Understanding India's New Political Economy

A Great Transformation?

Sanjay Ruparelia, Sanjay Reddy, John Harriss, Stuart Corbridge

• Publisher: Routledge
• Year: 2011
• ISBN:
  9781136816482
• Edition: 1
• Topic: Social Sciences
• Subtopic: Ethnic Studies
• Index: Social Sciences

A number of large-scale transformations have shaped the economy, polity and society of India over the past quarter century. This book provides a detailed account of three that are of particular importance: the advent of liberal economic reform, the ascendance of Hindu cultural nationalism, and the empowerment of historically subordinate classes through popular democratic mobilizations.

Filling a gap in existing literature, the book goes beyond looking at the transformations in isolation, managing to:

• Explain the empirical linkages between these three phenomena

• Provide an account that integrates the insights of separate disciplinary perspectives

• Explain their distinct but possibly related causes and the likely consequences of these central transformations taken together

By seeking to explain the causal relationships between these central transformations through a coordinated conversation across different disciplines, the dynamics of India's new political economy are captured. Chapters focus on the political, economic and social aspects of India in their current and historical context. The contributors use new empirical research to discuss how India's multidimensional story of economic growth, social welfare and democratic deepening is likely to develop. This is an essential text for students and researchers of India's political economy and the growth economies of Asia.

1 Introduction

India’s transforming political
economy

Stuart Corbridge, John Harriss,
Sanjay Ruparelia and Sanjay Reddy

This book brings together essays first presented at a conference on India’s political economy held at Columbia University in September 2007. The editors asked scholars from different intellectual backgrounds to consider whether and how India’s political economy might have been fundamentally transformed in recent years. The volume seeks to describe, explain and assess the changes that have taken place in a rigorous, interdisciplinary and synoptic manner. In particular, it focuses on the three most important transformations in India’s political economy since the 1980s: the influence of liberal economic reforms, the ascendance of Hindu cultural nationalism, and the empowerment of historically subordinate classes through popular democratic mobilizations.

Each of these large-scale transformations has received much scholarly attention in recent years. In contrast to previous decades, however, there have been very few attempts to provide a synoptic causal account of India’s political economy. Ideally, a synoptic account would (a) explain the empirical linkages between these three phenomena; (b) provide an account that integrates the insights of separate disciplinary perspectives; and (c) explain their distinct but possibly related causes and the likely consequences of these central transformations taken together. Needless to say, constructing such an integrative perspective is extremely difficult for any individual. The lack of an encompassing view reflects the pace, scope and complexity of change set in motion by each of these transformations. Yet our capacity to grasp the contemporary dynamics of India’s political economy, and to assess whether and how they are new, arguably requires such an analysis.

We seek to address this critical intellectual challenge. Our underlying premise is that only a synthetic account – one that seeks to explain the causal relationships between these central transformations through a coordinated intellectual conversation – can help to capture the dynamics of India’s new political economy in their totality. Accordingly, this volume brings together work by both senior and younger scholars from a variety of disciplines. Each contribution examines how a particular actor, policy domain or spatial arena has shaped, and in turn been shaped by, India’s transforming political economy since the 1980s. We hope that when read together, a larger view of the causes, nexus and consequences of economic liberalization, Hindu nationalism and popular democratic mobilization may emerge.

The challenge of writing such a synoptic causal account of India’s new political economy raises a critical question signalled by our title: do these three major transformations, taken together, constitute a “great transformation”? Our motivation for using this term is twofold. The first meaning of “a great transformation,” in simple language, is wide: to what extent have liberal economic reform, popular democratic mobilization and ascendant cultural nationalism fundamentally reordered relations of power, wealth and status in India? Or are the changes set in motion by these phenomena ephemeral and susceptible to reversal? The second meaning is more specific. To what extent can one understand the changes that have taken place in the Indian political economy through the idea of a “double movement,” to use Karl Polanyi’s well-known phrase developed in reference to the historical European case, in which the attempt to create a market-oriented society from above compels a movement from below to moderate its severely dislocating effects? The question mark in the title of the book registers our openness towards such questions while intimating differences of interpretation amongst the different authors. Our aim was to foster a critical debate, informed by rich empirical detail and sharp theoretical analysis, but unified by common questions.

The “economic reforms” that have taken shape in India over the past 30 years, reaching back at least to certain pro-business initiatives enacted by Prime Ministers Indira and Rajiv Gandhi in the 1980s, and carried further by the economic policy changes that began to be implemented by a recently elected Congress government in 1991, represent a shift – albeit a moderate one – towards neoliberalism. It is for this reason that Polanyi’s work, about earlier attempts to make a reality of the “self-regulating market” – which is what he meant by “the Great Transformation” – provides one key point of reference in thinking about the political economy of India today. Most contributors to this book, however, pay close attention as well to transformations that are more plural and perhaps even lower case. They are at least fivefold, and they are strongly interlinked. First, there is the economic transformation of India since about 1980. We inquire collectively into its chronology, mainsprings and consequences. Second, we note that economic liberalization has coincided with a period that saw the re-emergence of Hindu nationalism. We take seriously the proposition that these first two transformations are linked in important ways, not least in regard to the formation of identities and political projects among India’s urban middle classes. Likewise, we contend that the rise of Hindu nationalism and the pace of economic reform must be understood in relation to a third transformation: the slow-burning but significant deepening of India’s democracy. We ask how far and in what ways Indians from among the Backward Classes have been brought into the country’s main circuits of political and economic power, and on what terms. Are India’s subaltern communities beginning to enjoy forms of political citizenship and market access in anything like the same terms as the country’s middle classes, and if so, where: in which parts of India? How too are they engaged in forms of political struggle, including Naxalism and anti-dam movements, which cut against the grain of the production of India as a visibly “new” centre of economic production and exchange?

Finally, we begin to describe and think through what will possibly be India’s greatest transformations in the 20 years ahead: the expected movement of perhaps 200–300 million more men and women from the countryside to its towns and cities, and changes in India’s geopolitical position. How will political and economic power be redistributed in the wake of such a rural–urban transformation? How, indeed, should we think about the unity of India in the wake of these enormous shifts in labour power, and in the train of growing social inequalities between sectors and regions at the heart of India’s economic reform agendas and those that are locked out of them? And what changes can we expect in India’s foreign policy? Will India continue to move closer to the United States and other Western powers, or will it establish a more independent path?

There are many ways of thinking about these questions. As editors, we asked authors to deal with one or more aspect of India’s “Great Transformation” in relation to the extraordinary shifts in power, identity and wealth that symbolically were prefigured by the controversies around the so-called Mandal report (on reservations), the mandir/mosque dispute that erupted in Ayodhya in 1992 and the pro-market tilt of Manmohan Singh’s July 1991 budget. We certainly didn’t expect all authors to deal with all the lines of enquiry set out above.

We begin with a reflective paper by Partha Chatterjee. Chatterjee’s account of “Democracy and economic transformation in India” was produced for and played a prominent role in the 2007 New York conference. More recently it was published in Economic and Political Weekly, India’s leading journal of political economy and public record. Since its publication in April 2008, Chatterjee’s analysis has been challenged by several commentators, including Mary John and Satish Deshpande (2008), Amita Baviskar and Nandini Sundar (2008) and Mihir Shah (2008). These commentaries inform some of the papers that follow: papers that were prepared first for September 2007, but which in all cases have been re-written in light of further reading and recent events, and exchanges with other workshop participants.

Chatterjee begins his essay by declaring that the Indian economy has been undergoing a series of profound changes that have “since the 1990s … transformed [an earlier] framework of class dominance.” Nehru and Mahalanobis sought the development of India’s economy along the classic lines of capital goods-based import-substituting industrialization. India’s push for growth was, however, turned back by the country’s dominant proprietary elites. These have been described by Pranab Bardhan (1984) as its monopoly industrial bourgeoisie, its richer farmers, and its better-placed bureaucrats. The first of these groups blocked industrial competition and innovation. The richer farmers in turn blocked agrarian reform, pushing the country instead to a Green Revolution that gathered pace in the 1970s, while many bureaucrats worked the planning and license Raj to their personal advantage and to the advantage of many of the politicians they served. Planning was suspended in India from 1966 to 1969 and the country’s first experiments with state-directed development stalled sharply. What Chatterjee now describes as the first stage in India’s “passive revolution” delivered improvements in average per capita incomes of little more than 1 percent per annum.¹ By the time that Indira Gandhi returned to power in 1980 it was clear that the economy would need to be kick-started in other ways. Deficit financing was one option that was pursued vigorously in the 1980s, not least in the form of subsidies into and out of the agricultural economy, but this led to a burgeoning debt crisis by the end of the decade. Atul Kohli (2006) has also documented a tilt in favour of pro-business policies in the 1980s under Indira Gandhi and her elder son, Rajiv.

Per capita income growth rose to close to 4 percent per annum between c.1980 and 2003, before shifting closer to 6 percent after 2003 (at least until 2008). Chatterjee attributes this “major spurt” to “much greater confidence among Indian capitalists to make use of the opportunities opened up by global flows of capital, goods and services.” The earlier dominance of India’s economy by a “few ‘monopoly’ houses drawn from traditional merchant backgrounds and protected by the license and import substitution regime” has ended. Chatterjee instead sees the emergence of a vibrant and increasingly urbanized economy which is pulling younger people in their millions from a countryside mired in torpor, hardship and uncertainty.

Chatterjee’s broader argument is that capital’s pursuit of accumulation by dispossession is tempered by various path dependencies in India’s democratic polity. Governmental commitments to welfare still bring education, health and subsidies to India’s villages, and sanitation and water-pumps to its urban slum-dwellers. The picture that Chatterjee paints is of a double movement. Even as the larger economic pendulum swings in favour of “reform” and liberalization, the fully fledged sway of capital is reined in both by local resistance and by the commitment of government in India to “revers[e] the effects of primitive accumulation” by other forms of market intervention. The state in India remains committed to providing for “a culturally determined sense of what is minimally necessary for a decent life.” India’s poor might not have gained much directly from the country’s pro-market reforms – elasticities of poverty reduction remain disgracefully low by East Asian standards – but the voting power of named communities of the poor (SCs, STs, BPLs, slum dwellers, etc.) still translates into claims on the Indian fisc through what Chatterjee calls political society.²

Here is the nub of Chatterjee’s argument, which is developed at greater length in The Politics of the Governed (2004). Chatterjee suggests that what we are seeing in India is the rise to political power of a corporate capitalist class. This class has established an increasing role in a number of India’s states – in Gujarat most notably, but also in Mahrashtra, Tamil Nadu and elsewhere – and is minded more and more to view government as corrupt and inefficient. Calls are growing for the reform of government along “Western” lines, or at least along the lines that Western government is imagined by CEOs, senior managers and a new wave of maverick politicians trained in US universities and management consultancies. Bangalore, not Delhi, is the new model, with some among this camp of competitive capitalists looking to new emerging leaders (such, perhaps, as Rahul Gandhi) to modernize India’s polity as comprehensively as entrepreneurs like Nandan Nilekani and Mukesh Ambani are modernizing the economy.

But while this push for rule by experts is growing, Chatterjee suggests that it is restricted as yet to English-speaking elites in urban India. The urban middle class is now coming under “the moral-political sway of the bourgeoisie.” Its members also enjoy the protections of the rule of law and the privileges that accrue to those living in properly civil societies. Where India continues to depart from Western capitalist democracies, however, Chatterjee suggests, is in regard to the dominance of political society in the lives of its social majorities. Ordinary people don’t make claims on government in the form of rights or with regard to abstract laws and constitutions. They instead negotiate ad hoc, unstable and often illegal forms of access to basic public services through their political bosses or agents of the state, who acquiesce through acts of omission or commission. In West Bengal, until recently, this patronage democracy was brokered almost exclusively by the CPM; in Mumbai, the Shiv Sena has performed a similar function, offering services in return for votes and occasional acts of thuggery. Meanwhile, in both states, Chatterjee concludes, ruling elites have moved to embrace liberalization. “[A]s far as the party system is concerned, it does not matter which particular combination of parties comes to power in the centre or even in most of the states; state support for rapid economic growth is guaranteed to continue. This is evidence of the current success of the passive revolution.”

Chatterjee’s depiction of an India increasingly divided between elites and masses, between city and countryside, and between the life-worlds of civil and political societies, will find many takers. There is no doubt that social and spatial inequalities in income and consumption have increased. Trickle-down is generally notable by its absence in the poorest regions of India, and matters are not helped by demographic pressures that are delivering more and more young people into labour markets. During the next two decades India should reap a demographic dividend as the ratio of workers to dependents becomes more favourable. But this can go badly wrong if rates of human capital formation remain low or if educated youths fail to get decent jobs.

What is less clear from Chatterjee’s analysis is whether we should expect the urban and the civil to gain hegemony over the rural and the political – whether, to be blunt, we should expect a tenuous equilibrium to be maintained (for fear perhaps of the continuing power of the rural vote), or whether “the inevitable story of primitive accumulation” will progressively break free from governmental duties to provide welfare for the poor and create a volatile disequilibrium in the new India.³

Chatterjee argues that it all depends on politics, which of course it does. Still, his critics want to know more about his understanding of the dynamics and aims of “political struggle.” Some of them are uncomfortable with Chatterjee’s neat mappings of corporate capital on to civil society and of non-corporate capital on to political society. Isn’t it the case, ask Amita Baviskar and Nandini Sundar, that many of India’s most civil and progressive welfare measures have been pushed for at “the insistence of … ‘political society’ or even non-society marginal groups”? (2008: 87): they have in mind the National Rural Employment Guarantee Act, the Forest Rights Act and the Right to Information Act. And isn’t it also the case that corporate India has been anything but civil or law-abiding in its militaristic adventures in Kashmir, Singur or in Naxalite India? In their view, “Chatterjee inverts what is actually the case: generally, it is members of the so-called civil society who break laws with impunity and who demand that the rules be waived for them,whereas members of political society strive to become legal, to gain recognition and entitlements from the state” (ibid.: 88).

Of course, we don’t have to reverse Chatterjee’s arguments to engage them. In the essays that follow we find a nuanced range of positions being explored by authors keen to grapple seriously with Chatterjee’s broad theses. Nandini Gooptu focuses directly on one of Chatterjee’s main themes when she examines the links between economic liberalization, cities and the poor. She points out that efforts to tidy the poor out of India’s cities are hardly new. India’s urban elites have been keen for decades to punish those who can be coded as dirty, ill-kempt or “un-modern.” Evictions, demolition and imprisonment have long and troubling histories in urban India. Gooptu accepts even so that India’s obsession with neoliberal urban policies is changing the terms under which “new” urban governance systems are being imagined and put into practice. India’s ruling elites are increasingly buying into the view that cities are or should be sites of innovation and entrepreneurship. This is very much the view of the “New Economic Geography.”⁴ Far from being landscapes of predation – the “old” politics of urban bias, or of “Bharat versus India” – the city is now configured as fully authentic (contra Gandhi) and necessarily dynamic: so long, that is, that urban space can be liberated from chaos and cows, and remade as sleek, linear and above-all “professional.”

Gooptu explores the differential emergence of the new urbanism in India and the booming property markets and gentrification that come in its wake. She shows how gentrification can lead to revanchism, or the politics of revenge against the poor. More significantly, she explores how a desire to push the poor out of desirable urban space is being mirrored in cities like Delhi and Mumbai by increased middle-class distaste for democracy. The sheer numbers of urban poor, Gooptu reminds us, and the continued existence of vote-bank politics, threaten the bourgeois project of city upgrading. Democracy gets in the way of development. Worse, it points to Patna, not Mumbai. It is no coincidence, Gooptu suggests, that Mumbai is then such a heartland of rabid Hindu nationalism. Urban elites mobilize Hindutva politics as a way of resisting mass mobilizations from below, which they find threatening. Key here are the mobilizations of poor voters and of poor migrants.

In practice, the poor simply can’t be expelled from India’s largest cities, as opposed to being removed from their glossiest colonies. Gooptu ends her paper by showing how India’s ruling elites are proposing an ideology of urban regeneration that aims to turn slum dwellers into stakeholder entrepreneurs. (Inevitably, this is on the small scale that most appeals to NGOs, foreign funders and microfinance institutions). India’s urban poor are certainly not marginal to the country’s changing economy. Gooptu concludes nonetheless that they are increasingly being stripped of just those forms of group identification and solidarity that have provided them with the protections of political society. One danger facing India’s urban poor is that they become so “individualized” (as proto-entrepreneurs) that their increasing vulnerability in labor markets is matched by greater vulnerability in the political arena.

It is to be hoped this will not happen. Much will depend on the rate of growth of the economy as a whole, and more so on the terms under which non-elite groups negotiate access to jobs, savings, education and healthcare. Rob Jenkins, in the next paper, explores the role that Special Economic Zones are coming to play in the New India, or at any rate in imaginaries of the New India. SEZs are winning a special place of affection in the hearts of India’s reformers. Not only do they call to mind successes further east in Asia, they also promise to deliver capital from the state and politics. SEZs offer the prospect of growth unbound, and of cascading benefits to local workers and households. They announce yet another site of unbridled entrepreneurship.

As Jenkins reports, however, the reality of SEZs is very different. Export-processing zones in India date back to the 1960s, although the real push came after Murasoli Maran, then Union Commerce Minister, made a visit to China in 2000. In 2005, India passed the Special Economic Zone Act, and within four years about 600 SEZs had been...

Table of contents

• Cover
• Halftitle
• Title
• Copyright
• Contents
• List of figures and tables
• Contributors
• Preface
• Abbreviations
• 1. Introduction
• 2. Democracy and economic transformation in India1
• 3. Economic liberalization, urban politics and the poor
• 4. The politics of India’s special economic zones
• 5. The contested geographies of federalism in post-reform India
• 6. Patterns of wealth disparities in India
• 7. Political economy of agrarian distress in India since the 1990s1
• 8. How far have India’s economic reforms been ‘guided by compassion and justice’?
• 9. The transformation of citizenship in India in the 1990s and beyond
• 10. Making citizens from below and above
• 11. Hindutva’s ebbing tide?
• 12. Expanding Indian democracy
• 13. The Congress Party and the ‘Great Transformation’
• 14. Indian foreign policy since the end of the Cold War
• Glossary
• Consolidated bibliography
• Index