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Liberalisation in India

Part II Paper 26. Topic 28: Globalisation, Inequality and the Politics of Culture. Last essay of term! I was supervised by Leigh Denault at Churchill.

Liberalisation in India has merely perpetuated old hierarchies and entitlements. Discuss.

Following independence in 1947 India opted to follow socialist influenced economic policies, nationalising major industry and making it difficult for private business enterprise to flourish. In 1991 it was finally recognised that the current system was failing India and a process of economic liberalization was initiated. The effects however have not been as positive as many would have liked. Poverty continues to be a problem; the sectors of society that had suffered before liberalization still experience many of the same difficulties. To a large extent the old hierarchies have continued to be the main beneficiaries of industry and government infrastructure; corruption remains rife for instance. This essay seeks to examine the impact of liberalization, and to highlight the long road India still has to travel before liberalization can be viewed as a real success.

Following independence India decided implemented a series of socialist polices. Figures like Nehru, India’s first prime minister, believed direct state control would ensure rapid economic growth, allowing India to become a powerful state in its own right. The government however faced massive challenges in the aftermath of partition. Cotton, for example, had been primarily grown in East Bengal under British rule. Partition saw this area incorporated into East Pakistan, meaning not only had India lost valuable resources, it now had to give over cultivatable land to cotton production. Combined with the large numbers of refugees and general upheaval created by partition it is perhaps unsurprising that serious economic growth failed to materialise. In fact the low annual rates of economic growth, stagnating at around 3.5%, were referred to derogatorily as the ‘Hindu rate of growth’. By the late 1980s the comparison between India and the so called ‘Asian Tigers’, countries like Taiwan and South Korea, was stark. The government was finally forced to acknowledge the problem, and to begin liberalising industrial practice culminating in a broad package of reforms in 1991 which were labelled ‘liberalisation’ by the contemporary Indian media.

At first glance, liberalisation appears to have massively changed the expectations of Indian people, reshaping the country’s economic landscape and presenting new opportunities. Innovation led to economic growth rates rising to around 6-8% per annum. Foreign investment in India played a large role in this, increasing from $132 million in 1991-1992 to $5.3 billion by 1995-96. This rapid growth reflects the dismantlement of the so called ‘Licence Raj’ of the previous decades, referring to the complicated process of obtaining licences for private enterprise. Only 18 industries remained subject to licensing, and privatisation began to become a reality for India’s stagnating government corporations. In 2007 India’s annual GDP growth was second only to that of China, widely recognised as the next economic superpower. Such figures present a glowing picture of liberalization, implying that the situation for average people within India must have improved drastically in line with these statistics.

The increase in car ownership can be examined as an example of the improving standard of living in India. Before liberalisation Edward Luce claims that only important political figures like ambassadors were likely to own a car. Today it is one of the fastest growing markets in the world. In 2000 0.5% of the Indian population owned a car; by 2007 7 in 1,000 were driving. It is predicted that India will be the third largest consumer market for automobiles by 2015. This increased demand led, in turn, to road building projects. Highways were laid to link India’s major cities. In 2007 the Indian Ministry of Commerce and Industry told the BBC they were laying 14km of road per day, compared to 7km in 2004.(see 2) This level of private car ownership in India would have been unthinkable before liberalisation, suggesting that it is no longer just the political elite who are benefiting from the Indian economy.

A closer look at India’s situation however reveals a less positive image. Edward Luce highlights the problems caused by the slow rate of urbanisation. Of a population of around 1.1 billion people, roughly 750 million continue to live in villages. This, of course, was preferred way of living advised by Gandhi before India had even achieved independence. Ambedkar was unconvinced, stating: ‘The love of the intellectual India for the village community is of course infinite, if not pathetic … What is the village but a sink of localism, a den of ignorance, narrow mindedness and communalism?’ It is this more negative interpretation of the village which rings true for modern India. Of 680,000 villages, Luce claims that around half do not even have access to all-weather roads. Cut off from adequate health and education provision, little improvement can be made. Even apparent increased literacy is revealed to be something of a sham on closer inspection: half of India’s women are technically literate, yet it is argued that a significant proportion of these can do nothing more than sign their name. Here we see an India in which those who have traditionally been marginalised, women and the rural poor, continue to suffer.

Rural areas see poverty exacerbated by the survival of the caste system. Whilst it is true that caste segregation has been broken down to a large extent in urbanised areas, in accordance with the outlawing of caste based discrimination by the Indian constitution, over 70% of the Indian population continues to live in the countryside, urbanisation having increased by less than five percentage points between 1981 and 2001. This has led to a contradictory situation. On the one hand there has been far reaching social mobility. K.R. Narayanan who became President of India in 1997 belonged to a caste formerly regarded as ‘untouchable’. On the other hand 16% of Indians are still classed as ‘Dalit’, or ‘untouchable’. Even if they escape to the cities many find themselves living in squalid urban slums, still finding this preferable to the ingrained prejudice they face back in the village. In 2006 74 per cent of people questioned claimed they did not approve of inter-caste marriages. It is clear that caste continues to be something which divides India.

Traditionally the most coveted jobs in India were government positions, and these were almost exclusively preserved for the elite. During the time of the Mughal Empire these jobs went to educated Muslims, and this continued to be the case throughout the nineteenth century. However the rise of Hindu nationalism, and ultimately partition saw change. Today working for the government remains the ambition of many Hindus. Not only does it offer extensive job security, its high rates of pay and plentiful non-cash benefits such as subsidised housing and electricity make such a career a highly attractive option. This protection comes at the cost, many argue, of transparency. V.J. Kurian told Edward Luce that in Kerala corrupt officials are admired more than those who are scrupulously honest. ‘They say if you’re not making money, you must be really stupid.’ Rajiv Gandhi, former Prime Minister of India, estimated that as much as 85 per cent of all development spending in India was pocketed by bureaucrats. Bribery, too, is rife; BPL (Below Poverty Cards) which should help those in need to obtain subsidised food are regularly obtained through bribes, meaning subsidised food is being stolen from those who need it. Government jobs remain in the hands of the educated middle and upper classes, proof that the traditional hierarchy of privilege is being preserved.

Some would argue that the examples put forward in this essay are too pessimistic, too focussed on India’s problems rather than the massive improvements which have been witnessed since liberalisation. One such area is education. Before independence less than one per cent of India’s ‘untouchables’ were literate. Today this figure is estimated to be in the region of 35 per cent. Amongst other sectors of society the quality of education depends very much on what you can afford to pay. There is a growing attitude in Indian private industry that it is important to hire the person best qualified for the job, rather than taking on employees as a form of familial patronage. The IT industry in particular offers great opportunities for social mobility. But to be employed by such companies, you need to have received an adequate education. This is why, although there has been significant change, it can still be argued that liberalisation in many ways has perpetuated traditional hierarchies of privilege. Upper castes can afford better education, and so continue to secure good jobs.

Income is obviously inextricable from how successful people are in the job market. So whilst disposable income has been rising in India, as evidenced by the growth in private car ownership and the increasing ‘brand culture’, how much this impacts on the lives of ordinary Indians can differ greatly. The lavish wedding ceremonies depicted in Bollywood movies might be filtering down through society, yet for many they remain an escapist dream. In Bihar less than one in ten homes even have electricity, the divide between the ‘haves’ and ‘have nots’ of modern India appears to be as large as at any time in Indian history. The image India wants to present to the world is made up of modern success stories, the glamour of Bollywood and the influential software sector which has the ability to compete in the world market. Liberalization, which has allowed this image to be constructed, hiding India’s problems, can be said to perpetuate traditional privileges by preventing outsiders from looking too closely at the reality.

Although this essay has spoken of India in general terms, it should be remembered that it is far from a homogenous state. Whilst there are obvious class differences, and differences between rural and urban areas, conditions also differ greatly from region to region. In Bihar for example there is successful political coalition between Muslims and Hindus of the Yadav caste, described by Luce as the ‘traditional cow-herder caste of north India’. Corruption is high, whilst the economy is struggling: residents of Bihar have the lowest life expectancy in India. Life here is very different in that in Tamil Nadu, the most urbanised state in India. Here the chief secretary told Luce: ‘we estimate that roughly thirty per cent of public resources are diverted in Tamil Nadu, compared to about seventy per cent in the north.’ Almost ninety per cent of its population is literate. In a highly efficient, organised state education has enabled people to work liberalization to their advantage. In the corrupt states of north India it has done little more than continue to line the pockets of the traditional hierarchy.

In conclusion, liberalization has been beneficial for all sectors of Indian society. Poverty has been reduced, and the economy has witnessed massive growth allowing India to compete for the first time in the modern economic market. However the transformation has been neither as radical nor as complete as many would like to claim. Upper castes continue to benefit from job opportunities, having the money to secure the necessary education. In turn they then safeguard the future of their children through education. Corruption continues to be a huge problem which sustains the traditional hierarchies of privilege. Upper castes hold government positions, which allows them to benefit from not only government subsidies but also the complex system of bribes which operates in modern Indian society. In short, whilst there has been improvement, and a move towards greater social mobility, India still has a long way to go.


  • Appadurai, Arjun. Modernity at Large: Cultural Dimensions of Globalization, Public Worlds V. 1. 
  • Minneapolis, Minn.: University of Minnesota Press, 1996. 
  • Luce, Edward. In Spite of the Gods: The Strange Rise of Modern India. London: Little, Brown, 2006. 
  • Nussbaum, Martha Craven. The Clash Within: Democracy, Religious Violence, and India's Future. Belknap Press of Harvard University Press, 2007.


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