Periods of crisis often highlight the necessity for a fundamental reorganization of society. This was evident in the 19th century when liberal democracy, plagued by exploitation under capitalism, forced revolutionaries to seek better alternatives.

2. The Rise of Collectivist Doctrines

• A significant number of these radicals were influenced by new collectivist doctrines, which proposed transitional dictatorships and centralized economic planning as solutions to the defects of liberal democracy and capitalist exploitation.
• The initial enthusiasm of the revolutionary age waned when the "spectre of communism," which had once posed a threat to capitalist hegemony, itself degenerated into dictatorship. The simultaneous rise of 20th-century fascism created a political landscape characterized by outright dictatorships on one end and what some deemed the mere panacea of democratic formalities on the other.
• At the end of the Second World War, with millions dead and the world in chaos, many former champions of humanity's problems saw dictatorship as no solution. Yet, the challenge of reconciling the aspirations for freedom with the desire for justice remained as perplexing as ever.
• During this period of social crisis, Indian freedom fighter and humanist philosopher Manabendra Nath Roy, along with his Marxist colleagues, developed a theory they believed offered a solution. They called it radical democracy.

Scientific Philosophy and New Humanism

Before outlining a radical democratic political economy, it is essential to establish a scientifically consistent philosophical outlook. Manabendra Nath Roy and his colleagues developed the philosophy of new humanism to this end. They argued that humanism, as ancient as human beings, could be enriched by discoveries in scientific thought. This enriched humanism, best described as ‘scientific’ or ‘new’ humanism, integrates contemporary understandings of the natural world.

Rationality and Secular Morality

Roy and his fellow radicals emphasized the capacity for rational thought inherent in human behaviour. They posited that “morality results from man’s intelligent response to his surroundings,” and thus can be deduced from innate rationality. In his work "Reason, Romanticism and Revolution," Roy asserts that reminding individuals of their biological heritage can help them regain faith in themselves and rectify past harms. The realization of secular rational morality provides a new perspective for the modern world. Concepts such as human dignity, sovereignty, and creativity gain significance when they stem from the individual's rational faculty rather than divine decree.

The Possibility of Revolution

In his "New Orientation," Roy contends, “Revolution is not inevitable.... Fundamental changes in the structure of society occur only when a group of individuals feel the necessity, see the possibility of fulfilling it, and develop the will to bring about these necessary and possible changes.” Thus, individuals, aware of their capacity for reason and motivated to reshape their conditions, can cooperate to develop a just and free society.

The Illusion of Traditional Democracy

Democracy, if reduced to merely counting votes, becomes deceptive, especially when voters lack the opportunity to elevate themselves in dignity. In parliamentary democratic systems, demagogues often rise to power by promising utopia to a vulnerable electorate. Once in power, these demagogues fail to deliver on their promises and resort to strongarm tactics to maintain control.

The Rise of Collectivist Doctrines

The decay of liberal democracies has encouraged the emergence of various collectivist doctrines that deny the possibility of individual freedom, ridiculing it as an empty abstraction. These doctrines advocate for individuals to merge into the collective mass, a notion that benefits political demagogues who prefer to appeal to emotions rather than reason. The more backward a populace is, the more easily they are swayed by emotional prejudices. Roy argues that the true measure of a political party is not its ability to catch votes, but the merit of its principles and programs. Voters should judge governments by their records, not by their professions and promises.

Preconditions for Successful Democracy

A successful democracy requires a conscious will to freedom, a sense of responsibility, and the ability to critically examine the promises and programs presented by parties and politicians. For elections to reflect intelligent public opinion, there must first be an intelligent public opinion. Roy emphasizes that the electorate must be capable of independent judgment to ensure meaningful democratic participation.

Grassroots Democratic Participation

The radical democratic approach to elections begins with local or regional conferences where people discuss political and economic issues. By understanding these issues, people realize they need not rely on parties to solve their problems. This cultivates independent judgment and allows people to elect candidates from among themselves.

Independent Candidates and Local Committees

Candidates elected through this process enjoy greater independence as they are not beholden to any political party. They rely on their conscience and are directly accountable to the electorate. This approach eliminates the mechanical nature of party politics and reduces demagoguery and corruption.

Local “people’s committees” would have the ability to choose independent candidates and eventually become the foundation of a pyramidal democracy. Empowered with the right of recall and the ability to hold referendums, these organized local democracies would exert direct and effective control over the State.

Towards an Organic Democracy

A progressive democratic movement requires the intelligent and conscious participation of individuals. The more individuals engage in and think critically about the democratic process, the more organically democratic the society becomes.

The Scope of Economic Planning

Manabendra Nath Roy recognized the immense challenge of planning the economic life of a fifth of humanity in his "People’s Plan for Economic Development." He noted that the centralization of politics often goes hand in hand with the centralization of economics. In so-called 'free-market' economies, this centralization occurs through the concentration of wealth by capitalists, while in nationalized economies, it manifests as State capitalism.

Capitalism's Profit Motive and Challenges in Production

Capitalism prioritizes profit over meeting people's needs. When goods cannot be sold profitably, production is curtailed. In countries like India with large and continually expanding populations, rapid industrialization is often proposed as a solution. However, successful industries rely on a robust domestic market, which precedes a healthy export trade.

Modernizing Agriculture

Roy emphasized the importance of modernizing agriculture in India. He stressed that this requires organizing the rural economy rather than just mechanization. Addressing issues such as irrigation, soil fertility improvement, and infrastructure development is crucial. Additionally, organizing rural consumers and local industries on a cooperative basis can provide employment and income for rural communities.

Social Welfare Provisions

A radical democratic economic program includes provisions for unemployment insurance, old age pensions, and other measures for citizen upliftment. However, these measures should prioritize economic productivity aligned with human needs. This includes developing health infrastructure, housing, and education.

The Current State of Affairs

In the contemporary world, the outlook for those advocating for freedom alongside justice appears bleak. Despite humanity's advanced understanding of the cosmos and its laws, the world is on the brink of disintegration.

Embracing Scientific Thought and Humanist Philosophy

To navigate this crisis, a solution rooted in scientific thought and humanist philosophy is imperative. Roy highlights in "New Humanism" that the brain serves as the means of production, generating revolutionary ideas. Revolutions require iconoclastic ideas, and an increasing number of individuals, aware of their creative potential, driven by an unyielding determination to reshape the world, and inspired by the notion of a free society, can pave the way for democracy.

Creating Conditions for Democracy

Roy emphasizes that individuals, motivated by the adventure of ideas and the ideal of a free society, possess the ability to create the conditions necessary for democracy. By harnessing their creative power and collective will, they can usher in an era where democracy thrives.

7. Way Forward

Radical democracy lies in building a society where informed citizens actively participate in shaping their communities and the nation as a whole. By prioritizing human well-being, critical thinking, and decentralized power structures, this approach offers a potential path towards a more just and sustainable future.

INDIA-CHINA CONSUMPTION COMPARISON 

 

 

1. Context

 

In 2023, India surpassed China to become the world's most populous country. This shift is due to China's declining birth rate (6.4 births per 1,000 people) and total fertility rate (around 1%), leading to its first negative population growth rate in six decades. This translates to a rising dependency ratio in China, which is projected to increase further. In contrast, India's population is still growing and is expected to peak around 2060, despite reaching replacement fertility levels (total fertility rate of 2.1).

 

2. Comparing Consumption in India and China

 

Both India and China have a substantial consumer base. According to the Purchasing Power Parity (PPP) in 2017, a consumer is defined as anyone spending more than $12 a day.

Private Final Consumption Expenditure (PFCE)

Private Final Consumption Expenditure (PFCE) measures total household and non-profit consumption of goods and services. It serves as a useful proxy for consumer spending, especially within consumer classes where income and consumption are concentrated.

PFCE as a Percentage of GDP

India spends significantly more on consumption relative to its GDP than China. PFCE contributes more than 58% to India’s GDP, compared to only 38% for China. Including government consumption, the total consumption constitutes 68% of GDP for India and 53% for China, indicating that the Chinese government is a much larger consumer than its Indian counterpart.

Comparative Consumption Levels

Despite China's economy being approximately five times larger than India’s, its PFCE is only about 3.5 times that of India’s. This indicates that consumption is a much larger contributor to India’s GDP. India is expected to reach China's consumption level at a GDP of around $10 trillion, compared to China's $17 trillion.

Trends in Consumption Growth

China’s PFCE has increased significantly over the past four years, remaining steady during the pandemic year of 2020 and then increasing in 2021. India’s PFCE has grown steadily from $1.64 trillion in 2018 to $2.10 trillion in 2022. While China experienced a decline in 2022 in both aggregate ($6.6 trillion compared to $6.8 trillion) and per capita PFCE ($4,730 compared to $4,809), India saw marginal growth in both categories. The gap in expenditure between the two countries widened from $3.8 trillion in 2018 to more than $4.5 trillion in 2022.

PFCE Ratio and Per Capita Comparison

India has closed the PFCE ratio gap with China from approximately 3.3 to 3.1. Achieving this ratio indicates India’s higher growth rate in PFCE than China. Regarding per capita PFCE, China increased its lead from around 3.0 times India’s level in 2018 to approximately 3.1 times in 2022, partly due to China’s negative population growth in 2022.

Nominal Versus PPP Figures

Nominal PFCE numbers can be misleading as they do not account for cost-of-living differences, only giving an idea of total consumption value rather than volume. Therefore, comparing PPP figures is crucial for a more accurate representation of consumption.

PPP Comparison

In PPP terms, China’s PFCE is approximately 1.5 times that of India. China’s GDP (PPP) is roughly 2.5 times India’s. While the relative consumption gap widened from 1.58 in 2018 to 1.66 in 2020 and 2021, India closed the gap to 1.55 in 2022. China saw a marginal PFCE increase of $0.7 trillion due to an improved yuan-dollar PPP exchange rate, whereas India added a trillion dollars to its PPP consumption expenditure in 2022 despite a worsening exchange rate.

 

3. Expenditure by Categories

 

India’s Consumption Expenditure

India’s consumption expenditure is characterised by higher spending on food, clothing, footwear, and transport. Conversely, spending on education, culture, recreation, and healthcare is relatively low, which is typical of an underdeveloped or developing market.

China’s Consumption Basket

China’s consumption basket reflects a more developed market. While food and beverages constitute the largest portion of China’s consumption, this share is declining as a percentage of total consumption expenditure, signalling a maturing market. China spends a substantially higher percentage on housing, white goods, recreation, education, and healthcare compared to India. In advanced economies such as the U.S., Japan, EU, Germany, and the U.K., food expenditure is not the largest category.

Comparative Spending on Key Sectors

In aggregate terms, India spends about half of what China spends on food, transport and communication, and clothing and footwear. Given that India’s economy is one-fifth the size of China’s and spends a similar percentage of its total expenditure on these sectors, the fact that its total expenditure in these categories is around half of China’s is significant. Specifically, India spends a little over 50% of what China spends on transport and communication.

Growth Rates in Consumption Categories

Real growth rates in individual consumption categories in India often outperform the nominal growth rates observed in China. This trend adds optimism regarding India’s economic trajectory and consumer market development.

Implications for Foreign Investment

Whether India’s growing consumer class and increased spending will enhance its appeal to foreign businesses as a preferred destination over its competitors amidst the China+1 narrative remains to be seen.

4. Way Forward

 

India can capitalize on its demographic advantage and growing consumer base to attract foreign investment. Focusing on developing its infrastructure and creating a business-friendly environment will be crucial. Continued growth in discretionary spending categories will further strengthen India's position as a desirable investment destination.

 

 

For Prelims: Purchasing Power Parity, Population, Private Final Consumption Expenditure, GDP For Mains:  1. Explain the concept of Private Final Consumption Expenditure (PFCE) and its significance in analyzing a country's consumption patterns. How does India's PFCE compare with China's, and what are the implications for their respective economic growth trajectories? (250 words)

 

Previous Year Questions   1. Consider the following statements:(UPSC 2019) 1. Purchasing Power Parity (PPP) exchange rates are calculated by comparing the prices of the same basket of goods and services in different countries. 2. In terms of PPP dollars, India is the sixth-largest economy in the world. Which of the statements given above is/are correct?   A. 1 only        B. 2 only          C. Both 1 and 2        D. Neither 1 nor 2   2. Which of the following forms of purchasing power parity states that changes in spot rates over a period of time reflect the changes in price levels over the same period in the currencies of the concerned economies? (UGC NET  2023) A. Relative form B. Absolute form C. Expectations form D. Contango form Answers: 1-A, 2-A

 

Source: The Hindu