This is a story about the political economy of institutional change – where institutions are viewed as normative frameworks that facilitate certain types of policies, and constrain other types of outcomes. If institutions favored economic self reliance, promoting trade and competitiveness would be difficult. To give just one example, if economic self reliance were the goal, it would be difficult to have a market driven exchange rate and reduce tariffs. If, on the other hand, export promotion were the goal, these policies would be an ideal fit. Tectonic shifts in policy are best understood as a change in institutions or policy frameworks, rather than being a case of simple policy change.
The literature on the political economy of India’s industrial transformation is rather sparse compared to the literature in economics on the roots of India’s growing competitiveness. The published work on the economics of industrial change provides important insights about the economic drivers of industrial competitiveness in India. These drivers needed to be embedded in politics for institutional change to occur. This project explores the political economy of institutional change in the world’s most populous democracy, whose growth rates after the 1990s have attracted significant attention.
There is a substantial literature on the political economy of industrial competitiveness in Asian countries. This intellectual effort has proceeded to conceptualize a “developmental” state as opposed to the notion of a “predatory” state. These concepts provide valuable insights about the importance of a state’s autonomy with respect to the industrial class. The promotion of industrial competitiveness, which is in the long term interest of capital, may not be favored by industrialists because of their pursuit of other short term interests. Conventional wisdom suggests that the “developmental” state in Asia needed to actively intervene and discipline capital for pursuing long term industrial development. How does the promotion of competitiveness in India’s democratic setting add to our understanding of the “developmental” state? Are we exploring a substantially different kind of state-society relations that promoted competitiveness in a political setting that was more penetrated by social actors than was the case in the well researched stories of the Asian tigers and China?
This research project will engage with a number of propositions that have been used to explain economic change in India and other countries that have embarked on the process of development. First, what was the role of financial crises? Second, did ideational change within the technocracy play a role in promoting competitiveness? Third, what were the drivers of ideational change? Fourth, were changes in policy paradigms driven by sociological factors such as the appeal of certain logics of appropriateness in a moment of crisis? Or, were they driven by a reasonably rational assessment of policy objectives and outcomes regarding the quality and magnitude of change required for promoting policy objectives? Finally, what was the relationship between Indian industry and the policy community when these changes were being introduced?
The project will examine four cases for addressing these research questions. The first case will deal with the period from 1966 till 1967, which experienced a balance of payments crisis, and a temporary retreat to trade liberalization in 1966. India’s trade promoting policies were reversed by 1967 and it reverted back to autarchic policies at a time when some Asian countries decided to promote competitiveness. This case will try to answer the question: why did India not promote competitiveness, despite the crisis?
The second focused comparison will examine a case dealing with the years 1990 and 1991. The period between 1985 and 1990 was a time when India promoted its business class but not its trade. It made a radical shift in policies by promoting trade after 1991, in the aftermath of a balance of payments crisis. Why did India implement globalization friendly policies in 1991, but not in 1966? Had India pursued industrial competitiveness and growth from 1966 rather than in 1991, it may have emerged as an Asian tiger in the 1990s.
The third case will examine the success in service delivery in India’s telecommunications – a sector that is among the most competitive in the world. It will examine how ideational and policy changes before 1991, interacted with the balance of payments crisis of 1991, to produce institutional change that promoted efficient service delivery. Finally, the project compares the success in Indian telecommunications with the relative failure in India’s power sector by conducting a study of power sector reforms in Andhra Pradesh (AP). AP enjoys one of the best governed state-level power sectors in India.
It is hoped that this project will not only throw light on the political economy of globalization in India but also on the political and economic dynamics of institutional change within a plural polity.
Under contract: co-author with Sumit Ganguly, India Since 1980 (New York and London: Cambridge University Press, manuscript communicated on February 16 2010).
Under preparation: Democracy and Industrialization in India: Political Economy of Industrial Change and Competitiveness.
“A Tiger Despite the Chains: The State of Reform in India,” Current History Vol. 109, No. 726 (April 2010), pp. 144-50.
“Political Economy of Reforms,” in Neerja G Jayal and Pratap Bhanu Mehta, eds., The Oxford Companion to Politics in India (New Delhi: Oxford University Press, 2010): 483-98.
“Interests, Wireless Technology and Institutional Change: From Government Monopoly to Regulated Competition in Indian Telecommunications”, The Journal of Asian Studies Vol. 68, No. 2 (2009), pp. 491-517.