NOTE: this an unedited version of the final text. For reference or quote use the printed publication.

Harsh Sethi

Debating Swadeshi

(text not edited)



‘When memories die, a people die.’

‘But what if we make up false memories?’

‘That is worse’, replied the old man, ‘that is murder.’

- When Memories Die, A. Sivanandan, 1997


These are strange, somewhat troubled times. Words and phrases have a way of taking on new meanings, new resonances, which often have little in common with their heritage. Now that we are into a new millennium, with the official celebrations of our golden jubilee both as an independent nation state and as a democratic, secular and socialist Republic behind us, and poised to introduce the second generation of reforms - it is time we re-examine our tryst with destiny. Central to this brief examination is a re-visitation to some of the keywords that informed our struggle for independence.

Both swadeshi and globalisation are severely contested terms concepts in the Indian discourse. From the Mahatama’s swadeshi to the current ruling dispensation’s invocations represents a long journey. Then, as now, a primary concern was the economy. In the early years of the 19th century, Indians were concerned about the de-industrialisation of the country under the British Raj, the unfair competition between the mills of Lancashire and the millions of our poor weavers. In a nation wrecked by economic drain, our nascent bourgeoisie often turned to the political leaders for support.

Two of Gandhi’s essays in Young India and Harijan make clear his position. He well understood that the Britisher was top-dog and the Indian the under-dog in his own country. Consequently, he questioned the notion of ‘equality of rights’ between a giant and a dwarf. ‘Before one can think of equality between unequals, the dwarf must be raised to the height of a giant... The process may seem harsh but it is inevitable if the millions of the plains are to be the equals of the privileged few.’

But to read Gandhi’s call for swadeshi as one of reverse discrimination, or even as a slogan of ‘Be Indian, buy Indian’ would be doing him great injustice. Swadeshi for him meant not just svavalamban (self-reliance) and arthic swaraj (economic independence) but also a holding of British lives and honour as sacred as our own. As a positive process of both economic and societal regeneration it meant attacking our internal ills, our entrenched inequalities, as much as combating the inequitous colonial order. Above all, it had no place for rancour.

Or take another authority, frequently invoked these days, Sri Aurobindo. His strategy to win swaraj (independence) was based on a doctrine of passive resistance as a political method to bring an end to British rule and act as a catalyst to Indian regeneration. Central to it was an understanding that all share in the struggle and suffering such that the nation could start with a fully developed unity and strength. Otherwise, he argued, we may end up ‘embracing liberty over a heap of corpses.’

He went further: ‘To submit to illegal or violent methods of coercion, to accept outrage and hooliganism as part of the legal produce of the country is to be guilty of cowardice, and by dwarfing national manhood is to sin against the divinity within ourselves and the divinity in our motherland.’

Independent India’s experimentation with swadeshi has gone through various phases, much of it involving versions of a command economy. The broad consensus of the early decades was a distrust of the market and private enterprise, a primary reliance on the home market (import substitution) with the state (read bureaucracy and the political class) in the driving seat. At no stage was there any serious attempt to educate and mobilise the masses. So not only did our policies not enjoy popular sanction and participation, we evolved as a nation of supplicants, looking to the government as mai-baap (mother-father). Expert opinions vary, but while the country did develop a diversified, modern production base, the system of planning simultaneously introduced serious distortions and helped entrench a permit-quota raj with its consequent corruption and delays.

Times change and so do fashions. The previous decade, particularly after the collapse of the Soviet Union, seems to have ushered in an era of unbridled capitalism. As against the earlier faith in state planning and the home market, the pendulum has shifted to internal and external liberalisation. Foreign capital, technology and products have become the new yardsticks for assessing quality, competence and performance.

It is still too early to seriously assess the implications of this policy shift. What, however, does seem evident is that the opening up (and out) of the different sectors of the economy has created severe dislocations. Linking up globally implies sharing both the upturns and downturns of the global market. Unfortunately, being minor players globally, we do not have the wherewithal to influence the rules of the game, defined, for instance, by the WTO with its new rules for governing intellectual property or capital flows (TRIPS and TRIMS). And since markets habitually favour the better endowed, weaker parties - both globally and internally - tend to be worse off, at least in the interim.

But before we go on to discuss, albeit briefly, a spectrum of responses (both at the level of discourse and action), it would be useful to trace the origins, dimensions and implications of the crisis in the economy which surfaced at the beginning of the ’90s as also outline the strategy of macroeconomic stabilization, fiscal adjustment and economic reform adopted by the government.

The Process

Most experts trace the beginnings of the current reform process to the external debt crisis of early 1991 - fiscal crisis, a near unmanageable balance of payments situation, and an acceleration in the rates of inflation. The proximate cause may have been the Gulf War, the escalation in prices of oil, and the insecurities in the capital market. But it is today widely agreed that the crisis was neither an accident nor a consequence - it was a direct result of financial profligacy on the part of government. Internal debt had risen to 53.9% of GDP, the burden of debt servicing to 19% of central government expenditure, external debt to 22.8% of GDP and debt service burden to 29.8% of export earnings. Borrowing to spend was no longer feasible as lending institutions re-classified India as a high risk country. Overall the country came close to default. By early 1991, there was little room for manouevre for living on borrowed money or borrowed time.

The government had no choice but to negotiate a stand-by agreement with the IMF and approach the WB for a structural adjustment loan. Any programme of macro-economic stabilization involves preempting a collapse of the BOP situation, reducing the current account deficit, and curbing inflationary pressures. These efforts operate on the demand side of the economy - working to reduce the aggregate demand by cutting back on government expenditures, employing a tight money policy, and depreciating the currency. The horizon is short-term.

Alongside are programmes of structural adjustment and reform which seek to influence the supply side in an endeavour to raise the growth of output. This medium term policy seeks to shift resources from the non-traded goods to the traded goods sector and, within the latter, from import competing to export activities. Second, shifts are advocated from the government to the private sector. Apart from resource allocation, structural reform seeks to improve resource utilisation by changing the structure of incentives and institutions which would reduce the level of state intervention to rely more on the marketplace i.e. dismantle controls to rely more on prices and wind down the public sector to rely more on the private sector.

In conformity with this orthodoxy, assiduously promoted by the Bretton Woods institutions, the government has embarked on a wide ranging reform of the policy regime. Trade policy reform has eliminated most quantitative restrictions on imports (except for consumer goods) and progressively reduced tariffs. The desire to increase the degree of openness of the economy extends beyond trade flows to capital and technology flows - all intended to expose domestic firms to increased international competition. Industrial policy reform has removed barriers to new firms and limits on growth in the size of existing firms, as also cut down state intervention in investment decisions. This process is sought to be re-inforced by deregulation in the financial sector so that the allocation and utilization of financial resources is left to the market. Finally, Public sector reform involving privatization, both actual sell-offs and inviting private equity and management, has been initiated.

There is little doubt that the structural reforms already implemented by the government, combined with further reforms on the anvil, represent a radical departure from the development strategy of the first four decades after Independence. First, the objective function is economic growth combined with economic efficiency. The earlier concern about preventing a concentration of economic power or attempting a redistribution of wealth (never more than rhetoric) has been explicitly abandoned. The objective of bringing about a reduction in poverty and inequality has not been set aside but such concerns about equity have been subsumed in the pursuit of growth on the premise that it is both necessary and sufficient for an improvement in the living conditions of people.

Second, there is a conscious decision to substantively reduce the role of the state in the process of economic development and rely far more on the market. Industrial licensing has been in the main replaced by interventions in the financial sector. Public enterprises, both manufacturing and services, are being corporatised and partially or fully privatised. It is the new orthodoxy that a large share of the public sector in investment, output, even services, pre-empts scarce resources from the private sector, resulting in inefficiency and consequent drain on the public exchequer.

Third, the degree of openness of the economy is being significantly increased and at a rapid pace. The object is not simply to enforce a cost discipline on the supply side through international competition but equally narrow the differences between domestic and world prices. The effort to integrate the domestic economy with the global economy is through reducing quotas and tariffs and actively wooing foreign capital and technology.

As significant as the reforms in industrial policy, trade policy, policy regime for foreign investment and technology, and the public sector have been the initiatives in the financial sector - deregulation of banks, entry of private sector (both domestic and foreign) banks, energising the capital market and so on. It also needs to be appreciated that the basic reform process has been followed by a variety of regimes - Congress, United Front and a BJP led National Democratic Alliance.

What has been discussed so far are essentially the internal processes of structural adjustment and reform. The picture remains incomplete without taking into account the processes accompanying the Uruguay Round of GATT culminating in the establishment of the World Trade Organisation. The extension of what earlier was a trade regime dealing with manufactures to now include agriculture and services, investment flows and intellectual property - all in a new framework with new dispute resolution mechanisms and permission for cross-retaliation has implied a major re-ordering of the global economic system. Alongside has been the introduction of non-economic issues - social clauses, human rights and the environment - in what earlier was seen as an economic matter. What today is being debated and fought over in India is a combination of the above two processes - liberalisation/privatization and globalization.


While most observers of the Indian scene agree that the far-reaching changes initiated in the early ’90s were probably necessary, dictated by the immediate economic compulsions of crisis management, a fait accompli, there remain sharp divisions about both the real nature of the crisis and the actual strategy followed, particularly in terms of its timing and sequencing with critics attacking the reform process as either being too slow/hesitant/partial or too fast/unthinking/radical.

The debate in the academic circles is, however, quite different from the reactions in the political marketplace, with critics describing the reforms process as one of re-colonisation, an abject surrender to the Bretton Woods institutions or more explicitly U.S. hegemony, and a virtual abandonment of national sovereignty and peoples’ needs. What, however, is as important is that no one has seriously argued for a return to the development strategy and processes of the earlier years.

Let us take three areas where the debate has been particularly sharp. Those arguing for more thorough-going reforms have concentrated their ire on the labour market. They point out that extant labour legislation covers less than 10% of the country’s work-force; that while the ‘formal sector’ labour market is over-governed, leading to rigidities relating to entry and exit and thereby creating high wage islands, there is no protection to the really vulnerable in the informal sectors. Consequently, they have been lobbying to align labour policy to economic policy, on the need to appreciate the decentralized nature of industrial relations, and to permit a greater flexibility about both entry and exit of labour in production units. More specifically, their demand is to radically re-structure the Trade Union and Industrial Disputes Acts and shift focus from adjudication to collective bargaining. Overall, they feel that labour market rigidities and unrealistically high wages in the organised sector are directly responsible for the slow rate of investment, particularly foreign direct investment.

In the same vein, the enthusiastic liberalisers are arguing for a complete withdrawl of public ownership and management from non-core strategic units, changing the portfolio of investment in others and corporatising the rest i.e. wresting control of Public Sector enterprises from the government. This demand is most strident in the area of infrastructure, particularly power and telecommunications. Reformers would like a breakup of government monopolies, and a greater role for private, including foreign capital.

It is a matter of record that efforts at restructuring public sector enterprises, inviting private sector participation in infrastructure projects, and introducing greater flexibility in industrial relations via reforms of the Trade Union or Industrial Dispute Acts have faced concerted resistance, not the least from the organised sector workforce. Even as this note is being written, the employees of the Department of Telecommunications are on strike against the proposed corportisations, completely derailing the communications network. Similarly, every power project involving foreign direct investment has run into problems, mainly about the rates at which power would be purchased and on the demand that the Union government provide a guarantee of a secured rate of return on capital invested. Charges of corruption and kick-back are not uncommon.

It is evident that the government, while ideologically committed to reforms has neither thought through the process nor created a wider political constituency that would facilitate reforms. This, despite the fact that there is extreme middle class displeasure about the working of public sector enterprises - production, services and financial. This strata is convinced that ‘public’ units are marked by high costs, leakages, corruption and inefficiency. Consequently, efforts at downsizing enterprises, linking payments to performance, introduction of new technologies, altering dispute resolution mechanisms, ensuring accountability and transparency - have so far been successfully resisted.

The situation is further complicated by the fact that even in the modern industrial sector, domestic firms, both large and small, are finding it increasingly difficult to adapt to the altered market conditions. A mix of competition from imports (price, quality) and a cyclical recession in the global market has led to increased incidence of closures and lock-outs, creating a spectre of unemployment, particularly in the small scale sector. Expectedly, this has led to wide-spread, though scattered and uncoordinated, labour unrest. Possibly, the lack of organised trade union activity, except in governmental undertakings, can be explained by the widespread unemployment and a feeling that the reform process is inevitable.

Let us now turn to the other end of the Indian economy - agriculture. Though historically, Indian agriculture has in the main been a private activity, barring plantations in limited commercial products (tea, coffee, rubber, palm oil), the sector has received substantial state support (both input and output subsidies) and has been regulated and buffered from external competition. Over the years the basic policy has been geared towards ensuring food security. Towards this end, the Indian government has attempted land reforms (ceilings, consolidation, protection of tenure), invested in infrastructure and research, controlled the market (restrictions on movement of foodgrains, on imports and exports) etc. Overall, the degree of globalisation has remained limited.

The pressure for reforms has, however, not left this sector untouched - primarily through attempts to reduce the input subsidies (electricity, water, fertilizers, pesticides, seeds) and permitting greater play of private sector corporations in trade. Alongside, as a result of the changed WTO regimen, the last decade has seen the entry of multinationals and agri-business not just in the processed food markets but directly in primary products. Import duties on a range of agricultural, horticultural and farm products have been reduced as also on agricultural machinery.

All this has substantially changed the nature of the agrarian and farm economy, as also other sectors producing natural resource based goods. The greater involvement of the corporate sector has resulted in a change in cropping pattern. Pressure has increased to relax rules regarding ownership and control of land and water, resulting in increasing hardship to small producers. The operation of the new patenting regime has brought in new seeds over which local farmers have little control.

Yet, it needs to be realised that, at a macro-level, India has huge stocks of foodgrains, well beyond its warehousing and fiscal capabilities. Consequently, many are arguing for a complete freeing of trade in agricultural products, reducing subsidies, lowering tariffs, abolishing the Essential Commodities Act, inventory controls, permitting futures trading and so on - in short both freeing and corporatising the sector and providing a major push to exports. Some have gone further and argued that it is no longer necessary to be obsessed with notions of food self-sufficiency.

There is widespread apprehension that going along with WTO agreements on market access by removing non-tariff barriers, reducing tariffs and permitting incursion of private capital, particularly foreign, would not just impoverish smaller peasants but colonise the country. Across the country, there have been agitations against specific measures. It is, however, difficult to disentangle movements which are against the reforms from those which are seeking further removal of controls. It has also been pointed out that the current mix of policies, more than benefiting producers or consumers, operates in favour of middlemen.

Let us look now at the debate on intellectual property and patenting regimes since this has long term implications across all sectors. The Uruguay Round of multilateral trade negotiations covered seven forms of intellectual property - patents, copyright and related rights, trademarks, industrial designs, geographical indications, integrated circuits and undisclosed information. For each, certain norms of protection have been prescribed and a time duration has been set to bring national legislation in line with WTO regulations.

It for a moment we bypass the philosophical debates on patenting, the Indian opposition to the TRIPs agreement is based on the understanding that the country already has an elaborate legal regimen (Patents Act, Trade and Merchandise Marks Act, Copyright Act and the Designs Act); that there are prior international conventions on protecting intellectual property; that since protection of intellectual property can affect market structures through unfair and restrictive trade practices, the bringing in of TRIPs requires the simultaneous formulation of a competition policy and a code on technology transfer. But above all, the fear is that the country is not yet ready for the proposed improved standards of protection - we do not have a threshold level of technological capability; given inadequate investments in human capital formation we do not have the required innovative ability; and given low per capita incomes our expenditure on R&D is insufficient.

In particular there is fear that with the shift from process to product patents, indigenous research and development will be adversely affected; that the granting of exclusive marketing rights will mean a takeover of relevant markets by foreign MNCs leading to monopoly pricing. This is most marked in the pharmaceutical sector.

Similar arguments have been raised regarding plant and seed varieties and micro-organisms - in particular that patent protection to animate matter is unethical, that seed trade will be dominated by MNCs and prices will go up, that bio-fertilizers will become the exclusive property of multinationals and that bio-piracy will dramatically increase. While there is little conflict over trade marks and industrial designs there are greater fears as regards geographical indications, integrated circuits and undisclosed information - partly because there are no specific statutes protecting these in India and there is little case law.

The greatest fear about the proposed reforms, however, derives from the fact that India has weakly developed enforcement mechanisms. The shift of intellectual property disputes from the arena of civil law to criminal law, and that the burden of proof, particularly in the case of process patents, falls on the defendant, may result in a criminalization of Indian producers. Similarly for the transition period from 1995 to 2005, applications for product patents have to be accompanied by exclusive marketing rights for a period of five years, granting the patent holder a monopoly without going through a due process. Finally there are conflicts about the dispute resolution mechanism in the WTO. Coming as this does in conjunction with cross retaliatory measures, the fear is that Indian industry will face unfair and discriminatory treatment.

Unlike the conflicts over manufactures, agriculture and services, IPR conflicts have primarily to be resolved through the law courts, often in non-national fora. It is thus not surprising that they have not excited the same level of public attention (except in the case of the pharmaceutical industry) or protest. Further, there are those who argue that many of the fears are exaggerated, if not unfounded, and that more than focus on anti TRIPs or WTO activity, the country should be focusing on improving its registration systems, strengthening it data base and enforcement mechanisms. They also argue that given proper environment and support, Indians can emerge as big players on the world scene and that a new IPR regime will in the long run improve investments in R&D and provide a fillip to innovation.

Finally, let us briefly examine the policy and debate on financial deregulation and liberalization. The primary object of financial sector reform is to improve the profitability of state-owned commercial banking and insurance systems and the functioning of the domestic capital market on the presumption that market discipline will improve efficiency in both. Reductions in the statutory liquidity ratio and cash reserve ratio have resulted in increased availability of credit for the private sector. Simplification of the structure of differential interest rates too has been welcomed. Also introduced have been new guidelines for functioning, accounting practices and prudential norms to bring them in line with international standards.

More contested have been the efforts at opening out the banking sector to private players including foreign banks, as also pushing public sector banks into corporatising. A primary resistance has come from employees fearing changes in working conditions and retrenchment. There is also fear that the ‘public good’ aspect of banking - lending to priority sectors - would as a result decline. If true, this would have a major impact on the availability of cheap credit to the informal sector and smaller players.

Simultaneously the capital market has been reformed to finance investment in the private sector and attract foreign portfolio capital. Rules governing foreign exchange inflow and outflow have been modified permitting greater capital account convertibility and repatriation of earnings abroad.

While many of the reforms dismantling over-regulation were needed, the system still remains under-governed because institutional and legal frameworks that would govern the market have yet to be put in place. This opens up the sector to grave risks as became apparent in the securities and banking scandals of the mid-90s and the proliferation of non-banking financial companies which have defrauded the small investor. Nevertheless, resisting the pressure to rush into current account convertibility, or open up the insurance sector despite pressure have been welcomed as prudent steps.


Despite the proliferation of literature on the decade old process of liberalisation (structural adjustment and reform) and globalisation, there is no consensus, even in expert circles, on the basics. For instance, have as a result of the reforms process initiated in 1991 growth rates accelerated? If so, what have been the implications for poverty and inequality reduction? It is claimed that the trend growth rate of GDP, pegged at a low of 3.5% till the mid-eighties, has increased to 5.8% in the decade 1980-90 and to 6.1% between 1990-98. It is further claimed that the improved growth rate is a result of economic reforms and that national poverty figures have dramatically declined (some claim to as low as 19-24% of the rural population and 15-20% of the urban population). The implication is that the reforms must be continued and deepened.

First the poverty figures. There is sharp disagreement between experts as to the mode of computing these figures - the technical point being the period of recall with respect to food consumption. This is because Indian poverty estimates are based more on consumption and nutrition data than income data. Nevertheless, most experts do agree that the incidence of poverty has declined in the last two decades despite disagreements on causal factors.

Looking at growth rates of GDP, it is now accepted that between 1980-81 and 1999-2000, on a trend basis, the domestic economy has grown at about 5.7%. The growth is higher in per capita terms because of decline in trend growth rates of population. This is laudable in a comparative frame because while debt and inflation ravaged large parts of the developing world, the Indian situation improved and remained stable.

However, there is as yet no statistically significant acceleration in the growth rates after 1991-92. Equally, there is no significant acceleration in the primary and secondary sectors. Finally, if one correlates poverty estimates with those of unemployment and under-employment, one finds that there is a distinct deterioration in the quality of employment (organised sector work force declined; it went up in the unorganised sector; self-employment declined; casual wage employment went up.)

So if poverty figures have declined, but unemployment has worsened, the likelihood is that the growth such as is is has helped only those persons, regions or segments of the economy that are already employed or better-off. In other words, the last decade of growth and macro-economic stability has been achieved at the expense of equality between individuals, regions and sectors. More sharply, the ratio of rural to urban per capita income has deteriorated; there is a secular deterioration in the ratio of unorganised to organised sector per capita income; there has been steady increase in inequality between major states; the factor shares between wages and profits have shifted in favour of the latter. In thus appears that the increased market orientation since the 1980s has hastened the process of a widening of disparities.

To restate, despite shared opinion amongst those who matter that economic liberalization is both necessary and virtuous, the actual picture on the ground is mixed. There is also the difference between the concerns of the government and those of the common people. Above all, are larger questions about a shared evolution of economy and society.

The short run objectives of the government seem to have been adequately met with respect to the balance of payments situation. There is, however, concern that though foreign exchange reserves have gone up, given the high proportion of short term debt and repatriable deposits, the situation is less comfortable than assumed. On managing inflation, the government has done well only if we have Latin American economies in comparison; a 10% inflation is high by Indian standards. Further, it has been kept in check mainly because of good successive monsoons and the absence of an exogenous shock - a situation that may change as a result of the recent oil price hike and the spectre of drought in significant parts of the country.

Similarly, the government has been less successful in its control of fiscal deficits - much of it achieved through a cutting down of capital expenditures and those on social sectors. Given that the revenue deficit of the government shows little signs of declining, it does appear that the fiscal regime remains unsustainable.

If we shift focus from the concerns of government to those of the common people - issues such as employment and poverty, agriculture and the rural sector, and infrastructure - both physical and social - we find that the reform process has not even begun to address these issues. We have already argued that inflation is high, and unemployment has worsened as has inequality. There is thus great concern over demands to reduce subsidies on public distribution of foodgrains, or dismantle public food for work programmes. Similarly, the decline of investment in rural infrastructure, other cutbacks in social sectors (education, health, housing) - both to reduce subsidy burdens and on the presumption that greater privatisation will improve efficiency - seems clearly misplaced. Trade reform in agriculture too may contribute to inflationary pressures.

The greatest problem, however, not all attributable to the shift in economic paradigm, is the continuing neglect of human resources, improvements in technological capabilities and the major increase in disparities. All these have already caused political tension which is likely to be exacerbated over time.

Wider Ramifications

So far our brief survey has remained focused on economic issues, possibly because the measures proposed and initiated as also the ensuring debate have been confined to the economic terrain. There are, however, deeper political and social implications of the turn-around of development strategy.

It is inadequately realised that the last decade, the reform phase, has also been the phase of significant political changes. Though most analysts have commented on the shift from a single party dominant system to one involving coalitional forms of rule at the Centre, less attention has been given to the widening and deepening of democracy in the country. Not only has the decade of the nineties seen a significant rise in the electoral participation of social strata hitherto marginalised from the political process (SC/ST/minorities/women), the emergence of new parties (regional/ethnic/caste based) particularly at the state level, and the institutionalization of a third tier of governance (panchayats and municipalities) implies that irrespective of what party/coalition rules at the centre, the system has to accommodate the diverse concerns of these new political formations.

It is so far unclear how the sharp escalation of inequalities squares with the deepening of democracy. Already at the level of the states (regions) one can witness conflicts between better endowed and high growth states and others. The recent brouhaha over the Finance Commission Report, wherein high performers have criticized the Commission for penalizing them for doing better in terms of devolution of finances is an indication of things to come. So far, the Central government had played an important role in the development of backward areas/regions by not only allocating additional resources to governments of poorer states, but providing positive incentives for private investment through tax holidays.

More than formal political parties and representative democracy, India has been fortunate in having a large and vibrant civil society. A variety of NGOs, both constituency and issue based, have been active in promoting the interests of their constituents through networking and advocacy to engineer policy shifts. The last decade in particular has seen a deepening of links between local civil society actors and international NGOs lobbying at the global level to mitigate what they perceive as deleterious effects of the new economic orthodoxy. Seattle is just an indication of this process.

The previous decade has witnessed the emergence of a number of groups, organisations and movements which, to varying degrees, have attempted to combine struggles for the rights of the poor and dispossessed with efforts to evolve a new perspective on development. These struggles draw on earlier (and continuing) movements such as those of Chipko against deforestation and a taking over of common property resources by industry; the fishworker’s movements in the coastal areas against incursions of mechanized trawling; efforts by miners in the coal mines of Chattisgarh against retrenchment or closures by setting up cooperatives to run the mines; by workers as in the Kamani tubes factory of taking over the enterprise abandoned by owners - and the examples can be multiplied.

What were earlier essentially domestic struggles against local private capital and the state’s economic policies have acquired a new edge with the opening out of the economy and the greater role of foreign actors. Coalitional formations such as the National Alliance of People’s Movements (NAPM) - a network of community groups, NGOs, trade unions and social movements, have in alliance with political parties both of the Right and Left sought to question and agitate against what they perceive as a ‘sell-out’ to the World Bank-IMF policies of liberalisation; privatization and globalization. In this, the Indian formations are attempting to work in concert with regional and global actors to challenge the new policy regime and thinking.

One major struggle has been against the U.S. power major, Enron, Which was awarded a contract to generate electricity in the state of Maharashtra. The struggle is not only against the terms of the contract signed with Enron but against the policy of relying on private capital to develop basic infrastructure. Similar struggles have been launched against the building of private ports, against World Bank sponsored social forestry schemes, against the coming in of private seed companies and agri-business, the opening out of sectors of production/consumption to large capital, domestic or foreign, which were earlier reserved for the small-scale or handicraft sector.

Each of these struggles/movements, singly and collectively, face a difficult challenge. At one level they need to effectively respond to demands of distributive justice-against growing unemployment and closures. Second, they need to be able to distinguish between national and foreign capital. Most important, however, is to effectively articulate and create a viable political constituency for an alternative development strategy - wherin political economy and political ecology considerations combine with issues of consumption and lifestyle.

Struggles against structural adjustment, internal liberalization and privatization, and globalization, all suffer from a deep ambivalence vis-a-vis the state. At one level, a strong and stable state is seen as the most effective interlocutor in the global arena. If anything, the Indian acquiescence to a range of WTO clauses in the nineties, and the rushing in of legislations to bring national legal regimes in line with international codes is traced to a weakening of the Indian state. That is why the routine reference to bowing down to US pressure. On the other hand, there is substantial relief that the Indians have successfully resisted pressures at full convertibility of currency, and retained some control over capital flows - thereby partially insulating the economy from the kind of shocks the East and South-East Asian economies experienced during their currency meltdowns.

So in international fora, what position should the Indian civil society actors/agencies take against their own state?

The situation is equally complicated when addressing issues of internal privatisation/liberalisation and structural reforms. Not just in the organised sectors, but equally if not more in the case of those in the survival economies dependent upon the natural resource base, the opening up of these resources to pressures of industrial capital, Indian or foreign, can and has resulted in increasing displacement and vanishing of jobs and activities. The struggles here are both against encroaching private capital and the state for altering the legal regimen to favour new investors. If, however, conditions have to be ensured such that the new activity does not mindlessly displace and destroy the old, movements need to work alongside the state (constructive oppositionism).

The issues remain equally complex when addressing issues related to social clauses - child labour, environment etc. The Indian campaign against child labour has tasted success through international campaigns against products involving child labour. Not only does this sully the country’s image abroad, it directly affects those involved with such production, reduces exports and thereby Indian participation in global trade. Like in the case of intellectual property rights, producers in the country argue that a premature imposition of global standards - from minimum wages to the environment - will only result in de-industrializing India.

These above issues are far from settled, as is to be expected. It is clear that those on the losing end of the new contract are unlikely to be satisfied with the trotting out of macro statistics on forex reserves, growth rates or poverty reduction. They will seek support wherever available to retain what they have, insulate local economies/societies from the shocks of deeper incorporation in national/global markets, and reduce the costs of transition. Only in the rare situation of finding newer and better paying markets for their products (high end handicrafts) will they be in favour of loosening up and opening out.

The above are probably some reasons why the politics and attendant mobilisation and discourse around the problematic of liberalisation/globalisation remains confused. Those in favour of speedier, second generation reforms accuse the government of lacking political will - particularly on issues of internal structural reform. They are betting on those who are either already strong or in a position to re-invent themselves to participate in the new, enlarged market - Indian software exporters are a case in point. This strata is convinced that despite transitional problems, there is not only no escape from increased participation in the emerging global order, that this route offers the best chances of escaping endemic poverty.

On the other side are those who place swadeshi and nationalism against globalisation. Many of these too are against a return to the old order. They foreground Indian society’s core values as providing the basis of resistance and want the nation to be guided by factors inherent to itself and not an unstable global structure and ever-changing global institutions.

A substantial section, however, is in favour of reform and change but not in the manner currently being pursued. It argues that the belief that the markets know best or that state intervention is not needed or is counter-productive in the process of industrialization is ahistorical. This discourse stresses a new contract between the state and the market; thus the talk of timing, sequencing and intensity of the reform process. Equally, it stresses the importance of transparency and accountability on part of the actors influencing reform and the need for democratically building up a constituency for change.






Ownership of structural adjustment - the rights approach in India

‘By the late 1980s there was wide consensus that the Indian economy had performed below potential since independence and recognition of the need for major policy change. Most, if not all, international agencies agreed.

Rather than signing a secretive agreement on a structural adjustment programme with international financial institutions, India engaged in an open policy discussion. There were, and remain, vociferous critics of the reform path being suggested. But the process of open participation and expression of opinion has led to two important results.

First, despite persistent political instability and fragile coalition governments, the broad consensus on economic policy reform has survived. All the major political parties have adhered to the programme. National ownership has not been the issue.

Second, India’s economic reforms have produced the most rapid growth in its history - twice the average annual rate before the reforms. This has underscored the importance of reforms - and led to public debate how the benefits of the growth should be shared among regions, groups and classes.

HDR 2000, Box 3.11, p. 69


The key to the gate of heaven is also the key which could open the gates to hell - old Buddhist proverb.

Danger and opportunity are so intricately intermingled in the liberalization of the Indian economy that the journey to the promised land of a well-functioning market economy could easily turn into a hellish nightmare and widening inequality for the majority. If it has not, it is because we have a democratic set-up and a relatively free press. It is this institutional framework of political democracy that we must learn to respect when devising economic policies.

Towards this end we must learn to assess liberalization not in terms of abstract principles such as economic sovereignty or even governmental concerns about forex reserves, control of fiscal deficit or a comfortable balance of payments position but everyday concerns of poverty, unemployment and inflation. Second, economic policies will be sustainable and beneficial if government spending shifts from consumption to productive investment, to the development of physical and social infrastructure, and does not involve borrowing from the public to finance consumption expenditure. Third, the process must ensure autonomy for producers with commensurate accountability, which implies transparency of functioning.

To go back to the beginning. Gandhi’s swadeshi demanded that ‘the dwarf must be raised to the height of a giant’; that the process involves attacking our entrenched ills and inequalities as much as combating the inequitous colonial order. Aurobindo’s understanding foregrounded that ‘all share in the struggle and suffering such that the nation could start with a fully developed unity and strength.’ Otherwise, we may well end up ‘embracing liberty over a heap of corpses’.

Art critic and historian, Anand Kentish Coomaraswamy added another dimension. For him swadeshi meant much more than making India self-contained and self-reliant, especially in respect of industry and manufactures. It meant doing without things which are not worth having. ‘Civilization consists, not in multiplying our desires and the means of gratifying them, but in the refinement of their quality... a nation which sees its goals rather in the production of things than in the lives of men must perish.’

It is unfortunate that without a grounding in a larger philosophical and societal vision, the debate on swadeshi has been hegemonised by economists and businessmen, polarised between the pro and anti liberalisers and globalisers. There is little concern how our resource-poor and relatively unskilled citizens can survive in a new, competitive and ever-changing marketplace without adequate safeguards and support from the state. More disturbing is the veritable absence of a political strategy, any discussion of instrumentalities, the organisations through which the competing visions hope to mobilise support. Clearly, the shift from the current political coalition to another, even if dominated by the Left, is unlikely to lead to any substantive change in the existential situation of the majority.

What of the need to go beyond the polarities of the state and market or the domestic and foreign? Such a view promoted by the social movements, seeks to question the very model of development and representative politics as inherently inequitous and unsustainable. It would rather locate itself in base communities, relying not just on their material resources but indigenous knowledge systems, in an effort to rework the discourse on progress. It however, remains on the margins of political discourse and practice in the country. let us not forget that India’s most visible social movement, the one against large dams on the Narmada river, despite sustained struggle for over fifteen years has so far been unable to block further construction of the dams. True, this struggle has sensitized Indian public opinion as never earlier, to the importance of both ecological sustainability and democratic participation. Nevertheless, concerns of political economy more than political ecology, continue to dominate.

It is with some difficulty that the country was able to make a dent in the earlier economic orthodoxy. Hesitant and half-hearted, crisis rather than strategy driven, it did embark on a process of re-defining rules and regulations in an effort to reduce the power of babus and unshackle the creativity of the producing classes. Possibly this might not have happened in the absence of an external impetus. The fear is that with a continuation of recession as more enterprises go under, adding to the woes of high unemployment and inflation - a call for swadeshi could turn xenophobic.

Insecure nations and societies have a way of turning inwards. Practicing swadeshi and svavalamban demands a measure of self-confidence. All too easily this can lapse into pride and self-glorification which, particularly if the present is dismal, can locate itself in the past. Accompanying this is a search for enemies, both internal and external. In addition to a Cargill or Coca-Cola, the frustrated also target all those who challenge the current dispensation. This today may appear a far cry but there are shades of national socialism in many of our nationalistic and anti-foreign outbursts.

The need today is to resuscitate a positive and inclusive swadeshi. To build and renew confidence in our abilities and skills, in our peoples and knowledge systems. Above all, to be willing to learn, to change and adapt, to keep our doors and windows open and not be swept off our feet. That is swadeshi.


The term swadeshi, like many Indian terms has a complex history. Literally, it can be transalated as native or national, defined in counter position to that which is foreign or imposed. In the modern Indian context, the term first made its appearance towards the cusp of the 19th and 20th centuries, when the country, an English colony, was suffering from the ill-effects of an economic policy which resulted in de-industrialisation and a transfer of economic surplus (drain) to the metropolis.

In 1905, in reaction to the division of the Bengal province, we saw the outbreak of the swadeshi movement. This was the first example of a popular link between economic and political freedom. Early industrialists reacting to the trade regime between India and England which sought to convert the country into a supplier of raw materials and a consumer of English manufactures described themselves as swadeshi and extended support to the nascent political struggle for Independence.

The current phase of neo-liberal economic reforms has generated similar fears, of the country being once again being colonised by Western powers, this time through multi-national firms. In many ways, it is seen that the country’s sovereignty is being eroded and autonomous decision-making power is being lost. Little wonder, the concepts of the last century are making a comeback.

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