BOOK REVIEWS

covers reviews of current books on management

Indian Economy since Independence: Persisting Colonial Disruption

Arun Kumar
Vision Books Pvt. Ltd., New Delhi, 2013, pp. 792, `1450

his is a book that raises diverse and fundamental questions. It argues for a holistic view that is also historical. It is holistic in that it ties together international developments, the role of knowledge and education, the triumvirate of the Indian elite (business, politicians, and the executive), the black economy, growth, and poverty. It is historical in that it emphasizes and documents the continuity with the pre-independence period, the belief of the superiority of the West by the Indian elite, the indiscriminate adoption of technology, and the advantages as well as disadvantages of late starts to development. The author begins by emphasizing that the British rule is the most important influence for the developments in India after 1947. The British created a local ruling elite that was answerable to them which enabled their control over the rest of the population. This, it is argued, resulted in a disruption suffered by society in terms of the loss of the value of ideas in society, the absence of a long-term perspective, the emergence of an elite class that believed in Western modernity as the pathway to progress, and eventually a loss of dynamism in India.

THEMES Indian Economy Colonial Disruption Black Economy Right to Information Accountability Corporate Social Responsibility Liberalization History of Indian Business Gandhian Influence

It is true that the colonial state was extractive and that the British developed India only to a limited extent and largely in their own interests. The historical aspect of the book, however, is weak. Historians have claimed that despite being extractive, the colonial state was not hegemonic and it did not wholly dominate the mentalities and ideologies of Indias emerging entrepreneurial and clerical class. Ranajit Guhas influential book on colonial India in fact is titled as Dominance without Hegemony. Christopher Bayly has argued that the British state was weak at its fringes and reliant on Indian agency. This left room for local empowerment and for Indians to build local capabilities. Throughout the colonial period, Indias mahajans (bankers) and banias (commodity traders) retained control of the bulk of internal trade which was the foundation of the indigenous origins of comparative economic development unlike in Africa where European, Indian, or Lebanese traders controlled the bulk of internal trade, and in the Ottoman and Arabian geographies where Armenians, Jews, and Greeks performed this role. These mercantile families influenced the development of political and social capacities in the 19th century India. They pioneered education in Bengal and Bombay and patronized and supported newspaper editors and lawyers who became leaders of the early Indian National Congress. A modern press developed first in India before other British dependencies and the first Indian daily, The Calcutta Journal, established in 1819 by British radicals and Indians attacked corruption and the monopoly of the East India Company. Historians have also documented the culture of openness and public debate in India what Bayly (2011)1 calls the Indian ecumene which he suggests is a variant of the
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Bayly, C.A. (2011). Indigenous and colonial origins of comparative economic development: The case of colonial India and Africa. In C.A. Bayly, Vijayendra Rao, Simon Szreter, & Michael Woolcock (Eds.), History, historians & development policy A necessary dialogue. Manchester University Press.

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critical public sphere theorized for Europe by Jrgen Habermas, the German sociologist and philosopher. Contestation provided benefits to Indians against excessive taxation or the sequestration of property by the Mughals and the agents of the East India Company. Most importantly, as Bayly (2011) puts it: Even if state policies to bring education, clear water and medicine to villages were largely non-existent before Independence and flawed thereafter, the capacity to aspire for change was present in very strong measure and has been rapidly exploited in recent years. There have been historians such as Morris D. Morris2 who have emphasized how the education system from British times fostered conformist values and did not enable the dissemination of knowledge by creating a social barrier between theorists and craftsmen. Yet others like Eric Jones3 have stressed how the caste system privileged ascriptiveness and was a barrier to economic growth. The book would be more valuable if it were to address such arguments. There are many theses in the book, but it is the colonial disruption and the black economy that are portrayed as critical to an analysis of the developments in the economy. The black economy is estimated to be at a minimum of 50 percent of the GDP and is concentrated in the hands of 3 percent of the population. What makes it systemic is the link between the politicians, the businessmen, and the executives (bureaucracy, police, and the judiciary). Businessmen use political connections to have policies manipulated to suit their needs and in turn fund parties and elections. The corrupt executives also aid politicians and receive prized postings and favours. All this results in corruption and harassment rules are not followed; law and order is not maintained; and public services are erratic and undersupplied. The growing illegality associated with the black economy is nurtured by the conflict amongst the elite to corner large economic gains for themselves. The self-centred attitude of the ruling elite results in continuing disruption and a large mass of people who live in poverty and illiteracy. How can one deal with such systemic failures? The author suggests accountability, information availability, and social movements for democracy. The Right to Informa2

tion is advocated as an important step towards bringing in accountability. For political parties to function democratically, there is a need for genuine representatives of the people to enter legislatures which requires citizen groups to evaluate the records of candidates so that better informed choices can be made. The judiciary must speed up cases and simplify procedures. Independent directors are required on the boards of companies. Finally, political will that is spurred by a strengthening of democracy is required. These are all helpful suggestions that are made in the spirit of a holistic approach. The insight this book offers is that the growth process in India has been based on a form of social and political violence. The triad of business, politics, and the executive has cornered resources and generated poverty and inequality, displaced populations, and depleted natural resources. In the process, the downplaying of the value given to ideas that has been in existence since pre-colonial times has been furthered and resulted in the continuation of long-term social disruption. How can a society move from a situation of exploitation where surplus is appropriated and utilized through the power exercised by the triad towards a relationship of mutuality where different social groups have parity in power? This is a very difficult question to answer and the author thinks the fulcrum for change will emerge due to two dimensions from a demonstration of the fact that an economic configuration exists which makes it feasible to achieve such desirable outcomes, and from a focus on education and tackling the black economy that will materialize from political will. However, we do not have any history to guide us here. There is no example of a high-growth developing country that has achieved high growth by first acquiring advanced country corruption or governance characteristics. The types of corruption the book focuses on are those illegal ones that are not regulated by law. Some of them such as land licensing allocation and certain types of taxes could be made legal but they would be politically unpopular to implement and regulate. More importantly, such illegal activities involve exploiting political connections to facilitate their fruition. It is quite likely that once the profitable opportunities from corruption reach a certain level, the orientation of capital moves towards productive accumulation as occurred historically in many advanced countries. At such a stage, there is an economic surplus that is generated which is sufficient to provide
BOOK REVIEWS

Morris D. Morris (1983). The growth of large-scale industry till 1947. in Dharma Kumar (Ed.), The Cambridge history of India, Vol. 2. Cambridge University Press. Eric L. Jones (1988). Growth recurring. Oxford University Press, Oxford.

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fiscal resources that allows transfers to be made through state budgets which promote a fair and stable economic system. Until then, the state accommodates powerful groups by transferring resources to them in exchange for political support and in some instances the ability of these groups to mobilize by deploying musclemen and thugs to win elections. Many of the quandaries that we face could very well be related to our level of economic development and the process of accumulation that is involved. For instance, it is well known that no Indian university features in the top 100 worldwide. But it turns out India is a higher achiever than what would be predicted if one were to control for GDP per capita whilst doing the rankings. The stage of development is related to the politics of accommodation of patron-client relationships and off-budget redistributions that are illegal and unjust. Political survival requires corruption which in turn draws in certain types of individuals to seek public office which is entwined with their search for individual enrichment. It is not greed or the lack of public awareness or mobilization that is responsible for such outcomes. Rather it is a context of rapid economic and political change and conflict in society

which is attempting to rewrite the rights and obligations of various groups. This makes earlier processes non-viable for sustaining a system of rights that are backed by legal and voluntary transfers. Once social transformation transits to a stage where there is an entrenched and stable structure of rights that can be sustained by the economic surplus it generates, we would have a politicoeconomic system that will have the fiscal resources to contain corruption as well as conflict. Social change happens partially through a change of preferences and the emergence of political will and partially through a change in the underlying objective conditions that sustain states. This book reminds us that the growth process in India is underpinned by violence and a path of development where the standard of living of the majority of Indians is at best described as uncivilized. It is a tour de force of insights, a panoptic view, and a documentary of the ingredients behind the underlying processes of change that are dominating the Indian landscape today. Errol DSouza
Professor of Economics Indian Institute of Management, Ahmedabad e-mail: errol@iimahd.ernet.in

Business and Community: The Story of Corporate Social Responsibility in India

Pushpa Sundar
New Delhi, Sage Publications Pvt Ltd., 2013, pp. 408, `895

orporate Social Responsibility (CSR) is a much discussed topic today. There are many who still subscribe to Milton Friedmans famous assertion that the sole responsibility of a corporation is to maximize its profits and the corporation is responsible only to its shareholders. But this tribe is dwindling, and increasingly many are advocating a more active role for corporations with respect to their responsibilities to the other stakeholders including the community around them, and the larger society. Governments are even contemplating mandatory allocation of a certain portion of the corporations earnings for CSR activities and its inclusion in their Annual Reports. Few would have the audacity to state in their Annual Reports that they do not believe in CSR and refuse to undertake any CSR activities.
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Apart from complying with the basic requirements and displaying some commitment to CSR, has CSR really been in the blood of Indian companies? Do they believe in it? Pushpa Sundars book attempts to answer these questions by tracing the history of CSR and the philanthropic activities of business and business firms in India from the year 1850 onwards. She had published an earlier book, in 2000, titled Beyond business: From merchant charity to corporate citizenship, in which she had explored the evolution of the concept of CSR as a social contract between business, on the one hand, and the state and civil society, on the other. Her latest book takes the recent developments into account and though it draws on the earlier book heavily, it is not just an update. It takes a more critical look at the post-millennium developments in the con-

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