The two Indias

Print edition : September 19, 2014
An overall assessment of “the post-reform” period in the Indian economy.

THAT our country has been experiencing an unprecedented tempo of change—technological, economic and socio-political—in the past quarter of a century or so is generally recognised. Some aspects of it, such as the new economic regime, have received a great deal of attention as well. But how do they interact? And what can be expected for the future from such interactions? These are the questions for which answers are sought in this volume. Each chapter deals with a particular problem: When and Why Did India Take Off? Is the Indian State Delivering on Promises of ‘Inclusive Growth’ and Social Justice? Has India’s Democracy Been a Success? Has the Rise of Hindu Nationalism Halted? Does India Have a Civil Society? Does Caste Still Matter in India? The authors are foreign scholars who have worked on India and in India. They also draw on the studies on India conducted by Indian and other foreign scholars. The bibliography consists of over 50 pages and possibly around 1,000 entries.

Not surprisingly, the first section of the book deals with the transformation of the economy. While there are many economists, and perhaps even more politicians, who see a sudden and sharp discontinuity in the economic sphere with the “Reforms” of 1991, the authors place the economic transformation in historical perspective. They do not dismiss or even minimise the changes that were brought in between 1950 and 1980—the “planning era”. However, they do recognise that “something significant happened around 1980, and that sustained economic growth in India since that time has been pushed forward by an accumulating and more consistent set of pro-business and pro-market policies”. These pro-business and pro-market policies are subsequently recognised quite explicitly as capitalistic as well, attributing the sustained growth since then to capitalism’s growth compulsions. “India has boomed over the past thirty years [1980s, 1990s and the first decade of the new century] because India’s business classes have progressively been set free to behave as capitalists are wont to behave.” Some of the adverse consequences of such booming growth are recognised subsequently, but the pervading position throughout the volume would appear to be that growth would boom once the capitalist spirit is unreservedly accepted. This is surprising because much of the work on the volume was done in the late years of the past decade against the background of the 2008 economic collapse in the United States and even Europe. One wonders whether the authors were impressed by the resilience that India showed in the initial post-meltdown years. This is only speculation, but even in late 2011, when the work on the book was completed, there is no trace in it of anticipating India’s own collapse that followed immediately thereafter.

It is reasonable to surmise, too, that the authors did not take note of the major differences in economic activity and performance that the capitalist system has been experiencing precisely during the period when India decided to adopt fully and enthusiastically the capitalist path. That capitalism entered into a new phase somewhere in the 1980s dominated by finance capital and that what is being designated as global capitalism is the global sway of finance have not been recognised by the authors. Indeed, there is no reference to finance capitalism at all in the book. That has a bearing on their views on many other features of economic performance in India, especially the distributional aspects.

Missing middle

For instance, the authors record the overt attempts made during the planning era to benefit the weaker sections in society. The transformation that the Green Revolution brought about by increasing both private and public investments in the rural economy is noted and the consequent increase in food production is acknowledged. It is also shown that these changes led to an increase in employment and a reduction in poverty. On the other hand, it is clearly stated that “economic growth since 1990 has worked extremely well for its best-off households”.

Hence, even if poverty may be getting reduced, inequality has been increasing, too. The authors quote with approval a study which showed that “the average incomes of the top 0.01 per cent of [India’s] income distribution was about 150-200 times larger than the average income of the entire population during the 1950s. The difference fell to less than 50 times larger than the average in the early 1980s, but then rose again to 150-200 times larger by the late 1990s”. Inequalities in wealth have also increased.

On the basis of studies of a similar nature, the authors point out that contrary to a widely propagated view that the post-reform growth has been giving rise to a strong “middle class”, the reality is that there is a “missing middle”; indeed they lend support to the position that “two Indias” are emerging under the present growth regime. And yet there is no serious consideration of what is likely to happen as a result of the increased reliance on foreign capital.

That finance capitalism has a different perception of wealth and the means to become wealthy is not appreciated. Consequently, it is not recognised, too, that the inflow of foreign capital may be in search of short-term profits instead of any long-term investment in the much-needed infrastructure, for instance. There is, therefore, no critical evaluation of “growth” itself —that it may largely be a reflection of higher earnings in a bloating service sector rather than any increase in productive activity in agriculture or industry.

Corporate capital

Turning from economic to political issues, the first question considered is: How did a “weak” state promote audacious reforms? If the state had become weak during the 1980s, the corporate sector had become correspondingly strong and was in a position to influence city-dwellers in general and upper-class people with technical education in particular to lend support to the reforms. It was felt that information technology was making national boundaries less rigid and that it was a natural corollary that economic development, too, should become global, ensuring freer movement of goods and capital.

Within the country, the reforms, which did not face much political opposition even in the early stages, soon had the support of regional leaders, from Maharashtra, Gujarat and Andhra Pradesh, for instance, who saw in the new order, possibilities to strengthen their base and build their States, especially modernise their capital cities. The conclusion that the authors arrive at is: “The on-going pro-market reform in India has been designed so as not to prompt significant opposition at any time from more than a small fraction of India’s ruling elites…. One major consequence of this ‘audacious conservatism’ is that the state in India has become increasingly dominated over the past two decades by corporate capital….”

The period of economic reforms has also witnessed the re-emergence of Hindu nationalism. At the level of politics, the Bharatiya Janata Party (BJP) brought religious issues into public discourse by the destruction of the Babri Masjid. The formation of the National Democratic Alliance (NDA) under the leadership of the BJP further demonstrated that religion could not be kept out of the public sphere in the name of secularism. More important, perhaps, it led to Hindu religiosity increasingly intruding into civil life in the form of opposition to anything considered to be “un-Hindu”, be they forms of art, a book, or the observation of Valentine’s Day, for instance. With the BJP also supporting the reforms, the authors say, something like a “state-temple-corporate complex” was emerging.

A clear manifestation of this ambience is the different manifestations of “spirituality” among the business classes and urban elites. On the basis of these observations, the authors dared to predict in 2011 that the sharpened religious identity in the country and the failures of the Congress-led government “may mean that the BJP will again have the opportunity to govern the country”.

A variety of other themes are also dealt with in the book. An indication of the state of flux that prevails in the country today is that identities and interests are being constantly reformulated. If at one stage language was a major form of identity, soon within linguistic groups, divisions have arisen on the basis of control over resources. Politics plays a major role in such redefinition of identities. However, beneath the differences that politics features from time to time, caste still remains a strong basis of identity. The issue is not the caste system as such.

The relatively closed economies of the 1950s and 1960s, in which caste formed an interrelated sociological system, have crumbled away. But caste remains an unconscious “habitus”, “an embodied system of dispositions durably inscribed in people’s reflexes”, which finds expression when it comes to intimate relationships such as marriage. Because of such deeply rooted innate divisions, there is an absence of “civil society” if that expression connotes people meeting as autonomous individuals blind to differences of background and status. But India’s democracy has been a success. People have begun to participate more actively in forms of politics outside the ballot box. Masses have begun to assert themselves and articulate their grievances and rights.

The book provides an overall assessment of what has been happening in the country since “the post-reform” period and helps one to have a better appreciation of the complexity that is India.

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