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Economic & Political Weekly EPW may 24, 2008 35

How h S chngd is Mnd: pow, polsnd h Ogns of inds Mk rfoms

Mitu Sengupta

It is now well known that 1991 is an important year in Indias

economic history. In that turbulent year o ailing monsoons,

chaotic politics and a severe balance o payments crisis,

Narasimha Raos minority Congress government introduced a

new economic policy (NEP) that signalled a surprisingly major

rupture with the past. Widely seen as representing a denitive

shit in Indias guiding economic paradigm,1 the NEP carried the

promise o a systemic and multi-arena approach to liberalisation

[Srinivasan 2001], alongside a greatly minimised role or the

state in the economy. With its emphasis on integrating India with

global markets, the NEP was in step with not only the strident

economic liberalism o the Washington Consensus model o

policy reorm [Ahluwalia 2006],2 but also its core assumption o

a benign international order.

1 inoduon

In the past 17 years, the policies spawned by the shit in paradigm

have prooundly altered the countrys economic landscape, trans-

orming the states relationship with not only the domestic private

sector, but also international markets. The reorms have elicitedboth praise and criticism proponents complain about their slow

pace [Ahluwalia 2002], while critics worry that they have contri-

buted to rapid increases in poverty and inequality [Jha and Negre

2007]. All sides seem to agree, however, that, or better or or

worse, the basic eatures o the economic paradigm introduced in

1991 are now rmly entrenched, having survived multiple

changes in government [Mukherji 2002].

The initiation and remarkable persistence o the 1991 reorms

have always been regarded as somewhat o a puzzle by India-

observers. Indian democracy was long considered unavourable

terrain or major policy change, much less one o paradigmatic

proportions [or a thorough review o this literature, see Jenkins

1999]. Not surprisingly, the phenomenon has remained the ocus

o lively debate. An overview o these debates, however, reveals a

worrying trend: a gradual eclipsing o the more complex

arguments on the subject by a cluster o politically expedient

characterisations. Indeed, a prevalent explanation o the NEP is

that it is the product o a non-ideological, non-partisan and

ultimately inevitable process o intellectual evolution among

Indias policy elites. The 1991 reorms are oten represented as a

rereshing change in mindset [Joshi and Little 2001] or

mentality [Panagariya 1994] among policy intellectuals, who

gradually owned up to the blunders o statism and disposed othe old policy regime, much as prudent adults eventually cast o

their errant, adolescent ways. This long-awaited maturing o

There are a set of dubious though politically expedient

explanations for the origins of Indias market reforms.

These explanations problematically construe Indias

paradigm shift as the outcome of a non-ideological

and inevitable process of intellectual evolution among

policy technocrats. The paper proposes an opposing

view of the policy process, in which conflict is central,and the deliberate exercise of power is crucial to why

some policy alternatives are privileged and selected

over others. It is suggested that far from being the one

inescapable conclusion to the lengthy debates over

economic strategy that were typical to Indias

economic history, the 1991 reforms arose out of the

political defeat of many credible alternatives. These

reforms represented the surprising eclipsing of not

only an alternative economic paradigm, but also thereversal of almost 50 years of nationalist anxiety over

Indias position of disadvantage within an inequitable

global order. In light of this, the paradigm shift is

viewed as a political event that might have been eluded

under different political circumstances, and not as an

historically necessary phenomenon brought to light by

an elite team of experts.

Mitu Sengupta ([email protected]) is with the department o

politics and public administration, Ryerson University, Toronto, Canada.

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may 24, 2008 EPW Economic & Political Weekly36

outlook is said to have spread through both state and society,

meeting with little or no reasonable resistance.

The present paper contests this depoliticised characterisation

o the origins o the 1991 reorms, which has led to much exagger-

ation o the depth o intellectual support or these reorms,

particularly within the state. I argue that, ar rom being the

benign product o a cumulative progression o ideas among

universally accepted experts, Raos reorms were borne out oprolonged political and ideological contestation over dierent

explanations o past policy ailures and dierent prescriptions

or change. Furthermore, ar rom being the one, unavoidable

conclusion to these long debates over reorm options, the NEP

was ounded on the political deeat o an alternative economic

paradigm and, more signicantly, o an alternative position on

the politics o the global order, both o which had enjoyed high

regard or decades. Readers are urged to view paradigm change

as a political event that might have been circumvented under

dierent political circumstances rather than an historically

inescapable phenomenon that reigns without intellectual alter-

native or meaningul political resistance. The main aim o this

paper is to pave the way or more authentic explanations o the

1991 reorms that are predicated not on the enervating assump-

tion o inevitability, but on a rigorous inquiry into the politics

behind why the state apparently changed its mind.

2 an invbl chng n Mnds?

The NEP was presented in the Indian Parliament as evidence that

no power on earth can stop an idea whose time has come. These

weighty words o Victor Hugo conveyed the impression o inevit-

ability. Indeed, Indias market reorms have been widely portrayed

as the inevitable consequence o globalisation, which, in turn,is persistently characterised as an inexorable and irreversible

process [Lal 2000: 46]. This thesis o inevitability is usually

supplemented by two politically expedient arguments. The rst

is that the 1991 reorms are intellectually continuous with the

liberalisation policies pursued by past governments. This helps

dispel concern that they were imposed on India by the inter-

national nancial institutions (IFIs). The second is that the

reorms were spearheaded by a small group o exceptionally able

men who succeeded in winning over the unconvinced through

the art o argument and persuasion. This suggests a robust

consensus among policy intellectuals on not only the need or

reorm, but also a particular type o (neoliberal) reorm.

Learning and Continuity: By ar the most pervasive character-

isation o the post-1991 reorms is that they bear intellectual

continuity with prior attempts to liberalise the economy. The rise

o economic orthodoxy in India is portrayed as the outcome o a

linear and cumulative process o learning 3 among the countrys

policy elites. Domestic policy ocials are said to have learned

rom various errors o omission and commission o past govern-

ments, as well as rom larger global lessons, such as the

crumbling o state socialism, the decline o welare statism, and

the success o the open economies o east Asia. The image createdis one o a wholesome intellectual exercise, based on a candid

appraisal by non-partisan and non-ideological policy experts o

the existing paradigms strengths and weaknesses. When the

weaknesses piled up too high, the paradigm as a whole was

(justiably) discarded. Thus, as Nayar suggests: Through a

process o social learning key leaders had come to the under-

standing that earlier policies had ailed to meet Indias own goals,

and there was hardly any merit in persisting with them. The same

conclusion was, o course, sel-evident to the IFIs (1998: 350).All

in all, the concept o learning, or at least its underlying assump-tions, remains the dominant explanation o paradigm shit o

why the state changed its mind though there appears to be

some quarrel over when the lessons o such learning were

rst maniest.4

Men of Courage and Commitment? The claim o intellectual

continuity through learning is oten stapled together with the

idea that the NEP was masterminded by a small and cohesive

pro-market team that rst made its appearance in the mid to

late 1980s [see, or example, Acharya 2001; Nayar 1998; Shastri

1997].5 At the core o this team were a cluster o senior civil

servants, many o who had worked in either the World Bank or

the International Monetary Fund (IMF) prior to their government

appointments. Heroic depictions o this team are all too abundant.

Their contribution to the initiation and buoyancy o Indias

market reorms has been aithully chronicled, with descriptors

such as men with commitment and courage [Das 2000: 240]

and policy entrepreneurs [Dash 1999]. The men in question are

said to have gradually won the condence o critical segments o

the political and bureaucratic elite in administration ater admin-

istration in the 1980s, thanks to their proessionalism and

resh, innovative ideas [Shastri 1997]. Such qualities are also

evoked in explanations o their constant employment in topgovernment jobs or more than two decades [Nayar 2000, 1999].

It is striking that there is little to no discussion o the political

strategies these men may have employed to suppress dissent

(rather than simply win it over). The question o power and its

deliberate usage is extracted rom the equation.

The teams relationship with the IFIs is also beheld in glowing

terms. The opportunity or the IMF/World Bank to interact with

like-minded policymakers at the highest levels o decision-

making is said to have lent Indias reorm programme credi-

bility and support within international circles [Ghosh 2006:

417]. Overall, the readiness o Indian ocials to (nally) welcome

policies long-recommended by the IFIs is construed as reason or

relie, not concern. Nayar sums up the position like so: [i] the

IFIs applied pressure at all, they were pressing against an open

door (2001: 147) and the contemporary leadership was no less

nationalist in its aims than the ounding athers; however, the

world in which it unctioned had meanwhile changed and

required a dierent approach (1998: 349).

The characterisation o Indias market reorms as the outcome

o a linear, rational and home-grown process o learning among

policy elites transmits the impression that a good deal o serious

thought by some highly capable people experts or techno-

crats has gone into the decision to change tracks: no reasona-ble person could have proposed otherwise. In this view, it was the

irremediable ailing o the old paradigm, not politics, that led to

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its ejection. The argument eases anxiety that the reorms were

carried out at the behest o any particular social class [as

suggested by Corbridge and Harriss 2000], or or that matter, at

the behest o the IFIs [as argued by Chossudovsky 2003]. Finally,

the contention that learning in India ran parallel to a similar

process among international policy elites [Nayar 1998] creates

the perception o a rm global consensus on (neoliberal) market

reorm. In the ollowing sections o the paper, I provide a critiqueo such politically expedient notions, and propose that the

intellectual shit behind the 1991 reorms was the result o

complex political struggle rather than linear consensus-building.

I suggest that the old paradigm was expunged not because o an

incontrovertible consensus on its ailings, but because those who

supported its retention (even with substantial modication)

suered a decisive political deeat.

3 rdng pdgm Shf s poll evn

Policymaking as a Political Process:The claim that authorita-

tive knowledge any authoritative knowledge emerges rom a

linear, cumulative and value-neutral process o inquiry is predi-

cated on a downplaying o dissent and an exaggeration o

consent. The problem is nowhere more apparent than in the view

that Raos reorms were the unique and inevitable outcome o a

protracted process o learning among policy intellectuals on

the subject o best economic strategy or the country. These

individuals are seen to have set aside their interests and ideolo-

gical dierences, converging on not only similar diagnoses o

past policy ailures, but also on similar prescriptions or reorm.

An opposing view o the policy process especially in its

agenda-setting stages might be one in which confict is centraland consensus rare. Such confict may be set in motion during

periods o disillusionment with the prevailing policy regime,

which are marked by aggressive quests or alternatives. These

quests or alternatives typically engender multiple interpreta-

tions o past policy ailures as well as multiple prescriptions or

change. Past policy ailures may be diagnosed in dierent ways,

leading to varying proposals or reorm. Some may call or a

radical break with the existing regime, while others will remain

content with minor adjustments at the margins. On this heavily

contested terrain, the proposals that ultimately nd translation

into new policy will do so not because o their inherent logical or

ethical superiority, but because they are backed by power. It is

this second depiction o the policy process, in which the exercise

o power is central to why some alternatives are privileged over

others, that better ts the Indian record. This claim is substanti-

ated below through an examination o two major episodes o

discontentment with the statism o the Nehru-Mahalanobis

model the 1960s and the 1980s in which multiple diagnoses o

past ailures as well as multiple prescriptions or change

were in evidence.6

Policy Contestation in the 1960s: It is oten orgotten that

discontentment with the Nehru-Mahalanobis model7

began wellbeore 1991. The paradigm was seriously questioned in the

mid-1960s, when the country was conronted by a looming crisis

in agricultural production. Policy ocials were particularly

alarmed at this time by Indias increasing dependence on

American ood aid, and seemed prepared to undertake major

revisions o the existing agricultural policy regime. A rit

developed among these ocials, however, on the proposed direc-

tion o agricultural policy reorm [Lewis 1995: 53-166; Frankel

1978: 246-92; also see Kux 1994].8 At least two distinct actions

emerged, each armed with a di erent analysis o the problem ofagging agricultural growth, and not surprisingly, generated

dierent prescriptions or change.

The rst action drew on let critiques o Nehruvian statism,

and comprised let-minded individuals in both the party and

administration. Chie among these was Indira Gandhis nance

minister, T T Krishnamachari, who had held the same portolio

under Nehru. For the let, the remedy to both slowing growth

and enduring injustice in the countryside was to strengthen the

states role in Indias mixed economy, and press on with

measures such as land reorm, anti-monopoly legislation and

nationalisation. In contrast, the second direction o proposed

agricultural reorm was shaped by critiques o the prevailing

paradigm rom the right. These critiques had acquired resh

currency during Lal Bahadur Shastris brie term as prime

minister, which ollowed Nehrus death in 1964 [Frankel 1978:

246]. When Indira Gandhi assumed oce in 1966, advocates o

economic liberalism were infuential in both party and govern-

ment, and called or an agricultural reorm based on technologi-

cal innovation and market incentive. This second approach was

led by Indira Gandhis ood minister, C Subramaniam, but

included other important policy ocials, such as M S Swami-

nathan, I G Patel, and S Bhootalingam. Relations between propo-

nents o these two approaches (broadly statist let and pro-marketright) quickly soured, and the stage was set or an extended

contestation over the explanation o past blunders and the

mapping o new priorities. But who among these actions would

ultimately prevail?

Former USAID director John Lewis oers a ascinating account

o how oreign donors, led by the US, tried to orchestrate the pro-

liberalisation groups triumph in the ongoing confict over agri-

cultural policy [Lewis 1995: 132-66].This was done by unnelling

research and inormation towards it, by lobbying on its behal,

and by lobbying against its opponents (it is said that Krishnama-

chari was replaced by Sachin Choudhury as nance minister due

to American pressure).9 The objective o this strategy, which

Lewis reers to as ongoing dialogue, was to strengthen the

hand o like-minded members o the government (ibid: 164). It

was hoped that the members o Subramaniams group, who

exhibited broad streaks o economic liberalism (ibid: 134),

would ultimately support a thoroughgoing liberalisation o the

existing paradigm.

Lewis, or one, seems convinced that the donors plan to

manuacture a victory or Subramaniams group would have

succeeded had it not been or American president Lyndon

B Johnsons clumsy tactics.10 Johnsons humiliating policy o

short-tethering ood aid to India amid amine conditionsprovoked public outrage and empowered the let, precipitating

Indira Gandhis abrupt withdrawal o any promise o a major

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break with statism. Thereater, Indira Gandhis policies took a

radical turn[Joshi and Little 2001: 52] with tougher import

controls, anti-monopoly legislation, and a spate o nationalisa-

tions. Paradoxically, however, her government initiated a number

o agricultural reorms that were in keeping with the priorities

set by Subramaniams group (this issue will be addressed in the

next section).

Lewiss recounting o the battles over dierent reorm direc-tions during the 1960s underscores the confict-driven nature o

the policy process. It is evident rom his analysis that politics are

what ultimately determine the outcome o these struggles, not the

snowballing o consensus around the accepted merit o any partic-

ular set o ideas. Lewiss analysis also suggests that during periods

o confict over proposed policy alternatives, actors that are

ormally outside the state (such as USAID in the mid-1960s) may

penetrate the states internal decision-making terrain with relative

ease. In act, dierent actions within the policy elite may solicit

such intervention in their quest to triumph over one another, thus

allowing non-state entities space to act within the state.

Policy Contestations in the 1980s: Indira Gandhis return as

prime minister in 1980 ollowing the Janata interregnum is

oten viewed as the start o a second, more vigorous period o

questioning o the Nehru-Mahalanobis model, provoked,

initially, by concern over an alarming drop in Indias industrial

growth rate. As in the 1960s, perceptible rits developed over

how the problem should be explained and how it should be

xed. It is possible to identiy three distinct policy actions

in the 1980s.11

First, were the orthodox statists, who insisted on reinvigorat-

ing commitment to the existing regime and its emphasis on struc-tural, redistributive change. Second, were the selective liberalis-

ers, who argued or maintaining the parameters o the existing

paradigm, though with signicant market-oriented modications

thought to be growth-enhancing. Third, were the market radicals

who called or a comprehensive, multi-arena liberalisation o the

entire economy, and a clear prioritisation o growth as the chie

objective o development. It is this third group that is oten

reerred to as the team behind the reorms. This team, we may

recall, is said to have gradually built consensus around its vision

o change. A more careul review o this period suggests, however,

that no such consensus was in view.

When the Congress was restored to power in 1980, the ortho-

dox statists were already a marginalised group, their downall

marked by the wearing down o Indira Gandhis sympathy or the

let in the late 1970s, and the ousting o statist heavyweights such

as D P Dhar and P N Haksar rom elite policy circles. Indeed, in

1980, it seemed that Indira Gandhi was eager to embrace liberal

critiques o the existing economic model [on this, see Kohli 1989].

An Economic Administration Reorms Commission was appointed

under the chairmanship o L K Jha, who was widely known or

his pro-market position (Jha had served as Shastris principal

aide, and had backed Subramaniams group in Indira Gandhis

administration in the mid-1960s). Three other high-prole reormcommittees were created, each headed by a senior civil servant

known or his pro-market views.12

Yet senior ocials rom this period tend to insist, usually rather

strenuously, that the ongoing economic liberalisation was not

intended as a route to paradigm shit.13 Rather, liberalisation

initiatives under Indira Gandhi were in line with the broad param-

eters o the existing statist strategy and its governing (socialist)

philosophy. The thrust o Indira Gandhis reorm lay in relaxing

controls on the domestic private sector, which was seen as a route

to enhancing growth. Privatisation, trade liberalisation and, moreimportantly, cutbacks in public investment and social spending

were careully avoided [Sengupta 2001: 44-65], with political-bu-

reaucratic elites unprepared to abandon equity as an overarching

policy objective. It was on the basis o this very approach, urther-

more, that India succeeded in securing a major loan rom the IMF

in 1981 [Chaudhry, Kelkar and Yadav 2004 and Sengupta 2001].

The thrust o liberalisation under Rajiv Gandhi was no die-

rent, at least in terms o its conormity with the existing paradigm.

Although the private sector was now promoted even more aggre-

ssively [Patnaik 1985], there was no conclusive and irreversible

shit in ocial economic thinking [Corbridge and Harriss

2000:151]. I anything, Rajiv Gandhis exit as prime minister,

which was ollowed by a cascade o short-lived governments, was

marked by a strengthening o the accent on cautious, highly

selective liberalisation, i not a partial return o statist orthodoxy.

The late 1980s were witness to an increase in the infuence o the

Planning Commission, which was dominated by prominent

letists and Gandhian socialists. As the decade drew to a close,

there was little to no sign o an impending paradigm shit. Even

the Congress Partys election maniesto o 1991 made no open

reerence to the enormity o the policy changes just around the

corner. But what, then, o the market radicals?

While Rajiv Gandhi was certainly sympathetic to the marketradicals position, this was more so in private than in public.14

Even though the market radicals had articulated a clear alterna-

tive to the prevailing emphasis on selective liberalisation, they

remained marginal players within the policy elite throughout the

1980s. Key members o the so-called team behind the reorms

were lightweights at the time, tucked away in relatively minor

advisory positions.15 In contrast, many advocates o the second

position occupied powerul policy roles up until early 1991

indeed, until the very last gasps o the Chandra Shekhar govern-

ment and had entered loan negotiations with the IMF when

crisis seemed imminent.16 No linear, incremental and cumulative

process o learning that had concluded decisively in avour o the

market radicals was in evidence. Far rom inevitable, a ull, multi-

dimensional paradigm shit to neoliberalism was only one among

several market-oriented reorm options in the late 1980s, and

then too, not the likeliest one.

The market radicals moment o triumph, however, nally

arrived in 1991. They were catapulted into commanding positions

in the ormal government hierarchy, most notably in the prime

ministers oce (PMO) and the ministries o nance and

commerce. The market radicals also came to occupy some o the

choicest policy roles outside government, securing directorships

and other top jobs in some o the countrys most prestigiouspolicy research institutes (such as National Industrial Policy

Framework, Indian Council or Research in International

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Economic Relations and National Council or Applied Economic

Research. This is a trend that has been without setback [Shastri

2001]. To be sure, the rise to power o the market radicals was as

surprising as it was meteoric a point that is all the more striking

when nationalism is recognised as an additional axis o the

debate on economic reorm in India.

Nationalism as a Second Axis of Contestation: The concept oa linear, incremental and cumulative process o learning

derives rom the literature on public policy choice in advanced

industrialised countries, and may make some sense in the context

o the post-war intellectual histories o these states, in which the

range o debates over economic strategy was arguably much

narrower than in India. In developed countries, such debates

have been largely about the appropriate nature and scope o state

intervention within the connes o capitalism and liberal democ-

racy. Neither socialism nor communism has eatured as a serious

contender. In India, ideological ractures run deeper, and are compli-

cated by the legacy o post-colonial nationalism. The concept o

learning and the literature it stems rom cannot easily be applied in

this context. Nationalism, as argued below, adds a second axis or

dimension to the debate over state versus market, rendering it all the

more unlikely that Indian policy elites would have inevitably

converged, through a linear process o consensus-building, on a

Washington Consensus model o economic reorm.

Consider, or example, the legendary antagonism between the

socialist Jawaharlal Nehru and the ree marketer Sardar

Vallabhbhai Patel. Nehru and Patel, along with their leading

advisors, diered vastly on the mix between market and state, in

particular on the question o the extent o state ownership. They

ound common ground and even camaraderie, however, innationalism; in their deep mistrust o a global order they believed

to be dominated by an imperialist west, and in their scepticism

about the countrys possible gains rom trade. Perhaps much the

same can be said o the confict between Indira Gandhi and Lal

Bahadur Shastri, or between Indira Gandhi and Morarji Desai, or

more generally, between the let and the right in India. Neoliber-

alism, with its call or an aggressive retreat o the state rom all

arenas o the economy, and its sanguine view o the politics that

dene the international order, was not on the radar or either.

As seen above, challenges to the statist paradigm were airly

continuous, provoked by objections rom both the let and the

right. However, even though liberalisation arguably became

more vigorous rom one period to the next, with widening scope

and deepening reach, it remained rmly contained within the

parameters o a nationalist world view in which the principle o

sel-reliance was central. Neither a total jettisoning o the state,

nor a signicantly revised perspective on the global order was

entertained, other than by a small, relatively marginal minority

that appeared destined or oblivion even in the mid to late 1980s.

It seems that prior to 1991, liberalisation, however extensive, was

always delimited by nationalism. Indira Gandhis puzzling

decision to pursue agricultural reorms in line with advice rom

Subramaniams group in the late 1960s, despite an overall shit tothe let, is best understood through this lens. Her governments

selective steps towards the economic right were red by a

erocious nationalism infamed by Johnsons short-tethering o

ood aid amid amine conditions.

Dlb Dsons

The cautious economic liberalisation o the 1980s is also best

understood through the lens o nationalism, and should be

viewed as a conscious strategy betting o a particular world

view rather than as the product o muddled priorities and weakpolitical will.17 The decision to retain the existing paradigm was

deliberate, even celebrated. The prevailing mood, especially in

the early 1980s, was one o tiermondisme nationalism, stemming

in part rom the idea that India had successully resisted the type

o radical market reorm orced on to other developing countries

through the IFIs structural adjustment loans.18 In act, through-

out the 1980s, appraisals o the existing paradigm were mainly

positive, its strengths extolled by scholars [Adams 1990] and

policy ocials alike.19 One should note that such bullish

assessments o the policy regime o the 1980s have resuraced in

recent years, with a spate o infuential studies arguing that the

high growth rates commonly associated with the post-1991

period really belong to liberalisation in the 1980s [Rodrik and

Subramaniam 2005; Kohli 2006 and Virmani 2004].

A major signicance o the Washington Consensus model was

that it presented a set o diagnoses and prescriptions that was

beret o all scepticism about the relationship between developing

countries and global markets and, or that matter, between devel-

oping countries and the institutions o global governance. Its

undiluted ocus was on the internal causes o past policy ailures,

and on the onus o national governments to get policies right.

The external causes o policy ailure, long-emphasised by develop-

ment economists, were studiously overlooked [or urther analysisalong these lines, see Gore 2000]. With its rm silence on the

politics o the global order, the Washington Consensus had little

grounding in Indias intellectual and political history. This was a

new beast that represented a rupture with not only the statism o

the let, but also with almost 50 years o nationalist anxiety over

Indias unequal relationship with powerul global actors.

In act, quite ar rom having organic links with the past, Raos

reorms marked a breach with whatever little intellectual consen-

sus there might have existed between the let and the right in

India on the question o economic reorm. These reorms signi-

ed a paradigm shit o multiple dimensions, constituting a

proound change in not only prevailing ideas about the states

positioning with the domestic economy, but also the states

positioning within the international arena. This was ar more

than a transition rom state to market, since much market

reorm had occurred prior to 1991. The most signicant aspect o

the 1991 reorms is that they signalled a transition to the political

ideology o neoliberalism, and to its attendant assumption o a

benign (liberal-capitalist) global order.

Ultimately, an ideological shit o such depth and magnitude is

ill-explained by reerence to a cumulative process o intellectual

evolution among policy elites, albeit red in its nal stages by a

ew men o courage and commitment (who would then, quitenaturally, inherit the mantle o power). The shit is ar better

explained as the political deeat and subsequent displacement o

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one world view and its intellectual proponents by another. In

light o this, the weight o analysis should all on explaining the

origins o this political deeat, along with its timing and reasons

or consolidation. Although this paper does not attempt a detailed

investigation o these important questions, the reader is let with

several complementary possibilities.

4 th rou o rdl Mk rfom

Better Alliances: The rst, most straightorward, explanation o

the political triumph o the market radicals is that, relative to

their opponents, they developed more eective alliances with

groups outside the state. Pedersen (2000), or example, argues

that Indias market reormers have drawn strength rom a new

breed o entrepreneurs who, unlike the older generation o

amily-owned business, are condent in their ability to ace

global competition without the states protection. These rising

stars o Indias sunrise industries (inormation technology,

petro-chemicals and engineering) are also said to have devel-

oped superior means o communicating their objectives to

policy elites through the creation o better, more proessionalised

institutions such as the Conederation o Indian Industries (CII)

to represent their interests [Kochanek 1996]. It is quite possible that

the market radicals, with their distinctly pro-globalisation agenda,

succeeded in combing orces with these dynamic segments o the

corporate elite even prior to 1991. Their opponents, meanwhile,

remained trapped in less eectual alliances with groups, such as

labour and traditional business, whose political infuence and

economic weight were on the decline.

Another possibility is that, again prior to 1991, the market

radicals made common cause with the IFIs in their ambition todeeat opponents o a Washington Consensus style, pro-

globalisation model o market reorm. The claim does not seem

ar-etched, given that in the 1960s, external actors such as USAID

and the World Bank penetrated the states policy terrain with

relative ease, and tried, with near success, to steer intra-state

contestations on agricultural reorm towards their own preerred

ends. Such invasive attempts to manipulate the outcomes o intra-

state struggles over policy were most likely not unique to the 1960s.

Indeed, it is quite plausible that, onwards rom the mid-1980s, the

IFIs have consistently positioned the weight o their enormous

infuence and resources behind the market radicals, who, ater all,

most clearly refect their policy priorities and overarching world

view [see, in this connection, Sengupta 2004].

Overall, the ocus on the market radicals strategic linkages

with powerul groups outside the state do oer a ar more robust

account o why these market radicals might have gained traction,

even when they held no real power within the ormal govern-

ment hierarchy, than do allusions to their extraordinary personal

abilities. Reerences to specic political alliances go a long way in

explaining why the market radicals initially prevailed over

intra-state opponents o neoliberal reorm, and why they have

continued as a dominant orce in the country s apex policy circles.

They may also explain why the neoliberal models ideal ocompetitive markets has not been realised in India despite much

rhetoric to the contrary [on this, see Kohli 2007]. What they do

not explain, however, is why the denitive change o guard

occurred in 1991. For this, one must turn to the acute balance o

payments crisis that struck India in late 1990/early 1991. An

analysis o this crisis in particular, o its impact on policy contes-

tations within the state also stands to improve our more general

inquiry into the origins and persistence o the intellectual shit

behind the 1991 reorms .

Crisis and Centralisation: Senior government ocials have

described the severe economic crisis that beell India in late 1990

very dramatically, as a massive heart attack,20 and among the

cruellest [Jalan 1991] in the countrys economic history. Usually,

the accompanying claim is that, in 1991, radical market reorm

was no longer a matter o indulgent discussion, but one o

absolute necessity. The crisis is said to have been so grave that it

muted virtually all social opposition to the new paradigm [Nayar

1998],21 leading to a general acceptance o the inevitability o

structural adjustment [Dash 1999: 904]. Indeed, crisis is

requently depicted as both a tragic and a ortuitous event. Tragic

because it almost caused Indias nancial ruin, and ortuitous

because it nally rendered sel-evident (to state and society alike)

the pressing need o a paradigm shit.

Reerence to crisis as a critical juncture may certainly be

useul in explanations o change. In relation to the problematic

explanations o the 1991 reorms reviewed above, however,

crisis is a much-abused variable. It is used to explain both too

little and too much. On the one hand, the contribution o crisis to

the initiation o neoliberal market reorm is clearly exaggerated.

Crisis is viewed as having made sel-evident not only the need or

change, but also the precise content o change (in other words,

radical market reorm along Washington Consensus lines). On theother hand, there is little to no discussion o the eect that such an

acute crisis might have had on political dynamics within the state.

As Rodrik (1996) points out, crises are not coded with unambig-

uous directives or governments. Governments vary widely in

their responses to crisis: some opt or major reorm, others

declare a short-term emergency, and still others do nothing.

One might recall that the crisis in question arrived towardsthe

endo about a decades worth o debate over how to reorm the

prevailing statist regime. Radical market reorm was neither the

only, nor the most popular, option on the table. Thus, while the

immediate reerence to crisis explains why a orceul decision

was taken in 1991, it does not explain why radical market reorm

came to be privileged over all other alternatives. In act, the true

signicance o the momentous crisis o 1991 is appreciated only

when one pushes a step urther, examining its impact on ongoing

contestations over reorm alternatives within the state.

An important eect o the crisis, even when it was only

imminent, was to strengthen the position o the IFIs at the policy

table. The government ocials knew that they would have to

lean heavily on these institutions, even i only in the short-term.

The IFIs made their policy priorities clear, as well as who within

the policy elite they preerred to negotiate with. Here, the market

radicals were clearly the avoured group. The market radicalsand the IFIs had arrived at the same diagnosis o the crisis

attributing it to an irredeemably fawed statist paradigm as

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the same people are listed by the others who havewritten on the subject.

6 Paradoxically, similar phases or episodes arealso identied by proponents o the learningargument [Joshi and Little 2001; Mukherji 2000;Denoon 1998]. Here, such periodisation is used toshow how policy elites, ater much tr ial and error,came to accept the intellectual merits o neolib-eral market reorm.

7 For a discussion o the Nehru-Mahalanobis model

and the political debates that preceded itsadoption, see Bhagwati and Chakravarty 1969.

8 In addition to these three sources , my analysi s ocontestation over reorm alternatives in the 1960sis shaped by interviews with ormer high-rankingcivil servants i n the central government, includ-ing one on August 14, 2002 with the late K B Lall,

who served as Indira Gandhis commerce secre-tary in the late 1960s.

9 Krishnamachari reported the details o the matterto his riend, Communist Party o India (CPI)member Bhupesh Gupta, who later recounted thesein Parliament [Sundaram 1972: 1889].

10 Lewis says that Johnsons actions were backed bythe US department o agriculture, and were atodds with USAIDs priorities, thus refecting aninternal rit within the US government over howto leverage infuence in India.

11 My analysi s o debates over reorm alternatives inthe 1980s is shaped primarily by interviews withhigh-ranking policy ocials rom that time.Many have asked that their names be withheldrom publication.

12 Three committees on trade policy reorm, nan-cial sector reorm and public sector reorm wereheaded up by Abid Hussain, M Narasimham and

Arjun Sengupta respectively. In my interviewwith Abid Hussain (August 13, 2002), he stressed:The very act that Indira Gandhi said I was to bechairman was an indication that she wanted acertain kind o [pro-liberalisation] report.

13 Among others, Arjun Sengupta and Gopi Arora(both high-ranking economic advisors in the IndiraGandhi government). Arora was interviewed on

August 12, 2001; Sengupta on July 5, 2003.

14 Interview with Mani Shankar Aiyar, July 22,2003. The market liberals did not win over RajivGandhi, Aiyar said, There was always a tussleor Rajivs mind.

15 Arvind Virmani, or example, was an advisor inthe Planning Commission; Rakesh Mohan inindustry; Shankar Acharya in nance; JairamRamesh also in the Planning Commission. Thegroup was gradually enlarged by the induction oWorld Bank ocials such as Jayanto Roy intourther advisory posts in apex economic minis-tries (Roy took a leave o absence rom the Bank toserve as an advisor in the ministry o commerce).Within the ormal hierarchy o the government,however, all such market radicals, with the excep-tion o M S Ahluwalia, were marginal players.

16 Examples here are Deepak Nayyar (chie economicadvisor, ministry o nance), S P Shukla

(commerce secretary) and Naresh Chandra(cabinet secretary). Interviews with two seniornance ministry ocials rom this period (names

withheld on request).

17 The foundering o liberalisation in the 1980s isoten attributed to weak personal commitment(especially in relation to Indira Gandhi) and weakpolitical will (especially in relation to RajivGandhi). Were it not or these unortunate personalailings, it is implied, paradigm shit would havearrived earlier. For a particularly unkind appraisalo Rajiv Gandhis abilities, see Manor 1987.

18 For example, the Indian governments decision toreturn the third instalment o the 1981 IMF loanin 1984 was heralded as a matter o national prideby the media [see, or example, Varma 1983]. Theconditions o the loan that the Indian governmentdid cede to, urthermore, were widely seen as

home-grown, and suciently dierent romthose otherwise urged by the IMF (interview withGopi Arora, August 12, 2001; also see Chaudhry etal 2004).

19 Thus, Corbridge and Harri ss (2000: 47) point out:Although there was a body o opinion in the1980s that was critical o Indias planned develop-ment we think o the Economist newspaper asmuch as academics like Jagdish Bhagwati andT N Srinivasan the contemporary literature onthe Indian economy in the 1980s was more bullishthan pessimistic.

20 Pranab Mukher jee, quoted inBusiness India, NewDelhi, Januar y 15-28, 1996, p 280.

21 There was public recognition, Nayar says, thathard-headed decisions needed to be taken by theleadership (1998: 346).

22 Opponents o radical market reorm interpretedthe crisis as a temporary problem that haddeveloped out o a wave o profigate spending inthe late 1980s.

23 One important step was the creation o a specia lsteering committee on economic reormsheaded by principa l secretary A N Varma. Itscreation meant that the cabinet secretarys coordi-nating role was greatly diminished as the topsecretaries o the government o India were nowrequired to report directly to the prime min ister(interview with ormer cabinet secretary, NareshChandra , August 26, 2002).

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