Thirty years ago, on 24th July, the then Finance Minister Manmohan Singh presented the first budget of the Congress-led government headed by Narasimha Rao. That government had just been formed after the election of the 10th Lok Sabha, during which former Prime Minister Rajiv Gandhi was assassinated.
Finance Minister Manmohan Singh declared that the balance of payments situation was precarious, with foreign currency reserves not enough to even pay for one month’s imports. He said the central government’s finances were in crisis, with very high levels of debt and interest payments. He declared, “We have not experienced anything similar in the history of independent India”. He then unveiled a program of major changes in policies, laws and regulations relating to trade, investment and the public sector, broadly in line with the prescriptions of the World Bank and the IMF.
The 30th anniversary is an occasion to look back and analyse the program which was initiated in 1991. Why was it initiated? In whose interest was it initiated? Who all have benefited and who all have been harmed by the program of liberalisation and privatisation over the past three decades?
Why and in Whose Interest?
Since the end of colonial rule in 1947, the agenda for economic development has been set by the wealthiest capitalist business houses. The policy framework which was adopted in the 1950s was formulated by the Tatas, Birlas and other big business houses, taking into consideration the conditions prevailing in the country and on the world scale at that time.
A few years prior to the transfer of power, the Tatas, Birlas and other big industrial houses had worked out the policy and plan for the development of capitalism in post-colonial India. It was called the Bombay Plan and published in two volumes in 1944-45. That plan, popularly known as the Tata-Birla plan, was the basis for the first three five-year plans in independent India.
When British rule came to an end, even the wealthiest of Indian capitalists did not have adequate capital to invest in heavy industry, energy and other infrastructure required for industrial growth. They decided that the central government should mobilise the financial resources for such investments, through taxation and borrowing. In order to dominate the domestic market for manufactured consumer goods and transport vehicles, the big capitalists wanted the government to adopt a policy of restricting foreign investment and imports of such goods. They wanted the state to regulate licenses for imports and for investments, so that they could use their political influence to monopolise such licenses. The Bombay Plan was designed to fulfil these needs of the big industrial houses.
The situation on the world scale was pregnant with revolution in the 1950s. In all newly independent countries including India, the majority of people aspired for socialism. In such conditions, the Congress Government headed by Nehru marketed the Tata-Birla plan as a project to build a “socialistic pattern of society”.
Side by side with the creation of a state sector of heavy industry, land reforms of a limited nature were carried out. Starting in the 1960s, the ruling class launched the Green Revolution, to promote capitalist and commercial agriculture with technical support from the World Bank.
The implementation of the agenda set by the monopoly houses during the early decades of independence resulted in enormous discontent among the workers and peasants. While wealth had accumulated in very few hands, the toiling majority of people remained extremely poor and oppressed.
By the decade of the 1980s, the conditions had changed in many ways. The policy framework adopted in the 1950s was no longer suitable for the needs of the capitalist monopoly houses. The expansion of the state sector of industry as well as the spread of commercial agriculture had exhausted their potential. The protective import and investment policies had led to a situation in which Indian-made goods could not compete effectively with foreign goods in the world market. The mono-cropping and excessive use of chemical fertilisers, promoted under the Green Revolution, had led to the depletion of soil fertility. Both industry and agriculture were facing stagnation, while the government’s deficit and borrowing were growing out of control.
Throughout the 1980s, India came under increasing imperialist pressure, applied through the World Bank, to open up the domestic market and permit free inflow of imports and foreign capital investment. The Government of India responded by gradually permitting more and more commodities to be imported without requiring a license, and by gradually reducing import duties. Bit by bit, the Rupee was allowed to fall in exchange value against the Dollar, making Indian exports more competitive.
The Tatas, Birlas and other business houses had built up their domestic empires by restricting foreign competition. By the middle of the 1980s, they recognised the need to lift those restrictions so as to become globally competitive. However, they did not want to open up the Indian market too rapidly. They wanted to avoid the risk of losing their dominant position in the Indian market to foreign players. Hence the representatives of the government negotiated with the World Bank for adequate time to accommodate a gradual approach. This gradual process gave way to an abrupt change in 1991, in line with the abrupt changes which had taken place on the world scale.
The Soviet Union was heading towards disintegration in 1991. The countries of Eastern Europe, including socialist Albania, were facing waves of counter-revolution. The US was rallying its imperialist allies to launch an unprecedented offensive against the very ideal of socialism and against all the rights which the working class and people had won through protracted struggles. The tide of revolution had turned from flow to ebb on the world scale.
During the entire period of the bipolar division of the world, Indian rulers had used friendly relations with the Soviet Union as a counterweight to resist the pressure of the United States and the global agencies it dominates. With the Soviet Union heading towards collapse, the Indian ruling class could no longer manoeuvre as in the past.
The 1980s ended with India’s foreign currency reserves declining to a dangerously low level. In such conditions, the Indian monopoly capitalists succumbed to the international imperialist pressure in 1991. They gave up their gradual approach and agreed to openly proclaim that India was breaking with the earlier vision of a “socialistic pattern of society”. The technocrat Manmohan Singh was made the Finance Minister. He was charged with the mission of using the balance of payments crisis as the occasion to initiate the reform of trade and investment policies as prescribed by the World Bank and IMF.
The development of capitalism in our country had reached a stage when Indian monopoly houses had started viewing foreign capital investment in our country as a factor that can accelerate their own global expansionist drive. Reflecting this change in the outlook of Indian monopoly capitalists towards foreign capital, Manmohan Singh said in his speech, “After four decades of planning for industrialisation, we have now reached a stage of development where we should welcome, rather than fear, foreign investment.” He announced that licenses would no longer be required for foreign as well as large-scale domestic investment in most spheres.
Manmohan Singh did not use the word privatisation in his speech. He talked about the need to restructure the public sector so as to make it profitable. This reflected the decision of the monopoly houses to first implement measures to liberalise trade and investment policies. Liberalisation meant that no longer were licences and permits required to start a business. They decided to move more gradually and stealthily with the privatisation program.
Results after 30 years
The program unveiled by Manmohan Singh has been further developed and implemented by successive governments at the centre and in the states over the past three decades. The Congress government of Narasimha Rao was followed by the National Front government headed by Deve Gowda and Inder Kumar Gujral in succession. Then came the BJP-led coalition government headed by Vajpayee, two terms of Congress-led coalitions headed by Manmohan Singh, and now the BJP government headed by Narendra Modi. Each government has inherited and taken forward the program of globalisation, through liberalisation and privatisatiion.
Privatisation of railways, banking, coal, petroleum, electricity, health, education and other public goods and services have led to large-scale loss of jobs, deterioration of working conditions, poorer quality of many services and rise in their prices. The growing domination of Indian and international monopoly companies has destroyed large numbers of small and medium scale producers and traders. Every year, more old jobs get destroyed than the number of new jobs created by new investment. As a result, unemployment reached its highest level in 45 years, even before the Corona virus pandemic began. Hiring workers on temporary contracts and depriving them of job security and retirement benefits have become the norm.
Agricultural input and output markets have been opened up further to global and Indian capitalist corporations to dominate and plunder. This has raised the insecurity of farm incomes to an unprecedented degree, pushing peasants deeply into debt. In these three decades, lakhs of peasants have been driven to suicide.
The super-rich have grown richer more rapidly than ever before. The number of dollar billionaires has increased from zero in 1990 to 140 in the year 2020. A dollar billionaire is one who owns Rs. 7500 crore or more of private wealth, at today’s exchange rate,
The Tatas, Ambanis, Birlas, Adanis and other monopoly groups have expanded their global market share and made huge investments abroad. Some of them earn more profits from foreign countries than from our own country. The real meaning and aim of globalisation has been revealed. It is the drive of Indian monopoly houses to join the ranks of the richest capitalists of the world, while the workers and peasants of our country remain among the poorest in the world. It is a program to further entangle the country and its economy with the crisis-ridden world imperialist system, to satisfy the greed and imperialist aims of monopoly capitalists. To cover up the truth that the program initiated 30 years ago was aimed at fulfilling monopoly capitalist greed, Manmohan Singh’s budget speech referred to the Gandhian theory of trusteeship. He said, “For the creation of wealth, we must encourage accumulation of capital. This will inevitably mean a regime of austerity. We have also to remove the stumbling blocks from the path of those who are creating wealth (meaning the capitalists – ed). … Those who create it and own it, have to hold it as a trust and use it in the interest of the society, and particularly of those who are under-privileged and without means. Years ago, Gandhiji expounded the philosophy of trusteeship. This philosophy should be our guiding star.”
As already noted, the monopoly capitalists have accumulated enormous amounts of wealth in these three decades. Far from deploying their wealth in the interest of society, they have deployed it only in the interest of accumulating more wealth for themselves.
Manmohan Singh was turning truth on its head by referring to capitalists as those who create wealth. It is human labour which creates wealth. Workers, peasants and other toiling people are the real creators of wealth. Capitalists are the owners of the means of large-scale production. They keep expanding their wealth by exploiting and looting the workers and peasants.
The early decades after independence witnessed acute shortages of many essential commodities, famines and food riots. Today there are plenty of commodities available in the market. However, the majority of people do not have enough purchasing power to buy them. As a result, the economy is in crisis. Mass protests of workers and peasants are breaking out all over the country.
The reason why major reforms were launched in 1991 lies in the decision of monopoly capitalists to break with their old policy framework, in order to pursue their interests in the conditions of the post-Soviet Union period. It lies in the decision of the Tatas, Ambanis, Birlas and others to embrace the prescriptions of globalisation, liberalisation and privatisation, as prescribed by the World Bank and IMF. Manmohan Singh was entrusted with the task of unveiling this program in his budget speech 30 years ago.
The results confirm that this is a program to fulfil the greed of monopoly capitalists, Indian and foreign, through maximum intensity of capitalist exploitation and imperialist plunder.
Spokesmen of the monopoly capitalists naturally hail the 1991 budget speech of Manmohan Singh. For the workers, peasants and toiling majority of people, it represents the beginning of a most destructive phase of monopoly capitalist growth. It has had disastrous consequences for the livelihood and wellbeing of the people and for the natural environment.
The only path forward is to unite and fight for an immediate end to this anti-social program, and for its replacement by a program to reorient the economy. Production of goods and services must be reoriented to fulfil people’s needs, instead of being oriented to fulfil monopoly capitalist greed.