The noted economist, Amartya Sen, believes that if current economic trends continue, then one half of India may become like California while the other half would resemble sub-Saharan Africa. Radical critics go even further than that. They go to the extent of suggesting that at best, 10 per cent of India would resemble California and the remaining 90 per cent would be reduced to the sub-Saharan level. One may believe either of the two opinions, but the question that needs to be asked is: who is responsible for this sad state of affairs?

Leftist critics blame the process of liberalization for the plight of the poor in India. Is the criticism levelled by the leftists justified? Or can one say that the state, rather than the market, is the principal villain here? The unpleasant truth is quite different though. Even before liberalization efforts replaced the old-style central planning in India, the country?s performance in either economic growth or poverty reduction was nothing to write home about, especially when compared with that of some of the fast growing east-Asian economies.

The problem with the Indian government was that it was doing too much and too little at the same time ? too much in areas where the private sector could do the job equally well, if not better. Public sector units were producing goods from bread to scooters to cars, and in many cases, they were incurring heavy losses. The state was doing too little in areas like developing and maintaining physical (power, roads, transport, communication) and social (basic education, health services, sanitation, drinking water, social safety net) infrastructure and in providing a responsible administrative system and speedy justice for all.

The people who suffered the most were the poor and the underprivileged. The market would bypass them as they possessed very little purchasing power. The government machinery was either ineffective or corrupt or it was busy looking after the affluent and the well-connected. For instance, foodgrains were rotting in FCI godowns while people died of starvation in remote areas of the country. Public money was used to create rural roads that got washed away by the rains. Contractors, local officials and various middlemen prospered at the expense of the intended beneficiaries. Subsidies meant for the poor were largely usurped by rich farmers and powerful industrialists. Both growth and equity suffered in the process.

The quality of services doled out to poor patients in public hospitals was appalling but the rich and the famous could get far better treatment in special wards. The children of the affluent classes would attend private schools that imparted education of a higher quality. Their parents also had the means to engage private tutors for their wards at a time when the quality of education in government schools was deteriorating at a fast pace.

The average growth rate of the Indian economy has improved in the post-liberalization period. The percentage of people living below the poverty line has also gone down. However, one should recognize that the fall in poverty ratio was evident even during the pre-liberalization era. So there is very little to choose between state-led and market-led development as far as reduction in poverty ratio is concerned. The condition of the poor remains as bad as before.

In fact, for the really poor ? those below the poverty line ? the impact of liberalization is far less important than what the government is doing for them. Their major concerns are that foodgrains do not reach the ration shops in remote areas at a time when government godowns are bursting at the seams. Moreover, they have to do without proper treatment at government hospitals which suffer from an acute shortage of beds and medicines. In many villages, primary school teachers are often absent from the local schools and, in many cases, they do not teach the poor children even when they are present. All these facts have nothing to do with liberalization or the efficiency of markets. These are the areas of government failure which have to be tackled by reorienting the administration at different levels. The truth is that a democratic India has failed in its duties to wards the real poor. There is no point in blaming the World Bank, the International Monetary Fund or the market for the abysmal quality of public services available in India.

Liberalization and the market economy may have increased the scope of opportunities. But one needs to have certain skills and assets to convert these opportunities into income. The basic problem of the poor in India is that they do not have the necessary skills or products to sell. They are often located far away from the market, which makes it impossible for them to conduct their business in a profitable manner. The solution lies in entitling the poor to land and other resources, providing them with educational opportunities and in improving the connectivity of villages to the markets. Roads, transport, electricity, communication, refrigeration, storage facilities and information about prices in alternative markets should also be made available to them. Farmers, entrepreneurs and small enterprises need to have timely access to finance at affordable rates of interest and insurance against crop and business failures. In addition, poor people also need a social safety net when they are out of work, old or sick. The recently introduced Rural Employment Guarantee Scheme ? under which the rural poor would be entitled to at least 100 days of employment at the minimum wage rate ? is an initiative that is too little and has come too late in the day.

Given that two-thirds of the population still depend on agriculture, agricultural prosperity and employment in rural areas would go a long way in improving the condition of the masses. The real problem with Indian agriculture is that it is too localized. It often does not cater to the global market. If international prices and markets dictated agricultural production in India, then farmers would have produced more of fruits, flowers and vegetables and less of foodgrains which finally end up in government godowns. For instance, a cut rose gets double the price if it can reach the market in Amsterdam within a day. But to avail this high price, a farmer would require refrigerated vans to be stationed at the field, good roads to transport the flowers quickly to the airport and a mechanism to load the consignment onto the air cargo in the shortest possible time. Most of these infrastructural problems would have to be tackled by the governments ? Central, state and local.

Thus, India?s problem is not too much reliance on markets or globalization. Rather, the problem lies in the limited involvement of the government in areas such as land reforms, provision of education and health services, subsidized food and housing to the poor and development of basic infrastructure. This failure on the part of the state has hampered the majority of the poor from making use of market opportunities .

Markets are not the problem. They are part of the solution, but only a part. There is no doubt that monitoring by independent regulators is a must to prevent markets from being rigged by the rich and the powerful. Further, markets need to be supplemented by an active and effective administration to help build capacity to exploit the opportunities available. A crucial component of the package would have to be empowerment of the poor so that they demand and get the necessary support from the government in building up the necessary capa- city. Once that capacity is created, productive job opportunities through the market would benefit the poor as well.

In other words, there are some very good reasons for the poor in India to hold the state responsible for their sub-Saharan existence for nearly six decades after independence.