NEW DELHI, India – India has one of the most diverse cultures and complex histories of any nation-state. The largest democracy in the world, with a population of 1.2 billion, one of the fastest industrializing economies, and contributing 450 million people to the list of those living in dire poverty.
With the International Monetary Fund (IMF) officials set to evaluate the status of it’s economy, and all indications pointing towards a proposal of more loans. Contrasted with the statements of India’s new central banker Raghuram Rajan, ‘we do not need IMF money.’ It is a good time to look at the legacy of the IMF’s financial policies, specifically in relation to India and its economy.
In the early 1990’s, India joined the ranks of the Structural Adjustment Programs (SAP) from the IMF and World Bank. A process of economic liberalization that was sold to many developing nations at the time, as the path for unimpeded economic growth. India had employed socialist economic policies since its hard fought independence from the British empire, led by Mahatma Gandhi and his non-violent activism.
Liberalization of India’s markets was at the top of the global capitalists agenda, as its vast natural resources and immense untapped markets made it incredibly enticing. The slow rates of economic growth experienced by India’s economy during the 1970’s and 1980’s provided the political environment for the IMF to come in and apply its policies, and in July 1991, the loans began.
The economic impact the SAP’s that India has experienced are well documented and can be seen clearly in its economic indicators. Economic growth increased after 1991 from an average rate of four percent per annum to nearly nine percent per annum. GDP also rose dramatically, giving an illusion of economic success and fodder for the arguments of those in favor of such policies.
A closer and more holistic analysis of India’s economy shows a different picture. As of 2012, India’s Gini Coefficient was 33.9, certifying it is one of the most unequal economies in the world.
Highlighted by two of the main story lines coming out of the journalistic work done in India (over the last twenty years), is the incredible success of Bollywood and the tech industry. This has produced more billionaires in India than any other country in the last five years, and has consequently been well documented and praised by media outlets such as Forbes and The Wall Street Journal.
This ‘success’ is in stark contrast with the well reported epidemic of suicides being committed by hopeless farmers all over India, stuck in a poverty trap onset from a combination of factors that were direct results of those SAP policies.
Proprietary GMO seeds made by Monsanto introduced to the local markets and environment through the liberalization of tariffs and trade barriers. Combined with a lack of social welfare programs due to the austerity measures on public spending, many are so hopeless that suicide seems to be the only option. This crisis was very well documented and described in Raj Patel’s book Stuffed and Starved.
Seemingly a distinction in priorities is needed as the results of SAP’s are now undeniable. Increased economic growth on the whole is certainly an impact, but un-equitable distribution of this newfound wealth leads many to believe it stains and detracts from the positive impacts these policies claim to have.
If the wealthiest are all that matter, or producing the most billionaires is a priority for a society, than the IMF’s policies are very effective. If eliminating poverty, hunger and improving overall quality of life in a society is a priority, than a second and more critical look at these development loans seems appropriate.
– Tyler Shafsky
Sources: Counterpunch, Essential Action, BBC, Stuffed and Starved by Raj Patel