Historical backdrop and policy impact:
In 1947 when Prime Minister Jawaharlal Nehru took over reins of Independent India, deeply influenced by Marxist-Leninist socialism, he strived to achieve India’s prosperity by creating mammoth public sector enterprises that were engaged in manufacturing steel to running forcibly nationalised airlines. He also borrowed the concept of creating government-run research laboratories and institutes like CSIR, CARI and many others to promote scientific research in India.
Here it would be insightful to understand that the western concept of development and innovation are inherently driven by the wish to forever reduce human intervention to minimal. Humans are recurring operational costs on any western economic system and measurement and everything is measured per capita. While west has no qualms in capital expenditures as these go into asset building.
So Nehru, trained and influenced in west, chose to devote scarcely available capital of a poor nation that was just released from Imperial forces, on highly capital intensive public sector undertakings and larger than life projects that had little immediate impact on vast agrarian society of that time. Mega steel plants, nationalised airline, new research and development laboratories that left existing universities teaching archaic syllabi where masses got education. He built a few IITs and IIMs which stood as small oasis of modern knowledge in the vast desert of ignorance and illiteracy.
This ensured that all the resources and energy of nation got diverted and sucked up in building isolated marvels of engineering, infrastructure and science, leaving behind whole country untouched by any development worth mentioning. Most of the labour that was illiterate and worked in farms never got a chance to participate in these temples of modern India that were being built in those days. Moreover, other priority areas like primary education, health provisioning, family welfare, and even rural infrastructure provisions that would have made a positive impact in the lives of poor remained unattended due to lack of resources. So British legacy of closing the old Gurukuls by Macaulean policy, ensuring majority of Indians remained illiterate, continued in post-independence Nehruvian era also. The abysmal rate of GDP growth achieved in those years was called ‘Hindu rate of growth’, as if to drive home the point that a Hindu Bharat could never grow above 2-3% GDP.
However, there was one area where Mr. Nehru’s policies had an unintended effect. In these PSUs was incubating a robust future middle class that worked and earned a risk-free salary in these highly inefficient enterprises. Children of these working-class studied in Central Schools and private English medium schools and later helped in the technology boom that India achieved later. The legendary dhoti and kurta clad common man was left stuck in unsustainable village economy, with dilapidated or non-existent primary and secondary schools and health systems.
Theoretical argument of why Nehru’s Capital intensive USSR model of development was catastrophic for India:
In 2001 World bank sponsored study NRI Report No: 2662 Rural Non-Farm Economy The Rural Non-farm Economy in India: A Review of the Literature, author Daniel Coppard writes
Rural non-farm employment is considered to be particularly important to the landless and small and marginal farmers, leading to the conclusion that the growth of real per capita non-agricultural output can have a significant impact in reducing rural poverty. Rising non-agricultural incomes can, however, also increase inequality as a consequence of differential access between as the less- and better endowed.
Hence spending meagre resources available with third world economy, on highly capital intensive activities like heavy industries and infrastructure, Nehru committed a crime against the poor and led them further into agrarian distress. A large swathe of rural and poor India was deprived of non-farm government expenditure. Only in the late nineties, when non-farm rural expenditure by governments picked up, this rural-agrarian distress reduced and started reflecting in rapid poverty reduction.
It was PMRRY-Prime-Minister Rural Road Yojana of Vajpayee government which started pumping substantial funds for creating rural infrastructure across the whole country, that led to picking up of various non-farm economic activates in rural households. Better road connectivity meant every village was well connected to the market. At the same time, the mobile telephone revolution was taking place and communication infrastructure was also building at never before pace. Both these infrastructures, rural roads and rural-telephony, would have a substantial impact on Non-farm rural incomes. This had direct impact on poverty reduction in rural India. Though infamous for widespread leakages, to the extent money could reach actual beneficiaries, MNREGA and Mid-Day meal schemes of Manmohan Singh government also helped in giving a push to Non-farm activities in rural India.
I have no hesitation in inferring that the Nehruvian model of capital intensive growth had a similar effect on the rural populace of India as Mao’s Great_Leap_Forward had on China’s rural inhabitants. Both eliminated more poor than poverty itself.
Alternate model for inclusive growth:
Today, India is no more a country with ‘Hindu rate of growth’, whatever that meant to development economists. There are so many public projects in infra sector in progress in every nook and corner of the country. Even remotest places like Arunachal and Tripura are having massive infrasturucture building up at never before pace. National and State highways, metro rails in multiple cities, JLN urban renewable mission, dedicated freight corridors, railway expansion, high speed rail, Inland waterways, Namami Ganga for treating sewage waste of cities on river banks are some of the prominent examples. Most of these projects are using the latest cutting edge technology implemented by both Indian and foregin firms who are partners and stakeholders in these projects.
These new technologies brings time and cost efficiency and speed that is much desired. However, a serious impact of these technologies on low skill labor jobs is that Man is replaced wth machines in all such projects. As technologies have a western origin and influence the basic design parameter from all such technologies remain same output/person. So idea is to maximize output and minimise head counts. This runs counter to the idea of non-farm income generation by creating low skilled jobs in the economy, where millions of unskilled, illiterate and semi-literate people can participate in the New India growth story.”.
If the government of the day wants to give a massive boost to labour intensive jobs, then it should seriously think about creating a policy mechanism where all government funded projects should have minimum 30-35% (1/3rd) of project costs going in labor inputs. There should be a penalty on suplliers and contractors who supply goods and services to project where manpower costs are less than 1/3rd of value of total input.
This will force both foreign and Indian firms to proactively think and design India specific technologies that has more labor intensity per unit of output rather than think old ways about output per person.
I would only cite one example to drive home a point or two. In most of highway building work, lot of soil is transported and filled by big dumpers. A simple switching to tractor-trolley or even bullock carts for land filling in infrastructure projects like road and rail would create massive employment opportunity for rural people living nearby.
Prime-mister flagship scheme of subsidy on rural and urban housing is another case in point. In the state of Uttar Pradesh, the responsibility of building the house in rural area has been given to house owner itself, and payments of subsidy has been linked to submission of reports of various achieving various milestones. So house owner is stakeholder and participant in the construction of his own house. While in Andhra Pradesh big project construction firms have been handed over contracts to build mass housing for poor. With better and modern technology and more resources available, these firms have drastically cut labour intensity as a proportion of total project size. These houses, once build will be directly allotted needy and eligible by the state government.
One can only guess the better impact of UP model of rural housing projects will have on the local economy compared to mass housing projects being built by big firms. One must acknowledge that quality will be a big sufferer in case of UP scheme, due to lack of technical expertise available to small-time home maker.
Just a policy guided inversion in project implementation strategy of big firms, from anti to pro-people processes will create enough jobs in the economy for many more years. When a big project like Akshadham temple in Delhi can be carved out of millions of man-days of work with minimal use of heavy equipment and automatic machines, then increasing the labor intensity without compromising on quality can be achieved in most of Infra projects. It is not a difficult task as India has a rich tradition of carving grand temples and big cities in an era when modern technology was not there.
Here many potential voices would be raised citing cost and time in-efficiencies inherent in labor intensive technologies. These dissenting voices may be ignored for a larger picture of more equitable growth story rather than promoting jobless growth.
We need a paradigm shift in our approach while taking our nation from developing to a developed one. A metaphorical statement of above policy shift would be “Let India attain its 9 or 10% growth rate by moving material on back of donkeys’ back and bullock carts to build its bullet trains and highways”.
Unless a higher proportion of non-farm labour intensives opportunities in the infrastructure sector are created through government policy, the majority of India will once again miss the inclusive growth story in our progress. Mr. Nehru missed it due to his ideology of copying USSR, we will miss it now in blindly copying western technological advances that are inherently human phobic in nature. A suitable labour friendly adoption of new technology will go a long way in ensuring inclusive growth. A whole ecosystem of new generation entrepreneurs building human friendly machines will emerge in a short time.
Brief About Author: Pankaj Prasad is an Alumnus of DCE, working as technocrat in Oil and Gas industry, interested in human centric development of Bharat