Kautilya: Sen Hijacked

India Today
November 2, 1998

KAUTILYA
Sen Hijacked

Nobel Amartya's abduction by the anti-reform brigade.

Jairam Ramesh

Amartya Sen is a most deserving winner of this year's Nobel Prize for economics. He is a rare polymath, an uncommonly inspiring teacher, a versatile intellectual colossus and an epitome of humility and accessibility. He has defied neat categorisations. But this has not stopped the anti-reforms lobby in India from appropriating him as its patron saint.

This is amusing to say the least. In the 80s, when Sen produced his book on the Bengal Famine of 1943, leading intellectuals of Calcutta derided him. They complained that he was stating the obvious -- no money, no food; bad distribution, higher prices. At the time, the Indian leftists were incensed with Sen for his attack on Mao Zedong. Sen had compared India's record in successfully combating famine with China where, according to his estimate, more than 20 million perished without the world noticing in 1958-60.

To be honest, Sen himself has been ambivalent on liberalisation. But the great mind that he is, he has had the courage to admit where he may have got it wrong. Eight months ago, in a book called Indian Economic Reforms and Development -- brought out by Oxford University Press on Manmohan Singh's 65th birthday and containing essays by 15 distinguished economists -- Sen confessed he was wrong in propagating the view that India's exports could not increase (and, Kautilya adds, should not increase).

The only voice that argued empirically against export pessimism in the early 60s was Manmohan's, in his now-famous doctoral dissertation at Oxford. Sen candidly writes that he was wrong and his friend was right.

The anti-export bias continues. Our average import tariff levels are about double east Asia's. We want to export what we produce but not what the world wants. The world has a voracious appetite for "low-tech" goods -- garments, toys, household appliances, sportsware, components. China and India were on a par 13 years ago in the export of these goods. Today China's sales amount to $70 billion, five times India's. Our failure is entirely manmade and policy-induced, small-scale reservations being the main culprit.

Sen's main contention is that for market reforms to succeed in abolishing poverty, we need mass literacy, universal public health, meaningful land reforms and an end to all forms of gender discrimination. No genuine liberaliser will disagree. Sen's concern is that since 1991 public discourse has come to be dominated by issues of efficiency. The more pressing concerns of equity have receded into the background. But Kautilya's question is simple: When were they ever paramount?

The key question that Sen ducks is whether we can continue to be inefficient, profligate and inward-looking and yet meet the objectives of social justice. We cannot. Sen has written volumes on the success of Kerala on the human development front, ignoring what Tamil Nadu has achieved, but has not highlighted the costs of the Kerala model. Kerala could not have sustained its human development strategy were it not part of a larger federal framework and had it not been rescued by remittances. Otherwise, Kerala may well have ended up as a Sri Lanka.

Sen was right in being among the first to point out that you can have equity without growth. But what he downplayed was without growth equity just can't be sustained. Sen makes much of the role of left parties in Kerala; the very parties have a less distinguished record on literacy and health in West Bengal.

Sen repeatedly asserts that east Asia invests more in social infrastructure than India. But apart from cultural factors, it is the shape of public finances which is responsible. East Asia does not have a fiscal deficit of 10 per cent of GDP, half of which covers the revenue deficit. Sen is absolutely right: the Indian state is not a social investment state. It never has been. It will be one only when reforms move faster.

Are we more of a social investment state now than before? Only marginally. Reforms have upped public expenditure on education from 3.4 to 3.8 per cent of GDP, still short of the needed 6 per cent. More disturbingly the finances of states which account for 85 per cent of social development expenditure have deteriorated sharply. Social investment has been a casualty, declining from 5.4 per cent of GDP in 1990-91 to 5.2 per cent in 1996-97.

Reforms in the sense of restructuring of public expenditures have a long, long way to go in India. But the "how" of social investment is as critical as the "how much". Sen's own figures reveal 60 per cent of the rural primary schools in Kerala are private and half the students enrolled in such schools get free primary education.

In the Manmohan birthday volume, Sen has criticised India's reforms on the grounds that they have concentrated on correcting government over-activity in industry and trade and have not done enough to correct government under-activity in social development. With respect, the great man is being unfair. At no time have the liberalisers advocated a retreat of the state from essential human development areas. The under-activity is both a reflection of the anti-egalitarian DNA of our society as well as a direct consequence of the over-activity Sen talks about.

The state as we know it is an enemy of both efficiency and equity. Its whole apparatus has to be redesigned if Sen's concerns are to be met. Sen's criticism is an indictment of the Indian elite's preoccupations -- not of reforms.

The author is secretary of the AICC's Economic Affairs Department. The views expressed here are his own.

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