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Back from the brink

India’s top-heavy economic structure must be course-corrected with drastic reforms or risk crumbling away

Back from the brink

In May 2019, the Narendra Modi-led government had set a target of taking the Indian economy to USD 5 trillion over the next five years. As India's GDP is currently estimated at around USD 2.94 trillion and the economy is growing at less than five per cent, the target appears exceptionally formidable, if not impossible. India will have to grow, on an average, at a ten per cent per year to achieve the 5 trillion-dollar target by 2024.

India has become the fifth-largest economy in 2019, overtaking the United Kingdom and France. The U.S. has retained its position of being the world's largest economy, since 1871, at USD 20.58 trillion in 2018 in nominal terms. USA is followed by China (USD 14.14 trillion), Japan (USD 5.15 trillion), Germany (USD 3.86 trillion) and India (USD 2.94 trillion).

Achieving the target of USD 5 trillion GDP is a matter of time. It will be reached someday. In this phase of 'shifting goal post syndrome,' that the nation is infected with, the targeted year is not the main issue. Rather the most important concern of the hour should be- Who would lead and manage this fifth largest economy of the world? Will it be managed by state enterprises; global capitalists; Indian corporations (national capitalists) or the small and unorganised sector?

The government of India had made a strategic policy decision, in the 1990s to sell its stakes in various Central Public Sector Enterprises (CPSE). Under the BJP-led NDA regime headed by Atal Bihari Vajpayee in the late 1990s, the government had sold its stake in companies such as Videsh Sanchar Nigam Limited, Hindustan Zinc, Balco and IPCL to private entities. The government had also pushed oil companies to buy stakes in each other. Thus, the shift from crony socialism to crony capitalism began. During the last two years, strategic disinvestment of five CPSEs (HPCL, REC, NPCC, HSCC, and DCIL) has been successfully completed and in July 2019 the government has given 'in-principle' approval for strategic disinvestment of twenty-three central public sector enterprises (CPSEs) including subsidiaries, units and joint ventures. India's flagship air carrier Air India is also on sale. The Government of India (GoI) on January 27 said it would "completely exit Air India", including its units Air India Express (AIXL) and Air India SATS (AISATS). It is clear that state enterprises are not in a position to lead the economy.

To lure foreign investment, the government of India has launched 'Make in India' program in September 2014. The focus of the 'Make in India' program was on twenty-five sectors. These include automobiles, aviation, chemicals, IT and BPM, pharmaceuticals, construction, defence manufacturing, electrical machinery, food processing, textiles and garments, ports, leather, media and entertainment, wellness, mining, tourism and hospitality, railways, automobile components, renewable energy, biotechnology, space, thermal power, roads and highways and electronics systems. It was expected that many transnational corporations would shift their manufacturing base from China to India. In April 2016, India ratified the Trade Facilitation Agreement (TFA) to boost economic growth by reducing trade costs and supporting its integration into the global economy. But all these initiatives have failed to attract much foreign investment in greenfield sectors. FII, not FDI reached the Indian shore in billions and has inflated the share market balloon. The recent reaction of George Soros and international media on CAA and Kashmir issues indicate that global capital is turning hostile towards this government. The one thing capital abhors is political strife in invested countries. At this stage, India is not a long term investment destination.

What about corporate India? Are they in a position to lead a five trillion-dollar economy? The real problem lies in the absence of any big national bourgeoisie in the country. Indian capitalism did not emerge as a result of the contradictions within Indian society but as a result of the influence of the developed capitalism of foreign countries on a dependent pre-capitalist society. At the time of independence, the Indian bourgeoisie was divided into two camps, national and comprador, formed on the basis of the relationship with foreign imperialist capital. (Ghosh 1985) A comprador may be defined as "an individual of, and in, a developing country who serves a western interest. Such service is usually, though not always, implicit. Moreover, the rationale for such service is material gain rather than ideological or political conviction". (Srivastava 2012). The national bourgeoisie, on the other hand, belongs to different classes and strata of society. Some of them are scientists and technicians, while others are skilled workers. Secondly, the source of their initial capital is their own earnings or funds borrowed from friends and relatives.

Unlike the compradors that had set up big units with the help of foreign funds, the beginning of the national bourgeoisie was always very modest. Furthermore, the national bourgeoisie mostly knew the techniques of production. They often innovated products and machinery. Comprador's big bourgeoisie was mostly ignorant of the production techniques and felt no interest in them. The secret to the success of comprador big capital was its ability to manage finance and take advantage of opportunities for cornering the market in key articles of trade and for earning speculative profits. Thus, the compradors catering to neo-colonial capital dominated the Indian economy

Since the liberalisation of the economy in the 1990s, the compradors' importance to their foreign partners began to decline as foreign entities could directly do business in India through their captives. Companies like IBM, Suzuki and Honda started their independent operations through their 100 per cent subsidiaries. In the 1990s, many captains of Indian business had sold their firms and major brands to global competitors. Tomco, Thums Up, Limca and Gold spots are few cases in point.

Presently India exhibits several characters of internal and regional colonialism. Colonialism, particularly in its internal and regional variants, parallels the theory of dependency that was developed after World War II. Paul Baran's theory (1957) of 'lasting dependence' helps us to understand the post-colonial structure of the Indian economy. According to this model, the two common examples of infrastructure dependency were the patterns of dependent industrialisation and the formation of clientele social classes. The characteristics of the former included foreign domination of most dynamic sectors of industry, competitive advantage of foreign monopolistic corporations over local firms, and the introduction of advanced capital-intensive technology without regard to resulting unemployment. The clientele classes included the industrial bourgeoisie, the state bureaucracy and the middle class when their positions were tied to foreign interests. Thus, the infrastructure of dependency was the functional equivalent of a formal colonial apparatus though the system now rested on international capitalist institutions, rather than on particular colonial empires. (Dey 2015).

Since independence, a large section of producers, such as weavers and artisans, who for centuries have lived in villages and produced goods with local capital and indigenous technology to meet the basic needs of the millions of people, were kept outside the purview of the mainstream deliberations on national and comprador capital. Global imperialist capital unleashed coercive measures on these traditional producers to capture the market for their industrial goods. Most of these small producers (the Karigars) were either indigenous tribes or lower caste, which economically and socially lived at the 'periphery', in what would remain internal and regional colonies of the core. The comprador and crony bourgeoisie competed at the nation's core for control of the periphery and India as a whole.

None of these comprador crony and dot comprador (ITES firms those cater to foreign interests) possesses proprietary control on cutting edge technology. For example, the top three patent filers in the information technology (IT) industry in 2017-18 were Wipro (125) and Tata Consultancy Services (90), followed by the seven-year-old start-up Hike (66). During the financial year 2017, the number of patents filed by Tata Steel was 870. In the year 2018-19, RIL filed 49 patent applications to Indian patent office. Compared to this, as of September 8, 2018, Samsung Electronics has a total of 335,155 granted patents and 462,601 patent applications distributed into 336,266 patent families. In 2015 alone, the company had filed nearly 30,000 patent applications. In 2019 IBM inventors received a record 9,262 U.S. patents and IBM inventors from India received over 900 patents, the second-highest contributor to the global tally after the US.

The absence of patented technology has pushed Indian Inc to a 'screwdriver model' of manufacturing with the objective of assembling in India for the globe!

The 'development model' India has followed for the last seven decades has created an economy where 1 per cent of elites on the top, have four times the wealth of the lowest 70 per cent of citizens. Wealth at the bottom of the pyramid has been systematically siphoned off to the top. Unless some drastic measures are taken to correct this anomaly, the 'top heavy' structure of the economy is bound to crumble. The future of this country is safe in the hands of millions of small and unorganised national bourgeoisie. Instead of marginalising them further to the periphery, they should be patronised.

Views expressed are strictly personal

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