The Elephant becomes a Tiger and flies to the Moon: India’s Political Economy October 25, 2010 Quiz: How much does India’s mission to the moon cost?

2 India Today: what comes to your mind? Global economic powerhouse Poverty Outsourcing Bollywood Corruption Religious tension caste

3 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?

4 The change (1) “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

5 India now: The Corporate Sector The top 40’s worth is 243 billion, up from 229 billion a year ago, but still shy of the 351 billion record in richest Indians are worth a combined $86 billion, (down from180 billion 3 years ago). (forbes)

6 Poverty and Hunger Under $1 a day: 34.3% Under $2 a day: 80.4% Under national poverty line: 37.2% (debated figure) Ranks 67 out of 88 on the Hunger Index; still worse than Nepal, Pakistan, China, Sudan Farmer suicides – close to 200,000 suicides between (one suicide every 30 minutes)

7 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”

8 Digging deeper: Political Economy Study of processes through which value or surplus is produced and distributed across society recognizes that there are different social groups who are involved in the process of value creation Recognizes that these different social groups have different degrees of control over the process of value creation and distribution. This determines social relations since the processes and structures through which value is created changes over time, the study of political economy must recognise these changes. In other words, the study of political economy must historically oriented

9 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 by business groups taking advantage of the War demand, the decline in foreign competition, the price differential between agricultural raw materials.. and industrial goods, and the stagnation or decline in real wages (Sarkar, 1983, pp. 171–172).”

10 The famines of 1943 “Yet war and famine also meant super profits for some, and as in 1914–18, a major step forward for the Indian bourgeoisie.... The really fantastic increase was not in production but in profits, particularly speculative gains through profiteering in food, share market operations and the black market in general. The Indian bourgeoisie was a specific kind of bourgeoisie, characterised by a ‘ravening greed’, and a mania for speculation rather than initiative or efficiency in production” (Sarkar, 1983, pp. 406–407).

11 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

12 Big business: General feature: high corporate profits but low output, low growth large oligopolies No domestic competition No global competition

13 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

: 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

15 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

16 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

17 More ‘miracles’ Spectacular growth of the ‘informal sector’ Inequality across caste, gender and religion Issues such as female infanticide

18 The agrarian sector Has anything changed? Big question: could such inequality and depravation be avoided?

Tagore, in British India “Our villages are dying. If we think we can just continue to live, that would be a terrible mistake. The dying can pull the living only towards death” 19

"Today, it seems to me, some are putting all their strength and labour into producing life's necessities and some others are living off the fruits of that labour. Just as the moon - illuminated on one side, and dark on the other", Tagore, "The Neglected Villages" 20

"One day I had to leave the exotic world of literary enchantment. That day the extreme poverty of the Indian masses revealed itself to me: it was heart wrenching. Such gross depravation of the human mind and body has perhaps not occurred in any other modern state. And yet, this country has been providing the British with their wealth for a very long time", Tagore in 'The Crisis of Civilizations' 21

22 Agrarian Crisis today (photos and stories by P.Sainath)

Map of Maharashtra shtra/maharashtra.htm 23

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What can be done? A story from Kerala 29