook of Statistics, Reserve Bank of India, various years.
(%)
been a turnaround, whereby there were steep increases in these
1995–96 2000–01 2005–06 2011–12 2013–14 ratios. Ramakumar and Chavan (2007) argued that increase in
0.7 0.7 0.8 0.6 0.6 rural credit since 2001 was largely due to an increase in indirect
finance in agriculture and definitional changes that incorporated
export-oriented and capital-intensive agriculture under priority
sector lending. They also argued that the main beneficiaries of
this change were large agribusiness companies and big cultiva-
tors. The share of the latter in total credit outstanding and loan
per account increased substantially between the mid-1990s and
2004–05. It can be argued that the revival of rural credit in the
new millennium did not improve the performance of agricul-
ture sector as compared to the 1980s, and neither did it benefit
an overwhelming number of small and marginal cultivators.
Research and extension services: Extension and research are
public goods that are prone to market failures, and hence the
government has to take a leading role in investing in these
activities. Mohan (1974) Table 7: Estimated Marginal Internal Rates
in a study on the pro- of Return (EMIRR) to Agricultural Research
and Extension in India (%)
ductivity of Indian agri- Category/Study (Research) Period of Study EMIRR
culture across 15 Indian Evenson and Jha (1973) 1953–71 40
states between 1953 and Kahlon et al (1977) 1960–73 63
Evenson and Mckinsey (1991) 1958–83 65
1971 argued that states
Rosegrant and Evenson (1992) 1956–87 62
that showed highest Evenson et al (1999) 1956–87 58
productivity gains dur- Category/study (Extension)
ing this period had Rosegrant and Evenson (1992) 1956–87 52
higher research intensity Evenson et al (1999) 1956–87 55
This is a modified version of the original table.
as compared to others. Source: Evenson et al (1999).
march 4, 2017 vol liI no 9 EPW Economic & Political Weekly
 SPECIAL ARTICLE

He also argued that agricultural research was primarily Figure 5: Movements of Terms of Trade in Indian Agriculture, 1981–82 to
2013–14
responsible for the success of green revolution in India. 110

Agriculture’s terms of trade (in %)

Table 7 (p 70) reports the estimated marginal internal rates
of return (EMIRR) to agricultural research in India from 100
various studies.
Despite these positive impacts, Evenson et al (1999) ob- 90
served that the share of public spending on agricultural re-
search and extension services in GDP of agriculture in India 80

1981–82

1983–84

1985–86

1987–88

1989–90

1991–92

1993–94

1995–96

1997–98

1999–2000

2001–02

2003–04

2005–06

2007–08

2009–10

2011–12

2013–14
has been lower than that observed in the the 1990s in devel-
oped nations (2% to 4%), and the average share in developing
nations (0.75%). Index numbers are based on triennium ending 1990–91=100.
Table 8 shows public ex- Table 8: Public Expenditure on Research Source: Price Policy Reports, Commission of Agricultural Costs and Prices.
and Extension in Agriculture and Allied
penditure on research and Sector as Share of GDP of Agriculture which prices declined. It can be seen that the price of all
extension in agriculture and Allied Activities (%) agricultural commodities in 2015 had gone down compared
and allied sector as a share Year Research and Education Extension
to 2010.
of GDP of agriculture and 1960–62 0.21 0.09
Ghosh (2010) points out that changes in regulations related
1970–72 0.23 0.14
allied activities. It shows to spot and futures commodity trading had given a major
1980–82 0.39 0.11
that the share of public boost to speculative activities in commodity markets whereby
1989–91 0.41 0.16
spending on research and speculators and financial firms—banks, pension funds, and
1992–94 0.40 0.15
extension in GDP of agri- hedge funds—increasingly entered the market in order to
1995–97 0.38 0.14
culture and allied activities 1998–2000 0.44 0.15
profit from short-term changes in prices. It meant that interna-
was low since the 1960s, as 2001–03 0.52 0.13
tional prices of primary commodities, with a history of volatil-
well as in the subsequent 2004–06 0.52 0.13 ity, fluctuate more due to speculative activities of large finan-
decades. In other words, 2009–10 0.30 0.06 cial firms to the detriment of a large agrarian population in
public spending on agricul- 2011–12 0.32 0.05 developing economies like India.
tural research and exten- Source: Balakrishnan et al (2008). Figures for In India, where almost 91% of households are marginal,
sion services did not in- 2009–10 and 2011–12 are computed by the
author from Finance Accounts, Comptroller and
small and medium farmers who cultivate on less than 2 hec-
crease after reforms. Auditor General of India. tares (5 acres) of land, exposure to fluctuations in international
prices through greater participation in trade of agricultural
Price Factors Affecting Agricultural Growth commodities will endanger livelihood security of substantial
It was expected that with agricultural trade liberalisation, sections of the population in rural areas. In a survey of eight
India will emerge as a major exporter of agricultural commod- villages across different states of India between 2005 and
ities which will lead to inflows of scarce foreign exchange re- 2007, it was observed that a significant proportion of house-
serves in the economy due to elimination of bias against agri- holds across villages located in different agro-ecological set-
culture after reforms. In view of these arguments, it will be tings with different irrigation and cropping patterns had neg-
interesting to analyse trends in the movements of terms of ative incomes mainly due to losses suffered in cultivation of
trade in agriculture. This is shown in Figure 5. agricultural crops. This shows that income generating capac-
Figure 5 shows that the terms of trade had started to move ity in agriculture is under serious threat (Swaminathan and
in favour of agriculture in the 1980s, and this trend continued Rawal 2011).
till 1994–95. It was stagnant till 1998–99, and worsening Rao and Charyulu’s (2007) study on the basis of surveys bet-
mildly till 2008–09, falling further after 2010–11. There were ween 2001 and 2004 conducted in six villages of Andhra Pradesh
improvements in the terms of trade between 2009–10 and and Maharashtra found that except for two villages, incomes
2011–12 after which there was again a decline till 2013–14. In from crop production were negative for farmer households. This
all, there was no marked improvement in the terms of trade Table 9: Annual International Prices of Selected Agricultural Commodities,
for agriculture as was expected with the onset of reforms. In 1981 to 2015 ($, current prices)
Period 1981 1986 1991 1995 2000 2005 2010 2015
fact, in certain phases in the post-reform period, the terms of Commodities
trade for agricultural producers worsened. Wheat, US 178 115 129 179 119 158 243 232
Furthermore, international prices of agricultural com- Wheat, Argentina 191 89 100 167 120 131 253 226
Rice, Thailand 483 210 314 322 204 288 521 380
modities are characterised by fluctuations in prices. Table 9
Sugar (cents/pound) 9 6 9 13 8 10 21 13
shows that international prices of most of the commodities, Soyabean, US 288 209 240 259 212 275 450 390
except for cotton (Egypt) and sugar, had declined in the Soyabean oil, The Netherlands 507 343 454 625 338 544 1,005 757
1980s. It recovered briefly till the mid-1990s, although inter- Sunflower oil, EU 639 366 474 693 392 677 1,074 846
national prices of most of the agricultural commodities in Groundnut oil, The Netherlands 1,043 570 895 991 714 1,060 1,404 1,337
Cotton, Egypt (cents/pound) 155 147 226 NA 109 101 170 NA
1995 were lower as compared to 1981. Prices again went down
Cotton, US (cents/pound) 89 57 82 104 66 59 103 75
in the late 1990s, and this trend continued till 2005. There
Prices of sugar and cotton are in US cents/pound, the rest are in US dollars/tonne.
was a brief recovery again between 2005 and 2010, after Source: United Nations Conference on Trade and Development.

Economic & Political Weekly EPW march 4, 2017 vol liI no 9 71

SPECIAL ARTICLE

included large landowners. They argued that in 1975–78, when a
similar study was conducted in these villages by the Internation-
al Crops Research Institute for the Semi-Arid Tropics (ICRISAT),
incomes from cultivation of agricultural crops were positive in
all study villages. Their study brings out the following: first,
there has been an increase in net annual household incomes
across the study villages between 1975–78 and 2001–04. Second,
the importance of agriculture as an income generating activity
has gone down in the latter period. Third, not only has the share
of agriculture gone down in the latter period, it has been gener-
ating losses for crop producing households in most of the study
villages in 2001–04. Fourth, except for only one village, absolute
incomes from crop production at constant 2001–04 prices, were
higher in 1975–78 compared to 2001–04. Thus, the arguments
that economic reforms would eliminate the bias against agricul-
ture, thereby improving livelihood security of the rural popula-
tion remain largely unfulfilled.
Conclusions
It was argued that with the initiation of reforms in 1991–92,
the bias against agriculture will be reduced, there will be a
shift in the terms of trade in its favour, and price incentives
will favour producers to increase production. This would ena-
ble the producers to increase the surplus from cultivation of
agricultural crops that can be ploughed back to make long-
term improvements on land, undertake purchase of machines
and farm implements that raise productivity of land. However,
contrary to this expectation, the actual performance of the ag-
ricultural sector was not impressive in the post-reform period
in comparison to the pre-reform period. Growth rates of the
agriculture sector as a whole and across major crops cultivated
in India have deteriorated, as has the importance of agricul-
ture as an income generating activity. However, the sector re-
mains the main source of employment in India. This implies
that disparity in income generation between agriculture and
other sectors, particularly services, has increased.
Non-price factors such as capital formation in agriculture
(with an important role for irrigation), rural credit, and research
and extension services were not given adequate importance in
the post-reform period. Share of agriculture in gross capital for-
mation started to decline in the 1980s, with no turnaround in the
1990s, the greatest casualty being public capital formation in ag-
riculture. A similar pattern is witnessed for irrigation, where
share of outlays in GDP and productivity have declined in the
post-reform period. Trends in rural credit show that there has
been a steady decline in rural branches of commercial banks in
line with financial liberalisation initiated after reforms. There
was a decline in credit–deposit ratio in the 1990s as compared to
the 1980s, adversely affecting supply of credit in rural areas.
The increase in the credit–deposit ratio, as well as the share of
priority sector and agriculture in total outstanding credit since
2001 were largely due to definitional changes benefiting large
agri-business corporations and large cultivators. Agricultural
research and extension are seen to have been systematically
neglected during the reform period. It needs to be mentioned
here that it was neglected prior to the initiation of reforms as
well; this neglect further accentuated after the 1990s.
Expectations regarding improvements in terms of trade for
agriculture did not materialise after the reforms. Besides, agri-
cultural trade liberalisation has exposed domestic producers
to the volatilities of international prices of agricultural com-
modities that have turned agriculture into an unviable occupa-
tion. Studies carried out in different parts of India have also
shown that a significant proportion of households were earn-
ing negative incomes from crop production. Neither there has
been any significant movement in the terms of trade in favour
of agriculture after reforms, nor have the cultivators gained
from more exposure to international markets and prices.

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72 march 4, 2017 vol liI no 9 EPW Economic & Political Weekly

SPECIAL ARTICLE
Healthcare Consumption in Uttar Pradesh
Iniquitous Growth and the Social Factors Contributing
to Impoverishment
C S Verma, Shivani Singh, Alok Ranjan, T Sundararaman
The modest economic growth in Uttar Pradesh over the
last decade has not resulted in the betterment in the
health and well-being of the people. This study is based
on a household survey undertaken in three
representative districts to understand the contribution
that the provision of healthcare makes to the iniquitous
nature of economic growth in the state. By assessing the
incidence and intensity of catastrophic expenditures on
health by analysing their consumption patterns we find
that there is an impoverishing effect that out-of-pocket
healthcare expenditures have on the people of the state.
The authors would like to thank the Indian Council of Social Science
Research, New Delhi for funding this study.
C S Verma (verma.cs@gmail.com) is a senior fellow and Shivani Singh
(ssshivani15@gmail.com) is a research associate at the Giri Institute
of Development Studies, Lucknow. Alok Ranjan (alokranjancmc@
gmail.com) is a junior research fellow at the Indian Council of Medical
Research and T Sundararaman (sundar2016@gmail.com) teaches at
the School of Health Systems Studies, Tata Institute of Social Sciences,
Mumbai.
Economic & Political Weekly EPW march 4, 2017 vol liI no 9
U
ttar Pradesh (UP) is India’s most populous state. With
its 19.9 crore population, were it a country, it would be
the sixth largest in the world. As the official website of
the state department of health states: “Life in Uttar Pradesh is
short and uncertain ... in these respects Uttar Pradesh resembles
sub-Saharan Africa …” (Government of Uttar Pradesh 2016).
UP currently has a under-five mortality rate of 64 per 1,000
births, calculated by SRS data (Sample Registration System),
which is the third highest in India—with only Madhya Pradesh
and Odisha being higher (Census of India nd). If we take the
Annual Health Survey 2011–12 estimates, then the under-five
mortality is even higher at 92 per 1,000 live births (Census of
India 2013). UP’s maternal mortality is estimated at 285 per
1,00,000 in 2011–13, which is second only to Assam (Census
of India 2013). The undernutrition levels in UP are 42.4%
underweight, 56.8% stunting and 14.8% wasting, which is
second only to Bihar (Indiastat 2011); its male life expectancy
stands at 62.5 at birth and its female life expectancy at
65.8 at birth, as compared to all-India figures of 65.8 for
males and 69.3 for females (Census of India 2013). Further,
the demographic transition of UP has been slow—among
all the major Indian states UP has the highest birth rate
(27 per 1,000 in 2014) and the highest fertility rate (3.2)
(Census of India 2013).
UP with a per capita net state domestic product (NSDP) at
current prices of `40,373 (2014–15), is the second poorest state
in the country; only Bihar is poorer. This NSDP per capita is
significantly less than the all-India NSDP per capita (2013–14)
which is `74,308. However, on the positive side, UP has wit-
nessed a robust growth over the last decade. The economic
growth rate has been reasonable—about 44% over eight years
or an average of 5.5% per year—the NSDP per capita rose from
`12,950 in 2004–05 to `18,635 in 2012–13 at constant prices
(Statistics Times 2015). However, this economic improvement
has not been reflected in an improved standard of health and
well-being. The estimated proportion of the population living
below the poverty line (BPL) is 39.8% or 809.1 million in 2011–12
(using the Rangarajan methodology). Urban poverty is higher
at 45.7%, while rural poverty is at 38.1% (Planning Commis-
sion 2014). In all four key indicators of the health status of the
population—under-five mortality rate, maternal mortality
rate, life expectancy at birth and nutritional status in under-
five age group—UP performs poorly.
73
SPECIAL ARTICLE
The reasons for the iniquitous nature of growth are many,
but one dimension of this phenomenon that this paper explores
is the contribution that the health sector makes to this rising
inequity. We know that high out-of-pocket expenditure (OOPE)
on healthcare could lead to inadequate access because of
financial barriers and therefore poorer health outcomes. And
we know that healthcare costs could lead to a deepening in the
level of poverty (Shahrawat and Rao 2011) and could neutralise
the effect of poverty alleviation programmes. We note that if
consumption expenditure is taken as a measure of poverty, the
higher consumption of healthcare due to a high morbidity
rate and a higher cost of care could contribute to a higher
measured NSDP; though this is at the cost of consuming other
essentials of life. It has therefore been recognised that in
welfare states, the provision of affordable healthcare ought to
be one of the fundamental priorities of the state (Garg and
Karan 2006).
This paper attempts to assess the incidence, extent and
intensity of catastrophic health expenditures and its contribu-
tion to impoverishment in UP, and how this varies within dif-
ferent socio-economic and regional contexts. It also looks at
the effectiveness of current approaches to financial protection,
against the costs of healthcare, and the implications of this for
defining future healthcare strategies.
Methodology
A household survey to measure healthcare utilisation and
expenditure was conducted in three districts of UP, each of
which was picked randomly from a list of districts categorised
into three separate regions—Kushinagar district from Eastern UP,
Aligarh from Western UP and Hamirpur from the Bundelkhand
region, respectively. The study aimed to survey 1,200 house-
holds from each district and the distribution of the sample from
each of the districts was conducted through a multi-stratified
random sample, proportionate to the respective districts size.
The total sample size was 3,338 households spread across 47
villages and 13 wards of the three districts.
The usual monthly per capita consumption expenditure
(UMPCE) of the household(s) has been taken as a proxy for
income level and this was collected through a short set of ques-
tions based on the methods used by the NSSO (National Sample
Survey Office). Each household was asked whether any member
of the household had an ailment in the last 30 days (at the time
of conducting the survey), or if anyone of them were hospitalised
in the preceding 365 days, and if in case there was such a find-
ing, then the cause was sought and codified using the same
codes as used by the NSSO 71st round. Data on choice of provid-
er and insurance coverage was also collected. The total OOPE, in-
cluding the details of medical expenses on drugs and diagnos-
tics, consultancy fees and hospitalisation charges and non-
medical expenses like transport were also collected. An equity
analysis was done based on district/region, economic quintile,
urban–rural residence, religion and caste.
Measures of catastrophic health expenditure: Catastrophic
payment headcount (Hc) is the ratio of households incurring a
74
catastrophic expenditure to the total sample size (Garg and
Karan 2006):
HC = 1/n  L (T/x > z)
where L is an indicator function and L= 1 if T/x > z and L= 0 if
otherwise. ‘n’ is the number of households making an expendi-
ture on hospitalisation for various thresholds. T is the expendi-
ture on hospitalisation during the year and x is the total annual
consumption expenditure. However, this measure does not
reflect the amount by which households exceed the threshold.
The CHE (catastrophic health expenditure) threshold, “z”
has been defined in four different ways. One is as 10% of the
annualised UMPCE and another, more recently in vogue since
the advent of the World Health Organization’s Global 100 Core
Health Indicators, is 25% of annualised UMPCE. Yet another
threshold in use is 40% of total annualised non-food expendi-
ture and out of these, a more stringent measure is setting the
threshold at 20% of total non-food expenditure. We have cho-
sen to use 10% of UMPCE and 40% of non-food expenditures
as the thresholds in the study. While estimating UMPCE we
have excluded the cost of hospitalisation.
Average catastrophic payment overshoot (o) is used to capture
the average degree by which payments (as a proportion of
total expenditure) exceed the threshold z. If the household
overshoot is Oi =Ei((Ti /x i)−z), then the overshoot is simply
the ratio of aggregate overshoots for all households to the to-
tal sample size:
O = 1/ N  Oi
where N is the sample size of households which incurred CHE.
While the headcount ratio only captures the incidence of
catastrophe occurring, the overshoot ratio captures the inten-
sity of the occurrence as well (Chuma and Thomas 2012).
A logistic regression (logit) model has been used to estimate
the probability of a catastrophic health expenditure occur-
rence. On the basis of literature, it is assumed that households
having a catastrophic expenditure are affected by various factors
such as regional disparities, social category, place of living and
income status (Li et al 2012). The Wald test has been used to
determine the significance level of the predictor variable.
Results and Findings
Household profile in survey districts: The demographic
characteristics of the sampled population in the three districts
are given in Table 1 (p 75). The average household size for the
population surveyed was 5.44 and about 81.2% were rural
households. We also note that 86.9% of households were Hindus,
12.1% were Muslims and 0.95% were others. OBCs (Other
Backward Classes) predominated about 48.5% of surveyed
households while SC/ST (Scheduled Caste and Scheduled
Tribe) proportion of households was also high, at 22.6%. About
57% of the households sampled had a permanent brick structure
for their house—this is an important proxy indicator of being
non-poor. Though there are significant differences bet ween
march 4, 2017 vol liI no 9 EPW Economic & Political Weekly
 SPECIAL ARTICLE

the three districts, the average noted in the entire sample was very For ambulatory care, healthcare providers have been classified
similar to the UP average—indicating that it is representative. as “public healthcare providers,” “private healthcare provid-
Disaggregated by district, we see a gradient from Aligarh in ers” and “others.” The category of “others” includes informal
Eastern UP, relatively the most urbanised and least poor of the and unregistered medical practitioners (who may paradoxi-
three regions, to Kushinagar in the eastern region and to cally be referred to as “RMP’s” which is an acronym of regis-
Hamirpur in Bundelkhand; the latter easily being the least tered medical practitioners) as well as traditional healers. Of
urbanised and the poorest district of the three. From secondary the total of 2,391 cases where ambulatory care was sought in
data, we note that the proportion of households which were the last 15 days, 51.7% of households sought this service from a
issued a BPL card are 17.5% in Aligarh, 36.7% in Hamirpur and formal private provider, another 22.1% from an informal pri-
44.7% in Kushinagar—as compared to 29.43% for the state as vate provider and 26.3% from the public sector (Table 2).
a whole. The proportion of people seeking care from informal health-
care providers is high, but the average OOPE they incur for
Household Expenditure on Healthcare such care is relatively low. The median OOPE, in these cases, is
about `400 per visit. In contrast, the public sector provider is
Ambulatory care: Household expenditure on healthcare has about twice as costly, the median OOPE being `851 and the
been analysed for ambulatory and inpatient care separately. mean OOPE is as high as `2,182. The formal “private health care
Table 1: Household Profile in the Survey Area provider” is about one-third more costly than
Household Characteristics Category Aligarh Hamirpur Kushinagar Total Uttar the public provider, in terms of the median OOPE,
(n=1,117) (n=1,104) (n=1,117) (n= 3,338) Pradesh*
Household size Average household size 5.24 5.01 6.08 5.44 6.0
and is only 20% costlier, in terms of the mean OOPE.
Place of residence Rural 75 77.8 90.8 81.2 77.89 This pattern is seen across all specific causes and
Urban 25 22.2 9.2 18.8 22.11 ailments for which care is sought—an important
Religion Hindu 77 94 84.8 86.9 79.7 exception being mental illness where the public
Muslim 21.6 5.6 14.1 12.1 19.3 healthcare provider is more affordable than the
Others 1.4 0.4 1.2 0.95 1 informal provider. The general perception is that
Caste SCs/STs 25.7 16.4 25.5 22.6 20.5 the public provider provides free or highly subsi-
OBCs 30.3 57.9 57.4 48.5 50 dised care whereas the private sector is much
General 44 25.7 17.1 29 29.5 costlier. But we note that in UP, for ambulatory
Type of house Pucca 73.9 41.1 55.5 56.9 61.9
care the public provider charges are comparable
Semi-pucca 16.2 20.1 20.9 19.1 21.9
to those of the private sector. This is due to a mix
Kutcha 9.9 38.8 23.5 24 16.1
Nearest health centre SC 0.4 7.2 1.8 3.1 -
of user fees and the need to pay out of pocket for
PHC 15 49.4 25 29.7 - most drugs and diagnostics prescribed—all re-
CHC 37 36.3 63 45.5 - form measures that were introduced under the
Sub-district hospital 8.8 2.2 5 5.3 - structural adjustment programme of the 1990s.
District hospital 30 4.9 4.7 13.2 - The difference between the mean and the
Others 8.9 0 0.5 3.1 - median is instructive. The median is often the
Mean distance to hospital Mean (in kms) 6.04 4.95 3.98 4.99 - more useful figure for comparison, since a few
Source: Estimated from field data, * Census 2011.
patients might require high cost interventions
Table 2: Ailment-wise Mean Expenditure on Health by Type of Health due to the nature of their disease, which may skew the average.
Facility for Outpatient Care (` )
Type of Ailment Type of Health Facility However, when the mean costs are much higher it indicates
Public n = 628 Private n = 1,234 Others n = 547 n that there is a significant subset of patients who are facing a
Mean Median Mean Median Mean Median
much higher OOPE—this calls for specific financial protection
Infections 1,002 701 1,872 1,000 540 70 403
Cancers 1,900 400 5,530 2,000 0 0 45
strategies. This difference between the mean and the median
Blood diseases 2,283 1,201 2,750 1,700 600 600 66 OOPE is maximal in public sector hospitals and is within the
Endocrine, metabolic and nutritional 677 300 2,345 1,500 0 0 180 two for injuries.
Psychiatric and neuro 424 232 2,927 1,850 800 500 78
Eye 718 400 2,688 1,000 145 145 13 Inpatient care: Unlike the case of ambulatory care, the mean
Ear 561 221 1,834 1,310 0 0 126 OOPE for hospitalisation is `38,202 (private healthcare provider),
Cardiovascular 508 200 967 551 250 250 97 which is more than seven times higher than the mean OOPE of
Respiratory 1,253 600 1,631 1,225 0 0 207 `5,180 incurred on hospitalisation in public hospitals (Table 3,
Gastrointestinal 1,186 580 3,998 2,001 567 550 17
p 76). On the other hand, in the case of cancer/tumours, the
Skin 1,151 1,151 1,712 1,050 0 0 87
mean OOPE is high in both public as well as private facilities.
Musculoskeletal 550 340 2,148 1,800 465 130 183
The mean OOPE on hospitalisation for ailments like cardiovas-
Genito–urinary 808 451 3,242 1,500 230 100 661
Obstetrics 801 450 1,915 1,100 473 266 204
cular diseases, gastrointestinal diseases, bone/joint diseases
Injuries 1,697 552 2,238 1,640 733 350 24 and external injuries is substantially high even in public hospitals.
All 2,182 851 2,563 1,200 899 400 2,391 The difference between the mean OOPE of private healthcare
Source: Estimated from field data. and public healthcare providers is maximal, for ailments like
Economic & Political Weekly EPW march 4, 2017 vol liI no 9 75
SPECIAL ARTICLE

neurological disorders, cardiovascular diseases and external non-medical expenses, but the latter even without counting
injuries. However, the relatively low median expenditure for the loss of wages, is significant. Non-medical costs are less in ambu-
same ailments suggests that the high hospitalisation expendi- latory care and less for informal providers—since the distance
ture, for certain individuals, may have resulted in a higher to travel in order to access such care would be less.
mean value for the ailment in public facilities.
Table 3: Ailment-wise Mean Expenditure on Healthcare by Type of Health Medical expenditure on child birth: Out of the total house-
Facility for Inpatient Care (` ) holds surveyed, 844 pregnancy cases were reported in the
Type of Ailment Type of Healthcare Facilities
Public Hospitals Private Hospitals
three districts. The average total medical expenditure per
n = 320 n = 1,441 child birth accounted to `9,103 in the survey sample (Table 4).
Mean Median Mean Median
This is lower in Hamirpur (`6,834) compared to Aligarh
Infection 2,918 2,356 27,758 14,000
(`10,095) and Kushinagar (`10,310). Also, the average medical
Blood diseases 6,956 5,500 36,061 30,350
Endocrine 5,009 3,821 38,232 24,000
expenditure per child birth is higher in urban areas (`10,386)
Neurological 5,298 5,400 42,355 18,600
as compared to that in rural areas (`8,842) (Table 4).
Cardiovascular 10,300 6,500 64,636 30,000 The average expenditure per child birth in private hospitals
Respiratory 3,906 3,500 19,757 15,000 (`20,003) is almost four times more than that in public hospi-
Gastrointestinal 7,022 4,752 38,550 22,175 tals (Table 4). Socio-economic groups, who tend to use public
Bone/joint 13,823 3,101 33,471 17,500 health services more, will face a lesser expenditure. Religion
Urinary 4,143 2,651 31,603 20,000 wise, there is no significant difference in the average expendi-
Injuries: external 10,862 8,000 50,860 32,500 ture, but in the case of social categories the average expenditure
Cancer 24,354 21,000 35,400 22,350 for SCs and STs is much lower (`7,320) as compared to OBCs
Eye 3,429 1,800 17,840 10,000 (`9,554) and general category (`9,665). This also explains why
Total (n = 1,761) 5,180 3,000 38,202 20,000 households in Hamirpur district incur a far less expenditure
Source: Estimated from Field data. for childbirth as compared to households in the other two
This has to be explained in perspective. The NSSO 71st survey districts (Table 5).
(A–97 Table 18b–R) shows that UP has the third highest OOPE The preferences of women towards institutional deliveries
in the provision of services by public hospital for rural house- have increased in recent years—even in rural areas. In our
holds and the second highest OOPE for urban households. In Table 5: District-wise Average Total Medical Expenditure per Childbirth
contrast, in terms of private sector hospitalisation it is 14th Background Characteristics Average Medical Expenditure Per Childbirth
amongst the states, for rural households and 11th for urban Category Kushinagar Hamirpur Aligarh

households. Place of residence Rural 10,062 5,764 10,349

Urban 12,742 10,270 9,045
In order to understand the pattern of healthcare expendi-
Total 10,310 6,834 10,095
ture for ambulatory and inpatient care for various health
Religion Hindu 10,324 6,909 11,096
seekers, the medical and non-medical expenditures have
Muslim 10,237 5,755 6,914
been taken into account. Medical expenditure includes consul- Total 10,310 6,834 10,095
tation fees, surgical charges, bed charges and expenses on Social category SCs/ STs 8,893 4,029 7,320
drugs and diagnostic care. This is substantially more than OBCs 10,335 7,223 9,554
Table 4: Average Total Medical Expenditure per Child Birth in the Survey Area General 12,337 7,606 9,665
Background Characteristics Category Mean Median Std Error of Mean Type of hospital Public hospital 4,711 3,873 6,515
District Kushinagar 1,0310 3,844 878 Private hospital 18,144 19,243 26,868
Hamirpur 6,834 2,001 1,011 Non-institutional 2,168 1,088 5,303
Aligarh 10,095 4,200 1,008 Total 10,310 6,834 10,095
All 9,103 3,003 557 Source: Estimated from survey data.
Place of residence Rural 8,842 3,000 589 Table 6: Utilisation of Delivery Services for Childbirth
Urban 10,386 3,160 1,578 Category Type of Delivery Services
All 9,103 3,003 557 District Public Hospital Private Hospital Non-institutional
Religion Hindu 9,287 3,000 623 Rural Kushinagar 49.5 42.7 7.8
Muslim 8,197 3,251 1,204 Hamirpur 82.5 15.6 1.9
Others 5,461 4,800 621 Aligarh 71.6 18 10.3
All 9,103 3,003 557 All 65.6 27.7 6.7
Caste SC/ST 7,320 2,830 965 Urban Kushinagar 50 46.7 3.3
OBC 9,554 2,900 862 Hamirpur 60.6 33.3 6.1
General 9,665 3,963 947 Aligarh 66 19.1 14.9
All 9,103 3,003 557 All 60.1 31.5 8.4
Type of hospital Public hospital 4,943 2,301 348 All Kushinagar 49.5 43.1 7.4
Private hospital 20,003 10,950 1,586 Hamirpur 77.3 19.8 2.9
Non-institutional 3,456 2,100 751 Aligarh 70.5 18.3 11.2
All 9,103 3,003 557 All 64.7 28.3 7
Source: Estimated from field data. Source: Estimated from survey data.

76 march 4, 2017 vol liI no 9 EPW Economic & Political Weekly

 SPECIAL ARTICLE

sample, more than 90% of the total deliveries in the rural Rural–urban disparities: As clearly indicated, the catastrophic
areas as well as urban areas were institutional. In rural areas, payment headcount ratio is higher for urban households as
nearly 65% of all deliveries took place in government hospitals, compared to rural households in Hamirpur and Aligarh. The
while only 27.7% of deliveries took place in private hospitals reason for a higher headcount ratio ratio in the rural areas of
(Table 6, p 76). In urban areas, nearly 60% of all childbirths Kushinagar could be due to higher levels of poverty, combined
took place in public hospitals, while only 31% took place in with a poor public health infrastructure and a higher use of
private hospitals (Table 6). This development is probably due private healthcare facilities among households in the district.
to the implementation of the National Rural Health Mission In all the three districts taken together, 55.8% of households in
(NRHM) from 2005 onwards and the Janani Suraksha Yojana rural areas experienced CHE whereas in urban areas, 62.58%
(a conditional cash transfer scheme), along with improvements of households do so. Using 40% of non-food expenditure as the
in maternal healthcare facilities in public hospitals. threshold we find an even higher percentage—more than 60%
in both rural and urban areas—record CHE (Table 7). This is
Measures of financial hardship: We have measured financial the more sensitive way of measuring CHE, though it is much
hardship caused by hospitalisation in the preceding year more difficult to compute.
using two indicators—CHE headcount ratio also known as the The poorer sections of the population are characterised by
incidence of CHE and the catastrophic payment overshoot (O). a greater proportion of consumption expenditure being de-
Headcount or incidence gives the percentage of households voted to food, which means much less non-food expenditure.
exceeding the threshold and payment overshoot captures Any incurrence of healthcare costs easily compromises this
its intensity. small level of non-food expenditure. Similar findings have
Using the headcount ratio for CHE, we find that 56.95% of been found in a study on Kenya, which states that the differ-
those who were hospitalised in UP faced financial hardship ence in expenditure patterns among various economic groups
using the 10% total consumption threshold. This rose to in developing and underdeveloped countries, is caused by
60.73% when we used the 40% non-food expenditure thresh- the difference in the levels of average overshoot (O) (Chuma
old. Further, the average overshoot was 10.32% using the and Thomas 2012). However, the intensity of catastrophic
former threshold and it rises to 26.5%, using the latter. Or in payment on health as measured by average overshoot (O),
other words the intensity of financial hardship faced is seen to is about 10% using the 10% threshold and rises to about
be much more when we use only the non-food expenditure 26% when we use 40% of non-food expenditure as the thre-
threshold (Table 7). shold (Table 7).
The incidence of catastrophic expenditure was highest in Among the three districts, both the headcount ratio and
Kushinagar among all the three districts, followed by Hamir- average intensity (O) is highest in Kushinagar, when we measure
pur amd Aligarh. In Kushinagar, about 67% of households using the 10% threshold. Using the 40% threshold, Kushinagar
(two out of three) faced CHE by either method and in the other has the highest headcount ratio, but it is Aligarh which has a
two districts it was about half of those who needed hospitalisa- much higher intensity (O). Thus, on an average those house-
tion (Table 7). holds who experience CHE in Aligarh have to spend 37.66%
more than the threshold (Table 7).
Table 7: Place-wise Measures of Catastrophic Payments
Place 10% Threshold as Percentage of Total 40% Threshold as Percentage of
Consumption Expenditure Annual Non-food Expenditure Social disparities: Social category plays a differential role on
State Sample Headcount Ratio Average Overshoot Headcount Ratio Average Overshoot
(HC) (O) (HC) (O) the pattern of expenditure on healthcare. In the survey sam-
Rural 55.83 9.94 60.46 26.89 ple, the headcount ratio for CHE is highest for SCs/STs using
Urban 62.58 12.08 62.74 25.18 both the thresholds (Table 7). What is of even greater concern
Total 56.95 10.32 60.73 26.50 is that the average overshoot is far above the levels of over-
Social category shoot for households in the other two categories (OBCs and
SCs/STs 56.47 18.36 64.24 55.96
general). Given the higher levels of poverty amongst SCs/STs,
OBCs 51.45 9.26 55.9 22.57
such a finding is not surprising—nevertheless it gives us an
General 32.95 5.80 34.82 10.06
idea of how much of a crisis healthcare costs are creating for
Kushinagar
Rural 69.03 11.74 70.8 23.15 the most marginalised sections of UP. The incidence of CHE did
Urban 48.54 8.62 48.54 20.98 not differ much by religion.
Total 67.14 11.46 68.75 22.95
Hamirpur Income groups-wise disparities: The findings with regard to
Rural 50.17 8.77 61.58 20.24 financial hardship are however counter-intuitive. We expect it
Urban 61.63 10.76 65.31 15.71
to be maximal amongst the poorest—we find it to be about
Total 52.72 9.21 62.41 19.24
the same across all income quintiles—marginally lower in
Aligarh
Rural 44.99 8.84 46.06 37.91
the lowest group and highest in the fourth quintile using the
Urban 68.82 14.55 65.95 35.14 10% of total consumption threshold and with almost no
Total 51.54 10.39 51.63 37.66 difference using the 40% non-food expenditure threshold
Source: Estimated from survey data. (Table 8, p 78).
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SPECIAL ARTICLE

Table 8: Income Groups-wise Measures of Catastrophic Payments in the means place of living, SOCAT means social category, REL means
Survey Area
religion and INCG means income group. The logit model is
Income Groups 10% Threshold as Percentage of 40% Threshold as Percentage of Annual
Total Consumption Expenditure Non-food Expenditure based on the cumulative logistic probability function and is
Headcount Ratio Average Overshoot Headcount Ratio Average Overshoot specified as:
(HC) (O) (HC) (O)
1st quintile 54 10.01 68.33 68.10 P = F (Z) = 1/ (1 + e – (α + β X))
2nd quintile 59.83 7.22 69.5 22.30
3rd quintile 67.17 9.55 67.67 16.32 where Z determines a set of explanatory variables, X; F (Z) is
4th quintile 73.5 14.32 68.17 18.17 the cumulative logistic function; ‘e’ represents the base of
5th quintile 62.33 16.29 64.17 22.51 nature of natural logarithms and P is the probability of success
Total 56.95 10.32 60.73 26.50 when explanatory variable has the value X. Logit models are
Source: Estimated from survey data. explained using odd ratios (Ali 2011). If an odd ratio is less
A similar pattern is seen with the average overshoot also. than one, the likelihood of occurrence is less (Morgan and
This finding is difficult to interpret. One possible reason is that Teachman 1988). The result of the coefficients, standard error,
people limit their consumption of healthcare to what they can significance level and odds ratio for various parameters of the
afford and the provider is also flexible in pricing the product— logistic regression model are given in Table 9.
so that at a certain level of CHE, the overshoot consumption gets Table 9: Results of Logistic Regression for Various Catastrophic
capped. To explain further with an analogy, a person in the fifth Threshold Levels
Variable 10% Threshold as Percentage 40% Threshold as Percentage
quintile needs and is prescribed `200 worth of drugs—which of Total Consumption Expenditure of Annual Non-food Expenditure
he buys. But a person in the first quintile, with the same needs Coefficient z Value Odd Ratios Coefficient z Value Odd Ratios
and the same prescription, decides to cap his purchase of drugs Intercept 1.18* 5.8 3.27 1.02* 4.95 2.77
to `40 (which is what he has) and lets the pharmacist decide Regional characteristics
District1
which drugs will fit into his capacity to pay (this example is
Kushinagar -0.76* -6.9 0.46 -0.79* -7.13 0.45
well known among health activists working on rational drug Hamirpur -0.84* -8.36 0.43 -0.4* -3.87 0.67
therapy and is used to advocate against irrational and unneces- Place (Rural =1) -0.19** -1.91 0.82 0.01* 0.11 1.01
sary additions to a patient’s prescription). This capacity to pay Social category2
could be (in our explanation) in excess of the thresholds by dif- SCs/STs -0.22** -1.85 0.803 -0.17 -1.49 0.83
ferent absolute values, but by similar percentages across the OBCs 0.23 0.19 1.02 0.035 0.29 1.03
five quintiles. This capping or limiting of consumption, by both Religion3
patient and provider, would not be limited to drugs alone, but Hindus 0.26* 2.54 1.7 0.14 1.2 1.15
Others -0.46 -0.63 0.63 -1.07 -1.42 0.34
could be extended to the choice of provider, choice of proce-
Economic status4
dure, medication compliance, end of life care and much more. Quintile 1 -0.47* -3.91 0.62 0.09 0.72 1.09
In summary, those in the lower quintile limit their health- Quintile 2 -0.26* -2.13 0.77 0.13 2.09 1.74
care consumption even at the cost of incomplete or inadequate Quintile 3 0.05 0.43 1.05 0.035 0.28 1.04
treatment, while those in the upper quintile are charged on Quintile 4 .41* 3.22 1.5 0.095 0.76 1.09
the basis of what the market can bear—which is one reason LR chi2(11) 165.95 102.01
why the overshoot costs reach similar levels across all quin- Prob > chi2 0.0000 0.0000
tiles. Further, households from higher income groups avail pri- Pseudo R2 0.0421 0.0270
1Aligarh= Reference Group2 General Caste = Reference Group
vate healthcare facilities more easily for a wider basket of ser- 3Muslim = Reference Group 4 Quintile 5 = Reference Group

vices and therefore, their costs are higher. *= Significant at 1% ** = Significant at 5%.
Source: Estimated from field data.

Logistic Analysis for Catastrophic Expenditure on Health
Various factors such as regional disparities, social category,
place of living and income status affect the likelihood of a
household to make CHE s. A dichotomous choice logistic model
has been developed to predict the probability of CHE in house-
holds. Here, we assume that households having CHE s are
affected by their social category, place of living (rural/urban),
regional disparities and their economic status.
Logistic analysis for the survey area: Based on descriptive
statistics, an empirical model has been developed to identify
the factors affecting CHE:
Log λi= α + β1 DIS + β2 PLA + β3 SOCAT + β4 REL + β5 INCG + εi
where λi denotes OOPE as a share of total consumption
expenditure/non-food expenditure, DIS means district, PLA
78
Overall, the model is statistically significant as indicated
by the LR statistic(s) and the p value. Thus, it can be said that
regional disparities, place of living, social category and income
status significantly affect the likelihood that a household will
make CHE s. This implies that an urban Muslim household in
Aligarh district, belonging to the general category and within
the highest quintile, is 3.27 times more likely to spend more
than 10% of their total consumption expenditure and 2.77
times more likely to spend more than 40% of their annual non-
food expenditure as OOPE on healthcare (Table 9).
Further, district, place of living and social category play a
significant albeit, less important role, as compared to economic
status and religion. At the 10% threshold, the coefficients
of parameters reflect that households in Kushinagar and
Hamirpur districts or, in a rural place or, belonging to the SC/ST
category or, within the lower quintiles, are less likely to spend
march 4, 2017 vol liI no 9 EPW Economic & Political Weekly
 SPECIAL ARTICLE

more than 10% of their total consumption expenditure as
OOPE for hospitalisation, as compared to households in Aligarh.
Similarly, households belonging to the Hindu religion are 1.7
times more likely to make catastrophic expenditure at the
10% threshold as compared to Muslim households. At the 10%
of total consumption threshold, households belonging to the
first and second quintile are less likely to make CHEs as com-
pared to households in higher income groups. At the 40%
threshold, the likelihood for CHE is highest for lower income
groups, the main reason being the pattern of their non-food
consumption expenditure.
Households from the fourth quintile are, however, 1.5 times
more likely to spend more than 10% of their total consumption
expenditure on OOPE as compared to households from fifth
quintile. At the 40% threshold also, the district plays a less
significant role as compared to the place of living. Households
belonging to rural areas are more likely to spend more than
40% of their annual non-food expenditure as OOPE on health-
care. This is because rural households have the lowest average
total consumption expenditure, as compared to urban house-
holds, and most of it is spent on food items.
Impoverishment effect of expenditure on health: Large
OOPE on healthcare have an impoverishing effect on the house-
hold. In this study, the prevalence of poverty has been estimat-
ed by using the poverty headcount ratio (Hp). For this, the ratio
of the fraction of people living below the official state poverty
line before incurring expenditure on health (pre-poverty head-
count1) to the fraction of people below poverty line after health
payments (post-poverty headcount2), has been calculated
(Hooda 2014). The state specific poverty line for rural as well as
urban areas as adopted by Planning Commission for the year
2011–12 has been used (Planning Commission 2014).
The survey sample had only 13% of the population below
the poverty line, if we applied the Rangarajan Committee
method—a method which has been widely criticised for its
underestimation of poverty (Planning Commission 2014).
The survey shows that a single episode of hospitalisation
almost doubles the population below the poverty line—going
up to 21.26% after making a payment on healthcare (Table 10).
The impoverishing impact of health payments is highest in
Table 10: Impoverishment Effect of Expenditure on Health in the Area
Background Total No of Households Pre-poverty No of Households Post-poverty
Characteristics below Poverty Headcount below Poverty Headcount
Line Pre-payment (Pre-Hp) Line Post-payment (Post-Hp)
Survey area Total 381 12.76 638 21.26
District Kushinagar 130 13 212 21.2
Hamirpur 136 13.6 267 26.7
Hamirpur, followed by Kushinagar and then Aligarh. One of
the possible reasons is that, poverty rates in Kushinagar and
Hamirpur are already worse than in Aligarh. The incidence of
catastrophic expenditure on health is also highest in Hamir-
pur. Also, the severity of the impoverishment effect is more on
rural areas as compared to urban areas. The impoverishment
impact of healthcare payments is higher on households from
lower social status sections as compared to the impact on
households from a higher social status. Also, the impoverish-
ment effect that healthcare payments have is higher on Hindu
households as compared to households of families subscribing
to other religious faiths.
This shows that OOPE on healthcare imposes a heavy eco-
nomic burden on households in the state and pushes them
towards poverty—especially households in Eastern UP and
Bundelkhand compared to those in Western UP. Earlier studies,
from various states of India, have shown that high OOPE
imposes a high economic burden on households and has an
impoverishing effect on the household’s living standard (Dilip
2010; Ghosh 2010). Below poverty line households, within the
lower social strata, end up bearing more of the economic bur-
den and there is a deepening of poverty and indebtedness as
compared to households in the higher strata.
Government strategy’s to address the problem of impover-
ishment due to healthcare costs are twofold—one is through
the provision of free or subsidised care in the public health-
care facilities and the other is through coverage for the poor
so that they can access private healthcare without facing
financial hardship as a consequence. We have already seen
that though public provisioning is far more affordable than
coverage for private care, the costs of public healthcare are
still very high and for those in the poorer quintiles this would
still not be priced low enough to prevent CHE s.
The state has officially introduced an insurance coverage for
all its poor. But, officially only 23% of the eligible beneficiaries
have been enrolled. Thus, as the study shows that 10% of
households in Kushinagar were enrolled whereas in the other
districts no household reported the same. What is more distur-
bing is that while the mean medical expenditure and mean
expenditure per hospitalisation for those enrolled under Rash-
triya Swasthya Bima Yojana (RSBY) is slightly lower than for
those who are not insured, the median values are slightly
higher for those enrolled under RSBY (Table 11). The cashless
services that RSBY promises is nowhere in sight.
Table 11: Insurance Scheme-wise Expenditure on Inpatient Care in Kushinagar
Expenditure on Health RSBY No Insurance
Mean Median Mean Median

Aligarh 115 11.5 159 15.9 Medical expenditure 21,347 13,000 22,391 12,700
Place of Rural 247 10.27 458 19.98 Non-medical expenditure 1,145 600 1,170 500
residence Urban 126 13.26 180 17.74 Total expenditure 23,678 15,250 23,928 15,000
Source: Estimated from survey area.
Religion Hindu 234 8.97 491 18.5
Muslim 137 10.66 145 17.23
Conclusions
Others 2 25 3 37.5
Caste STs/SCs 167 11.16 299 19.67
The high levels of morbidity and mortality, the high
OBCs 150 8.97 245 18.45 levels of poverty and the poor state of public health services
General 56 11.62 84 17.43 are three interrelated and mutually synergistic features of
Source: Estimated from survey data. contemporary UP.
Economic & Political Weekly EPW march 4, 2017 vol liI no 9 79
SPECIAL ARTICLE
Poverty leads to ill-health through many pathways: poor
access to nutritious food, poor living and working conditions,
inadequate time and support for childcare and so on. But in
this paper we draw attention to the role played by poor access
to public health services.
This paper underestimates both the problem of access and
the impoverishing effect of healthcare. It underestimates the
problem of access since the lack of access presents itself more
often as suboptimal utilisation—either in the form of an inap-
propriate provider or incomplete and inadequate treatment—
because, all the medicine and diagnostics prescribed and
procedures ordered by the doctor cannot be paid for. The poor
would also have to weigh the loss of wages that seeking health-
care would entail and they would often have to report an illness
only when unable to work or when the life of a dependent is at
threat. The low hospitalisation rate, the high prevalence of ill-
ness and the lower costs of care reported amongst the poor and
more marginalised sections are better perceived as reflecting
problems of access, than as, the poor having less morbidity.
The study underestimates the impoverishing effect of health-
care because we have measured only the impoverishment due
to hospitalisation. If we were to factor in the costs of ambula-
tory healthcare, the annual healthcare expenditure rises much
higher. In one study, 79.3% of all impoverishment due to
healthcare costs in India can be attributed to ambulatory care,
with hospitalisation contributing only 20.7% of the total
healthcare cost (Berman et al 2010).
Prohibitively High Cost of Public Healthcare
One finding of the study that we draw attention to is the pro-
hibitively high costs of healthcare in the public sector. The
NSSO shows that amongst the states, in terms of the average
out-of-pocket costs in public hospitals, UP has the third highest
rank in rural areas and the second highest in urban areas.
This is not an oversight or inadvertent error—it was at the
advice of international aid agencies, perhaps with a ready
acceptance by administrators that user fees were introduced.
Further, these user fees were not to be used for local improve-
ments but to be deposited into the treasury. Healthcare pro-
vided by the public sector for the rural sector was by design
limited to a small package of child immunisation provisions—
which in turn was displaced by pulse polio campaigns for
almost a decade. There were also a limited number of repro-
ductive and child health interventions. The aim behind selec-
tive healthcare was to limit government provided healthcare
to a few priorities and leave the rest to the market. This
strategy, largely associated with the World Bank and agencies
like the United States Agency for International Development,
has indeed succeeded—though in the absence of the health-
care system strengthening.
Now, of course, aid agencies no longer push for user fees,
but patients still have to buy most of their medicines and pay
for diagnostics in the public hospital and there is no advocacy
against OOPE in the public hospital.
Unfortunately, while current governments are seized by the
need for public expenditure in building physical infrastructure
80
like highways, power stations, mines, and others alike and
perceive these expenditure as investments, expenditure in
healthcare fails to be perceived as an investment—giving
returns in a timeframe comparable to or often less than what
investments in physical infrastructure provide. Healthier
societies are wealthier societies.
There have been many economists who have argued that
the reverse is even truer. Wealthier societies are healthier
societies. But in the present trajectory of growth and the archi-
tecture of the healthcare system, this may not apply to UP.
Economic growth has been robust in the state, but it has also
been iniquitous. And the growing private healthcare industry
of UP may be contributing to both, the high growth rate and the
poverty. The service sector is the biggest contributor to UP’s
economic growth and within this, no doubt the growth of the
private sector in healthcare contributes significantly. But the
private sector in healthcare grows at the cost of impoverishing
the poor—a case of robbing the poor to pay the rich.
In our study, though the headcount of those facing CHE
across quintiles is the same, which we hypothesise is due to
reduced access, the average overshoot for non-food expendi-
ture is much higher for households from lower quintiles as
compared to those in the upper quintiles. This is because the
non-food expenditure is low for poor economic groups as com-
pared to higher economic groups and expenditure on health-
care out of it thrusts the former towards catastrophe. Also, the
percentage of households enrolled in any kind of insurance
scheme is very low across all social and economic categories
(Table 6). Hence, the burden of expenditure is to be managed
by them alone, which leads to their further impoverishment. It
is also to be noted that the average overshoot, for non-food
expenditure, decreases with an increase in the income level.
The findings that not only do close to two-thirds of the poorest
face financial hardship due to healthcare costs, but that the
poverty level almost doubles with a single episode of hospitali-
sation taken along with the high morbidity rates, nullifies the
impact of most poverty alleviation programmes.
Given the poor performance of the public health services
and the apparent choice that even the poor are making to opt
for private healthcare, it is tempting to conclude that what is
needed is a shift from public provision of healthcare to govern-
ment purchasing healthcare through insurance or other means.
But there are some cautions in this regard.
First, though these are still early days and coverage with
RSBY is low, purchase through insurance does not seem to be
providing financial protection even for those who have insur-
ance; a finding of ours which is supported by earlier studies as
well (Shahrawat and Rao 2011). This is probably due to the
poor regulation of the private healthcare sector and other
governance issues—which also ail the public sector.
Second, a case can be made that it is the lack of availability
of services by design that leads to the poor performance of the
public services. There is an exception to this general trend of
private sector preference, in the case of natal care. Our study
shows that for this service, the majority of women prefer public
healthcare facilities over private healthcare facilities. This is
march 4, 2017 vol liI no 9 EPW Economic & Political Weekly

also visible in other studies and official data (Table 1). How-
ever, in case of complications during pregnancy or in the case
of a caesarean, people still choose the private sector over the
public sector. The NRHM we know brought in a large number
of measures to strengthen delivery services in the public
healthcare system and remove barriers through the Janani
Suraksha Yojana and the Janani Shishu Suraksha Yojana. As
the reliable availability of desired services improves in the
public healthcare sector, its utilisation increases, as observed
in case of natal care. It also shows that the choice of being
treated in a private hospital is not an active preference but a
distressed migration to the private sector—where people
have to pay though it is ruinous, since the public facility is
overcrowded or because the service is unavailable. It would
also be difficult in a completely unregulated environment to
ensure that private players adhere to the rules of the game.
Our study also brings out the relatively high role played
by the informal and unqualified provider—a finding that
supports our contention that the preference for the private
Notes
1 Pre-poverty Headcount = Pre-Hp = 1/n1(CiPL),
where Ci is per capita consumption expendi- Hooda, S K (2014): “Out of Pocket Expenditure on
ture, PL is official state poverty line and n is
number of individuals.
2 Post-poverty Headcount = Post-Hp = 1/n1
(Ci-OOPPL).
Indiastat (2011): “Nutrition India Growth Statistics
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Economic & Political Weekly EPW march 4, 2017 vol liI no 9
SPECIAL ARTICLE
sector is a direct consequence of the poor level of healthcare
facilities in the public sector.
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SPECIAL ARTICLE
Equity in Oral Healthcare in India
A Review on Health System Analysis
Chandrashekar Janakiram, Rajeev B Rudrappa, Farheen Taha, Venkitachalam Ramanarayanan,
Harikiran G AKALGUD, Sushi Kadanakuppe
Oral health is a critical but overlooked component of
overall health and well-being. Although there have been
impressive advances in both dental technology and in
our scientific understanding of oral diseases, significant
disparities in both the prevalence of dental disease and
access to dental care among population subgroups
remain. This paper attempts to elaborate on the nature
of oral health equity in India by exploring the process
and trajectories of oral health inequity.
Chandrashekar Janakiram (sekarcandra@gmail.com) is Public Health
Expert and Bioethicist at the Amrita School of Dentistry, Amrita
Vishwavidyapeetham, Cochin; Rajeev B Rudrappaa is Dental Public
Health Expert at the Society for Community Health Awareness
Research and Action, Bengaluru; Farheen Taha and Venkitachalam
Ramanarayanan are postgraduate scholars at the Amrita School of
Dentistry, Amrita Vishwavidyapeetham, Cochin; Harikiran G Arkalgud
is Dental Public Health Expert at the DPAM RV Dental College,
Bengaluru; Sushi Kadanakuppe is Assistant Professor at the Department
of Public Health Dentistry, V S Dental College and Hospital, Bengaluru.
82
O
ral health affects people physically and psychologically.
It influences individuals’ feelings of social well-being
as it plays a role in how they look, speak, chew, taste
food, and socialise (Sheiham 2005). The presence of oral
diseases like dental caries, especially in children, affects their
quality of life, which in turn leads to a deterioration in
general health; they experience pain, discomfort, and disfig-
urement and contract acute and chronic infections that
result in eating problems and sleep disruptions, a higher
risk of hospitalisation, high treatment costs, and a loss of
school days and the subsequent diminished ability to learn
(Sheiham 2005).
Chronic diseases such as obesity, diabetes, and dental caries
are increasing in India, which indicates that quality of life, as
related to oral health, as well as general quality of life, may
deteriorate. Oral health and general health are related in four
major ways: (i) Poor oral health is significantly associated with
major chronic diseases; (ii) poor oral health causes disability;
(iii) oral health issues and major diseases share common risk
factors; (iv) general health problems may cause or worsen
oral health conditions.
A core group of modifiable risk factors are common to many
chronic diseases and injuries. The four most prominent non-
communicable diseases—cardiovascular disease, diabetes,
cancer, and chronic obstructive pulmonary disease—share
common risk factors with oral diseases; these are preventable
risk factors that are related to lifestyle. For example, dietary
habits play a significant role in the development of chronic dis-
eases as well as dental caries (Petersen and Kwan 2004). Many
general disease conditions have oral manifestations that in-
crease the risk of oral disease; similarly, oral disease acts as a
risk factor for several general health conditions. In addition,
poor oral health leads to poor nutrition, and both these factors
create a vicious cycle that may lead to an overall deterioration
in health and an inability to perform day-to-day activities. Se-
vere periodontal diseases, for example, are associated with di-
abetes mellitus and have been considered the sixth complica-
tion of diabetes (Löe 1993).
The deterioration observed in general health following the
incidence of many non-communicable diseases and more
daunting strains of infectious diseases can be compared
to that experienced after the incidence of oral diseases. The
burden of oral disease is high in both developing and
developed nations.
march 4, 2017 vol liI no 9 EPW Economic & Political Weekly

Social Determinants of Oral Health
Differential exposure: Social position is often inversely linked
to risk exposure. The underprivileged are exposed to far more
risk than their more privileged counterparts. A very good
example of the above statement in relation to oral diseases is
the increase in the occurrence of dental caries (Table 1) in de-
veloping nations compared to developed nations. India too has
its fair share of caries experience, and the rate is only increasing
(Maru and Narendran 2012). The consequences of widespread
poor oral health can be seen on the personal and population
front. Adler and Ostrove (1999) have aptly described health
as something one acquires based on how privileged one is.
Table 1: Oral Diseases in India
Oral Diseases Catastrophes
Dental caries Tooth pain, loss of chewing efficiency, loss of nutrition,
diabetes, wasting, psychosocial inhibition, etc.
Periodontal diseases Tooth loss, pain, risk of systemic health diabetes, CVA, etc.
Dento-facial anomalies Loss of self-esteem, loss of chewing efficiency,
psychosocial inhibition, risk of dental caries, risk of
periodontal disease
Dental fluorosis Loss of self-esteem, psychosocial inhibition, risk for
systemic fluoride toxicity
Edentulous Loss of chewing and mastication efficiency
Oral cancer Fatal
Locker (2000) has also proved the snug association between
socio-economic status and health, including oral health. In a
country like India, Adler’s and Locker’s words hold true to a
great extent, since here health is a commodity that can
be purchased based on one’s economic or social situation.
Peterson and Kwan (2011) have rightly said,
poor oral health was flagged as a severe public health problem. Oral
disease and illness remain global problems and wide inequities in oral
health status exist among different social groups between and within
countries.
Differential vulnerability: Certain population groups may
be differentially vulnerable to risk factors. Due to a lack of
resources, poorer social groups may have no other choice but
to live in unsafe and overcrowded houses and take on danger-
ous and risky work. In addition, they face frequent bouts of
unemployment that further strain their resources. The sense
of injustice is heightened in such cases as complications tend
to cluster together and reinforce each other, making some
groups more vulnerable to ill health (Braveman and Gruskin
2003; Culyer 2001; Freudenberg et al 2015).
In India, variations and inequities exist at all levels. It is a land
of various cultural, religious, and social customs and habits. It is
home to more than one billion people and has 14 major languages
and hundreds of dialects (Sinha et al 2003). This potpourri of
cultures, habits, social determinants, and exposure levels thus
aggravate the risk factors that lead to a wide assortment of oral
diseases in the nation (Table 2). The dental caries prevalence rates
ranged from 17.3% among the 5–14 years age group to 54.6% in
those aged 55 years and above in rural India (Rajaratnam et al
1995). The prevalence of dental caries experience ranged from
31.5% to 100% in those aged 65 years and above in India.
The prevalence of periodontal disease (including gingi-
vitis) is reported to be in the range of 86.5%–100% of the
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SPECIAL ARTICLE
adult population (Ramfjord et al 1968; Arjun et al 2014). The
risk of periodontitis increases with age, and there is a positive
correlation between socio-economic status and the occurrence
of periodontal disease (Gautam et al 2012).
Oral cancer is considered the third-most common cancer in
India (Byakodi et al 2012). Most of the time, oral cancers are
diagnosed only at an advanced stage (Coelho 2012), and by
then it is too late for the patient. Most of the time, there are not
enough experienced personnel to detect diseases, and inade-
quate healthcare infrastructure often lead to improper and
late detection of the disease. Oral cancer mostly affects people
from the lower socio-economic strata due to the increased
probability of exposure to risk factors.
There is a strong association between socio-economic status
and exposure to risk factors like alcohol and tobacco that could
lead to the incidence of oral cancers. Tobacco consumption
was significantly higher among the poor, less educated, and
Scheduled Caste (SC) and Scheduled Tribe (ST) populations
(Rani et al 2003). Individuals with no education are 2.69 times
more likely to smoke and chew tobacco than those with post-
graduate education (Subramanian et al 2004). Households
belonging to the lowest fifth of the Standard of Living Index
were 2.54 times more likely to consume tobacco than those in
the highest fifth. STs (odds ratio 1.23, 95% confidence interval
1.18 to 1.29) and SCs (odds ratio 1.19, 95% confidence interval
1.16 to 1.23) were more likely to consume tobacco than other
caste groups (Subramanian et al 2004).
Table 2: Burden of Oral Diseases in India
Oral Diseases Prevalence Age Prevalence per 1,00,000
(%) Years 2000 2005 2010 2015
Dental caries 50.00 All 5,084.7 5,484.6 5,869 6,231.8
Periodontal diseases (severe) 45.00 15+ 2,957.6 3,190.2 3,413.8 3,624.8
Malocclusion 32.50 9–14 401.4 433.0 463.3 491.9
Dental fluorosis 5.50 All 559.3 603.3 645.6 685.5
Severe fluorosis 1.0 All 101.7 109.7 117.4 124.6
Oral cancer 0.03 35+ NA 0.6 NA 0.8
Source: NCMH, Burden of Disease, 29 September 2005.
It has been reiterated that lower socio-economic status may
be a predictive risk factor for poor oral hygiene, thereby fur-
ther increasing the risk of oral cancer in tobacco consumers
(Ganesh et al 2013). It was further emphasised that the risk of
oral cancer is inversely proportional to increasing levels of
education, income, and occupation. Thus, it was concluded that
low education, occupation, and low monthly household income
are significant independent risk factors for oral cancer (Coelho
2012; Ganesh et al 2013; Gupta et al 2013). Moysés (2012) clearly
states that oral diseases are directly related to the socio-
economic condition of individuals across all populations.
Equity and Affordability of Oral Healthcare
Now, there is a need to balance patient care and the financial
solvency of healthcare institutions (Silverman 2000), due to
which the issue of ethics has become more relevant than at any
other point in time. Healthcare services have a moral obliga-
tion. Affordability in the purest sense of the word can be de-
fined as a descriptive measure of medical costs (Glied 2008).
Another well received but rather disturbing definition was
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given by Budetti et al (1999) who described those who are too
poor to afford healthcare as “people who can’t afford to get
sick.” This statement commands an in-depth understanding of
healthcare inequity.
Accessibility to oral healthcare can be affected by factors ex-
ternal to the patient like the availability of an adequate dental
workforce and ability to pay for dental care. These are factors
related to the supply side of the healthcare delivery system. Of
late, internal factors like the individual’s perceived need for
dental care, cultural preferences, language, and so on, which
are related to the demand side of dental care, have also been
taken into consideration. Thus, in short, accessibility is essen-
tially a supply–demand consideration (Guay 2004).
Public healthcare delivery is done through a network of
1,46,036 health sub-centres, 23,458 primary health centres
(PHCs), and 4,276 community health centres (CHCs). There is a
150-bed civil hospital at the district level to provide tertiary
care. Only 23.5% of the urban population, and 30.6% of the
rural population, choose to receive healthcare at government
facilities, thus reflecting the widespread lack of confidence in
the public healthcare system (IPHS 2012).
The growth in the number of private institutions that pro-
vide dental education could explain the manifold increase in
the number of dental surgeons who graduate per year. The
most convincing reason for this rural–urban disparity is that
this sector is concentrated in urban and semi-urban areas.
Physical accessibility to public or private oral healthcare facilities
is still a challenge in rural areas. The highly skewed geographi-
cal distribution of dentists has compounded the problem. Almost
62% of registered dental surgeons are serving in high human
resource for health (HRH) production states (namely, Karnataka,
Maharashtra, Tamil Nadu, Andhra Pradesh, Kerala, and Puduch-
erry). The dentist–population ratio, which is used as a yard-
stick to measure the availability of oral healthcare, bears testi-
mony to this fact. In India, this ratio stands at 1: 9,000 in urban
areas and at an alarming 1: 2,00,000 in rural areas. Around
80% of dentists work in urban areas while 70% of India’s pop-
ulation lives in rural areas (Ahuja and Parmar 2011). India has
5,278 dentists working at government hospitals. The dentist–
population ratio is 1: 10,120.85, and only 59% of the Indian
population is served by dentists.
With regard to the patient–centric factors that affect access
to oral care, it comes as worthwhile to note that it is the
perceived need for dental care that drives a patient to health-
seeking behaviour. With oral diseases apparently causing
more morbidity than mortality, it comes as no surprise that
oral care has always taken a back seat in healthcare priorities,
which is also reflected in the health policies formulated by
the state.
The poor are more likely to use public dental services.
Adequate access to oral care also affects special groups like the
poor and working for poor, rural and tribal populations, mobil-
ity restricted and differently-abled populations, culturally and
socially isolated groups, and the unemployed population.
Achieving equity in oral healthcare is possible only if the concerns
of these special groups are also addressed (Guay 2004).
84
Achieving equity in healthcare is based on three principles
(Mondal 2013): (i) equal access to healthcare for those who
have equal needs; (ii) equal utilisation of healthcare for those
who have equal needs; and (iii) equal (or rather equitable)
health outcomes.
Consider a hypothetical situation where all the patients who
need treatment are willing to seek it. The first contact point for
a person living in a rural area is the PHC or its sub-centres. The
presence of a government-appointed dentist is not mandatory
for PHCs or sub-centres in India (IPHS 2012). Therefore, dental
care is not available at the first contact point itself. Very few
PHCs offer basic dental services, and these are most often
provided by private colleges (Pai et al 2014).
Presently, dental care has not been included under the “Ass-
ured Services” to be provided in CHCs under Indian Public
Health Standards (IPHS). A mention has been made of an “op-
tional” dental clinic in the outpatient department. There is a
need to include compulsory oral healthcare in the IPHS for
CHCs (Pai et al 2014). Most CHCs in India are also not equipped
to handle dental treatments other than basic treatments like
scaling, extraction, and amalgam restorations.
Advanced dental care is available only in tertiary care cen-
tres like district hospitals and dental teaching institutions in
addition to private clinics and hospitals. As long as the number
of tertiary dental care centres run by the government (includ-
ing government-owned dental teaching institutions) is in such
stark disproportion to the number of private institutions (in-
cluding self-funded dental teaching institutions), dental treat-
ment will remain inaccessible and unaffordable for the com-
mon man. Thus, it can be summarised that inequalities exist in
and among the various levels of oral healthcare on offer in the
country. This gap between preventive (primary) and tertiary
levels needs to be bridged (Joshi 2015).
Affordability of Oral Care in India
“Providing affordable, quality healthcare to all is a challenge,”
said J P Nadda, Health Minister of India, at a Global Health
Summit (January 2015). At present, the Government of India
spends less than 3% of its gross domestic product (GDP) on
healthcare (Mondal 2013), which is low in comparison to
many low- and medium-income countries around the world
(McKinsey 2012). Oral healthcare activities, which have no
separate budget allocation, receive only a minute percentage
of this meagre investment (Nandakishor 2010). With India
being a non-reimbursed economy, comparing our GDP spend-
ing on health to other countries may seem irrelevant for some
(Joshi 2015), but this lack of funding does play a role in the
healthcare dynamics of the country. The health indicators of
India have consistently lagged behind the economic deve-
lopment that has been witnessed over the last decade, and
the need for increased investment in healthcare has been
acknowledged.
India ranks among the top 20 countries in the world in
terms of private healthcare funding, and 82% of medical
expenses in India are paid out-of-pocket (Sengupta and Nundy
2005). According to the Central Bureau of Health Intelligence
march 4, 2017 vol liI no 9 EPW Economic & Political Weekly

(CBHI), most Indians trust and visit private healthcare institu-
tions though costs tend to be significantly higher. The private
healthcare sector is highly fragmented with over 90% of pri-
vate healthcare serviced by the unorganised sector.
The sector, however, has attracted considerable private in-
vestments, and it appears that the participation of the private
sector in this industry is likely to continue in the near future.
The need to balance the financial solvency of private sector
players as well as the need to provide affordable quality
healthcare services in ways that enhance the health and well-
being of citizens is an immediate and visible area of ethical
conflict in the sector.
Indians spend around $120 per capita per annum on health-
care, of which only 40% is provided by public funding. Out-of-
pocket expenditure is the primary source of healthcare financ-
ing in India (McIntyre et al 1982). It is estimated that 61.7% of
medical expenses are borne out-of-pocket (WHO 2013). It has
been shown that in 41 low- and middle-income countries, pay-
ments for dental healthcare can be a considerable burden on
households, to the extent of preventing expenditure on basic
necessities. The burden is so high that households can easily slip
deeper into poverty in case of a health problem (Mondal 2013).
Traditional oral disease treatments are extremely costly; it
is the fourth most expensive disease to treat in many industri-
alised countries. Traditional curative dental care is a signifi-
cant economic burden for many industrialised countries where
5%–10% of public health expenditure relates to oral health
(Griffin et al 2001; Wang et al 1998; Widström and Eaton
2004). Over the years, industrialised countries that have
invested in preventive oral care have reported savings in dental
expenditure, and positive trends have been observed in these
countries in terms of reducing the prevalence of oral disease.
In India, government investment in oral healthcare is low.
Resources are primarily allocated for emergency oral care and
pain relief; if treatment were available, the costs of treating
dental caries in children alone would exceed the total health-
care budget for children. Around 19% of the out-of-pocket
healthcare expenditure in developed countries is for dental
care. It is estimated that 7% of households in low- and middle-
income countries (including India) have faced catastrophic
dental health expenditure and 35% were in the prospect of
facing such expenditure (Masood et al 2015). Less affluent
households in India have a higher burden of disease, and they
spend a higher proportion of their family income on health-
care than their more affluent counterparts (Somkotra and
Detsomboonrat 2009).
In India, the exact ballpark figure is difficult to obtain, since
most people avoid dental treatment altogether due to the ex-
penditure incurred and would rather spend the amount on
other basic necessities (Masood et al 2015). The proportion of
people who are unable to afford basic oral healthcare has
doubled in the last decade (Nandakishor 2010). It is also re-
ported that 39 million Indians slide below the poverty line be-
cause of their out-of-pocket healthcare expenses. The average
out-of-pocket expenditure on dental care was `2,135.95 ± `656
for three months, which is about 8.84% of the family income in
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SPECIAL ARTICLE
a peri-urban area in Delhi (Singh et al 2015). Thus, it is obvious
that current mechanisms in developing countries fail to pro-
tect the public from the economic consequences of dental care
(Masood et al 2015). Considering these bleak statistics, the
task of making oral healthcare affordable to all is both a chal-
lenge and a necessity.
Is There a Right to Oral Healthcare?
Despite advanced technical achievements, the oral healthcare
system is afflicted with mounting problems. Unique among the
democracies, India still retains a healthcare system in which
the free market prevails, and dentists function primarily as
free agents, selling their services to patient–consumers, most
of whom attempt to cushion themselves from the potentially
devastating costs of the treatments they purchase. In parallel
to this free market system is a government-funded public
healthcare system that intends to provide basic healthcare ser-
vices to those who cannot afford to pay on their own. Nearly
80 crore households, mostly working people and family mem-
bers, carry no dental health insurance or general health insur-
ance which covers dental care. As budgetary pressures keep
mounting at all levels of government, with no public health
programmes for oral health in place, millions of poor people
are falling through the giant holes in the oral healthcare sys-
tem. Such problems invite a basic question about this tangle
that we call the dental healthcare system—is it ethical?
The flaws in the system are a result of inefficiency or the
high fees paid to dentists. This should be considered in rela-
tion to a context where enormous amounts are allocated for
defence, bailouts for savings and loans, and other kinds of pay-
ments, which limit the allocation for oral healthcare.
The fundamental question here is distributive justice. One
way to phrase the question is to ask if there is such a thing as a
right to healthcare. But if such a right exists, it differs funda-
mentally from traditionally acknowledged rights such as free
speech. Such rights, known as liberty or negative rights, pro-
tect individuals from interference while conducting personal
activities, but a right to healthcare is a positive or an entitle-
ment right. Entitlement rights are necessarily limited by a soci-
ety’s willingness and ability to provide what is entitled. In
other words, they depend on a society’s resources, and the
choices it makes about how those resources are used. Even if
the right to oral health is accepted, the next problem is that it
would be literally impossible to provide the highest level of
dental care to every citizen.
Basic oral healthcare is not available to every individual in
India. Oral healthcare is provided by medical doctors in some
instances or by traditional healers or through the administer-
ing of home remedies. Contact with dentists and dental auxil-
iaries remains an impossibility for most individuals in the oral
healthcare system in India. The root cause of the oral health
problem in India is the lack of an organised primary oral
health programme. Both providers and individuals are to be
held responsible for this situation. In case of oral diseases,
most of the time, people have to avail tertiary care treatments.
This is just the tip of the iceberg; people often end up having to
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undergo expensive and extensive procedures when they could
have been prevented if proper prevention had been in place.
Equity relates to principles of social justice, fairness, and the
absence of disparity (Mondal 2013). Moyses concedes that “in
the end,” society may have to confront its choices about the
allocation of scarce healthcare resources (Andre and Velasquez
1990). But, she maintains, “I don’t think we are ‘in the end.’ We
ought to wake up to the fact that what’s wrong with this situa-
tion is that people are not getting care at basic levels,” because
we are allocating public dollars to other programmes. Both
Cook and Moyses agree that the current lack of access in the
system exacts an enormous toll (Andre and Velasquez 1990).
Equitable utilisation of oral healthcare for those who have
equal needs is a challenge as it requires policymakers to take
into account or override people’s lifestyle choices and/or levels
of risk aversion, which lead to differences in levels of utilisa-
tion (Oliver and Mossialos 2004). The healthcare policies of
most European nations are based on social solidarity. These
policies ensure that citizens have equal access to a reasonable
minimum range and standard of healthcare, irrespective of
their ability to pay for healthcare (Oliver and Mossialos 2004).
Is there a right to oral healthcare? What constitutes a fair
system of distribution? And if that system is administered by
the government, what dental procedures should it provide to
all citizens and which procedures should it refuse to fund? The
challenge, whether it is accepted by the dental profession or by
individual healthcare providers, is to find reasonable answers
to these questions (Andre and Velasquez 1990).
Maternal and child health (MCH) and treatment of infec-
tious diseases receive comparatively good budgetary alloca-
tions and healthcare facilities. Is it justifiable for the govern-
ment to offer differential healthcare facilities to individuals?
When an individual suffers from oral diseases, no care is pro-
vided, and if so, care is not affordable. Can we have a system
where certain diseases are not a healthcare priority compared
to other like infectious diseases, MCH, etc? So, there is inequity
in the healthcare priorities of the provider, where oral health-
care is either inaccessible or unaffordable and oral disease
constitutes a silent epidemic. Or is it that we have to under-
stand that we can only suffer from infectious or maternal child
diseases as care is available?
Involving Communities for Oral Health Promotion
The ideal goal of community-based oral health programmes is
to place health in the hands of the community. People are
more likely to use and respond positively to health services if
they have been involved in making decisions about how these
services are delivered, thus helping make these services sus-
tainable. They are also more likely to change risky health be-
haviour when they have been involved in deciding how that
change might take place. Thus, they gain information, skills,
and experience in community involvement, which helps them
take control of their own lives and challenge the social sys-
tems that have sustained their deprivation (Rifkin 2009).
Communitisation of the healthcare system has been included
as one of the five pillars of the National Rural Health Mission
86
(NHRM). The two key instruments that aimed to mobilise com-
munity action with regard to health under the NHRM were the
community health worker programme and the Village Health,
Sanitation, and Nutrition Committee. These initiatives em-
powered locals by involving them in the delivery of health pro-
motion programmes and has had clear benefits. Empowering
local people to set the agenda and design and maintain the
programmes is important.
Mobilising community involvement for health issues is a
challenging task, but it has been a successful one. A community-
based approach to comprehensive reproductive care using par-
ticipatory research on women’s reproductive health; mass edu-
cation on sexual, reproductive, and social issues; providing
care for women’s health issues through village-based female
health workers; and improving referral services has reduced
maternal mortality significantly in three decades in Gadchiroli
district in Maharashtra (Bang and Bang 1989). The affordabil-
ity of health services is another major aspect of public health.
With a community-based insurance scheme, 67% and 34% of
patients did not have to make any out-of-pocket payments for
their hospital expenses at ACCORD and the Self Employed
Women’s Association, respectively. Community-based insurance
schemes have provided protection against catastrophic health
expenditures within communities that bear accountability
and responsibility for their own health (Devadasan et al 2007).
However, oral healthcare is far from available to all commu-
nities in India. Oral healthcare is not seen as a priority by the
government, policymakers, and importantly, by communities.
It is the responsibility of local public health agencies (LPHAs) to
assess the oral health needs of the communities they serve and
to develop policies and programmes that help ensure those
needs are met.
LPHAs should be ideally positioned to identify specific com-
munity oral health problems; compare community data with
overall state and national surveillance data; and build broad
community support for public policies, regulations, funding,
and other means of improving community oral health. The
American Association for Community Dental Programs
(AACDP) developed a Guide for Developing and Enhancing
Community Oral Health Programs. It listed the steps involved
in organising a community oral health programme: mobilising
community support; assessing needs and existing resources;
planning, implementing, and evaluating the programme; and
participating in policy development and research.
To prevent the duplication of effort, and to identify the
platforms upon which community oral health programmes
can be developed, integrated, expanded, or enhanced, it is
also necessary to understand what oral health programme
resources are available as well as what general health pro-
grammes are in place and which may provide valuable link-
ages. One way to overcome the challenge of needs assessment
is to empower communities to conduct their own assess-
ments. This requires little training and continuous support.
Community-based diagnosis is also advantageous in a populous
country like India, where such humungous endeavours
require massive resources. Evaluations of community oral
march 4, 2017 vol liI no 9 EPW Economic & Political Weekly

disease prevention and oral health promotion programmes
should integrate with general evaluations of health pro-
grammes (Petersen and Kwan 2004).
Identifying community resources and utilising them effi-
ciently is vital for promotings oral health. NRHM’s accredited
social health activists (ASHAs) are recognised as important
resources in reaching out to communities. The Centre for Dental
Education and Research, All India Institute of Medical Sciences
(AIIMS), has developed guidelines for training health workers
and ASHAs for oral health promotion programmes, but there is
no data available on the implementation of the same. Though
health workers and ASHAs have been instrumental in mitigat-
ing several health issues, it is unfortunate that their role is
more limited in terms of reducing oral health inequalities
(Devadasan et al 2007). Dental colleges are another important
channel for involving communities. Often, their work takes a
top-down approach, and they do not have adequate resources
for surveillance. A lack of empathy on the part of the manage-
ment of these institutions is a commonly heard complaint, as
they are not socially accountable.
The need for community participation has been conceptua-
lised in different ways—as a strategy to improve health out-
comes, a way to use resources from the community for better
health outcomes, a right to participate, and as a way of sharing
power and control. These conceptualisations reveal differing
perspectives on the purpose of community participation—it
could varyingly be seen as a means to ensure better health out-
comes or alternatively as an end in itself (McCoy et al 2012).
Challenges for Oral Health Promotion in India
The challenges to oral health in India are multiple. To begin
with, the epidemiological data on oral diseases is not up to
date. A national oral health survey was conducted in 2004 and
has not been repeated. The survey aimed to investigate the
prevalence and incidence of oral diseases and reflected the
gravity of the problem.
Epidemiological data would help in planning the manpower
required to treat oral diseases. India has the highest number of
dental colleges in the world, producing annually about 25,000
dentists (CBHI 2015). The distribution of dentists is unregulat-
ed and skewed. Most them are concentrated in urban areas,
resulting in inverse square distribution.
Burnout in dentistry is quite common for various reasons
such as lack of employment opportunities, the heavy financial
investment required in case of dental entrepreneurship, high
competition in dental practice resulting in low returns, family
responsibilities for female dentists after marriage, etc (Pallavi
and Rajkumar 2011).
The potential of ancillary professionals has not been uti-
lised. Community health workers like ASHAs help bridge the
gap between the health system and the community. Though
they have been successful in mitigating several health issues, it
is unfortunate that their role is limited in reducing oral health
inequalities (Mohnaty and Parkash 2011).
Deficient manpower planning and projection is the result of
the mushrooming of dental colleges, geographical imbalances
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SPECIAL ARTICLE
in the distribution of dental manpower, the skewed dentist–
population ratio, lopsided specialist training, the lack of den-
tal auxiliaries, inadequate workforce in rural areas, immigra-
tion and migration of the dental workforce, changing disease
patterns, and the changing role of women in workforce
(Tandon 2004).
At a clinical level, ethical practices are often questioned. Re-
ports of abuse in dental offices have made news. Leaflets with
dental marketing messages offering perks for patients appear
quite often in newspapers. Dentistry is the most commodified
health practice in India. There is no regulation on dental prac-
tice, and this has resulted in unethical practices.
Dental education in India is skewed. The clinical material
for teaching remains questionable. The growth in the dental
education sector has translated into increased overall access,
although this has been accompanied by rising inequality in the
quality of dentists being produced. These schools have acute
shortages of both teaching and non-teaching staff. There is re-
gional inequality in the location of dental education institu-
tions (Mahal and Shah 2006).
There are no active dental insurance policies, with a few
exceptions like the Employees State Insurance scheme, Central
Government Health Scheme, and Ex-Servicemen Contributory
Health Scheme.
At the policy level, oral health is not given its due impor-
tance. The National Commission on Macroeconomics listed
oral health as the 17th priority among health issues in India.
The recent draft of the National Health Policy does not include
oral health. Except for the Karnataka State Integrated Health
Policy, no other policy document mentions oral health. This is
reflected even in the appointment of dentists at PHCs.
There is vocal support for incorporating universal health-
care, but how it will cover dental care remains to be seen.
We require both inventions to tackle some of these problems
as well as innovations in delivering the solution to the last
man in the remotest village. We lack innovative healthcare
delivery.
The usage of high precision technology raises the cost of
dental care. Most of the instruments, dental care materials,
and equipment have to be imported from other countries,
which raises the cost of dental care. Promoting local indige-
nous manufacturing facilities of dental materials would have a
long-term inter-sectoral effect.
Sustainable Development Goals: A Stiff Challenge
On 1 January 2016 the Sustainable Development Goals (SDgs)
(169 sub-targets) replaced the Millennium Development Goals
(MDgs) which had been in place since 2000 (Maurice 2015).
Goal 3 of the SDGs proposes to ensure healthy lives and pro-
mote well-being for all at all ages. Its targets include non-com-
municable diseases including oral health. It is a greater chal-
lenge for India, since until the Eleventh Five Year Plan, the
achievements were 10%–15% short of the targets proposed by
MDgs. The SDGs, for the first time, propose to include oral health
as a priority in India’s present Twelfth Five Year Plan. This
opportunity must be utilised to bring attention to the issue of
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oral health as a basic health right and to generate momentum Recommendations

to implement an oral health policy in the country.
The oral health system in India is unorganised. Accessible,
affordable, available, and appropriate oral healthcare, in the
form of a tailor-made oral health package, is vital for every
community. The challenges are many, but they can be over-
come with strong consensus and implementation through up-
stream approaches. Given the cost of dental treatment,
the subsequent effects of a large oral disease burden, and the
poor state of public healthcare facilities, the moral and ethical
discussion on the “right to healthcare” assumes a greater sig-
nificance in India. Ethical issues cluster around the provision
of basic oral healthcare or first level care and preventive dental
health programmes. Oral health needs to considered a part of
general health by the provider and seeker of care. There needs
to be equity in healthcare for all diseases in India.
The government and the private sector need to work to-
gether to assure the universal availability of dental services,
especially for the most vulnerable who bear the double burden
of restricted access and unaffordable treatments and greater
need (Drum et al 1998). Current public health programmes in
the country need to be reformed so that they include pre-
ventive oral healthcare. Doing this requires us to utilise the
opportunity to develop a networked module around the
social determinants of oral health. This should also address
the ethical dilemmas faced by oral health professionals in
trying to establish social justice in oral healthcare at all levels
(Hobdell et al 2002).
(i) National goals for oral health need to be drafted by form-
ing a committee consisting oral health scientists, social scien-
tists, and community representatives. This drafting should be
monitored carefully to ensure that the goals address the prob-
lems of oral health inequity in the country.
(ii) Members of the scientific fraternity and oral health profes-
sionals should be encouraged to engage in a discussion on
social determinants of oral health and inequity.
(iii) Taxes on oral care products should be reduced.
(iv) The gap between preventive (primary) and tertiary oral
care levels needs to be bridged.
(v) There is a need to include compulsory oral healthcare pro-
visions at PHCs under the IPHS.
(vi) Indigenous manufacturing facilities for dental materials
should be promoted.
(vii) The proposed universal healthcare should cover basic
oral healthcare needs.
(viii) Professionals who compliment dentistry, like ASHAs,
should be utilised for basic oral healthcare.
(ix) Oral health risk factors or risk indicators should be monitored.
(x) Dental practices should be regulated.
(xi) Public–private partnerships in oral healthcare should be
encouraged.
Insurance for oral healthcare (akin to the Affordable Care
Act in the US) should be introduced and the possibility of con-
verting our economy into a reimbursement economy to ensure
sustainability in healthcare expenditure should be considered.

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Review of Urban Affairs

February 18, 2017
Safe and Inclusive Cities: Pointers towards a Research Agenda – Amita Bhide, Anant Maringanti, Darshini Mahadevia
Resistance and Its Limits: Protesting Urban Violence in Lyari, Karachi – Nida Kirmani
Water and Conflict in Bombay Hotel, Ahmedabad:
Urban Planning, Governance and Infrastructural Violence – Renu Desai, Shachi Sanghvi
Ecology vs Housing and the Land Rights Movement in Guwahati – Darshini Mahadevia, Aseem Mishra, Yogi Joseph
The Violence of Worlding:
Producing Space in Neo-liberal Durban, Mumbai and Rio de Janeiro – Himanshu Burte, Lalitha Kamath
Colonising the Slum: Changing Trajectories of State–Market Violence in Mumbai – Amita Bhide
Urban Planning and Violence: Cause or Catalyst for Change? – Alison Brown
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Economic & Political Weekly EPW march 4, 2017 vol liI no 9 89

NOTES

An Unequal Process 30% in 1950 to 54% in 2014, whereas the

rate of urbanisation for Asia increased

of Urbanisation from 16.6% to 48% during the same

period. In the course of these 65 years, the
majority (54%) of the world’s population
began living in urban areas (UN 2014). As
Judhajit Chakraborty a developing nation, India’s rate of
urbanisation has been low and not very
Urbanisation in India has 1 Introduction impressive compared to the rest of the

reportedly accelerated over the
last decade, with a sharp rise
in the number of towns and
peri-urban areas. Cities, on the
other hand, are believed to have
become “exclusionary,” with
in-migration remaining stagnant.
This study uses primary census
data since 1991 to question
the hypothesis of exclusionary
cities and argues that the larger
T
he 2011 population census states
that 31.2% of India’s population is
urban—up from 27.8% in 2001,
and 25.7% in 1991. The accelerated rate
of urbanisation in the last decade, com-
pared to the 1990s when the growth rate
of gross domestic product (GDP) rose to
over 7% per annum, is widely applauded
as a positive sign of development. The rise
in urbanisation has been on account of
the unanticipated addition Figure 1: Number
Number ofofTowns
towns
of 2,774 new census towns 8,000
between 2001 and 2011
Number of towns
world as well as other developing nations.
In 2011, according to census data, only 31%
of India’s population was urban, com-
pared to 52% in China, 54% in Indonesia,
87% in Brazil, and 61% in South Africa.
In 1981, India’s urbanisation rate ranked
91 out of 124, with only 33 countries hav-
ing urbanisation rates lower than India’s
(Pant and Mohan 1982). In 2011, India
ranked 159 out of 195 countries (UN 2014),
for Census
for Each each Year
Census year

6,000
(Figure 1).
No. of towns

towns and cities have grown According to some 4,000

uninterrupted, whereas (Kundu 2011b), this is an

smaller- and medium-sized towns
have been slow to graduate to
higher size classes.
This article is based on the author’s Master’s
thesis, completed under the supervision of
R Nagaraj at the Indira Gandhi Institute of
Development Research, Mumbai. The author
would like to thank him for his valuable
guidance and comments on various aspects of
this article.
Judhajit Chakraborty (judhajit.igidr@
gmail.com) is an experienced associate at
PricewaterhouseCoopers, Mumbai.
90
2,000
outcome of “census acti-
vism” (Census of India 0
reporting a higher pace of 1951 1961 1971 1981 1991 2001 2011
Source: Kundu (2011c).
urbanisation), discussed
later in this article, while others (Guin indicating that urbanisation in India has
and Das 2015) believe it represents a remained at almost the same level rela-
genuine rise in the urban population tive to other countries. Figure 2 (p 89)
during the last decade. This article at- shows the proportion of urban population
tempts to clear up the statistical dispute since 1951 in China, India and Indonesia,
and present an accurate trend and pat- the three most populous nations in Asia
tern of urbanisation. (data for Indonesia are for 1971 onwards).
In India, a place is termed urban if it From the figure, it is clear that the other
meets any of the following criteria: (i) a developing countries had started from
minimum population of 5,000; (ii) a similarly low levels of urbanisation and
maximum of 25% of the male working attained high levels of urbanisation,
population employed in agriculture, the whereas urbanisation in India has re-
rest in non-agricultural activities; and mained low (though definitions of urban
(iii) population density of at least 400 centres are different across countries).
per km2. In addition, every place with a The low level of urbanisation in India
corporation, cantonment, municipality is a clear demonstration of the failure,
or notified town area is also termed urban. of plan and policy implementation since
The growth in urbanisation has three independence, to initiate or enhance
specific components: (i) natural increase urbanisation.
in population; (ii) net rural–urban The UN’s World Urbanization Prospects
migration; and (iii) the reclassification 2014 forecasts that India, China and
of settlements as urban areas.1 Nigeria alone will account for 37% of the
To put this in perspective, the world growth in the world’s urban population,
urbanisation rate (proportion of popula- with India contributing the highest, fol-
tion living in urban areas) increased from lowed by China and Nigeria.
march 4, 2017 vol liI no 9 EPW Economic & Political Weekly

Figure 2: Proportion of Urban Population
60
50
40
Percentage
30
20
10
0 since it raises concerns about exclusion-
1951 1961 1971
Source: Pant and Mohan (1982); UN (2014).
Against this background, this study
looks at the characteristics, nature and
trends in urbanisation to verify the
propositions made in recent literature in
India. A brief review of the literature on
trends in urbanisation is presented in
Section 2, the objectives and methodo-
logy of this article in Section 3, the find-
ings in Section 4, and conclusions in
Section 5.
2 Two Broad Views
on Urbanisation
There are two broad views on India’s
pattern of urbanisation up to the 2000s.
The first (Kundu 1983) contends that the
distribution of urban population across
size class of towns was “top-heavy,” im-
plying that large-sized towns and cities
were the main drivers of the urbanisa-
tion process, while the small- and medi-
um-sized cities barely grew. The second
view (Pant and Mohan 1982) holds that
the structure of urbanisation has been
roughly balanced and has had a stable
distribution.
According to Amitabh Kundu (1983),
the growth rates of urban population
across size classes are consistently in fa-
vour of large-sized towns and cities. The
growth rate of population for the largest
size classes remains higher than all other
size class categories for the period 1961
to 1981. According to Kundu, the weak
and unstable economic base of small- and
medium-sized towns has played a major
role in their unsatisfactory urbanisation.
On the other hand, Pant and Mohan
(1982) show that the growth rate across
size classes was not starkly different,
with the Class V (less than 10,000 popu-
lation) category attaining the highest
Economic & Political Weekly EPW march 4, 2017
Indonesia
China
India
1981 1991 2001 2011
growth rate, and a balanced growth rate
for different size class towns and cities
over decades. Pant and Mohan also
affirm that urban growth due to reclassi-
fication was negligible in the 1971–81
decade. This implies a broadly stable
urban distribution. These two contrast-
ing views of urbanisation in India were
largely because of the methodology
used, with Kundu taking the declassified
towns2 into account, while Pant and
Mohan did not.
As mentioned earlier, recent literature
on the changing patterns of urbanisation
is mainly based on the 2011 Census,
which showed an increase of 2,774 new
census towns during the last decade, al-
legedly due to “census activism” (Kundu
2011b). Kundu’s scepticism is mainly be-
cause the provisional census figures
showed a significant divergence from
earlier trends. However, census officials
clearly state that there has been no
change in definition and identification
clauses for a place to be identified as
urban (Registrar General, India 2008).
Guin and Das (2015) contest Kundu’s
contention for West Bengal, which has
witnessed the highest increase in census
towns amongst all states. After carrying
out a careful study of the available data
on population and population densities,
and approximating the percentage of
male workers in secondary activities,
the authors find that the large increase
in new towns in West Bengal is a clear
result of distress in the agricultural
sector. Agricultural distress has led to a
sharp increase in non-farm activities in
rural parts of Bengal, as a result of which
a large number of villages have come to
meet the criteria of 75% of the male
vol liI no 9
NOTES
population engaged in secondary acti-
vities, and hence those villages were
declared new towns in Census 2011.
Kundu (2011a) has further argued that
urbanisation has become exclusionary,
basing his argument on the fact that in
the last decade a few large cities have
faced negative or low population growth
rates. “Such low and negative popula-
tion growth in large cities and their
core areas need[s] further investigation,
ary urbanisation” (Kundu 2011a: 10).
However, this hypothesis does not have
a strong base, because Kundu’s study
does not show the cumulative impact of
all the large cities on total urban popula-
tion decelerating or stagnating, or any
other evidence that gives justifiable
strength to his hypothesis.
Sita and Bhagat (2005) argue that
there has been a substantial growth of
peri-urban areas or urban agglomera-
tions. In other words, the incremental
urban growth of the 2001–11 decade cor-
responds to the growth of new towns. It
has also been mentioned that the popu-
lation growth in these areas has been
more than that in the primary metros or
big cities and that “... urban agglomera-
tions are growing more than the city
proper” (Shaw 2005).
Kundu (2003) substantiates these
findings and observes that the addition
of these lateral spreads (peri-urban areas
or outgrowths) to the urban population
has been sizeable and significant since
the decade of 1991–2001.
In recent times, reclassification, in
contrast to its negligible contribution in
1981 (Pant and Mohan 1982), has been a
major driver of urbanisation, with mi-
gration rates remaining roughly the
same (Pradhan 2013). Pradhan’s article
(2013) shows that the new census towns
account for a 30% increase in urban pop-
ulation in the last decade and claims
that the extent of urban migration in the
last decade has been the same as in ear-
lier decades. Pradhan estimates the pop-
ulation of new census towns from the
2001 population data. Chandrasekhar
and Sharma (2014) show that there has
been an increase in two-way commuting
and a significant increase in the short-
term migration and return migration
91
NOTES
rate, but these findings are largely based
on the hypothesis of exclusionary urban-
isation and rapid growth of peri-urban
areas.
3 Objectives and Methodology
If these hypotheses were true, one
would expect that the lower size class
categories would contribute more to
overall urbanisation than the larger size
class categories over time. The literature
has little to say on the percentage contri-
bution of the largest size class cities to
total urban population, and its evolution
over decades, especially the 2001–11
decade. We propose to examine this
proposition using primary census ab-
stract (PCA) data since 1991.
The census commissioner is yet to
publish the Towns Directory tables for
the districts and states that are required
to examine the above-mentioned propo-
sitions. However, we have reconstructed
the table using the PCA, which we con-
sider a significant contribution of our
study. We extract the data for towns for
each district, and then stack the data for
all the districts of a state, to get all the
towns of a particular state. Similarly
stacking data of all the states, we get all
the towns of India. As the sum of the
total population of the towns matched
the total urban population of India, our
methodology of accumulating the final
data is correct. Thus, we have indepen-
dently created the towns directory (with
only the population data) from the PCA
data set. Then the data were used to
categorise into different size classes, to
arrive at the distribution of urban popu-
lation by size class. This method gives us
the urban population at 377 million for
2011, 286 million for 2001 and 216 mil-
lion for 1991.3
4 Empirical Findings
The next exercise was to get the distri-
bution of the percentage contribution of
each size class to total urban popula-
tion. This exercise was conducted for
1991 and 2001 data as well. Thus, what
we actually got was the required distri-
bution for a span of two decades, the
decades after the economic reforms of
1991. Moreover, the census has a con-
ventional way of defining the intervals
92
Figure 3: Distribution with Disaggregated Intervals (Census PCA Data for 1991, 2001 and 2011)
Percentage contribution of each size class to total urban population
30
25
2011
20
Percentage
15
1991
10
5
2001
0
<5,000
10,000–20,000
30,000–40,000
50,000–60,000
70,000–80,000
90,000–1,00,000
2,00,000–3,00,000
4,00,000–5,00,000
6,00,000–7,00,000
8,00,000–9,00,000
>=10,00,000
PCA = primary census abstract.
of the size class of towns. Typically, decades. The contribution of the largest
they have six classes (Class VI—less than size class towns has gone up from 22.5%
5,000; Class V—5,000–10,000; Class IV in 1991 to 26.3% in 2011. In other words,
—10,000–20,000; Class III—20,000– the size distribution of urban population
50,000; Class II—50,000–1,00,000; since 1991 has remained the same, ques-
Class I—more than 1,00,000). These tioning the hypotheses of exclusionary
intervals are not disaggregated to give us a urbanisation and rapid growth of peri-
better picture, and are mainly defined urban areas.
this way for ease of comparison and in- Using conventional census class-inter-
terpretation with the earlier decades. vals, there is a slight dip in the largest
Figure 3 and Appendix Table 1 (p 92) size class (Class I—more than 1 lakh)
show that the distribution of population bet ween 2001 and 2011, after a jump
by size class of towns has remained from 1991 to 2001. This seems to indi-
roughly the same for the last two cate that all the growth might be taking
Review of Rural Affairs
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Reconsidering Women’s Work in Rural India: – Mohammed Zakaria Siddiqui, Kuntala Lahiri-Dutt,
Analysis of NSSO Data, 2004–05 and 2011–12 Stewart Lockie, Bill Pritchard
Making Smallholder Farming Climate-smart:
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Understanding Open Defecation in Rural India: – Diane Coffey, Aashish Gupta, Payal Hathi, Dean Spears,
Untouchability, Pollution, and Latrine Pits Nikhil Srivastav, Sangita Vyas
Energy, Gender and Social Norms in – Govind Kelkar, Dev Nathan,
Indigenous Rural Societies Patricia Mukhim, Rosemary Dzuvichu
‘Do Only Girls Suffer? We Too!’:
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Transitions in Rice Seed Provisioning in Odisha: – Sushil Pandey, Debdutt Behura,
Constraints and Reform Agenda Maria Lourdes Velasco
For copies write to:
Circulation Manager,
Economic and Political Weekly,
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email: circulation@epw.in
march 4, 2017 vol liI no 9 EPW Economic & Political Weekly
 NOTES

place in the larger-sized class towns, and Figure 4: Distribution with Class I, I.1 and I.2 (Census PCA Data for 1991, 2001 and 2011)
therefore we further disaggregate and Percentage contribution of each size class to total urban population (India)
30
define the intervals above Class I (more 2001 2011
than 1 lakh population) in our own way. 25
We disaggregate the Class I interval
into three intervals: Class I—1 lakh–5 20
1991
lakh; Class I.1—5 lakh–10 lakh and Class

Percentage
I.2—more than 1 million. After doing this 15
and then formulating the distribution
values again, we see that the decline 10
happens in Class I and Class I.1 (between
2001 and 2011), which was the reason 5

behind driving down the percentage

contribution of the largest size class 0
<5,000

5,000–10,000

10,000–20,000

20,000–50,000

50,000–1,00,000

1,00,000–5,00,000

5,00,000–10,00,000

towns when we used the conventional
definition of intervals (that is, Class I—
more than 1 lakh). However, after rede-
fining, we get Class I.2—more than 1
million, as the largest size class, which
we have already discussed.
Figure 4 also shows that with these in-
tervals the distribution has remained
roughly the same for three decades,
with the largest size class contributing
the highest to total urban population.
Therefore, from Figures 3 and 4 we can
see there is no change in the distribution
of urban population across size classes.
Hence, we can question the idea of
exclusionary urbanisation. Further, the
largest towns and cities are the ones that
are the core drivers of urbanisation in
India, thus negating the earlier hypo-
thesis that the peri-urban areas are driv-
ing urbanisation in recent times.
The above analysis shows an uneven
urbanisation process given the metho-
dology we follow. The larger towns and
cities have grown uninterrupted, where-
as the smaller- and medium-sized towns
are slow to graduate to higher size classes.
Statewise analysis: The above analysis
is repeated for 12 major states, account-
ing for 90% of the total population, to
find out if the same pattern holds at the
regional level. Nine out of 11 states (ex-
cluding Kerala) experienced an increase
in the percentage contribution of the
largest size class (over 1 million) over
the last decade, thus further strengthen-
ing the counterargument to exclusion-
ary urbanisation. The argument that the
lower size class intervals are contribu-
ting more to urbanisation and also the
argument that unequal urbanisation
Economic & Political Weekly EPW march 4, 2017
PCA = primary census abstract.
has been a nationwide issue has gained
a strong foothold from these distributions
(Appendix Table 2, p 92).
The findings show that the distribu-
tion of Kerala is more equal than other
states considered here. Kundu (2011a:
11), while building up the evidence for
exclusionary urbanisation, mentions that
“Maharashtra, whose percentage of urban
population is over 40 has recorded a
significant reduction in its population
growth.” However, our findings show
that in Maharashtra, the contribution of
the largest size class interval to total ur-
ban population of Maharashtra has in-
creased over time, accounting for almost
55% of its urban population in 2011, thus
raising a strong objection to the conjec-
ture of exclusionary urbanisation.
5 Conclusions
Between 2001 and 2011, the share of
urban population in the total rose to
31.2%, from 27.8%. This happened when
the national economic growth accelera-
ted to over 7% per annum, with services
contributing over one-half of domestic
output. These trends gave rise to a few
hypotheses about the emerging urbani-
sation pattern, namely, exclusionary
urbanisation, peri-urbanisation, grow-
ing commuting and short-term migra-
tion. These propositions imply that the
distribution of urban population across
size class of towns and cities is now very
different from the past. Is it really so?
This article investigates the validity of
vol liI no 9
>=10,00,000
these propositions using population census
data for 1991, 2001 and 2011. As the
urbanisation table for the 2011 Census is
not yet published, we have recreated it
from the district-wise primary census
abstract.
This study does not show any percep-
tible change in the distribution of urban
population by size of towns in the last
two decades. Cities with more than 1
million population continue to dominate
the distribution with over 26% (of the
total urban population). If anything, the
share of the largest-sized cities in the
urban population has increased by 3.8%
since 1991, from 22.5% in 1991 to 26.3%
in 2011, the highest across all size class-
es. This result holds true for nine out of
the 12 most urbanised states, accounting
for more than 90% of the total popula-
tion of India (Appendix Table 2).
The results by our methodology show
that the pattern of urbanisation—with
the dominance of large-sized cities—in
the last decade, despite some speeding
up, remains the same as before.
This article reports a basic statistical
exercise that questions the recent litera-
ture and hypotheses on India’s urbanisa-
tion pattern, using data for the last three
censuses over the last two decades. The
distribution of total urban population
across different size class intervals re-
mained roughly the same and unequal
over 1991–2011. There has been no signifi-
cant change, with the largest size class
contributing the most to total urban
93
NOTES

population and the share of smaller size whereas from our analysis we get 28 million. Registrar General, India (2008): “Census of India—
This is the exact difference that is reflected in Circular No 2: Rural-Urban Classification for the
classes remaining roughly the same, total urban population for all-India, as it 2011 Census,” 23 July, http://censusgujarat.
thus invalidating the argument that the matched for all other states. Similarly, for 2001, gov.in/Downloads/Circulars/RGI-Circular-02.
the difference in total urban population in PCA pdf.
peri-urban areas (essentially the smaller data and what we obtained was only 705, Shah, A M (2012): “The Village in the City, the City
classes) are contributing more to urbani- which was from the mismatch of the urban in the Village,” Economic & Political Weekly,
population of Andhra Pradesh. However, it Vol 47, No 52.
sation, and questioning the much talked matched for all other states. These data incon- Sharma, A (2014): “Exclusionary Urbanisation and
about concept of exclusionary urbanisa- gruities raise questions about the data accu- Changing Migration Pattern in India: Is Com-
racy and quality of the census to some extent. muting by Workers a Feasible Alternative?”
tion. The skewed distribution of urban
However, we go ahead with our analysis with Working Paper, Indira Gandhi Institute of
population has persisted. This is disturb- these numbers. Development Research.
ing, as it depicts the sluggish and unequal Shaw, A (2005): “Peri-Urban Interface of Indian
Cities: Growth, Governance and Local Initia-
process of urbanisation, and the fact References tives,” Economic & Political Weekly, Vol 40,
that this process has gone on for almost Acharya, S (2014): “Understanding the Urban No 2.
Challenge,” Economic & Political Weekly, Vol 49, Sita, K and R B Bhagat (2005): “Population Change
50 years now, thus calling into question No 42. and Economic Restructuring in Indian Metro-
years of planning, policies, commissions Census of India (2011): “Provisional Population politan Cities: A Study of Mumbai,” Indian
and debates. Given this framework, sub- Totals: Urban Agglomerations and Cities,” Cities in Transition, Annapurna Shaw (ed),
http://censusindia.gov.in/2011-prov-results/ Orient Longman, Hyderabad.
sequent policy actions should be taken paper2/data_files/India2/1.%20Data%20High- UN, Department of Economic and Social Affairs,
with a great deal of sensibility and light.pdf. Population Division (2014): World Urbaniza-
Chandrasekhar, A and A Sharma (2014): “Urbani- tion Prospects.
should be driven by strong research that sation and Spatial Patterns of Internal Migra-
targets the core of the problem. More- tion in India,” Working Paper, Indira Gandhi Appendix Table 1: Percentage Contribution of
Institute of Development Research. Each Size Class to Total Urban Population (India)
over, policies such as the creation of 100 (%)
Guin, D and D N Das (2015): “New Census Towns in
smart cities will only make the distribu- West Bengal: ‘Census Activism’ or Sectoral Size Class 1991 2001 2011
tion of urban population and develop- Diversification?” Economic & Political Weekly, <5,000 1.04 0.31 0.54
Vol 50, No 14.
ment more top-heavy, adding to the ex- Kundu, A (1983): “Theories of City Size Distri-
5,000–10,000 3.87 2.83 4.24
isting problems. It is imperative now for bution and Indian Urban Structure: A Reap- 10,000–20,000 10.23 8.00 8.49
praisal,” Economic & Political Weekly, Vol 18, 20,000–30,000 7.44 6.54 7.00
urban policymakers to look into these No 31.
30,000–40,000 5.45 4.79 4.88
issues and develop and implement plans — (2003): “Urbanisation and Urban Governance:
Search for a Perspective beyond Neo-Liberal- 40,000–50,000 3.74 3.53 3.65
that will address the inequality in the
ism,” Economic & Political Weekly, Vol 38, 50,000–60,000 3.74 3.43 3.41
process of urbanisation and lead us to a No 29.
60,000–70,000 2.99 2.35 2.32
more balanced and inclusive form of — (2011a): “Politics and Economics of Urban
Growth,” Economic & Political Weekly, Vol 46, 70,000–80,000 3.12 2.20 1.91
development. No 20. 80,000–90,000 2.19 2.14 1.82
— (2011b): “Method in Madness: Urban Data from 90,000–1,00,000 1.58 2.15 1.71
2011 Census,” Economic & Political Weekly,
Notes Vol 46, No 40. 1,00,000–2,00,000 11.75 12.30 10.50
1 The United Nations defines settlements with — (2011c): “Trends and Processes of Urbanisation 2,00,000–3,00,000 4.12 6.51 6.39
over 20,000 population as urban and those in India,” Human Settlements Group, Inter- 3,00,000–4,00,000 3.00 4.20 4.24
with more than 1,00,000 population as cities. national Institute for Environment and Devel-
2 Towns were declassified during 1961–81, as
4,00,000–5,00,000 3.62 3.71 3.52
opment (IIED), Population and Development
there were changes in the definition of “ur- Branch, United Nations Population Fund 5,00,000–6,00,000 2.80 2.27 2.74
ban.” Towns that failed to meet the new defini- (UNFPA). 6,00,000–7,00,000 1.80 2.30 2.02
tion or criteria were declassified. Pant, C and R Mohan (1982): “Morphology of
7,00,000–8,00,000 2.06 1.81 0.99
3 Our method had a minor shortcoming: adding Urbanisation in India: Some Results from 1981
up the total population of all the towns of a Census,” Economic & Political Weekly, Vol 17, 8,00,000–9,00,000 1.16 2.66 1.83
particular state did not match with the total ur- No 39. 9,00,000–10,00,000 1.73 2.32 1.50
ban population of that state. For example, the Pradhan, K C (2013): “New Census Towns of India: >=10,00,000 22.55 23.65 26.29
total urban population for Uttar Pradesh in Unacknowledged Urbanisation,” Economic &
1991 is mentioned in PCA data at 27 million, Political Weekly, Vol 48, No 36. Total 100 100 100

Appendix Table 2: Percentage Contribution of Each Size Class to Total State Urban Population (%)
Size Class <5,000 5,000–10,000 10,000–20,000 20,000–50,000 50,000–1,00,000 1,00,000–5,00,000 5,00,000–10,00,000 >=10,00,000
Years 1991 2001 2011 1991 2001 2011 1991 2001 2011 1991 2001 2011 1991 2001 2011 1991 2001 2011 1991 2001 2011 1991 2001 2011
Punjab 1.6 0.3 0.8 1.9 2.6 3.4 11.1 9.8 8.5 12.1 13.1 13.2 21.3 15.9 17.1 14.3 20.6 22.1 20.3 8.6 8.3 17.4 29.0 26.7
Rajasthan 0.2 0.2 0.3 2.3 1.2 2.1 13.0 7.2 6.8 21.7 20.8 19.0 13.3 14.7 10.5 23.0 26.1 25.3 12.0 15.8 11.4 14.5 14.2 24.7
Uttar Pradesh 0.8 0.1 0.2 5.9 3.0 3.7 12.9 10.8 9.6 15.6 15.6 15.7 12.3 10.7 9.7 21.7 22.6 18.8 18.5 10.5 14.2 12.4 26.7 28.1
Bihar 0.5 0.1 0.5 2.6 1.8 4.7 10.4 7.0 6.0 24.1 20.8 19.6 23.2 14.5 12.4 25.9 35.2 38.0 13.4 9.5 3.5 0.0 11.1 15.3
West Bengal 1.1 0.7 1.3 5.1 4.3 10.5 7.2 5.1 9.3 9.9 7.5 8.1 12.9 8.7 8.8 35.2 48.9 38.9 5.1 0.0 3.9 23.5 24.9 19.2
Madhya Pradesh 1.6 0.3 0.2 7.2 4.3 4.5 17.6 13.4 12.5 14.6 17.2 16.6 12.6 11.9 10.7 23.1 23.3 23.5 9.3 11.2 2.6 14.1 18.6 29.5
Gujarat 1.6 0.3 0.3 4.0 1.1 1.9 10.8 4.6 5.8 12.8 13.2 10.7 15.2 13.0 9.3 13.8 20.4 16.5 3.9 2.7 4.7 38.0 44.9 51.0
Maharashtra 0.2 0.1 0.2 1.2 0.9 1.6 5.1 3.6 3.8 11.6 10.2 10.4 6.9 7.6 7.4 18.3 16.3 11.7 10.3 10.0 10.3 46.3 51.4 54.7
Andhra Pradesh 0.4 0.1 0.2 1.3 0.9 1.7 5.0 2.7 3.9 19.3 10.4 11.9 16.6 17.2 16.5 32.7 37.5 38.4 8.1 13.8 9.8 16.6 17.4 17.6
Karnataka 2.7 0.2 0.2 5.4 1.6 2.5 11.1 5.4 5.3 23.0 18.1 13.9 13.1 10.6 10.5 21.0 31.4 21.6 4.7 8.8 10.2 19.1 24.0 35.7
Kerala 0.7 0.1 0.2 2.2 1.6 3.0 12.6 6.9 14.7 44.1 28.1 50.2 15.5 20.0 11.9 11.0 25.4 11.8 14.0 17.9 8.2 0.0 0.0 0.0
Tamil Nadu 0.9 0.2 0.5 3.7 6.2 6.5 10.7 17.4 16.7 17.3 19.3 20.9 17.0 14.4 15.8 21.1 14.7 15.6 9.2 12.0 4.8 20.1 15.8 19.2

94 march 4, 2017 vol liI no 9 EPW Economic & Political Weekly

 CURRENT STATISTICS EPW Research Foundation

Wholesale Price Index Foreign Trade–Merchandise

The wholesale price index increased to a 30-month high of 5.3% in January 2017
compared to -1.1% in January 2016 and 3.4% a month ago. The index for primary
articles decreased by 1.3% in January 2017 compared to 4.3% in January 2016,
however, higher than 0.3% registered in December 2016. The index for food
articles declined to -0.6% in January 2017 from 6.5%, a year ago. The index for
fuel and power increased substantially by 18.1% in January 2017 against -9.9%
in January 2016. The index for manufactured products rose by 4% compared to
the fall of -1.2%, in the same period last year.
The merchandise trade deficit widened to $9.8 billion (bn) in January 2017 compared
to $7.7 bn, a year ago. Exports increased by 4.3% to $22.1 bn and imports by 10.7% to
$32 bn in January 2017, from $21.2 bn and $29 bn, respectively, in January 2016. Oil
imports rose by 61.1% to $8.1 bn in January 2017 against $5.1 bn, last year and non-oil
imports rose by 0.01% to $23.8 bn. During April–January 2016–17, the cumulative trade
deficit narrowed to $86.4 bn from $107.7 bn in the same period last year. Cumulative
exports rose by 1.1% to $220.9 bn while imports declined by (-)5.8% to $307.3 bn
during April–January 2016–17, compared to $218.5 bn and $326.3 bn, respectively.

Consumer Price Index Index of Industrial Production

The CPI inflation rate eased to 3.2% in January 2017 compared to 5.7% in January
2016 and 3.4% in December 2016. Consumer food price inflation slowed to 0.5% in
January 2017 from 6.9% in January 2016 and 1.4% in December 2016. The CPI-
rural inflation rate stood at 3.4% in January 2017 compared to 6.5% in January
2016 and 3.8% in December 2016 and the CPI-urban inflation rate at 2.9% from
4.8%, a year ago and 2.9%, a month ago. As per the Labour Bureau data, the CPI
inflation rate for agricultural labourers and industrial workers decreased to 2.5%
and 1.9%, respectively, in January 2017 from 5.6% and 5.9%, a year ago.
The year-on-year growth rate of IIP declined to -0.4% in December 2016 from -0.9% a year
ago and 5.7% in November 2016. Manufacturing sector growth declined to -2.0% in
December 2016 against 1.9% in December 2015 and 5.5%, a month ago. Mining sector
growth increased to 5.2% y-o-y compared to 2.8% last year, while electricity generation rose
to 6.3% from 3.2%, a year ago. Capital goods growth contracted by (-)3% in December 2016
from a substantial 15% growth in November 2016, however, the fall was less than -18.6%
recorded in December 2015. Growth in consumer durable goods and non-durable goods
fell by (-)10.3% and (-)5%, this time compared to 16.6% and -2.7%, in December 2015.

Movement of WPI Inflation April 2015–January 2017 Merchandise Trade January 2017
January 2017 Over Month Over Year (April–January)
Year-on-Year in % ($ bn) (%) (%) (2016–17 over 2015–16) (%)
Exports 22.1 -7.4 4.3 1.1
6
5.3% Imports 32.0 -6.7 10.7 -5.8
Trade deficit 9.8 -5.1 28.3 19.8
3
Data is provisional. Source: Ministry of Commerce and Industry.
2016–17
0
2015–16 -1.1% Components of Trade January 2017 and January 2016
-3 30 $23.8 billion
$21.2 billion Non-oil Imports $23.8 billion
Exports $22.1 billion
-6
Apr May Jun Jul Aug Sep Oct Nov Dec* Jan*

* Data (2016) is provisional. $5.1 billion $8.1 billion

Oil Imports

Trends in WPI and Its Components January 2017* (%)

Financial Year (Averages)
Weights Over Month Over Year 2013–14 2014–15 2015–16 $7.7 billion
Trade Deficit $9.8 billion
All commodities 100 1.0 5.3 6.0 2.0 -2.5 -15
Primary articles 20.1 -0.2 1.3 9.9 3.0 0.3
Food articles 14.3 -1.1 -0.6 12.9 6.1 3.4 2016 JANUARY 2017 JANUARY
Fuel and power 14.9 4.7 18.1 10.3 -0.9 -11.7
Manufactured products 65.0 0.5 4.0 3.0 2.4 -1.1 Oil refers to crude petroleum and petroleum products, while non-oil refers to all other commodities.
* Data is provisional; Base: 2004–05=100; Source: Ministry of Commerce and Industry.
Movement of IIP Growth January–December 2016
Year-on-Year in %
Movement of CPI Inflation January 2016–January 2017
12
Year-on-Year in %
2015
9
6
Consumer Food
-0.4%
6 0

CPI 5.1%
2016 -0.9%
-6
Miscellaneous 3.2% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec *
3
* December 2016 are quick estimates; Base: 2004–05=100.

0.5% Industrial Growth: Sector-wise December 2016* (%)

0 Weights Over Over Year Financial Year (Avgs)
Jan-16 F M A M J J A S O N Dec Jan* Month 2014–15 2015–16
2016 2017
* Data is provisional. General index 100 4.4 -0.4 2.8 2.4
Source: Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation, Base: 2012=100. Mining 14.2 6.5 5.2 1.5 2.2
Manufacturing 75.5 4.5 -2.0 2.3 2.0
CPI: Rural and Urban January 2017* (%) Electricity 10.3 1.8 6.3 8.4 5.6
Latest Over Over Financial Year (Avgs)
Month Index Month Year 2014–15 2015–16 Industrial Growth: Use-based
Basic goods 45.7 5.7 5.3 7.0 3.6
Rural (2012=100) 132.4 -0.3 3.4 6.2 5.6
Capital goods 8.8 -2.8 -3.0 6.4 -2.9
Urban (2012=100) 127.8 0.2 2.9 5.7 4.1
Intermediate goods 15.7 4.2 -1.2 1.7 2.5
CPI: Occupation-wise Consumer goods 29.8 5.5 -6.8 -3.4 3.0
Industrial workers (2001=100) 274.0 -0.4 1.9 6.3 5.6 Consumer durables 8.5 -12.1 -10.3 -12.6 11.3
Agricultural labourers (1986–87=100) 870.0 -0.7 2.5 6.6 4.4 Consumer non-durables 21.3 17.2 -5.0 2.8 -1.8
* Provisional; Source: CSO (rural and urban), Labour Bureau (IW and AL). * December 2016 are quick estimates; Base: 2004–05=100; Source: Central Statistics Office.
Comprehensive current economic statistics with regular weekly updates are available at: http://www.epwrf.in/currentstat.aspx.

Economic & Political Weekly EPW MARCH 4, 2017 vol lII no 9 95

 CURRENT STATISTICS EPW Research Foundation
India’s Quarterly Estimates of Final Expenditures on GDP
2014–15 2015–16 2016–17
` crore | at 2011–12 Prices Q1 Q2 Q3 Q1 Q2 Q3 Q1 Q2 Q3
Private final consumption expenditure 1424854 (9.6) 1427794 (9.7) 1513178 (2.7) 1495290 (4.9) 1522765 (6.7) 1615790 (6.8) 1602632 (7.2) 1600012 (5.1) 1778353 (10.1)
Government final consumption expenditure 286020 (5.9) 313839 (12.3) 254581 (29.5) 287477 (0.5) 325987 (3.9) 264070 (3.7) 332106 (15.5) 375626 (15.2) 316595 (19.9)
Gross fixed capital formation 812203 (5.7) 808473 (-0.3) 823732 (1.3) 889781 (9.6) 908449 (12.4) 849912 (3.2) 870650 (-2.2) 860150 (-5.3) 879763 (3.5)
Change in stocks 61248 (53.8) 60666 (51.1) 56288 (44.8) 64888 (5.9) 65312 (7.7) 61988 (10.1) 76970 (18.6) 76013 (16.4) 73070 (17.9)
Valuables 46596 (26.4) 41514 (9.0) 40404 (20.5) 39168 (-15.9) 47795 (15.1) 45574 (12.8) 27049 (-30.9) 31123 (-34.9) 28079 (-38.4)
Net trade (Export–import) -41023 -55579 -45759 -41475 -58298 -33387 -12292 -14857 -41201
Exports 621494 (11.7) 626487 (1.2) 636698 (2.0) 586330 (-5.7) 599544 (-4.3) 579567 (-9.0) 598705 (2.1) 594123 (-0.9) 599231 (3.4)
Less imports 662517 (-0.5) 682066 (4.7) 682457 (5.7) 627805 (-5.2) 657842 (-3.6) 612954 (-10.2) 610997 (-2.7) 608980 (-7.4) 640432 (4.5)
Discrepancies -55908 -40945 4845 -3432 -42752 26813 30645 45378 -6767
Gross domestic product (GDP) 2533991 (7.4) 2555761 (7.8) 2647270 (6.1) 2731697 (7.8) 2769256 (8.4) 2830760 (6.9) 2927761 (7.2) 2973444 (7.4) 3027893 (7.0)

India’s Overall Balance of Payments (Net): Quarterly

2015–16 ($ mn) 2016–17 ($ mn) 2015–16 (` bn) 2016–17 (` bn)
Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2
Current account -6132 -8559 -7121 -338 -299 -3450 -389 [-1.2] -556 [-1.7] -469 [-1.4] -23 [-0.1] -20 [-0.1] -231 [-0.6]
Merchandise -34175 -37173 -33975 -24755 -23833 -25642 -2169 -2415 -2240 -1671 -1594 -1717
Invisibles 28043 28614 26854 24417 23535 22192 1780 1859 1770 1648 1574 1486
Services 17751 17835 18013 16077 15769 16273 1127 1159 1187 1085 1055 1090
of which: Software services 17512 18058 18556 17328 17569 17699 1111 1173 1223 1170 1175 1185
Transfers 16153 16263 15250 14961 13965 13865 1025 1057 1005 1010 934 928
of which: Private 16267 16421 15305 15146 14161 14048 1033 1067 1009 1022 947 941
Income -5861 -5484 -6408 -6621 -6200 -7946 -372 -356 -422 -447 -415 -532
Capital account 18637 8121 10915 3455 7104 12706 1183 [3.7] 528 [1.6] 720 [2.1] 233 [0.6] 475 [1.4] 851 [2.3]
of which: Foreign investment 10226 3150 11256 7259 6192 23246 649 205 742 490 414 1557
Overall balance 11430 -856 4056 3274 6969 8512 725 [2.3] -56 [-0.2] 267 [0.8] 221 [0.6] 466 [1.3] 570 [1.6]
Figures in square brackets are percentage to GDP.

Foreign Exchange Reserves Variation

17 February 19 February 31 March Over Over Financial Year So Far Financial Year
Excluding gold but including revaluation effects 2017 2016 2016 Month Year 2015–16 2016–17 2011–12 2012–13 2013–14 2014–15 2015–16
` crore 2286360 2244760 2229020 -26540 41600 234360 57340 108086 82800 251570 322660 218620
$ mn 341163 330071 337605 1287 11093 8762 3558 -14361 -485 16769 40486 16297

Monetary Aggregates Variation

Outstanding Over Month Over Year Financial Year So Far Financial Year
` crore 2017 2015–16 2016–17 2013–14 2014–15 2015–16
Money Supply (M3) as on 3 February 12299340 154100 (1.3) 770690 (6.7) 978480 (9.3) 681720 (5.9) 1127560 (13.4) 1032790 (10.9) 1067450 (10.1)
Components
Currency with public 980300 169070 (20.8) -556460 (-36.2) 150570 (10.9) -616950 (-38.6) 104760 (9.2) 140370 (11.3) 211060 (15.2)
Demand deposits 1186700 -8000 (-0.7) 246900 (26.3) 48160 (5.4) 196870 (19.9) 58760 (7.8) 79660 (9.8) 98190 (11.0)
Time deposits 10116750 -7010 (-0.1) 1077300 (11.9) 781680 (9.5) 1101670 (12.2) 965330 (14.9) 800150 (10.7) 757310 (9.2)
Other deposits with RBI 15590 40 (0.3) 2940 (23.2) -1940 (-13.3) 140 (0.9) -1270 (-39.2) 12620 (640.6) 860 (5.9)
Sources
Net bank credit to government 4065920 204890 (5.3) 646950 (18.9) 411570 (13.7) 827440 (25.6) 335850 (12.4) -37470 (-1.2) 231080 (7.7)
Bank credit to commercial sector 8040460 79550 (1.0) 364960 (4.8) 625780 (8.9) 237390 (3.0) 777430 (13.7) 604430 (9.4) 753350 (10.7)
Net foreign exchange assets 2636080 7270 (0.3) 169020 (6.9) 216410 (9.6) 102350 (4.0) 287280 (17.6) 326710 (17.0) 283080 (12.6)
Banking sector’s net non-monetary liabilities 2467730 137600 (5.9) 413340 (20.1) 277370 (15.6) 488170 (24.7) 275010 (16.8) -137050 (-7.2) 202540 (11.4)
Reserve Money as on 17 February 2017 1606020 140030 (9.6) -457710 (-22.2) 135270 (7.0) -574720 (-26.4) 217860 (14.4) 195710 (11.3) 252280 (13.1)
Components
Currency in circulation 1131410 143930 (14.6) -492710 (-30.3) 175800 (12.1) -532060 (-32.0) 110090 (9.2) 147250 (11.3) 215150 (14.9)
Bankers’ deposits with RBI 458980 -4000 (-0.9) 46490 (11.3) -53070 (-11.4) -42850 (-8.5) 109020 (34.0) 35860 (8.3) 36270 (7.8)
Other deposits with RBI 15630 100 (0.6) -11500 (-42.4) 12540 (85.9) 180 (1.2) -1280 (-39.5) 12630 (644.4) 860 (5.9)
Sources
Net RBI credit to Government 492170 353090 (253.9) 47690 (10.7) 79950 (21.9) 67180 (15.8) 108120 (18.3) -334170 (-47.8) 60460 (16.6)
of which: Centre 491300 354100 (258.1) 49270 (11.1) 81000 (22.4) 66740 (15.7) 107150 (18.1) -336620 (-48.3) 63530 (17.6)
RBI credit to banks & commercial sector -425580 -219450 (106.5) -614220 (-325.6) -13870 (-6.8) -730120 (-239.7) 14070 (32.4) 145030 (0.0) 102030 (0.0)
Net foreign exchange assets of RBI 2434110 -22580 (-0.9) 47530 (2.0) 259310 (12.2) 50640 (2.1) 244460 (15.7) 324750 (18.0) 256200 (12.0)
Govt’s currency liabilities to the public 24620 0 (0.0) 2900 (13.4) 2290 (11.8) 2710 (12.4) 2000 (13.0) 2090 (12.1) 2480 (12.8)
Net non-monetary liabilities of RBI 919300 -28970 (-3.1) -58390 (-6.0) 192410 (24.5) -34870 (-3.7) 150810 (21.8) -58040 (-6.9) 168890 (21.5)

Scheduled Commercial Banks’ Indicators ( ` crore) Variation

Outstanding Over Month Over Year Financial Year So Far Financial Year
(As on 3 February 2017) 2017 2015–16 2016–17 2013–14 2014–15 2015–16
Aggregate deposits 10562430 -21740 (-0.2) 1252800 (13.5) 776340 (9.1) 1235140 (13.2) 955110 (14.1) 827730 (10.7) 794000 (9.3)
Demand 1072490 -8100 (-0.7) 231680 (27.6) 46780 (5.9) 183490 (20.6) 51620 (7.8) 80110 (11.2) 94970 (12.0)
Time 9489940 -13650 (-0.1) 1021120 (12.1) 729560 (9.4) 1051650 (12.5) 903480 (14.8) 747620 (10.7) 699030 (9.0)
Cash in hand 58460 -16420 (-21.9) 1650 (2.9) 3450 (6.5) 1020 (1.8) 5380 (13.3) 7490 (16.3) 4080 (7.6)
Balance with RBI 437680 7250 (1.7) 47920 (12.3) 16690 (4.5) 50240 (13.0) 34080 (12.1) 56730 (17.9) 14370 (3.9)
Investments 3475280 -159910 (-4.4) 725670 (26.4) 257790 (10.3) 849770 (32.4) 206720 (10.3) 279000 (12.6) 133690 (5.4)
of which: Government securities 3471160 -162530 (-4.5) 723460 (26.3) 257940 (10.4) 847220 (32.3) 207540 (10.4) 278570 (12.6) 134180 (5.4)
Bank credit 7478990 65570 (0.9) 353540 (5.0) 589040 (9.0) 229380 (3.2) 733640 (13.9) 542310 (9.0) 713200 (10.9)
of which: Non-food credit 7371640 64950 (0.9) 354880 (5.1) 574760 (8.9) 227280 (3.2) 731610 (14.2) 546350 (9.3) 702360 (10.9)

Capital Markets 23 February Month Year Financial Year So Far 2015–16 End of Financial Year
2017 Ago Ago Trough Peak Trough Peak 2013–14 2014–15 2015–16
S&P BSE SENSEX (Base: 1978–79=100) 28893 (23.4) 27117 23410 (-19.2) 24674 29045 22952 29044 22386 (18.8) 27957 (24.9) 25342 (-9.4)
S&P BSE-100 (Base: 1983–84=100) 9240 (28.4) 8663 7193 (-18.7) 7656 9240 7051 8980 6707 (18.1) 8607 (28.3) 7835 (-9.0)
S&P BSE-200 (1989–90=100) 3875 (29.3) 3631 2997 (-17.2) 3193 3875 2938 3691 2681 (17.2) 3538 (31.9) 3259 (-7.9)
CNX Nifty (Base: 3 Nov 1995=1000) 8940 (25.7) 8392 7110 (-18.8) 7546 8953 6971 8834 6704 (18.0) 8491 (26.7) 7738 (-8.9)
Net FII Investment in equities ($ Million)* 169797 (4.1) 168103 163148 (-1.4) - - - - 149745 (9.9) 168116 (12.3) 166107 (-1.2)
* = Cumulative total since November 1992 until period end | Figures in brackets are percentage variations over the specified or over the comparable period of the previous year | (-) = not relevant | - = not available | NS = new series | PE = provisional estimates
Comprehensive current economic statistics with regular weekly updates are available at: http://www.epwrf.in/currentstat.aspx.

96 MARCH 4, 2017 vol lII no 9 EPW Economic & Political Weekly

APPOINTMENTS/PROGRAMMES/ANNOUNCEMENTS ADVERTISEMENTS

GIRl INSTITUTE OF DEVELOPMENT STUDIES

LUCKNOW
Ten-day Research Methodology Programme for
Ph.D. Students in Social Science Research Sardar Patel Institute of Economic
(31st March to 09th April, 2017) and Social Research,
Thaltej Road, Near Doordarshan,
Call for Participation Ahmedabad-380054
Giri Institute of Development Studies, Lucknow, invites 10-day Research Methodology Course
applications from Ph.D. students and teachers pursuing for Ph.D. Students in Social Sciences
Ph.D. in Social Science subject for participating in the Ten- 24 April to 3 May, 2017
day Research Methodology Course for Ph.D. Students
The Institute is organizing ICSSR sponsored 10-day
in Social Science Research from 31 March to 09
Research Methodology Course for Ph.D. students from
April, 2017 sponsored by Indian Council of Social Science
Social Science disciplines during 24 April–3 May 2017.
Research, New Delhi. Applications are invited on or
Visit our website www.spiesr.ac.in for prescribed
before 15 March, 2017. Lodging, boarding and travel will
application form and other details. Applications may
be arranged by the Institute. Applications should be sent
be sent to Dr. Subrata Dutta, Course Director, either by
to The Director, Giri Institute of Development Studies,
e-mail: sd.spiesr@gmail.com, or to the above address by
Sector ‘0’, Aliganj Housing Scheme, Lucknow-226024,
registered post.
Uttar Pradesh.
Outstation candidates will be given to and fro actual
For further details visit to our website: www.gids.org.in or
journey fare (sleeper class / bus) travelled by the shortest
contact to Prof. B.K. Bajpai; E-mail: brijbajpai@gmail.com
route, along with free boarding and lodging at the Institute.
(M) +91-9839300811/gids.general@gmail.com.
No course fee. The last date for submitting application is
Director 27 March, 2017.

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Economic & Political Weekly EPW March 4, 2017 vol liI no 9 97

APPOINTMENTS/PROGRAMMES/ANNOUNCEMENTS ADVERTISEMENTS

11th Summer Workshop on Quantitative Methods in Political Science

Lokniti - Programme for Comparative Democracy, Centre for the Study of Developing Societies (CSDS), Delhi, invites applications for the
Summer Workshop on ‘Analyzing Quantitative Data on Indian Politics’ to be held in Bengaluru from Monday, 10th July 2017 to Saturday, 22nd
July 2017.
This is the 11th Summer School being organized by Lokniti-CSDS. Some of the leading scholars working on empirical methods in Political Science
have been involved in designing this summer school. In this Summer School, there will be special emphasis on understanding of quantitative data
on Indian politics. We plan to bring together a group of political scientists with the aim of providing them an opportunity to improve their skills
in quantitative analysis. The selected participants will be given a set of readings before they come to attend the workshop and will be expected to
attend lectures and practical data analysis sessions.
We invite the following categories of candidates to apply for this workshop (preference will be given to young researchers):
a. Teachers of Political Science in colleges and universities who are working on empirical subjects and would benefit from further training.
b. Research students of Political Science who are working on empirical themes for their M. Phil. or Ph. D. dissertations and can benefit from
further training.
c. Any other person (including those from outside Political Science and outside academia) who are interested in making sense of politics by
analyzing quantitative data.
Please send your detailed CV with a statement of research interest (those already registered for M. Phil or Ph.D should clearly mention the topic
of dissertation along with a brief summary of the objectives and methodologies used) in about 500 words. Applicants should also go through the
questionnaire used for the National Election Study 2014 (http://www.lokniti.org/pdf/NES-POST-POLL-2014.pdf) and submit a 500 word
Note on a research question that interests them based on this questionnaire. Selection for the workshop will be made on the basis of these two
write-ups submitted by candidates. The last date for receiving the application is Monday, 10th April 2017.
Please note that this is a full time residential training course and candidates admitted to the workshop are expected to stay at the Institute and
engage in full time work on all days during this period.
Participants need to bear their travel expenses from their place of residence to Bengaluru and back. The host institution will take care of the
accommodation and food for all the participants for the entire duration of the workshop.
Please send your applications by email to summerschool@csds.in or by snail mail to:
Director, Lokniti, Centre for the Study of Developing Societies
29 Rajpur Road, Civil Lines,
Delhi 110 054

Two-Weeks Capacity Building Programme on

Industrialization, Corporate Sector And Development
May 22 to June 07, 2017
The Institute for Studies in Industrial Development (ISID), New Delhi offers a Two-weeks Capacity Building Programme on
“Industrialization, Corporate Sector and Development” for faculty of Indian Universities and colleges from May 22 to June
07, 2017. The programme is sponsored by the Indian Council of Social Science Research (ICSSR). The programme is particularly
designed for faculty and post-doctoral fellows interested in related area and teaching within the broad disciplines of economics,
sociology, geography, anthropology, political science, commerce & management and development studies. The objective of the
proposed programme is to familiarise teachers with the recent developments in the Indian economy with special focus on issues and
debates relating to industrialization and development.
The programme is designed in an interdisciplinary approach in a workshop format enabling participants to discuss and debate relevant
literature on industrialisation, critically evaluate recent trends and handle datasets, techniques and methods used in contemporary
research on the subject. The content of the programme includes five broad themes: i) industry and market structure; ii) industrial
finance, corporate sector and FDI; iii) trade, technology and global integration; iv) political economy of industrialisation; and
v) research methodology, datasets and techniques.
Interested candidates participating in the programme may send their applications (downloadable from ISID website: http://isid.org.
in) in prescribed format along with a write-up of about 500 words on their area of research interest to the Programme Co-ordinator
through e-mail to capprog@isid.org.in on or before 16th April 2017.
To and fro AC 3 Tier Train fare by the shortest route will be reimbursed to the selected candidates from place of study/work. Selected
candidates will be intimated by 23rd April 2017. Further details and programme updates are available at: http://isid.org.in/capprog.html
Faculty and Post-doctoral scholars who have applied in response to earlier advertisement in
Economic and Political Weekly (EPW) dated January 18, 2017 need not apply again but they
have to convey their interest to participate in the Programme as per the revised time schedule.

Institute for Studies in Industrial Development

4, Institutional Area Phase II, Vasant Kunj, New Delhi - 110070
Phone: +91 11 2676 4600, Fax: +91 11 2612 2448

98 March 4, 2017 vol liI no 9 EPW Economic & Political Weekly

 Registered Office: C/O: Institute for Human Development, 3rd Floor, NIDM Building,
IIPA Campus, I P Estate, New Delhi: 110002
12th Annual Conference of Knowledge Forum
November 10-12, 2017
(In partnership with Tata Trusts)
Hosted by: Nabakrushna Choudhury Centre for Development Studies (NCDS)
Bhubaneswar, Odisha
Conference Theme:
Changing Paradigms in Technology, Trade and Development

Themes for discussion:

I. Changing Nature of FDI
• The declining share of the manufacturing sector in FDI flows.
• Consequences of several Asian (host country) firms enjoying higher productivity levels compared to
the US and European MNEs.
• The incidence of some FDI inflows being dominated by flows from tax heavens.
• Outsourcing of different stages of product development like R&D, designs, fabrication of components
and assembling of components to different firms in different countries.
II. Globalisation of R&D
• Determinants of FDI in R&D
III. Changing Paradigms in Science and Technology
Organised by National Institute of Science Education and Research (NISER), Odisha
IV. Trade
• Intra-Firm Trade
• Trade in Services
V. Development Strategies
• Changing patterns of FDI, technology creation and development, location of R&D units, and trade
in goods and services would influence development strategies of countries.
• Adoption of an environmentally benign, inclusive and specific target oriented approach.
Conference Format
• The conference will have an introductory session followed by Competitive Sessions.
• In the competitive sessions all the papers will be refereed before accepted for presentations.

Last date for submission of title of papers and abstracts: May 30, 2017
Last date for full paper submission: July 30, 2017
Send the abstracts and paper to: fgksindia@gmail.com

N. S. Siddharthan & K. Narayanan

Published on Saturday, March 4, 2017 Regd No MCW-238/2015-17
WPP Licence No MR/Tech/WPP-197/West/2017. Licensed to post without prepayment. Posted at Patrika Channel
Sorting Office, Mumbai-1 on every Tuesday-Wednesday. Regd. with the RNI – No 14089/66

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