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Drought, Dosa Economics And The Dire Subtext Of RBI Governor's Speech

10/02/2016 8:20 AM IST | Updated 15/07/2016 8:26 AM IST
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An Indian farmer pushes his bicycle past a parched paddy field in Ranbir Singh Pura, about 34 kilometers (21 miles) from Jammu, India, Tuesday, July 15, 2014. Delayed monsoon rains have raised fears of possible drought in some regions with the meteorological department reporting an acute deficit in rainfall in many areas, according to news reports. (AP Photo/Channi Anand)

That the government and the Central Bank differ on how to manage the economy is a well-known trope in economics. It is no different in India. The current governor of the Reserve Bank of India, Raghuram Rajan has a differing opinion on many issues -- from the GDP numbers to interest rates and an excessive reliance on exports -- with the Finance Ministry.

On 29 January, Dr Rajan delivered the C D Deshmukh lecture on financial reforms, where he mentioned drought twice in the context of falling inflation. In both instances he used the words "two successive" before drought. It was a barely noticed but significant nugget of information that has ramifications beyond the rarefied circle of policy-making and finance.

Some of the similarities in the themes of social strife coinciding with drought years in India and the present are striking.

"Two successive" just means that the year 2015 is the second consecutive year of drought that India is facing at the national level. To explain its significance let me go back to a talk by environmental historian Mahesh Rangarajan at the Hyderabad Literary Festival in January. He said that in the 20th century there have been only three such instances of back-to-back drought, defined by the Met Department as a deficiency of more than 10% of a normal monsoon and affecting between 20-40% or more of the geographical landmass of India.

The first was 1904-05, the second in 1964-65 and finally in 1987-88. Here is where it gets interesting. Mahesh said that each of these periods was marked by political turmoil.

Events during the colonial period that fuelled unrest include passing the Official Secrets Act in 1904, restricting freedom of the press and the Indian Universities Act the same year to bring them under tighter official control, according to historian Bipan Chandra. The spark that lit the fuse to widespread protest was the partition of Bengal Presidency, interpreted by the nationalists as a move to create differences between Hindu-majority Western Bengal and Muslim-majority Eastern Bengal. Chandra writes in India's Struggle for Independence that the British wanted to prop up Muslim communalists as a counter to the Congress and the national movement.

In 1965 India's economy was stuttering. Droughts in the previous two years had led to widespread crop failure. India imported 15 million tonnes of wheat from America to feed its population, Ram Guha notes in India After Gandhi, leading to a dip in foreign exchange reserves and a devaluation of the rupee.

Dissent around government policy towards freedom of the press, efforts to whip up communal passions, unemployment, cow-slaughter... reading about these led a sense of déjà vu.

Unemployment and looming famine led to protests by students from coastal Andhra cities like Guntur and Vizag to peasants in Bihar. Added to this was a simmering anger among orthodox Hindus on the issue of cow slaughter. Guha writes that in November of 1966 a 100,000 people, many brandishing tridents and spears, marched for a meeting outside Parliament. A confrontation with the cops set off a riot in which sticks, stones, rubber bullets and tear gas were used. Atal Behari Vajpayee issued a statement saying that "the undesirable elements, who resorted to violent activities in the demonstration against cow-slaughter, had done a great harm to the pious cause."

Finally, the late 80s saw another period of social strife around religious issues, social justice and corruption in defence deals.

It is difficult to draw any definite conclusions about the cause and effect between climatic change and social and political strife, though it is easier to link crop failure to an uptick in food prices. Dr Rajan in his speech acknowledges that this time round growth has been high and inflation and the current account deficit low.

However, links are beginning to emerge between climate change, political discord and social dislocation. Commentators have noted the role of climate change and natural resource scarcity as being one of the triggers of the Arab Spring, which sadly has now turned into an "Arab winter". An extreme drought in Syria between 2006 and 2009 has been linked to its violent civil war and the subsequent refugee crisis.

That drought in India leads to increased migration from rural to urban areas is well known. In addition, this blog post in Swarajya Magazine makes a correlation between rainfall deficiency and electoral outcomes.

Some of the similarities in the themes of social strife coinciding with drought years in India and the present are striking. Dissent around government policy towards freedom of the press and control over universities, efforts to whip up communal passions, unemployment, cow-slaughter, corruption, social justice... reading about these led a sense of déjà vu. Haven't we already been there? Haven't we already done that?

In India, history is for the "losers". The backbenchers in school go on to study the subject while the achievers join engineering, medicine or management. A society that neglects its own past or, worse, relies on others to interpret it is condemned to repeat it. Or so goes a popular saying. I can't remember who said that because I didn't pay attention in history class.

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