It’s a rich man’s world

Why has the hyped-up growth rate not touched the farmer on the ground?
Paranjoy Guha Thakurta Delhi

The controversy over the establishment of a slew of special economic zones (SEZs) has its origins in the agrarian crisis in large parts of the country. It has been argued that the fertile farm land that would be used to set up these SEZs comprise only a minuscule proportion of the total cropped area in India and that the phenomenon of industrial units coming up on agricultural land is an ‘inevitable’ aspect of economic development the world over. Such arguments evade the real issues.
A substantial section of the Indian farming community has not really benefitted from the policies of economic liberalisation that have been followed by successive Union governments over the last 15 years. On the contrary, many farmers in the country are far worse-off today in comparison with where they were in the late-1980s. Here’s what Prime Minister Manmohan Singh himself had to say on October 18, while addressing a conference organised by the Federation of Indian Chambers of Commerce and Industry: “The more I travel to interior areas and meet farmers, I get the feeling that in many parts agriculture is being carried out in adverse conditions. The problems may be attributable to a wide range of causes but the end result is that there are large tracts where farmers seem to be in acute distress.”
The point is simple. In recent years, whereas the industrial and the services sectors have been growing at between eight per cent and twelve per cent each year, agricultural production has increased by barely two per cent. While the share of the farm sector in the country’s gross domestic product has come down from around 40 per cent to 20 per cent over the last 15 years, the share of the population that is dependent on agriculture for their livelihood has decreased at a relatively slow pace in this period—from roughly 70 per cent to 60 per cent.
Given the severe agrarian crisis in many parts of India—a manifestation of which is the widespread incidence of farmers’ suicide in large numbers—it is hardly surprising that farmers should be reluctant to part with their land at prices that are a fraction of the prevailing market prices. As news came in about large corporate groups being actively assisted by the state governments of Haryana, Punjab and Maharashtra to acquire agricultural land at ridiculously low prices (often as low as one-tenth their market prices), questions have come up about whether the provisions of land-acquisition laws were being misused for private profit, while completely bypassing public benefit.
State governments are playing the role that brokers play in land and real estate transactions. They are buying the land cheap for private developers. Few had any doubts that many of these deals were not exactly above board.
Besides, the so-called reforms initiated by Manmohan Singh, then as finance minister in the Narasimha Rao regime, have only resulted in serious economic inequality and regional imbalances. Despite the high growth rate, the gap between the rich and the poor, the urban and the rural and India and Bharat has onley widened.
Besides, why, for instance, is the Centre not initiating SEZ ‘role models’ in poor and backward states like Bihar, Assam, Uttar Pradesh, Madhya Pradesh and others? Why are SEZs being opened only in prosperous states like Maharashtra and Haryana? This process of dichotomy will only create regional imbalances, a sea of deprivation and social conflict in an already fragmented society.
The chief economist of the International Monetary Fund, Raghuram Rajan, has chipped in by contending that the tax concessions being given to units in the proposed SEZs could result in industrial ventures relocating themselves. Thus, instead of creating new jobs, the SEZs would actually end up displacing existing employees. Indeed, the Reserve Bank of India has issued a new set of guidelines directing banks to loan funds for projects coming up in the SEZs at rates of interest that are at par with interest rates on loans for commercial real estate development.
A study conducted by the National Institute of Public Finance and Policy contended that the proposed SEZs could result in a loss of income tax, excise and customs duties to the tune of a huge Rs 1,70,000 crore over a five-year period. The commerce ministry countered that investments worth $60 billion could flow into the SEZs over the next six years and that as many as 5,00,000 jobs could be created.
Even as the veracity of these claims is being ascertained, Finance Minister P. Chidambaram struck a different note. He stated that the media had ‘exaggerated’ the differences between him and his Cabinet colleague on the revenue losses of billions of US dollars that would be a consequence of the generous tax concessions granted to the new establishments coming up in the SEZs. The commerce ministry’s decision to revise its guidelines to the effect that the ‘processing’ zone should comprise 35 per cent of the total land area in an SEZ, as against 25 per cent earlier, was also part of this process of realisation that the policy on SEZs would have to be moderated.
Historian Sumit Sarkar has described the move to set up SEZs as the “biggest land grab in modern Indian history”. Whereas earlier land-grab movements were led by the poor to acquire land held in excess of official ceilings by the affluent, this time round it is the rich that wants to ‘grab’ land belonging to poor farmers, he has argued.
Such areas were earlier designated free trade zones (FTZs) or export processing zones (EPZs)— these were akin to a ‘quarantined’ area or a ‘country within a country’, meant specifically to export goods and attract foreign investments. The world’s first FTZ came up in Puerto Rico in 1947 and the next one was set up in Ireland in 1960. Asia’s first FTZ came up in Kandla in 1965. China’s well-known EPZs at Shenzen, near Hong Kong, and Pudong, near Shanghai, as well as the Jebel Ali EPZ, in the UAE, were established during the 1980s. And contrary to the hype, China has only six SEZs.
After Kandla, seven EPZs were established in India. A different version of the current SEZ policy was announced in 2000 by the then Commerce Minister Murasoli Maran. A new law was passed by Parliament last year. Its broad contours did not cause any consternation in political circles. It was only after the fine print of the rules and guidelines issued by the commerce ministry was read that a host of questions cropped up. Ministry officials concede in private that rules should have been put in place before granting in-principle approvals.
So will the government be able to ensure that the 200-odd proposed SEZs do not become islands of affluence in an ocean of deprivation? The chances do not seem particularly bright