Frontline Volume 18 - Issue 24, Nov. 24 - Dec. 07, 2001
India's National Magazine
from the publishers of THE HINDU

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The reform experience


Economic Reform and Social Sector Development: A Study of Two Indian States by K. Seeta Prabhu; Sage Publications, New Delhi, 2001; pages 370, Rs.550.

ONE of the major issues of discussion relating to the economic reforms launched in the country in 1991 has been their impact on the lives of ordinary people, particularly those belonging to the weaker sections. The economic regime that prevailed in the country from Independence to the early 1990s had assigned a special responsibility to the state to protect the right of the weaker sections and to remove the impediments that prevented them from active participation in economic processes. The garibi hatao slogan that assumed the central place in the politics of the country in the early 1970s and the variety of specific poverty eradication schemes that figured prominently in the economic policies of the Central and State governments since then symbolised that collective responsibility of the nation.

The economic reforms initiated in 1991 did not directly call for any change in the commitment of the nation to the weaker sections or to the government's role in translating it into concrete action. In fact the reforms, belatedly at least, emphasised the continuing role that the state should play in eradicating poverty and conceded the fact that the state has to play a positive role in the social sector generally, including social security, education and public health. However, the main thrust of the reforms has been to reduce the role of the state in the economic realm, leaving economic activities to be decided by the market, both domestic and global. The market, allegedly working according to its own impersonal laws, does not have any preferential options for the poor, unlike the state. The actual implementation of the reforms, therefore, becomes crucial in assessing their impact on different sections of society, especially the weaker section.

An empirical enquiry of that kind is what Seeta Prabhu undertakes in the book under review. At the outset she points out that economic reforms such as those initiated in India in 1991 have as their objective changes in policies and institutions to bring about stable balance of payments, reduction in inflation, and the creation of conditions for a high and sustainable rate of growth. Human development is not considered to be a direct objective, although it may be an implicit assumption that it will happen when growth takes place. But the evidence of the past 50 years or so does not indicate that growth by itself will lead to human development. Empirical evidence also suggests that it is possible for certain forms of growth to have an adverse impact on the weaker sections. That is Seeta Prabhu's rationale for a study of how the reforms have affected the social sector. The social sector, in the study, refers to education, health and nutrition as well as poverty alleviation programmes (including asset and employment generation programmes) and social assistance measures such as old age pensions.

On the basis of a comparative evaluation of countries that had undertaken market-oriented economic reforms prior to the 1990s, Latin American and Sub-Saharan African countries on the one hand and South East Asian countries on the other, Seeta Prabhu shows that the former did not and the latter did succeed in having a positive impact on the social sector because the "initial conditions" were favourable in the latter. The favourable initial conditions included fairly egalitarian land distribution, availability of infrastructural facilities, especially in the rural areas, and investment in health and education. These facilities along with a high rate of growth and political commitment to protect the vulnerable sections of society enabled the South East Asian countries to utilise economic reforms to improve the lot of the poorer sections.

Turning to India, Seeta Prabhu's contention is that the country's experience has been similar to those of the Latin American countries. Apart from an all-India analysis, the Indian experience is examined through a case study of two States, Maharashtra and Tamil Nadu. Both States have come to be noted for their social sector policies, Maharashtra for its employment guarantee scheme and Tamil Nadu for some pioneering social security measures. While these policies have been commendable for what they were intended to achieve, and did achieve their goals to some extent, Prabhu makes the significant observation that they were "in the nature of add-on components" that did not seek to alter the structural conditions in any fundamental manner. Further, in both States there had been a deceleration of social sector expenditure since 1985-86.

These two factors together led to a neglect of the social sector in both the States immediately after the reforms were launched. The real per capita expenditure on education decelerated in both States. The expenditure on public health also suffered though it picked up from the mid 1990s. Even Tamil Nadu's ambitious nutrition scheme showed a decline in expenditure of 5 to 8 per cent during the first three years of reform. But because these shortfalls were corrected subsequently, the final conclusion has been that "there was no substantial change in the pattern of expenditure on social sectors during the period of economic reform" in the two States.

In search of more definitive answers, Seeta Prabhu makes an effort to get closer to the ground realities by selecting a few districts within the two States and selected villages in the districts. A great deal of empirical material has been assembled, which will help understand the working of the economy at these levels. These include information on income and expenditure, employment, public distribution, health, education and provisions for social security. This is a valuable contribution of the book. Unfortunately, however, the effort has not been particularly successful in throwing light on the main question: what has been the impact of economic reforms on social sector development? And this for two reasons. The first is that the period studied is the first half of the 1990s when, rightly or wrongly, the emphasis was on macro policies to correct the balance of payments problem, to curb inflation and to contain the fiscal deficit. That period, certainly, cannot be treated as representing the effectiveness of the reforms in their entirety. The second reason is related. During a short period of three or four years, and at lower levels such as a village, a district or even a State, it is not easy to sort out the impact of the reform from other changes which would also be taking place at the same time. If, for instance, employment and wages increase in a village over a period of three years, is it because of the reforms or the setting up of an industrial unit in the neighbouring town? How is the change in agricultural production to be accounted for - in terms of the reforms or in terms of rainfall?

But Seeta Prabhu provides a procedure for enquiry at different levels and arrives at conditions that are likely to determine the outcome. Judged by these criteria, the book is quite insightful.

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