By Abhishek Nayyar:
Since the 1990’s the word ‘neoliberalism‘ has been used for global market-liberalism (‘capitalism’) and for free-trade policies. In this sense, it is widely used in the West. ‘Neoliberalism’ is often used interchangeably with ‘globalisation’. But free markets and global free trade are not new, and this use of the word ignores developments in the advanced economies. The analysis here compares neoliberalism with its historical predecessors. Neoliberalism is not just economics: it is a social and moral philosophy, in some aspects qualitatively different from liberalism. The dictates of neoliberalism and its circulation of capital free market religion have become the entry credentials for countries, into the “community” of “democratic and free” nations.
To the dictatorship of free market capital circulation, only the neoliberal economic system and its survival matters. Totalitarian, democratic, non-democratic, communist and non communist, are welcome into the community of neoliberal nations, as long as the prerequisites for membership are adhered to, that is, that they embrace and participate in free trade without restrictions nor impediments. Since independence in 1947, the governments in India have proclaimed a desire to remove poverty through the rapid GDP (gross domestic products) growth rates. In order to achieve higher economic growth rates our countries have earlier adopted import-substitution-industrialization (ISI) and later on neo-liberal (i.e. ‘free market’) economic policies. The question arises as to what are the outcomes of these policies in terms of achieving the goals of development.
India’s GDP growth rates of 8-9 % annually in 2009 is claimed to be associated with the adoption of neo-liberal economic reforms. In 2005 it ranked 20th among world exporters, and 15th among the world importers of merchandise. In services, it was the 8th largest in exports and the 7th largest importers. In 1990 FDI (foreign direct investment) into India were US$ 165 million only. After the adoption of neo-liberal economic reforms, the inflows of foreign capital increased dramatically to US$ 2,439 million in 1999-2000 and further to $2,549 million in 2004-05. However, the rapid increase in GDP growth has not been accompanied by an increase in employment. With the introduction of neo-liberal economic reforms, a variable euphoria had swept both inside and outside India. International financial institutions and foreign and domestic media had been largely responsible for this creation. During the last five years, inflation has increased from 3.8 % to 10.8 %, which means cuts in real wages. Exports have doubled during the above period, but at the same time imports have more than tippled and are currently much higher than exports. The literacy rate has not much improved i.e. 64.4 in 2004 to 67.7% in 2009.
After the adoption of neo-liberal economic reforms the growth rates have risen along with the process of accelerated liberalisation of trade and capital market, but failed to bring any dramatic change in generating employment. This period was also marked by very slow growth in job creation, especially in rural areas. Growing disproportionately between growth rates of agriculture and non-agriculture sectors during the period of neo-liberal economic reforms has been the feature of development in India. Moreover, as a result of inter-regional and inter-sectoral inequalities the socio-economic stagnation in some states is even worse than the aggregate poverty the figures suggest. With the continuing retreat of the state from the economy and the privatisation of the state owned enterprises, the public sector is considered no more as a job creator. The job creation in public sector was at 4 % 1990, but fell sharply to 1 % by 2003 (Nagaraj, 2006).
The growth of IT has created jobs only for a small proportion of educated middle classes, but almost has no impact on the unemployment situation. The neo-liberal growth process is primarily driven by the service sector. The services sector contributes 50 % of the GDP, but it only provides 25 % of the total employment. India has became one the of the largest exporter of services in the global economy, as its share in the world exports of IT services reached to 17 % in 2006-07. Although India has shown great rise in various fields but the introduction of changes due to neo—liberalistic policies have led to inequality in income which is a serious issue and if India had to compete in race of development it has to surely overcome this hindrance.