Shaw, in his famous quote in the preface to the play ‘Major Barbara’, was talking about the culpability behind and the actors responsible towards committing the crime of bringing about poverty. A combination of paradoxical global policy making centred around liberalisation and protectionism promoted by international financial institutions like the World Bank (WB) and the International Monetary Fund (IMF) is responsible for bringing about disparities in the global agricultural trade and production framework and global commodity trade. A major part of the commodity trade of developing countries constitutes agricultural products. The structural adjustment programs empower subsidies and protection in the North and pose a threat to the livelihood and food security of Third World farmers.

In earlier literature on structural adjustment and democracy a commonly held assumption (by both advocates and opponents of adjustment) was that democracy would hinder adjustment.(ref) Democracies, it was said, would capitulate to the pent-up demands of the newly mobilised social forces that had borne them to power. They would thus be unable to pursue the tough austerity measures necessary for structural adjustment and would also tend to resort to “macroeconomic populist” strategies, inducing fiscal laxity (running high deficits and subsidies), insisting on price controls (e.g. food subsidies, minimum wages) and promoting nationalisation measures (Dornbusch and Edwards 1992). (ref) However the adoption of orthodox stabilisation and structural adjustment programmes by democracies like India proved otherwise.

Structural Adjustment in India was a response to the macro-economic crisis that erupted in early 1991.The reforms and policy changes suggested as a part of these adjustments in terms of trade policies and import liberalizations were meant to have a significant effect on Indian agriculture and help it to become a part of the international trading market. However the trends in Indian agricultural export during the adjustment period shows a steep decline from the pre adjustment periods (from as large as varying between 31.7%-30.7% during the decade of 1970-1981 to as low as varying between 16.6%-20.4% during 1990-1997).(ref)

Agriculture is at the core of Indian economy with a population over one billion people and distortions caused due to loan conditionality of the IFIs has lead to ‘farmer suicides, reports of starvation and erosion of biodiversity all of which brings about the horrors of India under colonial rule’ (ref) Contrary to popular belief therefore a democracy does not necessarily assure the alleviation of poverty but it is the developmental strategies that a country undertakes that ensures it’s success in eradicating poverty.

What is essential to find out at this juncture is what actually leads to a democratic nation like India to adopt neoliberal ideas and be unsuccessful in eradicating poverty. Is it because

Democratic deficits are induced on countries like India by the hegemony of Formal institutions like the World Bank and the International Monetary Fund thus damaging the capability of such nations to enhance their levels of agricultural production and /or productivity

Or the democratic leaders of this country do not have adequate organisational-political skills to form coalitions that would not hinder their pursuit of equity and social welfare enhancing schemes in a free market neoliberal context.

The Case in Question:

In 1991 the congress government in India under P.V. Narasimha Rao introduced the New Economic Policy as a shift from the statist strategy incorporated under the realm of India’s first Prime Minister Jawaharlal Nehru with a promise of economic liberalisation.The NEP reflected the strident economic liberalism of the ‘Washington Consensus’ model of economic reform along with its underlying assumption of a benign global order.(ref) The specific reforms included devaluation of the rupee, convertibility of the rupee on the current account, reduction in tariffs, abolition of industrial licensing, easing of entry requirements for direct foreign private investment etc. Pre 1991 India was considered to be a Dirigiste Economy where the state played and interventionist role and a multi-party parliamentary democracy propounding freedom of expression and a commendable public sector particularly in infrastructure and basic industries was in being. The 1991 crisis was largely due to rise in inflation and acute pressures on balance of payments. However it has been argued that this could have been effectively brought under control and the currency could have been stabilized with a low-conditionality loan from the IMF rather than incorporating the entire spectrum of structural adjustment policies.