THE CONTEXT: The nexus between state power and corporate interests was established at the expense of marginalized communities like the Adivasis. It emulates a broader trend in India’s development model, where economic liberalization and neoliberal policies have prioritized capital over labor, leading to rising inequalities and social unrest. The Salwa Judum episode also underscores how the Indian state has framed social and economic issues as internal security threats, further marginalizing vulnerable populations.
THE EVOLUTION OF INDIA’S ECONOMIC MODEL:
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- From Nehruvian Socialism to Liberalization: Post-independence India adopted a socialist framework under Jawaharlal Nehru, focusing on heavy industrialization and state control over key sectors. However, by the 1980s, it became evident that this model had created an oligopoly rather than fostering equitable growth. The liberalization reforms in 1991 marked a shift towards a market-driven economy. These reforms reduced import tariffs, deregulated industries, and opened the economy to foreign investment.
- The Gujarat Model and Its National Adoption: The Gujarat Model, which emphasized rapid industrial growth through business-friendly policies such as land acquisition for corporates, minimal environmental regulations, and tax incentives for big businesses, became a template for national development after Modi became Prime Minister in 2014. While this model boosted GDP growth, it did little to address job creation or improve human development indicators like education and health.
- The Elite Model of Development: India’s development trajectory has increasingly mirrored global neoliberal trends prioritizing capital accumulation over labor rights. This “elite model” of development has led to stark income inequality, with the top 1% controlling over 40% of the nation’s wealth. This model is characterized by policies that favor big corporations through tax cuts, relaxed labor laws, and easy access to natural resources at the expense of environmental sustainability and social equity.
KEY FEATURES OF THE ELITE DEVELOPMENT MODEL:
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- Prioritization of Big Business Interests: The elite model heavily favors large corporations by providing subsidies, tax breaks, and easy access to land and resources. For instance, projects like the Adani Group’s coal mining operations in Chhattisgarh have continued despite local protests and environmental concerns. These policies often result in the displacement of indigenous communities without adequate compensation or rehabilitation.
- Neglect of Public Goods and Services: Despite rapid economic growth, India underinvests in essential public goods like education and healthcare. According to Pratham’s Annual Status of Education Report (ASER), learning outcomes among primary school students remain dismally low. Similarly, public healthcare infrastructure is inadequate, with only 1.28% of GDP spent on health services as of 20232.
- Focus on Visible Projects Over Long-term Investments: Indian policymakers often prioritize visible infrastructure projects such as highways, airports, and ports over long-term investments in human capital like education and healthcare. These projects generate political capital but do little to address systemic issues like unemployment or inequality.
- Regressive Taxation System: India’s tax system is highly regressive, with indirect taxes like GST disproportionately affecting lower-income groups. Meanwhile, corporate tax rates have recently been slashed from 30% to 22% to attract investment, further exacerbating income inequality.
CONSEQUENCES OF THE ELITE DEVELOPMENT MODEL:
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- Rising Inequality: Income inequality in India has soared since liberalization began in 1991. According to a study co-authored by economist Thomas Piketty, the top 10% of earners now account for over 57% of national income. This growing disparity has been linked to social unrest in various parts of the country.
- Poor Job Creation: Despite high GDP growth rates—averaging around 7% annually—India has struggled with job creation. The workforce participation rate remains low at around 40%, with most jobs concentrated in low-productivity sectors like agriculture. The IT sector employs only about five million people out of a working-age population exceeding one billion.
- Inadequate Investment in Education and Healthcare: India’s spending on education remains below 3% of GDP—far lower than global benchmarks set by countries like Finland (7%) or South Korea (5%). This underinvestment has led to poor learning outcomes and high dropout rates. Similarly, public healthcare remains underfunded despite growing demand for services post-COVID-19.
- Environmental Degradation: Rapid industrialization has come at a significant environmental cost. Projects like Adani’s coal mining in Hasdeo forests have led to large-scale deforestation, while coastal erosion due to port development has displaced fishing communities in states like Tamil Nadu and Kerala.
- Weakening Democratic Institutions: The increasing nexus between political elites and big business has weakened democratic institutions such as the judiciary and regulatory bodies like SEBI (Securities Exchange Board of India). Investigations into corporate frauds are often slow-walked or dismissed entirely.
GLOBAL CONTEXT AND COMPARISONS:
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- Neoliberalism and Its Global Impact: India’s shift towards neoliberalism mirrors global trends initiated by leaders like Ronald Reagan in the U.S. and Margaret Thatcher in the U.K. and later adopted by Bill Clinton’s “Third Way” policies, which sought to balance capitalism with social welfare programs. However, these models have been criticized for exacerbating inequality while failing to deliver equitable growth.
- The East Asian Development Model: East Asian countries like South Korea and Taiwan offer a contrasting model in which authoritarian regimes paired rapid industrialization with solid investments in education and healthcare. This helped reduce inequality while sustaining high economic growth—a lesson ignored mainly by Indian policymakers.
- Lessons from the U.S.: The U.S.’s experience post-1980s shows how reducing taxes on the wealthy while gutting public services can lead to rising inequality without sustained economic growth. This is a cautionary tale for India as it continues down its developmental path.
POLITICAL ECONOMY OF INDIA’S DEVELOPMENT PATH:
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- Bipartisan Consensus on the Elite Model: Both major political parties—Congress and BJP—have supported policies favoring big business over labor rights or environmental sustainability. This bipartisan consensus has entrenched an elite-driven development model that marginalizes vulnerable communities.
- Role of Corporate Interests in Shaping Policy: Corporate lobbying plays a significant role in shaping policy decisions in India. For example, despite widespread protests for land acquisition for industrial projects like Tata’s steel plant in Bastar or Adani’s coal mines in Chhattisgarh, both Congress-ruled states have supported these ventures.
- Handouts and Freebies as Political Strategy: To maintain electoral support among marginalized communities affected by these policies, governments often resort to offering handouts like subsidized food grains or free gas cylinders under schemes like PM Ujjwala Yojana. However, these measures do little to address structural inequalities.
CHALLENGES AND FUTURE OUTLOOK:
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- Erosion of Collective Ethic and Public Goods: The erosion of public goods such as education systems or clean environments reflects a broader breakdown in India’s collective ethic—a trend also seen globally as neoliberal ideologies take root.
- Climate Change and Its Disproportionate Impact: Climate change poses an existential threat to India’s most vulnerable populations—especially those dependent on agriculture or coastal livelihoods. Rising sea levels due to unchecked port development have displaced thousands along India’s eastern coastlines.
- Potential for Social Unrest: Rising inequality coupled with poor job prospects could increase social unrest if not addressed through more inclusive policies focused on human capital development rather than corporate profits alone.
THE WAY FORWARD:
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- Progressive Taxation and Wealth Redistribution: Implement a progressive taxation system where the wealthy pay higher taxes. This can include wealth and inheritance taxes on the top 1% of earners. These taxes could fund essential public services like healthcare, education, and social security. Scandinavian countries like Sweden have successfully implemented progressive taxation systems, which have reduced income inequality while maintaining high levels of social welfare. Reducing income inequality will mitigate social unrest and improve social cohesion.
- Investment In Public Education and Healthcare: Increase public spending on education to at least 6% of GDP and healthcare to at least 2.5%, as recommended by various committees, such as the Kothari Commission for Education and the National Health Policy 2017 for healthcare. Improved education will lead to better employment opportunities, reducing poverty in the long run. A healthier, better-educated population will contribute more effectively to economic growth.
- Strengthening Environmental Regulations: Strengthen environmental regulations by enforcing stricter penalties for violations under laws like the Environment Protection Act (1986) and implementing the Polluter Pays Principle, as upheld in cases like Vellore Citizens Welfare Forum v. Union of India. In MC Mehta v. Union of India (Ganga River Pollution Case), the Supreme Court emphasized sustainable development while balancing industrial growth with environmental protection.
- Judicial Accountability for Corporate-State Nexus: Strengthen judicial oversight mechanisms, such as fast-tracking cases related to corporate malfeasance through specialized courts like Green Tribunals or Economic Offenses Courts. Enforce compliance with Supreme Court rulings, such as those in Salwa Judum (2011), which highlighted how state-backed militias violated constitutional rights. In Samata v. State of Andhra Pradesh, the Supreme Court ruled that tribal lands cannot be transferred for mining purposes without proper rehabilitation plans. This ruling should be enforced more rigorously.
THE CONCLUSION:
India needs a paradigm shift towards inclusive growth that balances economic expansion with social equity. This model invests heavily in public goods like education, healthcare, and clean environments while ensuring democratic accountability over corporate interests. Experts like Amartya Sen argue that true development must be measured by GDP and improvements in human capabilities—access to education, healthcare systems functioning well—and environmental sustainability.
UPSC PAST YEAR QUESTIONS:
Q.1 Professor Amartya Sen has advocated important reforms in the realms of primary education and primary health care. What are your suggestions to improve their status and performance? 2016
Q.2 In a crucial domain like the public healthcare system the Indian State should play a vital role to contain the adverse impact of marketisation of the system. Suggest some measures through which the State can enhance the reach of public healthcare at the grassroots level.
MAINS PRACTICE QUESTION:
Q.1 “India’s development trajectory mirrors global neoliberal trends but lacks the social democratic policies that have mitigated inequality in other countries.” Discuss
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