Economic Reforms and the Poor in India

The last few months have witnessed a slew of policy announcement by the United Progressive Alliance II (UPA-II) government. The media labelled the announcement as the second wave of economic reforms of the UPA-II. Important among the policy changes are: (i) allowing Foreign Direct Investment (FDI) in multi brand retail sector in India; (ii) partial withdrawal of subsidy to cooking gas by limiting the entitlement of the number of subsidised gas cylinders to a family to six in a year; and (iii) disinvestment of certain public sector units.

Prior to the official announcement, the UPA-II has been implementing in piecemeal other measures of change which included withdrawal of subsidy to fertilisers, shift in the mode of subsidy payment by kind to cash transfers to name a few. The process has been under operation as part of the everyday activity of the government since the official declaration of the development strategy of India in June 1991.

It needs to be made clear at the very outset that it is conceptually incorrect to tag the policies introduced under the tutelage of the UPA-II as “reforms”. Reform means make changes or transformations especially in the sphere of social, political or economic institutions in a country. In other words, the word reform is used to denote a long drawn out process of positive change in the existing institutions which is considered to be socially regressive, archaic and anachronistic like structure of land holdings or the practice of child marriage. On the contrary, economic “reforms” of the UPA or NDA is neither progressive nor intended to change the existing order but aimed at strengthening the current capitalist order by expanding it to spheres where a market principle can cause devastating consequence on the majority - the poorest of the poor.

A few questions crop up in the society regarding the recent policy announcements of the UPA-II:

  1. Why is the congress party stubborn on withdrawing subsidy to the cooking gas and allowing the public sector companies to increase the price of petrol and diesel;
  2. Why does the UPA-II make so much fanfare by such grand announcements of change in policy? It could have been done without an official announcement as it did happen in the case of fertiliser price hike and change in the mode of subsidy payment; and
  3. What have people in general gained by the globalisation and liberalisation policies of the last 21 years.

Let us take up these questions one by one and find answers.

First question: Why is the UPA-II stubborn on withdrawing subsidy to the cooking gas? Why the government does allow the public sector companies to increase the price of petrol and diesel while there were enough avenues to avoid the price hike?

The answer lies in the very class character of the UPA government and ruling class in India. The UPA government is bound to protect the interests of the monopoly capital (monopoly bourgeoisie) and rich peasants and landlords in India. On behalf of the interest of the Indian monopoly capital and global capital (imperialism), the UPA in general and Indian National Congress in particular is expanding capitalist production relations to areas, which has remained pre-capitalistic or under the protection of state. The withdrawal of subsidy to cooking gas and fertiliser, allowing petroleum price to move in tandem with international price movements, would open up newer areas of the expansion of capitalist production and plunder by national and international capital. It is primarily for this reason that the UPA-II went ahead, ignoring the interests of the poor and vulnerable, to withdraw subsidy.

The withdrawal of gas subsidy is primarily intended for Reliance Industries and others (both national and international capital) to carve out more profit.

The opening up of newer areas of investment, profit making and capitalist plunder of natural resources and labour have been always the source of accumulation for imperialist forces. As revealed by the Finance Minister of India, the Indian economy is poised to register much lower rate of growth between 5% and 5.5% in 2012 and the economic meltdown is likely to persist for some more time. The UPA is not concerned about the hardships the masses in India is likely to face with the economic meltdown but about the falling rate of profit for the monopoly bourgeoisie. Although Mukesh Ambani is rated as the richest Indian for the last five years, his net asset worth has declined by US$ 1.6 billion during the last one year because of this capitalist crisis in India. The withdrawal of gas subsidy is primarily intended for Reliance Industries and others (both national and international capital) to carve out more profit and avoid the impending crisis.

Why does the national government pamper the global financial capital by allowing FDI in retail trade?

Frequent crisis in the capitalist production is a matter of serious concern for monopoly capital in India because the unemployment and underemployment during the recessionary phase add much to the hardships of the poor. The big bourgeoisie and landlords are afraid that the revolutionary and anti-capitalist political parties may mobilise the poor and destitute against the system (as is happening in areas where extreme left forces are strong) and destabilise their existence. In order to harness the support of their counterparts elsewhere, the monopoly bourgeoisie and feudal landlords in India ask the government to open up avenues of plunder to the global finance capital and allow the capital to carve out a part of the Indian domestic market. It is precisely due to this compromise with the imperialist forces represented by international capital that the UPA government allows FDI in retail multi-brand market.

The extension of market forces to the fertiliser industry would extend capitalist relations of production to the non-capitalistic farm sector in India.

The existing order of production, consumption, distribution and exchange has pauperised a vast chunk of the population in India leaving the domestic market to shrink. It has had devastating impact on the pace of capital accumulation and rate of profit of the monopoly capital. The crisis in capitalist production in India could be resolved permanently by reforming the structure of production of wealth and its distribution. It would invite the ire of both the monopoly capital and imperialist forces outside. However, it is not the job expected from a government of bourgeois political parties led by Indian National Congress or Bharatiya Janata Party (BJP). Alternatively, impending crisis can be temporarily shifted to a future date by discovering a market abroad for the value realisation of the national bourgeoisie. Sharing of international market with Indian capital needs to be reciprocated by allowing international capital to plunder cheap labour, land and vast domestic market in India. Another junior partner in the ruling class is feudal lords and rich peasants. They are pacified by the hope that the economic liberalisation process would provide an export market for agricultural commodities, which would in turn improve the profitability of feudal lords. The increase in fertiliser price forces the small and marginal farmers to quit the production scenario (as it has already been happening in different parts of the country for the last 15 years). The extension of market forces to the fertiliser industry would extend capitalist relations of production to the non-capitalistic farm sector in India. It is precisely because of this class patronisation by the UPA government that there was little protest from the feudal lords and rich peasants against the hike in fertiliser prices.

Second question: Why does the UPA-II make much fanfare by announcing change in policy? Why does the UPA announce the policy changes in piecemeal?

Every policy announcement is intended to give a wake-up call to the capital that more areas are now made available for plunder and thrive.

The crisis in production is inherent in the capital system and the more advanced the production system is, severe and more frequent is the crisis. It is a known fact. On account its own lopsided economic policies; India had been in capitalist crisis in the 1960s, 1970s, 1980s. However, after the domestic economy has been integrated with the world economy in the early 1990s, Indian economy has become more prone to prolonged and deeper crisis. So, every policy announcement is intended to give a wake-up call to the capital that more areas are now made available for plunder and thrive. Upon the green signal from the government, more investment takes place and the crisis is temporarily shifted to a near future date. After a year or two, another complex battery of policies would be announced to salvage the capitalist production from its inherent characteristics of being perpetually in crisis.

Third question: Who has gained from Economic Reforms during the last 21 years?

The latest statistics on billionaires in India by Forbes brings out the answer to the question. The number of billionaires has increased from 57 to 61 during the last 12 months period. Another important aspect to be noted is that the IT giant Azim Premji is the third richest Indian in India, who has expanded his business territory to education substantially during the last few years. It is worth noting that the youngest billionaire in India is the 40 year old Ranjan Pai, who heads the Manipal Group of education. The entry of finance capital into education sector, which the states and central governments together opened up equally, is a clear example of opening up newer areas for the plunder of capital – areas which had hither to been not under the private sector. Alongside, the economic reform policies have widened the inequality in India as reported by the Asian Development Bank in 2012. The inequality in India has almost touched the upper threshold limit permissible by any international standards (40%). The increase in inequality does reorient the production in a market economy as the market stops the production of commodities and services for which there are few takers. As poor peoples’ purchasing power deteriorates, they are excluded from the market which forbade them from procuring for the very survival. Even the Indian National Congress and its allies agree that the rich in India and outside who have business dealings with India have benefitted the reform policy shift during the last 21 years while the poor and petty producers have been hit hardest than ever in the history of independent India.

If the trend is continued, unemployment, poverty and starvation death would outpace those in all recorded history in India.

Given the class identity and character of the UPA-II, it is the class responsibility of the UPA-II to safeguard and protect the interest of the monopoly capital in India, imperialist capital thirst mediated through international financial pimps like the World Bank and IMF and feudal landlords. In the process, the government announces soaps like MGNREGA and other anti-poverty schemes to silence the poor from revolt. The writing is clear on the wall - the Indian economy is again going to be in deep red with a sharp decline in GDP to 5.5% during the fiscal year. If the trend is continued, unemployment, poverty and starvation death would outpace those in all recorded history in India. The way out is the mobilisaiton of people against the state and government for the shift from this dictatorship of Reliance, Mittal and Premji led alliance to a dictatorship of the proletariat – the majority of people in India.

The author is an Associate Professor at the Institute of Development Studies, Jaipur.