The politics of neoliberalism in India

01 Enero 2004

Ganesh Lal interviews Achin Vanaik

Ganesh Lal is co-author, with David Whitehouse and Dina Roy, of "India, Pakistan and the question of Kashmir" in ISR 24 (July-August 2002).

GL: India has now seen about 15 years of neoliberalism, with the reforms that began in 1988. Could you give us a balance sheet of neoliberalism in India? How has it been able to survive for 15 years, while countries like Indonesia and Argentina have experienced catastrophic meltdowns?

AV: The absence of capital account convertibility (1) in India prevented the Indian economy from suffering the kind of damage that East Asia suffered, and Argentina of course is very much tied to the dollar economy. But if you want to assess the Indian economy, then you can do it in two ways: You can use the criteria that the pro-liberalizers themselves have set, or you can use other criteria.

The pro-liberalizers predicted two things: first, a dramatic breakthrough in growth rates, and second, a steady decline in the fiscal deficit. According to their own criteria, there has not been that dramatic a breakthrough at all. The average growth rate of the Indian economy since 1991 is approximately the same as that of the 1980s, averaging around 5.7—5.8 percent. This puts India among the top 10 fast-growing countries, but as an indicator of some dramatic new change, this is misleading, because we saw similar growth in the 1980s.

As far as the fiscal deficit is concerned, we've seen a huge failure. There's been no steady decline, and the fiscal deficit has hovered around 4.7—7 percent. The problem, however, is never really the fiscal deficit, but the revenue deficit. With neoliberal economics, you don't tax the rich and the wealthy-in fact you have to go in the other direction-hence a growing revenue deficit. Another reason for the revenue deficit is that in the last six years we've had the fastest rate of growth in military expenditure in the history of India since independence in 1947, much faster than any five-year period even before and after the wars in 1965 and 1971.

The neoliberals always insist on cutting the fiscal deficit because they want to reduce capital expenditure by the state. This has been a big mistake in the Indian context because it is based on a premise that is deeply flawed, particularly with respect to developing economies. The premise is to let the private sector take the burden of investment, while public-sector investment is seen as a drain on the role of the private sector. But in countries like India and other developing economies, and I suspect also in the advanced economies, public-sector investment on infrastructure crowds in, i.e. brings in private-sector investment.

So the fact that you had an attempt to reduce public-sector investment, combined with the attempt to increase the revenues on the capital account by reckless privatization sales means that the real problem-that of the revenue deficit-has not been tackled.

But there are other criteria that we can use to assess the state of the Indian economy: the question of poverty, inequality and jobs. The capitalists are not concerned about poverty and inequality; they are just concerned about the conditions under which they can reproduce capital.

We don't have accurate statistics as far as poverty levels are concerned. Because of changes in statistical methods, the statistics have been messed up, and we don't have reliable estimates. I won't go into the details of the changes in methodology, but what is clear is that there has been relatively jobless growth. Job expansion is much lower than what it was in the eighties. We have increased inequality between urban and rural populations, between the rich and poor, and between the advanced and the more backward states. Poverty has gone down overall, but not at the same pace as in the eighties, and it is still quite high-about a third of the population. This poverty level of course is the bare nutritional minimum, and doesn't account for a whole series of other dimensions which should be taken into account when referring to poverty, such as education, healthcare, housing and sanitation.

Around the world, the reality is that neoliberalism does not bring an expansion of high productivity-and therefore high-wage-jobs. There is a larger problem here. It is now clear that information technology, or what is called the fourth technological revolution, cannot do what the first three technological revolutions could do. With earlier technological revolutions, you had a deepening of capital, but you ultimately had a wideningof capital as well, so that the jobs lost as a result of capital deepening were compensated for by the expansion of capital and the expansion of higher productivity jobs overall.

Today, you don't have that. Even as services become more important, apart from a small layer of services at the top, most service jobs are low-productivity, low-wage jobs. In India you still have 65 percent of the population living in the countryside. Agriculture, as it opens up to the world market, is going to have to face competition from subsidized agriculture in the advanced countries, and this will create huge problems. When you combine the fact that there hasn't been an expansion of jobs, that there is increasing inequality, that agricultural prices for those who have to buy food has risen, then there is no justification for the claim that there is a significant decline of poverty, let alone any of the other factors.

So the 5.7—5.8 percent growth rate has not brought the kinds of benefits that it was expected to, and now you have the liberalizers talking about an 8 percent growth rate, which is almost unattainable and certainly unsustainable over a period of 10 or 20 years. The ecological consequences of this growth pattern will be a disaster. And the neoliberals still cling to this model despite its deeper ecological implications, utterly disregarding the fact that even at its best this is a model that dramatically increases inequality.

This means that neoliberal economics has to be accompanied by neoliberal politics-a politics that justifies these inequalities, which undermines any meaningful notion of deepening democracy. In the 1960s and 1970s it was taken for granted that you had to go beyond just civic liberties. You had to deepen democracy by reducing inequalities of wealth and income. Now the ideology is that of a rising tide lifting all boats. But some boats sink, some may rise a few inches, while others rise by meters.

GL: The boats that rise a few meters: What about them? We hear stories about the expanding middle class in India, which is supposed to be providing a consumer base, which in turn will be the engine of growth.

AV: You are refering to the 150 or 200 million who are misleadingly referred to as an Indian middle class. I say "misleadingly" in the sense that in the US and elsewhere, the middle class is more or less a median category, which serves as a crucial social buffer for those who are rich and powerful against those below. So someone like Clinton can talk about a "middle-class bill of rights," or a "middle-class tax cut."

But in India, you're not talking about a median category, but about the top 10—15 percent. Statistically, there is a problem here, because in many advanced countries you can assess the quantitative size of the middle class through tax records, but in India, where only a small percent of the population pays taxes, you have to make very crude and rough estimates based on expenditure, which can never be very accurate.

Now it is true that this 15 percent have seen a considerable expansion of their wealth and income. This category has been the principal beneficiary of all forms of development. Even in the Nehruvian period,(2) whatever the complaints of the middle classes, they benefited more than any other class in Indian society. But there is a very large layer at the bottom of this middle class, which is not prosperous. There is a deeper insecurity within this middle class because there is no big buffer between it and the pressure from the huge and more impoverished sections below, [an insecurity] that helps sustain the popularity of reactionary, right-wing parties like the BJP [Bharatiya Janata Party].

Recognizing this doesn't mean that we should exaggerate the extent to which the middle class has benefited. There is a good way of judging this. Take for instance, the market for consumer durables. While there is a huge market for consumer durables that reaches beyond the middle class, like watches and bicycles, this is not the case for refrigerators or washing machines or cars. In India today, an optimistic estimate for car production in India is around one million a year. Japan, on the other hand, in recession, produces more than a million cars a month. So we must maintain a sense of proportion: We're talking about a 150-million-strong middle class, but a million cars a year in production. This has indeed grown from the 1980s, when it was about 100,000 cars a year, but the growth hasn't been that dramatic in proportion to the size of this class.

The character of Indian exports-marine products, gems, leather goods, textiles, agricultural products-has remained unchanged, except for one area of course: software production. But even here, India is on the lower end of software production, and with growing competition from the Chinese, the rate of growth even in this sector cannot be sustained for long. The same holds for telemarketing call centers. India has become an important place for call centers, but this will shift if other countries begin to offer lower wage-rates.

The health of any economy, especially of continent-size economies like India's, has to be judged by internal resources -high savings rates, high domestic investment, infrastructure, etc.-supplemented by foreign direct investment (FDI). You cannot see FDI as a magic wand. In fact, India receives less FDI than Thailand and Malaysia, leave alone China.

GL: You said that neoliberal economics has to be sustained by neoliberal politics. Tell us something about the rise of Hindu fundamentalism, both in its domestic setting and in the international context.

AV: The BJP came to national prominence in 1992, with the demolition of the Babri Masjid.3 But it only came to power in 1996, and then only for 13 days. There has been something like an "insurgency of élites," as some have called it, an insecurity that has created a milieu that is very receptive to the BJP's message of belligerent aggressive nationalism. This nationalism is also connected to a certain sense of internationalism-the idea that India must "stand tall and take its place as a world power," and so on. The BJP has been saying this for decades, but it is only recently that it has been able to find an audience for it. The reason for this new receptivity is the decline of the Congress [Party].(4)

The BJP came in with a message of building national strength, and the bourgeoisie, which obviously wants to expand, generally felt more mature and confident enough to open up the markets. But they would have wanted to be more cautious about it. The integration of the Indian economy into the world market is not turning out quite the way the bourgeoisie would have hoped. But they are now willing to settle for it. So for instance, in 1991, a section of the Indian bourgeoisie, the "Bombay club," suggested that we should try to emulate the Korean model of having large national chaebols [state-protected, private conglomerates] and so on, because the bourgeoisie still needs to be supported and protected.

But that has been abandoned now. A large part of the Indian bourgeoisie is now prepared to settle for rentierstatus, and to collaborate with foreign capital. Politically, there is a growing sense among the Indian bourgeoisie that American political and strategic dominance can't be challenged, and although they would like to see it tamed, it is out of their hands. So they are willing to settle for the best they can get, by trying to become more important regionally and internationally through greater collaboration with the US

So politically, the BJP's line of seeking to forge a strong alliance with the US is looked upon favorably by the Indian bourgeoisie. The catch is that the US also needs Pakistan as an ally, which creates a set of particular tensions with India. The general thinking of this particular BJP government is that in the long run, the relationship of the US with Pakistan is an aberration and that we should put a great deal of our strategic eggs into the US basket. They also want to present India as a future counter-weight against the Chinese.

The importance of India to the US is three-fold. First, it is one of 10 countries that are marked for takeover by foreign capital; not necessarily just American capital, but foreign capital. The Indian bourgeoisie thinks that it can find its own place within this, by finding a niche within a rather large world market. Second, the US wants client regimes that will support its policies abroad, especially in the general region of client states, and in this the BJP has gone along with it. Third, the US needs regimes that have domestic stability. This is possibly the one area about which the US might have some misgivings, in terms of the potential for instability under a Hindutva (5) regime. But apart from this, the US looks upon the BJP government quite favorably, as a government that is most committed to a strong alliance with the US and determined to carry on with neoliberal globalization.

GL: You mentioned the Congress Party and its decline as one of the factors that led to the rise of the BJP. The Congress had historically been identified with what is known as the "Nehruvian legacy" of centrist and social-democratic policies. Why did it begin to bury that legacy?

AV: The Congress began to shift to the right in the 1980s, both economically and politically. Historically it had always come to power on a centrist program, reflecting its varied social base, including the lower sections of Indian society. For decades, the leaders of Muslims, tribals and dalits (6) -often known as the "core minorities"-had been content to act as brokers for the Congress Party, delivering votes to the party while extending their own networks of patronage.

Contrary to what many commentators think, the rise of the New Right is not what causes the decline of the old social-democratic left or center, rather it is the other way around, both here and worldwide. This is similar to the rise of Reaganism and Thatcherism in the eighties.

The 1960s and 1970s saw alternatives to the Congress emerging at the state level, thanks to the growing volatility among the poorer sections of society. This instability forced the Congress to look to other sources for its support, but to this day it hasn't figured out either its program or what are its most reliable bases. As it shifted to the right, it sought to consolidate its new mass base among the Indian middle class.

The rise of the BJP is preceded by the decline of the Congress. Since the 1970s, three non-Congress centrist-type parties have come to power, but they were unable to hold onto power for a full term. Interspersed within this period, the Congress did come to power again, but for the first time in its history as a minority government. It is only after this experience of various centrist failures that the BJP is able to come to power in 1996, although it is unable to hold onto power for more than 13 days. Then the BJP finally takes power in 1998 in a coalition government.

As a result of the Congress's decline, two forces benefited. First, there were forces in the north connected to caste politics. Second, the emergence of the right-wing and reactionary elements like the RSS [Rashtriya Swayamsevak Sangh].(7) The BJP actually moved forward by building the most significant mass movement since independence; a reactionary mass movement (which demolished the Babri Masjid) that is extremely successful. As a result, it has succeeded in shifting the center of gravity of politics to the right.

The Congress is a party today that is bereft of any clear ideas, and is pursuing a softer version of Hindutva. On key questions-foreign policy, the bomb, neoliberalism-it has no clear idea of a different program than that of the BJP. While the BJP's fortunes might go up and down, politics as a whole are being pulled to the right. For the bourgeoisie, it doesn't really matter who's in power, except that the BJP might be somewhat unstable because of its aggressive Hindutva, but overall, it doesn't really matter since their material interests will anyway be served.

GL: Arundhati Roy writes that for the governments of India and Pakistan, Kashmir is not a problem; it is a perennially spectacular solution.(8) What role does Kashmir play in the geopolitics of the subcontinent?

AV: I can understand what Arundhati says, because when you have two religious-extremist forces, Kashmir is a very convenient running sore which perpetuates communal sentiments (9) and nationalist sentiments in both countries.

But the problem for Pakistan is more serious. First, Pakistan's dismemberment in 1971 trashed the two-nation theory.(10) So what should its national identity be based on? Second, Pakistan hasn't had a sustained functioning democracy. The army has played and continues to play a key role in Pakistani society. For the army to justify its crucial role in Pakistani politics, it has to maintain anti-Indian sentiments, and Kashmir is a convenient "solution" in this sense.

This is not necessarily the case in India. In India we cannot see the perpetuation of the Kashmir problem as simply a "convenient solution." Most people in India, except for a small section among the RSS and Hindutva forces, would be happy if the Kashmir issue were resolved along the existing Line of Control [LOC]. (11)

The continuing dispute with Pakistan is seen by the Indian bourgeoisie as something that does not allow India to be recognized as the regional hegemon in India. They see the relationship between India and Pakistan as deeply irritating, and they too would like to see a solution along the existing LOC. Second, after Pokhran [the site of India's nuclear tests in 1998], this is undoubtedly seen as a tension-filled area. Third, with the rise of religious extremism and fundamentalism, there is the rise of forces that believe that the only solution to the problem is the collapse of Pakistan itself. Their long-term perspective is that Pakistan is a "failed state" that cannot last, and that its collapse will benefit India because, among other things, the US will come to recognize India as the most reliable ally in this part of the world.

Two things make the resolution of the Kashmir issue more complicated. First, it seems that Jammu and Ladakh (12) no longer want to be part of an independent Kashmir. Second, you now have a third player in the game, which is unfortunately not the people of Kashmir, but the United States. The US has begun to think of the kind of outcome it wants in Kashmir that would benefit its wider and longer-term strategic objectives in Central Asia. Since 1998, the issue of Kashmir has become "Americanized," as the US has become the more important player, particularly with the danger of nuclear war between India and Pakistan. And after 2001, the US, for the first time in its history, has a military-political emplacement in Central Asia. So they might push for some kind of Bosnia-type solution. This is not a certainty, but it is clear that the future of Kashmir will be tied up with and not easily separated from the future objectives of the United States.

GL: It seems that in many ways the Indian Left has stumbled on the question of Kashmir, and has been unable to put forward a coherent alternative.

AV: Yes, the weak point of the Indian Left is that the one thing they can be outflanked on is the question of nationalism. Despite their criticism of the mobilization of troops along the India-Pakistan border last year, they have always been scared of being labeled "anti-national." Their desire to speak in terms of "national unity and integrity" has prevented them from respecting Leninist principles of self-determination with regard to Kashmir, the northeast and Sri Lanka as well.(13) So they haven't been able to propose innovative or more democratic solutions.

On the other hand, I would not agree either with those who dismiss nationalism, even progressive nationalism, out of hand. In the long run we want a world free of capitalism. But we have no way of being internationalist today without at the same time being some kind of nationalist. An increasingly globalized capitalism has clearly learned how to use the nation-state; in fact, you wouldn't have neoliberal globalization if it weren't for the manipulation and use of nation-states. Even as we remain socialists and internationalists, we cannot have a one-sided and unbalanced rejection of nationalism. Iraq and Palestine are the two most important political weak points of the US empire, and here the struggle for progressive nationalism is very relevant.

GL: Can you describe the nature of the broader left in India? What is the significance of the World Social Forum (WSF) being held in India for the Indian Left and, more broadly, for the global justice movement?

AV: It seems to me that the decision by the WSF organizers to shift it from Brazil to India has to do with the idea that the WSF, which has had too much of a Latin-American and European face, must shift to another part of the developing world in order to generate a stronger and more global movement. There was some thought about holding it in Africa or some other part of the world, but for various reasons India was chosen. Hopefully, there will be an African Social Forum as well at some point.

At the last WSF, something very important happened: The anti-globalization movement and the movement against US imperialism came together for the first time. This will be reinforced in Mumbai. The United States is now correctly seen as the most important driver of the neoliberal globalization program. The US is also seen as the driving force of the new imperialism. So the coming together of these two strands at the last WSF, and their consolidation this time around is a very important thing.

During the last great movement against imperialism, during the Vietnam War, we didn't see the kind of international coordination that we are seeing now. Back then, we had some degree of continental coordination in Europe, but these were by and large nationally based movements. February 15, 2003 was an international day of action, something we've never seen before, and the next big international day of action will likely be March 20, 2004.

For groups like Jubilee 2000 and others in the global justice movement, this is an excellent opportunity to come together with the antiwar movements and begin serious coordination.

The Left in India has historically been prisoner to the "big development" program. Given their history of alignment with the Soviet model of development, they might have been critical of capitalism, but adopted an ecologically insensitive program of development.

But recently, the parties of the Indian Left have moved away from a degree of hostility toward the different social movements in India and toward a degree of accommodation to them. Some of the biggest social movements in India, for instance the Narmada Bachao Andolan, (14) have not only raised questions about neoliberal globalization but about the whole pattern of economic development. The Left has recognized that younger people today around the world are not drawn toward party formations, but find their energies in a range of activities. So if the Left is to make its voice heard, it has to intervene in these spaces. I was delighted to see at the last WSF that so many of the participants were under 30 years of age. We have to develop new forms of networking and organizing accordingly. The WSF is one very important dimension of this development.

GL: Sections of the Indian Left have attacked the WSF for its ties to NGOs (Non-Governmental Organizations) and for their sources of funding. What do you think about these criticisms?

AV: My opinion is that many of their criticisms about the WSF, about some of the participants, the sources of funding and so on, are quite legitimate and well-taken. Unfortunately, they are being, in my view, sectarian. There is no reason why they cannot participate within the WSF while at the same time maintaining their criticisms of it. They don't recognize that the WSF is a space in which there will necessarily be various tendencies.

The WSF should not simply become a global pep-rally, which is certainly part of its purpose, nor should it be a huge jamboree, where people sell their respective political wares, although this is useful, too. The WSF has to be a space where various activists forge practical links, and learn how to practically begin to work together: that is the most important thing that can come out of it. This is, I think, the main reason for holding the WSF in the first place.

GL: What role do parties play in the current formations of the broad left worldwide?

AV: At the WSF, you don't participate as the representative of a party. The WSF is, as I said before, a space that is open to various tendencies. But of course parties remain crucially important today.

Progressive politics can only succeed if we are able to unite the politics of the universal with the politics of the particular. We all have our own particular grievances and particular struggles, but succeeding in those particular struggles is only possible in the long run if they are connected with a politics of the universal. We have to recognize that our particular struggles are connected to a collective struggle against neoliberalism and against imperialism.

Another way of thinking about this is that nation-states still remain the most important political units on the world stage, and therefore national political parties remain crucially important, even though they have to find ways of being internationalist in their outlook.

We have to connect these struggles, and the organizational form that has embodied the connection between the politics of the universal and the particular has always been the party. The party has been therefore the most historically important embodiment of the combination of the universal and the particular.


1. Capital account convertibility is the ability to convert one currency into another, for example, rupees into dollars. Until now the Indian government has retained controls over its financial markets, contrary to the IMF-inspired trend toward greater capital account liberalization.
2. Jawaharlal Nehru was India's first prime minister following independence from British rule, serving from 1948 to his death in 1964.
3. The BJP, currently the leader of India's ruling coalition, is an electoral party that belongs to a family of Hindu nationalist organizations called the Sangh Parivar. Other groups in the Sangh range from militant defenders of religious orthodoxy to fascist street gangs. Sangh members, including India's current foreign minister, L.K. Advani, led the destruction of the Babri mosque (masjid) in 1992-and sparked riots that killed nearly 3,000 Muslims. The 16th-century mosque supposedly stood on the birthplace of the Hindu god Ram, and the Sangh Parivar has since sought to construct a Hindu temple on the mosque's ruins.
4. The Indian National Congress or Congress Party, founded in 1885, was the leading force in the independence movement. It assumed control of the national government when India achieved independence in 1947, and ruled almost without interruption until 1996.
5. According to the doctrine of Hindutva ("Hindu-ness"), Hinduism is the only authentic expression of Indian nationality.
6. "Dalit" is a collective term for India's oppressed lower castes, including the untouchables.
7. Rashtriya Swayamsevak Sangh (RSS) is the National Voluntary Service, one of the main Hindu communalist organizations. See endnote 9 for more on communalism. Several leading BJP members have active ties to the RSS, which has a record of physical attacks on Muslims.
8. Arundhati Roy, War Talk (Boston: South End Press, 2003), p. 35.
9. Communalism is a political trend dating from the late 19th century that takes India's religious groups (or "communities") as the natural components of political life. Communalists thus seek political mobilization along religious lines, with high-caste Hindus and wealthy Muslims as the "natural" leaders-and members of other religious groups as the "natural" antagonists.
10. In 1971, West Pakistan seceded to form the independent nation of Bangladesh. The "two-nations theory" was one of the founding ideologies of the pro-Pakistan segment of the Indian Muslim League under British rule. According to this theory, the only solution to Hindu-Muslim tensions was to create an independent, Muslim nation in the form of Pakistan. Bangladesh's formation in 1971 gave the lie to this theory by showing that Muslims did not form a homogenous community looking for a single Muslim nation-state.
11. The Line of Control was established after the 1965 India-Pakistan war and represents the de facto demarcation of Indian-held and Pakistani-held territory in the region of Jammu and Kashmir. See Dina Roy, Ganesh Lal and David Whitehouse, "India, Pakistan and the question of Kashmir," ISR 24, July/August 2002.
12. The Indian-controlled state of Jammu and Kashmir has three administrative regions. The vale of Kashmir is that it has the largest population and is predominantly Muslim. In Jammu, the majority is Hindu. In Ladakh, most people are Buddhists.
13. Several secessionist insurgencies have raged in the northeast states of Assam, Meghalaya, Nagaland and Mizoram for decades, with entire regions and provinces held under tight military control by the Indian government. In Sri Lanka, the Tamil minority, which has been disenfranchised and discriminated against by the Sinhala-dominated government, has been demanding some form of autonomy, if not independence, since at least the early 1970s.
14. The Save Narmada Movement is a grassroots movement involving peasants, tribals and dalits displaced or soon to be displaced by the construction of a series of dams along the Narmada River. See Arundhati Roy, Power Politics(Boston: South End Press, 2001).