- The economic reforms initiated in 1991, made use of the opportunity to initiate changes in India’s industrial policy.
- While the initial focus of economic reforms was on using exports to lead to economic growth, the longer-term sustainable option was to increase domestic consumption of goods and services.
- Rapid industrialisation and urbanisation, and consumption, often resulted in ecological imbalances.
- This is the first episode of ‘Environomy’, a new podcast series in which the host takes you through three decades of India’s environmental history.
In 1991, India initiated economic reforms to combat a severe financial crisis and it was a milestone year for economic growth in the country. The then government opened up markets to foreign investments and embraced globalisation. Since then, the language of development and growth has been well-ensconced in the national mainstream.
While the initial focus of economic reforms was on using exports to lead to economic growth, the longer-term sustainable option was to increase domestic consumption of goods and services, with a spotlight on the middle class population.
Rapid industrialisation and urbanisation, and the focus on economic growth, often sidelined sustainable development practices and resulted in ecological imbalances. With goods and services chasing the attention of the population, the ecological impact of this heavy consumption was not so much of a priority.
If before 1991, politics drove economics, after the reforms, economics drove politics. Even though national governments have changed since 1991, this focus on economic growth has remained. This change impacted the course of the Indian environment in the past three decades.
In the first episode of this new podcast, ‘Environomy,’ Mongabay-India Managing Editor and podcast host S. Gopikrishna Warrier discusses how the Indian middle class got a distinct economic and political identity after the economic reforms and how it impacted the environment.
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Full transcript
Gopikrishna Warrier: You are listening to Everything Environment by Mongabay-India.
In 1987, the year I started working, taking a train to Delhi from my hometown in Kerala, was a study in understanding the country through its drinking water. Travelling by non-air conditioned sleeper class, we waited with our plastic water bottles, the kind we had taken to school as students, to collect water from taps on the platform. As the train slowed down, we jumped and rushed to the few water taps near us. We jostled, pushed, and shouted our way to the taps. Even after these years, I still remember this sharp pain when someone elbowed me in the ribs as I reached for the water source. Those days, we knew that the water was copious in Vijayawada, brackish in Ballarshah, and sweet in Nagpur. Through the taste of the water, we could also imagine the environment in each of these locations.
In just a few years, bottled water was sold to us in the trains. We did not need to move away from our seats to get our fill. We were spared the jab on our ribs. But we also missed the opportunity to experience the world outside the train.
Welcome to our show Environomy. I am S.Gopikrishna Warrier, Managing editor, Mongabay-India. Through this series of podcasts, I’ll take you through the journey of how environmental economics got interlocked after the economic reforms of 1991. This is a journey for which I had a ringside ticket as a journalist, reporting and writing on the environment for the past three decades.
In this episode, we will look at how the Indian middle class got a distinct economic and political identity after the economic reforms of 1991. This change impacted the course of the Indian environment in the past three decades.
The economic reforms of 1991 were a response to a balance of payments situation, but it changed the way in which we Indians deal with our environment. If before 1991, politics drove economics, after the reforms, economics drove politics. Even though national governments have changed since 1991, this focus on economic growth has remained.
The economic reforms initiated in 1991 happened when the political leadership made use of the opportunity of a balance of payment shock to initiate changes in India’s industrial policy. The thrust was on liberalisation, privatisation, and globalisation. This meant giving space to industries to take independent decisions and grow, help the private sector move into areas that were hitherto reserved for the public sector, and integrate the Indian economy with that of the global economy. Thus, the reforms focused on the secondary sector of the Indian economy, which is the manufacturing sector.
In 1991, the tertiary sector of the economy, that is the services sector, was at a nascent stage of growth. This sector piggybacked on the reforms as it grew later in the 1990s and beyond. The primary sector of the economy, that is agriculture, was left behind in the reforms process. With more than half of the country’s population dependent on agriculture and allied activities for their livelihoods, perhaps it would have been too politically sensitive to initiate agricultural sector reforms.
Senior journalist Sanjaya Baru recalls the events that led to the reforms in his book 1991: How PV Narasimha Rao Made History. Though the economic crisis of 1991 was long incoming, the political and economic volatility after the national elections of 1989 triggered it. International perception of India’s stability was rocked by two rating agencies: Moody’s and Standard and Poor, downgrading the sovereign rating in 1990 and early 1991. The economy had slipped during the 1980s. Baru writes that the total external debt increased threefold from 20.6 billion USD in 1980-81 to 64.4 billion USD in 1989-90. The share of the external debt in national income went up from 17.7% to 24.5% in that period.
In other words, one out of every four rupees that India earned had to be repaid as debt.
There was an increase on government spending on subsidies. The share of fiscal deficit, that is the deficit in the government budget, and the government interest payment obligations, shot up from 6.3% in 1980-85 to 8.2% in 1985-90. In early 1991, the choice before the national government, then headed by Prime Minister Chandra Shekar, was either to convert India’s gold stock into hard cash or default on debt payment. I quote Baru here, “20 metric tons of confiscated gold, worth 200 million USD, was made available by the Reserve Bank of India to the State Bank of India for sale to the Union Bank of Switzerland.”
Political turmoil, an assassination, and national elections later, the new government with Narasimha Rao as Prime Minister and Manmohan Singh as Finance Minister took charge in June 1991. A series of policy measures followed. They included trade liberalisation, devaluation of the rupee to make exports competitive, actions to reduce fiscal deficit through reduced governmental spending, and a new industrial policy.
While the initial focus of economic reforms was on using exports to lead to economic growth, the longer-term sustainable option was to increase domestic consumption of goods and services. This could not be done by either the rich or the poor people alone. There came the focus on a consuming middle class.
I remember, in the early 1990s, the business newspapers printed either on pink or white newsprint talking about 250 million strong middle class in India. Some experts extolled the Indian middle class is as big as the population of the US or the population of Western Europe. Even if we were to question whether such a large middle class existed in the country, there was increasing attention on this section of the society for marketing domestic goods and services.
The customer became king. There were brands vying for the customer’s attention. The mummy-daddy stores gave way to malls with multiplexes. In fact, in cities like Chennai, where there is a severe shortage of public spaces, the new malls became the spaces to be in. Advertisements on television, newspapers, and on hoardings along city roads created the image of the new middle-class urbanite. Over the decades, for a generation whose parents perhaps aspired to own a scooter, buying a car as the first vehicle had become possible. With cheap airlines flying the skies, taking a flight had become as easy as taking a train.
If the Indian middle class got its economic voice in post-1991, it became bold with a political voice in 2011. The anti-corruption movement led by Anna Hazari was the first consolidation of the middle-class political voice. This political voice bloomed during the national elections of 2014. Writing that year, political analyst Pavan K. Varma identified multiple factors that signified this transition for the Indian middle class. Varma states that by 2014, the middle class reached the critical numerical size, constituting a group in electoral politics. It also took the shape of a distinct class identity and had acquired a national footprint. All this was supported by the social media revolution and 24/7 news.
Social scientists Surinder Jodhka and Aseem Prakash, in their book The Indian Middle Class, state that over the years, this class acquired the legitimacy to speak on behalf of the society as a whole.
The urban middle-class Indian felt pampered. With goods and services chasing their attention, they lost touch with their own ecological footprint or the ecological impact of their consumption. When bottled water reached them at a price that was affordable, they did not care from where the water was extracted at what ecological cost. Similarly, they were not worried where the plastic bottles went as long as they were picked up from their homes.
In episode two, we will explore how this new Indian order after the 1991 economic reforms changed the way in which the Indian society looked at the environment and the way in which they dealt with environmental issues.
This episode was written and produced by me, S. Gopikrishna Warrier. Production Editor: Kartik Chandramouli. Audio Editor: Tejas Dayanand Sagar.
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CITATION:
Baru, Sanjaya. 1991: How P.V. Narasimha Rao made History. Aleph Book Company. 2016.
Jodka, Surinder S. and Prakash, Aseem. Oxford India Short Introductions: The Indian Middle Class. Oxford University Press. 2016.
Varma, Pavan K. The Challenge of 2014 and Beyond: The New Indian Middle Class. Harper Collins India. 2014.
Banner image: Commuters in Mumbai Metro. Photo by Rajarshi Mitra/Wikimedia Commons.