In critique of the current growth process being experienced in India and China where inequalities have increased dramatically despite extraordinarily high growth rates, this paper argues that an increase in inequality is built into the dynamics of the system through the non-using up of their “labour reserves”. Labour reserves continue to remain non-exhausted because at the rate of growth of labour productivity, which arises as a consequence of the shift in demand towards products that entail the use of technology with higher labour productivity, the rate of growth of labour demand does not adequately exceed the rate of growth of labour supply. The shift in demand itself arises from a shift in income distribution away from wages to surplus. Therefore, any growth strategy for India and China, if it is to address their social needs, must be one capable of rapidly absorbing their labour reserves. In this context, the author re-emphasizes the need for a growth strategy stimulated by an expansion of agriculture, which, in turn, must be based on nonexpropriation of the peasantry from land.

June 17, 2009.