Social policy in Indian development

In this chapter, Jayati Ghosh explains that social policy is not just about
welfare or equity, but a crucial part of development strategy that works
alongside economic policy. For social policy to be more effective in
development, it's important to understand the political and economic
context in which it evolves. Ghosh analyzes the role of social policy in
India’s development,asking why it has taken certain forms, its
achievements and limitations, and how it can be improved for fairer and
sustainable growth.

Social policy refers to the collection of policies and institutions aimed at

managing the social conditions tied to economic activity. In developing
countries, like India, it represents the agreement between capital
(business) and labor (workers) to manage the development process.This
process aims to improve material welfare through economic growth, but
remains incomplete in many places.

Ghosh points out that social policy is important beyond just equity and
living standards. It plays a key role in managing modernization and the
social disruptions caused by rapid economic growth. For example, in
Malaysia, affirmative action policies have helped maintain ethnic harmony
by addressing inequalities across groups.

Another major role of social policy is to legitimize both the state and the
development project.When economic growth relies on high investments
and sacrifices by workers and peasants,social policy ensures that basic
needs and services are provided to those who may not benefit directly from
growth. This helps maintain social stability and long-term development.

Social policy also acts as a cushion during economic crises or natural

disasters, such as unemployment compensation during recessions or
public insurance during disasters like earthquakes. Countries with larger
public sectors tend to have less severe economic recessions because
these policies help absorb shocks.
A fourth important role is increasing labor productivity. Ghosh emphasizes
that access to good education, health services, and decent working
conditions is critical for improving overall productivity, not just in specific
industries. These factors can even influence technological choices, pushing
development toward more sustainable, high-wage growth.

In some export-driven economies, like parts of East Asia, social policy

supports low labor costs by providing public services such as housing,
transportation, and healthcare. This allows businesses to pay lower wages
while remaining competitive in global markets because workers' basic
needs are covered by the state.

Ghosh notes that social policy evolves with economic development,

depending on how it affects different social groups. For instance, in an
economy where government-funded projects create jobs, workers may
demand more social services like housing and healthcare. On the other
hand, if growth primarily benefits a wealthy few, political power may shift in
favor of policies that widen inequality.

In India, Ghosh argues, the state’s failure to provide adequate social policy
is a major reason why its development project has not fully met the needs
of its citizens. While social policy is essential to development, its
effectiveness depends on the political and economic context,which has
limited its impact in post-independence India.

The post-independence development experience of India is interesting

because, despite being a poor country with low per capita income, it
remains the world's largest liberal democracy. India managed to maintain
this democratic system while other countries' experiments with democracy
often failed. This raises questions about how democracy has influenced
India's social policies and why, despite being a democracy, the country has
not made more progress in providing basic goods and public services to all
citizens.
One factor that complicates India's development is its federal system,
where state governments have control over important issues like land
reforms, education, and health. Different political groupings in these states
have led to variations in social and economic outcomes across the country.

At the time of independence, there was a strong belief that the state should
play a big role in developing the economy. The goal was to create an
independent Indian capitalism by reducing foreign economic domination,
which was a holdover from colonial rule. The state built infrastructure, set
up financial institutions, and regulated economic activity to achieve
this.However, many features of this growth strategy limited the potential for
sustainable economic expansion. The Indian government did not
significantly address the fundamental inequality of land ownership, nor did
it effectively tackle the concentration of wealth in certain sectors.

This resulted in limited growth in the private sector and a narrow domestic
market for goods,especially in agriculture. Since private sector employment
and income growth were low, the government became the main driver of
the economy by increasing state spending. However, the government could
not discipline the industrial capitalists to push for cheaper labor and
international market growth.

During the 1950s and 1960s, India followed a strategy of import

substitution—producing goods locally rather than importing them—which
initially helped industrial growth. But by the mid-1960s, this strategy
became less effective, and the government struggled to raise resources
through taxes. This led to economic stagnation in the late 1960s.

In the 1980s, growth picked up again but was based on rising government
spending, which led to a balance of payments crisis in the early 1990s.
After this, India began a more systematic program of economic
liberalization,involving deregulation and less state involvement in the
economy.In the 1990s, India's economy grew between 5% and 6%
annually, with increased income for a small portion of the population.
However, this growth did not lead to widespread benefits.Employment
generation was low, income inequality increased, and poverty persisted.
Despite growth in some sectors, the majority of the population did not see
significant improvements in their living conditions.

India's economic liberalization in the 1990s led to some success, but the
overall economic growth was not as impressive as in previous decades.
Employment growth slowed, especially in rural areas, and there were
worrying declines in food consumption and other basic needs indicators.
Economic inequality grew, and poverty reduction slowed. The government
cut public spending on infrastructure and services, making things worse for
many people.

Several contradictions limited India's development:

The government had to balance expanding public expenditure to keep the

economy growing while also making large transfers of wealth to the
capitalist class. This created a worsening fiscal situation.

The state could not impose discipline on the capitalist class, which led to
inefficiency and corruption. In countries like Japan and South Korea, close
collaboration between the state and capital led to better results.

India's economy was unable to innovate and create new products like in
advanced capitalist countries. This led to an imbalance between domestic
production and the consumption patterns of the wealthy.

Indian society tolerated large inequalities in wealth, poverty, and poor

human development,especially in rural areas. This meant that social
policies aimed at addressing these issues were not prioritized.

In summary, while India made progress in some areas after independence,

it's development was hampered by deep-rooted inequalities, limited job
creation, and a lack of attention to basic needs and social policies.
Social policy in India has often been inconsistent and lacks clear direction.
It has responded more to immediate political demands than to a long-term
development strategy. Despite being labeled as "universal," most social
policies have actually been targeted at specific groups with political
influence, like urban workers or particular caste groups. In the 1990s,
efforts were made to include the poor and women, but these were limited in
scale and impact. As a result, social policy has not played a key role in
India’s development as it might have. Instead, it has been more of a
patchwork response to various group demands.

Even though social policy hasn’t been a driving force in development, it did
help manage some of the effects of modernization. For example, it helped
maintain some stability and encouraged people to accept sacrifices like
lower consumption. But these sacrifices were mainly for the workers and
peasants, while the elites and capitalist class did not follow the same
discipline.

Key areas of social policy in India have included land reforms, food
distribution, education,public works to create jobs, affirmative action (like
reservations for public jobs), and anti-poverty programs like microcredit.
However, compared to other countries in Asia, like Japan or South Korea,
India lacks a strong public provision of basic needs like housing or health
services, and has very limited social insurance programs.

Land Reforms

Land reforms have been the responsibility of state governments, leading to

big variations across the country. In general, land reforms in India have not
been very effective. There have been some successes, such as in Kerala in
the 1950s and 1960s, and West Bengal in the 1980s,where left-leaning
governments enacted reforms. In Kerala, land was redistributed, and
agricultural workers’ conditions improved. In West Bengal, tenant farmers
were given more protection, which led to higher agricultural productivity.
However, the lack of radical land reform across most of India meant that
agricultural growth was below its potential, and the domestic market for
goods remained limited. In recent years, the focus on land reform has
faded from policy discussions, even though it is still crucial for agricultural
growth.

Food Procurement and Distribution

India’s public food system had three goals: to stabilize food prices, to
support farmers with fair prices, and to ensure food security for consumers.
The system involved the government buying food grains at a minimum
price from farmers and distributing them through Fair Price Shops at
subsidized rates. However, this system was not uniformly effective.
Procurement was mainly focused on certain surplus states like Punjab and
Haryana, and many rural areas lacked access to the subsidized food. Still,
it did help stabilize food prices in the 1970s and 1980s.

In the 1990s, the system came under pressure as reforms targeted food
subsidies only to the poorest and reduced support for other consumers.
This backfired, leading to higher food stocks and increased storage costs,
but fewer people benefited from the subsidized food. Farmers also
struggled with rising input costs and competition from subsidized imports.

Over time, India’s per capita availability of food grains decreased. By 2001,
the situation was worse than it had been in the 1970s, with lower per capita
grain availability and declining calorie consumption. As a result, while the
food distribution system played a positive role in earlier decades, it has
been undermined and is now at risk of being replaced by private
operations.

In summary, India’s social policy has been shaped by political pressures

rather than a clear development strategy, leading to limited and uneven
impacts across the country.

Employment and Public Works in India

Overview of Employment Issues

After India gained independence, it faced significant challenges in creating

enough jobs to boost overall productivity. The lack of job creation is not
just a social problem; it's a waste of valuable human resources that could
help grow the economy. If the labor force had been used more effectively,
India's growth could have been both faster and more equitable.

The Impact of Economic Policies in the 1990s

In the 1990s, India's economic policies focused on neoliberal

adjustments, which did not result in sufficient job creation. During this
time, the number of jobs being created was lower than the growth in the
economy and the increase in the labor force. Although one might argue that
productivity increases were beneficial, the fact that many people remained
unemployed—both open and disguised—was a major issue. This situation
led to social tensions as people struggled to find work.

In rural areas, job growth was very low, only about 0.6% per year, which
was one-third the rate of growth in the labor force. Many people turned to
self-employment in agriculture due to a lack of non-farm jobs, and there
was an increase in unpaid work, especially among women. At the same
time, regular jobs were declining, and casual employment was on the rise.

Effects of Neoliberal Policies on Rural Employment

The neoliberal economic policies had several negative effects on rural

employment. The Government reduced spending on infrastructure and
rural development, which impacted job creation. Transfers from the central
government to state governments decreased, leading to cuts in local
spending on employment programs. As a result, investment in rural
infrastructure and public services, like education and health, also suffered.
In urban areas, job creation was even worse, with only a 1.5% growth rate.
Organized sector jobs grew by less than 1% per year. Casual jobs became
more common, while regular jobs declined for both men and women. This
trend was part of a global pattern where employers preferred hiring women
because they were often paid less and worked under poorer conditions.

The Need for Public Works

Given the low job creation in the economy, there was a clear need for more
public involvement in employment generation, especially during economic
downturns when there was unused capacity in the economy. Public works
programs, aimed at creating jobs while building essential infrastructure,
could have been a solution. However, such initiatives fell far short of their
potential.In the 1980s, India saw some success in rural employment
growth, with a shift from agriculture jobs in the secondary and service
sectors. Government support played a significant roleduring this time. For
example, nearly 60% of new government jobs created were in rural
areas.By 1987-88, two-thirds of non-agricultural jobs in rural areas were
government positions,demonstrating a significant government investment in
job creation.

Shifts in Government Policy in the 1990s

However, in the 1990s, many of the successful public policies from the
previous decade wererolled back. Employment programs that had been
created to help rural workers saw a decline in their scope and
effectiveness. The economy was marked by an unusual situation of
lowunemployment equilibrium, meaning that savings were higher than
investments.

Despite having excess resources, such as high food grain stocks and
unutilized labor, thegovernment did not increase funding for large-scale
public works programs. This was surprising,as many economists
recommended such measures, and the public was demanding them.
Thegovernment’s unwillingness to act reflected a change in the political
landscape, where theinterests of foreign investors and large domestic
businesses were prioritized over the needs ofunemployed workers.

Education

Education in India has not improved at the desired pace, particularly for
women. Despite a constitutional promise made in 1949 to provide free
education for children up to 14 years old,India has the highest number of
illiterate people globally, especially among women. Female Literacy rates
are much lower in marginalized communities, indicating that education has
not been prioritized by the government.

Public spending on education is only about 3% of GDP, which is half the

international standard.While literacy campaigns in the 1990s made some
progress, results varied significantly across states. For example, Kerala
has high literacy rates due to its historical focus on education, while other
states lag behind.

School enrollment increased from the mid-1980s, with more girls attending
school, but many registered children do not attend regularly, and dropout
rates remain high, especially among girls. Government schemes aimed at
increasing access to primary education have often relied on foreign aid,
which can divert resources from public education and impact equality in
access.

Affirmative Action

In India, affirmative action has primarily involved reserving government jobs

and educational seats for certain disadvantaged groups, mainly Scheduled
Castes and Scheduled Tribes. In the late 1980s, reservations were also
extended to Other Backward Classes, causing protests among the urban
middle class. However, a freeze on new government jobs meant that these
reservations had limited impact. While some progress was made in
education access for these groups, overall socio-economic improvements
have been minimal.
Conclusion

Despite some successes, India’s social policy has largely failed to address
the critical issues arising from economic development. The recent shift
towards neoliberal reforms has exacerbated inequalities, benefiting the
wealthy while leaving many struggling. The financial sector has thrived,
leading to increased wealth for a small percentage, while wages for the
majority stagnate.