DEVELOPMENT POLITICS

DEVELOPMENT POLITICS The politics of development, or development politics, has always been at the core of modern economic activity, despite claims to the contrary. In India, a developing and democratic country, one can never fully understand the process of economic development, or of liberalization, without deciphering the politics and power that envelop it, even if market-oriented reforms pretend to rid economic activity of "political interference."

Traditionally, development was understood as outcomes: economic wealth or economic progress measured in terms of gross national or domestic product. By this criteria, India performed badly despite its early potential; its per capita income in 2002 was $470, while its per capita gross domestic product grew at 3 percent in 2001–2002 and its rank for purchasing power parity gross national product was quite low, around 146th. Indian leaders wanted significantly more. Jawaharlal Nehru, India's first prime minister, had declared that independence in 1947 "is but a step, an opening of opportunity, toward the great triumphs and achievements that await us." He noted that the tasks of development included "the ending of poverty and ignorance and disease and inequality of opportunity." Important philosophical debates in the 1970s and 1980s expanded the notion of development to incorporate equality of opportunity as well as the expansion of human freedoms. The main idea was that one must see what "goods and services do to the actual opportunities and freedoms of people, categorized according to class, gender, location, and social status" (Drèze and Sen). Thus, development must be viewed in the broader sense as encompassing both economic and social opportunities and affecting different social groups—women and lower castes and minorities—differently. Unfortunately, India's performance by these more expansive criteria also remained quite limited. About 363.8 million people (out of 1.2 billion) earned less than $1 a day in 2003–2004. Its infant mortality rate was one of the lowest, around 90 per thousand live births, while life expectancy at birth was sixty-three years. Illiteracy remained endemic: around 38 percent of India's population cannot read or write, while the figures for women were much higher, around sixty-four percent. Malnourishment inflicted around 53 percent of children. Gender-related indicators were among the worst in the world: in 2004 there were only 933 women to 1,000 men in the population, a exceptionally low sex ratio; life expectancy of women was sixty-four years, and female mortality rates during pregnancy remained high. Eighty-six million members of scheduled castes and tribes, Dalits and indigenous communities, forming 25.6 percent of the population, continued to suffer from caste (status) inequality in addition to many other forms of inequality, despite constitutional protections. According to the United Nations Development Program, India's human development index's rank was 134th, below almost all the countries of the Middle East and behind many African countries with lower per capita incomes. Social and economic deprivation has found a home in India, despite Nehru's wishes and a surplus of state capacity. Thus, India is a bundle of contradictions: its government is all-pervasive and strong; yet, its capacity to affect the long-term developmental prospects of its citizens or to increase growth remains limited.

Development Theory and India

India's developmental experiment is unique for a number of reasons: for its grand ambitions, in aiming to achieve simultaneous economic progress with social and distributional equity, but also for its attempt to achieve these goals through democratic means. Thus, India's developmental trajectory figures prominently in larger comparative debates about the role of the state in economic development, the contests between states and markets as prime movers of growth, the complementarity or lack thereof between democracy and development, as well as the impact of overt centralization in subverting local and market potentials.

India has been compared unfavorably with East Asia and Southeast Asia, although its protection from the Asian financial crisis of 1997, as well as its rapid growth in the late 1990s, has given pause to such negative assessments. The consensus of the 1980s and 1990s seemed to be that India's developmental failure is attributed to its governmental failures, which overwhelmed its intrinsic potential. Rapid growth in the 1990s seemed to confirm this picture, since it coincided with liberalization policies that sought to reduce the power of the state and replace them with market forces and international competition. Yet, India's state institutions and its administrative structure remain the envy of many developing countries: its meritocractic selection system, the quality and reach of its civil servants, and its revenue capacity led the Indian state to create a public sector and a self-reliant economic policy in the 1960s that became a model for many other countries.

This puzzle led scholars such as Alva Myrdal to characterize the Indian state as "soft" and as "weak-strong." Lloyd Rudolph and Susanne Rudolph noted that the Indian state defies easy generalization in that it has "alternated between autonomous and reflexive relations with the society in which it is embedded" (p. 1). Baldev Raj Nayar, in a pithy description noted the "paradox of state strength and policy weakness" in India (p. 145). In the words of Pranab Bardhan: "It is, by now, obvious to most people that in spite of some measure of political autonomy and its direct command over vast economic resources, the Indian state is rather weak in shaping the economy" (p. 323). Others have argued that the Indian state is a rent-seeking state that uses its regulatory power to extract rents from the private sector. In this view, the strength of the Indian state was exploited by its occupants to augment illegitimate power and hurt its developmental prospects.

Despite this apparent consensus, recent interpretations note certain anomalies. Ronald Herring notes that unlike the Latin American states, India was prudent in its international debt management before the 1980s, and the cycle of high inflation and high growth rates escaped its citizens (1999). Vibha Pingle (1999) and Eswaran Sridharan (1996) outline the specificity of different sectors; state intervention in some sectors was more enhancing than others; dimensionality of state intervention needs to be incorporated rather than a blunt analysis of the Indian state. Aseema Sinha (2005) and Patrick Heller (1999) focus their attention on another kind of variation: regional variation in developmental prospects. Sinha argues that subnational developmental states lead us to rethink the national frameworks of most assessments. In India the failure of the national state and pervasive market failures were complemented or mitigated by some subnational developmental states. Heller's study of Kerala state highlights the fusion of labor-oriented class mobilization and development. He argues that class mobilization is not antithetical to the wholesome developmental prospects of a subnational state. Correspondingly, the well-being of people in Kerala is among the highest in the world. Thus, recent reevaluations urge a more nuanced and careful analysis of India's developmental failures.

A Historical Perspective

India's developmental experience took birth in a moment of nationalist hope and global postcolonial enthusiasm. At that time, it was believed that states can make a difference to long-term economic performance as well as address social and equity needs of a poor and underdeveloped population. India embarked on a path of planned industrialization, relying on the public sector to steer ahead, while a strong private sector was expected to aid the state's efforts toward larger developmental goals.

India's developmental trajectory has evolved simultaneously with the state and the Congress Party. India, after gaining independence in 1947, launched an ambitious developmental strategy that sought to achieve rapid economic growth and industrialization while improving the economic and social well-being of its citizens. The role of the central government was seen to be preeminent and strong. This strategy faced its first serious challenge in the 1960s with a persistent food crisis, combined with political instability and eventual recourse to a currency devaluation in 1966. Soon after, in 1969, Prime Minister Indira Gandhi moved the country's economic strategy toward stronger state intervention, nationalization, and self-reliance. A populist emphasis on poverty and welfare programs allowed the regime to acquire political and electoral legitimacy. Foreign economic policy turned inward, and trade with the external world was limited to the Communist bloc. India's share of world trade started to decline in this period. In 1977 a new Janata Party government took power and moved the economic trajectory more toward agriculture and small business. Yet, the overall orientation stayed state-led and centralized. Indira Gandhi, on returning to power in 1980, loosened some economic controls on the private sector and technology imports; her son, Rajiv Gandhi, who took power after her assassination, strengthened these hesitant steps.

Rajiv Gandhi's economic vision was different in two crucial respects: it was technocratic, and outward looking. Although he could not carry forward many of his reforms in his brief tenure (1984–1989), he can be credited with introducing many significant ideational shifts in India's economic policy, thus setting the background for farreaching reforms that were to come in 1991. In 1991 the minority government of P. V. Narsimha Rao, faced with a balance of payments crisis, was forced to seek an International Monetary Fund (IMF) loan. The finance minister at the time, Dr. Manmohan Singh, took this window of opportunity to initiate systemic economic reforms that went far beyond reforms required by the IMF structural adjustment package. Regulatory controls over the private sector were dismantled and India's relations with the external world opened up. Since the 1990s, reforms have proceeded in fits and starts; yet by 2004 most observers agreed that the reforms had been consolidated.

Before India's independence, developmental choices were crucially shaped by Mahatma Gandhi, who put his stamp of village democracy on India's developmental thinking so indelibly that, even after the ascendance of Nehruvian thinking, Indian politicians still evoke some of those ideas in their defense of local governance institutions such as panchayat raj. Critics of India's development experience, such as the recent anti–Narmada Dam movement, also evoke Gandhian ideas. Powerful regional voices gave different interpretations that shaped regional traditions of development in the colonial era: M. Vishveshvarayya, the diwan of Karnataka, and Sardar Patel, a leader in Gujarat, represented diverse views on development.

Yet, it was Jawaharlal Nehru's vision that proved most deeply consequential in the new nation's developmental thinking. He combined the goals of democracy, industrial development, and social and economic equity in a distinctive way. His stamp lies over the institutions of the Planning Commission, the Congress Party, and the national state as they grappled with these tripartite tasks. During the Nehruvian period, key regional leaders articulated their own visions, including Dr. B. C. Roy, the chief minister in West Bengal, Pratap Singh Kairon in Punjab, K. Kamaraj in Tamil Nadu, and Jivraj Patel in Gujarat. Intellectuals—largely economists and technocrats—also played key roles in the formative years of India's development, as policy makers consulted and involved "experts" in its policy process. P. C. Mahalanobis, the chief adviser to the Planning Commission from 1955, was the chief architect of the Second Five-Year Plan.

Prime Minister Indira Gandhi's role in India's developmental evolution is usually seen to be negative, but it is important to remember that she implemented an unparalleled populist reform program embodied in ameliorative antipoverty programs, as well as a move toward state capitalism of a distinct kind. Rajiv Gandhi, together with his group of technocrats such as Sam Pitroda, played a crucial role in laying the conditions for India's engagement with more current technologies and more generally with globalization. His technocratic vision, even if shorn of political realism, was an important turning point in India's developmental trajectory. Since then, the role played by Prime Minister V. P. Singh (1989–1991) and Finance Minister Manmohan Singh in initiating liberalization, facilitated quietly by the subsequent prime minister, Narsimha Rao, is crucial in understanding the peculiar, internally driven trajectory of economic reform in India.

To this list of national leaders one must add the newly important role played by regional leaders who, in the 1990s, not only shaped national policies but also engaged the global political economy in new and different ways. Chadrababu Naidu, the chief minister of Andhra Pradesh, along with Jyoti Basu, chief minister of West Bengal from 1977 to 2000, and S. M Krishna, chief minister of Karnataka, as well as Digvijay Singh of Madhya Pradesh, evolved distinctive regional responses to the ongoing process of liberalization in India. Naidu became famous for his ease with technology as much as for his ability to bargain effectively with the World Bank for loans for his state. Basu oversaw one of the most successful transitions in a subnational state as his party and state government, in 1994, embraced the central policy of liberalization while welcoming it for ensuring more "regional autonomy." Digvijay Singh was temporarily successful in making "human development"—literacy, infrastructural development, and health—the goal of his state.

Institutional Framework of India's Development

From rural development to agricultural development

"India lives in its villages" had long been the constant refrain of the country's politicians. In 2003, 60 percent of the country's population was still rural. Yet, India's leaders never linked agrarian reform to broader development goals or adequately addressed the linkages between distributive aims, rural well-being, and agrarian productivity. Mostly, each of these elements—redistribution, agrarian well-being, technical improvements in the service of agrarian growth—were treated separately at different moments, a product of the crisis of the day rather than of long-term strategic thinking about how they fit together into a coherent developmental strategy.

India's initial years of independence (1947–1955) saw the implementation of land reform legislation and the creation of community development institutions with the goal of achieving broader well-being for India's citizens. It was not clear, however, how that strategy would fit with the emphasis on large-scale industrialization that was so prominent at the time. Moreover, land reform was left to the states, given the pressures by landlords and powerful notables in India's ruling Congress Party. Its uneven and indifferent implementation robbed land reform of its radicalizing promise to change agrarian relations or to improve agrarian income and well-being.

The failure to address the core of India's agrarian problem created a food crisis in the early 1960s that led India's policy makers to move toward a limited technocratic and intensive solution aimed at agrarian productivity and self-reliance in food grain production. The New Agricultural Policy concentrated resources (credit and the Intensive Agricultural District Programme) and technology (highyielding varieties of seeds, irrigation, fertilizers, pesticides, etc.) in the already advanced areas of the country and among progressive farmers. It also sought to involve foreign—largely U.S.—aid with research institutions set up for this purpose. The strategy paid off in increasing agrarian productivity, and India's dependence on imports of food grain became a thing of the past. By 1988–1989, India was producing 170 million tons of food grain. Regionally, the greatest improvements occurred in the wheat-growing regions of Punjab, Haryana, and western Uttar Pradesh. Yet, this newfound self-reliance could not address the problems of the rice-growing regions of the country, thus creating new regional disparities in agrarian patterns. Even more tragically, large sections of India's populace have continued to suffer from chronic malnutrition and hunger despite the self-sufficiency in food grain production, highlighting the role of institutions that mediate the production process to the consumption of food; distribution of food continues to be a persistent failure of India's "Green Revolution."

Industrial development as the lynchpin of the modern developing state

Industrial development was the centerpiece of India's developmental strategy; its instrument was a strong public sector and regulation of the private sector for public purposes. Thus, India adopted an import-substitution industrial strategy (ISI), rather than developing its comparative advantage in agricultural and textile goods. Exports were neglected. This strategy was to be implemented by the central government, the licensing system, the constitutionally mandated Finance Commission, and the Planning Commission, which acquired disproportionate power in the early years.

The centerpiece of the regulatory state came to be identified with the licensing system—the so called "license-quota-permit raj"—that set up licensing regulations to direct the flow of industrial investments to desired locations and sectors and with the desired mix of product and technology. The purpose of the act was to regulate the entry of firms, to keep industrial capacities in line with plan targets, to achieve regional balance in the creation of industrial capacities, and to diversify the industrial base. Such applications were also reviewed for suitability of the proposed enterprise or expansion plans from the point of "national" and economically rational objectives.

Despite such rationality and preeminent power, the regulatory system became a combination of policy and patronage, wherein different groups established privileged channels of access to state policy. These distributive coalitions received subsidies, concessions, and benefits in return for their political support. As a consequence, the developmental health of the nation suffered.

Class, Capitalism, and Development

In its early years of India's development, private business, it was believed, would serve a subordinate, although important role. Colonialism had stunted the growth of capitalist enterprise in particular ways: it had ensured that Indian capitalists were reliant on state finances, in sectors like consumer goods and textiles rather than capital good industries, and were located in few coastal centers like Mumbai, Kolkata, and Chennai. Thus, the preeminent role of the state was seen to be natural, given the insufficient development of capitalist enterprise in colonial India and its dependent and uneven character. Largely foreign companies or the already strong business groups exploited the new opportunities for investment opened up by the newly independent Indian state: the Marwari, Gujarati, and Parsi business communities. Moreover, these business groups came to rely on state initiatives for finances, markets, and international connections. As state regulation proceeded, business learned to cope with a highly regulated system in subtle yet powerful ways, so that informal connections were established between the national bureaucracy and the large and powerful business houses. The influence of business on state policy took many informal forms wherein personal connections, party finance, and "briefcase politics" infiltrated the state-led system from within.

Democracy and Development

In comparative terms, India poses a puzzle to most accounts that link development with democracy. Most stable democracies are industrialized and wealthy; India is a large poor democracy, but one which has persisted and has been consolidated over time. Most of the world's stable democracies arose together with capitalism, as middle classes and the bourgeoisie challenged aristocratic privilege in favor of commoners and masses. Indian democracy arose in an agrarian colonial country, where poverty was endemic and capitalist development was nascent. India's failure to fit into this neat generalization has given pause to many an analyst.

In one view, democracy serves as an obstacle to growth. Democratic politics reduces developmental politics into populist and symbolic channels as office seekers subordinate the long-term collective ends to popular pressures and short-term electoral goals. Most observers believe that India's chaotic democracy, with multiple social groups, prevents the movement toward developmental politics. In 1997 Prime Minister Inder Gujral said: "India had to pay the economic price of political democracy." Yet, Adam Przeworski's research on the political foundations of economic growth finds no strong correlation between regime type and positive economic growth. Development is hurt by entrenched political-economic interests that acquired vested linkages with the license-quota-permit raj. Democracy may be an innocent bystander to this corruption of the development process.

Federalism and Development

The Indian strategy of development was not only led by the central government but gave enormous formal power to central institutions. Nehru saw planning in terms of its national scope, where central institutions of power would rationally direct development in the right way. Nehru, in contrast to Indira Gandhi, saw the power of regional chief ministers as embodying these goals in the most effective manner. Yet, over time, regional leaders gained prominence, and claims of regional redistribution came to animate public discussions and the work of the Planning Commission, which was responsible for allocating public expenditure to states in the most rational and equitable manner. This led to the formation of the National Development Commission, with chief ministers as members, and the modification of national plans to accommodate regional claims. Thus, the Third Plan incorporated regional development and regional equity as important goals, and many commissions were set up in the mid- to late 1960s to deal with the issue of backward states and backward districts.

The role of regional states in shaping and modifying central policy was not insignificant, since they were the actual implementers of most economic policy. This meant that regional politicians sought to maximize their influence within the central developmental process in widely differing ways, mitigating central constraints, where needed, but enhancing central policy where beneficial for regional agendas. Thus, regional states evolved complex and multilayered economic policies—incentives, tax breaks, and developmental goals—while creating new institutions to manage economic development in their regions. Also, numerous policy domains—most notably, industrial estates, small-scale sector, infrastructural development, agricultural development, and labor policy—were under the direct control of regional states. Thus, the role of regional states in India's development process was pervasive and consequential. Local politics and regional political economy variables thus shaped the nature of regional responses to central policies and regional developmental strategies. Kerala relied on public action–led social development, while West Bengal relied on a public sector–led industrial strategy combined with sustained reform of rural institutions. Other states, most notably, Gujarat and Maharashtra, followed hybrid strategies that emphasized rapid growth and capital accumulation. Thus, centralization in economic policy engendered divergent regional responses; this served to enhance the role of regional actors and accelerate the process of regionalization of national developmental institutions.

Conclusion

India's developmental experiment has been a unique one: the attempt to achieve broader developmental goals within a democratic framework. While its achievements in improving the well-being of the large majority of its people leave much to be desired, its developmental achievements in ensuring a self-sufficient economy that has a self-generating industrial and global agenda are notable. An assessment of India's developmental trajectory yields some interesting and counterintuitive conclusions about the role of the state in economic life, the relationship between democracy and development, and the federalization of India's developmental vision.

While the central state has not created facilitative conditions for the development of private enterprise, one cannot rule out the role played by regional states and local governments in creating positive conditions for industry to flourish. Thus, an assessment of India's government-led path must pay attention to the federal nature of its polity and the autonomy often displayed by subnational units. A negative correlation between democracy and growth, while at first glance plausible, also must be avoided; there is no necessary link between some of India's developmental problems and its democratic institutions, but the nature of its governmental institutions, including federalism, shaped the nature of India's development.

Aseema Sinha

See alsoKerala, Model of Development

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