The economic era since 1991 has been a mixed bag for development. While the economy showed a sustained growth of around 5 to 7 percent per annum, throughout the period, sometimes even growing at double digits, structural transformation had bypassed the industrial sector growth, the key sector for productivity enhancement. Growth, propelled by the new and emerging sectors also were carrying in its wave the skilled and the urban youth, but left behind were large swathes of the less skilled and the rural. Poverty rates had declined, arguably to some extent, yet not so effectively as in the immediate period preceding liberalization, however calorie consumption had certainly declined. Inequality has widened, across regions and interpersonal. Foreign investment flow has ever since been mounting, capital and stock markets expanding, while credit access and availability for productive investment had slowed down as well as private domestic investment has stagnated. Big infrastructure projects in mega and metro cities, as well as connecting these cities have multiplied, while the small and medium urban centres are imploding. Such contradictory signals of development since liberalization call out for arguments that can elucidate.
Quarter Century of Liberalisaton in India is a collection of essays explaining these emerging contradictions in development since liberalization. It primarily seeks to answer the questions: How did India wake up in 1991? Who rang the bells and for whom did the bells ring? This collection of essays that appeared in the Economic and Political Weekly between July 2016 and March 2017, is an excellent analytical gaze at the recent past, on liberalization, its promises and its discontents. Rich in arguements, the works of some of the most persistent and persuasive authors have been included in the volume. The volume would be particularly interesting for those who want to read the views of both sides of this sharply divided debate on liberalization and its prospects in India.
A general consensus among all the authors is that liberalization has been a period of high growth. Further, while growth had accelerated, it has been exclusionary in nature. However, the sharpest contestations arise on the causative conditions that led to liberalization, the emergent nature of state and the future prospects of liberalization. The essays in the volume are neatly classified into three running themes, the first theme discusses the circumstances of economic liberalization in 1991. The second theme addresses the process of transition, its successes and failures. The third theme looks into specific key sectors and their performances.
The two papers on the landmark year 1991 by Montek S Ahulwalia and Deepak Nayyar could be read in juxtaposition. Both the authors were in the thick of the plot when the act was carried out. Yet, their vantage point of the unfolding economic drama have led them to interpret the roots of the events of 1991 to different locales, sometimes even countering—one taking the view that the idea of liberalization was a long thought out home grown plan, the other that liberalization was a short term response to a looming threat on the government’s finances, not considering the developmental needs of the state.
The focus of the next three articles is the changing role of the state under liberalization and global capital. Prabhat Patnaik and Anjan Chakrabarty focus on the rise of global capital and the role of the state in building institutions that would calibrate India into an economic space for predatory forms of capital. Patnaik’s article discusses the mechanics of neo-liberal capital and its implications in terms of hunger, inequality and disguised unemployment. He further draws attention to the internal contradictions of capitalism and its need to expand on price bubbles. Anjan takes a philosophical look at the idea of liberalization and the transforming role of the state in disciplining and creating consent for neo-liberal capital. Sabri Oncu draws parallels from across the globe on liberalization and financialization being offered as the only sustainable alternative to move towards, in the discourse on development. He urges the need for prioritizing long term productive credit rather than financializing a rent seeking economy.
While the exclusionary nature of growth is a recurring theme throughout, its process is brought to the fore by Atul Sood, which is reflected by Rajeev Kumar as well. However, the authors take different positions in understanding the role of the state. While Sood posits the state as an active agent in creating this exclusionary character of the economy, Rajeev Kumar sees a benign role of the state, that of inaction, that created the exclusionary spaces. Sood argues that the state in the liberalized regime has acquired new characteristics; far from being the typical neo-classical state of minimal market intervention and maximum governance, the state has become a manipulator for the big players, shaping laws, rules and policies to further their interests. While this was done in a covert manner couched in the discourse of governance, the recent phase since 2014 has seen this nature of the state in blunt force, and a parallel politics of silencing the other voices has been deployed to expand this agenda. Rajiv Kumar also argues that the growth process was pro-rich as it disentangled the accumulation process for the rich while it withdrew from its responsibilities towards basic needs such as education and health and left the key livelihood sector, the agriculture sector, unattended. Further, the nexus between politician and crony capital vitiated the atmosphere. In Rajeev’s scheme of argument, therefore, the period after 2014, under Narendra Modi has seen pro-poor governance reforms and is hopeful of growth being less exclusionary.
Taking stock of the macroeconomic performance since liberalization Pulapre Balakrishnan concludes that the stated objectives of structural reforms in terms of easing of balance of payment constraint, greater growth and efficiency through enhanced competition has been partially achieved in specific sectors. However, he has singled out the lack of growth in public goods, infrastructure in particular which is stretching the private economy to its limits. Besides, sagging public infrastructure is depleting the quality of life as well. The slackness in capital formation is reiterated by R Nagraj and Shantanu De Roy in the industrial and agricultural sectors respectively. Roy decries the reformist argument of favaourable terms of trade for agriculture. On the contrary, growth and productivity performance of the sector in general had worsened in the post-reform period. Countering the reform argument Nagraj takes the structuralist view that poor agriculture growth and the poor infrastructure investment are hampering industrial growth. He further argues for a developmental state through strategic interventions for bolstering the manufacturing sector.
Looking at the changes in fiscal policy and Centre-State relations Chirashree Das Gupta and Surajit Mazumdar argue that there has been a change in the resolving of Centre-State relations from political conflicts to techno-managerialism post reforms. Market based fiscal prudence was to be achieved mainly through expenditure compression as tax mobilization was weakening, which in turn answers the question of weakening public investment. The fiscal powers of the States would continue to erode under the GST regime, thus weakening the position of the States vis-à-vis the Centre. AV Rajwade traces the major changes in the monetary and exchange rate policy since 1991. On analysing the performance, he argues that while the external account is robust in quantity it is wanting in quality. He further pleads for the case of an exchange rate targeting approach rather than the currently followed inflation targeting. Aseem Srivastava takes a look at the jobless growth and the rising resentment in the country, ecological and cultural loss that is associated with growing consumerism and individuation of the society.
The book, as stated above is a broad sweep of the Indian economy since 1991. Though a collection of essays, one can feel the continuity in the conversation as one moves from one essay to the other. It must be cautioned that many of them are aimed at articulating their case, conversing to a generally informed reader. For supporting rigorous empirical evidences for the arguments made, one may have to read their other works. Most of these essays are on the economic angle of liberalization, though its ramifications are wider, into social, cultural and political realms of Indian society.
Vinoj Abraham is with the Centre for Development Studies, Thiruvananthapuram, Kerala.