Polaris A Takshashila Institution Blog on International Politics and Security

Why is India’s Middle Class So Ambivalent about Economic Liberalization?

09.28.2012 · Posted in Uncategorized

Since the UPA government announced its intention to ease restrictions on foreign direct investment in the multibrand retail sector, we’ve seen a vigorous—if not terribly sophisticated—debate take place about the merits of this step, and what it might mean for India’s future growth prospects. Only the latest to weigh in against this move (in one of the better-articulated critiques) is former external affairs and finance minister Jaswant Singh. The opposition of the erstwhile NDA leadership to further liberalization—despite its own cherished record in this department—is often cynically attributed to the logic of democratic politics at its lowest.

But I can’t help but notice the continuing prevalence amongst India’s political leaders of what is, at best, ambivalence about India’s economic liberalization. This applies, in my experience, equally to members of the Congress and BJP, as well as some members of regional parties with whom I have interacted with over the years. It also applies more widely to the Indian urban, educated middle classes (particularly those over the age of 40), including to members of our media and even surprisingly to some of our business leaders—those thought to have benefited most from India’s economic awakening.

In an article in The Indian Express, Yale’s Tariq Thachil asks an important question: why does the average Indian voter appear not to care about important developments in economic policy? Thachil points to some convincing if tentative explanations, but in the context of India’s educated elites the rationale is somewhat more elusive. What makes it particularly puzzling is that I haven’t come across similarly widespread ambivalence about economic liberalization amongst other elites who have experienced high growth in recent decades, as in China, Turkey, South Korea, Poland, or Israel.

In addition to hyper-partisan politics, partial explanations can be sought by pointing to the prevalence of socialist ideology and the very real challenges of governing a democratic, developing country. But let me suggest a few other possible reasons for India’s middle-class apologism:

1. The blame game. Embracing the merits of economic liberalization involves honestly confronting two aspects of India’s recent past. First, accepting that independent India’s early leadership made some important mistakes when overseeing the country’s economic development. Second, acknowleding that later leaders, including some affiliated with the Congress Party, can be credited with steps that enabled the Indian economy to grow. This narrative is relatively uncontroversial to many members of the scholarly community, but is far less palatable to political leaders, who are either eager to gloss over the mistakes of Nehru and Mrs. Gandhi or are reluctant to credit the Congress for those things it did right. It’s an all-or-nothing package, so the easiest thing for all politicians to do is to downplay this narrative altogether, making it all but impossible for politicians of any stripe to construct a case for economic liberalization grounded in recent historical experience.

2. Historical amnesia. The challenge of assigning political credit and blame is compounded by historical amnesia. As I’ve observed repeatedly on this blog, India has a remarkably poor appreciation of its own history, particularly of its post-Independence experience. I recently observed on Twitter that India’s standard of living in the 1970s was equivalent to 15th century Europe, while today it would be comparable to the West in the late 19th century. My intention was to show how far and how fast the country had progressed in such a short time. When challenged on the facts, I noted that the vast majority of Indians—throughout India’s entire history until the 1990s—were illiterate, poor, rural, subsistence agricultural workers, even during periods of past historical grandeur, such as Mughal and Mauryan rule. The widespread perception that India was a wealthy, advanced state by modern standards laid low by a rapacious colonial Britain simply doesn’t hold true, even if it is evident that the British Raj stunted India’s economic potential. Most Indian elites, in other words, do not appreciate the fact that the pace and success of the last two decades’ growth is entirely without precedent in the country’s historical experience.

3. The urban-rural divide. As someone who grew up in Delhi, I know that life in the large Indian metros is almost unrecognizable from even 20 years ago, the days when a lower-upper-middle class existence meant watching DD2 (in colour!), having an STD connection, driving a second-hand Maruti 800, and eating occasionally at Nirula’s. But for many urban and educated Indians, the ensuing changes—more and better cars, bigger houses, more television channels, nicer restaurants—were improvements in material comfort rather than truly transformative. By contrast, the expansion of basic services (electricity, water, roads), the telecom revolution, secondary education opportunities, the expansion of basic healthcare, and other such offshoots of liberalization have completely altered the lives of hundreds of millions of previously illiterate and underemployed rural Indians. So India’s middle-classes can possibly afford to be nostalgic about the pre-liberalization period when, so they sometimes muse, life was simpler, prices were lower, politicians were less corrupt, children were better-behaved, and Bollywood films were superior.

4. Anti-intellectualism among the business class. I should qualify this: I know many brilliant members of India’s business elite who are deeply interested and invested in matters of public policy. But, by and large, the captains of Indian industry place a low priority on policy debates, not always investing their own efforts or—just as importantly—their newfound wealth in advancing the study of public policy. By default, that space has been ceded to well-meaning (if sometimes misinformed) members of India’s literary community, who also remain the most high-profile interpreters of the country abroad. Again, I do not mean to belittle the contributions of many important policy intellectuals who have added considerable heft to relevant discussions. But in the absence of commitment by the Indian business community, the important public conversation on the merits of economic liberalization has become skewed in favour of idealistic amateurs.

5. The private sector’s crisis of legitimacy. Many advocates of liberalization ground their arguments in the assumption that the Indian government is corrupt, incompetent, and exploitative, while the private sector offers a more efficient, transparent, meritocratic, and progressive alternative. If only it were so clear cut. The problem is that the Indian private sector often fails to live up to this ideal, providing easy fodder for the critics of liberalization. Stories I’ve heard from employees at some of India’s most reputable companies reveal inefficiencies, patronage politics, and corruption of the kind that makes these entities seem indistinguishable from an average Indian government department. It doesn’t help that companies all too often often conspire with the state, and leverage government regulation against one another.

I could probably come up with a few other reasons, over and above partisan politics, simple ideology, and political exigencies. In an ideal world, India’s political, business, and intellectual elites would be in relative agreement about the overwhelming merits of liberalization as a value. They would be making the moral case in its favour, against special interest groups who might seek to preserve an economic regime that has by every measure served India and its people poorly. But taken together, these possible mental blocks suggest the task might be more daunting. Several factors, I hope, will transform things. Demographics is a big one. Already, about half of India’s population has no memory of the period before liberalization. The rise of rural and small-town businesses, the growth of independent policy institutes, and the positive example and influence of the Indian diaspora might also bring about swift changes to the prevailing mindset. Let’s hope it happens sooner, rather than later.

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