If you believed that the Congress-led UPA government achieved nothing on the economic front this year, think again! It is not every day that you manage to antagonise the entire political Opposition, from the BJP to the Communists, your allies, and some of your own party members as well. Add to that the disappointment of business classes and trade unions alike. The long-suffering aam aadmi and kisan, whose names the ruling combine invariably invoked to justify whatever actions it took (or, as in most cases, did not eventually take), had nothing to cheer them either.

That is no mean feat. It is all the more remarkable because the government is headed by an economist whose sagacity was acknowledged by world leaders coping with the great recession post 2008.
The year began well. The country was basking in the glory of nine per cent growth; the holy grail of double-digit growth appeared as a low-hanging fruit, which was given the official stamp of approval in the approach to the Twelfth Five-Year Plan which followed mid-year. The finance minister patted himself on the back for having beaten the budget-deficit target (reflecting not so much the skills of managing the economy but the bonanza from the 3G spectrum auction) and making small, token allocations to various sub-sectors of agriculture, amounting to little nudges here and there, not quite the big push anticipated.
Come June, and the media went into overdrive, about two decades of reforms and the team that took us there, the chief wizard being none other than the Prime Minister himself. But bad news was already leaking — numbers on growth of output and deficits (trade, current account and budget) were not encouraging. Inflation did not yield to repeated doses of monetary tightening nor to the newspeak of government spokespersons. The term “policy paralysis” came into vogue to describe the government’s response, prompting the elders of the business community to send missives to the government, appealing for urgent action.
The government had to face the embarrassment of withdrawing its much touted sole reform step of permitting foreign direct investment in multi-brand retail when its most important ally threatened to walk away. Whispers, not too sotto voce at that, resounded in the corridors of power that the silence of the good doctor attending to the economy indicated fatigue or worse. As the year ends, food inflation coming down is about the only piece of good news for a government battling scams, political Opposition and strident civil society activists. Growth below seven per cent, Sensex at 16,000 and inflation around nine per cent do not exactly provide festive cheer. Many valid points can explain how the UPA’s seven plump years came to be replaced by a lean one. Most of them arise from our collective failure — more particularly of those in charge of economic affairs — to understand and deal with our core problem. This is the dualism of India, more pithily described by the phrase India vs Bharat.
At Independence, agriculture accounted for 60 per cent of our gross domestic product (GDP) and gave livelihood to two-thirds of the population. This equilibrium gradually eroded as we progressed, with agriculture still continuing to provide livelihood to more than half the population, but generating only a sixth of the GDP. The consequence is clear: the per capita income for those dependent on agriculture is only 20 per cent of that of the remaining population and the gap will widen every year even if agriculture grew at the desired rate of four per cent and the economy at eight per cent. All development efforts would come to nought if the dependence of our population on agriculture does not decline radically. Today, agriculture is the last-resort employer, and the vast majority of the unskilled and uneducated bloat the agriculture workforce.
A humongous population pursuing agriculture as an occupation because it has no other choice is the cause of our poverty. Our aspirational growth of the last decade has made no impact on the fortunes of agriculture — there is no significant shift in employment. Instead of the desired tapering pyramid, our economy resembles a large flat pedestal on which rests a rather thin and tall needle of the elite. We cannot hope to become a labour-intensive, low-cost manufacturing economy as China is in the absence of skills. Harvard professor Lant Pritchett, who has been working in India since 2004, recently characterised our education system as churning out millions with zero skills.
Most of the unskilled and underemployed India lacks even rudimentary purchasing power. The 2011 Global Hunger Index placed India, the wannabe economic superpower, in the “alarming” category at 67th position among the 81 hungriest countries in the world, well behind Zimbabwe, North Korea and Sudan. In response, we have pumped in money to boost not productivity, but directly the purchasing power, mainly through the National Rural Employment Guarantee Scheme, which more often than not takes the form of dole distribution rather than a far more desirable one of creating jobs through building productive assets. Prof. Raghuram Rajan of Chicago University, also an adviser to the Prime Minister, remarked recently that this added income not matched by increased productivity causes inflation.
This will soon be joined by the right to food programme. That, too, in its present form, has all the makings of patronage building palliative, rather than a structural reform, as its celebrated Brazilian counterpart was which successfully used cash transfers instead. Right to food is another palliative, a measure to relieve without curing the chronic malady.
What passes for policy is thus a collection of schemes, which manage to distract us. If we followed the Chinese practice of naming years, 2011 would undoubtedly be the year of the red herring.

The writer taught at IIM Ahmedabad and helped set up the Institute of Rural Management, Anand. He writes on economic and policy issues.