An indispensable overview

At a time when investment bankers sing hosannas to the Indian economy, when India is invited to meetings of the world's wealthiest countries, and when the CIA predicts that India will become a force to reckon with on the global stage, the second edition of Francine Frankel's well-known book will be a sobering reminder of the unfinished tasks of Indian democracy.

The first edition of this book had been published as long ago as 1978, when India was a very different place, and it made the point that India had been unable to resolve the contradiction between the radical vision of her rulers and the realities of power at the ground level.

As Ms Frankel puts it in her first chapter, this is "The Paradox of Accommodative Politics and Radical Social Change".

She points out how the Congress Party's class character made it very difficult to push through policies such as land reform that would have resulted in a more egalitarian social structure and an expansion of the domestic market.

The "fundamental paradox of Indian political economy," she says, was that "India's leaders had committed themselves to carry out basic changes in the pattern of economic and power relations as an integral part of development", while "they were equally determined to avoid the political costs of a direct attack upon the existing social order".

The second edition adds chapters covering the period since the Emergency, a period during which vast changes have taken place in Indian political economy.

The rise of the middle castes to power on the one hand and the rightward shift to economic liberalisation on the other are the two main themes of this period.

But Ms Frankel finds plenty of evidence of continuity. She points to India's two economies, one of them modern and globally competitive, the other, rural one, mired in stagnation.

She says that by the end of the seventies it was realised that Nehru's vision of rapid economic growth based on the development of heavy industry, import substitution, and economic justice had failed, because the existing power structures did not allow the development of a large internal market.

An attempt was therefore made to find an alternative growth strategy based on economic liberalisation. But while that approach has benefited the "consuming classes", most of the poor have been unable to gain from economic reform.

The author points to the underinvestment in agriculture and to the jobless growth of the nineties as evidence of the persistence of the dual economy.

At the political level, she chronicles the push to power of caste-based and regional alliances, and the decay of the major pan-Indian political parties, seen from the erosion in their share of the vote.

The rise of Hindutva is analysed in detail. Frankel concludes that "India's future as an all-inclusive, composite and pluralistic nation requires that the attack on secularism be turned back and that the democratic centre be expanded by enhancing the well-being of all sections of society."

There are several insights to be gleaned from Frankel's book. One of them, very relevant for today, is India's relationship with the United States.

Contrary to popular perception, India's alliance with the Soviet Union was not an ideological choice, but forced upon it.

The United States never delivered the billions of dollars of arms equipment promised to India after the Chinese war, in spite of the fact that the Indian government had even gone to the extent of asking for the American air force to defend Indian skies during the war.

Instead, America gave massive aid to Pakistan, aid that was used against India in the 1965 war.

On the economic front, Frankel points out that "after years of pressure by USAID and the World Bank for higher priority to agriculture and a larger role for private enterprise in industrial development, India's reorientation of the development strategy in line with Western advice did not secure the higher aid levels promised to finance the necessary imports of fertilisers, industrial raw materials, components and spare parts in support of the new approach."

There's no doubt whatsoever that the second edition of Frankel's book will garner the same acclaim as her first edition, and that it will be indispensable reading for anyone who wants an overview of India's political economy after Independence.

Frankel's view of India's two economies will also find much sympathy. It is the vociferously-stated position of the Left, and "liberalisation with a human face" has become the official creed of the UPA government.

On the other hand, the fundamental distinction between the post-1991 period of the Indian economy and the earlier period is not only a change in development strategy, as Frankel believes, but India's full-fledged embrace of global capitalism.

One section of political economists believe that the capitalist class has always been in control in India, using the state to build up and support capitalism at a time when it was relatively weak.

Now that domestic capital has found its feet, it no longer needs the support of the state. More and more of the Indian economy is now plugged into the global circuits of capital.

That has not only made possible a massive shift of services to this country, creating thousands of jobs, but it has also resulted in capital flowing into the country.

It is now the World Bank that woos India, rather than the other way round. Internally, the expansion of consumer credit and the lowering of interest rates have led to the creation of vast market.

And although it's the "middle classes" who have benefited the most from the reforms, there is little doubt that wealth has trickled down. All that is necessary is to ensure that capitalism permeates the rural hinterland and transforms agriculture.

Spurred on by the retail boom, that is a revolution waiting to happen. True, it's far from certain whether and in what form the transformation to a full-fledged capitalist agriculture will take place.

But Ms Frankel may have erred in not discerning a fundamental discontinuity between conditions in 1978, when the first edition of her book appeared, and the India of today.

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India's Political Economy 1947-2004

Francine R Frankel
Oxford University Press
Price: Rs 750
Pages: 819