Indian business in the colonial and postcolonial period: Quest for hegemonic influence over Indian society

By the early decades of the nineteenth century, the massive business network that existed in India comprising internal trade networks at the sub-continental level, long-distance foreign trade (India was the largest exporter of textiles in the world till the end of the eighteenth century), shipping, ship-building, banking, among others, had been more or less destroyed or severely restricted due to British colonial intervention, which had begun by the mid-eighteenth century. The internal accumulations in trade, banking, artisanal manufacture, merchant-usury, etc., made by Indian business, which could have constituted the primary accumulation necessary for ‘primitive accumulation’, necessary for the transition to modern industrial capitalism, were thus destroyed.

Even though the business community in India survived, the colonial intervention greatly diminished their scope of activity. Indian business was restricted to petty trade, money lending, etc. Partly the caste system, where for centuries certain caste groups engaged in business activity, had something to do with the survival of the business community. It must be noted that the survival of the business community in petty business on a wide scale all over the country was an extremely significant development because once the opportunity arose, as it did in the twentieth century, particularly after the outbreak of World War I, the Indian business community could make rapid advances, acquiring a dominant position in many important sectors of the economy even before independence. The opportunities Indian business had after independence was of course at a qualitatively different and much higher level. ²

However, it must be noted that the growth experienced by Indian business since World War I till independence in 1947 was not produced by colonialism but was a product of the space wrenched from it. It is easily demonstrable that the positive developments, which enabled Indian business to grow rapidly, occurred (to list some of the causes) either (a) as a result of the struggle, political and economic, against imperialism, whether through the national movement, legislative assemblies, business chambers or directly by entrepreneurs, as in shipping, or (b) when the grip of imperialism weakened or loosened due to world factors autonomous of the logic of the colonial system in the colony, such as the World Wars and the Great Depression, or (c) when the principal metropolis (Britain) lost out in competition to other metropolitan centres and preferred to permit indigenous enterprise in the colony to grow rather than allow other foreign powers to capture the colonial market, for example, protection to cotton, iron and steel, matches and sugar was related, to competition from Japan, Belgium and Germany, Sweden, and Java, a Dutch colony, or (d) due to the inner contradictions of colonialism itself, for example, the increasing need for from the colony could no more be met from a by now stagnating or even declining agriculture but had to be met through revenue tariffs on imports, which provided indigenous manufacture certain amount of protection. In other words, the specific non-colonial type of developments in the twentieth century occurred not as a result of colonialism but in spite of or in opposition to it. They were in the nature of independent capitalist developments in an embryonic form managing to survive like an illegitimate conception in the womb of colonialism, waiting to be ‘born’ and allowed growth without impediments only after independence.

The survival and growth of the Indian business community (in however hostile an atmosphere) created the economic basis for a ‘national bourgeoisie’, with implications on the nature of the class balance in the Indian national movement. The political trajectory in other colonial situations, such as say Indonesia, where even petty business had passed on to outsiders, such as the Chinese, was somewhat different, with a weak national bourgeoisie and the national movement coming under greater influence of the Left.

After the decimation of the indigenous big business houses under the impact of early colonialism in India, modern business groups particularly in the industrial sphere began to emerge once again in the closing decades of the nineteenth century. It was significant that the first Indian chamber of commerce, the Native Merchants’ Chamber of Coconada (later renamed Godavari Chamber of Commerce), was established in 1885, the year the Indian National Congress was founded. In fact, the process of disparate business groups from different parts of the country emerging as an all-India class came to be inextricably linked with the growth of the Indian national movement and the process of the Indian ‘nation in the making’. After all, the notion of an Indian capitalist class could not emerge so long as the notion of India or the Indian ‘people’ did not begin to take root and the capitalist class did not begin to identify with it.

A major and extremely creditable effort at national-level networking of diverse business groups, bringing them on to a common economic and political platform, was made by business leaders as well as by the leaders of the national movement. By 1927, business groups from all over the subcontinent speaking different languages, belonging to different religions and caste groups and representing extremely diverse interests such as pepper and ginger merchants, oilseeds and grain merchants, jute balers, hides and skins merchants, owners of textile mills, paper mills, engineering companies, insurance companies, banks, shipping companies, collieries, and tea plantations, to name just a few, had all come together in a national-level organisation of Indian business called the Federation of Indian Chambers of Commerce and Industry (popularly called FICCI or Federation). This class organisation of Indian business from its inception saw its role not only as merely a sort of trade union organisation of the capitalist class fighting for its economic demands and doing ideological propaganda to achieve them. The leaders of the capitalist class clearly saw the necessity of the class effectively intervening in politics. Further, involvement of the class in politics meant doing so on the side of Indian nationalism. As Purshotamdas Thakurdas, one of the most important leaders of Indian business put it, ‘Indian commerce and industry are intimately associated with and are, indeed, an integral part of the national movement—growing with its growth and strengthening with its strength’. ³

With some the most astute minds of the period in their ranks, Indian business leaders evolved a comprehensive economic critique of imperialism in all its manifestations—be it direct appropriation through home charges or exploitation through trade, finance, currency manipulations or foreign investments—including in their sweep the now fashionable concept of unequal exchange occurring in trade between countries with widely divergent productivity levels. ⁴ They kept a watchful eye on the complex national and international developments, especially those vis-à-vis imperialism, which had a bearing on Indian economic development and forcefully argued in favour of the national position. They showed how imperialism and the policies of the colonial state prevented Indian economic development and made wide-ranging efforts to combat the former in pursuance of their goal of independent capitalist development.

Thus, in the economic sphere Indian business leaders to some extent performed in the twentieth century the role that was in the nineteenth century performed by the tallest of the nationalist leaders like Naoroji and Ranade. It was they who now emerged as the champions of economic nationalism. The national movement leaders on their part acknowledged the role played by the business leaders and sought their assistance in combating imperialist designs in the economic sphere.

It is to be noted that the Indian business leaders consciously took up and highlighted issues, which did not relate only to their class interest but affected the interest of other sections of society or the society as a whole. For example, even when they made demands for a lower foreign exchange rate for the Indian Rupee, a move which would clearly benefit Indian industry as it would make Indian industrial exports cheaper and foreign imports more expensive, the business representatives took great pains to defend this demand on wider grounds such as the benefit to the vast masses of Indian agriculturists.

Similarly, they were willing to oppose measures, which were seen as very important in their immediate class interest, if the measures were not or were not seen to be in the national interest. For example, in 1930 the dominant section of Indian business opposed the Cotton Textile Industry Protection Bill brought in by the colonial government, which sought to secure some imperial preference for Lancashire in return for a measure of protection to the Indian textile industry. The bill was opposed ‘on the ground that the wider interest of the country demand(ed) that imperial preference could not be accepted’, ⁵ although the textile industry was in an extremely precarious situation at the time, which was partially caused by the Great Depression and desperately needed protection. Another example was during the negotiations for the Indo-British Trade Agreement of 1939, which essentially the business leaders from India negotiated with the British government. The business leaders had struck a very hard bargain after three years of tough negotiations and it was generally felt that the agreement was on the balance in Indian interest, yet the business leaders were prepared to oppose it if they were not able to carry the Congress along. They would not make any agreement behind the back of the Congress, even if it were economically beneficial to themselves. The capitalists had long realised that it was the Congress support which, on the one hand, gave their demands real clout and, on the other, lent weight to their assertion that they were taking positions not based on narrow class interests but national interests. Nevertheless, Gandhiji had reminded them of this aspect in the context of the ongoing trade negotiations: ‘Since the Congress is the only popular institution, it is necessary that whatever agreement is reached should have the seal of the Congress….This would prove your integrity and sense of justice’. ⁶

In the political sphere, too, the capitalists often did not support moves, which while benefiting their short-term class interest, could harm national or societal interest. For example, in 1928–29, when the colonial government introduced the Public Safety Bill to acquire extraordinary powers to contain Communist activity in the trade unions, the capitalists firmly opposed the bill. While accepting the threat of Communism and the need to contain it, they opposed the bill on the ground that the colonial state would use the extraordinary powers to suppress Indian nationalism. ⁷ As Purshotamdas put it, ‘We are Indians first and merchants and industrialists afterwards….’ ⁸

The business leaders were aware that the hegemonic influence of their class perspective would not be strengthened by the class being seen as pushing for its narrow self-interest. The business leaders showed maturity in correctly assessing the need of close relationship between their class and the growing anti-imperialist mass movement in India. They themselves never saw the Congress as their class party or even as a party susceptible primarily to their own influence, even though that was the perception of the Left and briefly even of the colonial state. ⁹ On the contrary, they saw the Congress as an open-ended organisation, heading a popular movement with ‘room in it for men of all shades of political opinion and economic views’, ¹⁰ and therefore open to being transformed in either the Left or the Right direction. It was precisely the fear (expressed as early as 1930 ¹¹ and destined to grow in the following years) that the Congress was shifting far too much to the Left, that led the capitalists to bestir themselves and evolve a complex strategy which would strengthen the influence of their class perspective both in the national movement and civil society as a whole.

Let us examine some elements of this strategy. First, the business leaders were aware that their class must at no point abandon or even be seen as abandoning the side of nationalism, whatever the fear or provocation, due to the radicalisation of the national movement, on the one hand, or the temptations offered to them by imperialism, on the other. If the capitalist class had gone over to the side of imperialism, it would have greatly facilitated the growth of the forces, which argued for a simultaneous overthrow of imperialism and capitalism or at least for working class or socialist hegemony within the national movement. Since the Indian capitalists did not go over to imperialism, the task of the Left, of eroding the hegemony of an ally in the common struggle against imperialism (the principal contradiction for all classes in colonial India society), became correspondingly more difficult. It called for a complex understanding of the concrete Indian reality and the evolution of equally complex strategies and tactics. This was a challenge, which the Left essentially failed to measure up to. In fact, the Left often chose to deny the reality itself and firmly assumed that the capitalists were bound to be on the side of imperialism.

Second, the business leaders were aware that bourgeois ideological hegemony in the anti-imperialist struggle was to be maintained not by simply buying up, manipulating or pressurising the nationalist leaders, but by trying to successfully project its own class needs or interests as representing the societal interest or the interest of the nation; in Marx’s words, by ‘…represent(ing) its interests as the common interest of all members of society’. ¹² Indian capitalists in fact were extremely conscious that they should not be seen as pushing their own narrow class interest of putting class before nation, but as speaking in the interest of the Indian nation. Further, this projecting of a class interest as the national interest was not achieved through manipulation, but by establishing a genuine coalescence of the two. In certain conjunctures, such as in a colonial society, there was up to a point a genuine unity of interests between the national bourgeoisie and the rest of society as all of them were oppressed by imperialism. ¹³ Similarly, the bourgeoisie could represent the interests of the rest of society in its own struggle against feudalism.

Third, a major index of the maturity of the Indian capitalist class was its ability to identify its broad long-term interest (i.e. maintenance of its overall ideological hegemony over the rest of society) and its willingness to subordinate its narrow short-term interest, sometimes at considerable cost, for the sake of the former. This perspective was necessary not only for sections within the class vis-à-vis the class as a whole but also for the class vis-à-vis the rest of society. The leaders of the Indian capitalist class showed remarkable sensitivity to this aspect. This was evident, for example, from the manner in which they chalked out a ‘plan’ envisaging a welfare capitalist system with partial nationalisation, an important public sector and definite limits on the private sector and free enterprise, ¹⁴ or the manner in which G.D. Birla argued against reduction of the taxes levied during the War to mop up ‘Excess Profits’ made by business enterprises. Further, the Indian capitalists recognised the fact that a popular movement (and after independence a popular government) had to, to a certain extent, balance conflicting class interests.

Fourth, the capitalists showed awareness of the subtle processes through which a class retained its ideological hegemony over society. To begin with, it is to be recognised that the best ‘political-ideological’ representative of a class may not necessarily be a member of that class. Marx had put it very succinctly while discussing the relationship between the ‘political and literary representatives of a class and the class they represent’. He said: ‘what makes them representative of…(a particular class) is the fact that in their minds they do not get beyond the limits which the latter do not get beyond in life, that they are consequently driven, theoretically, to the same problems and solutions to which material interest and social position drive the latter practically’. ¹⁵ The capitalists’ tactic naturally was to strengthen the hands of such representatives of their class.

The capitalist leadership firmly opposed efforts by a section of the capitalists to try to extend their class hegemony by entering politics themselves directly or forming a class party ¹⁶ when they felt threatened by the Left as they did in the days of heightened trade union struggle in the late 1920s or during Jawaharlal Nehru’s orthodox Left stance in the mid-1930s. G.D. Birla brilliantly enumerated how such efforts went against the interest of capitalism and how the method of strengthening the hands of those who, without being members of their class, were saying what the capitalists wanted, was much superior in maintaining their long-term interests. He argued that the capitalists were not to attempt to ‘kill Bolshevism and communism with such frail weapons’ as frontally attacking the Left with class organisations of the capitalists, which would carry no weight with ‘the masses’ or even with the ‘middle classes’. He added, ‘I have not the least doubt in my mind that a purely capitalist organisation is the last body to put up an effective fight against Communism’. ¹⁷ Birla was to outline a ‘superior’ method, in 1936, while reprimanding a section of his fellow capitalists who, alarmed by Jawaharlal Nehru’s leftism, raised an open banner of revolt against him and his socialist ideas in a public statement called the ‘Bombay Manifesto’. He said: ‘It looks very crude for a man with property to say that he is…opposed to expropriation in the wider interest of the country. Are you or myself a fit person to talk? Let those who have given up property, say what you want to say’. ¹⁸

The correct strategy, therefore, was to ‘strengthen the hands’ of the ‘right wing’ nationalists such as ‘Vallabhbhai [Patel] and Bhulabhai [Desai] who are fighting against socialism’. ¹⁹

The Indian business leaders envisioned role for their class in the immediate postcolonial era with a democratic popularly elected government in power, in the same complex manner as the role of their class in the national movement of the past. They had not seen the Congress as their class party and sought only to ensure that it remained under bourgeois ideological hegemony. Similarly, they saw that the postcolonial popular government would not be under their exclusive domination or control and they would in fact have to carefully evolve such a stance that the class balance in the government and other state apparatuses did not turn against them. The business leaders did not commit the error of believing what was said about them by a section of the Left that the Congress before independence was virtually a class party of the capitalists and consequently the postcolonial Congress government was essentially a government of the capitalists.

The business leaders were aware that a democratic popular government could not be under the exclusive influence, leave alone control of any one class. It would have to balance and resolve conflicting interests requiring sacrifices (though unequal, depending on the balance of class forces at each point of time) from all classes. Unlike the bourgeoisie of many other postcolonial countries in parts of Latin America and East Asia, Indian business did not at any point of time opt for the alternate model—a right wing dictatorship or an authoritarian regime which functioned in partnership with the capitalist class.

The twin notions of anti-imperialism and democracy were deeply ingrained among the Indian people through the efforts, spanning over half a century, of the Indian national movement. The Indian business community too was deeply influenced by both these ideas. While fully aware that there was ‘little guidance from history’, from the experience of other countries, for undertaking the task of comprehensive economic development within a democratic framework, they nevertheless argued that the objective of planned development would be served more ‘effectively’ by a ‘democratic organization of society’. ²⁰

The capitalists’ acceptance and even welcoming of the institution of democracy, rather than their pitting themselves against it, was of enormous import, particularly in relation to the influence of their class and their class perspective over the rest of Indian society. Once the notion of democracy had taken root among the people in general and democratic institutions were in place, any class (or section) which opposed democracy or based its politics outside its framework only ended up in isolating itself and reducing its own legitimacy, as well as that of its class (or sectional) perspective over the rest of society. The Communists forming the traditional Left often suffered this denouement as it tended to view democracy (as they viewed nationalism) in a class reductionist manner, seeing it as a bourgeois institution (and consequently a democratic state as a bourgeois state) which had to be overthrown, preferably through an insurrection, to bring in the ‘dictatorship of the proletariat’. They did not see the democratic state as an open-ended institution which could be transformed in favour of the oppressed by so altering the class balance in it as to orient it in a socialist direction. The adoption of such a stance by the Left amounted to its surrendering the democratic space in the state apparatus and civil society to other influences (such as that of the bourgeoisie) and thus allowing a consolidation of such influences.

Once democracy and democratic institutions were not assigned (as they were not by the Indian business) a pre-determined class character, it followed that any class could use them to extend its influence and seek to transform them in its favour. A class seeking to extend its influence in a democratic state (or in a popular movement) would have to be able to carry the bulk of the people with its programmes and plans. It would have to create a societal vision which (while it met its own interests) was not seen to be narrowly conceived in the interest of any one section of society.

In the colonial period, as argued above, Indian business championed the cause of the defence of national economic interests, consciously emphasising those aspects of its anti-imperialist agenda which would particularly benefit the common people. In a colonial situation, it was relatively easier for the capitalists to project their interests as societal interests as there was in this situation, to a considerable extent, a genuine coalescence of the two interests—it was not only the Indian capitalists but the Indian people as a whole who were oppressed by imperialism.

The postcolonial situation was, however, somewhat more complex. Though in the effort at generating independent economic development the capitalists and the rest of Indian society would share certain common objectives, the main contradiction in Indian society would no more be imperialism versus the Indian people but would increasingly tend to be within the various classes of Indian society, with socialism lurking on the horizon. ²¹ In such a situation the capitalists’ task of adopting and projecting a model of development which would (while maintaining capitalism) successfully carry the rest of society with them was daunting. The capitalists would have to adopt a national developmental approach which, while remaining within bourgeois parameters, would appeal to society as a whole and not only to the capitalist class. It was such an approach that the capitalists adopted in their plan of development for Independent India. ²²

FICCI President, G.L. Mehta, as early as 1943, brilliantly anticipated the complex task ahead for class organisations of the capitalists like the FICCI, once ‘self-rule’ was achieved. He said: ²³

Indian commercial bodies have hitherto, necessarily because of our political conditions, played a mainly critical role…But with the attainment of popular responsibility and the growth of representative institutions, the Federation (FICCI) will have an increasingly constructive part to play in national economy. As the apex organization of Indian commerce and industry, it will not rest content to be a custodian of sectional interests, in a land where sectionalism thrives, nor a defender of the status quo, but will strive to be the exponent of a sane and creative body of opinion in the economic sphere: the economic front, in fact, of a healthy and broad based nationalism. In so far as Indian commercial interests seek to identify themselves with the wider economic interests of the nation, respond to the finer and growing needs of the people and continually adapt their outlook and adjust their programme to the fundamental economic requirement of the changing times, in so far would they successfully pass the trials and conflicts and struggles in the years to come…Let it not be said that we were weighed in the balance and found wanting. For, with the rest of the country, we also are all on our trial at the bar of history.

The business leaders also realised that they would have to cooperate with the postcolonial popular government in trying to achieve this broad-based goal of national societal development. A failure to do so would isolate the capitalists, putting them in the ‘anti-people’ camp, facilitating a diminution of their influence, if not their overthrow. They thus ‘agreed to cooperate with Nehru’s government despite their inhibition about the Left anti-capitalist inclinations of many in that government and Nehru’s own socialist vision’, in the same way as they had stayed with the national movement despite a strong Left trend within it. As M.A. Master, President of FICCI, said in an address to the Federation: ²⁴

We are in a changing world…New [read Left, A.M.] ideologies have come into existence. We shall have to adjust our plans and policies. New obligations and duties will be imposed on us. We will have to take courage…and respond on many occasions to the wishes which our Government might express and to the new policies which our Government may lay down…As we are expecting them to meet our wishes it will be our obligation to meet their wishes.

Again, in his message to Prime Minister Jawaharlal Nehru carrying felicitations on the occasion of India’s independence, Master said: ²⁵

The Indian commercial community has played its part in India’s fight for freedom and has stood by and supported the Indian National Congress in its long unprecedented unique and heroic struggle for winning freedom for our motherland…While we all realize that the fight for freedom has been won, the victory for economic emancipation and social regeneration is yet to be won. In any well thought out plan the Government may therefore evolve for removing poverty, misery and economic and social inequality and injustice from the country to make our people happy contented and prosperous and for enabling India to attain her rightful place and to play her destined role in the comity of the free nations of the world may I assure you that the Federation will work with your Government in closest mutual cooperation and will always place their services at the disposal of your Government.

After Independence in 1947, the position taken by Indian business on issues of political economy, on what was to be the nature of the planned effort at development was coloured by the perspective of their class discussed above. It was also influenced by the colonial experience, the emerging consensus in India on the development path to be followed and on the existing state of knowledge and understanding on development theory in large parts of the world.

Indian business thus was largely in tune with, though not sometimes without reservations, the basic strategic objectives of the planned development envisaged by the postcolonial state or with what may be called the Nehruvian Consensus. They, for example, fully endorsed the objectives of trying to achieve comprehensive all round development aimed at reducing foreign domination over the Indian economy and a steady rise in the standard of living of the Indian people; initiating rapid industrial development which was to be carried out by indigenous capital, based essentially on the home market, and aimed at creating self-sufficiency, particularly in capital goods; allowing only a small volume of foreign capital, and that too under strict controls; not adopting an ‘isolationist’ outlook and participating in all possible areas of international cooperation, though on an equal footing, rejecting any terms which undermined India’s sovereignty and her right to follow her own chosen path, promoting comprehensive anti-feudal land reforms, maintaining the economic unity of India, bringing about a mixed economy with a combination of the private and public sectors, introducing ‘welfare’ measures which would cushion the social costs of the development process on the poor and underprivileged and, most important, carrying through the developmental effort within a democratic framework. ²⁶ In fact, the capitalists had stated these very objectives in their own Plan of Economic Development (Bombay Plan), published in January 1944. There were few fundamental differences between their Plan and the planning schemes introduced after independence.

The endorsement by Indian business of the basic tenets of the national developmental efforts after independence not only contributed to the relative success of such an effort (the business community was a critical ‘agency’ for carrying out the plan effort) but also prevented the isolation of the capitalist class from the Indian mainstream. However, it also contributed ultimately to the bourgeois developmental perspective exercising overall hegemony over the postcolonial state, despite the existence of a significant Left strand and Prime Minister Nehru’s own socialist commitment.

The Nehruvian model with its inward orientation and substantial state participation as well as extensive state control delivered good results in the initial years till about the mid-1960s. However, over time, the excessively inward looking, protectionist and control-ridden model began to produce major inefficiencies in the economy. Many of the controls and restrictions introduced in the name of socialist principles and equity (such as the Monopolies and Restrictive Trade Practices Act (MRTP) and reservation for the small sector) actually ended up building a distorted, backward capitalism, as they went against the basic laws of capitalism such as the need for continuous expansion on the basis of innovation and efficient investment.

Besides, changes that were occurring in global capitalism post-World War II, particularly since the 1960s, opened up new opportunities and were proving the inward-oriented model based on export pessimism, popular in economic thinking of the 1950s, to be inadequate. Some of the important changes that needed to be taken cognisance of were, very briefly, the following: First, the nature of foreign capital and multinational corporations was changing. A process of ‘internationalisation of production’ had started. Multinational corporations, instead of just looking for markets or sources of raw material, now looked for cheaper production areas. Instead of creating enclaves in the backward countries, which had backward and forward linkages with the home country (this was the typical colonial pattern), they were now bringing in investments which had major multiplier effects on the local economy, including of technology transfer. It became common for multinational companies to ‘source’ a large part of the components that went into the final product from all over the developing world and even shift entire production plants to the under-developed countries. Second, along with, and partially as a result of, the above process, there were massive capital transfers between countries, reminiscent of the capital transfers of the nineteenth century at the height of colonial expansion, but very different in character.

The above two processes contributed to the third major international development, that of an unprecedented explosion of world trade. Between the 1950s and 1970s, world output of manufacturers increased four times but world trade in manufactures increased ten times. The percentage of world produce that went for export doubled between 1965 and 1990. What is most significant is that while there was a massive increase in global industrial exports, the Third World was able to rapidly increase its share of total industrial exports, especially since the 1970s, from about 5 per cent in 1970 to double the figure in 1983. ²⁷

The East Asian Miracle, that is, the rapid industrialisation of the East Asian countries, beginning in the 1960s, which gradually shifted the industrial base of the world from the West to the East, took advantage precisely of these kinds of opportunities of capital and market availability. Japan’s example of explosive post-World War II growth was being repeated by South Korea, Taiwan, Singapore, Hong Kong and, more recently, Thailand, Malaysia, China and Indonesia. The four Asian tigers, South Korea, Hong Kong, Singapore and Taiwan increased their share in world export of manufactures from 1.5 per cent in 1965 to 7.9 per cent in 1990. Even the newly industrialising economies (NICs), Indonesia, Malaysia and Thailand increased their share form 0.1 per cent to 1.5 per cent over the same period. ²⁸ South Korea’s manufactured exports, which were negligible in 1962, amounted to four times those of India by 1980. Again, South Korea was exporting $41 billion worth of manufactured goods to the OECD countries in 1990 to India’s mere $9 billion.

That reform of the dirigiste, control ridden and inward looking Indian economy was necessary was recognised as early as the mid-1960s. However, India failed to respond promptly to the lessons learnt from her own experience and international changes. On the contrary, because of internal and external reasons discussed elsewhere, India got pushed in the late 1960s into an even more protectionist, inward-oriented and state-dominated direction, thus, failing to take advantage of the globalisation process. In fact, India’s share in world exports actually shrunk from 2.4 per cent in1948 to 0.42 per cent in 1980, rising to a paltry 0.6 per cent in 1994.

Since the mid-1970s, and particularly the 1980s, efforts began to be made to introduce economic reforms but its comprehensive implementation could not occur for various reasons. Governments, especially when in a vulnerable situation, for example, Indira Gandhi with the Punjab crisis, Rajiv Gandhi after the Bofors scandal, and later even Narasimha Rao, following the destruction of the Babri Masjid, were extremely wary of initiating or sustaining reforms which would involve introducing unpopular measures like attempts to regain fiscal discipline, change in labour laws, etc., steps which in the initial phase were bound to be painful. Also, there was (and still remains) persistent opposition to reform from vested interests such as the bureaucracy and even sections of business who benefited from the existing system of controls, using them to earn a sort of ‘rent’. Last and certainly not the least, a strong ideological opposition from the orthodox Left, strangely oblivious to the changing global reality, continued to play a role in obstructing reform.

The crisis in 1991, with the country at the edge of default, enabled the Narasimha Rao government to break through the traditional mindset and attempt an unprecedented comprehensive change at a time when both the ideological opposition and the resistance of the vested interests was at a weak point. Thus, though late, (nearly thirteen years after China changed course), a programme of economic reform was initiated in 1991. One reason why the shift took so long and, even when it took place, was not as sharp a turnaround as it was in China in 1978 or the Soviet Union after the mid-1980s was that in a democracy, the change from one kind of societal consensus (such as the Nehruvian consensus) to a new consensus (say around reforms) is a process and not an event, and consequently it has its own dynamic, which is very different from that operating in a non-democratic or totalitarian society.

The process of reforms started in 1991 involved, inter alia, an immediate fiscal correction; making the exchange rate more realistically linked to the market (the Rupee underwent about a 20 per cent devaluation at the very outset); liberalisation of trade and industrial controls like freer access to imports, a considerable dismantling of the industrial licensing system and the abolition of MRTP; reform of the public sector including gradual privatisation; reform of the capital markets and the financial sector; removing a large number of the restrictions on multinational corporations and foreign investment and in fact welcoming them, particularly foreign direct investment, and so on. In short, it was an attempt to free the economy from stifling internal controls as well as equip it to participate in the worldwide globalisation process to its advantage.

The record of the first few years of reform was creditable by any standards, though numerous problems and challenges still remained. India performed one of the fastest recoveries from a deep macroeconomic crisis. Moreover, the process of structural adjustment, particularly the fiscal reining-in (done initially), was achieved with relatively minimal pain—without it setting off a prolonged recessionary cycle leading to massive unemployment and deterioration of the condition of the poor as was feared and as occurred in the case of several other economies in a similar situation of structural adjustment.

As mentioned earlier, there were sections in Indian business who had over the years acquired vested interests in a model which sheltered them from external competition, and allowed some of them special privileges through the government imposed high import duty and licensing system—often called the licence-quota Raj. There was therefore some resistance to reform, particularly of the opening up of the external sector. Groups like the ‘Bombay-group’, as it was popularly called, argued for slowing down of the external sector reforms till such time as indigenous business was in a position to compete and for the creation first in India of conditions, which provided Indian capital a level playing field before allowing entry to external capital.

However, Indian business organisations in general and particularly the increasingly influential, modern and forward looking ones like the Confederation of Indian Industries (CII) actively supported economic reform which involved both internal liberalisation as well as external reform involving a greater opening up to the world economy. They reflected the growing self-confidence and strength of Indian business and also to some extent a farsightedness reminiscent of the early leadership of Indian business. They saw the long-term interest of Indian business in not being left behind iron or bamboo curtains but in participating in the globalisation process, in forcing themselves to be more efficient and competitive even if the process was painful and involved short time sacrifices.

Whatever the various strands of opinion within Indian business, by and large it appeared that Indian business refused now, as it had done in the past, to step outside the societal consensus and insist either for reform before a consensus had emerged in its favour or against reform after a consensus for reform had emerged in civil society.

But perhaps where the role of Indian business today is qualitatively different from what it was before independence and in the early years after independence is in its farsightedness and maturity in intervening in wider social processes that affect its class and societal vision. Business leaders appear today far less active and able in influencing broad societal trends. The last, glimmerings of the early élan were seen in 2002 when the CII took the brave step of having a full discussion of the fascist developments occurring in Gujarat involving the committing of genocide against the Muslim minority in that province. This they did knowing full well that it would annoy the Government in power in Gujarat, one of the premier industrial belts in India, as well as the Government of India. The business leaders here took courage to express concern over political happenings that have a serious bearing on the survival of the very system, which can nurture their development in today’s world.

Alas, Indian business today appears to have lost its connect with its own history. It is increasingly choosing the path of crony-capitalism, manipulating state power for its own narrow interest to the detriment of the nation as a whole. The overwhelming support of Indian business to Narendra Modi and the majoritarian communal fascist forces that he represents in return for turning the balance of class forces blatantly in their favour is a case in point. They support this regime in order to promote their short-term class interest oblivious of the fact that the ideology promoted by this regime would destroy the nation itself committing it to state of civil war, which would greatly harm their own long-term interest. What a contrast it offers to Indian business represented by the FICCI in the colonial and immediate post-colonial period keeping a clear distance from divisive religious communal and other sectional interests which would destroy the Indian nation as it was conceived by the Indian national movement!

Also, perhaps Indian business in supporting the ‘Hindutva’ communal fascist forces is making the same error that German big business did in the 1930s while supporting the Nazis under Hitler. German businesses in supporting Hitler thought they were promoting their class interest and even may have had the illusion that they would be able to control him. Ultimately, Germany (including German businesses) was destroyed by the Nazi experiment and German businesses were not in a position to ‘control’ Hitler once he had assumed power.

A British intelligence report prepared by the Intelligence Bureau in the 1940s looking into Indian business funding the national movement against the British made a very perceptive observation regarding business funding of political movements: ²⁹

The support given by Indian ‘Big Business’ to the Congress movement may be compared to that given by Russian Big Business to the Mensheviks before the Russian Revolution and that given by German Big Business to the Nazis…In both these instances, ‘Big Business’ failed conspicuously in the end to dominate the Government which it helped to create and there is no reason to suppose that Indian ‘Big Business’ will prove any more successful in realizing any ambitions that it may have in this direction.

As we have discussed in detail above, Indian business had no illusion that its support to the Congress movement would result in their dominating or controlling the national movement. Indian business today, however, may be suffering from an illusion that they will be able to control the communal fascist forces they have been actively promoting in the recent past, forces that could lead to their own destruction.