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Globalisation and the State in India: Myth and Reality

The Myth of the Shrinking State: Globalisation and the State in India by Baldev Raj Nayar;

nature of such strengthening and expan

Globalisation and the State in India:
sion is subject to debate, the argument

that “the expansion consequent to eco-

Myth and Reality

nomic liberalisation cannot be said to have resulted in large groups being adversely Ninan Koshy affected by liberalisation” is open to seri

his stimulating study by Baldev Raj Nayar makes a close and systematic investigation of the impact of globalisation and economic liberalisation on the State in India. One of the less explored areas in the studies on globalisation is related to its political dimensions. The book is a valuable contribution to the topic. In his latest book the author uses empirical evidence to challenge and even refute the claim by critics that the forces unleashed by globalisation spell the erosion, and dismantlement of the economic and welfare roles of the State as far as India is concerned.

Before and After

The analysis focuses on the change in the economic role of the State by examining the situation that existed before and after globalisation in respect to (i) the overall allocation and management of economy as reflected in economic planning or fiscal and monetary policy, and (ii) the welfare role of the State. It is argued that the building of the State in India as an economic leviathan proved dysfunctional for economic growth, economic stability and indeed economic autonomy. A strong case is thus made for shedding (at least in part) its functions.

The author carefully examines the globalisation thesis on the State, especially the position that “it follows from the very notion of globalisation that the most direct political consequence is the dismantling of the economic role of the State”. He finds that the position of the critics against globalisation receives strong support in India particularly among Marxist scholars. In fact, the issue of possible adverse impact of globalisation on the State was already brought up in the 1990s by many Third World scholars. One of the first to draw attention to it was Rajni Kothari (“Under Globalisation: Will the Nation State Hold?”, EPW, 1995, Vol XXX, No 26).

Economic & Political Weekly

september 12, 2009

book review

The Myth of the Shrinking State: Globalisation and the State in India by Baldev Raj Nayar;

Oxford University Press, 2009; pp 286, Rs 745.

Nayar’s book attempts to examine whether the hypothesis on the consequences for the State from globalisation, particularly about the shrinking or the dismantlement of the State is sustainable. Recognising that liberalisation has resulted in the rapid expansion of the private sector, the author raises the question whether such expansion means a diminution of the economic and welfare role of the State in India. With the help of convincing statistical data, the author states that under economic reforms, state expenditure on education, health and in general the social sector has increased and advanced rather than decreased and declined. With both education and health, however, the study underlines the complete failure of the government with regard to its delivery mechanism.

He concludes that “the thesis on the retrenchment of the economic and welfare role of the State is shown when confronted with hard data to be of little merit”. On the basis of empirical evidence, the author recognises a fundamental continuity in the role of the State. Far from being dismantled or shrunk, it has continued to expand in absolute terms. Economic liberalisation can be said to have led to a further strengthening of the State and, in fact, it has expanded. He admits however that despite the continued expansion of the economic and welfare roles, there are legitimate questions about the adequacy of the State’s efforts in relation to investment in the production of public goods, such as economic infrastructure.

While the claim that the State has strengthened and expanded under globalisation may be sustained, though the

vol xliv no 37

ous questioning. He further says, “Those who have not gained or gained as much are laggards rather than losers”. The study does not provide any evidence for these observations. Large groups like dalits and adivasis are adversely affected by liberalisation as many studies have shown. There is little evidence to show that the vast majority of Indians have gained from globalisation, notwithstanding recent claims about inclusiveness which seem to have come as an afterthought rather than being integral to economic policy. Again who are these laggards? Is it not more correct to describe them as “the pushed outs” or marginalised? In many respects globalisation and marginalisation are two sides of the same coin.

The Strong State

Several issues are raised by this important study. In fact the title The Myth of the Shrinking State itself raises questions. What the World Bank and its high priests advocated in the 1990s was shrinking the State. They were vocal about the benefits of shrinking the State both for transition economies and developing countries. But by the late 1990s the World Bank changed its views. There was little talk of “shrinking”. A growing emphasis was given in the structural adjustment literature to a strong State – strong in terms of capacity to implement changes, strong in terms of channelling and protecting private investment, strong in law and order, but not strong on participatory democracy or in building the country’s economic, social and cultural capacity. Building state capacity became a major thrust of the World Bank centering on public management, privatisation and market-based regulatory capacity. The State’s unique strengths were identified as its power to tax, to protect, to punish and to require participation. It was not a shrinking State that was needed.

Part of the answer to this problem is given by the author himself when he says


that “contrary to the prediction of the critics, then it may well be that the State faced with globalisation is not so much being retrenched as its is being reenergised, recalibrated or redefined”; except that it was not contrary to the “prediction of the critics”. In fact, the critics had predicated that the State would be redefined and transformed under globalisation. It would continue to intervene but the nature of intervention would change. It would be an intervention in favour of capital and market, not labour and the people. The concern is that this redefinition, transformation and change in the nature of intervention have been largely at the behest of external forces, rather than as the choice of the State.

The strength of the study lies in the important conclusions it arrives at with regard to public goods and services. First, the supply of public goods is an important function of the State. In India the investments have to be further increased in proportion to the GDP and effective delivery systems have to be ensured. Second, the supply of public goods is important for national solidarity. National cohesion is crucially dependent on the welfare of the population. Third, the supply of public goods at some minimal level is necessary insurance against risk that accompanies globalisation. Fourth, and importantly, an active role in the social sectors is mandated since India’s record so far is appallingly poor in this area. The author points out India’s low ranking on the human development index (HDI) – an index of 0.619 at 128 among 179 nations according to The Human Development Report 2007-08 – in contrast to its impressive record on economic growth.

This opens up another level of enquiry. Under economic reforms in India if there is indeed an expansion in the social sector, has there not been a change in the State’s perception of some of its essential functions? Even if the State has increased its expenditure on education, it can be shown that its policy on education has undergone changes which are not oriented to social justice. Increasingly, it is implementing educational policies under the influence of globalisation. The philosophical goals of education have been replaced by the functional goals of meeting the demands of the


market. Does this not indicate a change in the nature of the State with regard to one of its core functions? This applies equally well to health. In fact, the study confirms the general picture of poor performance in the area of health. The question is the extent to which privatisation in education and health has affected the public services for the common people in these areas.

The book is a very important contribution to the debate on the political dimensions of globalisation with particular reference to the State’s economic role. It challenges many of the assumptions that generally prevail in discussions on economic policies of the Indian State under reform. It also raises several issues which need further study and scrutiny. It is a valuable guide to students, scholars, administrators and policymakers.

The shrinking state may be a myth but the transforming State is a reality in India under globalisation. Such transformation in general unfortunately does not serve the interests of the majority of the people.

september 12, 2009 vol xliv no 37

Economic & Political Weekly

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