Huge Income Disparity Will Have Political Consequences for Modi

A yawning income gap puts a question mark on Narendra Modi’s efforts to generate jobs, writes Abheek Barman.

In the backdrop of a report in a national daily on 1 October 2016, on the steep climb in unemployment figures, The Quint republishes the following article.

Six years after the onset of the Great Recession in 2008, Narendra Modi swept to power in India, winning a full majority for his party – the BJP. It was the first time in three decades that one political party had enough Lok Sabha seats to form a government in New Delhi.

The verdict of 2014 was widely interpreted as voter fatigue with the dither of the Manmohan Singh-led UPA-II regime, afflicted with policy paralysis. News of alleged scams, while allocating resources like telecom bandwidth and mining licences tarnished the ‘clean’ image of Singh; allegations of ‘crony capitalism’ flew thick and fast.

Income Gap Widens

But was there another, more significant reason behind voters’ craving for a change in leadership, and Modi’s ultimate victory? Data released by the Hay Group, a global human resource consultant, on 15 September shows between 2008 and 2016, the real wage – earnings net of inflation – of the average Indian grew a tepid 0.2 percent, while the overall economy expanded by nearly 64 percent.

The lion’s share of gains from overall growth were mopped up by the top 30% wage earners – management, skilled professionals and government employees with inflation-indexed wages and perks. Incomes of the poorest 30% actually shrank.

Benjamin Frost, speaking for the Hay Group, said India had the largest income inequality among all countries surveyed.

Also read: Delhi Minimum Wage Hike Won’t Change Living Standards of Aam Aadmi

Other Asian Economies Steal a March

Unsurprisingly, China, Indonesia and Mexico topped the salary sweepstakes, with growth at 10.9 percent, 9.3 percent and 8.9 percent, respectively.

Turkey, Argentina, Russia and Brazil saw real incomes contract, as global commodities, including energy, slumped in value and inflation picked up.

In Delhi, almost mid-way through its term, the Modi-led NDA government hasn’t still been able to boost employment or wages. This, as Yoginder Alagh, one of India’s most respected agricultural economists points out, is the outcome of several factors.

Also read: India’s Gender Wage Gap: 7 Charts to Prove Feminists Aren’t Lying

Low Farm Productivity

One, farm productivity has fallen or remained stagnant. Two, compared to over 50 percent of the size of the economy in the 1960s and 1970s, the share of farming in the economy is less than 15 percent today.

Despite that, rural India is home to around 65 percent of the population, many between the age group of 18 to 30 years. This vast army of restless youth is underemployed in villages and ill-equipped to find better-paying work in cities.

Manufacturing Sector Jobs Stagnant

Services, the fastest growing sector, is now more than half the size of the economy, but employs less than a third of the workforce. Manufacturing employment is stagnant.

This has unleashed social tensions, otherwise simmering under the surface, in different parts of India. In Gujarat, which Modi touted as a ‘model’ of development, a massive agitation for reservations in jobs and education has been led by youth of land-owning, traditionally prosperous ‘patidar’ families.

Elusive Good Times

• Recent report indicates huge wage disparity with average earnings growing by only 0.2 percent in the period from 2008 to 2016.
  
• Among the factors responsible for the income gap is low farm productivity with the share of farming in the economy being less than 15 percent.
  
• This has resulted in venting of anger by the unemployed youth ill-equipped to find better-paying work in cities.
• Dilly-dallying by politicians such as Mamata Banerjee to be blamed for industry’s reluctance in setting up plants.
  
• Reports of income gap in last eight years should be an eye opener for the Modi government which came to power on the promise of achhe din.
  
• Unless investments come in, it will be hard to generate quality jobs, and this can lead to unexpected political consequences.

Restive Youth

Ironically, in the 1980s the same patidars led a violent campaign to abolish reservations altogether. Today, with Gujarat’s industry concentrated in a handful of capital-intensive sectors like oil, petrochemicals and car-making, job openings are scarce; aspirations, sky high.

A similar churn is taking place in Karnataka, the hub of India’s IT prowess and Tamil Nadu, home to many manufacturing units. A 100-year old dispute over sharing the water of the river Cauvery, has led to arson and violence in both states. The cosmopolitan image of Bengaluru has taken a knock.

Mired in Political Wrangles

Six years after coming to power in Bengal, Chief Minister Mamata Banerjee struggles to attract any serious business investment. On 14 September, Banerjee returned to Singur, near Calcutta, where she returned around 1,000 acres of land acquired for the Tata small car project by the previous Left regime, to its original farmer owners. Compensation cheques were also handed out.

Banerjee’s political fortunes soared in 2008-09 after she successfully campaigned against the Left’s heavy-handed land acquisition policy. Now, desperate for investments and jobs, Banerjee wants the Tatas or BMW or any other car-maker to set up shop. She claims her government has a land ‘bank’ in sparsely-farmed land in the western part of the state, which would be distributed to industry.

Bone Stuck in the Throat

Governments in Uttar Pradesh and Bihar appear clueless about economic development and job creation. Swathes of Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha and Telangana are effectively non-administered and run under the writ of the Maoist guerrillas.

The Hay Group says India’s uneven globalisation and lack of a big enough pool of modern talent have kept many big-ticket investments at bay. Unless such investments come, it will be hard to generate quality jobs. This can lead to unexpected political consequences.

At a meeting this week, Union Road Transport Minister Nitin Gadkari acknowledged that Modi’s 2014 campaign slogan, acche din aaney wale hai (good times are on their way) had become a gale mein haddi (a bone stuck in the throat) – for the BJP. Millions of Indians, struggling to make ends meet, would be thinking the same thing.

(The writer is a Delhi-based senior journalist. He can be reached at @AbheekBarman. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)

Also read: Unfulfilled Promises, Frustrations Fuel Gujarat’s Patidar Uprising