l07 corbridge 2010
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India has been acclaimed in recent years as aninformation technology (IT) superpower andperhaps even as a major new player in the worldeconomy. The Indian economy has beengrowing at around 5 or 6 percent per annumsince 2003, adjusted for population growth, andthere are good reasons to suppose that similarrates of growth of gross domestic product(GDP) per capita might be sustainable over thenext 20 years. Savings rates are very high inIndia. Indeed, at just over 30 percent of GDp,gross domestic savings are approaching EastAsian levels. The economy sits well inside itstotal factor productivity frontier, in large partbecause oflow levels of human capital forma-tion, and the country now has the chance toreap a demographic dividend. The ratio ofdependants to workers is set to decline fromjust over 0.6 in 2000 to just under 0.5 in 2025.1
The launch in January 2008 of the Tata N anoseemed like icing on this cake of economicsuccess. Much was made in the west about a carselling for $2,500, but in India the marketing ofa car for Rs 1 lakh (100,000) spoke to theexistence of a mass middle class. It also signaledthe rise of a small group ofIndian capitalists andentrepreneurs who could bestride the globalstage. Four-lane highways packed with Nanos
21The political economy
of development in Indiasince Independence
offered a vision of India far removed from oneof pot-holed roads shared by bullock carts,scooters, and state-built Ambassador cars. In thewords of Gurcharan Das, India had beenunbound.e It had escaped from a Kafkaesqueworld of bureaucratic red tape to take its placein the global information age.
There are clearly nuggets of truth inaccounts of India's political economy thathinge around 1991, as Das's book largely does.Yet the notion that all was bad or sick before"the reforms," or that all has been good orhealthy since, fails to provide a nuanced pictureof economic development in India sinceindependence. Recent academic work pointsout that high rates of economic growth arenow being achieved in India in part because ofpast legacies, some more intended than others,and not wholly in spite of them. Investments inhigher education and basic industries are twocases in point.f Recent work also points outthat economic reform did not begin overnightin 1991, but was prefigured in importantrespects by the pro-business agendas pursuedby Prime Ministers Indira Gandhi and RajivGandhi in the 19805. In any case, the realturning point in India's trend rate of economicgrowth was 1980-81, not the early 1990s,although there are signs that the trend rate hasimproved again since 2003-04.4
We also need to acknowledge that post-reform growth in India has reduced absolutepoverty less quickly than might have beenexpected, particularly through the 1990s. Theincidence of absolute poverty is much less nowthan it was at the end of the 1970s, whensomething like 50 percent ofIndians were poor,but a Tata Nano driven from Delhi to Kolkatastill takes its riders through the epic enter ofworld poverty.The government ofIndia (GOI)uses a particularly brutal measure of absolutepoverty, one that is more basic even than the"one dollar a day" definition used by the lead-ing multilateral institutions.f Yet even on thismeasure some 260 million people in India arefinding it hard to keep body and soul together-fewer than 100 million people less, in totalnumbers, than the figure 0350 million in 1980.
Social and spatial inequalities have alsoincreased sharply since 1990. Rising inequalitylevels are inevitable in a country escaping alow-level equilibrium trap, a point made bySimon Kuznets many decades ago." We canrefer to "good inequality" where it is based onhigher rewards to talent and entrepreneurship.But there is also "bad inequality," and thisoccurs when people are locked out of markets,or from the schools, roads and other routesthat lead to the acquisition of human capitaland other transferable skills, perhaps on thebasis of gender or caste or ethnicity. Whatis worrying about recent developments inIndia is the abundance of bad inequality andunemployment. Governments continue toinvest meagerly in the provision of publicgoods, particularly in the eastern part of thecountry. Naxalism is one index of pervasivegovernment failure in a group of states runningsouth from Bihar to Andhra Pradesh. For ruralpeople in these states, as the World Bank hasrecently reminded us, living standards are abouton a par with living standards in rural areas ofsub-Saharan Africa." They are a long wayremoved from the living standards of India'surban middle classes. In contrast, as the WorldBank also points out, the richer parts of NewDelhi, Mumbai,and Bangalore can reasonablybe described as India's "Latin Americas,"
These inequalities are holding back eco-nomic and social development in post-reformIndia. They led John Harriss and me toconclude that economic reform in India in the1990s had taken the form of an "elite revolt"against those aspects of the dirigiste state thatmost constrained a loose coalition of businessgroups and the urban middle classes.8 Thatrevolt has wrought some important andmuch needed changes in India's economy. Ithas also helped to rework key political relationsbetween the central state and the provinces andbetween the state and its citizens. But thereform process remains highly uneven, both inits mainsprings and in its consequences. I shallargue here that the term "elite revolt" stillworks well as a descriptor of the contradictorydynamics of political and economic change inIndia over the past two decades.
Political economy of growth inIndia, 1950-80
When the British quit India in 1947 they leftbehind an economy scarred by two centuriesduring which first preference was given toimperial interests. It is true that the Britishinvested heavily in a railway system that linkedmost of the major towns and cities in SouthAsia. They also sank considerable sums ofmoney into the canal colonies of Punjab andprovided new systems of property rights andcommercial law in both rural and urban areas.The British could even maintain in 1947 thatthey had built India into the world's tenthlargest industrial power. There were largetextile industries in Ahmedabad and Bombay,and an iron and steel industry in Bihar andOrissa (thanks mainly to Jamsetji Tata). Butwhat this rosy picture neglects is the involutionof the countryside in Bengal that followed thePermanent Settlement of 1793-a settlementthat promoted rack-renting landlordism ratherthan capitalist farming-and the underminingof many of India's craft industries as importsflooded in from Lancashire and elsewhere. Thegrim truth of British misrule was apparent in a
THE POLITICAL ECONOMY OF DEVELOPMENT IN INDIA SINCE INDEPENDENCE
series of famines that hit India at the end of thenineteenth century, and which culminated inthe deaths of three million people in the Bengalfamine of 1943-44.Alan Heston has estimatedthat average living standards in the Indiancountryside barely improved from 1900 to1947.9 There were always significant regionalvariations within this general picture, but it islikely that as many as two in three Indians livedin absolute poverty at the mid-point of thetwentieth century.
Against this backdrop, and given the loss in1947 of the jute economy of East Bengal (nowBangladesh), as well as the loss of the major portcity of Karachi, it is not surprising that India'sfirst plans for economic development tookshape in an atmosphere of crisis. The first five-year plan (1951-56) was something of a dampsquib and remained broadly neutral as betweenthe agricultural and non-agricultural sectors.After the assassination of Mahatma Gandhi inJanuary 1948, the remaining "tall men" ofIndia's nationalist elite were forced to occupythemselves mainly with nation building in abroader sense, with Sardar Patel working hardto ensure the de facto integration of India's 565princely states into the new republic, whileB. R.Ambedkar and Jawaharlal N ehru oversawwork on the constitution. It was clear by 1950that India would be a federal democraticrepublic in which universal suffrage would becoupled to the establishment of a central statewith considerable executive and emergencypowers and matching geographical reach.Ambedkar and N ehru agreed that the socialand economic modernization of India wouldhave -to be secured by vigorous planned actionsemanating from New Delhi. Conservativepoliticians sitting in the states would need to bedisciplined by wiser and more far sighted mensitting in the country's capital. Modernizationwas conceived as a diffusion process whereingreat pulses of social and economic change-ultimately liberating and uplifting, if oftendisruptive of established ways of being in theshort run-would push outwards from India'smajor cities to its smallest towns before reachinginto the countryside.l"
Ambedkar would break with N ehru overthe failure of his government to transfer surpluslands specifically to so-called untouchable (ordalit) families.Ambedkar had warned at the endof the Constituent Assembly debates that Indiawas about "to enter a life of contradictions. Inpolitics we will have equality and in social andeconomic life we will have inequality." In hisview, the failure to redistribute landed wealthin India would put" our democracy in peril."!'It seems likely that Nehru shared this view,although he had more faith than Ambedkar inthe economically empowering effects ofpolitical equality. In any case, by 1951 N ehruwas unchallenged in his leadership of theIndian National Congress. His ascendancyfollowed the death of Pate I in December 1950and the defeat of Patel's close supporter,Purushottam Das Tandon, in a struggle