In this interview, economist Prabhat Patnaik highlights contradictions in India’s economy, emphasising that while India may soon rank as the world’s third-largest economy, it struggles with deep-rooted poverty hunger, and unemployment. He argues that neoliberal policies have exacerbated inequality and unemployment, with GDP growth benefitting only a small elite.
Patnaik critiques the reliance on artificial intelligence for employment solutions, warning of widespread job losses and increased inequality. He also calls attention to the impact of privatisation on health and education, worsening nutritional poverty and public welfare.
Internationally, he links India’s situation to global neoliberalism and warns of the rise of ‘neo-fascism’, where corporations align with divisive political forces to preserve power. Patnaik proposes a shift to constitutionally guaranteed economic rights, funded through wealth and inheritance taxes on the wealthiest, to ensure basic needs for all citizens.
Prabhat Patnaik. Photo: Wikimedia Commons/Sreejithkoiloth (Creative Commons Attribution-Share Alike 4.0)
On the one hand, S&P global ratings has predicted that India will be the third largest economic powerhouse in the world by 2030, that is, after the USA and China (with its monetary worth reaching 30 lakh crore dollars). On the other hand, the Global Hunger Index, in its latest report, has claimed that India is ranked a dismal 105 among 127 countries most afflicted by hunger. Which estimate between these two – diametrically opposed to each other – reflects and represents genuine Indian quotidian reality?
We have to keep two preliminary points in mind. First, the large population of India makes it a large economy; in fact, it is already the third largest economy in the world today if we take not the nominal exchange rate but purchasing power parity to express our GDP in dollar terms. But being a large economy does not make us into a developed country. Secondly, all these figures of GDP and its growth rate are highly contested both conceptually and statistically and should not be taken at face value.
Now, coming to your question, both propositions you mention are true: the third largest economy of the world is 105th in terms of the Global Hunger Index; and that captures the contradiction of our growth experience under neo-liberal capitalism. Along with a supposedly high GDP growth rate, we have had a massive increase in economic inequality; indeed, according to the World Inequality Database, inequality today is greater than at any time over the last hundred years. In fact the extent of absolute poverty measured in terms of nutritional deprivation is worse today than in the early nineties when neo-liberalism, and the supposedly high growth-rate began. I shall return to this point later.
Instead of preening ourselves about the size of our economy, we should be worrying about the poverty of our people. John Stuart Mill had said that he was not worried about the prospects of a stationary state (zero GDP growth) if the workers were better off under it. He was absolutely right, the living conditions of the working people is what matters not how large our GDP is.
Severe unemployment in the rural and the urban sectors is an intrinsic part of this actuality. In fact, the rate of unemployment has broken all record, it is now close to 8%. It seems that the ruling dispensation has stopped thinking about this curse. Is this situation burdened by lack of investment by the private sector and dismantling of the public directly related to the practice of myopic neo liberalism?
In a neo-liberal capitalist economy, even when it is not afflicted by any crisis, there is a tendency for employment growth to be sluggish. This is so for several reasons: first, trade liberalisation increases competition among producers belonging to different countries which forces rapid changes in processes and products and accelerates the growth rate of labour productivity. Since employment growth rate is the excess of output growth rate over that of labour productivity, an acceleration in the latter slows down employment growth even when GDP growth is higher. Secondly, the rise in income inequality changes the pattern of consumption. Since the poor consume goods that are more employment-intensive, a loss in their relative income share slows down employment growth. Thirdly, the squeeze on petty production because of encroachment by large enterprises (Amazon replacing small shopkeepers) harms employment. In India, employment growth has slowed down so much that it has been even lower than the natural rate of labour force growth, leading to a higher unemployment rate even before the crisis began. To this the worldwide stagnation under neo-liberalism, arising from over-production owing to increasing income inequality (as the poor consume a larger proportion of their incomes than the rich), which also impacts India, has added further.
To these factors arising from the immanent tendencies of neo-liberalism, our government’s folly in demonetising currency-notes and introducing the Goods and Services Tax (its very introduction was deleterious), both of which left a permanent impact on the small-scale sector, have added significantly. Unemployment in India is not so much of persons as of person-days: a given amount of work gets rationed out among more persons so that everybody appears employed, though they are unemployed on more days than before. And this is in addition to unpaid women’s work in household enterprises which is erroneously counted as employment.
The rulers, however, are shouting hoarse over the possible flowering of artificial intelligence over probable tie-ups with the giants which, they claim, would create new avenues of employment. Is this claim worth its salt? Or will AI only create a very slender techno-savvy creamy class which will primarily serve our plutocratic system?
There is much talk of India emerging as an AI hub; but there seems very little concern over the destruction of jobs that AI will bring about in the country. After all, a country cannot emerge as a hub without also being a user of AI; and, in any case, international competition will ensure its domestic use.
The employment destroying effect of AI was signalled recently by the Hollywood writers who had gone on a strike. No doubt, a slender techno-savvy creamy layer will be employed in this sector, but this will be more than offset by mass unemployment. This calls for control over AI use which is not possible under neo-liberal capitalism.
Let us confront three shocking truths. One, no fewer than 800 farmers committed suicide in Vidarbha last year, a region which belongs to Maharashtra, a state that boasts of attaining the highest GDP in the country. Two, 24 crore Indians are wallowing at this moment in despairing poverty. Three, 80 crore families in the country barely survive on doles granted by the government. These three truths emphatically underline even further the dismantling of the minimal welfare system, especially the calculated indifference shown towards the two crucial sectors, health and education. Amartya Sen repeatedly emphasised the worth of these two in his enunciation of the concepts of ‘capabilities’ and ‘real freedom’. While the sphere of public education is under the assault of rampant privatisation; malnutrition, which affects 14% of the population, acts as the most telling comment on our system of health. Am I right in my evaluation?
Things are even worse than what you suggest. Undernourishment affects only 14% of the population if you take 1800 calories per person per day as the benchmark, which is too low. The erstwhile planning commission had taken 2200 calories for rural India and 2100 calories for urban India as the benchmarks for defining poverty. If we use the same benchmarks for undernourishment then the figure would be much higher.
In fact, the percentage of rural population below the benchmarks increased from 58% to 68% between 1993-94 and 2011-12; the corresponding figures for urban India were 57% and 65%. In 2017-18, the percentage for rural India increased to over 80%, while remaining broadly unchanged for urban India, which makes the poverty picture on this criterion much worse than you suggest. These figures in fact were so shocking that the NDA government withdrew the 2017-18 NSS report from the public sphere and changed the method of data collection. As a result, the 2022-23 NSS figures, expectedly painting a rosy picture, are not comparable with earlier ones and are themselves shrouded in mystery.
True, post-Covid, the government is giving 5 kg per month of foodgrains free to about 80 crore persons; but this, even assuming it gets to the beneficiaries, largely offsets the decline in monthly foodgrain consumption that had occurred between the late eighties and the eve of the pandemic in rural India. This growth in nutritional poverty in the intervening period is itself because inter alia of the increase in education and healthcare costs owing to the privatisation of these services.
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Now to the global perspective: neo-liberalism is on the rampage throughout the world? It is the mantra in the present global context intensifying economic inequality and promoting massive corporatisation. Your book on this subject will be published soon. Will this lead to a worsening of the economic situation in our country? It would no longer be an example of “uncertain glory,” the mild expression coined in the past by Sen and Jean Dreze. What is your opinion on this comment?
Neo-liberalism has already worsened the condition of the working people in the country, and there is no “uncertainty” about it. The stagnation of world capitalism that set in after the collapse of the U.S. housing bubble has recently become even more acute, accentuating an already precarious unemployment situation both in India and elsewhere. In this context, one sees a global tendency towards the ascendancy of neo-fascism. The corporate-financial elite in several countries is forming an alliance with neo-fascist elements to ward off any threats to its hegemony. Such an alliance provides a diversionary discourse by fomenting hatred against some minority group, and in the process seeks to break the unity of the working people that could challenge the hegemony of international capital and the domestic corporate elite integrated with it.
All the features of classical fascism are visible in neo-fascism: a close nexus between such fascist elements and monopoly capital, especially a stratum of new monopoly capital; the unleashing of state repression against political opponents, critics and all independent intellectual activity; the use of vigilante gangs to supplement state repression; the “othering” of a targeted minority; and the promotion of a cult of the “leader” whose views supersede rational discourse. The corporate-Hindutva alliance in India expresses this bonding between neo-liberalism and neo-fascism in the context of the crisis.
There is however a major difference between classical fascism and neo-fascism; the latter cannot overcome stagnation through larger government expenditure as the former had done through deficit-financed government spending on armaments. If government spending is to increase aggregate demand then it must be financed either through a fiscal deficit or through greater taxation of the rich who save a part of their incomes; taxing the working people and spending the proceeds does not increase aggregate demand as they spend the bulk of their income on consumption anyway. Both these ways of financing larger government spending however are opposed by globalised finance; and with globalised finance facing the nation-state, the form’s writ must run if a capital flight is to be avoided. A neo-fascist government therefore is as incapable of overcoming stagnation as a liberal democratic government under neo-liberalism.
Some months back you told me that the economic reality of India is no better than that prevailing in the states of Sub-Saharan Africa. Do you still cling to this devastating conclusion?
Yes, absolutely. The Global Hunger Index released in 2024 has a score of 27.3 for India and of 26.8 for Sub-Saharan Africa (a lower index is better). The Indian government’s response when any such figure comes out is to decry it. But the point is not how good the Global Hunger Index is; when a mass of data show an alarming picture, instead of running down each such datum, our objective should be to bring about an improvement in the real situation.
Whatever succour is provided to people in India is invariably presented as a largesse on the part of the government, for which they should be grateful; this is demeaning to their dignity. Instead, there must be the institution of a set of universal, constitutionally-guaranteed and justiciable economic rights that every citizen must enjoy on a par with the currently-guaranteed fundamental social and political rights. A set of five such rights: right to food, to employment, to free healthcare through a national health service, to free education provided by the state and to a living non-contributory old-age pension and disability benefit can be financed by levying just two taxes on the top 1% of the population, a 2% wealth tax and a one-third inheritance tax on what is passed on to progeny. This is eminently feasible, the point is to do it.
Subhoranjan Dasgupta is a professor of human sciences, author of several books in English and Bengali and a columnist.
