“That the 1991 reforms marked a major watershed in India’s economic history is surely beyond argument. No waiting list for cars and scooters, no special license for securing foreign exchange for studying abroad, no gold smuggling and no more the dread of customs officers at the airports”
“The world has changed substantially since the 1990s and so has India. The country is now carving a niche in the global markets which has so far been dominated by developed countries”.
These quotes were taken from issues of the Economic and Political Weekly (EPW).1 The consumerist glee seen in the first of them is of someone wholly supportive of the neoliberal turn taken by the Indian State in 1991. Rajeev Kumar (presently the vice-chair of the NITI Ayog) has some concern about the inequality that has accompanied it. Still, he believes that this can be handled and resolved, continuing with a neoliberal agenda adjusted to India. Greater integration with the world economy is declared as a ‘major achievement’. Above all he is quite certain that the reforms had a very large dose of indigenous inputs. He claims that they were based on domestic research and advocacy.
The second quote is from someone addressing a very different concern. Ramdas Rupvath was writing about the discrimination and humiliation suffered by Dalit and Adivasi students in institutes of higher education. Well aware of the social, economic roots of the prejudices they are victims of, he squarely targets the varna/caste system as anti-social and anti-national. He also points out that opportunities have become even more unequal and uncertain post-liberalisation. The fruits of its growth go to a tiny rich class.
Coming from distinctly different spaces, Kumar and Rupavath articulate sharply different concerns. Yet, as seen in these quotes, both are convinced about one thing — India has ‘arrived’ on the world stage. Indeed, this is a dominant theme among a great majority of the middle class. And that includes many otherwise critical of the state of affairs in the country. It is almost an article of faith, an unquestionable frame of reference. It was also the overriding theme of most of the articles that came in newspapers and magazines, marking the 25th anniversary of the 1991 reforms. Many of them made it a point to deny any foreign compulsion and insisted on their indigenous origin.
Montek Singh Ahluwalia’s article is symptomatic of this viewpoint. Refuting allegations that these reforms were imposed by the IMF, he writes, “This completely ignores the fact that there was a home-grown process of rethinking on economic policy that had been underway and pointed towards many changes. These changes certainly formed part of the conditionality of the IMF’s assistance, because the IMF’s supposed to lend only in situations where the government has a credible adjustment programme. The IMF obviously approved the reforms in that sense, but that is not the same thing as saying it dictated the contents”.2 He then goes on to enumerate various proposals and initiatives, beginning from the late 1970s onwards, aimed at changing economic policy. They culminated in a paper authored by himself in 1990. Its contents mostly anticipated the reforms of 1991. Ahluwalia cites the discussion of this paper in a Government of India (GOI) Committee of Secretaries as proof of these proposals “…being considered internally, well before any IMF arrangements was contemplated”.
We need not dispute this account given by a leading architect of the 1990 reforms. But does it really settle the matter? Can the mere fact of a policy paper being discussed by some GOI Secretaries, or the policy shift carried out since the 1990s, determine that the reforms were of internal origin? Ahluwalia supplies the answer in his unwitting admission — the policy changes proposed by the Narasimha Rao Government were precisely those which formed the conditionalities of the IMF loan. The conditionalities of the IMF were directed at ensuring structural adjustments suited to the neo-liberal agenda. They were not advisory in nature. A country seeking IMF assistance could not amend or reject them. They were inviolable, an imposition. That is the crux of the matter. It stands confirmed by the fact that almost all third world countries had to adopt similar policy shifts during that period.3
An imposition need not take the form of an explicit diktat. It could well be achieved through the loan seeking government pre-indicating willingness to fulfil IMF conditions. Considering that the prior acceptance of a structural adjustment programme was a must, it would make eminent sense for a desperate government to declare its compliance well in advance. Keep in mind that while the ‘balance of payment’ crisis was brought to quick maturation by the first Gulf War, the motion towards it was already evident by the late 1980s. Therefore, the fact that the policy shift was proposed and debated upon even before approaching the IMF really doesn’t prove Ahluwalia’s claim.
The collapse of the Soviet Union had a direct impact on the Indian economy. It severely weakened the Indian ruling class. They had to fall in line with the ‘Washington Consensus’ and accept the neoliberal ‘globalisation, privatisation and liberalisation’ (GPL) agenda promoted by the US, now the sole super power. Whether as an IMF conditionality or not, structural adjustments to give free play to neoliberal policies were inevitable. Later, structural adjustments incorporating the GPL agenda, became a permanent, inviolable condition, an inseparable part of the Indian economy (and of other third world economies) through the 1993 GATT Agreement and the World Trade Organisation’s (WTO) directives.
All of this is public knowledge since long. Why do Ahluwalia and Kumar then persist in insisting on the ‘domestic pedigree’ of the 1991 reforms? Theirs is not an attempt at covering up. No, they wholeheartedly believe that, in full view of the facts. And that makes it worth probing further.
What immediately strikes one is the blurring of the distinction between the internal and external. There has been a continuous exchange of technocrats and academicians between the GOI (and various Indian institutions) and imperialist agencies like the World Bank, IMF and Asian Development Bank (ADB). This became particularly noticeable from the 1980s onwards. Manmohan Singh, Ahluwalia himself, Raghuram Rajan, Arvind Subramanian and Arvind Panagriya and Urjit Patel — these are some of the recent examples.
Those who serve at the IMF and similar agencies are inevitably conditioned by the current set of ideas or policy framework being prescribed by them. When these technocrats came back to occupy key positions in GOI and articulate policy, they are invariably guided, inspired, by the thinking imbibed and argued for while working in those imperialist agencies. Kumar’s claim about the ‘Indian origin’ of the reforms very well brings this out. His justification is that researchers ‘well versed in the Indian ground realities’4 had presented reform measures in a ‘readily comprehensive form’ to the political leadership and other policy makers well before the formal acceptance of IMF conditionalities. Kumar has added a note to his article to prove this. It informs us about a study prepared by a team, including himself, for the ADB in 1989. In his words, “It is noteworthy that many of these measures (ie. those proposed in the study) were replicated in the structural reforms matrix presented by the IMF.”, as conditionality for its loan.
There is nothing surprising about this ‘replication’. After all the ADB is a key player among imperialist agencies. Going by the information provided by Kumar, there is also nothing surprising about his considering an external, foreign, set of ideas as ‘internally’ generated. For people like him and Ahluwalia this will only appear as a seamless flow of ideas, which they share and willingly act upon. For them there is nothing separating the indigenous from the foreign in this matter.
This approach is by no means restricted to IMF-WB returnees. A great many academicians and all top level administrators are tutored or directly trained, in imperialist thinking. Quite naturally enough, the contribution made by them to governance and economic policies remain within the framework of imperialist thought. Nothing is imposed. The external is internalised. The articulation becomes country specific without even a trace of its foreign origins.
Whether they be foreign returnees or home-based ones, consideration of the Indian economy as one enmeshed (not integrated) in the global imperialist system is simply missing. This stands in sharp contrast to the thinking of the local elites during the colonial period. They could not but be acutely aware of British India’s dependent status and its debilitating consequences. The British origins and biases of policies executed by the colonial administration were all too plain. Hence, even while remaining loyal subjects of the British empire, some among them produced weighty studies exposing the plunder of the imperial metropolis and expressing local interests in opposition to metropolitan capital.
The transfer of power in 1947 promoted a transition from this mind-set to a new one. To get an idea of this transformation and the characteristics of the new consciousness, we must first get acquainted with the colonial mind, the mind of the elite colonial subject. Awestruck by the political and economic might of the colonial power and grieving one’s own backwardness — such was its main character. The local elites were eager to imitate the colonial masters in all public spheres of their lives. The metropolis was acclaimed as the model to aspire to. Along with this, the colonial mind was also quite disgruntled. Even the richest, even those with royal lineage, or those who had demonstrated academic acumen, were still treated as inferior ‘locals’ by colonial masters. They remained lesser subjects compared to those in colonies populated by ‘whites’. They were denied dominion status. Dissatisfaction engendered by such discrimination, coupled with the drain of wealth, crystalised over time into political opposition expressed as anti-colonialism.
By 1947 an elite intellectual stratum had taken form. It was composed of elements from the comprador, feudal and upper middle classes. They became the formulators and executors of economic measures adopted by the new state. A good many were driven by a zeal to build an India capable of taking a prominent role in the world arena. Brahmanist claims about a glorious past and a desire to ‘retake’ it were intertwined with their ambitions. This was not simply a false image meant for deceiving the people. For the new rulers and their ideologues, independence was nothing more than the ending of colonial rule. Hence they sincerely believed that they were engaged in building an independent country. They were convinced about its feasibility. Getting rid of economic backwardness was their priority. But their very class nature ruled out radical reforms in agriculture and other spheres. Considering the building of an industrial base as a necessary condition and constrained by paucity of capital and technology they eagerly sought ‘foreign aid’.
Initially, some imperialist powers like the US were opposed to their plans. The new rulers succeeded in crossing this obstacle by relying on other powers. The whole experience and similar instances in other fields went to further strengthen the illusion of independence. Sharp contradictions between the capitalist bloc and the erstwhile socialist camp and later between the two super power blocs (led by US and the erstwhile Soviet Social Imperialism) allowed room for their manoeuvring and bargaining.
The uppermost strata were well aware of India’s actual position in the world order. This was realised as limits on their independence. Their immediate dealings with the world powers repeatedly underlined this real status, especially during recurring crisis. The middle class, distant from such experiences, was however firmly convinced of India’s ‘importance’ in world affairs as an independent country. It was quite taken in by ruling class hype. Such are the main characteristics of the neo-colonial mind. It mainly manifests as a sense of independence, even while the country remains dependent.
Formal independence of the erstwhile colonies is an essential feature, a vital requirement of neo-colonialism. That distinguishes it from colonialism. Instead of direct control exercised in the political sphere under colonialism, indirect control becomes the norm. This emerges from the very trajectory, the origins and evolution of neo-colonialism. Principally, it did not come from the internal economic dynamism of imperialism. Rather, it was a political response, something forced on it by the tide of anti-colonial and national liberation struggles. In countries like China this high tide was expressed as a revolution challenging the imperialist order. For imperialism, the success of the new global architecture hinged on the degree to which the tide of revolt could be turned back. The semblance of independence in the erstwhile colonies thus became crucial for the emerging neo-colonial world order. The imperialist powers had to concede this, even if grudgingly.
Even then they tried to retain their direct control in the economic sphere. This was true of the US too, which was promoting ‘decolonisation’ as a stratagem to weaken major colonial powers like Britain and France. Wherever possible, imperialism tried to prevent any development that would weaken its direct economic grip. It sought to retain existing forms of exploitation and plunder of oppressed nations. This impacted the interests of the new rulers in the neo-colonies. They were keen on building and strengthening their own base, in order to be in a better position to bargain. This tug of interests inevitably became a prominent aspect of the relations between imperialist powers and third world ruling classes. The shift to indirect control of the economies of semi-feudal, semi-colonial countries under neo-colonialism took place over time. Primarily, it was enabled by the perfection of new means for imperialist penetration, such as tied aid, transfer of obsolete technology and conditional loans from imperialist agencies during crisis period.
The new ruling classes remained subservient to imperialism as a whole. Yet, the legitimacy of their rule, their ideological hegemony, ultimately rested on the claim of heading an independent country Wherever the communists or other revolutionary forces succeeded in gaining leadership of the struggle against the colonial power they took it forward as a broad anti-imperialist, anti-feudal struggle. This forced the compradors and feudal classes in those countries to increasingly reveal their true nature as servitors of imperialism. In situations where revolutionary forces failed to gain leadership and power was transferred to the exploiting classes, they presented themselves as champions of independence. Having cornered the leadership of the struggle during the colonial period, they could conceal their nature and appear as genuine leaders of a quest to consolidate independence and achieve development. This appeared as a continuation of their leading role in the anti-colonial struggle.
The bolstering and perfecting of the semblance of independence in both the political and economic realms was vital for the new ruling classes. The backing away of imperialism from retaining direct control over neo-colonial economics and the fleshing out of neo-colonialism, was however mainly realised through the working out of the contradiction between imperialism and oppressed nations and people. Though the contradictions between third world ruling class and imperialist powers also had a role in this it was secondary. These remained essentially non-antagonistic, within the imperialist system. Opposition expressed by any third world state was always with one or the other imperialist power or bloc. It was never against the imperialist system as such. The limits of anti-colonial struggle that had posed the ending of colonial rule as independence was thus revealed. For the comprador and feudal classes that limit was inherent in their class character. But for the classes that rallied under their leadership and thus failed to go beyond anti-colonialism, it was an unconscious internalisation of comprador thought. It was also a process through which they were co-opted into the hegemonic consensus being forged by the rulers-to-be. They remained trapped in a false consciousness that presented dependence as independence.
Those lacking in a consistent anti-imperialist stand inevitably failed in breaking away from imperialist thinking. That frame of thought and the policies it generated appeared to them as value free universal principles. Imperialism’s active role in shaping and influencing the academic world of neo-colonies complemented and strengthened the disguised subservience it spawned. Hence, for the neo-colonial mind, measures of imperialist control and exploitation are never seen as external impositions. They are considered as arising from the internal dynamics of the country, necessitated by its development quest. The neo-colonial mind is blind to the imperialist system in which the country is enmeshed. Blocked from the real world by the false consciousness of independence and its articulation as narrow nationalism, the neo-colonial intellectual/technocrat proposes and pursues policies that heighten imperialism’s grip ever more, while believing they will strengthen the country. Participation in neo-colonial bodies like the IMF, WB, G-20 and so on is seen as a matter of self-willed choice and recognition of one’s country’s powers.
It is not the case that the neo-colonial subjects have no contradiction with imperialism. We earlier saw the differentiation within this. There is the antagonistic contradiction the oppressed people have with the imperialist system. And there is also the non-antagonistic contradictions third world ruling classes have with this or the other imperialist power. Consequently, the manner in which these contradictions are grasped varies. For the ruling classes, bred and shaped by imperialism, this is a matter of bargaining. That is not how it is experienced by other classes such as the national bourgeoisie, middle class, peasantry and workers. Yet, to the extent they are under the sway of ruling class hegemonic consensus, the neo-colonial mind dominates. Apparent similarity is seen between their understanding of the country’s position in the world, world events and that of the ruling classes. The difference lies in their patriotism as opposed to the compradorism of the rulers. However, that patriotism fails in its subjective desire to be independent when it remains trapped in the neo-colonial frame of thought. In the final analysis it ends strengthening the ruling class’s hegemonic consensus and dependence on the imperialist system. This is true even when it is expressed in the form of militant nationalism.
An instance of this dynamism that readily comes to mind is the Indira Gandhi government’s stand-off with the US in 1971 on the Bangladesh issue. Despite facing threatening moves by the US, the Indian government stuck to its plan to intervene in the Bangladesh liberation war and ensure the break-up of Pakistan. The ruling class celebrated it as proof of India’s independent foreign policy and standing in the world. This stance and India’s victory in the 1971 war were hailed by the broad masses with great fervour. In the midst of this what went unnoticed was the backing given by the erstwhile Soviet social imperialism and its tightening grip through the Indo-Soviet Treaty. Thus the patriotism of the masses became a means of legitimising greater subservience to social imperialism and, through it, to the imperialist system as a whole.
Having noted some of the salient features of the neo-colonial mind, we shall now return to the matter of 1991 policy shift. The occasion of the 25th anniversary has been used by some intellectuals to grieve the years ‘lost’ preceding that shift. A rather simplistic lesson is drawn by comparing the rapid growth of South East Asian countries in that period with the slow pace seen in India. It is argued that these countries ‘succeeded’ because they had opened up to foreign capital quite early and boosted exports. India, on the contrary, remained a closed economy insisting on ‘import substitution’. Note that the position of these countries in the post-World War 2 political and economic architecture of the imperialist system simply does not figure in this argument. When that is taken into consideration, the key role played by the strategic moves of the US in their growth would stand out.
The importance given by the US to these countries was closely related to its strategy of containing the impact of Socialist China and the growing national liberation struggles. The Vietnam War, pitting a communist led people’s war against the US and allies, soon turned into a focal point. Countries like Thailand, Singapore, Malaysia, Taiwan and South Korea became even more important for the US. This was the global context enabling and shaping the economies of these countries through ‘export-led growth’. Yet, for all that, they remained as links in the imperialist value-commodity chain, as component suppliers to transnational corporates. In recent decades, a few monopolies from these countries have emerged as significant players in consumer goods production. But then, so too have Indian corporates. Besides, import substitution was by no means unique to India. In its heyday, it was standard policy in a number of third world countries, particularly the bigger ones. Their common inspiration was a neo-colonial development model then favoured by some imperialist circles. It was seen as a means to deepen imperialist penetration through project tied loans and limited export of technology. Whether ‘export-led’ or ‘import-substituted’ they ultimately contributed to a strengthening of dependence. The Indian neo-colonial mind is bitter about having been denied the opportunity to indulge in consumerist orgies along with its fellows in South East Asian countries. In doing so it blinds itself to the hollowness of those economies, sharply exposed in the crisis that hit them in the late 1990s. Big corporates like Daewoo simply collapsed. A huge chunk of locally owned industrial assets was snatched up for a trifle by imperialist corporates. Their dependence on imperialism stood out in all its ugliness.
Incidentally, the Indian economy escaped the worst of the 2007 global financial crisis precisely because it had not yet opened up to full capital convertibility. This was something insistently demanded by the IMF and local technocrats. But, just around the time the clamour to fully open up capital markets reached a high pitch, the South East Asian ‘Tigers’ started collapsing. Given their ‘openness’ they were unable to control capital flight. It was this turn, rather than the prudence of this or that RBI Governor, that delayed full capital convertibility. And that turned out to be quite beneficial when the 2007 crisis hit the world.
The neo-colonial mind is still stuck up in a time warp lamenting the slow pace of ‘opening up’. Meanwhile, an influential and growing section in imperialist ruling circles and its agencies have moved on. Full capital convertibility is seen by them as a major risk. It is no longer advised. The sharp rise in inequality following implementation of GPL policies is recognised as a serious destabilising factor. The neo-liberal policy set is being amended. A trend arguing for this had emerged by the late 1990s and early 2000 itself with calls for ‘gobalisation with human face’ and ‘inclusive government’. What is significant is the broader respectability this has gained in the IMF-WB officialdom and its promotion through their official journals.5 Even then, the main thrust of the neo-liberal agenda still retains its venomous bite. Conditions imposed on Greece for a bailout loan are a sharp reminder of this.
The slowdown of reforms during the UPA rule and attempts to ‘revive’ it under the NDA-2 has been a prominent theme in neo-colonial academic, political circles. There certainly was a ‘slowdown’. Objective factors underlay it. By the late 1990s and early years of 2000s, broad mass struggle broke out in many parts of the country. They were mainly focused on the forced displacement of peasants and Adivasis from their lands for the sake of multinational-Indian corporate projects and Special Economic Zones. The ruling classes had to take this into account, particularly because they aided the growth and spread of the Maoist movement in some regions. Taking a cue from imperialist circles, and lessons from the miserable defeat of NDA-I in 2004, the UPA started parroting ‘globalisation with human face’. It initiated reformist programmes like MNREGA and adopted new acts meant to blunt struggles from below. The aggressive promotion of GPL was rolled back to a great extent.
As usual, the neo-colonial mind grasps this as its own product. The conclusion “India is not suited to the application of Washington Consensus” is presented as original thought “emerging from Indian reality”.6 Imperialist finance capital is renamed by some as ‘global capital’. Defying all indicators of deepening dependency it is even claimed that global capitalism “has been created’ within India!7
It is not that those who state such views are unaware of policy rethinking taking place in imperialist circles. They consider this merely as an enabling factor. The real impetus, in their view, comes from internal developments. Imperialist agencies certainly do not produce policies purely from their own thought or conditions. Political, social and economic developments in third world countries are under their constant observation. Sensing the mood of the broad masses is an important part of this. The comprador rulers and intellectuals are vital sources in this process. There is continuous interaction with them. But, ultimately, policy is set at the global level by imperialist think tanks and agencies serving finance capital. The comprador, the neo-colonial mind, won’t experience this as an external input. After all, they too have been part of its evolution. Yet they still are not the deciding factor, for the formulation of policy. This is the crux, however incomprehensible it is to the neo-colonial mind.
Let us go back to the ‘slowdown-revival’ theme posed and debated in neo-colonial circles. One notes a near total absence of any reference to the 2007 global crisis and the long drawn out global recession it caused. If we are to really understand what happened and is happening in our economy, this must be factored in. In the initial years of the crisis China and India (and a few other third world countries) were able to maintain their growth and remained stable. Restrictions on capital convertibility played a major role in this. The relative stability of these economies was an important factor aiding the imperialist powers to ride out the worst years of the crisis. However, given the enmeshing of these economies in the imperialist system this could not be sustained for long. By 2010/11 the continuing recession in imperialist countries started impacting them. Furthermore, the UPA-2 got caught up in the uncertainties of its coalition politics.
A stable government that could vigorously push the GPL agenda became a pressing necessity. This underlay the all-out backing given to Modi and the BJP led NDA by the ruling classes and imperialists. The payback is now appearing as a stepped up effort to carry out GPL. It is not just a matter of economic policies. Concerted efforts to stifle democratic protest through deploying fascist hordes of the Sangh Parivar, the attempt to disarm the masses by fanning up narrow nationalism and massive increase in para-forces deployment in areas of struggle are all part of this step up.
Despite all this and the haste to attract foreign capital, growth rates have kept on falling. Banking is in a mess. Fresh, local investment is stagnant. Demonetisation and GST have further worsened things. The biggest chunk of India’s industry is in the unorganised medium, small and tiny sectors. They are suffering the most, along with the rural economy. The answer is sought by the Modi government in a more desperate effort to attract foreign capital. Every instance of foreign capital coming in, even if it is mainly portfolio investment in the share, debt markets, is hailed as proof of the Indian economy’s strength and confidence in the present ruling dispensation.
Apart from seeking profits from differences in interest rates, the recession in imperialist countries also leads finance capital to seize profitable investment opportunities in countries like India that still retain some buoyancy. Thus, a few sectors like urban transportation have seen fresh foreign investment. We can see this in the race for metro networks, even in cities that still don’t even have proper roads. Huge amounts of finance capital, in the form of loans, are flowing in to fund these projects. They give recession stricken rail industries in imperialist countries some reprieve. The ‘smart cities’ project is another example of opening up new avenues for profit seeking finance capital. It is predicated on a wholesale privatisation of municipal services.
Control over finance capital is the key lever in the global imperialist system. According to a study by a research group in Switzerland, just 20 imperialist transnational financial corporates control almost all the big corporates in the world. No matter how many companies the Tatas or Ambanis buy up in imperialist countries, even if more than half of their income originate in global operations, they remain comprador midgets before these giants. The composition of India’s relatively higher growth rate is itself reflective of the country’s true status. It is mainly consumption driven. Industrial production does not contribute even one third.
Ramadas Rupavath has plainly got his facts wrong. Let alone ‘carving niches’ India’s performance in the ‘global market place’ is still quite negligible. But, more than the factual error, what is most worrying is the shocking knowledge that even someone like Rupvath, who stands with the oppressed, is trapped in the discourse of the neo-colonial mind. We are forcefully reminded that an unapologetic, aggressive anti-imperialism is by no means outdated. We need more of it in higher doses.
(Written in October 2016 and updated in January 2018)
?‘Making Reform Work for the People’, Rajiv Kumar; EPW, Vol 51, No: 19 and ‘Confronting Everyday Humiliation: Response from an Adivasi’, Ramdas Rupvath, EPW, Vol 51, No: 31.
2 ‘The 1990s Reforms: How Home Grown Were They?’, EPW, Vol 51, No 29, p 39.
3 Between 1982 and 1990 the number of ‘upper tranche’ loans with at least 11 conditionalities grew from 5 to 60%. WB structural adjustment loans went up from 3 to 25% in 1981–1996. (EPW Volume 52, no 33, note 6 on p 92.)
4 Rajeev Kumar, op. cit, p 35
5 ‘IMF’s Auto critique of neo-liberalism?’, Pritam Singh, EPW, Vol: 51, No 32. An article in the IMF’s official magazine has admitted that “the claim that neo-liberalism always contributed to economic growth is difficult to sustain”. (p 39)
6 Kumar, op cit, p 55.
7 ‘Indian Economy in Transition’, Anjan Chakrabarti, EPW, Vol 51, No: 29, p 64.