In the Name of Growth – The Politics and Economics of India’s Special Economic Zones
May 9, 2007
By Shankar Gopalakrishnan, a study prepared for The Council of Social Development
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Conclusion of the study :
If one were to sum up the current Indian SEZ policy in one sentence, it could perhaps be this: the policy fails on every count. It fails the test of logical consistency, with its actual provisions violating its stated goals. It fails the test of economic rationality, granting incentives that exacerbate
existing distortions and encourage speculative activity at the expense of production and development. It fails the test of historical reference, taking an already questionable model and exaggerating its most negative aspects. And, most of all, it fails the test of social and political justice, by promoting a
conceptual, institutional and political model that is deeply undemocratic.
It is possible on the basis of such a discussion to attempt ‘recommendations’ for a better SEZ policy. Among the obvious recommendations would be a halt to any further approvals, a revision of the SEZ policy requiring that zones demonstrate clear potentials for benefiting the economy, a bar on real estate operations in zones and so on. Many such demands are currently being made, though with seemingly little impact on the Central government.
But it has been the main argument of this study that such ‘recommendations’ can at most be palliatives. The flaws in this policy run far too deep to be corrected by small reforms. The SEZ Act is a particularly extreme example of the utter lack of democracy in India’s economic structures. Addressing this Act therefore requires far more than damage control measures – it requires a recognition of the need for economic democracy as a crucial concomitant of political democracy, a reality that one occasionally catches glimpses of in discussions of the need for democratically decided land use plans, for instance. What matters is the political nature of industrial policy and its restructuring in favour of democratic control over resources, investment and growth.
What might such a policy look like, and what role would incentives and zone policies have in it, if any? A brief exploration of possibilities could be as follows. A main focus of the new strategy would be on the expansion of the domestic market by a steady rise in wages, social services and public
investment. Exports may form a part of the strategy, but not its sole goal. Export production would be built around a targeted socioeconomic policy aimed at expanding certain sectors through a combination of incentives and disciplinary measures, similar to the East Asian pattern discussed in chapter 2. The focus would be on an continuous increase in value addition by integrating steadily larger parts of the production chain, leading to a rise in both labour productivity and wages. The concept of industrial zones might continue, but not as separate political areas with differential institutions and legal regimes. Rather, they would be one part of a wider vision of land use and allocation of resources, which would be decided democratically. Within zones, infrastructure may be specifically provided, but general incentives would not be granted and no other concessions made. Incentives would presumably be based on sector and value addition, with the geographical location of the industry becoming relevant only if deemed necessary for other gains.
However, such ideas are only possibilities. Once it is acknowledged that the need is for democratic institutions, it is clear that what is at issue is not policy matters but a political struggle – a strugggle that in fact has become the running theme of Indian politics. Among the crucial areas of this struggle are for land reforms and land rights, both for their importance to livelihoods and as a political strategy for the democratisation of control over resources and the elimination of the power of rentier classes. But beyond land reform is the fight for greater democratic control over both resources and decision-making, with economic planning becoming a popular exercise rather than a state and capital driven one. It is only in these circumstances that any policy, and particularly any investment or export policy, can have a hope of either economic gains or general ‘development’. Moreover, without this deepening of democracy, political democracy itself loses much of its meaning.
The current SEZ Act is so fundamentally antithetical to this principle that at the least it must be repealed, or amended in such a sweeping fashion that it would essentially be replaced with another legislation. It is not a formula for economic transformation; it is a formula for rising conflict and violence. The controversy over land acquisition is only the beginning, and many people have already paid for it with their lives. After SEZ’s are declared, we are likely to see new waves of disempowerment, impoverishment and subsequent resistance, especially in the larger zones. For many in this country, the story of India’s “high growth” and booming stock market has been a story of desperation, loss of livelihoods and brutal repression. SEZ’s are now largely seen as one more chapter in this story.
There is many a media commentator and neoliberal economist who would scoff at such a statement, describing it as a populist slogan that overlooks how wonderful economic growth is. They would do well to reconsider. There is a rising tide of resistance and popular anger across large parts of India, a tide that no amount of statistical sophistry and media hype can any longer obscure. It is visible in the collapse of large parts of central India into armed clashes and de facto civil war, along with the increasing violence that marks our cities and the wave of suicides among once wealthy farmers.
To ignore these signs and push forward with SEZ’s is to ignore the writing on the wall. It is a delusion of grandeur, serving the interest of a small minority, indulged in by the ruling class and propagated by a handful of opinion-makers. But it is a delusion for which all of us will pay an ever
increasing price.
