India 1Over the past two decades, India has been hailed by the western business media for its fast economic growth, which reached an average annual peak of almost 9% in 2004-08. On the strength of this growth, countless western economists have argued that India would soon be catapulted to the top of the world’s economic power league, behind China and the United States, but far ahead of the other rich imperialist countries.

The outbreak of the present economic crisis, in the summer of 2007, did not substantially change this prediction. On the contrary, the same economists went on to claim that, against the backdrop of the downturn taking place in the rich industrialised countries, the so-called “emerging countries” like India would provide a new lease of life for capitalism and revitalise a world market which had been wrecked by the somersaults of the financial crisis. So, in February 2012, Martin Wolf, probably one of the most respected among the economic columnists of Britain’s business mouthpiece the Financial Times, was still arguing, “even allowing for the slowdown forecast for 2012 in the International Monetary Fund’s recent World Economic Outlook update, India’s gross domestic product is set to rise by 43% between 2007 and 2012. This is below China’s rise of 56%. But it is far superior to the high-income countries’ 2%. This is a revolution.”

This so-called ‘revolution’ is supposed to be driven – and sustained – by a huge, ongoing increase in India’s domestic consumption. For instance, the American consultancy firm McKinsey predicted that the Indian middle classes will include 43% of the population by 2025. Likewise, in a special report devoted to India published last September, The Economist, another mouthpiece of British business, was arguing: “according to a new report by PriceWaterhouseCoopers, in 2010 some 470m Indians had incomes between $1,000 and $4,000 a year [£630 and £2,520]. The consultancy reckons that this figure will rise to 570m [people] within a decade, creating a market worth $1 trillion.” The same month the Financial Times added its own touch to this optimism by predicting that India “could well be the third largest [economy] by 2030. The country’s consumer market is growing rapidly . . . India has more (…) billionaires than Britain. It is a magnet both for the world’s aid agencies and for its multinationals. . .  India has nuclear weapons and a space programme; it recently announced a plan for a mission to Mars. It is now also the world’s largest importer of weapons, and recently said it would spend $10bn buying new fighter jets from France.”

However, far from providing the blueprint of a new lease of life for this crisis-ridden capitalist system, as heralded by western business pundits, India’s economic “success story” illustrates exactly the opposite – how much the operation of the world capitalist market, compounded by the parasitism of the Indian capitalist class, has been feeding poverty among the majority of the country’s population, while being an obstacle to any sort of real development for its economy.

In the shadow of the state

Up until the 1980s, the Indian economy remained shaped by the post-independence settlement incorporated in the so-called “Bombay Plan” – an economic programme drafted during WWII by a committee comprising some of India’s wealthiest capitalist dynasties, including representatives of the Tatas and Birlas, who still remain today the most powerful in the land.

This plan involved: massive investment by the state according to a long-term plan, with a host of new state companies to be set up in order to build and manage the infrastructure that the British colonisers had never bothered to develop; relatively high taxes to raise the necessary funding for these investments; high tariff barriers to protect the domestic economy against foreign competitors; and provisions to prevent foreign investors from taking full control of Indian companies and natural resources. Although these policies were merely nationalist in content, the fact that they imposed some limitations on the looting of the country by imperialist companies was enough for the first post-independence governments to be widely denounced as raving ‘socialists’ by a large part of the western media.

Not that these nationalist policies had anything to do with any kind of ‘socialism’, of course. In keeping with the preoccupations of the authors of the “Bombay Plan”, they were just meant to allow the small, but very rapacious Indian capitalist class to build up its profits and social weight, by using and abusing the resources of the state, increasing the exploitation of the working population and taking the largest possible share of the domestic market as well as the largest possible cut out of the country’s trade with the rest of the world.

During the first four decades or so after independence, the Indian economy remained primarily agricultural, with a low rate of growth. Its exports were still mostly confined to agricultural products, textile and minerals – much as in the colonial days. However, the new state companies did develop some facilities in electricity production, rail and road transport, harbours, mining, steel production, etc.., according to a series of “Five-Year Plans” which met some of private capital’s needs, but did little to change living conditions for the majority. Limited as this programme was and despite the governments’ protectionist policies they complained so much about, western multinationals managed to make considerable profits out of this, by getting the Indian state to pay through the nose for the most basic technology. Only in some specific areas, like electricity production, did the Indian state benefit from the less costly assistance of the Soviet Union, in return for Nehru’s advocacy of the non-alignment policy during the Cold War. By the same token, the Soviet Bloc soon became India’s largest trading partner.

Meanwhile, thanks to the tariffs imposed on consumer goods, private business blossomed by replacing some imported products with local ones. With the state taking care of most of the heavy investment, the small capitalist class was able to live a comfortable life in its shadow, while piling up more and more wealth out of the value produced by the country’s growing population.

By the early 1970s, however, the drastic shocks caused by the return of the world crisis hit the economy. Indira Gandhi’s brutal turn of the screw, during the 1975-77 State of Emergency not only failed to protect capitalist profits, but catapaulted the Congress Party into opposition. The state, which so far, had been so profitable for Indian capital was no longer proving as effective as before. So, much like in other countries, a consensus developed among the Indian capitalist class over the advantages there would be in reducing its cost and its control over the economy. The Janata Party’s (People’s Party) government, which took over from Indira Gandhi, under Morarji Desai, in 1977, made the first steps in that direction, with the removal of many price controls and a cut in corporation tax.

However, by the late 1980s, India was hit again by yet more shock waves from the world economy – first from the 1987 stock market crash and then the implosion of Japan’s financial bubble, in 1990. Faced with a rate of inflation reaching a record 17%, rising expenditure due to the emergency programmes designed to make up for soaring prices, a lower income from taxation and the collapse of its biggest trading partner (the Eastern Bloc), the Indian government found itself increasingly indebted, to the point of being compelled to request an IMF bailout in 1991.

The first ‘liberalisation’

This bailout was both the signal and the pretext used by the then Congress Party government, under Narasimha Rao, to launch the “economic liberalisation” drive which, over the next two decades, was to dismantle much of the limited protection against the multinationals’ looting built into the economy in the post-independence period.

To start with, the Indian rupee was substantially devalued before becoming fully convertible on the world currency market, both for foreigners and for Indian nationals. This was a concession to Indian exporting companies – which, apparently, preferred to be exposed to the ups and downs of the currency market than to the whims of the Bank of India and Finance ministry! But, above all, this was designed to encourage western capitalists in search of a profitable, safe investment to move into India, by guaranteeing them a full, immediate refund in hard currencies, if required. At the same time the maximum stake foreign companies were allowed to hold in their Indian subsidiaries was raised from 40 to 50% and, in specific cases, 100%.

True, some requirements were still imposed on foreign companies, in particular in manufacturing, where a certain proportion of the components used by foreign subsidiaries had to be sourced in India. But there were many ways around that, as Korean car giant giant Hyundai Motors proved, when it set up shop in India together with 14 of its Korean component suppliers. This way, Hyundai’s Indian subsidiary was able to claim it was using at least 70% “local components” in its production!

These measures were enough to generate a 10-fold increase – albeit starting from a low level – in the flow of foreign direct investment into India within the next three years. At first, this flow came mainly from foreign companies already operating in India, which either increased their stakes up to the new legal maximum in their local subsidiaries, or bought out their Indian partners, when they operated through joint ventures with local companies. Indian shareholders made a killing out of these operations and proceeded to use their profits to buy luxury products, when they did not transfer them abroad through mostly illegal channels.

However, once again, behind the cover of ‘liberalisation’, a large part of the profits cashed in by the Indian wealthy during that period, were actually funded by the public purse. Indeed, few foreign companies would have ventured into India had it not been for the huge sums diverted from public funds as “incentives” by ministers – both in the federal government in Delhi and at state level.

Among the many and oft-quoted examples of such “incentives” were, for instance, the 15-year holiday from sales tax awarded to Ford by the state of Tamil Nadu, when it started production at its Maraimalai Nagar factory, in the suburbs of the state capital, Chennai, or the 30 km road resurfaced by the state of Gujarat to service General Motors’ new factory, in Halol.

A second wave of foreign investment came later during the same decade of the 1990s, mostly in the form of short-term loans, packaged in such way as to enable foreign investors to withdraw their funds at short notice. This second wave gave a sudden boost to India’s GDP growth rate, which peaked at 7.8%, in 1997. But, by the same token, just like in the rest of South Asia, this inflow of short-term loans also fuelled a financial and real estate speculative bubble, which finally burst across the whole region, in that same year. And the flow of foreign investment into India suddenly dried up, while the country’s rate of economic growth was almost halved.

The 1990s had been a decade of political instability in India, marked by the involvement of many leading politicians, including at the very top of the state, in a long series of high-profile procurement scandals, and by their recurrent use of communal tensions to boost their political prospects. Finally, in the 1999 general election, the Congress Party’s main rival, the right-wing Hindu nationalist party, BJP, managed to secure a large enough majority to form a stable coalition government – the so-called “National Democratic Alliance”, or NDA. And it was this NDA which proceeded to introduce the second stage of economic ‘liberalisation’.

The making of the “Indian tiger”

In fact, what the NDA did, was primarily to build on the Congress Party’s policies of the early 1990s, relaxing state controls even further, and adding to this only the promise to open up the large state sector to part-privatisation.

However, the main cause for the economic transformations that occurred under the NDA, had more to do with the situation of the world economy outside India following the “dotcom crash”, in 2001. Masses of speculative capital flowed out of the rich countries’ stock markets, especially in the US, looking for alternative grounds for speculation. A large part of these funds turned to the corporate loan market, at a time when big companies were seeking to increase their profits by moving some (or more) of their production to countries where labour costs were low.

India, with its huge labour force and low wages, was one of the beneficiaries of this general trend, with foreign direct investment rising from a mere $3.45 billion in 2002 (still lower than the level reached in 1997) to a peak of $27 billion, in 2008. It was this flow of investment which fed the country’s rapid economic growth in 2004-2008, prompting the admiration of western commentators and their celebration of India as an “emerging economy”.

In fact, part of this flow had nothing to do with “foreign investment”, as Indian capitalists repatriated funds they had illegally held abroad so far, in order to take advantage of the new low-tax environment and opportunities for financial speculation created by the NDA administration. But most of this flow came once again from foreign investors attracted by the incentives offered by the Indian government at great cost to public funds.

However, the biggest of these incentives, by far, was not introduced by the NDA, but by the Congress Party-led administration of the United People’s Alliance (UPA) which won the 2004 elections. This was the systematic development of Special Economic Zones (SEZs) across the country. Up to the SEZ Act passed by the federal parliament in 2005, only 19 SEZs had been opened in India, and most had been devoted to import-substitution facilities. The Act turned SEZs into export-orientated zones whose infrastructure was to be financed mostly out of public funds, while the companies which were invited to move in were to be exempted from a whole range of taxes.

SEZs were designed to virtually operate as foreign territories for all practical and legal purposes. In particular, and initially at least, the SEZ Act excluded them from the scope of existing labour laws. Under pressure from the Communist Parties, whose votes the Congress Party needed in order to retain its parliamentary majority, these provisions were at first left out. But the following year, they were reintroduced through the back door by means of a ministerial rule declaring operations in SEZs to be “public utility services” under the provisions of the Industrial Disputes Act 1947 – provisions which were, themselves, inherited from the colonial anti-strike laws of the 1920s. This meant, among other things that, while theoretically SEZ workers retained the right to strike, they had to give employers 14 days notice before taking any form of industrial action. Each state had the power to further restrict workers’ rights in its own SEZs, which many did. Moreover, instead of being enforced by a labour administration – which was already known to be very lenient to the bosses – labour rights were enforced in each SEZ by a Commissioner appointed jointly by local politicians and employers – meaning that in so far as the authorities could ensure it, workers’ rights remained on paper only.

With such incentives and the prospect of being able to use and abuse a tame, low-cost workforce, foreign companies began to flock towards India’s new SEZs. Altogether, 693 SEZs were registered during the three years from January 2006 – a number which went down to 637 in subsequent years.

The huge number of registered SEZs, although often quoted by western commentators as illustrating India’s status as an economic “power house”, should be taken with a lot of salt: according to the government’s own figures, only 158 of these 637 SEZs are actually in operation today! However, the SEZs did attract a large number of companies – especially from the rich industrialised countries, but also from India, like IT company Infosys, which, on its own, runs four SEZs in three states, occupying 650 acres.

Still, these SEZs have come at an exorbitant cost to a state which is notorious for its failure to cater for the most basic needs of the majority of the population. Even leaving aside the cost of funding the SEZs’ infrastructure, which is virtually impossible to work out, it was estimated that the annual loss in tax revenue due to the tax exemptions awarded to companies operating in SEZs was equivalent to the entire budget of the National Rural Employment Guarantee Scheme (NREGS), which is supposed to provide a precarious lifeline to around 20 million rural unemployed, in the form of 100 days of guaranteed employment per year on the minimum wage.

Economic growth and the working class

Whatever its growth rate, the fact that India has remained a poor country cannot be denied, not even by the most blind-folded among the proponents of capitalism. Even The Economist had to admit in the special report mentioned above, that one third of India’s 247m households had no access to electricity whatsoever and that many of those which did were subjected to recurrent outages. Likewise the Financial Times had to admit that “India has more mobile phones than toilets”. But since, the same paper extolled the fact that 63% of Indians have a mobile phone as a proof of capitalist affluence, it followed that over 37% did not have access to sanitation – hardly proof of social affluence!

However, these appalling facts, reluctantly revealed by the western business papers are still vast understatements. A very official body like the UN agency UNICEF, for instance, estimates that about half of India’s population has no access to sanitation of any kind, that in 2011, 25% of the world’s children dying under the age of five were Indian (1.7 million) and that 42% of India’s children were underweight.

The truth is, that the poor majority of the Indian population has not benefited from the “economic boom” during the period between 2000 and 2008. In fact it has paid for it dearly.

For instance, on the issue of energy use, an article published in April 2010 by the Indian journal “Aspects of India’s Economy”, showed that, by that time, the average consumption of domestic energy per head in India was 7% that of the US, compared to 19% for China and 16% for Brazil. The same article added: “Nearly half India’s population lacks access to any form of commercial energy. Indeed, in 2007-08 77.6 per cent of rural households depended primarily on firewood and chips for cooking energy, and another 7.4 per cent on dung cake. These two sources together accounted for more than a fifth of even urban households.”

As far as poverty is concerned, there are many ways of defining poverty figures. But, for instance, using the UN’s so-called Multidimensional Poverty Index (MPI), which defines poverty levels not just in terms of income or consumption, but also in terms of access to basic facilities (including water, sanitation, and electricity), 55.4% of the Indian population lived under the MPI poverty line in 2009 (645 millions). Moreover, said the above-mentioned journal, “there are more MPI poor people in eight Indian states alone (421 million in Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh, and West Bengal) than in the 26 poorest African countries combined (410 million)”.

That India’s economic growth hasn’t benefited the working class is illustrated graphically by the way in which workers’ employment and conditions evolved during the decade up to 2008.

The state of Gujarat, for instance, is considered today as the most successful in the country in terms of investment. But over the decade up to 2008, while manufacturing investment increased by 9.1% per year on average, the number of jobs only increased by an annual 2.8% and the share of workers’ wages in the value they produced actually shrank from 11.4% to 8.5% over the decade. Despite this state’s prominent position in the “economic boom”, the Indian journal Economic and Political Weekly noted in October 2011 that, among all 28 Indian states, Gujarat had “the 13th highest infant mortality, the 14th highest child mortality and the 9th highest level of child malnutrition”.

Gujarat is not an isolated case. What happened there, also happened in the car and component industry, which is portrayed as a “success story” in its own right, within the “Indian success story”. Thus, in its June 2012 issue, Aspects of India’s Economy explained: “it is a well-kept secret that real wages in the auto sector. . . fell 18.9% between 2000-01 and 2009-10. . .  In 2000-01, an auto worker spent 2h12m of an 8-hour shift working for his own subsistence and that of his family [and] the remaining 5h48m generating surplus for the capitalists. . .  By 2009-10, the ratio had deteriorated: the auto worker now spent just 1h12m working for his own subsistence and that of his family, and the remaining 6h48m working for the capitalists.”

The capitalists’ class war

To the question, “how did this deterioration take place?”, the author of the above article answered: “active class struggle was being waged – by the employers against the workers.” This, indeed, together with the massive diversion of the Indian state’s resources towards companies, encapsulates the secret of India’s “economic boom”.

There are many ways of categorising the different kinds of employment status of Indian workers. But broadly speaking workers are either employed in the formal (or organised) sector – working mostly in companies employing more than 100 workers, and more and less covered by labour laws, with limited welfare protection – or they are in the informal (or unorganised) sector – and have virtually no rights. According to an article published in June 2011 in Aspects of India’s Economy, “organised sector employment actually shrank during the period of frenetic growth; the figure for 2008 was lower than that for 2000. From 27.96m in March 2000 out of 336.8m employed on average per day, the figure fell to 27.55m out of 401.4m.”

The “economic boom” had an even worse impact on employment as a whole, according to the same article: “employment growth has virtually stalled, growing at an annual rate of less than 0.1% since 2004-05. While the percentage of the population deemed of working age (between 15 and 59) has risen by 5% over the last decade, a falling share of this working-age population obtains employment. In the last decade, roughly 159 million would have been added to the working age population, but only 65 million got employment of any type whatsoever. And the pattern of employment presents a picture typical of a very underdeveloped economy: more than half was ‘self-employed’, another third was casual, and only 16.6% was ‘permanent’ employment.”

Casualisation is, indeed, like in all the so-called “Asian Tigers”, one of the keys to India’s economic growth. Let’s take a few examples.

Hyundai Motors’ Indian subsidiary is the country’s largest car exporter and its second largest car manufacturer. In 2009, according to the Indian weekly Frontline, its main production unit, at Irungattukottai, near Chennai, in the state of Tamil Nadu, “had a total workforce of about 6,000, of whom only 1,556 were permanent and earn anything between Rs.8,000 and Rs.22,000 a month [£90-£247]. The rest, numbering about 4,500, are temporary and in the categories of casual workers, apprentices, trainees and contract labour. Their monthly wages range from Rs.3,000 to Rs.4,500 [£33-£50]. Labour contractors supply a substantial number of workers in these categories.” By 2011, a report about the same plant noted that no less than 60 sub-contracting companies were now operating on-site, meaning a further casualisation of the workforce!

In the same state of Tamil Nadu, the Taiwanese giant electronics sub-contractor Foxconn has a factory at Sriperumbudur. In 2010, according to Frontline, workers in this plant were “aged between 19 and 25”. They included “1,800-odd regular and 3,000 contract workers and trainees. . .  Their average salary is around Rs.4,500 per month [£50]. Most have migrated from other districts during the past four or five years and are children of small peasants, farmhands, construction workers or daily wage labourers.” And of course, since rural wages were even lower, these workers were expected to hang on to their industrial jobs.

Much the same situation prevails in the Gurgaon-Manesar-Bawal zone outside Delhi, in the state of Haryana. This area is dominated by car-related manufacturing, which accounts for about 60% of India’s car production and an even higher proportion of car components. It also includes facilities in just about every manufacturing sector as well as in software and call centres. Hundreds of foreign manufacturing companies from the imperialist countries have set up shop in this area, in some shape or form. According to the June 2012 issue of Aspects of India’s Economy, around 80% of the estimated 2 million workforce are hired on some form of casual basis.

The same article detailed workers’ conditions at one of the big plants in Manesar – the car and diesel engine facility run by Maruti-Suzuki, the Indian subsidiary of Japanese giant Suzuki, which controls over 50% of the Indian domestic car market. In this plant, says this article, “there are 970 permanent workers, 400-500 ‘trainees’, 1,100 contract workers, and 200-300 ‘apprentices’. . .  As punishment for minor mistakes, workers are also asked to work overtime without compensation. ‘I am supposed to produce one unit of work in 40 seconds. If this target is not met even by a low margin, I have to work two to three hours extra’, rued a worker. Apprentices are made to work in three shifts at a stretch. . .  Workers do not get proper healthcare even though their contracts mention that the company will provide compensation for ill-health. Most of them are migrant labourers from far-off villages in Haryana, Bihar, Uttar Pradesh and Rajasthan, and they are often not given leave even to meet their families.” In this plant, all workers get the minimum wage of around Rs 5,000 a month (£56), which is then topped up with various kinds of allowances, premiums and incentives – so that permanent workers may earn up to Rs 17,000 a month (£191) and trainees up to Rs 10,000 (£112), while temps are paid Rs 6,500 (£73) and apprentices up to Rs 4,200 (£47).

In the shadow of the ‘boom’

These examples give an idea of the dire conditions of workers in the formal economy. But those experienced by the overwhelming majority of workers who are in the informal economy are far worse.

Although few western commentators would care to admit it, the situation in the informal economy is just as much a reflection of India’s “economic boom”. After all, by 2007, the informal manufacturing sector – i.e. the slum industries – employed an estimated 41m workers and many of the “successful” companies driving the “economic boom” were sourcing components from these slum industries. In fact, there are even big multinationals whose profits are almost entirely based on the over-exploitation which is rife in the informal sector.

The tea industry, which is largely part of the informal sector, is a case in point, since it is dominated by big companies like Tata-Tetley and Unilever (owner of the Lipton brand). An estimated 12 million workers are employed directly or indirectly by this industry and, according to the Asian Monitor Resource Centre, “the wages they receive are among the lowest in the world, lower than Kenya and Sri Lanka, at about US$1-1.5 a day [65p to £1]. (They) do not enjoy even basic amenities like safe drinking water, and often suffer from diarrhoea, cholera and other water-borne diseases. Malaria and tuberculosis are also rampant.” Following the collapse of the price of tea on the world market, in the late 1990s, many of these workers were left to starve: “more than one million workers lost their jobs in West Bengal alone and more than 1,600 died in the region due to starvation and other related diseases.”

Worse even, is the huge, shadowy part of the Indian economy where social relations are still semi-feudal, having virtually remained unchanged over the past two centuries. In this sector, various forms of bonded and indentured labour remain widespread. Just to take one example, here are some extracts of a report on the informal brick industry in the state of Tamil Nadu, which was published in Frontline in 2009:

“In the brick kilns of Tamil Nadu, life for hundreds of thousands is one of extreme exploitation – dismal working conditions, back-breaking toil for 12 to 16 hours a day, meagre wages and generations of bonded labour. . .  There are around 2,000 brick kilns, big and medium, apart from thousands of units making country bricks in the tiny sector. . .

“The most important factor that makes the workers and their children vulnerable to bondage is the advance paid to migrant workers, who then pledge their labour to the owners of kilns. The amount ranges from Rs.5,000 to Rs.40,000 [£60 to £480]. (This) advance system not only makes workers vulnerable to bondage but also pushes them into the quagmire of perpetual indebtedness. . .

“Apart from low wages and curtailed mobility, the workers are subjected to harassment in various ways… One bonded labourer said she, along with her son, was detained at a house for 29 days on the grounds that she tried to flee without repaying the advance she had taken. . .

“In most of the brick chambers work started at around 3pm and went on up to 7pm. After a break of six hours, work resumed at 1am and went on until 10.30am. The bricks need maximum time of exposure to the sun to render them dried. Thus, the workers have to catch up with their sleep only during the day. . .

“These cycles of work interfere with the normal development of the children… (Yet) according to a study conducted in 2005 by two NGOs, over 100,000 children in the six to 18 age group were employed in brick kilns in the State. Of them, 60,000 were in the six to 14 age group.”

The shock of the crisis and its cost

When it broke out in the summer 2007, the world financial crisis did not seem to have a major impact on the so-called “emerging economies” – or at least this was what western business pundits claimed. They even predicted that the “dynamic health” of these economies would pull the world economy back on course.

Of course, today, the latest estimates of the pundits’ own favourite economic indicators are proving how wrong they were: estimated GDP growth in 2012 was 4.5% (less than the average annual growth level of the 1980s); manufacturing output went down by 3.5% over the year; exports have shrunk every month since May 2012, causing a record trade deficit; foreign investment went down by over 30% and overall investment by 14%; and inflation is well over 7% (but 10.5% for food and even 50% for vegetables!). None of this can be described any longer as a sign of “dynamic health”!

In fact, it did not take very long after the beginning of the crisis for the Indian population to feel the pain. By November 2008, the Sensex (the Bombay stock market index) had lost 60% of its value. Exports were slowing down – especially in the textile industry whose export target had to be reduced by 30%, while some of the industry’s 88 million workers were laid off. The car components industry was starting to be affected by job cuts as well. Meanwhile, the UPA government, which was keen to show that it was doing something in the run-up to the 2009 general elections, had cut a number of indirect taxes, reduced interest rates and printed £38bn worth of fresh money to boost the country’s crippled banking system.

Then came 2009 and the frantic wave of speculation which wrecked the commodity market worldwide, sending the prices of staple food, cooking oil, petrol, etc.. through the roof. Rising agricultural prices could have been good news for the rural population in India, if not for the urban poor. But given the monopoly of middlemen and wholesalers over the food market, the resulting inflation hit the rural poor just as much as it did the rest of the poor population. Meanwhile the government seemed to be caught by recurrent panic, reacting to every sign of financial chaos by cutting interest rates – no less than 13 times in total!

In 2010, the Indian economy seemed to recover. GDP growth picked up again and foreign investment increased, as western capitalists were returning to the “emerging economies” in search of a quick buck and companies were attempting to boost their presence in an attempt to snatch markets from their competitors. But by the summer of 2011, everything went ugly again. The rupee fell by 19% against the dollar and the UPA government used this as a justification for relaxing most restrictions on financial cross-border transactions, under the pretext of attracting more foreign funds into India.

By that time, the government had embarked on another expansion of its largesse to the capitalist class, Indian as well as imperialist. In 2010, tax rebates to companies and the wealthy had already resulted in an estimated Rs 1,200bn (£13.5bn, 2% of GDP) loss of income to the state. In addition, it had been decided that all future infrastructure projects would be run as Public-Private Partnerships, in which up to 40% of the total investment could be paid upfront by the state to the private partners, even before any work had been done. Since the total value of planned infrastructure projects for 2012-17 is £65bn, this amounted to a commitment to subsidise private firms on a massive scale – but in a way which, in addition, was very prone to corruption in a country where the political establishment is notorious for engineering procurement scams!

A master piece in this infrastructure programme is the Delhi-Mumbai Industrial Corridor Project. This “corridor” will be centred around a 922-mile high-speed heavy freight railway line and a motorway between the two cities, linking 24 new “industrial cities”, three ports, six airports and a host of power plants to service them. Many of the new industrial zones in this Corridor will be a new brand of SEZ – called National Manufacturing Investment Zones (NMIZ). Apart from having even more restrictions on workers’ rights, these NMIZs will no longer be exclusively export-orientated. In addition they will provide companies with a fast-track mechanism allowing them to withdraw without having to face any liability towards workers.

By 2018, seven of the Corridor’s new “industrial cities” are meant to be completed, at a cost of £57bn – half of which will be provided by Japan in various ways. The question, however, is whether this colossal project will really pave the way for a new industrial future for India, as the government claims, or whether it will only leave a graveyard of white elephants? Either way, the state’s subsidies will have gone to line the pockets of the shareholders of the Indian and foreign companies involved in these projects.

Either way, too, the Indian population will be expected to pay for all these present and future handouts to the capitalists. In fact, it started paying from April 2010, in every government budget, by means of a reduction in state subsidies for various basic commodities, especially those most vital to the poor. In the latest budget adopted in 2012, for instance, subsidies were reduced from 2.34% of GDP to 1.77%. Petrol subsidies were cut by almost 40%, the fertiliser subsidy by 10% – both of which have resulted in an automatic increase in the cost of living. As to the food subsidy for the poorest it was increased by only 3% – this, when it is estimated that a 10% increase would be necessary just to keep food distribution at the same level as the previous year. In addition, the 2012 budget reduced the income tax of the wealthy, while increasing indirect taxes – which primarily affects the poor.

Of course, commentators in the western media are still claiming that the size of India’s domestic market and, especially, the consumption of what they call its “growing middle-class”, can be an engine for the economic development of India. But what are they really talking about? About the 470m Indians with an income between £630 and £2,520 that The Economist hailed as a “$1 trillion market”? 470 million people earning between 5 and 20% of the income of a British full-timer on the minimum wage? But how much of their earnings can these 470 million people spend on anything other than the strict minimum they need to survive? They may constitute a “market” for food, cooking oil, soap and such essentials, possibly a limited market for basic utensils, but for what else? In any case it is hard to see how their purchasing power can possibly provide the profits required for the development of a modern capitalist industry!

The working class holds the key to the future

India, therefore, will not – at least not under capitalism – become the giant economic power house anticipated by western commentators, nor cater for the needs of its population. On the contrary, it will remain a mere instrument at the mercy of western profiteers, while the parasitism of capital – foreign and national – on the Indian state, will only result in a further deterioration of the living conditions of the majority of its population.

However, for us, revolutionary communists, there is some cause for optimism, because the way in which its economy has been shaped by the requirements of imperialist companies over the past decades, has actually strengthened and reinvigorated the Indian working class. It has created a a highly concentrated industrial working class, mostly young, which may still be relatively small compared to the size of the country’s overall population, but which nevertheless includes tens of millions. What’s more, this industrial working class has recently come from the urban slums or from rural villages and has, for that reason, close links with the country’s poor masses.

What’s more, this working class has already gone through a rich experience of struggles against both its capitalist exploiters and the repressive forces of their state.

Indeed, an article published last June by Aspects of India’s Economy read as follows: “The last few years have seen a rise in labour unrest, particularly in the auto and auto parts sector. Among the prominent instances are: Mahindra (Nashik), in May 2009 and March 2011; Sunbeam Auto (Gurgaon), in May 2009; Bosch Chassis (Pune), in July 2009; Honda Motorcycle (Manesar), in August 2009; Rico Auto (Gurgaon), in August 2009, including a one-day strike of the entire auto industry in Gurgaon; Pricol (Coimbatore), in September 2009; Volvo (Hoskote, Karnataka), in August 2010; MRF Tyres (Chennai), in October 2010 and June 2011; General Motors (Halol, Gujarat), in March 2011; Maruti Suzuki (Manesar), in June-October 2011; Bosch (Bangalore), in September 2011; Dunlop (Hooghly), in October 2011; Caparo (Sriperumbudur, Tamil Nadu), in December 2011; Dunlop (Ambattur, Tamil Nadu), in February 2012; Hyundai (Chennai) in April and December 2011-January 2012; and so on. Unrest is not limited to the auto industry, but it has been centred there.”

The same article added: “Perhaps the single most important demand of the workers in recent agitations has been the right to form their own union; in most cases workers have still not been successful in doing so. Methods employed by the employers include sacking, foisting of criminal cases, beating, and even killing. The German auto parts manufacturer Bosch successfully resisted three attempts at formation of a union. The story is the same everywhere – Hyundai, Hero Honda, Wonjin, Maruti Suzuki, Graziano, Rico Auto. When 1,800 casual workers of the Dharuvera plant of Hero Honda sought to join the union of their choice, cases under the Arms Act and Section 307 of the Indian Penal Code (attempt to murder) were filed against the leaders. In Rico Auto, Gurgaon, workers were attacked by thugs in 2009, leading to the death of one worker.”

India may be misleadingly called the “world’s largest democracy” in the western media, but the Indian working class is constantly threatened by one form of repression or another. Where private bosses allow the existence of a union, it is usually only a “company union” of some sort. Anyone suspected of trying to create – or even thinking of joining – an independent union is systematically harassed. It is common practice for companies to hire armed thugs against workers. Sometimes these thugs are used to terrorise workers at gunpoint on the shopfloor, or on their way home.

When a strike does take place, the strikers are never just confronted with their employer and its thugs. They also have to deal with the labour administration together with the local politicians and authorities, which are all quick to take the side of the bosses, while the police is there to beat any form of militancy out of them. Strike leaders and union organisers often end up in jail, sometimes with ridiculously long sentences, under the most spurious charges.

Nevertheless, the Indian workers have never given up and have kept demonstrating the same dynamism and determination to fight for the right to organise and to earn a decent living, and for their dignity.

In many respects, this Indian working class is reminiscent of another one – the Russian working class during the decades preceding the 1917 revolution – with two important differences, though. The Indian workers are far better educated than were the Russian workers and this is a major advantage for them. But at the same time, unlike the Russian workers, they do not have a Bolshevik party – that is, a revolutionary communist party capable of providing them with a political voice , encapsulating their fighting tradition. But who knows? It took less than one generation for the Russian working class to build up its party – and it does not need to be any different in India!

The article above is reprinted from issue #98 of the British Marxist quarterly Class Struggle, January-March 2013; see here.  Important sources of information, such as Aspects of India’s Economy, are produced by the Research Unit on Political Economy, which is based in India.  It can be found on our blogroll.

See also: India’s rising corporate-military-complex

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Comments
  1. David Walters says:

    An excellent overview. I agree about the knee-jerk opposition socialists usually reserve for nationalist economic policies. it is no small thing to protect domestic industries via trade restrictions, tariffs, etc. need a LOT more discussion.