Nos. 44-46, April 2008

Nos. 44 - 46
(April 2008):


India’s Runaway ‘Growth’: Distortion, Disarticulation, and Exclusion
IV. How Distortion, Disarticulation, and Exclusion Are Built into India’s Runaway ‘Growth’

The Indian economy has no doubt been undergoing very rapid GDP growth for the past few years. However, the nature of this growth is such that it accentuates all the existing distortions in India’s pattern of development, to an extreme.

Who can miss the most visible manifestations of these distortions – the grotesque gap between the rich and the poor, the metropolises and the countryside, the performance of the stockmarket and that of agriculture? Where views differ is on what, if anything, needs to be done about these disparities.

An important section of ‘opinion-makers’, well-represented in the media, believe nothing at all need be done: economic growth is generating jobs and prosperity, and poverty is vanishing on its own. All that remains is to do away with the remnants of State intervention in the economy in order to give full latitude to the dynamic private sector. No doubt a section of people suffer in the course of this development, but that is part of the pain that accompanies all progress. 

Another influential section is less crass, and more sensitive to the turbulent political realities of India – even as they share certain fundamental premises with the first section. These humanitarians emphasise the need to make development more ‘inclusive’ by sharing some of the revenues of the current boom with the disadvantaged – through the expansion of public employment schemes, child welfare and nutrition schemes, public expenditure on education, health and other services, measures to uplift the socially disadvantaged, and so on. In the last few years the country’s rulers have picked up on these themes and have included higher ‘social sector’ allocations in the Eleventh Plan.

Hardly anyone can argue against larger expenditures on employment schemes, welfare, nutrition, education, and health. If carried out, they would partly reverse the damage done by more than 16 years of fiscal retrenchment and straitjacketing. But this ‘welfarist’ approach essentially views the process of bettering the lives of people as separate from the process of economic ‘growth’; the sphere of distribution divorced from the sphere of production. The only link it makes between the two is that some funds for people’s welfare can be raised thanks to the growth of the economy. The limitations of such a theoretical frame are particularly apparent in a country like ours, where the majority of people are in a pitiable condition. Demanding greater expenditure on people’s basic needs should not divert us from examining the underlying economic processes which generate and reproduce disparities, exclusion, disarticulation and distortion on an ever larger scale. It should not divert us from tracing these processes to basic social relations, in order to change them.

The argument in brief
In the first chapter we argued that we cannot attach much meaning to the phrase ‘economic growth’. Rather, we must investigate the pattern of development to know what it means for people. In order to understand that pattern, we need to approach it historically. Thus we briefly sketched the pattern of capitalist growth in Europe, characterised by a complex of linked developments in the economic and social spheres.

We proceeded to describe the distinct course of colonial development of India: how colonialism used its political hold to drain surplus from India’s economy, and for this purpose ruptured important linkages between (and within) sectors of India’s economy. These were the linkages through which in the ‘normal’ course – that is, the course taken by the original capitalist countries – capital accumulates, expands itself over and over, and transforms every sector of an economy from within. While certain internal linkages were broken, certain external ones were strengthened out of proportion. This prevented accumulation in some sectors, and diverted surplus to others for the purpose of the drain, stunting growth in large sectors and exaggerating it in select sectors. This pattern of development fostered certain native classes whose interests were linked with imperialism, and it is these classes that ascended to power with the departure of the British. Maintaining their grip on political power, these classes perpetuated a pattern of development along the same course, under the tutelage of the ‘developed world’, that is, the imperialist countries.

There have been many obvious changes since the end of British rule, and these changes appear to have accelerated in the last decade; yet the economy is in crucial ways still shaped by the legacy of colonialism and the continuing hold of imperialism. As a result, the spectacular growth celebrated by the rulers is restricted to islands of the economy; the vast mass of people are trapped in miserable economic conditions and face unbearable social oppression.

With this we reach our subject proper, namely, the current pattern of private corporate sector-led growth.

First, we sketch the extremely distorted structure of the economy. The bulk of the workforce is crammed into sectors with very low income; a tiny section of the workforce is in the booming sectors. The links between the different sectors (and within the each sector) are missing or weak, allowing islands to flourish in a sea of backwardness and poverty. The gaps between these sectors and sub-sectors are expanding with the growing capital-intensity of the private corporate sector.

Secondly, we link the current spell of rapid growth in India to certain developments in the world economy and large inflows of speculative capital from the developed countries. That is, the current high ‘growth’ is not essentially an internally generated phenomenon, but an externally induced one. Moreover, the increasing financialisation of capital in the imperialist economies has brought some changes in the operation of imperialism here. Among the by-products of the changes in the world economy is the emergence of Indian firms as ‘multinationals’, powered partly by foreign capital. However, the increased integration of the Indian economy with the highly financialised global economy implies that the impending crisis in the latter, and particularly the long-term downturn in the trajectory of the leading imperialist power, may transmit both shocks and stagnation here.  

Thirdly, we sketch the pattern of growth of the private sector in this period of boom. We showed how foreign inflows have generated a boom in credit, which, given the structure of the economy, fueled a consumerist surge concentrated among the better-off; this in turn spurred growth in a range of industries catering to this demand. However, this market necessarily remained narrow. Inevitably, the push for rapid growth on such a narrow base took the form of ‘enclaves’ catering to export or the elite: the software and BPO industries, the SEZs, and ‘infrastructure’ projects fenced off from the requirements of the rest of economy.

Fourthly, we describe a significant element in the economy’s ‘growth’: the large-scale capture of natural resources by the private corporate sector, using the State machinery. As this pattern of resource capture progresses, it results in large-scale destitution of the already depressed sections of the rural population – even as it shows up as growth in GDP.

Fifthly, we illustrate the manner in which various flourishing industries – health care, real estate, organised retail, luxury industries – either caused or required economic exclusion of the working people as an essential part of their growth.

Sixthly, we show how, while neo-liberalism talks of the need for the State to retreat from economic intervention, it actually requires active State intervention in order to transfer surplus to the private corporate sector on a massive scale. Here we talk of various forms of privatisation and the array of subsidies provided to the corporate sector.

Seventhly, as a natural outcome of this pattern of growth, extreme inequalities have developed in Indian society. They have progressed to the point where among ruling class circles, and even within international financial institutions, some have raised the alarm, pointing to the threat of grave social disorder. Yet these alarms have little meaning; the present order is quite incapable of moderating inequalities.

Finally, we discuss the extraordinary growth of the financial sector within a small enclave of the Indian economy – a necessary consequence of integration with global financial markets even as the internal economy remains disarticulated. This integration has yielded foreign investors breathtaking returns; it has also placed the Indian economy on a precipice. The impending troubles of the world economy now will have a more direct impact here. Further, even in the absence of a crash, the demands of foreign speculative capital – such as the introduction of capital account convertibility and the transformation of Mumbai into an international financial centre – require the further subordination of the productive economy of the vast majority to the financial-speculative island.

An alternative path of development must be based on transforming agrarian relations: This would be the prerequisite for accumulation in the vast agrarian sector, and in turn would create scope for generating manifold internal linkages in the economy – between sectors, within sectors. Growth rates would not seem so spectacular, but the growth would be meaningful for the people and be more reliable, because based on an internal dynamic. Moreover, the process of transforming agrarian relations would bring to the fore long-suppressed social forces capable of pursuing a development path in favour of the vast mass of people – whose productive energies too would be progressively unleashed in this course.

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