It’s time to change the paradigm of economic progress

When the Left Front in West Bengal joined the capitalist game and invited the Indonesian Salim Group to set up the Haldia SEZ (special economic zone) and the Indian Tata Group to set up the Nano car plant in Singur, Mamata Banerjee took to the streets with peasants whose lands were taken. In May 2011, she ended the 34-year rule of the longest-serving elected communist government in the world.

She arrived at the Planning Commission, and demanded special status for West Bengal which the Commission would not give. Other chief ministers were also dissatisfied with the Planning Commission. Then Tamil Nadu chief minister J. Jayalalithaa refused to come to the Planning Commission to get her plans approved. She objected to boffins in Delhi telling the state how to spend its own money for the welfare of its people.

Narendra Modi of Gujarat also disliked economists in the Planning Commission who thought their statistics gave a more accurate picture of reality than he and his officials on the ground.

Even business associations were unhappy with the Planning Commission. Too much planning, too little implementation, they said. Some recommended the Planning Commission should be replaced by an Implementation Commission. Civil society was dissatisfied too. The plans were focused only on GDP growth: the growth was not inclusive nor environmentally sustainable, they complained.

Dr. Manmohan Singh, then prime minister and chairman of the commission, called for a review. Government officials, business leaders and civil society were consulted. Singh summarised the diagnosis. The Planning Commission must become a systems reforms commission, not a maker of economic plans; a persuasive force for change, not an allocator of money.

Narendra Modi, who rose on the wave of dissatisfaction with the UPA government, abolished the Planning Commission and replaced it with NITI Aayog. Now, Mamata Banerjee is unhappy with NITI Aayog; she wants the Planning Commission back. Those who forget history will repeat it. NITI Aayog is the same medicine for the economy, only in a new bottle with a new label.

When the UPA returned for its second term in 2009, deep cracks in India’s growth story were already showing. Growth, though fast, was not inclusive, and the environment was degrading rapidly. The goal of the 12th Five-Year Plan, which was abandoned along with the Planning Commission, was ‘Faster, More Sustainable and More Inclusive Growth’.

In 10 years, NITI Aayog has been unable to alter the shape of India’s growth. Inequalities between the have-nots and have-mores have widened further. At the bottom, incomes are not rising to keep up with inflation while at the top, the number of millionaires is increasing faster.

Decent jobs with adequate incomes are not available even for educated youth. The demographic dividend is turning into a disaster. Drinking water is becoming scarce even in metros. Hillsides are collapsing, beaches are being eroded, river waters becoming toxic, and Indian cities have become the most polluted in the world.

The Indian government is confused. It has accepted that it must grow jobs and industry within the country. At the same time, it is being pressed by economists and large corporations to further open its borders to flows of trade and integrate faster with international supply chains. These economists say India must not go backwards to the pre-1991 socialist era. But they have no concrete solutions for increasing the pace of job creation.

India is suffering from the same disease of inequitable and unsustainable economic growth that afflicts the whole world. Insufficiently regulated financial flows across borders created a global financial crisis in 2008. Economists promised they would change their theories to create a ‘new normal’. They did not; they only pressed harder on the accelerator to get economic growth out of the slump.

Global economic growth reversed again when the Covid pandemic froze global supply chains in 2020. Glaring inequities between the rich and poor were starkly revealed. Policy makers vowed, “Never again”. They would change the economic model fundamentally.

They have not. They are pressing even harder to grow the size of the economy. They do not know how to alter its shape. The country needs a new model of the economy and a new way of shaping public policies that is not dominated by pro-market economists wedded to economic theories that are failing all around the world.

In economics theory, the global economy is a large machine that extracts energy and resources for its consumption from the natural world and from human beings. Global supply chains carry food, materials and energy within the machine.

Multinational corporations and economists wedded to the borderless trade and free markets ideology want to increase the efficiency of the economic machine and reduce frictions in flows across national borders, because this can increase global GDP with the same resources. There is no place in their model for equity within countries and amongst countries, in the use of resources or distribution of the surpluses produced from the machine’s efficiency.

The time has come to change the paradigm of economic progress. New ideas are required which economic science does not have. The economy is only a component of a complex system composed of society and the natural environment. Growth policies derived from this limited and faulty model are harming society and the natural environment; they are not economically sustainable either.

India needs a new model of economic governance. Ms. Banerjee wants the Planning Commission back. Replacing NITI Aayog with the Planning Commission is not the solution for India’s unsustainable growth. It will only put the stale medicine back into the old bottle.

A new model of growth is required. As well as a new, participative approach to planning. Chief ministers should not have their voices shut off after a few minutes — as they were in the meetings of the Planning Commission and in the NITI Aayog meeting Ms. Banerjee attended.

Most of all, the views of common people must be heard, and not only the ideas of experts who have statistics which, as it is turning out, are wrong (for instance, on employment), or even if right (like the size of the GDP), are not measuring what really matters to the people on the ground.

Arun Maira is a former member of the Planning Commission. Courtesy: The Billion Press