Luxury-Led Growth Strategy and Its Beneficiaries

Author(s): Ashok Rudra

Source: Economic and Political Weekly, Vol. 23, No. 27 (Jul. 2, 1988), pp. 1370-1372
Published by: Economic and Political Weekly
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 PERSPECTIVES
discarded concept of illegitimacy and so on.
Luxury-Led Growth Strategy and Its I never cease to feel surprised that not only
has our government, supposedly engaged in
Beneficiaries planning for socialism, not even made a
beginning with anything that may be called
Ashok Rudra a social welfare programme for the country,
but this conspicuous absence is not even
commented upon by the formidable com-
It is not true that there is no income policy in the country. There munity of economists who are forever
is one, a very well thought-out one. That policy is to cut out a engaged in critical discussions about the
very small enclave in the economy which would be provided with performance of our development efforts.
more and more purchasing power and which would in its turn While there is no social security pro-
gramme as a whole, each group of white
provide an ever expanding 'home.market' for our industries.
collar workers and officers in the different
government offices and the different govern-
DIDN'T somebody say that "when teachers to inter-state disparities. Then there are all ment financed organisations have got a
actually calculated the benefits, they found the different public sector enterprises and whole lot of schemes for various perquisites
the real gain was in the Rs 200-300 range"? autonomous institutions each with a dif- and benefits. We began with mention of only
(Gurbir Singh, EPW, September 19, 1987). ferent basket of wages, salaries, allowances two schemes, but there are many others. In
He was not alone to indulge in that petty and various fringe benefits. So forget the rest variety and lack of uniformity they compare
deception. Plenty of pamphlets issued by of the country. Forget the unorganised fairly well with the private sector. There have
striking teachers made similar comments. sector. Even those belonging to the charmed of course always been things connected with
The revision has now been implemented in circle of recipients of income from the housing like quarters, free or at nominal
the Central Universities. I present below a Treasury are subject to gross and arbitrary rentals, and house rent allowances at various
set of fi ures comparing gross salary before inequality, their remuneration in cash and arbitrary and heavily subsidised rates. But
revision and that after revision from the kind having little to do with merit and these have been left far behind by the flood
payrolls of Visva-Bharati Univeisity (see almost everything to do with the chance of money being paid out by way of house-
Table). As one may see, practically nobody factors that determine a particular indi- building loans at heavily subsidised interest
got a benefit of less than Rs 550 and most vidual's entry into one of the many segments rates. Similarly, the provision of office cars,
got benefits ranging from Rs 700 to Rs 1,400. within that circle. This point, of course, restricted till recently to people of ministerial
I have also collected figures about arrear requires substantiation. Some of my research rank and top administrators and executives,
payments. The lowest amount is a little more students are working to gather material that is now dwindling in importance before the
than Rs 8,000 and the maximum amount is would constitute hard evidence. Pending massive loans being given for the purchase
nearly Rs 32,000. For most, this windfall completion of the work, in the present article of motor cars, motor cycles, scooters, etc.
ranges between Rs 10,000 and Rs 20,000. we shall take for granted this state of affairs (These loans are often combined with
This we suppose is enough to dispose of the and try to solve an apparent puzzle, symbo- generous allowances for covering running
protestation that the striking teachers were lised by the very different ways two benefit costs.) There is also the phenomenon of
not after money but only after certain noble schemes function, namely, the LTC and handsome 'conveyance allowances', which
principles. medical reimbursement. are paid whether one travels or not. As to
We shall not dwell any more upon TA/DA, it is perhaps not known to every-
teachers' remunerations. The point is not at
No SOCIAL SECURITY PROGRAMME
body that while travelling abroad our
all why teachers should get what they are get- government officers draw daily allowances
ting or are going to get soon. The staggering To begin with, how shall we characterise at the rate of $ 150 which compares with the
fact is that the teachers, probably the most these schemes? Are they welfare schemes? upper ceiling of $ 80 imposed by the federal
articulate single community in the popula- Do they constitute parts of a comprehensive government of the US. As to lack of unifor-
tion, did not feel the slightest disturbahce social security scheme? By no means. Our mity, for the same city of Calcutta I have
while asking for or receiving pay revisions country calls itself socialist. Yet, after 40 personally received from one central govern-
which. were carried out totally arbitrarily, years of independence and seven five-year ment institution Rs 49 per day by way of DA
outside the framework of any income policy plans, there is not even the beginning of any and from another central government insti-
for the country as a whole; or even a wage social security. The countries of west Europe tution Rs 75, both before salary revisions.
policy for the organised sector alone; or even do not call themselves socialist. Some of the As to holidays, there are the LTC schemes
a framework for that part of the organised political parties there call themselves Social which also reveal fantastic variations. If you
sector which belongs to the public sector or Democrats; but even they would not describe are a central government officer you can
consists of autonomous institutions finan- any of the states in Europe as social travel first class or second class by railways
ced by the government. democratic. These states are full-fledgedly to the farthest corner of the country. If you
One may think that the Pay Commission capitalist. Yet, all these countries have got are a bank officer you can travel AC first
report provides such a framework. That social security schemes of different kinds, class or even fly. If you are a state govern-
covering the entire population. The lead, it
however is just not true. For various reasons. ment officer you may not get any benefit at
First of all, the Pay Commission for the may be remembered, was given by the all if you are in West Bengal; you may travel
central government employees does not con-Labour government of Great Britain after within the borders of Orissa if you belong
tain any policy framework whatsoever whichthe Second World War with the National to that state. In most cases you have to
provides any kind of a rationale for the Health Programme. After that different submit papers showing that you have actual-
disparities in the various salaries and countries followed, not only in the matter ly travelled though cheating on that score is
allowances that they recommend. Then, each of health but also in a large number of other made extremely easy. However, in some
state government sets up its own pay com- fields like education, unemployment bene- organisations you need not cheat; you get
mission. While each of them tries to follow fits, maternity benefits, old age pensions, your LTC for your entire family even if you
the lead of the central pay commission, they provisions for the retarded, a whole range have not travelled at all. Many organisations
succeed to different degrees, thus giving rise of benefits for children irrespective of the provide cheap and comfortable holiday

1370 Economic and Political Weekly July 2, 1988

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homes for their staff in tourist spots. We can
safely predict that soon one will be paid for
international travels by Air India.
Many public sector organisations now
provide loans also for all kinds of
durable
consumer goods. You can now watch films
showing the poverty of the poor by pro-
gressive directors like Mrinal Sen and
Govind Nihalani, sitting in your air-
conditioned drawing room furnished with
the help of loan money.
Then there are the various bonuses and
advances for festivals, flood, drought and
what not. These advances usually do not
represent very large amounts. All the same,
it is a significant indicator of the mentality
of people in the service sector that practical-
ly everybody who is entitled to them applies
for and gets them for their being interest
free, practically no attention being paid by
anybody as to whether one is really affected
by festivals or floods or drought. Talking of
floods and droughts, is it not remarkable
that while development projects have been
drastically cut in the name of the drought,
that reason was not used for postponing the
salary revisions even by a year or putting any
cuts on all the different kinds of consumer
loans to the rich?
None of the schemes mentioned above can
be treated as parts of any social security pro-
gramme even for the microscopic group
having access to them. Social security is a
concept of protection against hazards. None
of the above schemes are designed to pro-
vide any protection against any hazards.
They are meant to meet such needs which,
in the context of our country, constitute
luxuries and not necessities. This is true not
only of the consumption loans for buying
durables and the different advances but also
of house building loans and tour expenses.
House building loans are not given to people
who live in slums. It is given to people who
are already living in apartments or official
quarters. While millions of people live in
unspeakably squalid slums without sanita-
tion, without electricity, and without run-
ning water, the loan receivers move from one
comfortable accommodation to another
even more comfortable accommodation. As
to official tours, there are a few services in
which touring is obligatory. But in others it
is usually discretionary. One would hardly
expect an officer to go on tour if in that pro-
cess he should incur financial losses. As a
matter of fact, in most cases each tour pro-
vides the touring officer with some extra
cash and all kinds of utilities (e g, sight
seeing, meeting friends and relatives, etc).
Insofar as travel is a form of enjoyment,
which easily reach Rs 10,000. Nobody
there cannot be any doubt that official tours
are at least partly a kind of perquisite. Let demands any proofs that the persons travel-
us not forget that those who fly or travel first
ling are really family members. Requirement
class when going on tours usually travel of vouchers is so slack that to travel second
second class when travelling on private class and claim first class fare is a most com-
account. At least the difference in comfort mon practice. The same is true of house-
between these different modes of travel has. building loans, vehicle loans and all other
to be accounted for as a fringe benefit to the
travelling officer.
Fcnnnmic and Political WEeklv JIlyv 2- 19R-
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Medical benefit schemes are the only ones
which can be treated as meeting some kind
of a necessity. Very interestingly, it is in this
field that one finds the least provisions.
Many private sector enterprises provide full
coverage of health protection to their staff,
at least at higher levels. But what is the state
of affairs in the public sector? If you are an
employee of the West Bengal government all
you get is Rs 16.70 per month, irrespective
of your salaty and irrespective of your
illness. If you are a school or college teacher
you get the same. If you are a bank employee
you can get reimbursement up to Rs 500 or
Rs 800, depending on your position against
properly approved vouchers. If you are a
central government employee you are also
subject to some reimbursement rules. There
are provisions for practically everything,
provided you get treatment by approved
doctors or in government hospitals. You can
in some situations also get treatment outside
government hospitals but you will be refund-
ed amounts which are subject to limits
related to rates in government hospitals.
That, too, you can get only if you have filled
up a whole lot of papers and got them
approved by a whole lot of authorities and
processed through very complicated chan-
nels. The fact of the matter is that most
people in the services or in autonomous
institutions do not find, for very good
reason, the conditions in government
hospitals acceptable (excepting when one is
a VIP or when one goes with the recommen-
dations of a VIP). Most government
hospitals do not even provide the medicines
needed for treatment; patients have to pro-
cure them for themselves and thatdeIimits
the beneficiaries of government medical
service. Most people prefer the services of
private doctors, private hospitals or nursing
homes and for these services they get prac-
tically no refund whatsoever. Even when one
is entitled to some refund, one mostly does
not care to even ask for it, such is the
amount of harassment one has to undergo
to get any refund and such is the small
amount one is likely to get even after all such
troubles.
A PUZZLE
I have wondered over a very long time on
what appeared to me to be a puzzle. All the
other benefits are governed by rules which
are so easy to meet or to evade that prac-
tically everybody entitled to them takes full
advantage of them. Take the LTC. Practically
every service holder takes advantage of it
and receives at stipulated intervals refunds
loans that we have ment ioned before.
Whoever is entitled is receiving them with
TABLE
Gross Salary before Gross Salary after
Revision (Rs) Revision (Rs)
1824.00 2586.00
2605.80 3164.00
2652.00 3427.00
2950.00 4405.00
3060.00 4405.00
3625.00 5255.00
3734.00 5555.00
4394.00 6187.00
5175.00 716i
very little of bureaucratic delay or troubles.
How is it that the rules governing medical
reimbursement are such that most people
incurring heavy expenditures on treatment
do not even try to get any refund? (Inciden-
tally, these are not just vague opinions of
mine. A research student of mine is carrying
out a survey among people of the category
NOTICE
It is hereby notified for the information of the Public that
Reliance Industries Limited propose to make an appli-
cation to the Central Government in the Department of
Company Affairs, New Delhi under sub-section (2) of
Section 22 of the Monopolies and Restrictive Trade
Practices Act 1969, for approval to the establishment of
a new undertaking/unit/division. Brief particulars of the
proposal are as under:
1. Name & address of the Applicant: Relianc( Indust-
ries Limited, Maker Chambers IV, 3rd floor, ariman
Point, Bombay 400 021.
2. Capital Structure of the Applicant Organisation:
Authorised Capital: Rs. 2,500 million.
Issued & subscribed: Rs. 1,579.5 million.
3. Management structure of the Applicant Organisa-
tion indicating the names of the Directors including the
Managing/Whole Time Directors & Manager, if any:
Reliance Industries Limited, a body corporate managed
by the Board of Directors consisting of:
a) Shri Dhirubhai H. Ambani, Chairman & Managing
Director. b) Shri Ramniklal H. Ambani, Joint Managing
Director. cl Shri K. Gopal Rao, Director. dl Shri J.R.
Shah, Director. e) Shri M. L. Bhakta, Director. f) Shri T.
Ramesh U. Psi, Director. g) Shri V.V. Divecha, (Nomi-
nee Director of Industrial Credit & Investment Corpora-
tion of India) h) Shri B. D. Shah, Nominee Director, GIC.
i) Shri N.H. Ambani, Executive Director. j) Shri M.D.
Ambani, Executive Dir3ctor. k) Shri A. D. Ambani,
Executive Director. I) Shri Nikhil R. Meswani, Director.
4. Indicating whether the proposal relates to the estab-
lishment of a new undertaking or a new unit/division:
New Unit.
5. Location of the new undertaking division/unit:
Hazira, Taluka-Chorasia, District Surat, Gujarat State.
6. Capital Structure of the Proposed undertaking: The
proposed undertaking will be a unit of the applicant
organisation and therefore will not have a separate
capital structure.
7. In case the proposal relates to the production/stor-
age, supply, distribution, marketing or control of any
goods, articles indicate:
i Name of the goods/articles: Vinyl Acetate Monomer
ii) Proposed Licenced Capacity: 20,000 TPA
iii) Estimated Annual Turnover: Rs. 620 Million
8. In case the proposal relates to the provision of any
service, state the volume of activity in terms of usual
measures such as value, income, turnover etc.: Not
Applicable.
9. Cost of the Project: Rs. 428.9 Million.
10. Scheme of Financing indicating the amounts to be
raised from each source: Promoters contribution- Rs.
92.4 Million. Foreign Exchange Loan- Rs. 86.5 Million.
Debentures/Loan from Financial Institutions-
Rs. 250.0 Million.
Any person interested in the matter may make a repre-
sentation in quadruplicate to the Secretary, Depart-
ment of Company Affairs, Government of India, Shastri
Bhavan, New Delhi, within 14 days from the date of
publication of this notice, intimating his views on the
proposal and indicating the nature of his interest the-
rein.
For RELIANCE INDUSTRIES LIMITED
(V. M. AMBANI)
(SECRETARY)
Date: 23rd June 1988
RegBd. Office: Maker Chambers IV,j3rd floor,
Nariman Point, Bombay-400 021.
we are talking about. Her solid findings will
be published in due course.)
I think that I have finally succeeded in
solving the problem. I have to acknowledge
that I made an elementary mistake at the
very beginning of this article in saying that
there is no income policy whatsover in the
country. There indeed is one, a very well
thought-out one, from which everything
follows. That policy, which is being more
and more systematically pursued from the
beginning of the eighties, is to cut out a very
small enclave in the economy which would
be provided with more and more purchasing
power and which would in its turn provide
an ever expanding 'home market' for our
industries. This enclave does not include
only businessmen and rich farmers but
encolses within its limits all white collar
workers in the organised sector and in
government services, from the clerk to the
secretary. Many among our economists for
a long time made the elementary error of
thinking that luxury products could not be
the basis for the industrial development of
our country. The rich are very small in
number, they argued, and therefore the
market for luxury goods is very limited. The
elementary mistake lay in that the size of a
market does not depend on the number of
customers but on the volume of purchasing
power in their hands. It is in pursuance of
this policy that salaries have been revised
upwards, direct tax rates lowered, exemption
limits raised and more and more schemes
announced for tax exemptions and borrow-
ings at attractively high rates of interest.
Even by these means the target group could
not be provided with enough purchasing
power to create big enough markets for dif-
ferent luxury industries. It is for these
reasons that a huge amount of money is
being pumped into-the enclave by way of
various tied loans at subsidised interest rates.
That is the sure way of expanding the
markets for automobiles, motor cycles and
scooters, house-building materials, etc. As
to the LTC and official tours, they involve
only transfers from one budget head to
another and this helps the railways and the
airlines to present nice-looking balances of
accounts.
A NICE, NON-VICIOUS CIRCLE
How is this particular 'Operation Flood'
to :e financed? Well, the answer has been
with us for some time now. Obviously by
borrowing from the public! That the govern-
ment is more and more meeting its current
expenses with the help of borrowed money
has been noted by various commentators
who have not failed to point to the impend-
ing disaster of a debt trap: by 1992, we have
been told, interest payments would exceed
fresh borrowings. It has however not been
sufficiently appreciated that it is not only
the government that is living on borrowed
money, but the entire salaried.part of the
enclave is also being made to live much
beyond its means on borrowed money. The
1372 Economic and Political W"eekly July 2, 1988
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government is acting as an agent for the standing conflicts with the government of
entire luxury goods industries for prompting India. It is such a pity that it should be so.
hire purchases! There is ohie important dif- It would have been so much better if
ference between the government and this business interests saw to it that one could
pampered section of the public. While the obtain medical reimbursement as easily as
government is getting into a debt-trap, this one gets LTC refunds or consumer loans for
public is not. That is because it is simul- luxury products. It is indeed such a pity that
taneously lending money to the government this one single welfare oriented scheme
at high rates of interest and borrowing should be practically non-working. It is such
money from the government at half those an irony that in a country where poor
or even lower. A nice, non-vicious circle! peasants get into different degrees of
So here lies the explanation for the pro- servitude through consumption loans of
liferation of all kinds of allowances, over- Rs 50 or less and the government has done
times, bonuses, loans, etc, etc. But, then, nothing to get them out of the clutches of
what is wrong with medicines and medical their rich farmer moneylenders, not even in
services? Why are the same forces not giv- leftist West Bengal, there should be such
ing rise to a countrywide medical reimburse- generous provisions for consumption loans
ment scheme? The most plausible explana- for the rich and even that should leave out
tion seems to be that the industries around the most essential item, namely medicine
health-practising doctors, nursing homes, and medical services.
private hospitals and drug manufacturers do Do the militant teachers realise that each
not constitute a powerful lobby in the coun- Rs 10,000 of arrear payment could have pro-
try's politics. There is nobody to exert in- vided consumption loan of Rs 100 to 100
fluence on the government so as to funnel poor peasants? That each automobile loan
government money through patients into theof Rs 80,000 could have saved 800 poor
coffers of drug manufacturers and vendors peasants from the clutches of money-
of medical and nursing services. The drug lenders? Luxury, in our country, is not to be
manufacturing industry is well known to associated only with the extravaganza of the
suffer more than the usual degrqe ofweddings of Madhava Rao Scindias. The
dominance by foreign capital. It is also well lives that college and university teachers in
known that for various historical reasons this country lead is no less luxurious by the
these multinationals have some long- standards of the masses.
INCOME TAX WE COME TO
SURVEY MEET YOU
Income-tax Department is conducting Survey Operations of busi-
ness & professional establishments all over the country.
Survey Team is to help you and its purpose is to widen our tax base
It is in your own interest to extend full co-operation to
Survey Teams.
When a Survey Team visits you, please
- Complete the prescribed form given to you by the Survey
Team, and
- Provide such information as the Team may require.
If you are not a tax-payer and your Income Is taxa-
ble, then:
- Ask the Survey Team to help you prepare and submit the
return;
- If you need any clarification, meet the head of the Survey
Team.
In case of any difficulty please contact yowr nearest I.T.O./ Dy.
Commissioner/ Commissioner/ Director of Income-tax / Deputy
Director of Income-tax (Inv.).
PLEASE REMEMBER
Voluntary disclosure of full and correct income may
save you from Penalty and Interest.
co
co
j n INCOME TAX DEPARTMENT Q
I i r~~~~~~~~~~~~~~~~~~~c
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