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Ideas, interests and the politics of development change in India: capitalism, inclusion and the state

7 August 2014.
ESID‘s latest working paper investigates how ideas and beliefs held by India‘s elites – political, bureaucratic, business – have shaped the country’s political settlement and thereby state performance. The paper is authored by Pratap Bhanu Mehta of the Centre for Policy Research in New Delhi, and Michael Walton of Havard’s Kennedy School of Government.
‘Ideas, interests and the politics of development change in India: capitalism, inclusion and the state’: a sweeping title which reflects the authors’ ambition to redefine how Indian politics is conventionally portrayed, crafting a history of the country’s recent development that moves beyond the old dichotomy between market-based reform and populist social provisioning. In particular, Mehta and Walton highlight how competing cognitive maps and policy designs have shaped the evolution of Indian development at key junctures. They believe that the country may be facing such a juncture right now, and that the transformation of the state in response to the demands of a more aspirational electorate will be the central challenge of this new phase.
Here are some excerpts from the paper:

This paper develops an interpretation of India’s past development trajectory and the present conjuncture that links underlying political economy drivers with policy choices. This is framed around the idea of an evolving political settlement that is constituted both by cognitive maps, especially of state elites, and perceived interests. …
The post-independence framing for business was never purely socialist … It rather involved three lines of thought: to build industrial  capabilities in strategic areas in the public sector (coal, steel, IT etc.); to work with the large business houses within the state-managed license regulation system behind high trade barriers; and to support the very small-scale informal, cottage industry sector …
This search for growth alternatives connected with two intellectual narratives that provided a basis for the policy changes. First, there was the general argument for reliance on markets in the productive sphere,which was spreading around the world in different forms in the 1980s. For India this had existed as a politically peripheral “counter-narrative” amongst a few economists … Second, the narrative of the “corrupt state” that had already emerged as a theme in the 1970s bolstered the liberal-market critique of the distortions created by external protection and domestic licensing. …
The recent evidence in fact suggests two faces of Indian capitalism. On the one hand, there has been extraordinary dynamism, with evidence from profit behaviour more consistent with the view of competitive forces than exploitation of monopoly powers … On the other hand, there has been an array of high-profile scandals, ranging from allegations of high-level bribery (as in the 2G case or mining in Karnataka) to major accounting malfeasance (as with the high profile case of Satyam in the IT sector). Which way this will play out is a major issue for India’s future political economy and polity. …
The 2014 election was seen by many as crystallising demands for change, and giving a mandate to the Modi government to effect change. Here we suggest it is useful to frame this in relation to core questions around the strategic tensions and dilemmas in India’s development path. India has immense problems of deprivation, deep inequalities, widespread deficits in public good provision, and periodic violence. Yet the current political settlement has, by some criteria, been a successful arrangement – in political terms – for providing overall stability, supporting dynamic capitalist growth, achieving a slow but steady improvement of social provisioning, and, not least, allowing regular alternation of power. …
The state will lie at the heart of what happens, on the interface between politicians, state actors and business, and between politicians, state actors and middle and poor groups.

Download the paper:

• ESID Working Paper 36 – Pratap Bhanu Mehta and Michael Walton,  ‘Ideas, interestes and the politics of development change in India: capitalism, inclusion and the state’