Dilip Dutta Development under Dualism and Digital Divide in ......Dynamics of Asian Development...

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Dynamics of Asian Development Dilip Dutta Development under Dualism and Digital Divide in Twenty-First Century India

Transcript of Dilip Dutta Development under Dualism and Digital Divide in ......Dynamics of Asian Development...

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Dynamics of Asian Development

Dilip Dutta

Development under Dualism and Digital Divide in Twenty-First Century India

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Dynamics of Asian Development

Series editor

Anthony P. D’Costa, Carlton, Australia

Editorial Board

Tony Addison, Helsinki, FinlandAmiya Bagchi, Kolkata, IndiaAmrita Chhachhi, Rotterdam, The NetherlandsAkira Goto, Bunkyo, JapanBarbara Harriss-White, Oxford, UKKeun Lee, Seoul, South KoreaR. Nagaraj, Mumbai, IndiaRene E. Ofreneo, Baguio, PhilippinesRajah Rasiah, Kuala Lumpur, MalaysiaMa Rong, Beijing, ChinaAshwani Saith, Rotterdam, The NetherlandsGita Sen, Bangalore, IndiaAndrew Walter, Melbourne, AustraliaChristine Wong, Oxford, UK

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More information about this series at http://www.springer.com/series/13342

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Dilip Dutta

Development under Dualismand Digital Dividein Twenty-First Century India

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Dilip DuttaThe University of SydneySydney, NSWAustralia

ISSN 2198-9923 ISSN 2198-9931 (electronic)Dynamics of Asian DevelopmentISBN 978-981-10-6342-8 ISBN 978-981-10-6344-2 (eBook)https://doi.org/10.1007/978-981-10-6344-2

Library of Congress Control Number: 2017949509

© Springer Nature Singapore Pte Ltd. 2018This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or partof the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations,recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmissionor information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilarmethodology now known or hereafter developed.The use of general descriptive names, registered names, trademarks, service marks, etc. in thispublication does not imply, even in the absence of a specific statement, that such names are exempt fromthe relevant protective laws and regulations and therefore free for general use.The publisher, the authors and the editors are safe to assume that the advice and information in thisbook are believed to be true and accurate at the date of publication. Neither the publisher nor theauthors or the editors give a warranty, express or implied, with respect to the material contained herein orfor any errors or omissions that may have been made. The publisher remains neutral with regard tojurisdictional claims in published maps and institutional affiliations.

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Preface

Structure of the bookEconomic development is generally viewed as a continued socio-economic growthassociated with a set of interrelated changes in the structure of an economy. Thesechanges involve the composition of domestic demand, production and employmentas well as the composition of foreign trade and capital flows. These ongoingstructural changes taken together define the societal transformation of the pre-dominately traditional socio-economic system to a predominately modern one. In aclosed auto-centric capitalist economy or a fully planned socialist economy, thehighest degree of articulation among a society’s modes of functioning may exist.However, in reality, a certain degree of ‘disarticulation’ of any type (sectoral orsegmental) exists in the societal formation of almost every society—economicallydeveloped or less-developed. But the degree of disarticulation is usually more acutein the case of emerging/developing countries that are in the transitional phase—from a predominantly pre-capitalistic or pre-socialistic ‘traditional’ society towardsa ‘modern’ one. As a result, structural dualism has become, in reality, a commonfeature at the very aggregate level of these disarticulated societies. The co-existenceof a modern and a traditional segment does exist side by side within the samegeographical territory of almost all the developed and the emerging/developingsocieties. Although the degree of co-existence in the form of structural dualismvaries from society to society, there is, of course, no doubt that this is much moreaccentuated in the case of the emerging/developing societies.

Chapter 1 focuses on the concepts of societal articulation or disarticulation(segmental/social), economic equilibrium (market/system), nature and laws ofdualistic societies, as well as main characteristics of a dual economy. During thetransitional phase of the contemporary emerging/developing countries, their politicalauthority or regime has been mostly applying the ideology of either state capitalismor state socialism in order to guide the future course of socio-economic develop-ment. The regime under state capitalism borrows socialist ideology—political(one-party state, socialist rhetoric, etc.) and economic (state ownership, planning,etc.)—to accomplish capitalist ends, i.e. the realisation of profit on the basis ofexploitation of the wage labour within a class society. The regime under state

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socialism, especially involving a public–private mixed economy, makes effort toincorporate capital into the State by negotiating with the capitalists and withoutadopting any mechanism of labour repression.

Regarding an appropriate development strategy, every emerging/developingcountry still needs to follow a judicious combination of both planning/policy andmarket mechanisms. However, the variation in degree of such a combinationdepends on the circumstances objectively existing at a given historical moment,particularly under the contemporary globalising forces that began to be felt since theearly 1980s. It is often argued that the path of socio-economic development underglobalisation is becoming mostly a ‘compressed’ one in many developing/emergingeconomies. This compression has been the result of both blurring the stages ofdevelopment as well as the simultaneous occurrence of industrialisation andde-industrialisation under the globalising forces. Towards the end of Chap. 1, recentdecades’ economic outcomes of the development strategies followed by China andIndia have been compared, given that they have been primarily following oppositepolitical ideology, although they are world’s two most populous countries andhappen to be in Asia. Apparently, from the historical point of view, the path ofsocio-economic development in China has followed the traditional stages: fromagricultural development to industrial development, and then to service sectordevelopment, although the industrial sector development has been so fast during therecent decades that it is unparalleled in the world history of industrialisation. In thecase of India, the service sector development in the recent decades seems to haveleapfrogged the industrial sector development that has been somewhat slow overthe decades.

The history of China’s economic reforms since 1978 illustrates that China hascome a long way since the days when entrepreneurs were banned and centralplanning dominated economic life. Her continuous experimentation withmarket-based development—spontaneous marketisation—has certainly been aproven means for her recent economic prosperity. Today entrepreneurship is taughtin Chinese universities, markets set most prices and trade is seen as the way toprosperity. The contemporary Chinese State has essentially been a regime based onState capitalism within a one-party political system, which has helped in advancingits economic growth very rapidly in the recent decades. On the other hand, theIndian State, although had initially planned to build a ‘socialistic pattern of society’after its independence in 1947, but essentially has ended up with a State controlledmixed economy within a democratic multi-party political system. Its mixed eco-nomic structure jointly with public and private sectors had, however, little successin achieving continuously the targets of planned economic growth until veryrecently and only during a few of years over the past two decades or so.

The rest of the chapters are focused on growth and development processesexclusively of the Indian society over the past 70 years (1947–2017). The structuralforces that the Indian society inherited from its pre-colonial and colonial past hadcontributed primarily to its social disarticulation i.e. essentially a mismatchbetween the rate of economic growth and the distribution of income from theeconomy’s demand-side point of view. After the independence from the British

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colonisation over nearly two centuries, the Indian government’s initial developmentstrategy was of higher agricultural growth as a preparatory task for industrialdevelopment, but soon the plan strategy turned to growth in heavy industry. DespiteIndia being a labour-surplus agrarian economy, its agricultural sector developmentstrategy was nowhere near a comprehensive one. The initial planning process ofsuch a supply-side focused growth strategy within a mixed economic frameworkcontributed to a periodic, shorter-run maladjustment in social allocation of capital,which led to a shorter-run segmental/sectoral disarticulation in the form of dis-proportionalities at different levels of the Indian society. The disproportionality atthe macroeconomic level and particularly because of low effective demand becameprominent. From Chap. 2 onwards, the concept of structural dualism as a snapshotof the above dynamic process of disarticulation has been used. This approachfollows the footsteps of the earlier generations of development economists whowere very concerned with the society-wide holistic development of the decolonisedless-developed countries with acute structural dualism during the post-SecondWorld War period. Because growth rate of employment generation could not keeppace with growth rate of labour force over the past seventy years, there has beenhardly any sizable dent on the intensity of structural dualism in labour surplusIndian economy. The focus on structural dualism is, therefore, expected to servethe book’s purpose of analysing Indian society’s overall achievement or failure interms of firstly, the periodic integration of its unorganised (or traditional) segmentinto its organised (or modern) one, and secondly, the application of information andcommunication technology (ICT) for bridging its digital divide. While the formerhas direct implications for tackling structural dualism through socio-economicchannels (e.g. direct measures for poverty eradication, resource and income redis-tribution across states/regions), and the latter has indirect implication for the samethrough technological channels (e.g. setting up of Community Information Centres,making Government services accessible at affordable costs through Nationale-Governance Plan, and technology-enabled Direct Benefits Transfer to the socialwelfare recipients).

Chapter 2 identifies major structural changes and analyses their consequences asa result of India’s development plans (long-term) and economic policies(short-term) adopted during 1947–1980. In order to see any clue for the genesis ofprolonged structural dualism in modern India, the author has looked back to itsplanned development strategies/policies since her independence in 1947 and untilthe contemporary globalisation that begins roughly around the very early years of1980s. This period has been divided into two phases of India’s economicstrategies/policies:

Phase I: Planned development strategies/policies under the Nehru era (1947–64);Phase II: Dilution of industrial licensing system and import policy, and morecontrols (1965–79).

Chapter 2 also examines the widely discussed two major socio-economic con-sequences of structural dualism during the period from 1960 to 1980: (i) industrial

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deceleration during 1966–79, and (ii) widening development disparity among theIndian provinces or states during 1960–80. The implications of these consequencesin terms of the accentuation of India’s structural dualism have been elaborated inthis chapter.

It is often argued that various aspects of globalisation are intentional andreflexive, many globalising forces are impersonal and beyond the control andintentions of any individual or group of individuals and even manydeveloping/emerging countries. In response to the contemporary globalisationprocess, economic liberalisation has been taking place in India–a labour surplusdualistic economy–since the early 1980s. Although India’s economic liberalisationduring the 1980s was slow, more comprehensive policies of economic liberalisationand social sector development had been adopted by the Indian government underdifferent major political parties or their coalitions since the early 1990s. Chapter 3records the economic policy changes that have been made by various governmentssince 1980, which have been divided into three phases:

Phase III: Policy changes towards liberalisation (1980–90);Phase IV: Policy changes towards comprehensive liberalisation (1991–2004); andPhase V: Policy initiatives under comprehensive liberalisation (2005–17).

Many argue that the adoption of comprehensive economic reforms in July 1991was initially, in many ways, erratic, hasty and unplanned. According to the critics, ithad eroded the role of the planning process and aggravated the social problems ofunemployment and poverty, and had also increased India’s external vulnerabilityespecially during the post (comprehensive) liberalisation period of the late 1990s.After highlighting the nature of various changes in the Indian economy, the authorhas examined the validity or otherwise of the arguments that prevailed then in the1990s and also the later ones that have emerged afterwards in the twenty-firstcentury. Although the share of the organised segment in India’s net domesticproduct (NDP) (at factor cost) has increased from 30% during 1980–81 to 44.7%during 2012–13, its share in employment has continuously remained very lowwithin a range of only 5 to 9% of total labour force over almost the same period. Itcontinuously declined from 7.89% in 1991 to 5.70% in 2006 before it marginallyincreased from 5.80% in 2006 to 6.27% in 2012. Consequently, despite the unor-ganised segment’s continuous decline in its share in NDP, it continues to containover more than 93% of India’s labour force (predominantly in the form ofself-employment and/or disguised unemployment).

Chapter 3 also closely looks into an often-quoted argument that economic lib-eralisation in India and its deepening involvement in the process of economicglobalisation have created several related adverse trends such as reduced/stagnantemployment generation, greater casualisation as well as feminisation (especially inconstruction and transportation sectors) and deskilling of the work force in general,which have caused erosion of living standards particularly of the impoverishedsections of India’s unorganised segment. These trends have also given rise togrowing income inequality in general and increased regional disparities in particular,

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because the diversion of industrial benefits going mostly to the industrially advancedstates. Despite India’s self-sufficiency in food-grain production, about 21.9% of itspopulation was estimated to be below the poverty level in 2011–12.

Towards the end of Chap. 3, there is a short section on demonetisation policyadopted by the government in November 2016 as well as the introduction of Goodsand Service Tax (GST) rolled out on 1 July 2017. While the demonetisation isexpected to have potential for integration of a part of the unorganised segment intothe organised one, similar implication of the introduction of GST seems to beminimal at least in the short run.

As has been noted in Chap. 2, India’s prolonged structural dualism with theunorganised segment’s contribution to the net domestic product (NDP) remainedvirtually constant around 70 percentage even after three decades of the so-calledplanned economic development and until 1980. This state of socio-economicunder-achievement, as reflected on more than 50% of people living below thepoverty line during the 1970s, led the Indian planners to search for an alternativedevelopment strategy.

Chapter 4 starts with the government’s adoption of a strategy of ‘DirectMeasures for Poverty Eradication’ in the Sixth Five Year Plan (1980–85). Sincethen, starting with special employment programmes in the 1980s, and then sub-sequently several social sector development programmes have been in operationtargeting both the rural and urban poor. During the 1990s, along with the adoptionof economy’s comprehensive liberalisation policy, the government committed to anexpansion of the scope and coverage of direct poverty reduction programmes.Recognising the importance of proper utilisation of human resources, the govern-ment launched a number of new schemes related to the fields of education, healthand family welfare, housing, water supply, sanitation and employment generationexpected to contribute towards the goals of improving the quality of life andensuring social justice. There had been a substantial increase in the Central PlanAssistance allocations for social sectors and poverty alleviation programmes.Successive governments continued executing several key projects and legislations,including the National Rural Health Mission (2005), National Rural EmploymentGuarantee Act (2005) and Unique Identification Authority of India (2006).Understanding that social inclusion requires financial inclusion as an essentialcondition, and disbursement of benefits needs a systematic channel, the PradhanMantri Jan Dhan Yojna (PMJDY), the biggest financial inclusion initiative in theworld, has been launched by the current government in August 2014. The currentgovernment has also adopted a multipronged policy approach to enable skilldevelopment.

Although there has been a steady increase in the social sector expenditure inCentral Government’s total plan expenditure, total public sector expenditure onimportant social sector heads (such as health and education) remains low comparedwith international standards and even with many Asian neighbours. During thepost-comprehensive liberalisation period, the Indian governments have also beenvery concerned of India’s continued regional inequality alongside with itsincreasing GDP growth rates. Chapter 4 has a detailed analysis on the distribution

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of Central Plan Assistance to the provincial states during 1980–2014. The financialresource transfers to the states had followed a set of criteria that had been revisedover time; such transfers took place until 2014 through fund disbursal by theCentral Government via two channels: (i) grants, loans and advances (plan andnon-plan) decided by the erstwhile Planning Commissions; and (ii) a share ofcentral taxes stipulated by the Finance Commissions. These funds constituted astrong redistributive element for dealing with regional inequalities and had played acrucial role in correcting fiscal imbalances between the Centre and the states(general and special categories).

Coming to power in May 2014, the current government has updated/initiated anumber of social sector-related development programmes with a vision of attainingan inclusive society via proper delegation of responsibility for managing them inco-operation with different levels of government (centre, state and local) asappropriate (co-operative federalism). The idea of competitive federalism has beenlater on added to the initial amalgam of government’s policy objectives in order tomake the states compete each other not only for the attraction of investments, butalso for the better provision of public goods and services. As the current govern-ment turns three in May 2017, a number of social welfare schemes have been foundsuccessful by reaching out to the poorest of the poor. These include (i) MahatmaGandhi National Rural Employment Guarantee Scheme (MNREGS)–the inheritedone from the previous governments, but recast drastically by the current govern-ment; (ii) Assistance to Disabled for Purchase/Fitting of Aids/Appliances (ADIP)scheme has become very effective particularly for the elderly people below povertyline; and (iii) Pradhan Mantri Ujjwalla Yojana (PMUY) launched by the currentgovernment with the objective of providing clean cooking fuel to all parts of India.

Chapter 5 utilises an analytical composite framework of actor-network theory(ANT) and national innovation system (NIS) approach to capture the essence of thesocio-economic dynamics of the evolution of the ICT industry in India. The basis ofANT is the idea that society and technology are composed of networks linkingvarious actors and actants, while the policy-oriented approach of NIS focuses onnational-level analysis for examining the impact of technology on society. Thedevelopment of the ICT industry in India has been receiving considerable statesupport since the 1980s. Over the past three decades, the policy-makers have felt anurgency for connectivity of India’s vast rural unorganised/informal segment withthe counterpart of organised/formal segment initially through telecommunicationtechnology and then through mobile telephones, Internet and other wirelesstechnologies.

Along with a comprehensive coverage of the origin and growth of theIndian ICT industry, this chapter focuses particularly on the growth of India’sICT-enabled service sector that began to evolve in the early 1990s. Softwaredevelopment and information technology-enabled services (ITeS) including busi-ness process outsourcing (BPO), business process management (BPM), softwareengineering R&D services and product development has emerged as one of themost dynamic and vibrant sectors in India’s economy. The growth of ICT serviceindustries in general has created employment, higher urban consumption growth

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and increased demand for technical education, at the both national and regionallevels. During the 2000s, there have been various government incentive policies aswell as initiatives adopted for bridging the digital divide between the technologicalhaves and have-nots, and also between ICT-intensive and ICT-deficit states.

After recognising the potential of broadband services in the creation of anenabling environment for promoting a knowledge-based society, government hadannounced a broadband policy in 2004. In order to make sure that the benefits ofICT-related services reach the common people across the country, the governmenthad also announced a programme in 2004 to establish State Wide Area Network(SWAN) up to the block level in 35 states and union territories for providingconnectivity for e-Governance, along with setting up of Community InformationCentres (CICs) in hilly, far-flung areas of the north-east and Jammu and Kashmir.In 2006, the government approved the National e-Governance Plan (NeGP) formaking all government services accessible to the common man in its locality ataffordable costs. In 2011, a project of National Optical Fibre Network (NOFN) wasapproved for providing broadband connectivity to India’s approximately 2.5 lakhgram panchayats (village governance units). In the same year, another project onthe establishment of National Knowledge Network (NKN) as an ultra-high speedbackbone for e-Governance was also approved by the government.

In 2012, the Government constituted a high-power National Committee onDirect Cash Transfers in a bid to ensure that benefits flowing out of various gov-ernmental welfare programmes go to individuals’ bank accounts electronically,curbing pilferage and duplication. Along with the Unique IdentificationDevelopment Authority of India’s (UIDAI) Aadhaar programme, the DirectBenefits Transfer (DBT) scheme was rolled in 2013 initially in several identifieddistricts before it was widely applied across the country.

Coming to power in 2014 on the promise of good governance and developmentfor all, the present government continues the previous e-Governance initiativesundertaken by various State Governments and Central Ministries. Recognising theneed for further penetration of ICT services domestically, this government envi-sions ‘Digital India’ strategy as an ambitious umbrella programme to prepare Indiafor knowledge-based transformation. One of the important components of thisprogramme is the empowerment of the people through availability of entitlementscoupled with Aadhaar Authentification Platform. A National Rural Internet andTechnology Mission (NRITM) for services in villages and schools, and e-Kranti forgovernment service delivery are the important ones amongst other initiatives. Thecurrent government has expanded the previous government’s Aadhaar program byintroducing a potential large-scale, technology-enabled, real-time Direct BenefitTransfer (DBT) system, namely the JAM (Jan Dhan-Aadhaar-Mobile) numberTrinity solution. The JAM Trinity is meant to drive the financial inclusion measuresas well as make various payments secured through Mobile connectivity, althoughprotection of personal data has been a challenge.

Chapter 6 summarises the recent trends in the Indian society such as overalljobless growth, mass dependence on social sector subsidies, under-funded healthand education sectors, relatively higher digital divide, gradual loss of faith on

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democracy, and above all increasingly high unproductive military expenses. It isconcluded that due to these trends, it is unlikely that the intensity of India’sstructural dualism will be substantially reduced in the very near future.

AcknowledgementsI am very thankful to two persons associated with the publisher—SpringerSingapore Private Ltd. My thanks go to Anthony D’Costa, the Book Series(Dynamics of Asian Development) Editor, for his understanding of why I tookmore time for the completion of the manuscript, as I genuinely felt the need forincluding policy updates on Indian economy until 1 July 2017. I’m also thankful toStephen Jones, Associate Editor, Business and Economics, for his patience on mylapsing of several deadlines for manuscript submission. While I fully appreciatetheir understanding and patience, I must also express gratitude to my inner self,which constantly inspired me for making the book a chronicle of structural dualismduring seventy years of independent India (1947–2017).

Finally, I’m grateful to my wife Pompa, sons–Abhi and Ravi, as well as daughterPritha for enduring my long hours spent at the University of Sydney, roughly from9 a.m. to 9 p.m. on almost daily basis (including many weekends) over the pastthree years. Special thanks also go to each of them: Pompa for packing my lunchand afternoon/evening snacks daily without any complaint ever; Abhi, to keep ahome computer ready for my night-time typing work; Ravi, for his meticulouslycorrecting the typos in the first draft of manuscript; and Pritha, for her constantonline guidance for solving the Microsoft Word-related computing issues. I alsoappreciate Xin Zheng’s help in recreating a number of figures from different issuesof Government of India publication–Economic Survey–exactly in the way I wantedthem to be drawn digitally.

Sydney, Australia Dilip Dutta

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Contents

1 Development Dynamics in Two Dualistic Societies of Asia. . . . . . . . . 11.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.2 Articulation (Segmental and Societal) versus Equilibrium

(Market and System) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.3 Nature and Laws of Dualistic Societies . . . . . . . . . . . . . . . . . . . . . 10

1.3.1 Main Characteristics of a Dual Economy . . . . . . . . . . . . . . 111.3.2 Economic Dualism versus Functional Dualism . . . . . . . . . . 15

1.4 Market and Structural Disequilibrium under Disarticulation . . . . . . 171.5 Nature and Role of State Institution . . . . . . . . . . . . . . . . . . . . . . . . 21

1.5.1 Nature of State under State Capitalism and StateSocialism. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

1.5.2 The Notion of Relative Autonomy of State. . . . . . . . . . . . . 231.5.3 Role of State under State Capitalism. . . . . . . . . . . . . . . . . . 241.5.4 Role of State under State Socialism . . . . . . . . . . . . . . . . . . 28

1.6 Economic Development: Major Views and Strategies underGlobalisation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 321.6.1 Convergence of Structuralist and Institutionalist Views

on Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 371.6.2 Development Strategies under Globalisation in China

and India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

2 Development in Modern India under Structural Dualism(1947–1980) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 452.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 452.2 Organised versus Unorganised Segments . . . . . . . . . . . . . . . . . . . . 462.3 Genesis of Prolonged Dualism under Modern India . . . . . . . . . . . . 48

2.3.1 Phase I: Planned Development Strategies/Policiesunder the Nehru Era (1947–1964). . . . . . . . . . . . . . . . . . . . 48

2.3.2 Phase II: Dilution of Industrial Licensing Systemand Import Policy, and More Controls (1965–79) . . . . . . . . 52

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2.4 Major Structural Changes of the Indian Economy(1951–1980) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 562.4.1 Implications for the Unorganised Segment . . . . . . . . . . . . . 60

2.5 Two Major Socio-Economic Consequences of StructuralDualism (1960–80) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 622.5.1 Industrial Deceleration (1966–79) . . . . . . . . . . . . . . . . . . . . 622.5.2 Widening Development Disparity among

the States (1960–1980) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64

3 Economic Liberalisation and Structural Dualism (1980–2017). . . . . . 713.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713.2 Policy Changes during Pre- and Post-Comprehensive

Liberalisation in India. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 723.2.1 Phase III: Policy Changes towards Liberalisation

(1980–90) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 723.2.2 Phase IV: Policy Changes towards Comprehensive

Liberalisation (1991–2004) . . . . . . . . . . . . . . . . . . . . . . . . . 743.2.3 Phase V: Policy Initiatives under Comprehensive

Liberalisation (2005–16) . . . . . . . . . . . . . . . . . . . . . . . . . . . 763.3 Evaluation of India’s Planned Socio-Economic Development

(1980–2014) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 823.3.1 Diminished Role of the Planning Commission . . . . . . . . . . 873.3.2 Trend in Poverty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 893.3.3 Trend in Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 903.3.4 Major Reasons for Low Rural Income . . . . . . . . . . . . . . . . 96

3.4 Implications of Economic Liberalisation for UnorganisedSegment Employment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 963.4.1 Employment Growth in Rural and Urban Areas

during the Post-Reform Period . . . . . . . . . . . . . . . . . . . . . . 973.4.2 Employment Growth in Unorganised Manufacturing

Sector across the States . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1003.4.3 Informal Segment as a Subset of the Unorganised

Segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1043.5 Demonetisation and Goods and Services Tax (2016–2017):

Implications for Dualism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

4 Role of Social Sector Development Programmes during1980–2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1134.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1134.2 Direct Measures for Poverty Eradication and Social Sector

Development Programmes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1144.2.1 1980–90 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1144.2.2 1991–96 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1164.2.3 1997–2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1194.2.4 2004–2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1244.2.5 2014–2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

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4.3 Government Expenditure on Socio-Economic Services:Composition, Trend and Impact . . . . . . . . . . . . . . . . . . . . . . . . . . . 1294.3.1 Distribution of Central Plan Assistance to the States

during 1980–2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1324.3.2 Interstate Variation in Social Sector Expenditures during

1990–2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1364.3.3 Interstate Comparisons of Selected Socio-Economic

Indicators during 2001–2013. . . . . . . . . . . . . . . . . . . . . . . . 1404.4 Inclusive Growth under Co-operative Federalism during

2014–17 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1464.4.1 The 14th FC Recommendations on Centre–State Fiscal

Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1464.4.2 Cooperative Federalism and Inclusive Policies since the

Mid-2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1494.4.3 Redistributive Resource Transfers (RRT) and Their

Impact on States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

5 Development under Digital Divide in India . . . . . . . . . . . . . . . . . . . . . 1555.1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1555.2 Origin and Growth of the Indian ICT Sector . . . . . . . . . . . . . . . . . 158

5.2.1 Growth of India’s ICT-Enabled Service Sector . . . . . . . . . . 1625.2.2 Software-Specific Incentive Policies

during 1970–1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1635.2.3 ICT-Specific Incentive Policies during 1996–2011 . . . . . . . 164

5.3 Success Story of India’s Telecom and Related CommunicationServices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1685.3.1 India’s New Telecom Policy 2012 . . . . . . . . . . . . . . . . . . . 169

5.4 Digital Divide in India and Government’s Initiatives for ItsBridging . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1715.4.1 Initiatives to Bridge Digital Divide under the UPA-I & II

Governments (2004–14) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1715.4.2 Initiatives to Bridge Digital Divide under the NDA

Government (2014–2017) . . . . . . . . . . . . . . . . . . . . . . . . . . 1855.5 The Overall Socio-Economic Dynamics of India’s ICT Service

Industry during 1995–2017. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1925.5.1 Recent Start-Ups and Dynamism. . . . . . . . . . . . . . . . . . . . . 1935.5.2 Re-skilling: Online Education-Technology Platforms . . . . . 1945.5.3 Online Start-Ups in India’s Informal Segment. . . . . . . . . . . 195

5.6 Post-Demonetisation Initiatives for Digital Transactions . . . . . . . . . 1955.6.1 Bharat Interface for Money (BHIM) . . . . . . . . . . . . . . . . . . 1955.6.2 Aadhaar Pay (or BHIM-Aadhaar Interface) . . . . . . . . . . . . . 1965.6.3 Is Aadhaar a Security Threat? . . . . . . . . . . . . . . . . . . . . . . . 196

6 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199

References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205

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Abbreviations

ACA Additional Central AssistanceADIP Assistance to Disabled for PurchaseAEPS Aadhaar Enabled Payment SystemAIC Accessible India CampaignANT Actor-Network TheoryBHIM Bharat Interface for MoneyBJP Bharatiya Janata PartyBPM Business Process ManagementBPL Below Poverty LineBPO Business Process OutsourcingBSNL Bharat Sanchar Nigam LimitedBWA Broadband Wireless AccessCAG Comptroller and Auditor General of IndiaCAGR Compound Annual Growth RateCICs Community Information SystemsCIS Centre for Internet and SocietyCSO Central Statistics OfficeCSS Centrally Sponsored SchemesDBT Direct Benefits TransferDEITY Department of Electronics and Information TechnologyDEPwD Department of Empowerment of Powers with DisabilitiesDRDA District Rural Development AgencyDWCRA Development of Women and Children in Rural AreasDWCUA Development of Women and Children in Urban AreasEA External AssistanceEAS Employment Assurance SchemeEDS Electronic Delivery of ServicesEPZ Export Processing ZoneFDI Foreign Direct InvestmentFERA Foreign Exchange Regulation Act

xvii

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FFC Fourteenth Finance CommissionGBS Gross Budgetary SupportGCS General Category StateGDCF Gross Domestic Capital FormationGDP Gross Domestic ProductGER Gross Enrolment RatioGFC Global Financial CrisisGNI Gross National IncomeGPT General Purpose TechnologyGSDP Gross State Domestic ProductGST Goods and Services TaxGVA Gross Value AddedHCR Headcount RatioHDI Human Development IndicatorsIATP Income Adjusted Total PopulationIAY Indira Awas YojanaICDS Integrated Child Development ServicesICT Information and Communication TechnologyILO International Labour OrganizationIMY Indira Mahila YojanaIMR Infant Mortality RateINC Indian National CongressIRDP Integrated Rural Development ProgrammeISP Internet Service ProvidersITeS Information Technology enabled ServicesJAM Jan Dhan-Aadhaar-MobileJGSY Jawahar Gram Samridhi YojanaJRY Jawahar Rozgar YojanaLDCs Less Developed CountriesLFPR Labour Force Participation RateMCA Ministry of Corporate AffairsMEITY Ministry of Electronics and Information TechnologyMIT Ministry of Information TechnologyMMPs Mission Mode ProjectsMNCs Multi-National CorporationsMNREGS Mahatma Gandhi National Rural Employment Guarantee SchemeMPLADS Member of Parliament Local Area Development SchemeMRTP Monopolies Restrictive Trade PracticesMVAS Mobile Value Added ServicesNAS National Accounts StatisticsNASSCOM National Association of Software and Service CompaniesNBA Nirmal Bharat AbhiyanNCEUS National Commission for Enterprises in the Unorganised SectorNDA National Democratic AllianceNDC National Development Council

xviii Abbreviations

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NDP Net Domestic ProductNeGP National e-Governance PlanNEP New Economic PolicyNGOs Non-Governmental OrganisationsNIS National Innovation SystemNITI National Institute for Transforming IndiaNJAC National Judicial Appointments CommissionNKN National Knowledge NetworkNNI Net National IncomeNOFN National Optical Fibre NetworkNPCI National Payments Corporation of IndiaNREG National Rural Employment GuaranteeNREP National Rural Employment ProgrammeNRHM National Rural Health MissionNRITM National Rural Internet and Technology MissionNRY Nehru Rojgar YojanaNSAP National Social Assistance ProgrammeNSDP Net State Domestic ProductNSS National Sample SurveyNSSO National Sample Survey OrganisationOBCs Other Backward ClassesOFN Optical Fibre NetworkOTR Own Tax RevenuePHCs Primary Health CentresPMGY Pradhan Mantri Gramodaya YojanaPMIUPEP Prime Minister’s Integrated Urban Poverty Eradication ProgrammePMJDY Pradhan Mantri Jan Dhan YojanaPMUY Pradhan Mantri Ujjwalla YojanaPRAGATI Pro-Active Governance and Timely ImplementationPRI Panchayati Raj InstitutionPSEs Public Sector EntitiesPwDs Persons with DisabilitiesRBI Reserve Bank of IndiaRGLIS Rural Group Life Insurance SchemeRLEGP Rural Landless Employment Guarantee ProgrammeRRT Redistributive Resource TransfersRTE Right to Free and Compulsory EducationRTI Right to InformationSAGY Sansad Adarsh Gram YojnaSC/ST Scheduled Castes/Scheduled TribesSCAoRA Supreme Court Advocates on Record AssociationSCS Special Category StateSDC State Data CenterSEEUY Self-Employment for Educated Unemployed YouthSEZ Special Economic Zone

Abbreviations xix

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SHASU Scheme of Housing and Shelter UpgradationSHGs Self-Help GroupsSJSRY Swarna Jayanti Shahari Rozgar YojanaSMEs Small and Medium EnterprisesSNA System of National AccountsSTAR Standard Training and Assessment RewardSTPI Software Technology Parks of IndiaSUME Scheme of Urban EnterprisesSUWE Scheme of Urban Wage EmploymentSSCs Sector Skills CouncilsSWAN State Wide Area NetworkTCS Tata Consultancy Services LimitedTRAI Telecom Regulatory Authority of IndiaTRYSEM Training for Rural Youth for Self EmploymentUAL Universal Access LevyUBI Universal Basic IncomeUBSP Urban Basic Services for the PoorUIDAI Unique Identification Development Authority of IndiaULGs Urban Local GovernmentsUNESCO United Nations Educational, Scientific and Cultural OrganizationUPA United Progressive AllianceUPI Unified Payments InterfaceUPSS Usual Principal plus Subsidiary StatusUSOF Universal Service Obligation FundUSTTAD Upgrading Skill and Training in Traditional Arts/Crafts for

DevelopmentUTs Union TerritoriesVAS Value-Added ServicesVPT Village Public TelephoneWTO World Trade Organization

xx Abbreviations

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List of Figures

Fig. 1.1 Institutions matter—India and China. . . . . . . . . . . . . . . . . . . . . . . 43Fig. 1.2 Hypothetical growth convergence—India and China. . . . . . . . . . . 44Fig. 3.1 a Low incomes of rural households, b Six reasons why rural

incomes are so less. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95Fig. 4.1 Gross devolution and RRT per capita (Rs. Thousand 2015). . . . . 154Fig. 5.1 Mission mode projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174Fig. 5.2 Integrated approach for implementing NeGP . . . . . . . . . . . . . . . . 178Fig. 5.3 Nine pillars of Digital India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186Fig. 5.4 JAM Trinity in 2014–2015 (The source of the JAM related

figures in 2014–2015 on Jan Dhan disbursement and Aadhaarbeneficiaries is Economic Survey 2015–2016 (Table 1, p. 56),while the source of the figure on India’s mobile teledensityin 2014 is Table 1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191

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List of Tables

Table 1.1 China’s growth in GDP at factor cost in 1996 prices (%). . . . . 40Table 1.2 India’s growth over previous year in GDP at factor cost in

2004–05 prices (%). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42Table 1.3 India’s growth over previous year in GDP and major sectors

in 2011–12 prices (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43Table 2.1 NSS estimates of incidence of poverty in rural India:

1960–1961 to 1970–1971 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52Table 2.2 Composition of India’s gross domestic product

(1951–1980) (at 1970–1971 prices) (per cent) . . . . . . . . . . . . . 56Table 2.3 Composition of India’s industrial structure (1956–1980)

(Sectoral weights (%)) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57Table 2.4 Share of public sector in GDP and GDCF (1951–1980) . . . . . . 58Table 2.5 Performance under the Five-Year Plans during 1951–1990

(Per cent growth) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59Table 2.6 Employment in the organised segment (public and private

sectors): 1961–1980 (Figures in lakh) . . . . . . . . . . . . . . . . . . . . 60Table 2.7 Selected decadal key indicators (1950–1951 to

1990–1991). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61Table 2.8 India’s industrial growth rates: 1959–1960 to

1978–1979 (Per cent Per annum) . . . . . . . . . . . . . . . . . . . . . . . 63Table 2.9 Distribution of household by consumer expenditure (%) . . . . . 64Table 2.10 Inequality in consumer expenditure: 1960–1961 to 1983

(Gini coefficient) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65Table 2.11 Transfer of resources from the centre to the states through

different sources (Rs. Crores) . . . . . . . . . . . . . . . . . . . . . . . . . . 66Table 2.12 Transfer of resources from the centre to the states through

different sources (Rs. crores). . . . . . . . . . . . . . . . . . . . . . . . . . . 67Table 2.13 Widening disparity among the Indian States: 1960–1961

to 1979–1980 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68Table 3.1 Charactersing the exit problem . . . . . . . . . . . . . . . . . . . . . . . . . 81Table 3.2 India’s annual average growth rate . . . . . . . . . . . . . . . . . . . . . . 84

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Table 3.3 India’s population growth (1951–2011) . . . . . . . . . . . . . . . . . . 85Table 3.4 Estimates of poverty in India . . . . . . . . . . . . . . . . . . . . . . . . . . 89Table 3.5 Rates of population growth, labour force and employmenta in

India during 1972–2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91Table 3.6 Total employment and organised sector employment in India

during 1983–2012. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92Table 3.7 Growth of employment by sectors in India during

1983–2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93Table 3.8 Growth of employment (UPSS) by sectors in India from

1999–2000 to 2009–2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94Table 3.9 Share of organised and unorganised segments in India’s net

domestic product/gross value added (at factor cost in currentprices) (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

Table 3.10 Estimates of employment in organised and unorganisedsegments in India (in millions) . . . . . . . . . . . . . . . . . . . . . . . . . 98

Table 3.11 Share of unorganised segment in India’s net domestic productby economic activity (old series at current prices) (%) . . . . . . . 99

Table 3.12 Share of unorganised segment in India’s gross value added byeconomic activity (new series at current prices) (%) . . . . . . . . . 100

Table 3.13 Composition of rural employment (UPSS) by sectors from1993–94 to 2009–10 (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

Table 3.14 Growth of rural employment (UPSS) by sectors in India from1993–94 to 2009–10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

Table 3.15 Growth of urban employment (UPSS) by sectors in Indiafrom 1993–94 to 2009–10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

Table 3.16 Share of major industry groups in unorganised manufacturingemployment across the states . . . . . . . . . . . . . . . . . . . . . . . . . . 102

Table 3.17 Pattern of unorganised manufacturing enterprises across theIndian States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

Table 3.18 Share of informal and unorganised segments in NDP:2001–02 (%). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105

Table 3.19 A list of selected items under five tax slabs . . . . . . . . . . . . . . . 110Table 4.1 Pattern of Five-Year Plan outlays on social services

(Rs. Crore) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114Table 4.2 Selected indicators of social development for major states

in early 1990s . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118Table 4.3 Estimates of poverty in rural and urban India: 1973–74

to 1999–2000 (percentage poor) . . . . . . . . . . . . . . . . . . . . . . . . 120Table 4.4 Estimates of poverty at the state level in rural and urban India

(1973–74 to 1999–2000) (Percentage poor) . . . . . . . . . . . . . . . 121Table 4.5 Central Government expenditure (Plan and Non-Plan) on

socio-economic services (1991–2005) (Rs. Crore) . . . . . . . . . . 130Table 4.6 Trends of social sector expenditure by Central and State

Governments combined (1986–2015) . . . . . . . . . . . . . . . . . . . . 131

xxiv List of Tables

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Table 4.7 Government’s expenditure on health and education as apercentage of GDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132

Table 4.8 Components of Central Plan Assistance (Revenue + CapitalExpenditures) share of states (%) . . . . . . . . . . . . . . . . . . . . . . . 134

Table 4.9 Composition of Central Plan Assistance to states (%). . . . . . . . 137Table 4.10 NSC states’ expenditure on social sector, education and

health, (as per cent of GSDP at current market prices) . . . . . . . 139Table 4.11 Selected socio-economic indicators of India’s major states in

recent years (2001–13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141Table 4.12 Selected social indicators and programmes in India’s major

states in recent years (2010–14) . . . . . . . . . . . . . . . . . . . . . . . . 143Table 4.13 State-wise share in divisible pool of Union taxes . . . . . . . . . . . 147Table 4.14 Grant-in-aid for Revenue Deficit States (2015–20) . . . . . . . . . . 148Table 4.15 Preliminary estimates of gain from additional FFC transfers

from the centre to the states . . . . . . . . . . . . . . . . . . . . . . . . . . . 152Table 4.16 Trends of social sector expenditure by Central and State

Governments combined (2013–16) . . . . . . . . . . . . . . . . . . . . . . 153Table 5.1 Extent of digital divide in India: 2001–2014 . . . . . . . . . . . . . . 172Table 5.2 List of 25 schemes implemented for Direct Benefit Transfer

(DBT)—as on 10.04.2013. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183Table 5.3 Objectives and key principles of e-Kranti . . . . . . . . . . . . . . . . . 188

List of Tables xxv