India After Gandhi (122 page)

It is tempting to view Bangalore as the
benign
face of economic liberalization. There, the opening of foreign markets has generated
skilled employment and enormous wealth, shared fairly widely among the population. It is also tempting to see tribal Orissa as the
brutal
face of economic liberalization. The wealth that will accrue from mining will go to the mine owners and the political class that works in league with them. Those losing out will be the villagers beneath whose land the veins of bauxite run. They will be rendered homeless and assetless, and also left to cope with the degradation of the ecosystem that will be the inevitable consequence of open-cast mining.

Of course, even before 1991 India was a land marked by sharp inequalities. Some regions and some social groups were noticeably less poor than others. However, the market-oriented reforms have tended to accentuate these inequalities. The states that were poorest grew most slowly during the decade, while the states that were already better off grew faster. Throughout the 1990s Bihar registered an annual growth rate of 2.69 per cent, Uttar Pradesh 3.58 per cent and Orissa 3.25 per cent. On the other side, Gujarat had a growth rate of 9.57 per cent, Maharashtra 8.01 per cent and Tamil Nadu 6.22 per cent. Broadly speaking, the states that did well were located in the south and west of the country while the states that fared indifferently were in the north and east. At the very bottom were the massively populous states of Bihar and Uttar Pradesh. In 1993, these two states accounted for 41.7 per cent of India’s poor, in 2000, for 42.5 per cent.
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It appeared that economic performance was crucially dependent on initial endowments of human capital and physical infrastructure. The states that had better schools and hospitals and hence amore skilled and healthy workforce were usually also the states that had better roads, more reliable electricity and less corrupt administrations.
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Naturally it was to these locations that investment and investors gravitated. In a pre-reform era, the central government often chose to site industries in areas deemed ‘backward’. Private entrepreneurs were under no such obligation; they looked to where they would get the best return on their capital. These were the southern and western states, which surged further ahead as a consequence.

That said, in even the most prosperous states it was not the entire population that benefited. The capitals of Karnataka and Andhra Pradesh, Bangalore and Hyderabad respectively, were at the leading edge of the software boom, but their own hinterlands had been left far behind. Between 1994 and 2000 per capita consumption expenditure grew in rural Karnataka at 9.5 per cent annually, in urban Karnataka at 26.5 per
cent. The corresponding figures for Andhra Pradesh were 2.8 and 18.5 per cent. Taking India as a whole, expenditure grew at 8.7 per cent per year in the countryside, but at 16.6 per cent in the cities.
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As the economist T. N. Srinivasan observes, these wide disparities meant that

if one is poor in India . . . one is more likely to live in rural areas, more likely to be a member of the Scheduled Caste or Tribe or other socially discriminated group, more likely to be malnourished, sick and in poor health, more likely to be illiterate or poorly educated and with low skills, more likely to live in certain states (such as . . . Bihar, Madhya Pradesh, Rajasthan and Uttar Pradesh, and also Orissa) than in others . . .
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One consequence of these disparities is the growing migration from poorer areas to richer ones. Once, most Indians lived, worked and died in the vicinity of their place of birth. Now, they increasingly travel long distances in search of a living. Labourers from Orissa come to work on coffee plantations in the Coorg district of Karnataka, 1,000 miles away. Many of the wheat fields of Punjab and Haryana are harvested by labourers shipped in from Bihar and Jharkhand. But there is also a great deal of migration into the cities. Many plumbers in Delhi, for example, come from Orissa, many taxi-drivers in Mumbai from Uttar Pradesh. Nor is the outflow one of artisanal or unskilled labour alone: for example doctors and engineers trained in Bihar increasingly seek work elsewhere.
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Economic growth in contemporary India is marked by considerable disparities of region and class. The Nobel-prize-winning economist Amartya Sen worries that, as these inequalities intensify, one half of India will come to look and live like California, the other half like sub-Saharan Africa.
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Already, prosperity co-exists with misery, technological sophistication with human degradation. The paradoxes of life in India were tellingly captured in a conversation between the prime minister and villagers in Orissa that took place in September 2001. From his home in New Delhi, Atal Behari Vajpayee spoke by satellite to tribals in Kashipur, whose kinsmen had died after eating mango kernel because their crops had failed. ‘It is extremely unfortunate that in today’s world people die by eating poisonous material’, said the head of a government that could speak to its citizens by videophone, yet not supply them with wholesome food.
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The strategy of economic development followed in the 1950s was backed by a strong consensus. There were critics, but these were
marginal
figures, lacking in influence and without asocial base. By contrast, the strategy of economic development adopted since the 1990s has been subject to a searing critique within and outside the political system.

The economic debate in contemporary India is conducted between two schools, whom the columnist T. N. Ninan calls the ‘reformists’ and the ‘populists’.
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The reformists ask for a freeing of market forces, the abolition of subsidies, the removal of restrictive labour laws, the full convertibility of the rupee and a general retreat of the state from intervention in the economy. Some even want health care and education to be privatized. The populists, on the other hand, demand restrictions on foreign investment, the continued nationalization of key industries and the protection of the interests of labourers and small entrepreneurs. In addition they demand that the state implement land reforms, fund programmes to end rural poverty and provide subsidized food, housing and energy to the urban as well as rural poor.

The arguments between these two groups are very vigorous, and conducted in different for a – in the press, in Parliament, on television and in the streets. Intriguingly, political parties tend to be in favour of economic reforms when in power, and against them when in opposition. Between 1998 and 2004 the Bharatiya Janata Party promoted the opening of the economy and the disinvestment of publicly owned industries. These policies were opposed by the Congress Party, which had, of course, originally introduced market-friendly reforms in 1991. Forgetting (or annulling) its own recent history, the Congress led a countrywide strike in March 2000, in protest against liberalization in general and the rolling back of subsidies in particular.
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The ruling BJP fought the 2004 elections with a feel good slogan – ‘India Shining’ – and a promise to bring prosperity to all through market-led growth. The Congress campaign proposed the claims of the
aam aadmi
(common man). However, after winning power, the Congress-led coalition chose the original architect of the reforms, Dr Manmohan Singh, as prime minister. He in turn appointed two well-known reformists as finance minister and deputy chairman of the Planning Commission. Now it was the turn of the BJP to cry foul. They dusted off the old
nationalist idea of
swadeshi
(self-reliance), claiming that the new government’s policies were undermining India’s sovereignty and independence.

Most curious is the behaviour in and out of power of the Communist Party of India (Marxist). In Delhi, CPM intellectuals – many associated with the prestigious Jawaharlal Nehru University – are in the populist vanguard, opposing any move to cut subsidies, sell inefficient state enterprises or invite foreign capital. And CPM-led tradeunions organize strikes and
bandhs
whenever a public utility is privatized. In West Bengal, however, the CPM chief minister, Buddhadeb Bhattacharya, is actively canvassing investment from capitalists both foreign and indigenous. He has chastised trade unions for their excessive militancy, and banned strikes in the key software sector. He once went so far as to say that his administration is guided by the slogan ‘Reform or Perish!’

In an era of minority governments and coalition politics, there has necessarily to be some give and take, the seeking of common ground between reformists and populists. One such compromise was worked out in 2005 over the implementation of an employment guarantee scheme (EGS), under which the state would commit itself to providing gainful employment to those who needed it, by putting them to work on schemes for soil and water conservation, road-building and the like. The EGS was lobbied for by left-wing economists, who thought it would provide valuable support for the rural poor and also create badly needed infrastructure in the countryside. But it was opposed by market-oriented economists, who felt it would be an unnecessary drain on the exchequer and only promote corruption. Predictably, the EGS scheme eventually approved by Parliament was regarded as too radical by the reformists, but as not radical enough by the populists.
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The dismantling of the ‘licence-permit-quota raj’ has closed many avenues of corruption. Yet the process of privatization has opened some new ones. When public sector factories are sold there are possibilities of favouring a particular bidder in exchange for a financial consideration. Crucially, the state retains the power to acquire and dispose of land; a power abused in the present as in the past to allot land to private firms at well below market cost.
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Perhaps the most notorious case of corruption in post-reform India concerns a power plant that the American firm Enron wished to setup in Maharashtra. In June1992 the state government, then controlled by the Congress, signed a deal with Enron which guaranteed the company a staggering 16 per cent annual rate of return on its investment. The
details were leaked to the press and a popular campaign was launched to stop the project. The Shiv Sena Party, then in opposition, also joined in the protests. The project was temporarily shelved, but when it won the state elections in 1995 the Shiv Sena reversed its stand and recommenced negotiations with Enron. Fresh protests were launched, this time with the Congress Party seeking to support them.

The Enron project never got off the ground, in part because of the intensity of the protests and in part because of the troubles that the company was facing in the US, which finally forced it to declare bankruptcy. However, while the controversy was at its height, the head of Enron in India revealed that they had spent $20 million on ‘publicity’ for the project, this widely (and almost certainly correctly) seen as a euphemism for bribery. If the negotiations alone saw so much money change hands, one can only speculate on how rich the pickings would have been when the project was up and running.
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The growing size of the Indian economy has prompted some noticeable shifts in foreign policy, among them a growing friendship with the United States. As we have seen in this book, these countries did not always or usually enjoy cordial relations. During the Cold War the Americans tilted markedly towards India’s hostile neighbour while India tilted somewhat towards the US’s rival superpower.

After 1991 the provocation of the Soviet Union did not exist; but Pakistan did. It was only towards the end of the 1990s that the US moved to a position of equidistance between India and Pakistan. In the early years of the twenty-first century it even seemed to favour India. The reasons for this were chiefly economic, the sense that here was a large market for American goods. (In 1990, Indo-US trade was worth $5.3 billion; by the end of the decade it had nearly tripled.) President Clinton came to India in 2000 and President G. W. Bush six years later, these visits merely confirming what had become a fundamental change in attitude. For, as the foreign policy expert Stephen Cohen has pointed out, while for many decades Washington was prone to treat India as an ‘insignificant pawn’ in the Cold War, by the end of the twentieth century it had become a ‘natural ally’.
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In a speech to the Asia Society in Washington on the eve of his visit
to India, George W. Bush described it as a ‘global leader’, and a ‘strategic partner’ and ‘good friend’ of the UnitedStates.
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This anointing of India as a natural ally marked a decisive victory of the US Congress and the White House over the Pentagon. As the former senator Larry Pressler points out, the generals in Washington warmed to Pakistan not only because they could sell them arms, ‘but also because the Pentagon would often rather deal with dictatorships than democracies. When a Pentagon official goes to Pakistan, he can meet with one general and get everything settled. On the other hand, if he goes to India, he has to talk to the Prime Minister, the Parliament, the courts and, God forbid, the free press.’
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For its part, the Indian government took time to realize the significance of the ending of the Cold War. The nuclear tests of 1998 were in some measure a continuation of an ‘independent’ foreign policy. However, after the US overcame its initial distaste and accepted India’s nuclear status, New Delhi worked seriously to improve relations. In a unipolar world it made sense to ally with the most powerful nation in it. Indian leaders took to speaking of the ‘common values’ that linked these two ‘great democracies’. There was also economic self-interest at work, for the US was by far the greatest outlet for the software industry. Anyhow, in 2001 relations became so cosy that the BJP foreign minister even offered to send troops to help the Americans in Afghanistan. The proposal was overruled by his prime minister, but that it was made at all was a sign of how close the political establishments of the two nations had now become.
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