Question for Ulhas on the Indian Bourgeoisie

Ulhas Joglekar uvj at SPAMvsnl.com
Thu May 31 21:08:22 MDT 2001


Saul Thomas:
> What have been the effects of the economic "liberalization" policies
> instituted in India since the early 1990s on the health and independence
of
> the Indian bourgeoisie? Has the removal of barriers to foreign investment
> and control had much of an effect of the ability of Indian-owned industry
> to compete?

Liberalisation was a demand of Indian bourgeoisie for a long time. Upto
1990, Indian economy was highly controlled and regulated, imports were
restricted and regulated by tariff and quantitative restrictions. Foreign
investment was subjected to detailed regulations regarding sectors in which
foreign investment was allowed, the nature of technology imported, export
commitments, dividend balancing, parent company holding in Indian
subsidiries, location of plants etc. Indian currency, the Rupee was not
freely
convertible. During liberalisation years, Indian capitalism has grown, it is
more confident than ever before and it is brimming with optimism. The broad
objective of liberalisation was to make Indian capitalism globally
competitive. Removal of barriers on foreign investment have certainly
weakened some Indian business groups, but others have managed to adapt to
the domestic as well as international competition. Despite liberalisation,
India has not attracted foreign investment in significant quantities. During
the previous decade, India has received $ 30 billion in foreign capital, 20
billion in FDI and 10 billion in portfolio investment. China has received $
300 billion! Vietnam probably gets more FDI than India. On average India
receives about 1 to 2 percent of the total annual global FDI flows to the
developing nations.

> Has the Indian bourgeoisie been partly spared because of Western capital's
> relative lack of interest in India? Do you have any idea why Western
> capital doesn't mythologize and try to capture "the India market" as it
has
> fantasized about and longed to capture "the China market" since the last
> century?

Indian market is smaller than the Chinese market. China's GDP is roughly
twice that of India, $ 1 trillion against $ 450 billion. (These are
approximate numbers.) In high technology areas such as PCs, moblie phones,
consumer durables etc. Chinese market is even larger, perhaps 3 to 5 times
the Indian markets.(It is usually the domestic growth that attracts foreign
investments, which in turn supplements economic growth of the economy as a
whole. In economies like China and India, which are economies driven by
domestic markets, domestic savings and domestic investment, the foreign
capital actually contributes to the capital accumulation. Foreign capital is
not an obstacle to the process of capital accumulation in China and India,
since this is subordinated to the domestic capital accumulation.) MNCs
complain about slow and bureaucratic Indian rules and procedures, China on
the contrary is seen by MNCs as brisk and efficient. Global capitalism
prefers China to India, since China has created better conditions for
capital accumulation than India! This is consistent with the global trend.
Less developed countries are less dependent on global capitalism, than more
developed ones, theories of dependent capitalism notwithstanding.

> I suppose that the biggest Indian conglomerates will be able to maintain
> their competitiveness on the global market in the future, although they
may
> have a difficult time competing with well-known foreign brands, whose
names
> now seem to be as valuable as the commodities they produce.

Brands are important in certain sectors. Indian brands can not compete with
Coke, Pepsy and Microsoft. But Indian steel companies can compete globally,
by upgrading technology, expanding scale of production and cutting costs
through redundancies etc. China and India, unlike other developing nations,
can afford economies scale.

> But what is
the
> future for smaller Indian industry in the face of foreign competition?

Indian small industry will have to adjust to new realities, it must
restructure, reorganise or perish. But the competition which Indian small
and medium industry is scared about is the competition from China. It is not
the competition from MNCs that small business has to worry about. Chinese
products compete on price, MNC products compete on quality and brand image.
On the other hand, MNCs use outsourcing on a significant scale, thus they
are also creating and sustaining small Indian businesses.

All this may be at variance with the conventional Leftwing wisdom about
the socalled Third World imagined by Samir Amin and others, but these are
ground realities.

Ulhas














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