As Pushpa Sundar points out in For God’s Sake (2002), arguably the most famous temple in India—the Tirupati Temple in Andhra Pradesh, dedicated to the Hindu god Venkateshwara (or Vishnu the preserver)—is visited by approximately 40,000 pilgrims daily. The Siddhivinayak Temple, a famous temple dedicated to the Hindu god Ganesha, is visited by 160,000 devotees on the birthday of Ganesha (a day known as Ganesh Chaturthi). The Golden Temple in Amritsar, the main site of pilgrimage for Sikhs, attracts 30,000 people every day.

These figures testify to the sheer volume of pilgrims that some of the most famous temples in India receive. But it is not temple visits alone that generate resources for religious institutions. Devotional music in India is approximately one-third of the audio music market, which is worth 400 crore. The visual media has not lagged behind, since religious channels on television offer religious discourses twenty-four hours a day.

Religious services (or pujas) can now be ordered online from various religious institutions across India, and religious offerings (or prasadam) are now routinely delivered through the postal service, both nationally and internationally. Based on survey data on 6,400 households in fourteen Indian cities, Pushpa Sundar estimates that in 2001 the average amount donated to any religious group in India was 481, and that the total amount donated in that year was 475.9 crore.

Although the poor regularly go to places of religious worship, members of the middle class contribute the most money as donations to religious organizations. She estimates that in terms of the average household donation, Christians give the most—followed in order by Sikhs, Muslims, and Hindus. An interesting recent development is the demonetization of the 500- and 1,000-rupee notes on 8 November 2016, by the Indian government. Since this immediately affected temples, many rapidly responded to help protect their donations, and many temples are now introducing e-wallets or setting up ATMs within their premises.

Republic of Religions

But why should an economist be interested in places of worship and the religious services that they provide? I argue that this is because the provision of religious services today displays many features that economists would recognize as those of competition or innovation. These features have become particularly pronounced since India’s economic growth and productivity began to increase in the 1990s.

Philospher N. Mukherji points out in Religion In Indian History (2007) that annual growth in gross domestic product (GDP) had increased to 6.7% in the 1990s and the Indian corporate sector and multinational corporations grew rapidly, even as employment growth fell from 2% in the 1980s to 0.98% in 2000, and the use of the public distribution system for subsidized grain declined in the 1990s. Although 20% of the population had become middle class, the remainder of India had become, in economist Utsa Patnaik’s words, a “republic of hunger".

Patnaik links communalism to developments in agriculture, although as Mukherji points out, a similar collapse of the rural economy happened in the 1950s and 1960s without the rise of communalism then. Mukherji thinks that this is due to the rise of effective people’s movements in the 1950s (particularly around food) that created good political actions. My view is that in the more recent phase, people formed groups around religion rather than around politics.

One of the themes of this book is the links between religion, competition, and inequality. When there is some economic inequality and poverty is high, religious organizations may provide more non-religious services, such as education and health services. These qualitative perceptions are based on detailed field notes and descriptive statistics generated by a unique dataset (the India Religion Survey), which also forms the basis of this book. Between 2006 and 2010, a team of investigators based in Cambridge, England, and Delhi, India, conducted the first large-scale economic survey of religious institutions in India with a view to understanding their economic, innovative, and competitive behaviour.

Religious ‘club goods’

In this study, non-religious services are those services provided by the religious organization for which secular substitutes (services such as government-run schools and hospitals) are available. The organizations in the survey provided a range of non-religious services. The organizations were asked if they provided various types of services, including those related to education, health, employment, food distribution, and childcare.

Compared to the period before 1991, religious organizations across the board have increased their provision of all non-religious services. This is an important finding. The most common services provided are education, food distribution, and healthcare, followed by childcare, and then employment.

One possibility is that non-religious services are being provided by religious organizations to compensate for the lack of public provision. It is noteworthy that over half of the sample of 568 religious organizations spread across seven large states provided food and over 60% provided education in the post-1991 period.

There are striking variations in the provision of non-religious services before and after 1991 by religion. Hindu organizations are more likely to distribute food, while Muslim and Christian organizations are more likely to provide education. It is not surprising that Christian organizations, many of which have been providing education through missionary and other activities since the colonial period, continue to do so. The fact that Muslim organizations provide so much education is more unusual.

Religious organizations in all the states in the survey increased their provision of non-religious services from before 1991 to after 1991. In some states, like Uttar Pradesh, the organizations provide a great deal of these services. Compared to organizations in other states, those in Madhya Pradesh provide a great deal of food distribution. Thus, poverty and inequality might lead to religious organization membership.

The organizations explained that the provision of these services was a key way of propagating their faith and gaining adherents. Over 55% of the organizations thought that this was very important after 1991, a substantial increase relative to the period before 1991.

The changes we observed in the provision of non-religious services may be related to wider changes in the Indian economy since 1991. Education and health are the dominant social services provided, although organizations did venture into different areas such as cow lending.

Inequality and radicalism

This analysis does help explain the disturbing and seemingly paradoxical growth of religious conflict in India in the face of technological progress and economic growth, which scholars have traditionally viewed as a key source of secularization. The paradox is resolved by recognizing that economic growth often increases inequality. One disturbing but perhaps unavoidable result of inequality within and between the members of different religious groups is to push competing religions to become more doctrinally differentiated (or more radical or polarized), while also becoming more active in providing non-religious social services.

Though it is unclear whether these tendencies raise or lower welfare overall, they clearly represent a response to concrete needs and underscore the danger of policies that seek to reduce material inequality without reference to religion—as well as the danger of policies that seek to reduce religious conflict and extremism without reference to material needs.

I suggest that the economic differences between Hindus and Muslims may contribute, through the channel of religious competition, to the rise of Hindu fundamentalism in India since the nineteenth century, and especially since independence. I feel that any debates about fundamentalism in India must take into account economic inequality and the insecurity of the poor. In any democratic society, there are bound to be social divisions related to religion, caste, or other identities. Policymakers need to know not just what are the drivers of inequalities among religious groups, but also what are the consequences of these inequalities in the long term.

Our findings show that as income inequality is increasing in India, members of all religious groups are demanding more education, jobs, healthcare, food distribution, and other services that are affordable and of good quality. Such services may not be adequately provided in all states by the government, and that is where non-state entities step in.

Religious organizations are such entities. This pattern is not unique to India. As much research on other developing and developed countries has shown, in the presence of a welfare state, the demand for services provided by religious organizations is reduced, and in some countries, as public services have increasingly been provided over time, the influence of religion has weakened.

From a policy perspective, the need is for better secular provision of services as a way of limiting the need for religious organizations to provide them. This must be the core development strategy if policymakers are concerned about religion, and radical religion in particular. The simple message is that better state-provided public services now can minimize religious conflicts in the future. Counter to other analyses of the role of religion in development, I argue that religious organizations may then have a very positive role to play in economic development, if their energies are harnessed correctly. How religion and religiosity evolves in the future has enormous significance for policymakers in all nations.

Sriya Iyer is Bibby Fellow and economist at the University of Cambridge. This extract is from her book Economics of Religion in India, published by Penguin.