The Elephant becomes a Tiger

and flies to the Moon: India’s Political Economy

October 26, 2009

Quiz: How much does India’s mission to the moon cost?

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Kalavati, Shashikala and India’s Nuclear Deal

• Background: What is the Indo-US Nuclear Deal? • Who is Rahul Gandhi? Not related to Mahatma

Gandhi. Grandson of Jawaharlal Nehru, first PM of India; son of Indira Gandhi who was PM for 14 years

• Rahul Gandhi’s speech (1)and (2)• Kalawati, the woman Rahul spoke of in Lok

Sabha (house of the people in the Indian Parliament)

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Main questions

I. What was the nature of India’s ‘elephant’ phase?

II. What is the nature of India’s ‘tiger’ phase?

III. How did this transformation come about?

IV. How does it affect different social groups in India?

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The change (1)

1950-80• “Hindu” rate of growth• Big state and state

interventionism• License-permit-quota

Raj• No corporate growth,

low corporate profitability

• No global role

1980-present• ‘Miracle’ rates of

growth• State less

interventionist• End to license Raj• High corporate growth

& profitability• Spectacular global

role

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India now: The Corporate Sector

• As of 2004-05, about 836 million or 77 % were living below Rs.20 per day; the 10 richest Indians were worth $43.8 billion

• As of 2007-8, 40 richest Indians are worth $351 billion; 4 richest Indians are worth $180 billion

(Forbes)

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Poverty and Hunger

• Under $1 a day: 34.3%• Under $2 a day: 80.4%• Under national poverty line: 30% (debated

figure) • Ranks 66 out of 88 on the Hunger Index (23%

hungry, down from 32% in 1990); still worse than Nepal and Pakistan

• Farmer suicides –182,000+ suicides since 1997 (according to some, one suicide every 30 minutes)

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Two questions & standard answers

Why this miracle?• “freedom” from the

state• Less regulation• High consumption• Globalization: free

trade, more foreign investments, more active stock market

Why such inequality?• Still a lot of regulation• High dependence on

agriculture• Not enough skills • Bad governance• “People are not able

to take advantage of globalization”

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Quote from Nayyar

“This wonderful story about economic growth in India is not quite a fairy tale. And everybody does not live happily hereafter. Both phases of economic growth had something in common. Economic growth in independent India, respectable in the first phase and impressive in the second phase, was not transformed into development, for it did not bring about an improvement in the well-being of people. Independent India did make significant progress during the second half of the 20th century, particularly in comparison with the colonial past. But poverty and deprivation persist. In fact, there are more poor people in India now than the total population at the time of independence. And, in terms of social development, India has miles to go”.

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Drivers of Growth

• Historically, big business has been very profitable in India. How were profits generated? In the context of World War I, a well-known Indian historian writes:

“While the war meant misery . . . for the majority. . . it also contributed to fabulous profits bybusiness groups taking advantage of the Wardemand, the decline in foreign competition, theprice differential between agricultural raw materials..and industrial goods, and the stagnation ordecline in real wages (Sarkar, 1983, pp. 171–172).”

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The famines of 1943“Yet war and famine also meant super profits forsome, and as in 1914–18, a major step forward forthe Indian bourgeoisie. . . . The really fantasticincrease was not in production but in profits,particularly speculative gains through profiteeringin food, share market operations and the blackmarket in general. The Indian bourgeoisie was aspecific kind of bourgeoisie, characterised by a‘ravening greed’, and a mania for speculation ratherthan initiative or efficiency in production” (Sarkar,1983, pp. 406–407).

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Big business in Independent India

• State-business collaboration

• Cheap inputs provided by the state for development of business

• Nationalized banking gave control over the savings of the common person to the government which could then be channeled to big business

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Big business: 1950-85

• General feature: high corporate profits but low output, low growth

• large oligopolies

• No domestic competition

• No global competition

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Since 1980: Globalization

• Rajiv Gandhi, the PM, and a number of other politicians and business leader see opportunity

• Division within Indian business re:globalization

• Globalizers win, lots of profit to be made

• Foreign companies eye large domestic market

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1991: turning point

• Deepening fiscal crisis

• Acute foreign exchange crisis

• In 1991 in takes a loan from the IMF

• Beginning of the process of structural adjustment and neoliberal reforms

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What are the neo-liberal reforms?

• Easing entry of foreign corporations

• Easing labour and environmental regulations (especially in export processing zones)

• Less state regulation

• More competition

• Privatization of public sector companies

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The ‘miracle’ arrives

Drivers of the ‘miracle’:

• Outsourcing and growth of service sector

• Sell-offs of Indian companies

• Low cost production

• Lay offs and restructuring

• Growth of the middle class with phenomenal growth in salaries

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More ‘miracles’

• Spectacular growth of the ‘informal sector’

• Inequality across caste, gender and religion

• Issues such as female infanticide

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The agrarian sector

• Green revolution Phase 1 in the 60s

• Green revolution Phase 1 in the 90s

• Currently, highly intensified pace of corporatization of agriculture

• Big question: could such inequality and depravation be avoided?

India’s Society and Social Relations

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Main questions

• How diverse is India? Is it diversity or inequality?

• What is the caste system? Does it still exist?

• What is the relationship between different religious communities in India?

• What is the meaning of secularism in India?

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Deeper questions

• Is India a democracy? How much inequality can a democracy tolerate and still remain a democracy?

• How does India’s social fabric compare with the US and Canada?

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India’s society: some basic facts

• 1. 3 billion people

• 8 different religious groups. 82% Hindus,13% Muslims

• Hindus have a hierarchical social organization, known as caste

• 122 recognized languages; many other dialects

• 672 million voters, 230 parties

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Basic economic facts

• 70% survive on agrarian incomes

• 80% live in under $2 a day

• 42 million live in slums

• 2 million are homeless

• 90 million are marginal workers

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The tradition of caste

Sudra (manual and menial labourers)

Untouchables, now called Dalits (the downtrodden)

Brahmin(producers of knowledge, particularly theology and

interpretation of religious texts

Khsatriya (ruling classes/ political elites/warriors)

Vaishya (business classes)

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Traditional role of caste

• prevent social mobility

• ensure a supply of manual workers

• prevent social equality

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Caste in colonial India

• Fairly strong reformist movements started with respect to the question of untouchability

• British referred to them as “depressed classes” • Gandhi popularised the issue of untouchability by calling

them Harijans (the children of God). He argued for the end to untouchability

• B.R Ambedkar argued for the end to caste altogether (and if necessary, end to Bramhinical Hinduism) . Read his seminal essay Annihilation of Caste

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Who was Ambedkar?

• BHIMRAO RAMJI AMBEDKAR (1891-1956) • Born into a Dalit family• By virtue of his brilliance became a Barrister at

Law • Was the first Law Minister of Independent India;

drafted the constitution; major disagreements with Congress leaders, Nehru and Gandhi

• Converted to Buddhism in 1956 (along with thousands of other Dalits)

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Ambedkar’s theses on caste

• He disproved both dominant theses on caste• The orthodox thesis that Sudras were born out

of the feet of ‘God’• The modern thesis that they were non-Aryan

indigenous peoples inferior to the other three castes who were of Aryan descent

• He argues that they are of the same ethnicity and the Sudras were pushed to a lower status because of their growing power and conflict

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Ambedkar’s philosophy

His two main thesis were: • The issue is not only to accept inequality and

end discrimination, but to establish political and social structures which are premised on the fundamental equality of all

• Justice can not be given from above (i.e. those who are privileged). It has to be secured by those who were victims of injustice

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What happened at Independence

• The constitution was drafted by Dr. Babasaheb Ambedkar.

• It became illegal to discriminate on the basis of caste or religion

• Untouchability was abolished by law• Untouchables came to be categorized as

Scheduled Castes

More faces of discrimination

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ST and OBC

• Another category of Scheduled Tribes were also recognized by the constitution. These are primarily indigenous communities known as Adivasis

• A third category called the Other Backward Classes (OBC) – communities listed by the government who have suffered systematic patterns of disadvantage but are not included in the Scheduled Castes or Tribes. They can be in any religion.

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SC, ST, OBC

• Scheduled Castes (SC) 16.8%

• Scheduled Castes (ST) 8%

• Other Backward Classes 27% (or more)

Even with conservative estimates, it appears that more than 50% of India’s population suffers systematic disadvantage and depravation

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Quotes from Ambedkar (1)– It is mischievously propagated by Hindu scriptures that by serving the

upper classes the Shudras achieve salvation. Untouchability is another appellation of slavery. No race can be raised by destroying its self-respect. So if you really want to uplift the Untouchables, you must treat them in the social order as free citizens, free to carve out their destiny.

•  –  What you have lost others have gained. Your humiliations are a matter

of pride with others. You are made to suffer wants, privations and humiliations not because it was pre-ordained by the sins committed in your previous birth, but because of the overpowering tyranny and treachery of those who are above you. You have no lands because others have usurped them; you have no posts because others have monopolised them. Do not believe in fate; believe in your strength.

– From ambedkar.org

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Quotes from Ambedkar (2)

• Caste cannot be abolished by inter caste dinners or stray instances of inter caste marriages. Caste is a state of mind. It is a disease of mind. The teachings of the Hindu religion are the root cause of this disease. We practice casteism and we observe Untouchability because we are enjoined to do so by the Hindu religion. A bitter thing cannot be made sweet. The taste of anything can be changed. But poison cannot be changed into nectar.

from ambedkar.org

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Ambedkar on the Constitution

On the 26th January 1950, we are going to enter into a life of contradictions. In politics we will have equality and in social and economic life we will have inequality. In politics we will be recognising the principle of one man one vote and one vote one value. In our social and economic life, we shall by reason of our social and economic structure, continue to deny the principle of one man one value. How long shall we continue to live this life of contradictions? How long shall we continue to deny equality in our social and economic life? If we continue to deny it for long, we will do so only by putting our political democracy in peril. We must remove this contradiction at the earliest possible moment else those who suffer from inequality will blow up the structure of democracy which this Constituent Assembly has so laboriously built up.

from ambedkar.org

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Inequality across religion

• The British left a highly communalized polity, scarred by the partition

• In India, the Muslim community found itself depleted of its middle class (who left for Pakistan)

• The community was left with a rather sharp divide between its upper classes and its lower classes

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Situation of Muslims (1)

• The literacy rate among Muslims is substantially below the national average (59% as opposed to 65%). Only 3.4 per cent of the Muslim population obtains graduate degrees

• In the elite civil services, comprised of the Indian Administrative Service (IAS), the Indian Foreign Service (IFS) and the Indian Police Service (IPS), Muslim representation was at 3 %, 1.8 % and 4 %

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Situation of Muslims (2)

• Muslims have the second highest levels of poverty with 31 % below the poverty line. Incidence of poverty among urban Muslims is the highest (31%), followed closely by SC/ST categories 36.4%.

• Worker Population Ratio for Muslim women are the least from among all communities, more so in urban areas; the participation of Muslims in regular jobs in urban areas is quite limited compared to even the traditionally disadvantaged SCs/STs.

• Other Backward Classes (OBCs) constitute 40.7 per cent of the total Muslim population. In the total OBC population, Muslim OBCs have a share of 15.7 per cent.

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Structural Inequality

• Caste and religion-based inequality in India are structural, i.e. they arise from

underlying social, political and economic structures (rather than factors such as lower access to education or jobs).

How did India try to address them?

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Addressing Inequality

• Secularism: non-discrimination and separation of state and religion (i.e. state has no official religion

• Affirmative action (called reservation in India): creating quotas for admission to educational institutions and

Did they work?

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Solutions?

• Secular democracy fulfilled a very important role but generated contradictions: it did not reduce the structural inequality between different religious communities, particularly Muslims

• Rise of communal politics and fundamentalist politics

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Dalit Muslims

• Muslims got some protection for language, separate educational institutions, freedom of religion etc. but not affirmative action

• The Dalit Muslim movement claims that 80% of India’s Muslims gained nothing from these changes. They demand affirmative action based on religion and socio-economic situation

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Politics of Affirmative action

• Affirmative action resulted in some progress of individuals but has done little to change the social location of disadvantaged groups

• Upper castes and classes have reacted strongly against these reservations

• At present major social conflict exists over whether SC/ST/OBC should have reserved seats in elite institutions (such as the top engineering, business and medical schools). The fear is that this may lead to admission of students with less merit and destroy the credibility of these institutions