This article reflects only my own personal thoughts and do not reflect the official position of any other organisation. Responsibility for the information and views expressed this article lies entirely with me.
Rajan was one of India’s best central bankers and was a cornerstone in driving the Indian economy over the last three years.
Here is a man who in 2005 at a conference in Jackson Hole made some prescient statements about how financial developments have made the world a riskier place and called out the systemic risks posed by banks to the global economy. (His speech can be found here: https://www.imf.org/external/np/speeches/2005/082705.htm). He was derided as a luddite who was misguided. However, the developments of the 2008 financial crisis proved him right and a number of his proposed safeguards have since been implemented.
Some may question why the current Indian administration has removed a man who is widely recognised as an architect of India’s growth story.
It goes back to 2014, when Rajan questioned Modi’s “Make in India” campaign and cautioned against “against picking a particular sector such as manufacturing for encouragement, simply because it has worked well for China. India is different, and developing at a different time, and we should be agnostic about what will work.”
Last year, Rajan also questioned the rising of sectarian tensions and intolerance propagated by factions associated with the currently ruling government. In a speech to the Indian Institute of Technology last October, Rajan lambasted the rising intolerance and stated: “India has always protected debate and the right to have different views. Excessive political correctness stifles progress as much as excessive license and disrespect.”
This is consistent with the pattern of behaviour displayed by the current Indian administration .
What have Modi and his administration achieved in the last two years:
I am genuinely concerned at the state of affairs in India and despite the sometimes effective PR campaign Modi’s government may run, the cracks are beginning to show.
India’s always been a home to alternative thoughts, ideas, ideologies, religions, faiths, beliefs, ethnicities and ways of life. We have been a beacon of hope and democracy for all and it is very sad to see the very edifices of inclusivity and secularism crumbling.
The Indian government led by Modi has proposed a series of wide-ranging reforms to the Land Acquisition Bill which, in my personal view, will have a deleterious effect on the nation and her people.
The long and the short of this new Bill is that it will allow for the government to take over land from landowners without sufficient due diligence or understanding the social impacts in the name of ‘public interest’ whilst not actually defining what this ‘public interest’ may mean.
The proposed Land Acquisition Bill fails the most material principles of the Indian Constitution – that of democracy, welfare, justice and equality.
For almost one hundred and twenty years, India’s land acquisition was governed by the Land Acquisition Act of 1894 which was a fundamentally exploitative, oppressive and inherently unjust piece of colonial legislation. Since Independence, over 50 million people have been displaced in the name of development. A large segment of the displaced includes entire scheduled tribal communities. The vast majority of the displaced have faced declines in the quality of life, received inadequate compensation and have ended up being marginalised in their own lands.
The Land Acquisition, Rehabilitation and Resettlement (LARR) Act of 2013 was subsequently passed with the official mandate to support the twin objectives of farmer welfare along with the strategic development of the country.
When Modi and his government took over, they decided that they wanted to amend a number of major aspects of the LARR as one of their core priorities. The proposed amendments have drawn widespread condemnation and flak, not just from the opposition, but from within the ruling party itself and more importantly the majority of the populace, particularly those within the rural community. .
Flawed analysis leading to incorrect conclusions
Part of the problem arises from the fact that current Indian administration’s economic analyses predicated on the notion that greater freedom by the State and large commercial interests in acquiring land and property will promote accelerated economic growth. Land acquisition is often cited as an impediment to India’s growth and India’s policymakers and a number of corporate-sponsored industry bodies would have us believe that having a draconian bill to confiscate land is the panacea to India’s economic ailments.
On the contrary, according to a Ministry of Finance-led Economic Survey of 2014/2015, it is less than 1% of projects that have stalled in India as a result of land acquisition issues.
India’s true obstacles to economic progress include corruption (which imposes a cost of between 1% to 3% of total GDP), tax evasion and ultimately a lack of a consistent and coherent economic policy.
Land grabs by the State actually have a huge cost, both economic and societal, for India. An unfair and unjust land acquisition campaign will only serve to further exacerbate the problem of rising income inequality and social disparity that remains a stain on India. The economic, social and environmental cost of displacement and conversion of forests/agricultural land towards industrial assets have never been truly understood or analysed by the government.
The ownership of land is a fundamental basis of livelihood and subsistence for a majority of Indians. Mere monetary compensation, without a resulting benefit in the form of employment will have devastating consequences for farmers, farmhands, artisans and other individuals whose livelihoods depend on agriculture and farming. Forest tribes, adivasis (large segments of tribal and aboriginal groups in India) and dalits (the most marginalised segments of the Indian population) who have been impacted as a result of past land acquisitions will in turn be even more marginalised and suffer even more inequity and exploitation.
The current Indian government is pushing for its “Make in India” slogan. There is no point making in India, if it does not benefit the majority of Indians and only serves to undermine and taint India.
The problems with the proposed amendments
There are a number of serious problems with the amendments being proposed by the government.
First and foremost is the deletion of the clause to consider the social impact assessment of the land acquisition. Without the ability to assess the possible adverse impact a potential land acquisition has on people in an area, how can we truly understand the externalities (negative or otherwise) and make an informed judgement about the wisdom of acquiring the land. How will we be able to say, to a high degree of comfort, that the benefits of the land acquisition will indeed be substantively higher than the resultant costs and consequences and benefit a broader segment of society?
Secondly, agricultural land has to be viewed as strategic assets designed to support the development of the nation in order to preserve food security. We have seen countless nations, who in their rush to convert viable agricultural land into vast sweeping industrial or tourist outposts, have lost their ability to feed and serve their people and have had to resort to food import in order to sustain themselves. It can be argued that agricultural efficiencies have improved and that the same output can be delivered with a smaller land area – but in order for this to be truly understood, there has to be a clear understanding and assessment of impacts, which this government does not want to do either. India cannot surrender her independence in her ability to feed, serve and protect her people.
Thirdly, the previous Act had a provision which required the consent of 80% of affected individuals prior to the land acquisition. The amendments proposed will allow for the government to unilaterally acquire land without the permission of the people who depend on the land. The principles of democratic conventions are being violated here. Unlike a few other countries, India’s rule of law is not enforced by a dictatorship of some nature or under a command economy where all ownership belongs to the State. India is a democracy – a government of the people, by the people, for the people. With the proposed amendment, the state will be a government of a very small group of people, by the faceless/nameless corporates and industries, and certainly not for the people.
Fourthly, the amendments themselves are vague and, it appears, intentionally ambiguous. ‘Public purpose’ has not been clearly defined and no indicators are being proposed to indicate whether the nation benefits and aids the welfare of all. Five categories of projects are being proposed (national security and defence; rural infrastructure; affordable housing; industrial corridors; and infrastructure (including public-private partnership projects (PPPs)) which are being defined in the broadest possible way which will allow for the government and their industry and corporate partners to acquire/confiscate land without a robust case. It is the absence of a sufficiently strong check and balance that is the biggest cause for concern here.
As the law stands, if no development takes place on acquired land within five years, it has to be returned to the people. This has also now been amended and the land can be held on indefinitely from the time of purchase with no recourse made available to the people who are being impacted. Under the amendments, more land than is required can also be acquired by the government, including the purchase of an additional one kilometre of land on both sides of an industrial corridor – which again will have severe debilitating effects on farmers and small land owners. There is also no consideration of efficiency on the part of the industries and the state looking to acquire the land for their uses and it does not spur or promote more efficient use of the land and instead ends up subsidising the absence of efficiency improvements made by industries.
Finally and most fundamentally, the proposed amendments to the Land Acquisition Bill violate the principles of individual liberty and human rights. What this Bill does is redistribute land away from the poor and the most vulnerable to the richest and most privileged segments of society. The principles of prior consent and recognition of the societal and economic impacts on the people most directly impacted by any land acquisition is essentially a land grab by those who can from those who cannot do anything about it.
Land is not just a mere economic commodity or factor of production to a large number of people who will be affected by the proposed amendments of the Land Acquisition Bill. Land is a source of life, of sustenance, of faith and of hope. It is a function of the culture of the people who depend on it, be it the farmers, the forest tribes or the dalits. It is a source of livelihood, of dignity through employment and of a symbol of progress and growth.
India can only truly progress, economically and socially, if there is an improvement in the lives of all Indians and not just a select and privileged few.
A nation must be judged not just on what economic progress it has made but on how it has enhanced the welfare of its most vulnerable constituents.
The proposed amendments violate the principles of the Indian Constitution which dictate that India remains a sovereign, socialist, secular and a democratic republic. Socialism and democracy will be the first casualties if this Bill comes to pass – for how can a nation claim to be democratic when it tramples over the rights of its own people to own land without a proper recourse and safeguards.
The amendments to the Land Acquisition Bill must be opposed at all costs. At stake here is not just about India’s principles of fairness and equity for her people but about the future of a prosperous India which benefits all and not just a select few.
S Rajaratnam School of International Studies (RSIS) Distinguished Public Lecture by Bapak Gita Wirjawan, (GW) Minister of Trade, The Republic of Indonesia. (2nd September 2013, Pan Pacific Singapore) on “Indonesia’s Economy: Future Challenges and Opportunities.”
I had the pleasure of attending the distinguished public lecture by Pak Gita last week and I wanted to share some salient points from the discussions
Key highlights and introduction
July results for trade is a continuation of the trends observed in June – and are actually worse. (There was a US$2.3 billion trade deficit in July 2013 alone – cumulative deficit of US$6 billion for the whole of 2013). (Click here to see news on the latest trade deficit)
Continued outflow of capital resulting in a downward pressure on the currency.
The ongoing slowdown in Europe and uncertainty in the US/Middle-east is also having knock-on effects on Indonesia.
We are witnesseing a “recalibration of the global economic outlook.”
However, Indonesia has seen significant progress made under the Susilo Bambang Yudhoyono (SBY) presidency – Under Sukarno’s era, the GDP per capita was around US$500 per capita – this went up to US$1,200 under the Suharto era. However the Asian Financial Crisis in 1997-1998 had a catastrophic impact on Indonesia, where the GDP per capital plummeted to US$600 per capita. Indonesia also very narrowly avoided the Balkanisation of the country during that period.
After the political reforms post-Suharto, GDP climbed steadily to US$1,100 under the Megawati presidency and today (2013), the GBP per capita has just about exceeded US$5,000 per capita under the SBY presidency. This has also resulted in the increased purchasing power of Indonesia leading to heightened domestic consumption, particularly from a growing middle class.
Can Indonesia emerge from the middle-income trap?
Indonesia’s improved its policy and position in the fiscal space.
However in the social space, the gini coefficient (one indicator of income inequality) has risen, which implies a widening income gap and disparity. This remains a critical issue which the government needs to resolve.
Furthermore, there is still an over-reliance on the commodities sector which is prone to very violent swings and shocks.
Infrastructure development remains a challenge for the country.
The needs to be further work done in the educational space as well.
Education and the economy
In 15 years, there will be 150 million Indonesians under the age of 30.
There remains an urgent need to sharpen the educational infrastructure.
As GW says, “It is important that we need a good runway, not just to land, but to also support us in taking off.”
Between 2012-2022 – it is estimated that Indonesia’s accumulated GDP be will be over US$60 trillion – on a cumulative basis.
There needs to be a supply side narrative to realise this estimated accumulated GDP and that remains the challenge.
The SBY government leaves a sustained economic trajectory for Indonesia.
The woe of the number of taxpayers (or lack thereof!)
For an economy in the top 20 largest economies grouping – the G20 – there are fewer than 20 million tax payers! (comparatively?)
Indonesia and her geopolitical relevance
GW highlighted the example of how South Korea has used its soft power effectively (from Gangnam style to Samsung products) to drive international trade and economic growth. What can Indonesia do to achieve a similar impact?
GW also highlighted that Indonesia has the ability to develop a high degree of political relevance because:
Indonesia has the potential to serve as the ‘middle power’ to narrow the gap between the Middle-East and the West
Indonesia can also narrow and bridge the gap between China and the US (a slightly debatable claim?!)
However, Indonesia needs sustained political order in order to develop and create this geopolitical relevance.
Indonesia must engage in Democracy 2.0 – the next iteration of her democratic freedoms enjoyed post-Suharto.
Improve her manufacturing and technological sector (invest in high-quality and high-yield technology and sectors).
Without Democracy 2.0 – it is highly unlikely that Indonesia will sustain her political and economic reforms and progress. Areas such as corruption must be tackled with and though there has been some good initial progress, this must remain sustained for there to be tangible returns and a progressive shift.
Indonesia as the ‘middle power’
Indonesia believes in regional cohesion and solidatiry.
ASEAN is a great example of multilateralism – socio-political, cultural and economic solidarity have helped ASEAN overcome initial challenges and be a more cohesive and effective regional bloc.
The future of Indonesia
Indonesia must continue her path of bundling pluralism and democracy.
Economic growth must be achieved hand in hand with economic equity – otherwise the unbalanced growth will have severe social impacts and fractures.
Without this economic equity – all of the work being undertaken now will be an exercise in failure.
This will take time to achieve.
Indonesians have now come much closer together than ever before (Indonesia has the second highest Facebook usage and the third most users on Twitter).
Indonesia and Indonesians must have the ability to say and proclaim that they have the wherewithal to move on with the necessary reforms and changes required for Indonesia’s sustained progress.