Adjustment, Integration, Exclusion

Author(s): Dolly Arora
Date Published: July 16, 2006

The adoption of the Structural Adjustment Programme by the Government of India in 1991 implied an intensification of contradictory imperatives in the policy domain. In the course of an ideological shift from an interventionist state defining the basic rules of the game to a reinstatement of doctrines of market supremacy, the state has switched positions along issues and contexts, not necessarily to take care of the democratic constraint of not forsaking the voters completely, but often to make space for corporate players who want a range of commitments, compromises and concessions from policy makers. Economic growth has virtually come to be equated with their growth, and structural adjustment has come to mean adjustment coerced on the weak and the marginalized. It is adjustment inflicted by the state through policy or due to the very absence of it, in order to accommodate global players as well as interests and classes aligned with or subservient to them.

Globalisation in this scenario has emerged not only as the primary objective of adjustment, it also appears to have become a significant ideological vehicle for legitimating such accommodation. The key underlying proposition is that growth, efficiency and even the prosperity of people are conditioned upon globalization, and, therefore, on such accommodation. In effect, the present patterns of globalization - induced adjustment and reforms have generated the duality of integrative and exclusionary processes in the Indian economy and society.

The chief architects and proponents of the so-called reforms, the multilateral aid agencies like the World Bank the IMF and the WTO, the governments of industrialized countries, the big corporations and finance companies, and the policy makers of India at different levels, are building a new India. An India that integrates Indian elites into the global order and lends space to the global actors within this country. With freedom to exploit and prosper at the cost of the real people of India, of course!

Redefining India

Structural Adjustment and 'reforms' programme is only an attempt at redefining India and its 'progress'. Through SAP elite control over resources is being facilitated, whereas people of India are being deprived of whatever little control or use rights they had. This includes, both natural and other resources, including those of the public sector. The reasons extended for denial include, lack of efficiency and management skills among people and state functionaries. All else is forgotten, from the numerous non-economic but sustainable functions performed by the people when they manage these resources and the various reasons for unprofitability in public and private sector alike, to the social cost at which the private enterprises register profits. Privatization of commons, mines, water resources and public enterprises is made to seem crucial to the re-emergence of India as a powerful economy. Use rights are to be based on the capacity to pay for them. Those who cannot pay must stay away, the state does not seem to be concerned that these resources are crucial to their survival. The economy must be spared the burden of their survival needs.

With the advent of 'reforms', the crisis of policy process has reached its worst. Policy space continues to be used and misused much as the processes of policy formulation remain inconspicuous and shady. Control of aid agencies over the day-to-day functioning of the government is evident. Repeated experiences of conditional loans, accompanied by threats of withdrawal if conditionalities are not met speak for themselves. The World Bank, for instance, has pressured various state governments to 'reform' the power sector, restricting use to those who pay for it to ensure profitability. Recommendations, suggestions and conditionalities cover a wide range of issues. It is telling that the Eighth Five Year Plan of India could be adopted only after being approved by aid agencies, while the approval of the Parliament was not considered necessary.

The total silence on the part of policy makers on problems generated in the process of 'reforms' is quite disturbing. Proponents of reform have ignored the worsening of regional, class and gender inequalities, deepening of resource-based conflicts in rural society, growing powerlessness due to displacement of local knowledge systems by exogenous and centrally controlled technologies and processes. The emergence of new contradictions due to lopsided policy priorities, as in the case of aggressive export promotion for meeting growing consumer imports have not been given any serious attention by the proponents of reform.

The evasion of any talk about the negative outcomes of the policies advocated, withdrawn or altered in the course of adjustment raises questions not just of perspective, but more than that, of accountability. Attempts to delay the release of the mid-term appraisal of the Five Year plan and to tone down its critical content are a serious comment on the degeneration of policy processes in this era of 'reforms'. But this style of functioning of the state is crucial for the very execution of the 'reforms' which simply do not wish serve the needs of those who live at the margin, and who cannot even hope to become world class consumers.

Global Quest for Markets

Globalization is being vigorously advocated by powerful international actors - economic and political- as the need of the hour. It is being projected as a strategy of growth which will serve those who accept its chartered course of action. In reality, it is just a promising device to bail out the industrialized world from its growing problems of unemployment, recession and stagnation. Not surprisingly, then, while international agreements ensure the movement of goods across countries, increasing restrictions are being imposed on the movement of people across borders, through immigration laws.

The World Bank is candid about safeguarding the interests of the U.S. Its media campaign last year, worth five million dollars, was designed to bring home this very point. The advertisements underlined that the developing countries "now purchase almost $200 billion in US exports, creating nearly four million American jobs". And the initial cost of developing new markets has been low - "for every dollar the US provides, more than $4 is contributed by other countries. At a time when the budgets are tight, that's good banking", claims the Bank.

The opening up of the economy has only generated pressures for various kinds of policy supports that are now being demanded by foreign governments on behalf of their investors and exporters. This political dimension to the process of adjustment and reforms raises doubts about the genuineness of restoring market principles. Not that a complete withdrawal of the state in favour of the market is desirable, but selective use of state interventions to further the interests of the powerful cannot be justified.

In its quest for markets, foreign capital has effectively used institutional mechanisms like joint business councils, inter-regional chambers of commerce and of late commercial alliances to extract favourable state policies and, thereby, better terms for themselves. Regional groupings have also become more active in influencing the conditions of operation in the Third World. But even more significant has been the role of bilateral negotiations in shaping the conditions and outcomes of operation of foreign business. For instance, government and business interests from Canada have together worked out a strategy called "Focus India" launching a Team Canada Mission that is described as the launching point of Canadian trade development in India. Interestingly, while its strategy applauded the opening up of India, it underlined that enhanced bilateral consultations and formal mechanisms would help build commercial linkages between the two countries and gain more secure access for Canadian exports and investment. Towards that end it suggested "an increase in high level visits, public relations and an extended diplomatic presence to be undertaken to improve Canada's political relationship with India." "Canadian trade commissioners will continue to be a vital link between Canadian business and Indian market by providing timely market intelligence and advice to exporters."

Team Canada consisting of 400 businessmen was led by none other than the Canadian Prime Minister and nine premiers and territorial leaders. It signed US$326 million worth of new deals with Indian companies and the Export Development Corporation of Ontario signed a Memorandum of Understanding with the Exim Bank of India to establish a line of credit for US$ 10 million to support the sales of Canadian goods and services.

Political dignitaries of several other countries have also accompanied their respective trade missions to India. Significant among these were, the Minister of Trade and Industry from Singapore, the President of the Board of Trade of UK, the Minister of Trade and Shipping of Norway, and important Ministers from Germany, Ireland and Thailand. In other words, business is definitely not being left to the whim of "market forces" by the metropolitan capital.

The growth in Indian imports from most industrialized countries in fact points less to the needs of India and more to the latter's desperation to increase their exports. Often, junk goods, some of them even hazardous to health, are dumped here. Policy makers have been under constant pressure to further liberalize Indian imports. At the recent WTO meeting, the U.S. along with several other countries increased the pressure on the government of India to change its consumer goods import policy. The government of India has already promised further liberalization at a time when imports are already growing at a much faster rate than exports. It is noteworthy that imports from U.K. were up by 19 percent in the first nine months of 1995 as compared to the previous year while exports rose by only 9.9 percent. During the financial year 1995-96 our exports to the U.S. are expected to drop by 11.8 percent while imports are expected to rise by 40 percent.

In this process of entering India, the support of the Indian business community is also considered crucial. And often this is forthcoming, through institutional avenues, which make space for tie-ups at the level of business. The Partnership Summit organized by the Confederation of Indian Industry (CII), for instance, was a gathering of 2000 delegates, including foreign and Indian policy makers and businessmen.

Tie-ups between foreign and Indian business interests, however, have also intensified conflicts between them as well as within the Indian business community, due to differing capacity to collaborate and compete. The conflicting positions of Indian business on issues such as conditions for the operation of foreign business, government policy on portfolio investment, desirability of maintaining exchange rate stability, as well as on specific decisions such as exports and imports of specific commodities are indicative of the multiple ways in which Indian business is being affected.

Steps towards globalization have also caused considerable strain on small-scale businesses. Their position has worsened even though this change is camouflaged by raising the limits of investment in defining "small-scale" or by opening up this sector for foreign investment. In the past, the Industrial policy has protected this business segment by reserving production of certain goods for this sector, but today those who are getting this protection are not so small. The expectation of generating employment through this sector is also unlikely to be met because increasing accent on technology intensive production processes. The real small producers are being pushed into the less profitable and 'dirty' spheres while better prospects in this sector are being captured by the not-so-small industrialists. Every sector, in fact, is creating better opportunities for some while making things worse for the majority.

Even if the present capital intensive pattern of development initially results in the generation of some jobs in the organized sector, it is unlikely that this growth in employment will be sustainable. The growing unemployment problem in most of the industrialized countries, even when they are able to dictate the terms of trade, make this clear. Worse still, this is happening at the cost of loss of existing jobs or work opportunities in the unorganized and informal sector. The new jobs being created in the small sector are the dirty ones, as can be seen in the recycling industries which are springing up from dumping of waste.

The precise nature and limits of globalization are well reflected in the addresses delivered at number of business gatherings. To illustrate, the President of the Indo-Canada Chamber of Commerce, while addressing a gathering of businessmen in the U.S., said that improved economic activity had given birth to a growing "yuppie" culture, and the beneficiaries will be those firms from the U.S. who pay attention to the multiple income urban households. Indeed, it is this section of the Indian population which interests foreign business. And it is their lifestyle which is sought to be changed through globalization strategies of the state and business alike.

Environment, Technology and Resources

All investments in and exports to India are definitely not meant only for the elite. India is also becoming a dumping ground for the rejects of the West - technology and industrial waste as well as consumer products. In the past five years India's imports of industrial waste, have grown by 60 percent. Ostensibly, this import is for recycling, but in practice most of it is just dumped. Even when recycling takes place the processes are full of health hazards. Ironically, this happened in a phase when the Indian government has faced increasing pressure to commit to Environmental protection measures, and when Indian exports are restricted because they are not eco - friendly. The setting up of hazardous industrial plants is on the increase. Approval to Dupont despite strong local protests is only one of many such investments.

Large sums of money indeed are being committed by global players to environmental matters. But the way these are to be spent points to their real interests. A considerable proportion is earmarked for technology import. For instance, the grant of US $1,755,000 from Montreal Protocol's multilateral fund to assist in phasing out use of chloroflourocarbons, will be given to five foam manufacturers in the private sector for import of eco-friendly technology equipment and training.

Environment has become big business and is recognized as such. A report of the US Commerce Department emphasizes that India's rapid industrialization has spawned a substantial environmental market, conservatively estimated at US $150 million, with a potential annual growth rate of 20-25 percent, which can be exploited by the U.S. businesses. These aspirations become problematic when technological fixes are offered as solutions to problems rooted in complex socio-economic realities, and assistance is offered to facilitate the sale of technology or goods.

Growing Contradictions

Contradictions generated by these new policies are often being deliberately overlooked under the pressure to achieve results of a certain kind. The immense ecological destruction and the loss of livelihood of hundreds of farmers due to excessive shrimp farming is ignored by policy makers when a uni-dimensional approach is adopted for assessing costs. Only dollar earnings and contributions to the Gross Domestic Product find a place in official reports.

Indiscriminate deep sea commercial fishing has also been a source of resentment in many regions of India. As a consequence local fisherfolk have suffered a decline in catch per trip, damage to their boats and nets and the destruction of potential grounds. The nationwide agitation of fisherfolk supported by all major trade unions is an indicator of the miseries inflicted on the poor.

While intense struggles have been going on against these policies for some time, interest groups served by these export-oriented policies have organized themselves too. They are not only accusing the challengers of being inconsiderate but are also demanding further concessions. The Orissa Shrimp Farmers' Association accused the opponents of shrimp farming of being "pseudo-environmentalists and eco-terrorists, jeopardizing the livelihood of thousands of prawn farmers and villagers dependent on shrimp farming." It has also demanded a separate aquaculture department to make its interests more secure from agitations. There is no doubt that some people are forced to adopt unsustainable ways of livelihood under pressure. But in many cases this is a profitable mode of living without having to bear the costs.

The corporatization of agriculture, advocated under pressure from business organizations, agri-business corporations and the rural rich alike, is also giving rise to processes of exclusion and marginalization in rural India. Numerous concessions being offered for agro industries and exports have made agriculture lucrative for businessmen. Pressure is now mounting to change land ceiling laws and permit agri-business corporations to acquire large tracts of land which will change the face of rural India. This change is already visible in the growing intrusion of urban black money into rural land deals, and consequent incidence of landlessness, migration and exclusion of the weak and the vulnerable. Simultaneously, it is reflected in the growing purchasing power of the rural elite which is more than willing to become an element in the global chain of agri-business corporations.

The nature of ownership and control of agricultural processes as well as cropping patterns are changing in response to policy shifts. Some of these changes have serious implications for the future. Primarily on account of policy changes, for instance, commercial flower cultivation has emerged as a major economic activity in the metropolitan cities which are well linked to the world markets. Many industrialists and big business houses have been attracted to the lucrative prices which Indian flowers fetch abroad and this has been responsible for significant shifts in the area under cultivation. In the state of Haryana, the area under floriculture has gone up to 1600 hectares from 50 hectares in a space of four years. At least thirteen projects, with an outlay of 1127 million rupees and estimated to produce 65 million cut flowers annually, have already been set up. According to the Agribusiness cell of the PHD Chamber of Commerce. floriculture exports from India are expected to touch Rs 5 billion by the year 2000, up from the present turnover of Rs 180 million. Other cash crops in demand in the global market have witnessed similar expansion over the years. Food grain production is under serious pressure due to corporatization of agriculture.

Farmers' organizations are agitated at the processes being unleashed. Warnings have been sounded, as in the state of Karnataka by the State Agricultural Workers' Union and the state unit of All India Kisan Sabha (farmers' organization). They contend that India will become a major producer of fruits and flowers, if such a policy is encouraged throughout the country. As a result the country will lose out in terms of food security and cultivation of food grain where developed countries already have an edge. "We will end up as the banana republics in Central and Latin America and will be totally dependent on grain producers such as the U.S., Canada and the E.U." they argue while opposing the policies which encourage this "switch from food to ornamentals". Farmers' organizations in Andhra Pradesh have called the farmers to resist the moves of big companies to acquire lands at high rates, whether by leasing or by outright purchase.

Corporations are not only interested in the land but also in exploiting the increasing buying power of the rural elite. The CII explored the possibilities recently and brought out a document to show that there is a surge in demand for consumer products in villages. It is estimated that rural expenditure on packaged goods is growing at 23 percent. Already the rural markets account for over 70 percent of the sale of portable radios, mechanical wrist watches and bicycles; between 60 to 70 percent of sales of Quartz watches; sewing machines and table fans; 40 to 60 percent of sales of black and white television sets, motorcycles, cassette recorders; and 20 to 40 percent sales of small colour televisions, mixer-grinders, and electric irons. And the document emphasized, that this suggests that opportunities for business in the rural area are worth paying attention to.

This does not mean that business is thinking of the needs of rural India. Its objective is limited to tapping the purchasing power. That rural India lacks public amenities is no doubt a limitation to entering this market. Only 32 percent of villages can be reached by metalled roads, 31 percent have no bus connection, only 16 percent have banks and 31 percent have post offices. And business is worried about it. The class with purchasing power is small and rural poverty is growing. A majority of rural people would still be out of the processes of integration, no matter how much rural business expands.

The present model of adjustment simply fails to address the processes of marginalization underway in present day India. While multiple schemes have been floated during the past year to project a pro-people image of the government, these remain symbolic exercises, not only because of lack of funds but also because of caution being exercised in implementing them. For instance, the Prime Minister's Employment Scheme for educated unemployed youth in the state of Bihar faced rough weather because commercial banks could only disburse loans to 2,386 persons against the target of 22,150 in the financial year 1994-95. Overall, 27,859 applications were received by the banks. The Reserve Bank of India directed the banks to disburse loans in a phased manner. Finally, only 1.29 million rupees were disbursed, averaging a little over 50,000 rupees per applicant, as the banks wanted to avoid making bad debts. Incidentally, a loan of Rs 100,000 was to be provided to each person under the scheme. Even if these schemes were to be carried out effectively, it is doubtful that they could make a significant dent in the overall situation which is going from bad to worse.

Towards An Alternative Agenda

An alternative agenda does nevertheless seem to be emerging, through the very reality of struggles being waged in different parts of the country. This agenda belongs to those who have been forgotten or marginalized or sacrificed to carry out the Structural Adjustment Programme, but who live on. It speaks not of the multinationals and large development projects; nor of privatization and profits; or of the freedom of the market. Instead it speaks of the plight of the people of India at large and of the impossibility of the present pattern of adjustment offering them any succour. It speaks of the struggles of the people, the real people of India, who cannot possibly hope for an integration with the global economy or the lifestyles of the Indian elite, for their struggle is the struggle for survival and sustainability. Structural adjustment must be restructured and reforms must be rewritten if only to account for the lives and struggles of the real India. Policy makers must give up the illusion of progress under adjustment and confront the challenges facing this India. Else there would be no time left for them.

(This article is an extract from Alternative Economic Survey 1995-1996)

Dr. Dolly Arora is a Reader in Political Science in Bhagat Singh College, Delhi University and active in Women's Movement