One big step was the Bihar elections in November 2005, where voters formed a new social coalition for governance and ousted Lalu Prasad Yadav’s alliance, installing Nitish Kumar as the new chief minister. Bihar, the second most populous state, had the worst governance in India for decades. Nitish Kumar has made drastic changes. His empowerment of panchayats (village governments) exceeds that in most other states. Women were elected to head over half the villages in Bihar, including in unreserved seats. A quarter million teachers are being recruited through panchayats. They will be far more accountable than teachers employed directly by state governments as they are in the rest of the country. It must be acknowledged that Lalu Prasad Yadav, in his first term (1989-2004), brought much greater caste equality to a state that had the worst discrimination. That feat earned him two more terms, which he thoroughly misused. After this lost decade, Bihar has taken the next step on the road to development. Nitish Kumar won because mistrust among castes in Bihar declined slightly. His strong performance has reduced it further and established a large pro-development social coalition. At the current stage of Indian political history, this is the most important step for development and governance that a state can take.
Another major improvement at the national level is in tax collection. In the last three years tax revenues are growing at about 15 percent per annum adjusted for inflation, while the overall economy is now growing at 9 percent. This is a subtle but significant shift in performance.
Another important development is the sources of the revenues. A major weakness of the post-1991 performance in India has been in low taxation. Taxes on corporate profit are the fastest growing source of revenues and now exceed excise taxes from factories, previously the largest source of government revenues. This is another subtle but important qualitative change. A major reason for the improvement is the rapid growth of private corporations. These are easily taxed in comparison with more informal productive entities. Corporate profit taxes and income taxes are much more stable, fair, and non-disruptive sources of revenue. An improved tax base, along with the improved administration that Prime Minister Manmohan Singh is providing, will go a long way toward improving social welfare and infrastructure.
A new strategy in development policy is the creation of special economic zones (SEZs) for industrial development. The plan is to give investing companies a zone free of taxes and many regulations. In return the investors are asked to provide much of the infrastructure that would otherwise require government expenditure, and to provide the seed for economic growth in a wider region. The most controversial aspect of these zones has proven to be land acquisition. The worst of it has come in Bengal where the state government has chosen to pursue the SEZ policy aggressively.
State governments in India, like governments throughout the world, have long compelled farmers to sell their land at mandated prices for various purposes. One paradox that arises is that the price of such land rises dramatically after the state has designated it for industrialization. The compensation paid to farmers inevitably reflects the lower price of agricultural land. The previous landowners often feel cheated, and certainly feel that they can get more by agitating. Others simply do not wish to have their lives disrupted. One group of farmers in a designated SEZ sent Rs. 35,000 to the industrialist who was planning to set up shop there. They offered to buy his mother. They were drawing an analogy between their land and his mother. The benefit of SEZs on farmland is of course that the number of people who will get jobs from the SEZs is many times the number of people who will be displaced. As with so many of the economic reforms, the main challenge is for political leaders to build confidence that those who are required to sacrifice in the short run will be among the first to participate in the new development.
Another issue of governance that surfaced recently was in the Sachar Committee, which focused on development issues among Muslims. The famous bar graph that emerged showed that in 2001, dalits and adivasis (tribals) surpassed Muslims in the percentage completing primary school, and had gained on the rest of Indian society. The percentage for dalits and adivasis went from 9 in 1948 to 61 in 2001, with the numbers being much higher for younger ages. The main cause of this is that dalits and adivasis have built a much stronger personal and political commitment to education than the rest of the country, and have educated their children under the most difficult circumstances. Babasaheb Ambedkar’s advice to overcome discrimination through education has been taken to heart. Among Muslims, while progress in primary education has not been as swift as among dalits and adivasis, it has occurred in comparison with the rest of Indian society. In 1948, the Muslim primary school completion rate was 64 percent of that in the rest of society. By 2001, it was 77 percent.
India’s overall performance in primary education, though far behind most of Asia, is now improving. Of the 130 million children of primary school age, the number out of school has gone down from 32 million in 2001 to 9.5 million in 2005. As primary education becomes universal, inequalities in that respect will of course disappear.
Sanjoy Banerjee teaches international relations at San Francisco State University. He writes about India, America, and the world.