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10.06.2004

India: A Setback for Neo-Liberalism

Prabhat Patnaik

In 1991, India, one of the bastions of third world dirigisme since the days of Jawaharlal Nehru, embarked on a neo-liberal economic policy-course, a shift which was ranked by a leading World Bank economist of the time among the ''three most important events of the twentieth century'', alongside the collapse of the Soviet Union and China's turn to ''market reforms''. The immediate provocation for India's switch was a balance of payments crisis caused by a combination of the Kuwait war, and a flight of Non-resident Indians' deposits with Indian banks. But this was a minor problem which could have been handled without any change of course : the real reason for the change was that the contradictions of the dirigiste strategy, manifested above all in a fiscal crisis of the State, had brought it to a cul-de-sac, where the bourgeoisie, especially newer sections of it, wanted to adopt a neo-liberal regime, which imperialism had been pressing for anyway. While the government of the Congress party initiated the neo-liberal reforms, it is the government led by the Hindu right- wing party, the BJP, which came to power in 1998, which carried forward these reforms with a vengeance.

This might appear intriguing at first sight. The BJP is the political wing of a fascist organization called the RSS, which had been formed in the 1920s preaching virulent communal hatred of the Muslim minority. It had played no positive role in the freedom struggle since it was fundamentally anti-Muslim rather than anti-colonial. It had actively participated in the communal riots that followed independence and partition of the country, and one of its followers had assassinated Mahatma Gandhi. Though there was no evidence linking the organization to this act, it had been banned for a while until it pledged to abjure politics. It had formally kept the pledge by setting up the BJP as a front political organization, which adopted all kinds of opportunistic slogans, even though the consistent objective of the RSS has always been the establishment of a Hindu State. Like other fascist outfits however the RSS too has a Radical Right opposed to the hegemony of the MNCs and global finance, and advocating ''swadeshi'' or ''indigenous capitalism'', which makes the BJP's avid espousal of neo-liberalism rather curious.

But RSS/BJP is not a religious fundamentalist outfit of the sort one finds in several middle eastern countries. It is much more in the fascist mould. While appealing to religious sentiments (its recent rise to power was propelled by the destruction of a sixteenth century mosque in Ayodhya on the grounds that a temple had to be built on that very spot since Lord Rama, the Hindu deity, was born there), it is technology-savvy, and has a large following among well-to-do professionals of Indian origin in the U.S. and elsewhere who combine the conservative politics of their adopted land with an RSS-mediated vicarious link to their ''cultural roots''. The BJP with its long-standing affinity for Israel, and hence for the U.S. (especially after September 11), was quick to jump on to the neo-liberal bandwagon and establish for itself a sizeable chunk of support among the domestic nouveau riche, young upwardly mobile professionals (the “yuppies”) and sections of the bourgeoisie (in addition to its traditional petty-bourgeois base). The Radical Right within its ranks, under the circumstances, was silenced with ease.

With all its communal appeal and propaganda, the BJP never succeeded in getting more than a quarter of the total votes in the country, fractionally less than the Congress, and that too on account of a degree of disillusionment of the people with the first five years of neo-liberal reforms. It ruled however with the support of a number of regional and smaller parties, some driven by local anti-Congressism, some tempted by the offer of financial assistance to state governments run by them in a situation where the states have been fiscally squeezed by the Centre, some tempted by power, and some merely jumping on to the bandwagon. The BJP was however the undisputed leader of the coalition government (of 22 Parties) termed the National Democratic Alliance from 1998. Its writ ran, and ran to devastating effect.

In foreign policy, India moved much closer to the U.S., and the government even toyed with the idea of sending troops to Iraq at American request, until massive popular opposition made it desist. Though not formally abandoning India's traditional support for the Palestinian cause, it warmed up to Israel, and there was even occasional talk of an India-U.S.-Israel axis. In the name of fighting terrorism, it enacted a draconian law, the Prevention of Terrorism Act (POTA) providing for arrest without bail and trial by special courts. The RSS cadres targeted the minorities, the Muslims of course, but additionally the Christians as well. Christian missionaries were attacked in many places and a law banning conversions was demanded. Government-run cultural and educational institutions were sought to be handed over to persons of little expertise but with known RSS loyalties. A whole set of text books, reinterpreting Indian history to the liking of RSS, was sought to be introduced at the school level. And obscurantist courses on astrology and Brahmin priestly practices were sought to be introduced at universities. Since ''Communists'' were vilified, and any liberal opinion opposed to the RSS was called ''Communist'', all scholarly activity in effect was treated with suspicion. The best-known painter, and the best-known theatre activist of the country who happen to be Muslims were attacked. Above all, there was a massive pogrom against the Muslims in Gujarat from February 2002, organized with the connivance of the state government which was and continues to be headed by a hardcore RSS loyalist. The state-aided pogrom was apparently in retaliation for the killing of some Hindu activists, though the exact nature of this killing still remains shrouded in mystery. In short there was a veritable assault on the country's composite culture, the secular foundations of its polity, and the entire legacy of its anti-colonial struggle.

This legacy was undermined in the economic realm too through a determined pursuit of neo-liberalism. The neo-liberal decade of the nineties has witnessed a massive deflation. Since the tax-GDP ratio has come down, as a fall-out of tariff cuts and ''incentives'' for investment, since the interest on public debt has been raised, and since enlarging the fiscal deficit has been taboo (notwithstanding the coexistence over much of the period of unwanted food stocks, unutilized industrial capacity and burgeoining foreign exchange reserves), the governments, both at the Centre, and, through the latter's arm-twisting, at the state-level, have cut expenditures drastically, especially social sector expenditures, investment expenditures, rural development expenditures, and transfer payments to the non-rich. This has brought about an infrastructure crisis (which no amount of red carpets for the MNCs has succeeded in overcoming), a running down of public education and health facilities (accessed mainly by the poor), and a compression of aggregate demand through a reduction in purchasing power, especially in rural India.

Notwithstanding the fact that the growth rate of foodgrain output fell behind the rate of population growth for the first time since independence in the nineties, so drastic has been the fall in purchasing power, especially in rural India, that there were 65 million tonnes of foodgrain stocks lying with the government by June 2002, even though per capita foodgrain absorption for the country as a whole had fallen by that date to what it had been on the eve of the Second World War. To get rid of the stocks the BJP-led government sold foodgrains in the international market at prices below what the poorest in the country pay, even though there was growing mass hunger at home ( reflected in the abnormal stock accumulation).

Reduced infrastructure investment, combined with the curtailment of subsidies to the peasantry, the virtual end of the regime of low-cost credit directed to agriculture, and the import of the world price-crash for many crops under the new WTO dispensation, caused a massive agrarian crisis with thousands of peasants in several states, including even prosperous ones, committing suicide. Small scale industries too faced closure in the new context of high-cost credit and import liberalization. Even though there was considerable expansion of IT-related services and Business Process Outsourcing to India (which the U.S.Presidential candidate Kerry now wants to restrict), employment opportunities shrank both in urban and rural areas. Organized workers faced retrenchment, ''voluntary retirement'', and vastly reduced bargaining strength, with the Supreme Court even giving a verdict against their right to strike. The need for ''introducing flexibility into the labour market'' (a euphemism for a wholesale attack on workers) began to be openly aired.

All these have been experienced in other countries, and may not sound much to an outsider, but in India with its long history of dirigisme, its strong democratic tradition inherited from a prolonged anti-colonial struggle, it represented an unimaginable shift, and especially so when the BJP-led government started selling off profit-making public sector enterprises at throwaway prices to the private sector (some of which were resold within weeks at a multiple of the price at which they were bought). Even the oil sector, control over which had been acquired after decolonization, through a prolonged struggle against the oil majors and imperialist agencies acting on their behalf, and that too only because of the help from the Soviet Union, was sought to be privatized, with an initial clutch of the shares of the highly-profitable public enterprise, Oil and Natural Gas Commission, being bought by the nominees of Warren Buffet, the Californian financier.

Meanwhile however the stock-markets boomed; foreign exchange reserves multiplied, reaching a staggering $110 billion by early-May, as the Reserve Bank tried to keep currency appreciation in check in a situation where India was becoming a ''parking place for dollars''; and the cities became jammed with imported, or locally-assembled, cars, as the upper echelons, which in India would still run into a few millions, prospered under the new dispensation, a prosperity that was played up in the media, both internationally and locally.

The BJP-led government, taken in by this hype which was sustained by several Opinion Polls, decided to call for early elections, and campaigned on the slogan of ''India Shining'', and of a ''Feel Good'' factor in the air. It was faced by a Congress-led secular alliance in several states, and by the Left in its own strongholds. The alliance between these two was confined to a few states, though it was well-known beforehand that the Left would support a secular government at the Centre. The election outcome was a resounding defeat for the BJP-led alliance, the like of which had not been seen since 1977, when Indira Gandhi had suffered a humiliating defeat in the election, which she had called to legitimize her authoritarian rule imposed during the ''Emergency''. The Indian people had once again risen to the occasion. These election results show above all the strong roots that electoral democracy has struck in India. The sheer fact of people across what is virtually an entire continent acting in unison, without any prior contact with one another, despite being apparently fragmented along language, religion, caste and other lines, and stubbornly against what the pundits had been telling them about ''India Shining'', is indeed quite overwhelming.

Their verdict however is not only against the BJP. It is against the neo-liberal policy course. It is noteworthy that even in Congress-ruled states like Karnataka and Punjab, where the writ of the World Bank or the ADB ran, and the peasantry was driven to suicides, the people voted against the Congress, as they had done a few months earlier in Madhya Pradesh, throwing out the Congress government there. Indeed ever since the introduction of neo-liberal ''reforms'' in 1991, the tendency has been for ''reform''-oriented governments to be voted out of power, but this fact could always be camouflaged by dragging in this or that specific explanation of the concerned government's unpopularity. The recent election outcome however reveals this fact clearly and sharply. It is not surprising that the Congress, sensing the popular mood, came out with an election manifesto that is at variance with the neo-liberal agenda which it had itself been instrumental in introducing into the Indian economy.

Indeed the two most striking features of these elections have been the shift in the avowed position of the Congress Party, and the strong emergence of the Left. The Congress manifesto talked of the revival of public investment, of emphasis on the agricultural sector, of strengthening the public distribution system for foodgrains and certain other essential goods, of not privatizing profit-making public enterprises, and above all of an employment guarantee scheme that would ensure a minimum of 100 days of employment per year to at least one member of each household. These, among others, were the demands of the Left during the heyday of neo-liberalism; the Congress' adopting them is symptomatic of the popular mood, as is the strong emergence of the Left, admittedly only in its areas of influence.

The Left, consisting of an alliance of four Parties, obtained 62 seats in a House of 543, its highest tally ever. It virtually swept the polls in the three states where it is a major force, West Bengal, Kerala, and Tripura. Since a secular government could not be formed without its support, there was a view that it should join the government in order to strengthen it. Though this view was ultimately rejected by the Central Committee of the Communist Party of India (Marxist), the largest of the four Parties, and the Left decided to support the government from outside, what was significant was the fact that a very large number of artists, intellectuals and social activists, representing a whole spectrum of political views, from Gandhism to anarchic Leftism, to social democracy, to NGO-style progressivism, entreated the Left to participate in government. Many of them have traditionally been hostile to the organized Left. The fact that they nonetheless wanted the Left to be a part of the government to defend the peoples' interests, shows a significant re-alignment of socio-political forces, a coming into being of a new kind of relationship, towards which the Left's active participation at the World Social Forum at Mumbai in January 2004, was a pointer.

The new government has been formed on the basis of a Common Minimum Programme, which, though well short of what the Left would have liked, has been broadly endorsed by the Left and has been generally well-received. The Programme does represent a shift of direction away from neo-liberalism, by re-asserting the centrality of State intervention for improving the living conditions of the people. No matter what the specific provisions it begins with, if there is an honest adherence to this perception, then that would inevitably set up an alternative dialectic away from the neo-liberal trajectory.

Not surprisingly therefore globalized finance has not taken kindly to the CMP. Indeed India at this moment represents the classic spectacle of a struggle between the will of the people demanding a shift away from neo-liberalism, and the will of international finance capital, and its local allies, demanding a continuation of neo-liberal ''reforms'', with the bulk of the English-language media, both print and electronic, pitching in with the latter. Finance capital fired the first shot in its struggle against the peoples' will during the election process itself (which in India lasts several days), with the intention of influencing the peoples' verdict. When the exit polls after the first few rounds of voting suggested difficulties for the BJP-led government's return to power, the stock-markets crashed, and the BJP promptly appealed for votes in the name of financial stability. When the results came out and the Left, without which a government could not be formed, expressed itself against disinvestment in the core sector and of profit-making public enterprises, there was again a crash on the stock-market, which the media played up suitably as portending disaster.

This was absurd, since stock prices have very little impact on private corporate investment decisions in India, let alone on the overall investment ratio; since the so-called ''losses'' owing to stock price falls are mainly ''paper losses'' with no impact on the real wealth of the country; and since in any case only about 0.1 percent of the country's population participates in the stock market. But the media blitz was unrelenting: a thousand billion rupees of wealth, it was claimed, had been ''wiped out'' because of the Left's ''ideological intransigence''. Emboldened by this brou-ha-ha some financiers even held a demonstration against the stoppage of disinvestment of profit-making public sector units (as if grabbing peoples' property was their birthright)!

There was some revival of the stock-market when Sonia Gandhi, the Congress leader who had struck a chord with the masses and had virtually single-handedly brought that Party to power, and who, because of her ''inexperience'' was seen to be ''pro-poor'', made way for Manmohan Singh, the original architect of ''reforms'', to be Prime Minister. But the when the CMP was released to the public there was yet another crash. The new Finance Minister Chidambaram, also with a pro-''reform'' background, has been trying to reassure finance capital in various ways, but with ambiguous results so far. Capital flight has not been a problem as yet, but not a day passes without the media circulating scare stories about the implications of the CMP.

The question that arises is: what will be the outcome of this struggle? Where is India heading? The dependence of the government on support from the Left would ensure that it would not make a complete volte face on its commitments embodied in the CMP in the matter of economic policy. Even though the Left has assured support to the government for a full five year term, it is unlikely that the government would exploit this commitment to push a neo-liberal agenda. The least that can happen in this respect in the short-run therefore is a ''freezing'' of ''reforms'' with some measures to alleviate the peoples' hardships, such as have been announced by the new government of Andhra Pradesh, where the previous regime, much loved by imperialism, has been voted out. And certainly in the matter of removing the baleful influence of communal-fascism in the sphere of education, in eliminating POTA from the statute books, in bringing in stringent laws against the fomenting of communal violence, in correcting the foreign policy bias of the BJP-led government, and, generally, in refurbishing the secular foundations of the polity, much can be done.

Taking a somewhat longer view however it is clear that since the adoption of the neo-liberal agenda was in part a result of the fact that old dirigisme had brought the bourgeoisie to a dead end, the capacity of the latter to chart a new course away from neo-liberalism is limited. The current bourgeoisie is not the bourgeoisie of the period of the anti-colonial struggle, just as the current imperialism differs vastly from the old colonialism. The current bourgeoisie is in no position to provide the lead in charting an anti-imperialist development trajectory, even though it might benefit from such a trajectory and sections of it may even join the movement for adopting it. The lead for such an alternative trajectory has to come from the Left. In other words the current developments in India mark the beginning of a process, which no doubt would be protracted and tortuous with several twists and turns, of a polarization of society into two camps, a pro-imperialist camp supported by the Fund, the Bank, globalized finance and the MNCs, and an anti-imperialist camp led by the Left but encompassing diverse elements. Imperialism's impending defeat in Iraq would provide space for the consolidation of the latter camp, but the degree to which such consolidation can be successfully accomplished depends crucially on the ability of the Left to overcome sectarianism and narrowness of outlook and unite the widest possible segments of anti-imperialist social forces. The people in a whole lot of third world countries, to whom India is the latest addition, have rejected the neo-liberal agenda, imposed by imperialism, in recent months. A new anti-imperialist stirring is visible in the third world. The Left has to respond to it, and only by doing so can it move forward to its eventual objective.