Governance, democracy and economic adjustment in India

Third World Quarterly, Vol. 17, No. 4, pp. 787± 807, 1996

Governance, democracy and economicadjustment in India: conceptual andempirical problems

BOB CURRIE

The past decade has marked an extension of the policy concerns of manyWestern development agencies and aid donors, with a more explicit recognitionthat democracy and good governmental practice represent an essential prerequi-site for development.1 As a consequence, the World Bank in particular hasbroadened the focus of its conditionality and policy advice to give greaterattention to the process of governance within a borrower country, alongside itstraditional concern with `sound economics’ , expressed in practice as neoliberaleconomic policy in which states interfere as little as possible with the operationsof the market. Good governance in the political and administrative sphere is seenas essential to make laissez-faire economic policies work, and vice versa.

The foundations of such a policy are not entirely new. Since their formationat the end of the Second World War, the Bretton Woods Institutions have longrecognised the crucial interrelationship between politics and economics in theirefforts to promote stability within the global order. A central aim of the BrettonWoods system at its creation in 1944 was to prevent a repeat of the economicinstability which occurred during the Great Depression of the 1930s. This wasfelt to be a product of economic nationalism, as governments used protectionismand trading blocs to advantage their own countries at the expense of theircompetitors. However, an additional aim was to prevent a repeat of two majorworld wars. It was therefore recognised that economic competition had widerpolitical and strategic implications; in its most brutal terms, it could lead tomilitary con¯ ict.

To address these concerns, the Bretton Woods system established a set ofrules and procedures designed to regulate the postwar global political economy.These were designed to promote interdependence through free trade and openinternational policy secured by international cooperation.2 Within this system theBretton Woods institutions were both rule-enforcers and facilitators of develop-ment. The IMF was in part a bank, charged with short-term lending to stabilisetemporary balance of payments problems and to restore economic equilibrium.However, as head of the Paris Club it was also the principal regulator ofinternational borrowing, policing lending from institutional and private creditorsand assessing the creditworthiness of borrower countries. The World Bank wasestablished to lend over longer periods and to monitor structural adjustment. It

Bob Currie is at the Department of Politics, University of Hudders® eld, Queensgate, Hudders® eld HD1 3DH,

UK.

0143-6597/96/040787-21 $6.00 Ó 1996 Third World Quarterly 787

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was also a development agency, charged with reconstruction and developmentin the postwar order and lending at concessional rates to developing countries.Responsibility for overseeing free trade within this system lay principally withthe General Agreement on Tariffs and Trade, and subsequently with theWorld Trade Organisation (WTO).

Good governance: the World Bank and the `new orthodoxy’

While the association between `good economics’ and `good politics’ has longbeen recognised under the Bretton Woods system, the prominence given togovernance within recent World Bank literature has produced a change in howthis in¯ uences the policy of the World Bank and the wider `WashingtonConsensus’ .3 Since 1945 the emphasis has been on interdependence; on howtheir policies promote economic and diplomatic cooperation between coun-tries.

Since the late 1980s this agenda has been overlain with an additional set ofconcerns, notably with policy formation and administration within countries.This shift has been justi® ed in the name of promoting pluralistic democracy,social justice and administrative accountability and ef® ciency.4 Speci® cally ithas derived from a belief that corrupt and unaccountable authoritarian govern-ments lack the necessary governmental and administrative infrastructure tosuccessfully implement the neoliberal development strategies widely advocatedby the international ® nancial institutions (IFIs).

The World Bank de® nes the term `governance’ as ` ¼ the manner in whichpower is exercised in the management of a country’ s economic and socialresources for development’ .5 However, there is ambiguity regarding the degreeto which the World Bank’ s terms of operation allow it to become involved inthe internal politics and administration of a borrower country. In the word andspirit of its articles of agreement it is stated that, ` the Bank and its of® cersshall not interfere in the political affairs of any member; nor shall they bein¯ uenced in their decisions by the political character of the member ormembers concerned’ .6

Forbidden from using explicitly political criteria in its lending operations,the Bank justi® es its right to advise on the process of policy formation andadministration in borrower countries in terms of ` good economics’ rather thanpolitical principles. It argues that control over the political and administrativeprocess is vital to safeguard the sustainability of programmes and projects thatit helps to ® nance. For sustainable development to occur, a predictable andtransparent framework of rules and institutions must exist to regulate andcoordinate the conduct of private and public business. The absence of such aframework may put at risk many of the goals that it is setting out to achievethrough its lending. Consequently, to ensure that its projects are successfuland that its funding is used effectively, the Bank deems governance of bor-rowing countries to be of direct relevance to its work.7

Since the direct aims and intentions of its governance agenda were estab-lished, the Bank has looked to enhance the ® nancial and informational supportgiven to borrower countries in order to strengthen the governance underpin-

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ning their development efforts.8 The crux of these initiatives has remained in anarea traditionally falling within the ambit of World Bank policy advice, notablyin the sphere of public sector management.9 This remains central to the Bank’ sconcerns since it is felt to have a central bearing on how power is exercisedwithin borrower countries.

However, under the governance agenda the Bank has also extended itsattentions into new spheres of support. These are grouped under the categoriesof accountability, transparency and rule of law. The intention in this policy shiftis twofold. First, it aims to promote more determined efforts to foster localownership of reform programmes. Second, it aims to encourage strong institu-tions of civil society that will press for greater accountability from governmentsin the economic sphere.10

Central to the governance agenda is therefore an interlocking set of disci-plinary procedures which regulates both state and civil society. Williamssuggests that the World Bank oversees the activities of both state and civilsociety, and sets out to ensure good practice in both spheres.11 Within therequired liberal democratic framework, state and civil society also regulate eachother.12 Civil society exercises discipline over the state. A state which fails torespect human rights, and to administer effective policy to promote economicand social development, will be voted out of power within a pluralistic electoraldemocracy.13 Freedom of information and a free active press ensure that thepublic is kept informed of government practice and performance in this regard.Second, under the rule of law a government with a democratic mandate isempowered to regulate and exercise discipline over civil society. It is able todraw on controls laid down within a codi® ed legal framework to protectindividual rights, to secure law and order and honesty in economic activities andto safeguard other democratic principles.

The World Bank’ s concern with governance therefore emanates from thebelief that accountability of government, through the checks and balancesavailable under a liberal democratic system, will ensure that state activity meetsthe needs and expectations of society.14 Such a system attempts to ensure that wehave the ` right kind of state’ and the ` right kind of society’ ; or perhaps moreaccurately to encourage a state and society that `do the right things’ accordingto the neoliberal agenda.15 In practical terms, this loosely translates into a stateand society that practice probity and ef® ciency in the management of politicsand economics.

Importantly, alongside the role played by the World Bank as rule enforcer ordisciplinarian, it is required to ful® l a crucial role as ` facilitator’ and promoterof development. The Bank is charged not only with supervising the operation of` good governance’ within a client country, but also with an enabling role inestablishing the conditions for this to take place. This role as multilateral agencyand policy advisor derives from its founding principles established at its creationat Bretton Woods in 1944.

The remainder of this paper will explore the relationship between democracyand economic development in India and examine how this dual role, as` supervisor’ and ` facilitator’ of good governance, is applied in practice duringthe recent programme of structural adjustment.

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The context of India’ s liberalisation: `early’ democratisation and recenteconomic adjustment

India is comparatively rare among developing countries in having maintained along tradition of liberal political democracy, with only brief interruption, sinceindependence. Heralded, rightly or wrongly, as the `world’ s largest democracy’ ,it is noteworthy that many of the central features of the governance agenda havebeen in place for much of this period since 1947. These democratic institutionsand processes have developed not as the result of external pressures imposedunder structural adjustment, but have evolved gradually under the in¯ uence of abroad mix of internal and external political forces over a period of centuries.

In contrast, economic liberalisation in India has been a recent process.Introduced since the early 1980s, this marked a response to the failure of India’ sdevelopment strategy to ful® l its declared aim at independence of promotingeconomic growth with equity and justice. Indeed, with the exception of theinitial decade after the introduction of the planning system, when annual GDP

growth exceeded 7%, India has failed to compete economically with many othernewly industrialising countries, particularly in East Asia. By the late 1970s, GDP

growth had fallen to less than 3%pa.16 With external debt escalating during the1980s and international con® dence undermined by the pressures of debt serviceand a persistent trade de® cit, by 1991 India faced economic crisis. The currentprogramme of structural adjustment was introduced alongside a stabilisationpackage by the Narasimha Rao government on taking of® ce in June 1991 in anattempt to address this crisis. India’ s experience is therefore one of `early’democratisation but restricted economic development and ` late’ economic liber-alisation in LDC terms.17

Sequencing and pace of democratisation

These issues raise important questions about the relative pace and sequencing ofpolitical and economic liberalisation. The World Bank’ s governance ideologysuggests that political democracy is not only compatible with economic growthand equity, but that the two are mutually reinforcing. Liberal political democracyis necessary for a healthy laissez faire economy, with the obverse also true.

Sub-Saharan Africa formed the initial focus of World Bank investigations intothe relationship between `good government’ and economic adjustment.18 In anumber of states economic failures were attributed to authoritarian rule orweaknesses in the democratic process.19 In Benin, the Bank suspended disburse-ments of structural adjustment loans until the government had demonstrated the` consent of the people’ to continue its reform programmes. In 1990 it exertedpressure on the governments of Kenya and Malawi to initiate political reformsdesigned to establish a ` broader political consensus’ through improved publicaccountability and transparency.20 Economic failures and weak governance havebeen closely linked with lawlessness and factional con¯ ict in Somalia andLiberia, and with war and external destabilisation in southern Africa (egMozambique, Angola). Democratisation in Africa has in many cases therefore

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ECONOMIC ADJUSTMENT IN INDIA

taken place in parallel with or subsequent to economic liberalisation, oftenprompted by external pressure from the IFIs.

Contrasting experiences are also provided by states in Paci® c Asia that haveundergone rapid economic development in recent decades. Thompson notes thatin South Korea, Taiwan and Thailand democratisation was `delayed’ until afterconditions for economic growth were well established. A democratisationmovement in South Korea was suppressed by the military after General Park’ sassassination in 1979. In Taiwan, opposition parties were heavily controlled untilpolitical liberalisation was cautiously initiated in 1987.21 These examples appearto lend little direct support to World Bank arguments that economic developmentis necessarily impaired by authoritarian rule and weak democracy. Selective,covert state intervention in the economy and controls on civil society, particu-larly labour organisations and opposition parties, were important factors inestablishing the conditions for sustainable export-led development in thesestates.22

In South America there have similarly been few instances of uninterrupteddemocracy since 1945. The early 1980s has marked the beginnings of demo-cratic reconsolidation in a number of countries, often in parallel with a period ofeconomic liberalisation. Chile has been widely forwarded by the IFIs as anexample of the economic advances possible through a neoliberal economicstrategy. However, like the authoritarian developmental states in East Asiamentioned above, this again appears to be a case where a strong and repressivestate apparatus has maintained tight controls over society while implementingaustere components of its economic reform programme. Indeed Philip questionswhether measures of the kind adopted in Chile by the Pinochet governmentduring 1982±84 would have been possible under democratic rule.23

India’ s `early’ and gradual democratisation, and its experience of implement-ing economic adjustment under civilian rule and multiparty electoral democracy,therefore contrasts strongly with the cases cited above. The character of India’ sliberal democracy, and its apparent resilience relative to these comparativeexamples, needs to be explained in terms of a number of factors that havein¯ uenced its historical development. This is done more fully in the next section.

Process of democratic consolidation in India

The evolution of pluralistic democracy in India has been a gradual processshaped by a wide range of internal and external forces. A number may be clearlyidenti® ed. First, India’ s liberal democracy draws heavily on the political andsocial order preceding British rule. Ties of caste, religion and tribe provided aninformal division of labour and social hierarchyÐand hence an uncodi® edsystem of sanctions and regulationsÐfor many centuries before the arrival ofthe East India Company.24 These, arguably, contributed to social stability inpre-colonial India. They also provided bases for political mobilisation that haveendured after independence. In addition, the political and administrative systemin place under Mugal rule was widely co-opted into the system subsequentlymaintained by the British. One third of India’ s territory remained, for politicaland logistical reasons, under princely rule until independence.

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India’ s parliamentary democracy was inevitably also shaped by British col-onial rule. Faced with the challenge of managing a huge geographical area witha small number of personnel, the colonial government established an adminis-trative service heavily staffed by Indians. The modern bureaucracy, centredaround the Indian Administrative Service and State Administrative Services, wascreated out of this system. The structure of India’ s Westminster-style parliamentdraws heavily on the model laid down in the 1935 Government of India Act;while decentralisation under the 1909 Morley±Minto Act and the 1919 MontaguChelmsford reforms established the conditions for regional government, andproduced a class of Indian politicians with experience of liberal electoraldemocracy,25 albeit selected by restricted electorates.26

Further, liberal democratic politics after 1947 was in¯ uenced by the indepen-dence struggle and the tactics of the Indian nationalist movement. This wassigni® cant in a number of ways: it provided a political cadre that was to occupykey positions in the Constituent Assembly and post-colonial government; itbestowed a particular legitimacy to the Indian National Congress that was centralto its electoral success as the Congress Party after independence; it shaped theideological principles that were to underpin India’ s development policy, based inNehruvian socialism and a Gandhian political philosophy that represented botha reaction against colonial rule and a critique of modern (`Western’ )civilisationand its pernicious in¯ uence on Indian society;27 and it created a partiallypoliticised civil society, drawn into politics through the broadly inclusivecharacter of the nationalist movement and its efforts to transcend gender, caste,religion and ethnic divisions through its campaigns after 1915.28

A ® rst key point is therefore that democratic consolidation in India has beena gradual and extended process, during which it was shaped by a wide range ofpolitical cultures. In contrast, democratisation (or ` re-democratisation’ ) in EastAsia, sub-Saharan Africa and Latin America has often been a more recent anda much more rapid process, lacking the range of cosmopolitan in¯ uences evidentin the Indian case during the period of transition and consolidation.

Second, the Indian political union has managed to withstand pressures thathave provided a major constraint on democracy in other regions. In sub-SaharanAfrica ethnic divisions have been forwarded as a key reason why democracy hasbeen late to develop in many states. This factor also contributed to thedisintegration of the erstwhile Soviet Union.

Comparative studies have suggested that for democracy to be successful as asystem of government, there is a requirement for popular consent in conditionsof free expression and association. If people cannot consent to go on livingtogether, then the only alternative to secession or civil war would appear to bethe imposition of some form of authoritarian rule.29 In India, however, it wouldappear that this consent is at times only weakly established. A wide literature hasidenti® ed strong cleavages within civil society, based on ethnicity, religion, casteand language, that have threatened to tear the Union apart on numerousoccasions.30

Several factors are vital to explaining this apparent ` resilience’ in the Indiancase. First, there has generally remained a high degree of consensus in supportof the principle that political power should be exercised with consent and on

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behalf of the people, with accountability of rulers to the governed.31 With theexception of a number of sub-nationalist movements and revolutionary commu-nist movements, the majority of interest group demands have pressed for greatercontrol of power and resources within the existing federal parliamentary democ-racy, rather than a replacement of it.

Second, an association with the Indian nation has generally coexistedalongside strongly developed regional identities (Bengali, Oriya, Punjabi, Tamil,etc) and associations based on caste, tribe, religion, class and gender. Whilemany societies divided by clearly de® ned and historically antagonistic culturalgroups have experienced dif® culty in sustaining democracy,32 in India a sense of` Indianness’ ,and a commitment to the Indian Union, has prevailed next to a wellestablished consciousness of being, for example, an Oriya, an Adivasi, or aMuslim. The survival of the current federal democratic structure is dependentupon the endurance of this factor in the face of rising communal and separatistpressures.

Third, Indian democracy has held a high degree of international legitimacyand India has experienced few attempts from external forces to destabilise itspolitical system. Nehru’ s respected international status and leading role in theNon-Aligned Movement enabled him to establish solid working links with bothsuperpowers, and with leaders of many developing countries. Subsequent PrimeMinisters have been able to maintain these working relationships after Nehru’ sdeath,33 despite their coming under challenge at various times because of therespective positions taken by the USA and the USSR during India’ s regionaldisputes, especially with Pakistan and China. Tensions within the subcontinent,particularly with Pakistan, have threatened border stability, but without substan-tially threatening India internally. This therefore contrasts with experiences, forexample, in Southern Africa (eg Angola, Mozambique), the Horn of Africa (egEthiopia), Central and Latin America (eg El Salvador, Guatemala, Allende’ sChile) where destabilisation and external involvement have constrained possibil-ities for democratic consolidation.

India’ s Developmental Model: the `Nehru± Mahalanobis’ model of plannedmixed economy

India’ s development model since independence has been founded upon a systemof indicative plans within a mixed economic structure in which both privatecapital and a state-owned public sector have played a key role. A major objectiveof this strategy, heavily shaped by Nehru’ s Planning Minister, P C Mahalanobis,was to `promote rapid and balanced economic growth with equity and justice’ .34

This commitment to social welfare within a self-reliant pattern of developmentowed its roots to two key factors. First, it represented an attempt to break fromIndia’ s reliance on exports of primary commodities and simple manufactures(especially textiles and foodstuffs) to generate income and foreign exchange; andon imports to provide modern capital goods and the technology required tobecome a globally competitive industrial power. Hence it was an attempt toescape from the pattern of dependency inherited at independence and to establishinternationally competitive industrial production for domestic and global

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markets. Second, it was founded on a political and economic culture dating frombefore 1947. This drew on principles such as swadeshi (` self-reliance’ )that werecentral to the strategy of the nationalist movement in its struggle for indepen-dence.

While according a key role to the state in economic development, India’ splanned mixed economy did not imply an opposition to capitalism.35 Thesubstantial public sector was designed to complement and support privateenterprise, rather than to displace it. Indian industrialists and business classesappeared prepared to invest in sectors which offered quick and safe pro® ts, butwere often unwilling to take on long-term investments with the possibility of lowreturns. State intervention was therefore essential in this context to compensatefor limited economic initiatives coming from within civil society.36

Speci® c areas were also reserved for production by `small-scale industries’ .The rationale for this policy was partly economic, since the labour-intensivenature of these industries (handicrafts, earthenware, etc) appeared to offerpotential for employment generation, and encouraged the development of newentrepreneurs. However, this policy also had an ideological foundation, derivingfrom the particular importance attributed to small-scale industries in Gandhianthought.

Central government also regulated the economy through a range of otherimportant provisions. Entrepreneurs were required under the licensing system toobtain government permission to enter into a broad range of economic activities.This enabled the government to tightly regulate imports, investment in newprojects and efforts to expand into new product lines.37 The government alsomaintained tight controls over company takeovers and concentration of capitalwithin the private sector. Through the Monopolies and Restrictive Practices Act(MTRP) of 1969, upper limits were set on the total capital which could bepossessed by any company. In addition, the Foreign Equity Regulation Act(FERA) of 1973 placed strict controls on the operation of foreign companies in theIndian economy. For regulatory purposes all Indian companies with more than40% direct foreign equity were required to register under FERA. The activities offoreign companies were restricted, particularly in banking, insurance and theextractive industries.

The state has therefore played a key role in regulating both politics andeconomy in India. It has attempted to coordinate production for domestic andoverseas markets and to secure commitment to political principles based onselective mix of liberal and social democracy. These aims are clearly identi® edin the prelude to the constitution which commits India, as a `Sovereign SocialistDemocratic Republic’ , to secure to all citizens:

Justice, social economic and political; Liberty of thought, expression, belief, faithand worship; Equality of status and opportunity; and to promote among them allFraternity, assuring the dignity of the individual and the unity of the Nation.38

Stabilisation and structural adjustment in India

India’ s programme of stabilisation and structural adjustment was introduced bythe Narasimha Rao government principally in reponse to liquidity crisis faced on

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taking of® ce in June 1991. This was precipitated by two key factors. First,outbreak of the Gulf war caused world oil prices to double within a six weekperiod. This increased the burden of oil imports on India’ s foreign exchangereserves. Second, loss of international con® dence in the Indian economy led toan out¯ ow of overseas funds held in India, particularly from non-residentIndians who withdrew a total US$1.3 billion NRI deposits between October 1990and April 1991.39 It also led to the suspension of commercial lending. Thesefactors caused India’ s foreign exchange reserves to fall to an all-time low,barely suf® cient to meet two weeks’ imports. India faced the possibility for the® rst time of having to default on debt service obligations (by then 27% ofGDP

40), thereby endangering its ability to attract future credit from overseaslenders.

Although the 1991 payments crisis can be partially attributed to a speculativewithdrawal of funds during the preceding months, its roots must be explainedover a longer time period. The con® dence of international and domesticinvestors was limited by economic stagnation in India since the mid-1960s.Consequently the government experienced pressures from business to reduceregulation of private sector activity, to reform the public sector and to providegreater opportunities for foreign participation and collaboration. Internationalcon® dence was also dented by the confrontational approach to transnationalcorporations taken by George Fernandez, Minister for Industry under the1977±80 Janata government. Restrictions imposed on TNC activities during thisperiod caused key overseas companies, including Coca Cola and IBM, tosuspend their operations in India.

Economic reforms introduced during the 1980s precipitated further economicinstability. Facing a persistent trade de® cit on re-election to of® ce in 1980,Indira Gandhi was forced to approach the IMF for a SDR ® ve billion (aboutUS$3.6 billion) loan to meet this immediate ® nancial shortfall. In accordancewith IMF policy advice, she implemented a stabilisation package which relaxedimport controls and removed licensing restrictions in 20 key industries.41

The momentum established through these reforms was extended by RajivGandhi after taking of® ce in 1984. Under his New Economic Policy, introducedin 1985, he planned to shift India onto a `new economic growth path’ througha programme of private sector-led growth, with reduced public sector involve-ment in all but strategic areas such as defence. This was accompanied by aneasing of FERA restrictions on equity participation of foreign ® rms in export-oriented collaboration agreements with Indian business. This formed part of awider package of measures to encourage foreign capital and foreign partici-pation, as the ` panacea’ for India’ s economic dif® culties.42

In performance terms, this strategy failed to trigger the planned upturn ineconomic growth. Under the liberalised import/export regime, growth of im-ports continued to outpace exports. The resulting trade shortfall was ® nancedprimarily by de® cit ® nance. Consequently, India’ s external debt escalated froma relatively modest $20 billion in the early 1980s to reach $70 billion by theend of the decade, leaving India the world’ s fourth most indebted developingcountry. The increased size of debt was exacerbated by a sharp fall in thepercentage of disbursements at concessional rates and a reduction in the average

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TABLE 1Annual growth rates in major sectors of industry (%)

Sectors Weights 1990± 91 1991± 92 1992± 93 1993± 94 1994± 95

Manufacturing (77.11) 9.0 2 0.8 2.2 6.1 9.7

Mining and quarrying (11.46) 4.5 0.6 0.5 3.5 7.3

Electricity (11.43) 7.8 8.5 5.0 7.4 8.5

General (100) 8.2 0.6 2.3 6.0 9.3

Basic goods (39.4) 3.8 6.2 2.6 9.4 5.3

Capital goods (16.4) 17.4 2 12.8 2 0.1 2 4.1 24.9

Intermediate goods (20.5) 6.1 2 0.7 5.3 11.7 3.7

Consumer goods (23.6) 10.4 2 1.8 1.9 4.0 8.7

Durables (2.6) 14.8 2 12.5 2 0.7 16.1 10.2

Non-durables (21.0) 9.4 1.2 2.5 1.3 8.4

Source: Government of India, Economic Survey 1995± 96: an Update.

maturity of loans, leading to a sharpening of India’ s debt service obligations intothe 1990s.43

Performance of stabilisation and structural adjustment

It is not the intention of this paper to provide full details of the performance ofthe Indian economy under stabilisation and structural adjustment.44 However, anumber of key trends may be identi® ed. First, the stabilisation package imple-mented by the Narasimha Rao government on taking of® ce in June 1991 provedto be relatively effective in negotiating the immediate liquidity crisis and inconsolidating foreign exchange reserves. Through an 18% devaluation of therupee, and short-term loans from London and Switzerland,45 Finance Minister DrManmohan Singh restored international con® dence suf® ciently to reverse theout¯ ow of NRI deposits and re-establish commercial lending to India. Thesemeasures were introduced in parallel with a low conditionality $4.8 billion loanfrom the IMF under standby arrangements.46

Given the longer-term orientation of the SAP, the performance of this pro-gramme is at this stage harder to evaluate, particularly given the defeat of theNarasimha Rao Congress (I) government in the April 1996 Lok Sabha elec-tions.47 The broad focus of the SAP at its introduction was to limit stateownership and control of economic assets and activities; promote exports andunrestricted access to foreign goods, services, investment and technology; andremove state subsidies on food and mass consumption goods, along with publicservices such as transport, education and health (see Table 1).

On the positive side, tentative signs of economic improvement have been inevidence according to a number of indicators. Industrial growth has shown asigni® cant upturn since 1993±94, following two years of limited growth afterintroduction of the reform programme. Annual GDP growth has also slowlyincreased, to reach nearly 6% in 1995±96.48 However, on the downside, thesereforms have failed signi® cantly to curb India’ s long-standing trade de® cit, aproblem that fuelled the huge escalation in external borrowing during the 1980s

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TABLE 2India’ s foreign trade 1990± 1996

Foreign trade 1990± 91 1991± 92 1992± 93 1993± 94 1994± 95 1995± 96

(up to Mar. 96)

Exports (US$ million) 18143 18366 18537 22173 26233 25487

Imports (U$ million) 24073 19411 21882 23212 28251 29544

Balance of Trade (US$ mn) 2 10640 2 3809 2 9687 2 3259 2 2018 2 4057

Annual growth of exports (%) 9.1 2 1.5 3.8 20.4 18.3 22.1

Annual growth of imports (%) 13.2 2 19.4 12.7 6.8 21.7 30.1

Source: EPW Research Foundation.

(see Table 2). With India’ s external debt reaching $93.84 billion by September1995, representing 29.4% of GDP,49 the burden of debt service has limited ® nanceavailable to the government for development purposes. In its 1995 CountryEconomic Memorandum the World Bank also expressed concern about thegovernment’ s failure to keep up with its commitments to reducing its ® scalde® cit.50

Several other factors also raise potential questions about India’ s capacity forpromoting sustained export-led growth. First, rates of domestic savings andinwardly-directed foreign direct investment remain low compared with a numberof India’ s competitors, particularly in Paci® c Asia.51 Overseas investment com-ing into India has been dominated by volatile portfolio investment, whichsigni® cantly outpaced foreign direct investment (FDI) during the initial years ofthe adjustment programme.52 While net portfolio investment by foreign institu-tional investors reached an all time high ($435 million) in February 1996,increased volatility of capital ¯ ows in LDC equity markets in the aftermath of theMexican ® nancial crisis has fuelled concerns that this investment may shift toother ® nancial markets if higher returns can be made elsewhere. Describing suchinvestors as ` fair weather friends’ , the governor of the Reserve Bank of Indiareportedly asked the government to consider a tax on such FII in¯ ows.53

Second, the government’ s easing of restrictions on foreign participation hasallowed overseas transnationals to establish majority shareholdings in a numberof sizeable Indian companies. This has generated concerns about dilution ofindigenous ownership and loss of Indian control within the domestic economy.Further monitoring over a longer timescale will be necessary to establishwhether these collaborations will produce the desired spin-off bene® ts for IndiancompaniesÐ in terms of technology transfer and access to global marketingnetworksÐthat may compensate for this factor.

One of the most tangible implications of structural adjustment at the locallevel has been the increase in prices that has accompanied removal of subsidiesand curbs on government spending. Despite high buffer stock levels, prices offoodgrains and pulses have increased by more than 60% since 1991, with thewholesale price index having risen by a comparable level during this period (seeTable 3).54

In terms of its implications for democracy, economic liberalisation in India

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TABLE 3Cost of living and wholesale prices: percentage annual increase

Annual variation (%)

1991± 92 1992± 93 1993± 94 1994± 95 1995± 96

Cost of living indices

Industrial workers 13.9 6.1 9.9 9.7 9.5

Urban non-manual labour 13.6 6.8 8.3 9.9 9.7

Agricultural labour 21.9 0.7 11.6 10.6 11.2

Wholesale prices

All commodities 13.6 7.0 10.8 10.4 11.8

Primary articles 15.3 3.0 11.5 12.7 15.7

Food articles 20.9 5.4 4.4 11.9 13.3

Non-food articles 8.1 2 1.4 24.9 15.5 22.7

Manufactured products 12.6 7.9 9.9 10.7 11.8

Food products 10.2 6.8 12.3 8.1 11.1

Source: EPW Research Foundation/

has therefore had an ambivalent effect. On the one hand, delicensing has givenIndian entrepreneurs greater autonomy from the state and has reduced opportu-nities for corruption and rent-seeking created by the permit system. Economicreform has therefore created a ` leaner’ state with less personalised economicrelations and a more autonomous civil society,55 less obligated to state personnelto provide the necessary permission to engage in economic activity. On the otherhand, removal of subsidies has reduced coverage provided by the state welfaresystem and eroded the purchasing power of the poor through rises in the cost ofessential commodities. It has therefore compromised standards of social welfarein India, a central component of the World Bank’ s ` good governance’ agenda.

For this reason the reform programme has been strongly opposed in India bysome groups. These have included trade unions fearing job losses throughrationalisation of the public sector; poorer sections adversely affected by cuts insubsidies and social expenditure; and politicians, from Congress (I) and oppo-sition parties, opposed to the reforms on the grounds that they have diluted thecommitment to equity and social justice that has underpinned India’ s develop-ment strategy since independence.

In an attempt to counter these criticisms, and to minimise loss of electoralsupport, the Narasimha Rao government highlighted the external pressures thatit faced from the IFIs to implement policy reforms. In doing so it responded tolong-standing pressures from Indian entrepreneurs (especially those excludedfrom the bene® ts of the licence system and patronage networks) and higher-income sections (hoping to bene® t from tax reductions and better access toimported goods) to liberalise the economy in order to provide a more openeconomic environment and greater consumer choice. This government thereforeused the SAP as a tool to roll back the regulatory framework and to usher throughunpopular aspects of its reform programme.56

Signi® cantly there appeared to be little substantial retreat from liberalisationin the approach to the April 1996 Lok Sabha elections of the form witnessed

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from the unpopular and discredited Rajiv Gandhi government during the 1989campaign. However, rising living costs, decay of infrastructure and socialservices, and the absence of visible signs of economic improvement at the locallevel, appear to have been important factors in shaping the public’ s decision notto renew the Congress (I) majority at the polls.

Governance, structural adjustment and the Washington Consensus: `super-visory’ and ` facilitating’ role?

Examined in terms of the governance agenda outlined earlier in this paper, it isnoteworthy that there has been minimal direct conditionality-linked pressure onIndia to reform its political and administrative structure in order to improvestandards of political and economic governance. Given the much publicisedrespect accorded to India’ s long tradition of parliamentary democracy, this maybe unsurprising.

Indeed, with the exception of a brief suspension of democratic functioningduring the 1975±77 Emergency period, India has maintained a pluralistic polityand periodic elections throughout the period since independence. There is littlerestriction on membership of political parties or right to stand for election.India’ s main communist parties, the CPI and the CPM, have both held seats inregional government in recent decades, with Jyoti Basu’ s CPM-led Left Frontgovernment having held power in West Bengal since 1977. India’ s federalsystem provides considerable autonomy to state governments, with democraticdecentralisation of political power extended at district, block and village levelwith the progressive introduction of the panchayati raj structure since 1989.57

India also compares favourably with many developed and developing coun-tries in meeting the Bank’ s requirements for social justice.58 A free and activepress, publishing in English and in the vernacular, performs an importantadversarial role in keeping the public informed of government activity anddrawing attention to instances where it steps outside its mandate or neglects itsresponsibilities to society. India is signi® cant in providing channels, throughpublic interest litigation, by which members of the public can initiate legal actionagainst the government for ineffective policy or unlawful activity.59 It is perhapsless institutional failure, and more low levels of literacy and political awarenessin some regions that has represented a principal constraint on the level ofdiscipline exercised by civil society over the state.60

Clearly, according to a number of criteria, `good governance’ in India is wellestablished and has been for much of the period since independence. However,this is far from being the case in all spheres. An important exception comes inthe area of public sector management. The World Bank’ s concern with `predict-able, open and enlightened policy making’ (ie transparency) has hinged onimproving standards of accountability in public administration. For public policyto be effectively implemented, it has argued that the existence of a bureaucracyimbued with a professional ethos is an essential condition.61 This requisite isonly partially ful® lled in India.

Most obviously, shortfalls in this sector are demonstrated in terms of lack ofaccountable administration of public funds. Accountability, simply de® ned,

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concerns the process of ` holding public of® cials responsible for their actions’ .62

In India the politician±bureaucrat±private contractor nexus that is central to theadministration of government programmes at local level (including public works,public distribution system management and construction projects such as roadsand dams) is characterised by major inef® ciencies and widespread corruption.This trend prevails up the decentralised administrative chain from local to centrallevel. Procedures for overseeing the effective use of public resources havelargely failed to highlight and address these shortfalls.63

At the central level, allegations of inef® ciency and corruption have featuredregularly in government debates and press reports during the period of economicliberalisation. The Bofors,64 Reliance65 and HDW

66 scandals, dating from theperiod of Rajiv Gandhi’ s New Economic Policy, remain the subject of publicinvestigation. Inquiries also continue into the multi-billion rupee Bombay StockExchange securities scandal, concerning offences which allegedly include theillegal withdrawal of Rs 965 crore ($300 million) from public sector banks bystockbroker Hershad Mehta. The defendant has maintained that an illegal Rs1crore ($300 000) payment was made to Prime Minister Narasimha Rao duringthe course of this fraud.67 At state and district level inef® ciencies and corruptionin the administration of government projects are also documented.68

The World Bank and IMF have lent broad support to the government’ s effortsduring the structural adjustment period to roll back the state sector and regula-tory framework through delicensing, selective privatisation and removal ofrestrictions on monopolies, trade and foreign participation.69 The Bank hasimposed direct conditions on its lending for ® nancial sector reform, making its$500 million loan conditional on privatisation of the State Bank of India andanother nationalised bank. Government reforms in the ® nancial sector havecentred on privatisation and efforts to subject public sector banks to increasedcompetition from private and foreign banks.70 Lesser attention has been directedto the internal functioning of the existing commercial and cooperative bankingstructure, and attempts to revamp its outdated systems and procedures. Greaterfreedom for the operation of market forces appears to underpin governmentplans to make the ® nancial sector operate more ef® ciently.71

The World Bank has therefore been selective in applying pressure, in its` supervisory’ capacity, to force the government to address shortfalls in account-ability and transparency in the name of promoting `good governance’ . It has alsobeen selective in its ` facilitating’ role in supplying project ® nance to manage thepublic sector more effectively. During 1995, World Bank lending in this sectortotalled $66.9 million to Europe and Central Europe, $1096 million to LatinAmerica, $438 million to East Asia and the Paci® c and $104.3 million tosub-Saharan Africa.72 However, no South Asian country received funding in thisarea. In spite of this fact, shortfalls in public sector management remain a majorconstraint on sustainable economic development in South Asia.

In other areas more overt pressures have been applied from Washington toencourage policy shifts by the Indian government. One obvious example lies inWorld Bank efforts to force the Indian government to adjust its policies onenvironment and on resettlement and rehabilitation. This ultimately led to theremoval of Bank funding for the Sarvar Sarovar project (SSP), designed to

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provide irrigation water from the Narmada river for the states of Maharashtra,Gujarat and Rajasthan in western India.

Since its commencement in 1985, this project has been the target of regularprotest action from groups concerned by its environmental implications and thegovernment’ s failure to make adequate provisions for oustees. The NarmadaBachao Andolan (` Struggle to Save the Narmada’ ) has been at the heart of thisagitation which has included a highly publicised hunger strike by its leaderMedha Patkar.73

In response to these public protests, and its own concerns that state govern-ments were failing to meet its criteria for funding, the World Bank commis-sioned an independent review of the SSP in 1991. This commission, led byBradford Morse, former head of the United Nations Development Programme,concluded that the government had failed to conduct adequate preliminaryassessments of the social and environmental impact of the project, and had failedto meet its speci® cations to compensate the 200 000 persons who would berelocated after submergence. The Morse Report ultimately argued that the Bankshould withdraw its funding. Unsatis® ed by the Indian government’ s efforts toful® l new conditions required to qualify for a further $181.5 million loan, theWorld Bank ceased ® nancial support for this project in 1993. Recently the AsianDevelopment Bank has also declared that it will `monitor very closely’ itsproposed $570 million loan to the Gujarat state government to ensure that noneof this money is used for the Narmada project.74

A second major area in which disciplinary pressures have been exerted onIndia from the Washington Consensus has come in the sphere of trade. Despiteongoing economic liberalisation during the 1980s, the US government in 1989named India, along with seven other countries, under sub-section Special 301 ofits 1974 Trade Act for allegedly failing to provide adequate protection to USpatents. US trade representative Michael Kantor identi® ed India as beingparticularly unsatisfactory in the area of pharmaceuticals and chemicals. The USgovernment also named India, along with Brazil and Japan, under the morefar-reaching Super 301 provisions for allegedly imposing unfair restrictions onthe entry of US capital, especially in its nationalised insurance sector.75

The US government dropped its threats of retaliatory action under Super 301in 1991 with recognition that India had made substantial progress in ® nancialsector reform. However, disputes over intellectual property rights have contin-ued. India was moved from the `watch list’ under Special 301 to the ` prioritylist’ in 1991.76 In 1992 it was punished for lack of progress made in extendingpatent protection, when the USA removed Indian pharmaceuticals exports fromthe list of products covered under the Generalised System of Preferences. AsIndia’ s major trading partner (receiving 19.8% of total Indian exports andsupplying 9.5% of its total imports in 199477), bilateral action by the USgovernment has costly implications for the Indian economy.

India has experienced further pressures to implement reforms in the areas oftrade and intellectual property rights under the TRIMS and TRIPS provisions of theUruguay Round of GATT. US proposals in 1986 to extend GATT coverage toinclude intellectual property protection and services were opposed by 10 coun-tries, including India. After the break-up of the 1990 GATT talks, concessions

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given to developing countries within the GATT negotiating process were with-drawn under the much publicised Dunkel Drafts, laid down in December 1991by GATT Director-General Arthur Dunkel.

This move was widely seen by these countries as an attempt to force them toaccept the outstanding sections of the Uruguay Round provisions. In the Indiancase, proposed reforms in the area of Trade Related Intellectual Property Rights(TRIPS) required changes to Indian patent rules established under the 1970 IndianPatent Act. These amendments potentially allowed transnational companies totake out patents on products previously excluded from patent cover in India.Their impact was particularly feared in the agricultural and pharmaceuticalsectors. Like Super 301, reforms under Trade Related Investment Measures(TRIMS) provisions required India to extend freedom of access for foreigncompanies within its domestic economy, particularly in the insurance sector.Reforms by the government of India are in progress in this sphere.78

Conclusion

T h e W o r ld B a n k a n d th e IMF h a v e p e r fo rm e d a c o n s u l ta tiv e a n d s u p e rv i s o ryr o le in o v e rs e e in g th e im p le m e n ta t io n o f s tr u c tu r a l a d ju s tm e n t a n d s ta b il i s a t io nin In d ia d u r in g th e 1 9 9 0 s . D i r e c t p re s s u re h a s b e e n a p p l ie d o n ly s e le c tiv e ly o nth e I n d ia n g o v e rn m e n t to im p ro v e i ts s ta n d a rd s o f p o l i ti c a l a n d e c o n o m icg o v e r n a n c e . A m o r e o v e r t ly ` d i s c ip l in a r y ’ ro le h a s b e e n e x e rc i s e d f ro m W a s h -in g to n in o th e r s e c to r s , n o ta b ly in e n v i ro n m e n ta l a n d re s e t t le m e n t p o lic y b y th eW o r ld B a n k , a n d in t ra d e a n d in te ll e c tu a l p ro p e r ty b y th e U S g o v e rn m e n t a n dth e WTO.

A number of factors are signi® cant in explaining this situation. First, theneoliberal agenda of the Washington Consensus was enthusiastically imple-mented by Finance Minister Manmohan Singh in the economic sphere. HenceIndia was already seen to be meeting many of the Bank’ s demands under the SAP

and required little additional coercion to introduce desired reforms.Second, the World Bank has less leverage over India through its conditionality

than it has in many other countries, especially in sub-Saharan Africa. Despitehigh levels of existing external debt, India is currently not heavily dependent onthe World Bank for additional funds. Net transfers from the Bank to India havebeen low during the last decade. During 1995 there was actually a net out¯ owof $183 million from India to the Bank. During the 1990±95 period, Indiareceived $11 851 million in new disbursements. This only marginally exceededthe $4632 million in repayments, and $4737 million in interest and charges, paidout to this institution.79 Similarly, the Government of India estimates a netout¯ ow of $2856 million to the IMF for the 1994±96 period.80

Third, the governance agenda is applied in a partial and ad hoc manner. Inpractice the electoral process and a multiparty system appear to remain thede® ning feature of ` good governance’ , along with the existence of freedoms ofassociation and speech needed to make them effective. If these are already inplace, a government appears unlikely to experience substantial additionalpressure to address broader elements of the governance agenda (eg transparency,administrative accountability). India’ s long tradition of liberal parliamentary

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democracy appears to be suf® cient to satisfy the World Bank in this regard.It has not been possible to establish a clear causal relationship between

democratic good governance and economic development on the basis of thisstudy. While democracy remains an important end in its own right, 50 years ofelectoral multiparty democracy in India have failed to guarantee good gover-nance in the economic sphere. Clearly rapid economic development has beenachieved in some countries without democracy. In South Korea and Taiwan,authoritarian states established sustained economic growth, and a substantial risein living standards, well before political liberalisation.81 The economic successof these developmental states was built upon a base of relatively successful landreform, low inequality in income and asset ownership, and major improvementsin standards of literacy, health care and welfare conditions. Despite the rhetoricat independence, and the pioneering aims of the Indian constitution with regardto equity and social justice, India’ s liberal parliamentary democracy has failed todeliver comparable improvements in social welfare, poverty alleviation oreconomic growth.82

This relationship remains dif® cult to analyse empirically. Economic develop-ment is dependent upon a wide range of explanatory variables, and the in¯ uenceof political democratisation is dif® cult to isolate. This is compounded bydif® culties in choosing suitable criteria as measures of democracy and economicdevelopment. In India it seems quite probable that political democracy has beenconducive to economic development, but that its positive effect has been maskedor neutralised by economic constraints such as excessive bureaucratic restrictionson production and trade, a large and inef® cient public sector, and an undynamicprivate sector that has failed to innovate and to expand production for export anddomestic mass markets.

This issue raises a ® nal concern about the concept of `good governance’ andits practical application. Like democracy, ` governance’ remains a particularlydif® cult variable to operationalise. At present `good governance’ is seeminglyde® ned in terms of a check-list of criteria (transparency, accountability, publicsector management, etc) that governments must broadly satisfy in order to justifyreceiving loans. However, it is not made explicit which, if any, of these areprioritised and how they should be measured and compared. Governance is nota binary variable and cannot be de® ned in terms of `on/off’ or `present/absent’criteria. There is little clear guidance as to how well or badly a government mustperform in the above categories before it is granted or disquali® ed from funding.If quality of governance is to represent a standard for making vital decisionsabout international lending, there is a need for greater clarity about what thisactually means in practical terms.

In this regard we must also recognise that exceptions will be made to generalrules. China has received substantial World Bank support, despite making littleapparent effort to satisfy governance requirements. In spite of substantialongoing disputes with the US government, Most Favoured Nation status wasrestored to China in May 1994, having been withdrawn in connection withalleged human rights violations during the Tiananmen Square protests. Inrestoring MFN, the USA delinked the question of trade from human rights indealings between these two countries. This appears to be more closely linked to

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China’ s substantial potential for future trade and economic cooperation than toany reference to its quality of political or economic governance; particularlygiven the US government’ s long-standing reluctance to grant MFN status toIndia.83 In trying to explain this apparent inconsistency, it would appear thatdemocracy and `good governance’ are clearly signi® cant factors in shapinginternational trade and lending policy; but seemingly far more signi® cant forsome states than others in the eyes of those charged with monitoring it.

Notes1 For an introduction to this set of issues, refer to IDS Bulletin, Vol 24, No 1, 1993; and Adrian Leftwich

`Governance, democracy and development in the Third World’ , Third World Quarterly, Vol 14, No 3, 1993.2 See further in R O Keohane & J S Nye, Power and Interdependence: World Politics in Transition, Boston,

MA: Little Brown, 1977; Richard Cooper The Economics of Interdependence: Economic Policy in theAtlantic Community, New York, McGraw Hill, 1968; and Stephen Gill & David Law, The Global PoliticalEconomy: Perspectives, Problems and Policies, Hemel Hempstead: Harvester Wheatsheaf, 1988.

3 While recognising that there are differences of policy focus and orientation between the different actorsconcerned, the `Washington Consensus’ (or the `view from Washington’ ) has been used to describe thedevelopment agenda of the Bretton Woods institutions (IMF, World Bank, GATT/WTO) and the US govern-ment. See further in Lancaster, `Governance and development: the view from Washington’ , IDS Bulletin,Vol 14, No 3, 1993; and John Williamson, `Democracy and the ª Washington Consensusº ’ , WorldDevelopment, Vol 21, No 8, 1993.

4 World Bank, Governance and Development, Washington, DC: World Bank, 1992. For analysis referparticularly to the articles by Lancaster, Moore and Osborne in IDS Bulletin, Vol 14, No 3, 1993.

5 World Bank, Governance: The World Bank’ s Experience, Washington, DC: World Bank, 1994, p 1.6 International Bank for Reconstruction and Development, Articles of Agreement, Article IV, Section 10,

cited in Lancaster, `Governance and Development’ , p 12.7 World Bank, Annual Report, 1994, p 76.8 Key World Bank documents detailing the development of its thinking in this area are particularly

Sub-Saharan Africa: From Crisis to Sustainable Growth, Washington, DC, 1989; and Governance andDevelopment.

9 This area includes public expenditure management and reform of civil service and public enterprise. WorldBank, Annual Report, p 76.

10 Ibid.11 David Williams, `Governance and the discipline of development’ , draft paper presented at the 1995

Development Studies Association Annual Conference, Dublin. See also D Williams & Tom Young`Governance, the World Bank and liberal theory, Political Studies, Vol XLII, 1994.

12 A similar conceptualisation is advanced by Claus Offe in his essay `Legitimacy versus ef® ciency’ , in whichhe refers to a set of ` selective principles’ that regulate political authority and also carry the burden oflegitimating it, thereby constituting ` the binding directions for the rulers and the ruled’ . C Offe, in J Keane,ed, Contradictions of the Welfare State, London: Hutchinson, 1984, pp 134±135.

13 Leftwich, `Governance, democracy and development in the Third World’ , p 609.14 Williams, 1995, `Governance and the discipline of development’ .15 Christopher Clapham `The developmental state: governance, comparison and culture in the Third World’ ,

paper presented to ECPR Joint Sessions, Bordeaux, 1995, p 4.16 Bimal Jalan, ed, The Indian Economy: Problems and Prospects, New Delhi: Penguin India, 1992, p 165.17 Compare with the examples from Paci® c Asia advanced in Mark Thompson `Late industrialisers, late

democratisers: developmental states in Paci® c Asia’ , paper presented to ECPR Joint Sessions, Bordeaux,1995.

18 Refer to World Bank, Sub-Saharan Africa.19 Leftwich, `Governance, democracy and development in the Third World’ , p 609.20 Lancaster, `Governance and development’ , p 10.21 Thompson, `Late industrialisers, late democratisers’ , p 12.22 This issue is discussed further in Bob Currie `From partition to peonage?: a study of debt and economic

adjustment in India’ , currently available as a Dept of Politics Working Paper, University of Hudders® eld,1995. See also G White, ed, Developmental States in East Asia, London: Macmillan, 1988; F Deyo, ThePolitical Economy of New Asian Industrialism, Ithaca, NY: Cornell University Press, 1987; and R Wade,

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Governing the Market: Economic Theory and the Role of Government in East Asian Industrialisation,Princeton, NJ: Princeton University Press, 1990.

23 George Philip, `The new economic liberalism and democracy in Latin America’ , Third World Quarterly, Vol14, No 3, 1993, p. 566.

24 Barrington Moore, The Social Origins of Dictatorship and Democracy: Lord and Peasant in the Making ofthe Modem World, London: Penguin, 1966, ch 7; and Ronald Inden, Imagining India, Oxford: BasilBlackwell.

25 James Manor `How and why liberal and democratic politics emerged in India’ , Political Studies, VolXXXVIII, 1990.

26 Judith Brown, Modern India: the Origins of an Asian Democracy, Oxford: Oxford University Press, 1985;and Sumit Sarkar, Modern India 1885± 1947, Delhi: Macmillan, 1983.

27 Rudrangshu Mukherjee, ed, The Penguin Gandhi Reader, London: Penguin, 1993; Bhikhu Parekh, Gandhi’ sPolitical Philosophy: A Critical Examination, London: Macmillan, 1989; and Ashis Nandy, `From outsidethe imperium: Gandhi’ s cultural critique of the West’ , in Nandy, Traditions, Tyranny and Utopias: Essaysin the Politics of Awareness, Delhi: Oxford University Press, 1992.

28 For example the INC attempted to attract broad-based support through its satyagraha against Rowlatt(Sedition) Bills in 1919; to consolidate Congress±Muslim League cooperation through the 1916 LucknowPact and its support for the Khalifat movement; to strengthen lower caste and lower class support throughthe Anti-Brahmin movements in South India; and to extend its general appeal through the Non-CooperationMovement, 1920±22, the swadeshi campaign (boycott of British goods), opposition to the Salt Tax and otherGandhian strategies. See Hugh Owen, The Indian Nationalist Movement, c 1912± 22: Leadership, Organis-ation and Philosophy, New Delhi: Sterling Publishers, 1989; Brown, Modern India; and Sarkar, ModernIndia 1885± 1947.

29 David Beetham, `Conditions for democratic consolidation’ , Review of African Political Economy, Vol 60,1994, p 169.

30 See further in Atul Kohli, Democracy and Discontent: India’ s Growing Crisis of Governability, Cambridge,Cambridge University Press, 1991; Atul Kohli, ed, India’ s Democracy: An Analysis of Changing State±Society Relations, Princeton, NJ: Princeton University Press, 1988; Francine Frankel & MSA Rao, eds,Dominance and State Power in Modern India: Decline of a Social Order, Delhi: Oxford University Press,1990; Subrata Mitra, ed, The Post-Colonial State in Asia: Dialectics of Politics and Culture, HemelHempstead: Harvester Wheatsheaf, 1991; and Jyoti Das Gupta, ` India: democratic becoming and combineddevelopment’ in L Diamond, J Linz & S Lipset, Democracy in Developing Countries, Boulder, CO: LynneRienner, 1989.

31 For comparison in the African context refer to Christopher Clapham, `Democratisation in Africa: obstaclesand prospects, Third World Quarterly, Vol 14, No 3, 1993.

32 Beetham, `Conditions for democratic consolidation’ , p 169.33 India maintained special trading links with the USSR under the Rupee±Rouble agreement and barter

arrangements until the late 1980s. However, despite this, the USA has been India’ s major trading partnerfor several decades.

34 V Dandekar, `Indian economy since independence’ , Economic and Political Weekly, Nos 2, 9, February1988. See also Claude Bettleheim, India Independent, New York: Monthly Review Press, 1968; PranabBardhan, The Political-Economy of Development in India, Oxford: Basil Blackwell, 1984; and Baldev RevNayar, `India’ s mixed economy: the role of ideology and interest in its development’ , Bombay: PopularPrakashan, 1989.

35 Indeed a number of Indian industrialists clearly recognised before independence the advantages of selectivestate interventions in key sectors of the economy, particularly to provide infrastructure, raw materials andother key inputs required by the private sector. This point was made explicit in the National PlanningCommittee of 1935, chaired by Jawaharlal Nehnu, and in the 1945 Bombay Plan, which laid down plansfor economic strategy after independence. A useful treatment is provided in Bipan Chandra, `The coloniallegacy’ , in Jalan, The Indian Economy.

36 Sudipto Kaviraj, `On state, society and discourse in India’ , in James Manor, ed, Rethinking Third WorldPolitics, London: Longman, 1991, p 87.

37 Rakesh Mohan, `Industrial policy and controls’ in Jalan, The Indian Economy, p 36.38 The Constitution of India, 6th edn, Madras: Swamy, 1986.39 C T Kurien, `Limits to liberalisation: have we reached them already?’ , Frontline, 5 December 1993, p 99;

and M R Bhagavan, `Technological implications of structural adjustment’ , Economic & Political Weekly(EPW), 18±25 February 1995.

40 World Bank, World Debt Tables, 1993± 94, Washington, DC: World Bank.41 Atul Kohli, `Politics of economic liberalisation in India’ , World Development, Vol 17, 1989, p 308.42 J Harriss, The state in retreat: why has India experienced such half-hearted liberalisation in the 1980s?’ ; and

J Manor, `Tried, then abandoned: economic liberalisation in India’ , both in IDS Bulletin, Vol 18, No 4,1987; Kohli, `Politics of economic liberalisation in India’ .

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43 World Bank, World Debt Tables, 1993± 94.44 This is done more fully in Currie, `From partition to peonage’ . Refer also to Vijay Joshi and I M D Little,

India’ s Economic Reforms, 1991± 2001, Oxford: Oxford University Press, 1996; and Amit Bhauduri &Deepak Nayyar, The Intelligent Person’ s Guide to Liberalization, New Delhi: Penguin, 1996.

45 A total 67 tons of gold was temporarily transferred to the UK and Switzerland as security for these loans.46 K Basu `Structural reforms in India, 1991±93: experience and agenda’ , EPW, 27 November 1993, p 2600.47 While widespread publicity has been directed to the introduction of the United Front government’ s Common

Minimum Programme, designed to promote infrastructural development, poverty alleviation and employ-ment creation alongside efforts to control the ® scal de® cit, the content of Finance Minister P Chidambaram’ s® rst budget in July 1996 appears to indicate initial continuity with the major economic policies of thepreceding government, rather than a substantial shift in direction. Major policy statements in this regard aredetailed in Government of India, Economic Survey, 1995± 96: An Update, New Delhi: Ministry of FinanceEconomic Division, 1996; and Government of India, The Budget, 1996± 97, New Delhi: Bharat Law House,1996.

48 Government of India, Economic Survey 1995± 96, p 1.49 Ibid, pp 100±101.50 World Bank, Country Economic Memorandum: India, World Bank, Washington, DC. See analysis in M

Govinda Ram, R T Shand & K P Kalirajan, `World Bank on Fiscal Adjustment in India’ , EPW, 16September 1995, pp 2317±2322.

51 Reserve Bank of India, Annual Report 1994± 95, Bombay: RBI, p 93. For further analysis and supportingdata refer particularly to EPW Research Foundation, `Economic reform and rate of saving’ , EPW, 6±13 May1995.

52FDI during the ® rst nine months of 1995 totalled a mere $756 million, compared with $3.1 billion in portfolioinvestment. Frontline (Madras), 25 March 1995. See further in Currie, `From partition to peonage’ .

53 `Behind the Stock Market’ , EPW, editorial, 20±27 April 1996, pp 979±980.54 Frontline (Madras) 21 April 1995; EPW, editorial, 6±13 May 1995.55 Beetham, `Conditions for democratic consolidation’ , p 165.56 Prabat Patnaik & C P Chandrasekhar, ` Indian economy under `Structural Adjustment’ , EPW, 25 November

1995.57 Panchayati raj represents a three-tier system of decentralised localised self-government, initially imple-

mented with limited success in 1959. A number of subsequent attempts has been made to implement thissystem more fully after the failure of this initial project. It was reintroduced by Rajiv Gandhi’ s governmentin 1989, although there is considerable variation between states in the degree to which panchayatgovernments are currently in operation.

58 However, various groups, including the Delhi-based People’ s Union for Democratic Rights (PUDR) havedrawn attention to government violations of civil rights. Criticisms have focused particularly on excessiveuse of the Terrorism and Disruptive Practices Act (TADA) and other procedures to contain public rights toorganise and protest.

59 Bob Currie, `Laws for the rich and ¯ aws for the poor? Legal action and food insecurity in the Kalahandicase’ , forthcoming in H O’ Neill & J Toye, eds, A World without Famine, Basingstoke: Macmillan, 1996.

60 Bob Currie, `Food crisis, administrative response and public action: some general implications from theKalahandi issue’ , unpublished PhD thesis, Dept of Politics, University of Hull, 1993.

61 Williams, `Governance and the discipline of development’ , p 5.62 Mick Moore, `Declining to learn from the East? The World Bank on ª Governance and Developmentº ’ , IDS

Bulletin, Vol 24, No 3, 1993, p 42.63 Currie, `Food crisis, administrative response and public action’ .64 Allegations were made on Swedish radio on 15 April 1987 that four payments, totalling Rs 66 million (US$5

million) had been paid into the Swiss bank account of an Indian intermediary as part of a governmentcontract for purchases of howitzers from the Swedish company Bofors. The Indian government denied therewas a go-between or that any such payments had been made. India Today, May 1987.

65 In October 1986, Finance Minister V P Singh announced that he had commissioned US private investigatorsFairfax to investigate allegations of ® nancial impropriety against persons with close connections to RajivGandhi. This notably included Congress (I) MP Amitabh Buchchan and leading industrialist DhirubhaiAmbani of Reliance Industries. India Today, May 1987.

66 On 7 April 1987, V P Singh announced that he had commissioned an inquiry into illegal payments madein connection with the purchase of two submarines from the German company HDW. Rajiv Gandhi wasaccused in 1989 of obstructing the Public Accounts Committee inquiry into this case.

67 S Muralidharan, `An epic of corruption: and Manmohan Singh’ s ª slumberº ’ , Frontline (Madras), 16 July1993, p 16.

68 For further details refer to Currie 1993, `Food crisis, administrative response and public action’ .69 L C Gupta, `Challenges before Securities and Exchange Board of India’ , EPW, 23 March 1996, p 751±752.70 N A Mujumdar, `Financial sector reforms: an exercise in introspection’ , EPW, 23 March 1996; and editorial

in same issue.

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71 However, a decision to conduct an annual inspection of foreign banks, public sector banks and weak privatesector banks has been approved by the Board for Financial Supervision. RBI, Annual Report, 1994± 95,p 98.

72 Over the longer 1991±95 period, funding for this sector totalled US$382.3 million to Africa; $690.1 millionto East Asia and the Paci® c; $821.1 million to Europe and Central Asia; $2632.7 million to Latin Americaand the Caribbean; $28.9 million to the Middle East and North Africa; and $296.8 million to South Asia.All South Asia’ s funding came during 1994, the only year in which any country in the subcontinent hasreceiving funding in this area during the last decade. World Bank, Annual Report, 1995, Washington, DC:World Bank.

73 John Wood, ` India’ sNarmada river dams: Sarvar Sarovar under siege’ , Asian Survey, Vol XXXIII, No 10,1993; Jashbai Patel ` Is national interest being served by the Narmada Project?’ , EPW, 23 July 1994.

74 Pratab Chatterjee `Asian Development Bank ready to lend, but not for Narmada Dam’ , article sent to IndiaAlert±Madison Electronic Mailing List ([email protected]), 26 March 1996.

75 S Muralidharan `Unfair practices, Super 301 and the Indian response’ , Frontline (Madras), 4 June 1993,p 102.

76 Executive Of® ce of the President, United States Trade Representative, ` USTR announces Two Decisions:Title VII and Special 301’ , Press Release, 29 April 1995.

77 International Monetary Fund, Direction of Trade Statistics Yearbook, 1995, Washington, DC; and personalcalculations.

78 For further details refer to D Nachane `Intellectual property rights in the Uruguay Round: an Indianperspective’ , EPW, 4 February 1995; N K Chowdhry & J C Aggarwal, Dunkel Proposals: Implications forIndia and the Third World, Delhi: Shipra Publications, 1993; Suman Sahai, `Indian Patent Act and TRIPS’ ,EPW, 17±24 July 1993, Amiya Baychi & Uttam Bhattacharya, `Indian patents as competitive instruments:dream and reality’ , EPW, 24 June 1995.

79 World Bank, Annual Report 1995, p 75.80 Government of India, Economic Survey, 1995± 96: An Update, p 15.81 Thompson, `Late industrialisers, late democratisers’ .82 Bob Currie, `Food crisis and prevention: an analysis in the Indian context’ , Contemporary South Asia, Vol

1, No 1, 1992, ® gure 1, p 105.83 US exports to China during 1994 totalled US$9287 million, compared with $2811 million to India. Further,

the USA imported $41 362 million worth of goods and commodities from China during 1994, comparedwith only $5663 million from India. IMF, Direction of Trade Statistics, pp 436±437.

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