Professor Kamath teaches economics at California State University at Hayward.
For the past decade, India has been on the verge of political and social collapse. In recent months, caste riots over a decision to enlarge India’s affirmative-action “reservation” policies have claimed hundreds of ives, including an estimated 150 suicides, mainly by distraught youth, many by public self-immolation and ingestion of poison. In just one week, 325 people lost their lives in communal riots sparked by a politically motivated religious dispute between the country’s majority Hindus and the minority Moslems.
In the beautiful vale of Kashmir, the idyll has again been shattered by gun battles between Kash-miri Moslem secessionists and indian security forces with nearly 2,000 people killed. Life in the adjoining state of Punjab remains paralyzed, and the death toll mounts as Sikh secessionists continue their reign of terror. Continuing agitations in the northeastern states, especially Assam, fester and take a heavy toll on human life. Communal frenzy has touched virtually every state while caste divisions seem drawn more sharply than ever before.
In the latest act of a long political tragedy, another Indian government has fallen as a result of the communal and caste frenzy unleashed by its vote-mongering policies. The coalition government that has replaced it is not expected to last long. The situation, uncannily, seems to bear out the gloomy prognostications of Selig Harri son’s influential 1960 book, India: The Most Dangerous Decades, on the disintegrative forces of caste, region, religion, and language on India’s ability to remain united. It seems that
India’s “most dangerous decade” has arrived.
While the causes of the tragic events unfolding in India are complex and varied, there is a common denominator that is insufficiently appreciated. Since India won its independence in 1947, social and economic policy has been dominated by statism. An all-pervasive network of controls on the private sector combined with a framework of centralized planning and an emphasis on public sector activity have stunted economic growth in a land of tremendous human and natural-resource potential. Confiscatory tax rates along with ever-escalating controls have led to the growth of one of the largest and most thriving underground economics in the world, estimated to account for 50 percent of economic activity. Prohibitive tariffs and a policy of inward-looking “self-reliance” have insulated the economy from foreign competition and investment.
Besides preferential policies many times more comprehensive and detailed than similar U.S. affirmative action programs, social policies have included statist labor-market and employment policies, government control over the broadcast media, and socialistic educational and housing programs. These have gone hand-in-hand with the unrestrained growth of a bureaucratic, redistributive state.
Over 20 million Indians are on the public payroll, and around 70 percent of all organized sector employment is in the public sector. The government’s wage bill accounts for two-thirds of its annual revenues. During the past 40 years, the public sector has accounted for about 60 percent of total investment. India’s jungle of red tape is said to be one of the largest and most complex in the world.
The result of such a statist development policy has been the neglect and systematic suppression of market activity. Private property rights and voluntary transactions have been severely circumscribed. Anemic rates of economic growth have been the direct result of the suppression of market forces amidst increasing population pressure, rising expectations, and burgeoning powerful special interest groups. These interest groups have competed to commandeer the redistributive powers of the state in their favor, despite sporadic recent attempts at economic liberalization. The tragic events of recent months have been the predictable result.
The caste violence and deaths unleashed by then-Prime Minister V. P. Singh’s decision to implement the findings of the 1981 Mandal Commission Report for extending the ambit of India’s preferential policies is a case in point. India’s 1950 Constitution enshrined the concept of restitution for the “untouchable” castes by allowing the state to “make special provisions for the advancement of any socially and educationally backward classes” and to make “any provision for the reservation of appointments or posts” in favor of such backward classes in the services under the state.
Some 1,765 different groups in India’s complex and locally variegated caste system, comprising about 17.5 percent (increased to 22.5 percent in 1970) of the population, were classified as “Scheduled Castes” and “Scheduled Tribes.” Quotas in central government employment, legislative representation, education, and numerous other areas were provided by statute. Individual states set up their own “reservation” policies with much higher quotas, in some cases up to 80 percent of government positions. All this was done despite the inability of government committees to come up with clearly defined criteria for identifying the targeted groups.
Subsequent events have borne out the unintended consequences of the decision to put social justice in the political commons. While quotas at the state level proliferated, political pressure for similar policies for the “Other Backward Classes” (OBCs) led to the Mandal recommendations. By its own admission, the co mission was unable to define clearly the criteria for identifying OBCs.
When Prime Minister Singh saw his fragile 10-month-old coalition government on the verge of collapse, he decided to create a “vote bank” by implementing the Mandal recommendations. By doing so, he hoped to command the backing of about 60 percent of the electorate, the total number of “reserved” seats now comprising 22.5 percent for the Scheduled Castes and Tribes, 27.5 percent for the OBCs, with another 5 to 10 percent for the poor. The resulting “anti-reservation” riots have been the outcome of this policy of making politics dominant and the market subservient.
The communal frenzy that has engulfed the nation in recent months is also linked to the dominance of politics over economics. While the 1950 Constitution declared a secular state, political parties have used religious affiliation as a powerful force to gain and hold power. The lack of sustained economic growth and employment opportunities, accompanied by a rapid increase in the numbers of educated but unemployed young people, has contributed to the rise of religious fundamentalism.
The most recent strife has been caused by one of Mr. Singh’s coalition partners, the militant Hindu Bharatiya Janata Party (BJP), which has spearheaded a drive to build a Hindu temple at the site of a 450-year-old Moslem mosque in Ayo-dhya, the legendary birthplace of Lord Rama, the Hindu deity. Events were precipitated by Singh’s decision to implement the Mandal recommendations, which the BJP saw as a serious threat to its very existence and its strategy of building a united electorate of Hindus, who comprise about 83 percent of the population. It saw the Other Backward Classes reservation decision as dividing the Hindu vote. In turn, Moslem leaders have raised the specter of Hindu dominance in the face of severe job competition in a stagnant job mar ket and an unsympathetic bureaucracy. The BJP-led march to and temporary occupation of the mosque at Ayodhya prompted a nationwide outbreak of communal frenzy and the collapse of Singh’s coalition government.
The same denominator underlies the events in Kashmir, Punjab, and the northeastern states. The redistributive and statist policies of previous governments led to an on-and-off policy of distributing state largesse alternating with the undermining of democratically elected governments in these states. The violent demands for secession provide a paradigmatic example of an effort by regional elites to wrest the coercive power of the state in order to gain political and economic payoffs.
Thus, since gaining independence in 1947, India has been epitomized by the replacement of individual pie-enlarging behavior with interest-group oriented pie-slicing behavior. Recent attempts at liberalization have only led to an escalation of fragmentation and violence, since no fundamental changes have been made to restore a market order.
Such fundamental Changes would involve an across-the-board scrapping of all controls over the domestic economy and foreign trade and investment, the dismantling of the nihilistic planning system, a drastic reduction in the bureaucracy, a restoration of absolute rights to private property and voluntary exchange, and a comprehensive reliance on market forces in every facet of daily life. A constitutional convention to limit the powers of government and guarantee a decentralized, truly federal system of government is also urgently needed. The objective should be to make economics dominant and politics subservient.
Given the political economy of the redistributionist society and the entrenched interest groups and violence, such an outcome is unlikely. But the alternative is the continued unfolding of India’s most dangerous decade.