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Two Decades of Market Reform in India

Two Decades of Market Reform in India

Sudipta Bhattacharyya

(2013)

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Abstract

Have neoliberal policies truly yielded beneficial effects for India? ‘Two Decades of Market Reform in India’ presents a collection of essays that challenge the conventional wisdom of Indian market reforms, examining the effects of neoliberal policies enacted by the Indian government and exploding the myths that surround them. In particular, the volume questions the perceived benefits of India’s reform policies in the areas of growth, agriculture, industry and poverty alleviation, and examines how the government’s focus on preventing a fiscal deficit caused a large-scale decline in development expenditures, which in turn has had a negative impact on the well-being of the poor. With its rich and insightful analysis, ‘Two Decades of Market Reform in India’ bravely shines a light on the true implications of India’s neoliberal governmental policies, and provides a revealing indication of how policy reform since 1991 has, at times, detrimentally affected the general populace of India. 


Sudipta Bhattacharyya is Professor of Economics at Visva-Bharati University in Santiniketan, West Bengal, India. 


‘“Two Decades of Market Reform in India” provides a powerful corrective to the simplistic, celebratory views of the Indian economy that have prevailed since the country embarked on neoliberal reforms in 1991. A must-read for anyone interested in understanding the ongoing economic transformation of India and its social and political implications.’ —Jyoti Saraswati, New York University and author of ‘Dot.compradors: Power and Policy in the Development of the Indian Software Industry’


‘After more than two decades of liberalization and privatization, this is a comprehensive assessment, which helps us to understand why policies have not been a way out of underdevelopment, inequality and poverty, but actually have fortified the process of a lopsided, elite-oriented development.’ —G. K. Lieten, Professor Emeritus, University of Amsterdam


Have neoliberal policies truly yielded beneficial effects for India? ‘Two Decades of Market Reform in India’ presents a collection of essays that challenge the conventional wisdom of Indian market reforms, examining the effects of neoliberal policies enacted by the Indian government and exploding the myths that surround them.

The volume addresses three key areas. Firstly, it investigates how the high growth rate of the Indian economy has made it uneven, vulnerable and liable to poor employment generation and agrarian crises. The text refutes the hypothesis that growth in India has been driven by domestic factors, and argues against the notion that the Indian economy has remained unaffected by the global economic meltdown. The volume also investigates the reduced demand for food grain during the reform period, questioning whether it was indeed a result of increased income, as suggested by the government, or rather a consequence of increasing poverty and agrarian crisis. [NP]Secondly, the text counters the neoliberal myth that a fiscal deficit is essentially bad, and examines how the government’s focus on preventing a deficit caused a large-scale decline in development expenditures, which in turn had a negative impact on the well-being of the poor. Finally, the volume also argues that there is no evidence that supports denationalization as an effective way to reduce fiscal deficit, as the public sector, it argues, is not necessarily less efficient than the private sector.

Striving to hold India’s market reforms – and those responsible for their implementation – to account, ‘Two Decades of Market Reform in India’ bravely shines a light on the true implications of India’s neoliberal governmental policies. With its rich and insightful analysis, it provides a revealing indication of how policy reform since 1991 has, at times, detrimentally affected the Indian populace, and will serve as an invaluable resource for students, professionals, activists and policymakers interested in the socioeconomic future of the country. 

Table of Contents

Section Title Page Action Price
Two Decades of Market Reform in India_9780857283269 i
Title iii
Copyright iv
CONTENTS vii
LIST OF TABLES AND FIGURES ix
FOREWORD xiii
ACKNOWLEDGEMENTS xv
Chapter 1 INTRODUCTION: A CRITICAL LOOK AT TWO DECADES OF MARKET REFORM IN INDIA 1
Introduction 1
Theoretical Framework 4
Rise of Structural Adjustment Lending and New World Order 7
Structural Adjustment Policy, Globalization and the Indian Economy 9
Fiscal Deficit and Policy of Stabilization 12
Chapter Outlines 13
Conclusion 21
Notes 23
References 24
Chapter 2 DEVELOPMENT PLANNING AND THE INTERVENTIONIST STATE VERSUS LIBERALIZATION AND THE NEOLIBERAL STATE: INDIA, 1989–1996 27
The General Assault on Development Planning and the State as an Agent of Economic Change: Neoliberalism, the IMF and the World Bank 27
Liberalization in India, its Antecedents, and ‘Encouragement’ by the Bank and the Fund 28
Crisis, Foreign Pressure, and India’s Neoliberals Both Past and Present 30
Towards a Corrective of the Neoliberal Representation of the Pre-1991 Record 34
Some Observations on Neoliberal Anti-statism and the Nature of the Interventionist State 42
Notes 44
References 48
Chapter 3 PREDATORY GROWTH 55
Lived Experiences 55
Unequal Growth 56
Jobless Growth 57
Augmented Profit and Misery 57
Income Elasticities of Demand 59
Anti-poor 60
Heightened Misery for the Poor 60
No Place for the Poorest 61
Note 62
References 62
Chapter 4 ON SOME CURRENTLY FASHIONABLE PROPOSITIONS IN PUBLIC FINANCE 65
Notes 74
References 75
Chapter 5 THE COSTS OF ‘COUPLING’: THE GLOBAL CRISIS AND THE INDIAN ECONOMY 77
Introduction 77
The Export Slowdown 79
Capital Inflows and the Financial Sector 82
The Crisis and Credit-Financed Demand 85
The Indian Government’s Response 88
Notes 91
References 91
Chapter 6 THEORIZING FOOD SECURITY AND POVERTY IN THE ERA OF ECONOMIC REFORMS 93
Introduction 93
What Deflationary Policies and Trade Liberalization Have Meant for the Rural Economy in India 94
More Trade Leads to More Hunger in Developing Countries under Global and Local Deflationary Conditions 98
Large Decline in Foodgrains Absorption per Head Is Owing to Falling Purchasing Power, Not ‘Voluntary Choice’ 102
Alternative Measures of Head-Count Poverty: Or, How to Count the Poor Correctly versus Illogical Official Procedures 107
Concluding Remarks 118
Notes 121
References 122
Chapter 7 GLOBALIZATION, THE MIDDLE CLASS AND THE TRANSFORMATION OF THE INDIAN STATE IN THE NEW ECONOMY 125
Introduction 125
Embourgeoisment and State Transformation 127
The Middle Class, IT Workers and the Neoliberal Turn 130
Growth of the Indian software industry 131
New economy labour and state transformation 131
Implications of a transnationalized new economy workforce 135
Conclusion 136
Notes 138
References 138
Chapter 8 THE WORLD TRADE ORGANIZATION AND ITS IMPACT ON INDIA 143
GATT to WTO: High Expectations from the Organization 143
Unfulfilled Promises and New Challenges 144
The WTO and India 145
WTO and Policy Space Available to Developing Countries 151
Are There Alternatives? 154
Notes 155
References 156
Chapter 9 THE CHANGING EMPLOYMENT SCENARIO DURING MARKET REFORM AND THE FEMINIZATION OF DISTRESS IN INDIA 159
Introduction 159
General Trend 160
Employment and Gender Divide 162
Gender inequality: Participation 162
Gender inequality: Activity status 166
Gender inequality: Feminized casualization 169
Gender inequality: Feminization of non-diversification 171
Conclusion 172
Notes 174
References 174
Chapter 10 PRIVATIZATION AND DEREGULATION 177
Privatization 178
Import Competition? 180
‘Physician, Heal Thyself!’ 182
Will Deregulation Eliminate Corruption? 183
Capitalism Stinks! 184
Conclusion 185
References 185
Chapter 11 MACROECONOMIC IMPACT OF PUBLIC SECTOR ENTERPRISES: SOME FURTHER EVIDENCE 187
I 189
Overall deficits of PSE 189
‘Budgetary burden’ of PSEs 192
Self-financing ratio 192
Trends in capacity utilization in PSEs 193
II 194
Notes 194
References 196
Chapter 12 LIBERALIZATION, DEMAND AND INDIAN INDUSTRIALIZATION 197
Introduction 197
Industrial Development since 1991: An Assessment 198
Liberalization and the Problem of Industrial Demand 202
Conclusion 209
Notes 210
References 210
Chapter 13 ON FISCAL DEFICIT, INTEREST RATE AND CROWDING-OUT 213
Introduction 213
Theoretical Overview 214
Empirical Evidence: India 225
Empirical Evidence: World 231
Conclusion 241
References 241
Data Sources 242
Chapter 14 GOING, GOING, BUT NOT YET QUITE GONE: THE POLITICAL ECONOMY OF THE INDIAN INTERMEDIATE CLASSES DURING THE ERA OF LIBERALIZATION 243
Introduction 243
What are the Intermediate Regime and the Intermediate Classes? 244
Preconditions for an ‘intermediate regime’ 244
The intermediate regime, intermediate classes and liberalization 245
Liberalization and Politics: The Orthodox Theory 245
Big and Small-Scale Capital 246
Small-sector promotional policies 247
No evidence production was a function of reservation 248
The small-scale sector and liberalization 248
An Explanation for the Success of the Intermediate Business Classes 249
Can exploit liberalization 250
Subcontracting 250
Exploitation and profitability in the small-scale sector 250
The Intermediate Regime and Alternative Class Alliances 253
Liberalization and the BJP 253
The rise of the middle classes 253
Problems with this model/perspective 254
Conclusion: The Intermediate Classes in the 1990s: Decentralization and Accumulation 254
Notes 256
References 256
CONTRIBUTORS 260