Any student of India’s post-Independence history would be baffled by the record of its democratic experiment. Does it meet Edmund Burke’s notion of representative democracy? Parliament bears testimony to its physical reality, sure; but does it work? Many are enraged by the antics of elected representatives and their indifference to issues of national importance -- and therefore draw the conclusion that the “political class” is dirty, and consider Parliament a mess. The urban, self-aware middle-class would like a technocratic solution to democracy: leaders have to be like the suave and articulate Finance Minister, or even Manmohan Singh, a model of personal moral probity.
The student could turn to another idea of democracy as a participative one and find the classical Greek democracy palpably evident on the ground. In the US and the UK, only at times of huge stress, as is the case now or during the Vietnam war, have mass protests emerged on the streets to challenge, and often shake up, the existing order. But most of the time, it is representative democracy that effects change through legislation for better or worse, be it desegregation laws or the Dodd-Frank legislation to regulate the financial industry, or the earlier raft of financial de-regulation measures.
Cross-eyed policymaking
In India it’s not just democracy that defies textbook notions. Economic theories too end up in rather messy cauldrons, including policies meant to promote “economic growth”.
Consider the recent reforms for FDI in retail, or all the changes wrought since 1991. Dressed up as “national” economic policy in Budget speeches, policy changes over the past twenty years have worked with assumptions that marked a radical departure from the early epistemological premises informing public policy after the Second Plan.
The current assumptions are that progress can be measured by the enhancement of production, that policies aimed at increasing the output of goods and services are the primary condition for national “growth.”
Distribution, this implied, would follow as the consequence of an enlarged national pie. The second assumption was that the reallocation of resources was not the business of the state, that “markets” were more efficient in dispensing economic and social benefits of increased production.
This would seem fairly familiar as parts of the neo-liberal world-view. In India, policies since 1991, however, had to confront and try to overcome the “national” economy’s historically derived structural features. One of these has been identified, erroneously, as the protected status of Indian industry. But this problem was overstated. Very quickly the Indian monopoly industrialist adapted to the expansionary opportunities that globalisation generated, collaborating with global capital across a wider spectrum of manufacturing and, increasingly, services, rather than being devoured by it.
Running away from problems
The real problem was with the rural sector. Given its structural weaknesses, more than just the slew of reforms through the 1990s would have been required to transform it along the lines dictated by the new epistemology of market-led growth.
The Indian state simply tiptoed around it. Look at the Budget speeches, and the tilt towards industry is evident; that slant is more obvious after 2004-05, with the first UPA government.
After a decade and a half, the Indian state — or more specifically, its Executive arm — dressed in NDA or UPA garb, had found its audience in the organised economy’s industrialists (manufacturers, real estate players and power brokers) and an avaricious middle-class now ready for more “reforms” and less government.
In the bargain, and by the turn of the century therefore, the Executive arm of state power had begun articulating a close affinity with monopoly power located in a rising stock market and its increasingly narrow band of movers and shakers, the FIIs, consumer-goods manufacturers and land-bank merchants, votaries of globalisation. In their material successes (measured by GDP) the UPA had begun to justify itself as a representative government.
But this is India. Those decade-long reforms worked for a while because they released pent-up industrial capacity. By 2008, the organised economy had exhausted itself: markets — first, the consumption and then the investment market — ran out of steam; employment had not grown extensively enough to generate rising consumption demand; power and infrastructure bottlenecks discouraged investment growth.
Confidence in the Indian state’s ability to nurture another round of growth has ebbed within the band of manufacturing that enjoyed unprecedented profits till 2008.
Soured growth
That disenchantment perhaps explains the rising murmur of disapproval in corporate circles about corruption in high places; it’s a grouse at the “misappropriation” of resources by an Executive that should have let them do the appropriating.
But capital, like water, has to find its way to flow: the current bag of “reforms” now carries goodies for an even narrower and largely foreign band of stakeholders. FDI in retail will certainly help those global conglomerates recover ground lost in their recessionary markets; insurance and pension reforms will benefit Wall Street and Indian private firms get closer, and no one will complain because the public sector firms are still under government control.
The only policy that could have reversed the narrowing of the government’s social base was the Special Economic Zone Act of 2005. Perverse as its economic logic and incentive package may have been, it could have led to a transformation in agriculture; had it been accompanied by policy incentives for cooperative farming and adequate compensation for land transfer — a bouquet of policies that could have worked as well as they have in China.
But in its eagerness to pamper an increasingly successful industrial constituency, policymakers simply forgot the peasant until rudely reminded by the many incidents of resistance to land acquisition that have up-ended “projects” across the country.
The present government may have succeeded in “targeting”: not subsidies for the poor but reforms for the rich.