Never since the early days of independence has any government in New Delhi received the kind of acclaim that Rajiv Gandhi’s has enjoyed from bourgeois commentators at home and in the West.footnote The eastern bloc, if not so vociferous, has certainly not sounded a dissenting note. The ‘Rajiv wave’ first gathered momentum in the general elections of December 1984, held in the wake of Mrs Gandhi’s assassination. The following March, a Congress(I) party in decay seemed to have been miraculously reinvigorated when it scored a solid performance in the state assembly election. Then came the ‘new wave’ budget, which was promptly hailed as an unmistakable sign that the Indian ship of state had embarked upon a new course, steered for the first time by a talented and determined young captain. In the face of this deluge of rhetoric and hyperbole, any rational evaluation must first attempt to situate the Rajiv government and its prospects within the essential contours of bourgeois domination (and the challenges to it) as these have evolved in the last decade and a half—a context which can hardly be obliterated by the mere election of a new administration. During these fifteen years or so the Indian polity has been marked by an endemic crisis of leadership, within the framework of a real, though weak, bourgeois democracy. It is the relative dynamism of the capitalist economy, however, developing in constant tension with an unsettled political life, which should form the starting point of our analysis. Already at the achievement of independence in 1947, the Indian bourgeoisie displayed considerable autonomy and power by comparison with other ‘Third World’ countries. With the Congress party in government, the structures of the Indian state were then utilized to advance this relative strength. The country was insulated from the world economy, so that it might be later integrated at a higher level when the relationship of forces with the imperialist bourgeoisie was more favourable. In the process a solid economic infrastructure was established with Soviet and East European help, and by the early seventies the foundations had been laid for a self-generating process of industrialization whose dynamics of growth and major constraints were essentially internal.

The record of Indian economic development since then stands out by virtue of its consistency. Annual growth rates have never reached the heights of a Brazil or South Korea, but nor have they been subject to the buffeting that the world recession has caused elsewhere. Whereas the average annual rate declined from 9.8 per cent in 1965–73 to 4.8 per cent in 1973–83 in the case of Brazil, and from 10 per cent to 7.3 per cent in that of South Korea, the Indian rate actually increased from 3.9 per cent to 4 per cent over the same period. Moreover, India’s growth has not been the result of integration into the world division of labour or export-oriented industrialization: its overall ‘space’ in the world economy has indeed shrunk, even as its export base has diversified in terms of products and customers.footnote1 Its level of external debt compares very favourably with that of other major Third World nations, and the proportionate burden of its debt service fell from the sixties to the seventies to total a mere 0.7 per cent of gnp by 1983, when the corresponding figures for Mexico and Brazil were 7.3 per cent and 3.5 per cent respectively.footnote2 Indian industry has undergone impressive diversification and built up substantial reserves of skilled manpower, technicians and scientists, while its domestic market has expanded considerably on the basis of an income distribution that does not differ markedly from Mexico’s or Argentina’s. These achievements are all testimony to the success of Indian state policy.

One peculiarity of India’s growth pattern is that the secular rise in gnp has relied upon historically exceptional performance in agriculture, where output has increased by a yearly average of 2.6 per cent since the early seventies. In the second half of the sixties India was seriously dependent on the West for food imports, but self-sufficiency in grains was gradually achieved so that 1979—the year of perhaps the worst drought of the century—passed without widespread famine or heavy imports. The extension of Green Revolution techniques to rice-growing, the enormous potential for further irrigation (both major and minor) beyond the 25 per cent or so of cultivable land presently covered, for extensive planting of hyv seeds, for farm mechanization, multiple cropping and greater use of fertilizers—all these suggest that as high if not higher agricultural growth rates can be sustained for another decade.footnote3

Industrial growth, by contrast, has slowed since the period of major infrastructural development. Here, at least, the numerous theorists of ‘stagnation’ have historical data on their side. But before drawing conclusions for the future, it is necessary to take account of the recomposition that is taking place within Indian industry as a whole. First, as Table 1 shows, the weight of Department I (basic, capital and intermediate goods) is growing in relation to Departments II and III of the economy: that is, industry is more and more becoming the best customer for industry—the characteristic of all industrialization processes with a strong self-generating thrust. Secondly, within basic goods (heavy chemicals, electricity generation, aluminium, etc.), capital goods (motor vehicles, machine production, etc.), intermediate goods (synthetic fibres, petroleum products, etc.) and consumer goods (electrical appliances, pharmaceuticals, etc.), the more modern sub-sectors have strengthened their position vis-`-vis older ones such as mining and quarrying or steel (basic), railway wagons (capital goods), cotton spinning and jute products (intermediate), cotton textiles, tea and sugar production (consumer goods). Growth rates in the newer sub-sectors tend to be higher than the sectoral average and in principle exert an upward pressure on the industrial economy as a whole. As yet, however, the relative weight of these sub-sectors has not passed the critical point at which they would pull up the overall growth rate in industry,footnote4 and there are various supply-and-demand constraints which prevent too ready an assumption that this will happen in the near future. Nor is it possible to ignore the overall cyclical character of capitalist growth in India or the fundamental barriers to the emergence of a ‘long boom’. One of the most important of these is the low and declining rate of labour absorption in factories, mines and plantations, down from 3.04 per cent a year in the early phase of industrialization to 1.91 per cent in the period from 1965 to 1975. This trend has been reinforced as a larger role has been taken by the private sector, where labour absorption progresses more slowly than in the public sector.

Of lesser significance is the ‘poverty syndrome’ or ‘low purchasing power’ constraint so often referred to by left-wing economists and activists. The persistence of desperately high levels of poverty in India has not been a matter of dispute within the left or among bourgeois economists and commentators—if, that is, we leave aside the handful of government ideologues who blatantly and crudely distort statistics to argue that the sixth plan period (1979–80 to 1984–85) has seen a dramatic reduction in poverty levels from 45 to 30 per cent of the population with the promise of a complete elimination of mass poverty by the turn of the century. Serious economists like Raj Krishna have shown that the relative level of mass povery has remained stationary or slightly increased, and that by the year 2000 a mere extrapolation of existing trends will give 394 million below the poverty line (a figure equal to the total population at the time of independence!).footnote5 However, advocates of the ‘poverty syndrome’ thesis then go on to conclude that there is no foundation for sustained capitalist growth—as if the test of a successful capitalism were the degree to which it eliminates poverty rather than its establishment of conditions for the reproduction of capital on an ever-expanding scale. No doubt the ‘healthiest’ scenario for Indian capitalism would be the mass production of consumer goods for the whole population, rather than the elite-oriented industrial production that currently holds sway. It is also true that the inability to effect a massive redistribution of income constitutes the outer limit to vibrant capitalist growth in India. But it is just that—an absolute outer limit. Less ‘healthy’ scenarios can perfectly well afford the space for capitalism to prosper, more or less at the rate of recent years. Indeed, it is reasonable to assume that the skewed distribution of income has actually deepened the market (ten per cent of the population, or 70 million people) towards which the industrialization drive is directed, and the cuts in direct taxation announced in Rajiv’s first budget will actively boost this effect. To the extent that rural kulaks acquire rising cash surpluses and demand more consumer goods, there will be a further expansion of the market for this type of industrial output.footnote6