Could objectives of the Nehru-Mahalanobis model and the planned economic development in terms of industrialization, asset and infrastructure creation, poverty alleviation and employment generation be achieved? If not, then what are the factors that have influenced the state policies and their operation? Are there interest groups that have influenced the resource distribution away from the state decided policies towards their own benefit? Which are the powerful interests that interfere in the state policy formulations and their operation? Pranab Bardhan’s The Political Economy of Development in India and Lloyd Rudolph and Susanne Rudolph’s In Pursuit of Lakshmi: The Political Economy of the Indian State are of particular interest in this regard. These writers have analysed the dynamics of planned approach and policy of controlled economic development and the role of various groups in society in influencing the state policies towards economic development.
Pranab Bardhan has argued that political economy of the Indian state is characterized by the presence of ‘dominant proprietary classes’. They include ‘industrial capitalists, rich farmers, and white-collar workers and professionals’. Applying the public choice theory, he argues that these classes influence the state policy on resource allocation in their favour. Bardhan finds a correlation between the political support that the state seeks from these classes and the share of public resources exchanged. The political process in Indian democracy is characterized by providing patronage and seeking support from a variety of groups. Due to diverse interests of these groups—regional, economic and professional, there are conflicting demands from them on the state. For example, the industrial capitalists, rich and commercial farmers and white-collar workers have different interests and their support to the government would require accommodating and balancing their conflicting interests. This has economic cost to the state. Bardhan points out that ‘massive doses of public investment in basic industries and infrastructural facilities, such as coal, transport, power, and irrigation, are crucial at the early stages of industrial and agricultural transformation’.20 However, he ruefully observes that ‘the bulk of public resources are being frittered away in non-development expenditures and political and administrative mismanagement of public capital’. Why and how does this take place? Bardhan suggests that this happens due to the pressure and pulls from the coalition of the dominant proprietary classes. The industrial capitalists, rich farmers and the white-collar and professionals seek to influence resource allocation in their favour but they are not strong enough to dominate individually. Each pulls the loose coalition of the dominant proprietary classes in different directions. To keep them from pulling apart and placated, the state policy formulation is influenced and results in ‘proliferation of subsidies and grants … with the consequent reduction in available surplus for public capital formation’.21
It means due to a plethora of subsidies and grants to interest groups like rich farmers, industrialists and professionals, there is little or no investable capital left with the state for capital investment and asset and infrastructure creation. Subsidies to farm products in the form of support prices (Minimum Support Price), fertilizers, electricity, fuel, gas, exports etc. serve the interests of the rich farmers, industrial capitalists directly and indirectly, professions and white-collar urban middle classes. Various claims such as, subsidized credit by public sector lending agencies, non-payment of loans by rich farmers and their organized agitation for influencing resource allocation in their favour, concessional financing to the industrial sector, nursing sick private industries, eat upon the public resources. Bardhan concludes that ‘The Indian public economy has thus become an elaborate network of patronage and subsidies’. This also raises a question about whether the Indian state is relatively autonomous from interests of the various groups and to what extent its policy formulations would be free from the pulls and pressures of these interests.
Bardhan’s study points to the influence of the dominant proprietary classes on the state policy formulation and public policy choices. Lloyd and Susanne Rudolphs have analysed the characteristics of the political economy of the Indian state from the perspective of planned economy on the one hand, and pressure of the demand groups, on the other. Their main thesis is that the Indian political economy has swung between command and demand economy. According to Rudolphs, the dynamics of planning and control of the economy gives birth to command economy and pressure from the rising ‘demand’ groups makes it a demand economy. This duality signifies that the political economy of the Indian state shifts between being a strong commanding economy to a soft patronage-distributing economy. Because of the green revolution, middle peasants have emerged as powerful demand group. Similarly, a number of intermediate castes, also referred to as ‘Backwards’, have become politically conscious and demanding. Rudolph suggest that the demands emerging from these groups influence the public policy formulation and resource distribution by the state.
Critique of political economy of development in India has been broadly to reflect the urban-centric focus of the public policy or influence of various demand and interest groups on public policy. In fact, given the influence of the rich farmers and rural dominant castes, it may not be appropriate to characterize public policy as merely urban-centric or biased, because it assumes class homogeneity in both urban and rural areas. To say that the rural rich farmers of the green revolution are biased is an incorrect representation of the political economy. The objectives of demand groups, both urban and rural, are to influence the state public policy in their favour.
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