Notes on the Indian Economy

From now on I will be updating the blog with my notes on the Indian economy. I basically deal with the Indian economy in its social and political content and the consequences of these dynamics which may have in the global context and especially in terms of developing revolutionary political work. I would particularly like it if readers would give me their feedback on the postings.

Part - 1

Proletarianization and the Manufacturing Sector in the Informal Sector

I would like to begin by stating a well known fact of Marxist analysis of the Law of Value. Capitalism works ultimately to suck out surplus from the labor intensive, low tech sectors to sectors where high tech capital intensive operations take place. This is what was at the heart of the destruction of the Indian handicraft industry in the colonial period as well as the rise of British manufacturing on a global scale. In the scenario that a nation develops capitalism fully, it is reflected through the marginalization of the contribution of the 'intermediate classes' of small proprietors ( Peasants and petty bourgeois ) . In areas where capitalism is plentiful we see this has already happened. Here the social and political significance of small proprietors is either insignificant or non-existent in totality. In areas where capital is scarce, the intermediate classes of small / petty proprietors are existent to the greatest degree. By and large you may characterize the third world in this way. This half of the world where capital is scarce in relation to the total population would include South Asia, Sub-Saharan Africa, South East Asia, and parts of Latin America and Eastern Europe. These are areas which have a large base of peasants and petty bourgeois which have yet to be proletarianized. As such they present extremely attractive markets for big capital particularly from imperialist countries. For most countries which have such a large and substantial peasant-pb base and having scarce availability of capital they are generally not strong enough to develop a powerful bourgeois on their own and become dependent on the entry of foreign capital to aid them with vital technology and infrastructure and in many cases in actively securing their political power. However, this is not a stringent rule and in some cases, there are such 'third world' countries where capital is scarce which manage to develop their own bourgeoisie and need little or no help to maintain their authority internally. Not only that but at least 3 countries throughout history have been able to emerge as capital exporting countries without any recognizable strategic or economic impairments despite the scarcity of capitalist development. These four countries are : 1) Tsarist Russia till 1917, 2) Imperial Japan till 1945 , 3) India 1947 - present.

As a post-war example India contains many unique features of a country undergoing rapid capital accumulation having emerged from a colonial yoke. Among these features, is the continuing scarcity of Capital in India in relation to its large population, as well as the proliferation of its urban population as a part and parcel of proletarianization. But is this proletarianization concentrated and organized ? In Tsarists Russia during its period of industrialization, similar efforts were taken by the then existing government to liberalize the agrarian sector allowing for massive transfers of populations from the countryside to the city. In India, far more sophistic methods are used to achieve roughly the same end. But there's a difference here in the consequence of the action. It has been reported that manufacturing in India has stagnated. This has resulted in two things for the masses of rural migrants when they enter into Indian cities. On the one hand, organized large scale manufacturing is stagnating in terms of absorption of new proletarians into its fold, whilst on the other a channel is created for very sub-standard employment either in certain government jobs(cleaners, sweepers etc) or as is in the majority of the cases, into the informal sector. This informal sector is characterized by the existence of micro organizations employing not more than 9 people in it, with very limited capital requirements where the government imposes restrictions on the total capital invested. The Law of Value tells us that these are sectors where the workers involved are *exceptionally* exploited by their owners for the reason that they are forced to competing with the forces of big capital with very limited means. In India's case a large number of these small 'informal' businesses are in fact family owned stores and organizations. The profits would be shared by the family and each member of the family takes part in the business, even though women are found to be in a minority for the most part. *( Surveys reveal they represent not more than 20% of the total employment in the unorganized and informal sectors) .The unfavorable economic realities of small proprietorship is compounded by the fact that labor laws and protective coverage hardly ever reaches to these areas. Which means, the employment of child labor among other things is found mostly in this area. This speaks of the situation of labor in the urban centers, but what of the rural sector ?

The situation is actually worse in the rural sector with big capitalist farming holding a minority of land *( large estates in India are considered to be 5 hectares and above ) whilst their relative share in the total number of rural households are few. In addition they monopolize the best technologies available and are able to employ large numbers of agricultural proletariat to till their crops. This section of the agricultural population actually accounts for the bulk of the farm output in India and are concentrated for the most part in the wheat belt of India, in Punjab-Haryana-Western UP region whilst in Maharashtra and Gujarat there is the influential "Sugar lobby" based mostly around Western and Central Maharashtra. The marginal farmers and the landless rural households have only two choices in the villages, either leave to work in the cities, or to work in another's farm. But since, most holdings are either small, marginal or medium the scope for generating rural employment for this landless populace is bleak. *( 30% of all rural households are landless ) they have no other choice but to go to the cities, or die. Here again we have yet another phenomena in the villages, with the existence of village money lenders and pawn brokers. This class of usurious people are present in the cities as well and are considerably more exploitative and consequentially richer in most cases than the money lenders in the villages, however, the destruction to livelihood caused by village money lenders is considerably greater when comparing the relative standards of the urban and rural poor. In most cases it is this debt that drives the migration from countryside to city. There are of course other factors too if one considers, direct state repression of peoples in Central India. For the forces of Big Capital what this would mean, is the massive availability of dirt cheap labor as a result of migration from the villages to the cities. Additionally, what this could mean if we consider the steadily rising unemployment and underemployment of peoples is the creation of a vast reserve army of the unemployed. the proliferation and steady expansion of this means, that the Indian bourgeois finds a ready and seemingly 'natural' mechanism for the dampening of wages across the board. The prevalence of statism in India means *( figures suggest that even now 38% of all goods produced in India and almost 50% of the GDP output and 75% of all banking in India by volumes belong to State owned corporations ) that the Indian bourgeois and particularly the big Indian bourgeois need not worry about the entry of foreign capital who would not have the upper edge in terms of exploiting this vast pool of exploitable human labor.

The initial stages of protectionism in that case would stand to mean that an internal sphere had already been secured by State fiat, something which Russia and Japan both invested in heavily but not to the extent of Italy or Germany. Statism, however, could not and will not last forever. The bourgeois does not see state control as an end in itself but merely as a means to an end. The end envisaged here is that Big Indian capital should be readied and nurtured enough to be able to compete aggressively with its more technically sophisticated big imperialist rivals in the west and in the far east. A facet of this development has been noticed in the stagnancy of employment generation in manufacturing sector which contributes to around 14% of the total employment *( Note this includes small and micro level manufacturing as well ) but contributes nearly 30% of the total GDP and this contribution is rising. In fact, Indian manufacturing sector has reached to such an extent that it presently has assumed the lead role in exporting Capital outside India. The main targets of this export has predictably been in the advanced countries where the best technologies exist as well as providing a sort of backroom access to outlying markets in other countries. This success of course, is limited to only a few family based conglomerates and households who control the bulk of the output in the country along with of course the government. But this still hides the perplexing fact that the Indian economy for its boom and accumulation shows enormous and seemingly mysterious disequilibrium. One example of this is the fact of micro and small scale firms accounting for 40- 55% of the GDP in India *( the higher estimate takes into consideration the size of unorganized or informal sector to be 9 per organization, whilst the lower estimate is based on labor output ) . To the largest extent they are represented by small traders in the city and peasant households in the countryside, but also include various services and small manufacturing *( Small manufacturing has a unique feature of having a relatively small output compared to its manpower employed ) . This sorry state of affairs has a parallel with Indian agriculture which has a similar adverse relation between productivity and labor employed. The spurt in growth of Indian manufacturing post 1991 has taken place in only the last 6-7 years of this century and this period saw the emergence of India as a *Major* Capital exporting country which achieved the distinction of exporting more capital than it imported around 2007 when the Tatas acquired CORUS. Before this it was the IT sector which emerged as top dog. What i feel may have happened during this phase was the IT sector losing its distinctive position in India owing to a market determined shift of labor from the IT sector to Manufacturing which has spurred on this growth of Indian manufacturing. Over and above that it has been helped enormously by the infusion of foreign capital in this period as well as acquisitions made abroad which has given it access to new technologies and an expanding investment into research and development. This impetus was previously absent owing to the natural cover provided by Statism in India. Despite these changes, India's manufacturing has yet to catch up the levels of its nearest rivals China. What these contradictions in part shows is the validity of our argument for India's sub-imperialist status as well as its characterization as an economy driven by enforced proletarianization. In India it is the politics of India's sub-imperialism which maintains the social dynamics at the rural level that holds more importance than the economics of sub-imperialism. But the one only exposes the latter and vice-versa.