Dialogue  January - March, 2009 , Volume 10  No. 3


The Economy of Kleptocracy


D. N. Bezboruah*


Kleptocracy, the current malaise of the Indian polity, has the economy of the Northeast totally in its grip. But before I proceed any further, it is perhaps necessary to explain what kleptocracy signifies, since it is a term coined during the pre-perestroika days of the erstwhile Soviet Union. The term kleptocracy was coined by taking the Greek word kleptes meaning ‘thief’ and combining it with Greek -kratos meaning power or rule. During the time of Gorbachev and earlier, blue-collared foremen of Russian factories would take over a factory from the manager, meet his targets of production in two shifts, and produce additional goods clandestinely in the third shift with the state’s infrastructure and raw materials. This would be sold for cash and the loot divided among the workers responsible for the extra production. This is how they stole the state’s legitimate earnings by using the state’s infrastructure, its raw materials, the labour paid for by the state and the state’s time for personal profit. This lucrative business has been further simplified in India for the last two decades or so. In India, there is no need to manufacture anything at all. The smart guys just loot the money straight away by siphoning it off from government funds allocated for specific projects. The projects remain on paper (or there may be a ritual of completing the project with substandard material) and do not benefit anyone except those who manage to steal government money to fill private coffers. The most popular schemes from which such theft is easy are the government’s diverse plans for guaranteeing rural employment  that are initiated at every budget. Schemes like NREGA are very popular with those running the siphoning business. All one has to do is to write down the names of about 300 young men working on a project and actually appoint just 40 or 50. The money supposed to be paid to the 250-odd non-existent youths on the rolls is the money that has got stolen from India. And since it is money from the exchequer, nobody is complaining. In fact, the siphoning of the money has remained so easy despite mandatory audits and so on because this is what even the providers of the funds want. They too are the beneficiaries.

    The difference in the Northeast is that in addition to this form of kleptocracy, there is also the input of terrorism (commonly referred to euphemistically as ‘insurgency’) to make the game a little more exciting. In fact, in the Northeast, where there has been so little of industrial activity in the last 30 years, people have managed to turn terrorism into an industry. It got started as a cottage industry, but has now become a medium-scale industry of sorts. If we give it a few more years, we shall probably see terrorism turned into a heavy industry. This is what happens when the benevolent Centre keeps on giving huge dollops of grants to States even when the States fail to show any performance or even to establish convincingly how and where the money was spent. Contractors in flood-prone Assam who build embankments that collapse unfailingly every year are engaged year after year with no punishment of any kind because they have godfathers among the ministers who protect them. The fact that they cause a great deal of human misery and some deaths every year seems to be of no consequence at all. The blue-eyed boys remain in place, quite immune to the laws of the land for cheating, fraud, causing injury and damage and even for murder.

       As almost everyone knows, the economy of the Northeast is mainly agrarian, with Assam alone having a few industries that might give it a marginal quasi-industrial status in the country. Assam has the oldest oil refinery in the whole country. The Digboi refinery that belonged to Burma Shell at one time and then to Assam Oil Company and is now Indian Oil Corporation’s Assam Oil Division, is about 120 years old. Apart from crude oil and natural gas, Assam produces a lot of tea (over 55 per cent of India’s total production), some coal and some cement. The old saying about Assam’s three industries – tea, oil and timber – is not really valid any more, since much of the timber has been stolen, and rampant smuggling from our forests is the order of the day. Nor has there been much of replanting or regeneration of forests by the Forest Department in evidence over the last few years. As such, one can really talk of only tea and oil as constituting Assam’s economy today, and even the available crude oil in Assam is in short supply. Thus even the oil industry may have an uncertain future without serious efforts at further prospecting and the introduction of new technology into the business of prospecting for oil and natural gas. Assam’s coal has not been able to generate much demand because of its high sulphur content.

     Oil and natural gas can change the face of the region’s economy if all the States of the Northeast are enthusiastic about prospecting. After all, the entire region right up to Bangladesh and Myanmar is literally floating on hydrocarbons. This is proved by the recent findings of natural gas in Bangladesh and Tripura. However, States like Nagaland, Arunachal Pradesh and Manipur do not seem very keen about prospecting. In fact, Nagaland suspended the ONGC’s prospecting activities just after they had got started. So, barring oil and natural gas and a lot of excellent cottage industries in Tripura involving bamboo and cane, the economy of the Northeast is largely dependent on some agricultural produce, desultory attempts at food processing, weaving, pig-rearing and some service industries in a few States that could form the stepping stones to a tourism industry that is also trying to take wing. The service sector is confined mainly to Assam and Meghalaya, while attempts at setting up tourist resorts have been undertaken in several States, with Assam taking the lead in the matter. The efforts are far more visible in Assam because they are not confined to the public sector. In Assam, we have quite a few private entrepreneurs setting up holiday resorts and drawing sizeable crowds to them.

     Like Assam, Meghalaya too has coal deposits and a lot of timber (mainly pine), but the forest wealth of Meghalaya and Arunachal Pradesh too is fast disappearing largely due to the greed of politically powerful lobbies that have legitimized illegal felling of trees. Meghalaya also produces some cement. It is interesting to find more and more small industries being set up in Meghalaya because it is a State relatively free from the menace of terrorism and is better off compared to Assam in respect of electrical power.

    Mizoram and Nagaland have both made successful attempts at launching a garment industry based mainly on the vibrant fabric designs of these two States. This makes a lot of sense for land-locked hill States without the kind of dependable transport facilities that are indispensable for any kind of heavy industry to prosper. Considering the designs being produced in Mizoram and considering that a highly literate and educated fashion-conscious population has taken to the garment-related cottage industry in Mizoram, the fashion industry could have excellent potential there.

     Meghalaya’s economy could undergo a sea change with the discovery of uranium in the State. Mizoram and Assam too are likely to have uranium deposits. However, under the provisions of the Indian Constitution, whatever natural resource occurs below the ground belongs to the Centre. As such, the discovery of uranium is unlikely to make a great difference to the economy of Meghalaya. The State will receive a certain amount as royalty just as Assam gets a royalty on its crude oil. But the royalty determined by the Centre is a pittance when one thinks of the price of crude oil in the Persian Gulf.

    It is a mistake to think of the economy of the Northeast as being agrarian any more. In the case of Assam, the annual floods and the middlemen have put paid to agriculture in the State. About ten years ago, Assam had a sort of a mini green revolution. Agricultural production had gone up in a spectacular manner. The increased production of vegetables saw the prices paid to the producer plummet to absurd levels while the prevailing prices for the consumers hardly changed. In other words, the farmers were being punished for producing more, while the series of middlemen were making huge profits from other people’s work. The mini Green Revolution hailed by Dr Swaminathan himself lasted about three years. Farmers obviously saw no point in committing hara-kiri by producing more. Here is a facet of the economy that hardly gets even noticed by the powers that be, not to speak of the government taking active measures to protect productive and well-meaning farmers against the machinations of a series of middlemen out to ruin them merely on the strength of vegetables being perishable and cold-storage facilities being totally unavailable in the State.

   Even the most elementary article on the economy of a region is expected to be bristling with statistical data. I have scrupulously avoided statistics for the simple reason that these days official data are totally suspect and a lot of cooked-up statistics is beginning to do the rounds to paint the rosiest pictures of development and the economy. A recent study of statistical data furnished in a series of government advertisements has convinced me that such data are likely to remain unreliable until after the Lok Sabha elections.

    Some of the important points that need to be made about the economy of the Northeast are: (a) there is really nothing to write home about in the almost total absence of new industries and investment on industries for the last three decades; (b) the unemployment rate is very high in the Northeast (it is about ten per cent in Assam) because of this lack of investment on new and successful industrial ventures; (c) the culture of easy money (both money siphoned out from government projects and money collected through extortion by terrorist outfits) prevails in several States of the region; (d) some governments like the Government of Manipur openly admit to contractors that a percentage has got to be paid to the ‘underground’ and that the government will not only pay that additional amount but also help in handing over the required amount to the ‘underground’; (e) in States like Nagaland and Manipur, terrorist outfits levy regular monthly ‘taxes’ on all government officers and employees without exception, but even though government employees pay these ‘taxes’ no one will ever admit to paying these levies; and (f) terrorist groups can always decide which contractor should get a contract and can prevent would-be contenders from filing their tenders. Given such a scenario, it is quite pointless to discuss the economic situation of the Northeast. The bottom line is that there is a lot of money floating around, but that most of it is unearned money. In fact, in quite a few of the north-eastern States, we have a whole lot of young people who claim that they are in business, but will never reveal what their business is. Siphoning out money is big and privileged

       The Centre is much to blame for the complete economic stagnation of the Northeast. The present method of flooding a State or a region with money far in excess of what can be handled efficiently and transparently is always sure to destroy any economy. In the case of the Northeast, the Centre’s allocations are 90 per cent grant and 10 per cent loan. This is the best way of ensuring that the culture of easy money without work will prevail for all times. It is a way of ensuring that people here will always detest honest work – especially manual work — and expect to be paid handsome salaries without work. It is also a way of ensuring that the Northeast will always have to keep going to New Delhi with the begging bowl. This is not what a welfare state does to its own citizens, because this is a way of crippling people. What New Delhi should be doing is to give people manual and cerebral skills that will enable them to stand on their own feet and be their own economic masters. This is what needs to be done for the Northeast (by force if need be) rather than giving the region perpetual doles to keep the people incompetent, afraid of work and short of skills. This is what colonizers do when they want to use a territory as a hinterland so that the indigenous people of the territory can never be masters of their own land or their own fate. New Delhi must change its notions of economic justice when the Northeast is concerned.


Dialogue (A quarterly journal of Astha Bharati)

Astha Bharati