The Economy after Seven Decades of Independence

Prabhat Patnaik

THE shocking fact that India, an “emerging economic superpower”,was ranked 131st among 188 countries on the Human Development Index of the UN in 2015 may be brushed off on the grounds that rankings say little about absolute levels of living or changes in them. So let us take another statistic. Consider the calorie norms that constitute the official benchmark for poverty, namely 2200 calories per person per day in rural India and 2100 calories per person per day in urban India. The percentages of population unable to spend enough to reach these norms, and therefore falling below these norms in the various years of NSS large sample surveys since 1973-4, when such estimates began, were as follows:

Year                              Rural                                       Urban

1973-4                          56.4                               60

1983                              56                                  58.5

1993-4                          58.5                               57

2004-5                          69.5                               64.5

2011-12                        68                                  65

Source: Published sources, calculating from NSS data.

What is remarkable is not only the high absolute magnitude of nutritional deprivation (which currently is greater in India than in sub-Saharan Africa) but also the increase in it, especially in the years of neo-liberal economic policies. But this increase comes on top of a situation where, though there was noticeable improvement compared to the colonial period, the improvement was less than satisfactory.

One other statistic illustrates the point. The per capita annual foodgrain availability in “British India” was around 200 kilogrammes at the beginning of the twentieth century. It fell to less than 150 kilogrammes by the time of independence. After independence it increased to around 180 kg for the Indian Union by the end of the 1980s, but has fallen during the neo-liberal period, to 162 kg at present.

This picture, of an advance, but to a less than satisfactory extent, followed by a retrogression, is true of India’s socio-economic development generally. A capitalist trajectory of development has been pursued in the post-independence period, but there have been two distinct phases within this capitalist development: the first was the phase of dirigiste development when the attempt was to maintain a degree of relative autonomy vis-à-vis metropolitan capital, by imposing trade restrictions, maintaining strict controls over cross-border capital flows, and challenging the technological monopoly of multinational corporations by using the public sector to promote a certain amount of self-reliance. The second phase was of neo-liberalism, characterised by the global hegemony of international finance capital, when India too adopted the policy of freeing trade and capital flows (including of finance), of privatising public sector enterprises, of pursuing “sound finance” by keeping down the fiscal deficit, of using the State as an instrument for promoting almost exclusively the interests of the domestic corporate-financial oligarchy, now integrated with globalised capital, and of withdrawing State support from petty production and peasant agriculture. While the latter phase expectedly has been characterised by growing inequality and nutritional deprivation, since the former had seen less than satisfactory advance, we have a situation where even after seventy years of independence the socio-economic conditions of the people remain pathetic.

The reason why even the dirigiste period had seen less than satisfactory improvement in the socio-economic conditions of the people, lies essentially in the post-colonial State’s refusal to carry out radical land redistribution. This amounted to reneging on the promise of the anti-colonial struggle, and constituted a glaring instance of the bourgeosie’svolte face, its crossing over from the side of the people, where it had been before independence, to the side of the landed rich. To be sure, the feudal landlords were encouraged to convert themselves into Junker-style capitalist landlords; and some very large zamindari estates lost a certain amount of their land to rich tenants (typically of the intermediate castes), so that an admixture of peasant capitalism and landlord capitalism started developing in the countryside. But land concentration was not broken: the upper 15 per cent (say) of landowners owned the same proportion of total area as they had done before land reforms, though their composition had changed somewhat.


This had several crucial implications. First, the development of productive forces in agriculture remained arrested, so that not only did the domestic market, so important under the dirigiste strategy, remain constricted, but it also did not grow rapidly enough, limiting the pace of overall economic development. Second, the social power of the landlords who had been the custodians of the old oppressive village “community”, with all its hierarchical, patriarchal, irrational and inhuman customs and rituals, remained largely intact, posing a threat to any democratic advance. Third, as the obverse of it, the dalits who had been prevented from owning any land under the old feudal system (to ensure that a class of landless agricultural labourers remained in the village even when uncultivated land was available outside of it, as in medieval India), continued to remain landless and hence socially disempowered. The bourgeoisie’s compromise with landlordism therefore arrested India’s democratic revolution, even as it constrained the pace of economic development.

The bourgeoisie’s compromise with the landlords however was followed by an even bigger volte face when it integrated itself with globalised finance capital and adopted a neo-liberal economic regime. To be sure, the emergence of globalised finance capital on the world stage was a phenomenon powerful enough to sweep aside all opposition to its hegemony, all attempts by individual countries to remain outside its ambit. But the dead-end at which the dirigiste regime had arrived because of its own contradictions arising from its compromises; its growing lack of popular support on account of them; and the bourgeoisie’s desire to shake off the shackles of this regime which could no longer fulfill its ambition; facilitated the onset of the neo-liberal regime. And with this onset, the democratic revolution which had been arrested began to be reversed, leading ultimately to a process of counter-revolution which is now in full flow.

An important economic root of this counter-revolution was the unleashing of a process of primitive accumulation of capital against petty production, including peasant agriculture. Primitive accumulation within the agricultural sector had been occurring even in the dirigiste period, but it had accompanied the development of capitalism within the sector, and had a comparatively limited sweep. In contrast the primitive accumulation under neo-liberalism entailed the “outside” capitalist sector squeezing peasant agriculture; and this squeeze had a wide sweep.

This primitive accumulation had a “stock” aspect: the snatching of peasants’ land for a “song”, by the corporates, or the State on behalf of them (which is now set to escalate with the new projects being launched, such as “industrial corridors”); it also had a “flow” aspect: a squeeze on peasant incomes through increased input prices (owing to the withdrawal of the earlier subsidies and the dwindling of institutional credit), and un-remunerative and sharply fluctuating output prices, especially for commercial crops (owing to the abolition of the marketing function of various commodity boards). Measures such as demonetisation and the GST, introduced supposedly for other reasons, carry forward this process of primitive accumulation of capital against petty production.

A striking and tragic consequence of this process has been the spate of peasant suicides (over three lakhs in the last two decades); but in addition there has been an exodus of distressed peasants from villages to towns in search of non-existent jobs. This has not only swelled the reserve army of labour, but also led to a change in the form in which employment is rationed: instead of a binary, the active army and the reserve army, we have phenomena like casual employment, intermittent employment, and part-time employment, and a growth in “disguised unemployment” (often disguised as “petty entrepreneurship”).



The burgeoning reserve army of labour expectedly has had an adverse impact on trade unions, especially when it has taken the form of casualisation of work; but two other factors have also sought to set them back. The first is the fact of globalisation of capital which confronts not only nation-States, bending them to its will, but also nationally-organised trade unions; and any militancy on the part of the latter runs the risk of even greater unemployment through capital locating plants elsewhere. The second is the privatisation of public sector units: it is a well-known fact that all over the world workers in the public sector are more powerfully unionised than workers in the private sector (in the US for instance the proportions of unionised workers in the two sectors are 33 and 8 per cent respectively). Privatisation under neo-liberalism therefore has worked against the trade union movement.

This has had two consequences: one is on the wage rate and the wage-share. The growth rate in the real wages in all four categories of labour, namely, rural regular, rural casual, urban regular and urban casual, has slowed down markedly in the period after 1993-94 compared to the period between 1983 and 1993-94. But since the growth rate of labour productivity in the later period has increased greatly compared to the earlier one, there has clearly been a significant decline in the share of wages in total output, or an increase in the share of surplus in output. In addition, since casual workers earn less than regular workers, the fact that there has been a growing casualisation of the work-force, implies that the decline in the share of wages is even greater than appears at first sight. The process of primitive accumulation in other words has also had the additional effect of raising sharply the rate of surplus value in the economy.

The second effect of the assault on trade unions has been a shift in the balance of class forces which has facilitated the growth of communal and authoritarian tendencies at the behest of the corporate-financial oligarchy. The resistance against such forces has been weak in a situation of subdued class militancy. Not only in other words has there been an economic squeeze on the working people, but a general weakening of their social strength which corporate capital has used to its advantage.

Neo-liberalism, it must be remembered, does not have any specific ideological prop of its own, other than simply claiming that it would bring about accelerated growth to the benefit of everyone. As this promise increasingly rings hollow, it needs to find some other ways for retaining its ideological hegemony in society. And this need becomes even more pressing in a period of crisis and slowing down of growth, such as now, since even the segment of the middle class that had hitherto done well out of globalisation now begins to feel frustrated within it as job opportunities dwindle. A strategy of alliance with communal-authoritarian forces is resorted to at this juncture by the corporate-financial oligarchy. Such an alliance buttresses the position of the oligarchy, helps it to carry forward the process of “reforms”, disorients the opposition to neo-liberalism by changing the social discourse from a potentially anti-system one to an anti-minority one dominated by Hindutva “nationalism”.

The glue that binds this fusion of Hindutva with neo-liberalism is unreason. The projection of “the leader” as a “messiah”, the propagation of policies of “shock and awe” to impress the people, even though the purported aims of the policies are clearly and demonstrably incapable of being realised, hyperbolic references to jingoistic nationalism, are all mechanisms for spreading unreason. And in a situation where the struggles of the people through class organisations like trade unions have been subdued, the scope for the spread of unreason is considerable.

The bourgeoisie which first compromises with feudal landlordism, and then hitches itself with globalised finance capital, eventually ends up in partnership with communal-authoritarian elements which purvey unreason and consciously and explicitly plan to roll back the democratic advance of the people by substituting the current secular democratic regime with a “Hindu Rashtra” which would be a dictatorship by a coterie of corporate-financed dyed-in-the-wool reactionaries promoting a corporate agenda.

For a society like ours, marked by millennia of institutionalised inequality in the form of the caste-system, to adopt a constitution that proclaimed equal rights for all, equality before law, and universal adult franchise as the basis for forming a government, was no mean achievement. It was made possible by the two great struggles of the late nineteenth and early twentieth century(of which the Communist movement is the legatee). One was the anti-colonial struggle, and the other was the social emancipation struggle associated with people like Phule, Periyar and Ambedkar. While these two struggles are generally seen as being contradictory, they in fact reinforced and strengthened one another at the grassroots level, and laid the foundation for an unfolding of India’s democratic revolution. The pursuit of the capitalist trajectory of development with its immanently inequalising tendencies was fundamentally against this unfolding democratic revolution. The different markers along the capitalist path, from the compromise with feudal landlordism to the institution of a neo-liberal regime, signify the setbacks to the democratic revolution.

The dialectics of this process has now brought us from mere setbacks to a full-fledged unleashing of a counter-revolution against the democratic advance of the people. The historic task of the Left at this juncture is to effect the largest possible mobilisation to thwart this counter-revolution and carry forward the democratic revolution.


Newsletter category: