When aspirations collide with realities

The system must be reformed. There must be good dialogues soon with stakeholders about the shape of the reforms; or expect more protests and violence

That India is an aspirational society has become a cliché. The cliché is supported with projections of millions of neo-middle class families wanting to own their own 2BHK homes, send their children to good schools and lead a good life.

However, when aspiration comes up against reality, frustration will spill into anger.

The massive uprising of Patels in Gujarat, the site of Prime Minister Narendra Modi’s Gujarat model of development, seems to have caught many by surprise. In a discussion on TV, the night the army was called in to quell the violence, the predominant theme among the participants was the frustrated aspirations of the Patels. There are too many who cannot find good employment in the state.

In 2005, the World Economic Forum had prepared three plausible scenarios of India’s future, including the likely effects of social and political forces on economic growth.

One scenario was called Bollyworld. Two pictures of forces shaping India accompanied this scenario. In one, peacocks strut in the middle while little birds scramble around them for grain. It illustrated the increasing gaps of wealth and income in the country. Those with the wherewithal, of capital, education, or political connections, seize the opportunities and become very wealthy. The little birds who do not have these resources wait for ‘achhe din’. The other, complimentary picture is a scene of violence, with tigers and wolves prowling in a jungle, and little animals scampering for safety.

The forum’s scenarists pointed to an increasing tension within Indian society with rising aspirations colliding with a growing sense of unfairness in the system. This tension will spill out in violence, they feared, which could stall further market reforms and slow economic growth. They suggested that this scenario, with its mixture of glamour and violence, was like a Bollywood movie. Hence they called it Bollyworld.

Their principal fear was that this scenario can easily slip into another one, which they called ‘Atakta Bharat’ (stuttering India), in which growth will begin to decline. They predicted that if institutional improvements were not made in good time, the growth rates of around 9% that India would soon experience in the Bollyworld scenario (which it did) would decline towards 6% (as it did too).

The less well-off Patels are not the only angry ones. Unrest is simmering among youth in other areas of the country too, for example, around the
high-growth Delhi region. Here too, young people, who are no longer employed on the land (some with lots of money from selling their land), are turning violent. Add to this youth migrating to urban areas looking for decent livelihoods, which are not easy to find. They live in slum-like conditions. Their frustrated aspirations are spilling out in violence—against women, road rage, street brawls and even against the police.

While urban violence is increasing, the violence in India’s tribal heartlands has not subsided.

Meanwhile the rich are reported to be getting even richer, with rising stock markets and soaring executive salaries. The gap between top executive salaries and median salaries in the same companies is reported to have increased tenfold in the last 15 years.

Though India’s gross domestic product growth has recovered from the 6% lows at the end of the previous United Progressive Alliance regime, its sustainability will depend on socio-political conditions in the country, and not merely on economic fundamentals. Economists acknowledge that economic fundamentals depend on many intangibles: such as the mood of markets, the confidence of investors and the trust of citizens in the country’s institutions. Among these intangibles, a fundamental one is the perception of unfairness in the system.

It is difficult to find an objective measure of fairness. For example, what should be a fair differential among top earners and median earners in a firm? Some economists dismiss the concern about differentials, which range to over 300% in many firms. They calculate that if the money that these executives earn were to be redistributed to others, incomes of the less paid would rise very little. According to the American Enterprise Institute, if the $6.75 billion compensation earned by the 500 chief executives of the S&P 500 firms were redistributed to their employees, each would get only $69 more.

The point is not about the additional dollars employees would get. The anger is about differentials and unfairness. Do the high earners really deserve that much? The people below see the system, which is controlled by the high earners themselves, as an unfair one. So they become angry at the system. This was a principal cause of the anger that drove the Occupy Wall Street movement. Nurses, firefighters and soldiers could not accept that financial analysts, stockbrokers and hedge fund traders, all of whom were merely making money out of money, were hundreds of times more worthy human beings than they were.

One solution for this maldistribution of wealth and income, according to some of those who feel they are unfairly deprived, is to demand their share through quotas and laws. With this, the political game shifts to a sharing of the pie rather than increasing it. Sadly, the Indian system, with reservations on the basis of castes, has gone that way. Now many communities, who are a part of the aspirational middle of India and hardly at the bottom, want their share: the Patels in Gujarat, the Gujjars in Rajasthan and Marathas in Maharashtra. This is the recipe for ‘Atakta Bharat’, in which the economy is stifled with demands for grabbing more rather than making more.

The people protesting against the system are not demanding the replacement of capitalism and democracy—at least not yet. They want democracy and capitalism to be improved—to become more inclusive and more fair.

The system must be reformed. There must be good dialogues soon with stakeholders about the shape of the reforms; or expect more protests and violence.

Arun Maira is former chairman, Boston Consulting Group India and member, Planning Commission.

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