The Indian Political Economy_ Naim Keruwala

THE INDIAN POLITICAl ECONOMY

Until the early 1990s, the Political Economy of India was in a sorry state of affairs. Till
the end of 1980s, Political Economy of India was protected and strictly regulated
economy, both internally and externally. The wars with Pakistan, increased tensions with
China, communal, linguistic or caste violence, Naxalite uprisings, secessionist
movements in Kashmir, the Northeast, and Punjab created a crisis of governability in
India.

The dramatic and pragmatic shift in reforms started taking place from the 1991s onwards.
The crises during that period initiated a process of economic reforms and structural
adjustment. It was marked with speedy reforms and its subsequent successful
implementation. The Government took measures which were more rational than their
previous ones. Its paradigm shift from strong government holdings to market
liberalization marks the Revival of Indian Economy.

India started its reforms very late, thirteen years after China changed had its course. Even
when the change took place, the shift took very long and was not as sharp a turnaround as
it was in China in 1978 or the Soviet Union after the mid-1980s. The Change in India was
from one kind of societal consensus (such as the Nehruvian consensus) to a new
consensus (say around reforms) and had to be a process and not an event, which had its
own dynamic, very different from that operating in a non-democratic or totalitarian
society.

The 1991 reforms showed a lot of positive aspects. The growth rate of India’s GDP
which had fallen to a paltry 0.8 per cent in the crisis year of 1991-92 recovered very
quickly to 5.3 per cent by 1992-93 and further rose to 6.2 per cent in 1993-94 despite the
major disturbances in 1992-93 triggered by the destruction of Babri Masjid. Despite the
crisis and necessary structural adjustment, the Eight Five Year Plan (1992-97) averaged a
growth rat of nearly 7 per cent. The Industrial production which showed a dismal, less
than 1 per cent growth rate in 1991-92 rose to 12.8 per cent by the end of Eight five year
plan. The Capital Goods sector also showed a growth rate of 25 per cent from a negative
growth in 1991-92. The Central Government’s fiscal deficit was reduced to 2.9 per cent
from 8.3 per cent, in just 3 years of the reforms.

It is constantly proclaimed that poverty in India is declining, and a great industry has
sprung up of academic treatises to show how fast poverty is declining. However, these
treatises have reduced poverty by defining the term so that it no longer relates to whether
or not people get their minimum requirements of calories. The official National Sample
Survey of 2000 revealed that three-fourths of India's rural population and half the urban
population did not get the minimum recommended calories. This is confirmed by
nutritional and health surveys, which reveal that more than two-fifths of the adult
population suffer from chronic energy deficiency, and a large percentage are at the border
of this condition; half India's women are anemic; half its children can be clinically
defined as malnourished (stunted, wasting, or both).

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 The Indian Political Economy_ Naim Keruwala

One sector of the country's economy has seen breakneck growth in the past decade: the
provision of software services and business process outsourcing services to foreign
(principally US & UK) firms. However, that sector accounts for 0.25 per cent of the labor
force. Where are the rest? Nearly half of India's total working-age population (15-59
years of age) is unemployed, most of it not even counted as part of the labor force. While
agriculture continues to employ the majority of those considered employed, it accounts
for less than a quarter of the national income, and that share continues to shrink.

The Industrial growth rate was mounting high after the 1991 reforms, but the agriculture
and allied sectors showed negative growth-rate. In 2002-03, the growth rate of agriculture
and allied sectors was only 3.8 per cent which further declined to 2.3 per cent in 2006-07.
These figures are a disaster for a country like India where more than half of its population
is completely dependent on agriculture and allied sectors.

Poverty remains to be the biggest challenge for India and one of the main reasons for it is
the sluggish growth in agricultural and allied sectors. This has serious implications for the
poor as about 55 per cent of the total work-force in India is still engaged in agriculture
and Employment in agriculture is facing a near collapse. The absolute number of poor in
India is intolerably large, about 300 million (as estimated in 2004-05). This makes the
size of the poor population nearly as large as what the size of the total Indian population
was at independence.

Wide prevalence of poverty, inequality and social justice and the poor quality of life of
the vast majority of the people are the major areas of darkness in India’s social and
economic development. The Indian people enter the twenty-first century with a low per
capita income, an intolerable level of illiteracy and a lowly position on the world index
on human resource development, despite commendable achievements in terms of
economic growth and political democracy. A change in the social and economic
condition of the people has occurred since independence but at too slow a rate.

Today, India does no face the challenge of economic growth but the challenge of
effective governance that would harness this growth, create institutions and structures
that would make this growth sustainable and inclusive.

India is not a great nation but it has the potential to be one, and it’s the responsibility of
its citizen to embrace the diversity of its nation, forget the differences and work towards
achieving the common goal of development of India and its people. There is a need for
the Civil societies to help in effective implementation of the programs such as NREGA
and RTI. There is a need that the benefits reach to the most needy through ‘self selection’
without dividing the poor into caste and other categories, as is repeatedly done, not so
much to reach benefits to the most needy, but to seek short-term political dividends on
communal or caste basis.

To conclude,
If India has the will, and is able to realize even half of its potential in the next 20 or 25
years, poverty would become a distant memory

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