Geography Reference
In-Depth Information
execute them.
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However, the privatization of BALCO suggests that while these
reforms are fraught with difficulties and political opposition, some will
ultimately prevail partly because the first-generation reforms changed the rules
of the game for India's political leaders. Most notably, earlier reforms created an
institutional environment that forces current leaders from different states to
appear pro-reform in order to compete with each other for investment.
The dynamic of the new institutional environment emerges from the economic
and political transformations that India underwent throughout the 1990s that
have affected the way states relate to one another and to the central government.
This in turn has shaped state-level political economic processes.
Of the many consequences of the economic reforms of the early 1990s in
India, one stands out: reform created incentives for the states to compete against
each other for investments. Prior to the early 1990s, the central government
regulated investment, which included assigning the location and scope of new
projects. But after the central government reduced its regulatory load and
decreased public investment, states have been increasingly competing to secure
private investments.
One result of this transformation is that opposition regional parties—even left-
leaning ones like the communist government in West Bengal—have
simultaneously implemented neo-liberal policies within their own states that are
seen as necessary to be competitive, even while protesting similar reforms at the
center. Similarly, members of the Congress party volubly protest economic
reforms at the center, where it is the largest opposition party, while at the same
time supporting reforms in Congress-led state governments.
Seemingly contradictory policy stances become clear when considered in the
light of this double-bind of political leaders, as I will illustrate further with the
case study of the privatization of BALCO. First, however, we should understand
that the history of the current era of reform begins during Rajiv Gandhi's
stewardship.
RAJIV GANDHI'S REFORM EFFORTS
In 1985, without the stimulus of a severe economic crisis or inducements from
international financial institutions, the newly elected government headed by
Rajiv Gandhi initiated a series of economic reforms, the ultimate goal of which
was to open India to the global economy, lift the labyrinthine regulations on
economic activity within the country, and eliminate the subsidies and price
controls that tied the government to powerful domestic constituencies.
Many scholars of political economy contend that an economic crisis is
necessary to create popular acceptance and a strong political coalition in support
of often-unpopular reforms.
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The Gandhi regime's short-lived encounter with
reform lends support to this thesis. The Congress government was beset with
