On Some Contradictions of India’s Neoliberal Trajectory

C. Saratchand

September 14, 2022

The neoliberal project has become hegemonic in most countries of the world. Contrary to some popular formulations, neoliberalism does not involve a theological commitment to some (abstract) notion of ostensibly “free markets,” “free trade,” “free enterprise,” etc. It involves, rather, a reinforcing of capital’s power over workers, driven in the first place by the dominance of international finance, centered around (but not confined to) the US dollar. Though the conflict in Ukraine has aggravated the crisis of neoliberalism, it would be premature to claim that this phase of the capitalist system has presently entered a terminal crisis.

This dominance of international finance (which necessarily requires the absence of capital controls) results in an attenuation of fiscal policy, whose ideological apology is provided by the resurgence of the doctrine of “sound finance.” On the one hand, this attenuation of fiscal policy disproportionately involves those elements pertaining to the social wage. On the other hand, it involves tax (and other policy) “concessions” to capital including privatization of public assets. This results in unprecedented levels of inequality, growth slowdown relative to the “Golden Age of Capitalism,” social precarity, and unemployment. The macroeconomics of this process may be summarized as follows: a redistribution of income from wages to profits (involving a rise in surplus value) creates conditions that are adverse to the realization of this surplus value. This adversity is attributable to the fact that workers tend to consume most of their wages while capitalists only consume a fraction of their profits. Consequently, aggregate demand will decline when income is redistributed from wages to profits. This decline in aggregate demand will exacerbate the crisis of realization of surplus value (manifested as a decline in capacity utilization, for instance), which, in turn, will reduce private investment, output, employment, and, consequently, wages.

To counter this tendency towards stagnation, capitalist governments seek to create periodic asset price “bubbles” by unleashing the “animal spirits” of the corporate-financial oligarchy. In India, the corporate-financial oligarchy refers to the upper layers of the Indian bourgeoisie that has emerged through the peculiar dialectical processes of proliferation and monopolization of the bourgeoisie during and after the transition from dirigisme to neoliberalism. This unleashing of “animal spirits” involves a further round of corporate tax concessions, further declines in the regulation of finance capital, heightening of the privatization drive, etc. These measures, which are nothing but a renewal of the process of primitive accumulation of capital in the phase of neoliberalism, result in brief spurts of (jobless) growth followed by slumps and job loss. This is the case since private investment (which is a component of the productive accumulation of capital) does not derive any persistent stimulus from this unleashing of the “animal spirits” of the corporate-financial oligarchy. Jobless growth in this setup emerges due to the following reasons: First, along the neoliberal trajectory, the technical composition of capital tends to rise in developing countries since this process imitates trends in developed countries. Second, along this trajectory, that part of profits that is consumed results in demand for commodities whose technical composition tends to be above the existing average. Therefore there emerges a vicious cycle whereby growth involving a rising technical composition of capital results in joblessness. This vicious cycle is a consequence of the incorporation of the corporate-financial oligarchy into the ambit of international finance.

These socially destabilizing characteristics of the neoliberal trajectory are sought to be managed by the corporate-financial oligarchy through a right-wing mobilization process that involves the entrenchment of inequality among the working people through the otherization of some of the most marginalized among oppressed strata. This draws on the fascist tendency to try and ward off challenges to the neoliberal project resulting in the emergence of neo-fascism. The corporate-financial oligarchy that is contingently reproduced through this overall dialectic is intimately linked to international finance.

The ideological elixir for this entrenchment of inequality among the working people is provided by a reinvigoration of the process of reinvention of history. In India, this reinvention of history has involved an attempt by neo-fascists to repudiate the implicit inclusive social contract that emerged among the people of India during the anti-colonial struggle, which is incorporated into the Constitution of India to a certain extent. This attempted repudiation also provides new ideological underpinnings to the current incorporation of the national corporate-financial oligarchy into international finance.

The process of otherization of the most oppressed strata aids in obscuring this intimate link between the corporate-financial oligarchy and international finance, the identification of the interests of the corporate-financial oligarchy with those of India. In other words, the neo-fascist forces are seeking to entrench an exclusive nationalism that is defined by this process of otherization, above all Dalits and, especially, Muslims. But this otherization process of the most oppressed strata involves not merely intervention by neo-fascists in the realm of propaganda but a process of extra-legal pauperization, especially through pogroms. Over time, these result in systemic segmentation in both communities and workplaces. In other words, both the active and reserve armies of labor are segmented.

However, this entrenchment of and accentuation of inequality among the working people pales in significance to the humongous inequality between the corporate-financial oligarchy and the working people as a whole. But the proponents of the neoliberal project and neo-fascist mythologists, in particular, persistently strive to invert the significance of the double inequality in their propaganda. As long as the most marginal are disproportionately squeezed, the neoliberal trajectory often seems to be relatively sustainable even as the process of economic atrophy continues. The obverse of this process of asymmetric squeeze is that the paltry prospects for “upward mobility” disproportionately made available to the relatively less oppressed strata. However, the most oppressed strata in countries where the neoliberal project has been hegemonic for decades (in India, tribals, Muslims, Dalits, other religious minorities, women, “other backward classes,” etc.) have already been squeezed to such an extent that further increases in the share of wealth and income of the corporate-financial oligarchy (and international finance) will now require a further squeeze of other relatively less oppressed strata (principally composed of the working people).

This gives rise to a fundamental but irresolvable contradiction. On the one hand, the process of accumulation of capital along the neoliberal trajectory (more through encroachment than “productive” means) eventually requires a generalized squeeze on the relatively less oppressed strata of the working people. But this very process undermines the social legitimacy of the neoliberal trajectory by undermining the material basis of the otherization process.

A second contradiction of the neoliberal trajectory is the persistent attempt to “stir up things” through fascist attacks on the most oppressed strata but seeking to “contain matters” so that there is no large-scale conflagration that may undermine the “confidence of investors” (international finance, above all). For instance, in 2020 there was a communal riot in one part of Delhi which was preceded and succeeded by many others. Abandonment of these attacks will undermine the fascist tendency while “overdoing” them will undermine the “confidence of investors.”

The recent experience of India’s neoliberal trajectory illustrates the relevance of such contradictions. Early on in the tenure of the current union government of India, attempts were made to “liberalize” legal provisions regarding land acquisition, but that was hastily withdrawn due to massive peasant resistance. Subsequently, both demonetization and the Goods and Service Tax resulted in a massive setback to petty producers, workers, and small enterprises. Demonetization in 2016 involved the sudden end of the legal tender status of 500 and 1000 rupee notes ostensibly to rein in “black money.” Demonetization was proximately driven by policy incompetence, but effectively constituted a targeted attack on small enterprises and petty producers whose production process is not only disproportionately cash based but also labor intensive relative to economic activities dominated by the corporate-financial oligarchy. Thus, demonetization, through a disproportionate squeeze on small enterprises, increased unemployment. Likewise, the Goods and Services Tax introduced in 2017 not only “unified” indirect tax rates thereby undermining federalism in India, it also weakened small enterprises and petty producers since, for instance, the process of determination of indirect taxes became more concentrated in the hands of the corporate-financial oligarchy.

The flawed policy response to the Covid-19 pandemic that began in 2020, involving only the most unavoidable minimal relief to the working people, reportedly resulted in millions of deaths, widespread morbidity, and unprecedented economic setbacks (with a crescendo of unemployment, precarity, and closures of small enterprises). Besides, there has been an extensive privatization drive with public assets being handed over to the corporate-financial oligarchy. The principal beneficiary of this has been, besides international finance, the national corporate-financial oligarchy, especially those close to the current ruling dispensation.

However, the federal government of India has faced a setback in its attempt to impose the Three Farm Laws, in 2020 during the early phase of the Covid-19 pandemic, which sought to drive a process of corporate encroachment into peasant agriculture. The Three Farm Laws were eventually withdrawn in 2021 after a protracted struggle by peasants and workers. Likewise, its attempt to drive contractualization in the armed forces through the “Agnipath” scheme has faced violent protests. The current federal government of India is confronting the reality that the shattering of the residual hopes for a modicum of subsistence (principally among the relatively less oppressed sections of the working people) cannot be assuaged merely by another bout of otherization of the most oppressed strata.

Since 2014, when the government assumed office, the fascist tendency has begun to give rise to neo-fascism. There are significant similarities and differences between fascism of the twentieth century and neo-fascism. A brief consideration of these trends is germane to a discussion of the contradictions of India’s neoliberal trajectory.

Repression of the working people under neo-fascism is partly analogous to the fascist regimes of the twentieth century. However, unlike the fascism of the twentieth century, neo-fascist regimes operate within the ambit of international finance, and, at least in India, they are unable to ensure employment of even the relatively less oppressed strata of the working people. This is the case, since neo-fascist regimes operate, by and large, as components within a “rules-based international order.” Therefore, they cannot rearm (through domestically produced weapons) or undertake wars to an extent that will allow near full employment to prevail (unlike fascist regimes of the first half of the twentieth century). Near full employment of the relatively less oppressed strata among the working people, even when seasoned with repression, will require an extent and quality of fiscal intervention that will irretrievably undermine the “confidence of investors.”

In these circumstances, the neoliberal trajectory in India is moving towards the entrenchment of a neo-fascist regime, encompassing all domains of political economy, proceeds in fits and starts with a “gig a day.” The fascism of the twentieth century sought to convert politics into theatre where (some of the) oppressed were mobilized to “let off steam” against the most opposed strata, In some cases, neo-fascists also target albeit only in their propaganda sections of previously entrenched elites, but under neo-fascism, the real Mccoy (full employment through war or preparing for it and demagoguing the rich) is impossible.

Why has the political opposition to neo-fascism so far been unable to mount an effective fightback in India? To begin with, a principal reason for this is that bourgeois opposition parties (most notably, the Indian National Congress) are themselves no less committed to the economic status quo. They do not fundamentally disagree with the economic policies advocated by the current federal government of India. They merely believe that those policies need to be packaged, sequenced, and paced differently. For instance, capitalist opposition parties lament the “botched” implementation of the Goods and Services Tax, but they do not critically interrogate the rationale of this policy itself. In other words, they advocate an unrealizable objective of an “inclusive” neoliberalism. An “inclusive neoliberalism” is a contradiction in terms.

This vain quest for an “inclusive neoliberalism” results in either lukewarm or no participation of these capitalist opposition parties in popular resistance to neoliberal policies that are unleashed by the current federal government of India. In other words, it is arguable that some proponents of the neoliberal project seek to immunize it from a wide-ranging critique and resistance by attributing the setbacks of the neoliberal trajectory exclusively to those who are helming the transition to a neo-fascist regime.

This has a number of deleterious consequences. First, these popular resistance movements against neoliberal policies are often less effective than they would have been otherwise. Second, as is characteristic of the neoliberal trajectory the world over, political “discourse” is shifted to the relative “credentials” of leaders of the various capitalist parties. This terrain is favourable to leaders of neo-fascism who have unmatched resources (due to the relatively more opaque system of political funding that they have put in place, i.e. their greater proximity to the corporate-finance oligarchy) to burnish their “credentials” and secure the backing of much of the state machinery. Even in the realm of political propaganda, the opposition political parties in North India (but not elsewhere) have failed to put in place an alternative organizational infrastructure that can effectively contest the ideological hegemony of neo-fascism. Third, if the capitalist opposition parties eschew effective participation in resistance to neoliberal policies, an important factor that could have led to their effectively working together against neo-fascism fails to come into effect. For instance, if capitalist opposition parties had fully participated in the struggle against corporate encroachment, then that could have given an impetus to such parties to working together among themselves and with other opposition parties against other policies of the union government of India. Once again, “political equations” among leaders of such opposition parties is quite an imperfect substitute to that grounded cooperation that could have emerged due to joint resistance to neo-fascism. Fourth, eschewing effective participation in the resistance to neo-fascism places significant hurdles in the emergence of a popularly credible common minimum program that could rally the different components of the democratic movement.

The neo-fascist forces also seek to entrench themselves through a wide-ranging political re-engineering of the opposition. This political re-engineering is centered on but not exhausted by administrative coercion and lucre. At least three approaches of this political re-engineering by neo-fascist forces have emerged. First, in the states of Madhya Pradesh and Karnataka, a large minority of members of the legislative assemblies of the Indian National Congress party (and some of its coalition partners) were “persuaded” to resign. This allowed the Bharatiya Janata Party (BJP), which currently presides over the federal government of India, to establish a majority in these state assemblies. Second, in the state of Maharashtra, more than two-thirds of the members of the legislative assembly of the Shiv Sena were “persuaded” to part with their leadership in order to form a coalition government with the BJP. Third, in the Indian state of Tamil Nadu, the neo-fascist forces have become the fulcrum around which the various factions in the All India Anna Dravida Munetra Kazhagam play out their political struggles for “leadership.” However, the process of political re-engineering in the Indian state of Bihar failed since the Janata Dal (United) party, which was previously in a coalition with the BJP, broke off to establish a coalition government with the Rashtriya Janata Dal. This they did with the outside support of other parties, including the Left. Currently, efforts at political engineering are ongoing in the National Capital Territory (Delhi) and in the Indian state of Jharkhand.

The inability of many (but not all) opposition parties to resist the neo-fascist forces only serves to render acceptable the process of political re-engineering. The grounds for this acceptance is prepared by the brazen lauding of the shenanigans of the corporate-financial oligarchy, especially of its upstart elements during the ongoing phase of neoliberalism.

In these trying circumstances where the very viability of the constitutional order is being undermined by neo-fascism, it is imperative for all sections of the democratic movement to jointly commit to the constitutional imperatives of democracy, secularism, social justice, gender equality, and federalism. Neo-fascism is only one component of the neoliberal project in India, albeit the component which is near hegemonic. A united front of all forces willing to resist is necessary to combat it. This coalition against neo-fascism can be sustainable only if these forces are willing to delink from neoliberalism. The Left's political-organizational resurgence is a precondition for this delinking. For instance, in the Indian state of Bihar, the Left needs to adroitly blend tactical flexibility with mass struggles to not only ensure that neo-fascist political re-engineering does not succeed there but also to highlight genuinely alternative policies. However, the dislodging of neo-fascism’s grip on state power is a necessary (but insufficient) condition to proceed onward to such a process of comprehensively challenging all dimensions of India’s neoliberal trajectory.

The author thanks Dr. Chirashree Dasgupta, Dr. Navpreet Kaur, Pragya Singh and Somya Choudhary for their critical comments on previous versions of this article.