The Spark

“The emancipation of the working class will only be achieved by the working class itself.” — Karl Marx

India:
An “Emerging Economy” in the Capitalist Crisis

Jan 26, 2013

Over the past two decades, India has been hailed by the Western business media for its fast economic growth, which reached an average annual peak of almost 9% in 200408. On the strength of this growth, countless Western economists argued that India would soon be catapulted to the top of the world’s economic power league, behind China and the United States, but far ahead of the other rich imperialist countries.

The outbreak of the present economic crisis, in the summer of 2007, did not substantially change this prediction. On the contrary, the same economists went on to claim that, against the backdrop of the downturn taking place in the rich industrialized countries, the so-called “emerging countries” like India would provide a new lease of life for capitalism and revitalize a world market which had been wrecked by the somersaults of the financial crisis. The following article which first appeared in Class Struggle #98, a journal published by comrades of the British group Workers Fight, deals with the social and economic realities behind the so-called “economic miracle” and how they change with the crisis.

In February 2012, Martin Wolf, probably one of the most respected among the economic columnists of Britain’s business mouthpiece the Financial Times, argued: “Even allowing for the slowdown forecast for 2012 in the International Monetary Fund’s recent World Economic Outlook update, India’s gross domestic product is set to rise by 43% between 2007 and 2012. This is below China’s rise of 56%. But it is far superior to the high-income countries’ 2%. This is a revolution.”

This so-called “revolution” is supposed to be driven and sustained by a huge, ongoing increase in India’s domestic consumption mainly due to the Indian middle classes which are to include 43% of the population by 2025, according to the American consulting firm McKinsey. Likewise, in a special report devoted to India published last September, The Economist, another mouthpiece of British business, argued: “According to a new report by Price Waterhouse Coopers, in 2010 some 470 million Indians had incomes between $1,000 and $4,000 a year. The consultancy reckons that this figure will rise to 570 million within a decade, creating a market worth one trillion dollars.” The same month the Financial Times added its own touch to this optimism by predicting that India “could well be the third largest [economy] by 2030. The country’s consumer market is growing rapidly.... India has more ... billionaires than Britain. It is a magnet both for the world’s aid agencies and for its multinationals.... India has nuclear weapons and a space program; it recently announced a plan for a mission to Mars. It is now also the world’s largest importer of weapons, and recently said it would spend 10 billion dollars buying new fighter jets from France.”

However, far from providing the blueprint of a new lease of life for this crisis-ridden capitalist system, as heralded by Western business pundits, India’s economic “success story” illustrates exactly the opposite – how much the operation of the world capitalist market, compounded by the parasitism of the Indian capitalist class, has been feeding poverty among the majority of the country’s population, while being an obstacle to any sort of real development for its economy.

In the Shadow of the State

Up until the 1980s, the Indian economy remained shaped by the post-independence settlement with Great Britain, the former colonial power, which was incorporated in the so-called “Bombay Plan” – an economic program drafted during World War II by a committee comprising some of India’s wealthiest capitalist dynasties, including representatives of the Tatas and Birlas, who remain today the most powerful in the country.

This plan involved massive investment by the state according to a longterm plan, with a host of new state companies to be set up in order to build and manage the infrastructure that the British colonizers had never bothered to develop; relatively high taxes to raise the necessary funding for these investments; high tariff barriers to protect the domestic bourgeoisie against foreign competitors; and provisions to prevent foreign investors from taking full control of Indian companies and natural resources. Although these policies were merely nationalist in content, the fact that they imposed some limitations on the looting of the country by imperialist companies was enough for the first post-independence governments to be widely denounced as raving “socialists” by a large part of the Western media.

Not that these nationalist policies had anything to do with any kind of “socialism.” In keeping with the preoccupations of the authors of the “Bombay Plan,” they were meant only to allow the small, but very rapacious Indian capitalist class to build up its profits and social weight, by using and abusing the resources of the state and increasing the exploitation of the working population.

During the first four decades or so after independence, the Indian economy remained primarily agricultural, with a low rate of growth. Its exports were still mostly confined to agricultural products, textile and minerals – much as in the colonial days. However, the new state companies did develop some facilities in electricity production, rail and road transport, harbors, mining, steel production, and so on, according to a series of “FiveYear Plans” which met some of private capital’s needs, but did little to change living conditions for the majority. Limited as this program was and despite the governments’ protectionist policies they complained so much about, Western multinationals managed to make considerable profits out of it, getting the Indian state to pay through the nose for the most basic technology. Only in some specific areas, like electricity production, did the Indian state benefit from the less costly assistance of the Soviet Union, in return for Nehru’s advocacy of the nonalignment policy during the Cold War. By the same token, the Soviet Bloc soon became India’s largest trading partner.

Meanwhile, thanks to the tariffs imposed on consumer goods, private business blossomed by replacing some imported products with local ones. With the state taking care of most of the heavy investment, the small capitalist class was able to live a comfortable life in its shadow, while piling up more and more wealth out of the value produced by the country’s growing population.

By the early 1970s, however, the drastic shocks caused by the world crisis hit the economy. Indira Gandhi’s brutal turn of the screw during the 197577 “State of Emergency” imposed a rough austerity to the working class. Much like in other countries, a consensus developed among the Indian capitalist class, which wanted to reduce the cost of the state and its control over the economy. The Janata Party’s (People’s Party) government, which took over from the Congress Party of Indira Gandhi in 1977, made the first steps in that direction, with the removal of many price controls and a cut in corporate taxes.

In the late 1980s, India was hit again by yet more shock waves from the world economy – first from the 1987 stock market crash and then from the implosion of Japan’s financial bubble in 1990. Faced with a rate of inflation reaching a record 17%, rising expenditure due to the emergency social programs designed to make up for soaring prices, lower revenues from taxation, and the collapse of its biggest trading partner (the Eastern Bloc), the Indian government found itself increasingly indebted. In 1991, it was compelled to request an IMF bailout.

The First “Liberalization”

This bailout was both the signal and the pretext used by the Congress Party, once again in government under Narasimha Rao, to launch the “Economic Liberalization” drive which, over the next two decades, was to dismantle much of the limited protection against the multinationals’ looting built into the economy in the post-independence period.

To start with, the Indian rupee was substantially devalued before becoming fully convertible on the world currency market. This was a concession to Indian exporting companies. But, above all, this was designed to encourage Western capitalists in search of a profitable, safe investment to move into India, by guaranteeing them a full, immediate refund in hard currencies. At the same time the maximum stake foreign companies were allowed to hold in their Indian subsidiaries was raised from 40 to 50% and, in specific cases, 100%.

True, some requirements were still imposed on foreign companies, in particular in manufacturing, where a certain proportion of the components used by foreign subsidiaries had to be sourced in India. But there were many ways around that, as Korean car giant Hyundai Motors proved, when it set up shop in India together with 14 of its Korean component suppliers. Hyundai’s Indian subsidiary was able to claim it was using at least 70% “local components” in its production!

These measures were enough to generate a 10fold increase – albeit starting from a low level – in the flow of foreign direct investment into India within the next three years. At first, this flow came mainly from foreign companies already operating in India, which either increased their stakes up to the new legal maximum in their local subsidiaries, or bought out their Indian partners when they operated through joint ventures with local companies. Indian shareholders made a killing out of these operations and a big part of their profits were transferred abroad through mostly illegal channels.

However, once again, behind the cover of “Liberalization,” a large part of the profits cashed in by the Indian wealthy during that period were actually funded by the public purse. Indeed, few foreign companies would have ventured into India had it not been for the huge sums diverted from public funds as “incentives” by ministers – both in the federal government in New Delhi and at the state level.

Among the many and oft-quoted examples of such “incentives” were, for instance, the 15year holiday from sales tax awarded to Ford by the state of Tamil Nadu when it started production at its Maraimalai Nagar factory in the suburbs of the state capital, Chennai, or the 20 mile road resurfaced by the state of Gujarat to service General Motors’ new factory in Halol.

A second wave of foreign investment came in the later 1990s, mostly in the form of short-term loans, packaged in such way as to enable foreign investors to withdraw their funds on short notice. This second wave gave a sudden boost to India’s GDP growth rate, which peaked at 7.8%, in 1997. But, just as in the rest of South Asia, this inflow of short-term loans also fueled a financial and real estate speculative bubble, which finally burst across the whole region in that same year. And the flow of foreign investment into India suddenly dried up, while the country’s rate of economic growth was cut almost in half.

The 1990s had been a decade of political instability in India, marked by the involvement of many leading politicians, including at the very top of the state, in a long series of high-profile procurement scandals, and by the recurrent use of communal tensions by some political forces to boost their political prospects. Finally, in the 1999 general election, the Congress Party’s main rival, the rightwing Hindu nationalist party, BJP (the Party of the Indian People), managed to secure a large enough majority to form a stable coalition government – the so-called “National Democratic Alliance,” or NDA. And it was this NDA which proceeded to introduce the second stage of “Economic Liberalization.”

The Making of the “Indian Tiger”

In fact, the NDA primarily built on the Congress Party’s policies of the early 1990s. The only novelty that was added was the promise to open up the large state sector to part-privatization.

However, the main cause for the economic transformations that occurred under the NDA had more to do with the situation of the world economy outside India following the “dot-com crash” in 2001. Masses of speculative capital flowed out of the rich countries’ stock markets, especially in the U.S., looking for alternative grounds for speculation. A large part of these funds turned to the corporate loan market, at a time when big companies were seeking to increase their profits by moving some (or more) of their production to countries where labor costs were low.

India, with its huge labor force and low wages, was one of the beneficiaries of this general trend, with foreign direct investment rising from a mere 3.45 billion dollars in 2002 (still lower than the level reached in 1997) to a peak of 27 billion in 2008. It was this flow of investment which fed the country’s rapid economic growth in 20042008, prompting the admiration of Western commentators and their celebration of India as an “emerging economy.”

In fact, a number of Indian capitalists repatriated funds they had illegally held abroad, in order to take advantage of the new low-tax environment and opportunities for financial speculation created by the NDA administration. But most of this flow came once again from foreign investors attracted by the incentives offered by the Indian government at great cost to public funds.

However, the biggest of these incentives, by far, was not introduced by the NDA, but by the Congress-Partyled administration of the United People’s Alliance (UPA), which won the 2004 elections. This was the systematic development of Special Economic Zones (SEZs) across the country, thanks to the SEZ Act passed by the federal parliament in 2005.

Contrary to the 19 SEZs already existing in India which had been devoted to import-substitution facilities, the new SEZs were turned into export-orientated zones whose infrastructure was to be financed mostly out of public funds, while the companies which were invited to move in were to be exempted from a whole range of taxes. SEZs were designed to virtually operate as foreign territories for all practical and legal purposes. In particular, despite the protestations of the two Communist Parties allied with the Congress Party, the SEZs were excluded from the scope of existing labor regulations, by means of a ministerial rule declaring operations in SEZs to be “public utility services,” under provisions which were inherited from the colonial anti-strike laws. Each state had the power to further restrict workers’ rights in its own SEZs, which many did. Moreover, instead of being enforced by a labor administration, labor rights were enforced in each SEZ by a Commissioner appointed jointly by local politicians and employers, which means that the rights of the workers were only a formality, as long as they depended on the authorities.

With such incentives and the prospect of being able to use and abuse a tame, low-cost workforce, foreign companies began to flock towards India’s new SEZs. Altogether, 693 SEZs were registered during the three years from 2006 to 2008.

The huge number of registered SEZs, although often quoted by Western commentators as illustrating India’s status as an economic “power house,” should be taken with a lot of salt: according to the government’s own figures, only 158 of these SEZs are actually in operation today! However, the SEZs did attract a large number of companies – especially from the rich industrialized countries, but also from India, like the IT company Infosys, which, on its own, runs four SEZs in three states, occupying 650 acres.

These SEZs have come at an exorbitant cost to a state which is notorious for its failure to serve the most basic needs of the majority of the population. Even leaving aside the cost of funding the SEZs’ infrastructure, which is virtually impossible to work out, the annual loss in tax revenue due to the tax exemptions awarded to companies operating in SEZs was estimated to be equivalent to the entire budget of the National Rural Employment Guarantee Scheme, which is supposed to provide a precarious lifeline to around 20 million rural unemployed, in the form of 100 days of guaranteed employment per year on the minimum wage.

Economic Growth and the Working Class

Whatever its growth rate, the fact that India has remained a poor country cannot be denied, not even by the most blindfolded among the proponents of capitalism. Even The Economist had to admit, in the special report mentioned above, that one third of India’s 247 million households had no access to electricity whatsoever and that many of those that did were subjected to recurrent outages. Likewise the Financial Times had to admit that “India has more mobile phones than toilets.” But since the same paper extolled the fact that 63% of Indians have a mobile phone as a proof of capitalist affluence, it follows that at least 37%, if not much more, did not have access to sanitation – hardly proof of social affluence!

These appalling facts, reluctantly revealed by Western business papers, are still vast understatements. A very official body like the U.N. agency UNICEF, for instance, estimates that about half of India’s population has no access to sanitation of any kind; that one quarter of the world’s children dying under the age of five are Indian; and that 42% of India’s children are underweight.

The truth is, the poor majority of the Indian population has not benefitted from the “economic boom” during the period between 2000 and 2008. In fact it has paid for it dearly.

For instance, on the issue of energy use, an article published in April 2010 by the Indian journal Aspects of India’s Economy showed that the average consumption of domestic energy per head in India was 7% that of the U.S., compared to 19% for China and 16% for Brazil. The same article added: “Nearly half India’s population lacks access to any form of commercial energy. Indeed, in 200708, 77.6 per cent of rural households depended primarily on firewood and chips for cooking energy, and another 7.4 per cent on dung cake. These two sources together accounted for more than a fifth of even urban households.”

As far as poverty is concerned, using the U.N.’s so-called “Multidimensional Poverty Index” (MPI), which defines poverty levels not just in terms of income or consumption, but also in terms of access to basic facilities (including water, sanitation, and electricity), 55.4% of the Indian population lived in poverty in 2009 (645 million). Moreover, said the above-mentioned journal, “there are more MPI poor people in eight out of 28 Indian states alone (421 million in Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh, and West Bengal) than in the 26 poorest African countries combined (410 million).”

That India’s economic growth hasn’t benefitted the working class is illustrated graphically by the way in which workers’ employment and conditions evolved during the decade up to 2008.

The state of Gujarat, for instance, is considered today the most successful in the country, in terms of investment. But over the decade up to 2008, while manufacturing investment increased by 9.1% per year on average, the number of jobs increased by only an annual 2.8% and the share of workers’ wages in the value they produced actually shrank from 11.4% to 8.5% over the decade. Despite this state’s prominent position in the “economic boom,” the Indian journal Economic and Political Weekly noted in October 2011 that, among all 28 Indian states, starting with the most poverty stricken state, Gujarat had “the 13th highest infant mortality, the 14th highest child mortality and the 9th highest level of child malnutrition.”

Gujarat is not an isolated case. What happened there also happened in the car and component industry, which itself is portrayed as a “success story” within the “Indian success story.” Thus, in its June 2012 issue, Aspects of India’s Economy explained: “It is a well-kept secret that real wages in the auto sector ... fell 18.9% between 200001 and 200910.... In 200001, an auto worker spent two hours and 12 minutes of an 8hour shift working for his own subsistence and that of his family [and] the remaining five hours and 48 minutes generating surplus for the capitalists.... By 200910, the ratio had deteriorated: the auto worker now spent just one hour and 12 minutes working for his own subsistence and that of his family, and the remaining six hours and 48 minutes working for the capitalists.”

The Capitalists’ Class War

How did this deterioration take place? The author of the above article explained, “active class struggle was being waged – by the employers against the workers.” This, indeed, together with the massive diversion of the Indian state’s resources towards companies, encapsulates the secret of India’s “economic boom.”

Broadly speaking, workers are classified as being employed either in the formal (or organized) sector, working mostly in companies employing more than 100 workers, more or less covered by labor laws, with limited welfare protection; or in the informal sector, with virtually no rights. According to an article published in June 2011 in Aspects of India’s Economy, “Organized sector employment actually shrank during the period of frenetic growth; the figure for 2008 was lower than that for 2000. From 28 million in March 2000 out of 337 million employed on average per day, the figure fell to 27 million out of 401 million.”

The “economic boom” had an even worse impact on employment as a whole, according to the same article: “Employment growth has virtually stalled, growing at an annual rate of less than 0.1% since 200405. While the percentage of the population deemed of working age (between 15 and 59) has risen by 5% over the last decade, a falling share of this working-age population obtains employment. In the last decade, roughly 159 million would have been added to the working age population, but only 65 million got employment of any type whatsoever. And the pattern of employment presents a picture typical of a very underdeveloped economy: more than half was ‘self-employed,’ another third was casual, and only 16.6% was ‘permanent’ employment.”

Casualization – that is, part-time, temporary and even hired-by-the-day employment – is, indeed, one of the keys to India’s economic growth, as in all the so-called “Asian Tigers.” Let’s take a few examples.

Hyundai Motors’ Indian subsidiary is the country’s largest car exporter and its second largest car manufacturer. In 2009, according to the Indian weekly Frontline, its main production unit, at Irungattukottai near Chennai in the state of Tamil Nadu, “had a total workforce of about 6,000, of whom only 1,556 were permanent and earn anything between 8,000 rupees and 22,000 rupees a month [$135 to $372]. The rest, numbering about 4,500, are temporary and in the categories of casual workers, apprentices, trainees and contract labor. Their monthly wages range from 3,000 rupees to 4,500 rupees [$50 to $75].” By 2011, a report about the same plant noted that no less than 60 subcontracting companies were now operating onsite, meaning a further casualization of the workforce!

In the same state of Tamil Nadu, the Taiwanese giant electronics subcontractor Foxconn has a factory at Sriperumbudur. In 2010, according to Frontline, workers in this plant were aged between 19 and 25. They included: “1,800odd regular and 3,000 contract workers and trainees.... Their average salary is around 4,500 rupees per month [$75]. Most have migrated from other districts during the past four or five years and are children of small peasants, farmhands, construction workers or daily wage laborers.” But, since rural wages were even lower, these workers often tried to hang on to those industrial jobs.

Much the same situation prevails in the Gurgaon-Manesar-Bawal zone outside Delhi, in the state of Haryana. This area is dominated by car-related manufacturing, which accounts for about 60% of India’s car production and an even higher proportion of car components. It also includes facilities in just about every manufacturing sector as well as in software and call centers. Hundreds of foreign manufacturing companies from the imperialist countries have set up shop in this area, in some shape or form. According to the June 2012 issue of Aspects of India’s Economy, around 80% of the estimated two million workforce are hired on some form of casual basis.

The same article detailed workers’ conditions at one of the big plants in Minister – the car and diesel engine facility run by Maruti-Suzuki, the Indian subsidiary of Japanese giant Suzuki, which controls over 50% of the Indian domestic car market. In this plant, “there are 970 permanent workers, 400500 trainees, 1,100 contract workers, and 200300 apprentices.... As punishment for minor mistakes, workers are also asked to work overtime without compensation. ‘I am supposed to produce one unit of work in 40 seconds. If this target is not met even by a low margin, I have to work two to three hours extra,’ rued a worker. Apprentices are made to work in three shifts at a stretch.... Workers do not get proper healthcare even though their contracts mention that the company will provide compensation for ill-health. Most of them are migrant laborers from far-off villages in Haryana, Bihar, Uttar Pradesh and Rajasthan, and they are often not given leave even to meet their families.In this plant, all workers get the minimum wage of around 5,000 rupees a month ($85), which is then topped up with various kinds of allowances, premiums and incentives – so that permanent workers may earn up to 17,000 rupees a month ($289) and trainees up to 10,000 ($170), while temps are paid 6,500 rupees ($110) and apprentices up to 4,200 ($71).

In the Shadow of the “Boom”

These examples give an idea of the dire conditions of workers in the formal economy. But those experienced by the overwhelming majority of workers who are in the informal economy are far worse.

Although few Western commentators would care to admit it, the situation in the informal economy is just as much a reflection of India’s “economic boom.” After all, by 2007, the informal manufacturing sector employed an estimated 41 million workers. Many of the “successful” companies driving the “economic boom” were sourcing components from these workshops in the slums or rural areas. In fact, there are even big multinationals whose profits are almost entirely based on the overexploitation which is rife in the informal sector.

The tea industry, which is largely part of the informal sector, is a case in point, since it is dominated by big companies like Tata-Tetley and Unilever (owner of the Lipton brand). An estimated 12 million workers are employed directly or indirectly by this industry and, according to the Asian Monitor Resource Center, “the wages they receive are among the lowest in the world, lower than Kenya and Sri Lanka, at about. $1 to $1.50 a day . [They] do not enjoy even basic amenities like safe drinking water, and often suffer from diarrhea, cholera and other waterborne diseases. Malaria and tuberculosis are also rampant.” Following the collapse of the price of tea on the world market, in the late 1990s, many of these workers were left to starve. “More than one million workers lost their jobs in West Bengal alone and more than 1,600 died in the region due to starvation and other related diseases.”

Worse even, is the huge, shadowy part of the Indian economy where social relations are still semi-feudal, having virtually remained unchanged over the past two centuries. In this sector, various forms of bonded and indentured labor remain widespread. Just to take one example, here are some extracts of a report on the informal brick industry in the state of Tamil Nadu, which was published in Frontline in 2009:

“In the brick kilns of Tamil Nadu, life for hundreds of thousands is one of extreme exploitation – dismal working conditions, backbreaking toil for 12 to 16 hours a day, meager wages and generations of bonded labor.... There are around 2,000 brick kilns, big and medium, apart from thousands of very small units....

“The most important factor that makes the workers and their children vulnerable to bondage is the advance paid to migrant workers, who then pledge their labor to the owners of kilns. The amount ranges from 5,000 rupees to 40,000 [$85 to $680]. [This] advance system not only makes workers vulnerable to bondage but also pushes them into the quagmire of perpetual indebtedness....

“The workers are subjected to harassment in various ways.... One bonded laborer said she, along with her son, was detained at a house for 29 days on the grounds that she tried to flee without repaying the advance she had taken....

“In most of the brick chambers work started at around 3 p.m. and went on up to 7 p.m. After a break of six hours, work resumed at 1 a.m. and went on until 10.30 a.m. The bricks need maximum time of exposure to the sun to render them dried. Thus, the workers have to catch up with their sleep only during the day....

“These cycles of work interfere with the normal development of the children.... [Yet] according to a study conducted in 2005 by two NGOs, over 100,000 children in the six to 18 age group were employed in brick kilns in the state. Of them, 60,000 were in the six to 14 age group.”

The Shock of the Crisis and its Cost

When it broke out in the summer of 2007, the world financial crisis did not seem to have a major impact on the so-called “emerging economies” – or at least this was what Western business pundits claimed. They even predicted that the “dynamic health” of these economies would pull the world economy back on course.

Of course, today, the latest estimates of the pundits’ own favorite economic indicators are proving how wrong they were: India’s estimated GDP growth in 2012 was 4.5% (less than the average annual growth level of the 1980s); manufacturing output went down by 3.5% over the year; exports have shrunk every month since May 2012, causing a record trade deficit; foreign investment went down by over 30% and overall investment by 14%; and inflation is well over 7% (but 10.5% for food and even 50% for vegetables!).

In fact, it did not take very long after the beginning of the crisis for the Indian population to feel the pain. Exports were slowing down – especially in the textile industry whose export target had to be reduced by 30%, while some of the industry’s 88 million workers were laid off. The car components industry was starting to be affected by job cuts as well. Meanwhile, the UPA government, led by the Congress Party, which was keen to show that it was doing something in the run-up to the 2009 general elections, cut a number of indirect taxes, reduced interest rates and printed 58 billion dollars worth of fresh money to boost the country’s crippled banking system.

Then came 2009 and the frantic wave of speculation which wrecked the commodity market worldwide, sending the prices of staples – food, cooking oil, gasoline, etc. – through the roof. Rising agricultural prices could have been good news for the rural population in India, if not for the urban poor. But given the monopoly of middlemen and wholesalers over the food market, the resulting inflation hit the rural poor just as much as it did the rest of the poor population. Meanwhile the government seemed to be caught by recurrent panic, reacting to every sign of financial chaos by cutting interest rates – no less than 13 times in total!

In 2010, the Indian economy seemed to recover. GDP growth picked up again and foreign investment increased, as Western capitalists were returning to the “emerging economies” to boost their presence in an attempt to snatch markets from their competitors. But by the summer of 2011, everything went ugly again. The rupee fell by 19% against the dollar and the UPA government used this as a justification for relaxing most restrictions on financial cross-border transactions, under the pretext of attracting more foreign funds into India.

By that time, the government had embarked on another expansion of its largesse to the capitalist class, Indian as well as imperialist. In 2010, tax rebates to companies and the wealthy had already cost the Indian state 1.2 trillion rupees ($20.4 billion), about 2% of GDP. In addition, the government decided that all future infrastructure projects would be run as “public-private partnerships,” in which up to 40% of the total investment could be paid up-front by the state to the private partners, even before any work had been done. Since the total value of planned infrastructure projects for 201217 is 99.5 billion dollars, this amounted to a commitment to subsidize private firms on a massive scale – but in a way which, in addition, was very prone to corruption in a country where the political establishment is notorious for engineering procurement scams!

A masterpiece in this infrastructure program is the Delhi-Mumbai Industrial Corridor Project. This “corridor” will be centered around a 922mile high-speed heavy freight railway line and a motorway between the two cities, linking 24 new “industrial cities,” three ports, six airports and a host of power plants to service them. Many of the new industrial zones in this Corridor will be a new brand of SEZ – called National Manufacturing Investment Zones (NMIZ). Apart from having even more restrictions on workers’ rights, these NMIZs will no longer be exclusively export-orientated. In addition they will provide companies with a fast-track mechanism allowing them to withdraw without having to face any liability towards workers.

Seven of the Corridor’s new “industrial cities” are meant to be completed by 2018, at a cost of 87 billion dollars, half of which will be provided by Japan in various ways. The question, however, is whether this colossal project will really pave the way for a new industrial future for India, as the government claims, or whether it will only leave a graveyard of rusted out plants? Either way, the state’s subsidies will have gone to line the pockets of the shareholders of the Indian and foreign companies involved in these projects.

Either way, too, the Indian population will be expected to pay for all these present and future handouts to the capitalists. In fact, it is already paying. In every government budget since April 2010, state subsidies for various basic commodities, especially those most vital to the poor, have been reduced. In the budget adopted in 2012, for instance, subsidies were reduced from 2.34% of GDP to 1.77%. Gasoline subsidies were cut by almost 40%, the fertilizer subsidy by 10%. Both of these reductions have resulted in an automatic increase in the cost of living. As to the food subsidy for the poorest, it was increased by only 3%, when it was estimated that a 10% increase would be necessary just to keep food distribution at the same level as the previous year. In addition, the 2012 budget reduced the income tax of the wealthy, while increasing indirect taxes – which primarily affect the poor.

Of course, commentators in the Western media are still claiming that the size of India’s domestic market and, especially, the consumption of what they call its “growing middle class,” can be an engine for the economic development of India. The Economist hailed it as a “one trillion dollar market.” But this “middle class” – 570 million people – have an income between $965 and $3855 a year. How much of their earnings can these 570 million people spend on anything other than the strict minimum they need to survive? In any case, it is hard to see how their purchasing power can possibly provide the profits required for the development of a modern capitalist industry!

The Working Class Holds the Key to the Future

India, therefore, will not become the giant economic power house anticipated by Western commentators, nor will it serve the needs of its population – at least not under capitalism. On the contrary, it will remain a mere instrument at the mercy of Western profiteers, while the parasitism of capital – imperialist and national – living off the Indian state will result only in a further deterioration of the living conditions of the majority of its population.

However, for us, revolutionary communists, the situation in India offers some reason for optimism. The way in which its economy has been shaped by imperialism has reinforced the Indian working class. It has created a highly concentrated industrial working class, mostly young, which may still be relatively small compared to the size of the country’s overall population, but which nevertheless includes tens of millions. What’s more, this industrial working class has recently come from the urban slums or from rural villages and has, for that reason, close links with the country’s poor masses.

What’s more, this working class has already gone through a rich experience of struggles against both its capitalist exploiters and the repressive forces of their state.

Indeed, an article published last June by Aspects of India’s Economy reported some of those struggles: The last few years have seen a rise in labor unrest, particularly in the auto and auto parts sector. Among the prominent instances are: Mahindra (Nashik), in May 2009 and March 2011; Sunbeam Auto (Gurgaon), in May 2009; Bosch Chassis (Pune), in July 2009; Honda Motorcycle (Minister), in August 2009; Rico Auto (Gurgaon), in August 2009, including a oneday strike of the entire auto industry in Gurgaon; Pricol (Coimbatore), in September 2009; Volvo (Hoskote, Karnataka), in August 2010; MRF Tyres (Chennai), in October 2010 and June 2011; General Motors (Halol, Gujarat), in March 2011; Maruti Suzuki (Minister), in JuneOctober 2011; Bosch (Bangalore), in September 2011; Dunlop (Hooghly), in October 2011; Caparo (Sriperumbudur, Tamil Nadu), in December 2011; Dunlop (Ambattur, Tamil Nadu), in February 2012; and so on. Unrest is not limited to the auto industry, but it has been centered there.”

The same article added: “Perhaps the single most important demand of the workers in recent agitations has been the right to form their own union; in most cases workers have still not been successful in doing so. Methods employed by the employers include firings, criminal prosecutions, beatings, and even killings. The German auto parts manufacturer Bosch successfully resisted three attempts at the formation of a union. The story is the same everywhere – Hyundai, Hero Honda, Wonjin, Maruti Suzuki, Graziano, Rico Auto. When 1,800 casual workers of the Dharuvera plant of Hero Honda sought to join the union of their choice, charges of attempt to murder under the Arms Act and Section 307 of the Indian Penal Code were filed against the leaders. In Rico Auto, Gurgaon, workers were attacked by thugs in 2009, leading to the death of one worker.”

India may misleadingly be called the “world’s largest democracy” in the Western media, but the Indian working class is constantly threatened by one form of repression or another. Where private bosses allow the existence of a union, it is usually only a “company union” of some sort. Anyone suspected of trying to create – or even thinking of joining – an independent union is systematically harassed. It is common practice for companies to hire armed thugs against workers. Sometimes these thugs are used to terrorize workers at gunpoint on the shop floor, or on their way home.

When a strike does take place, the strikers are never just confronted with their employer and its thugs. They also have to deal with the labor administration together with the local politicians and authorities, which are all quick to take the side of the bosses, while the police are there to try and beat any form of militancy out of them. Strike leaders and union organizers often end up in jail, sometimes with ridiculously long sentences, under the most spurious charges.

Nevertheless, the Indian workers have not given up and have kept demonstrating the same dynamism and determination to fight for the right to organize and to earn a decent living, and for their dignity.

In many respects, this Indian working class is reminiscent of another one: the Russian working class during the decades preceding the 1917 revolution, with two important differences. The Indian workers are far better educated than were the Russian workers at the eve of February 1917 and this is a major advantage for them. But at the same time, unlike the Russian workers, they do not have a Bolshevik party – that is, a revolutionary communist party capable of providing them with a political expression of their class interests and encapsulating the experience due to the struggles of the past. But who knows? It took less than one generation for the Russian working class to build up its party – and it does not need to be any different in India!