Chapter 1. Introduction:

In India during the last ten years or so, flags of warning have been waved with increasing ferment. "India is at a crossroads", "a new era is dawning" are the calls. Many experts have claimed that the increasingly fragile societal structure of India is on the verge of a breakup because of all the problems the country is now facing. In the shadow of the upcoming parliamentary elections in India in 1996, with some of the attention centering on financial issues, the importance of these has struck many people's minds, judging by the abundance of scholarly and journalistic material available. Many voices assume the characteristics of doomsday prophecies as they chant their eulogies over Indian finance and society. Is it really so bad? This scenario and questions about the good of liberalisation in general and the highly emphasised and politically inflated Indian version have attracted my attention to this matter lately.

My purpose of this paper is fourfold. I wish to suggest a theory for interpreting Indian and other conflict with a focus of attention on the question of how economic issues can be used to deliberately increase ethnic identification, and thereby animosities. I also wish to make a contribution to a broader understanding of the political debate regarding economic issues by trying to structure some of the arguments as well as lines of politics and development. Also, I will attempt to give my interpretation of the supposedly foreboding Indian disintegration by means of the theoretical framework, and what I call the socio-economic "parameter", as the most important one (but not crucial on its own) for a possible eruption and the subsequent spread of conflict in India today. The last purpose of this paper is to try to prophesise an alteration in the shape of the elite class in India.

Chapter 2. Reforms
2.1. Reform history
Since independence in 1947, India has been a semi-planned economy, whose production has been decided at government level in five-year periods, the so-called five-year plans. Partial opening-up has occurred at intervals ever since, but only recently has there been a drastic increase in the speed of their implementation. In the 1960s the government, in order to protect indigenous industries from foreign competition, fortified its self-supporting policy, and simply kicked out many of the foreign companies. A license system for imports was then introduced.

The New Economic Policy was initiated by Rajiv Gandhi in India in the mid-80s and continued by V.P. Singh in the early 90s. Why then, did India open up its borders to foreign investors? First of all, India's main trading partner the Soviet Union crumbled to pieces, and so a large export market fell out. Secondly, interior problems faced the country; separatist movements in Kashmir, the Punjab, and in neighbouring Sri Lanka erupted, droughts etc. added to the problems. The economy was overheated for both structural and temporary reasons. In the Gulf War period in the early 1990s, India's economy was further eroded by left-out chances of oil imports due to sanctions against Iraq. Therefore credit was approved of by the IMF, the International Monetary Fund, and the World Bank, under the conditions that the country open up its borders to foreign capital and that it start an economic reform policy.

The political reforms of the economy started very late, when the fiscal deficit was big, there was a lack of money in the country, the economy was overheated, and inflation was threatening, which still is the case. Since then, the nexus of the reform debate has shifted a little. In 1987 more emphasis than now was put on the import of technology, import that is up-to-date with the latest achievements in product development refining. This was done to get India out of the state of industrial or technological stagnation, and by consequence a sinking quality of manufactured goods in the absense of competition and availability of exterior markets, in which it still partly finds itself. This is a by-product of the country's - in other respects rather successful (for instance by the attainment of a self-reliance in agricultural foodstuffs) - import substitution policy and it has partly been achieved by a step-by-step opening-up of the economy. Speed in reforms was put forward by one side as important, just as is the case today. Corruption and inefficiency were things under attack. The slow economic growth and the fiscal deficit were looked upon with fear, even though an Indian potential for economic prosperity was admitted by some. Decentralised development was preferred, and a general trust in governmental development planning was expressed (Hussain and Jha). Then more than later, the economists tried to model Indian development on that of the successful East Asian economies.

The Indian Import Substitution Policy stood a good chance of succeeding due to India's large prospective consumer markets, variable climate and soil, plus a diversified agricultural output, a long tradition of handicraft, and large mineral resources (Wiemann). During this period the planned Indian economy was attacked because of its having no clearly defined long-term goals, like the Tiger models in East Asia. Other things which contribute to India's inability to follow the Tiger model are that the Indian society is maybe as hierarchical as that of, say Japan, but that upward mobility in India has been difficult even at a very low level, mainly because of the rigid caste system structures which work as impediments in this respect. Education is lacking in India, both enough primary schooling due to the shrinking financial sources and high dropout rates, and competitive higher education. The latter, but not the former, problem may be cured by market-friendly reforms and there is always the problem of injustice towards women, even in education. The long period of democracy in India has allowed the state sector to grow out of the state's hands, whereas the relatively new "democracies" and their respective administrative systems. Those in South Korea and Japan have firstly developed together (during the period of Japanese colonisation of Korea and the large amount of Japanese investment in South Korea), and secondly quickly, to the effect that bureaucracy in these countries is less autonomous than that in India. The financial development of Japan and South Korea has been helped in that it has been heavily sponsored by U.S. investors (and the IMF and the World Bank). What's more, these countries have not had to sponsor their own armed forces, so they have been relieved of a substantial part of the budget (Altmann). The absense of this heavy post of expenditure has helped improve the economy for numerous other countries in other parts of the world like Costa Rica, Sweden, and Germany. India being a former "friend´" of the Soviet Union has not been able to savour the fruits of that advantageous position. Loans to India from the international money lending institutions have been large, but smaller per capita than the loans to the two East Asian economies. Another difference is the discrepancy or rather the sometimes outright animosity that exists between Indian private and public sectors. In the successful booming economies of East Asia, the opposite is the case, and cooperation is promoted by the state and looked upon favourably by the private firms. If this cleft is not just a gimmick in the debate over liberalisation efforts, it has to be overcome if India is to succeed in the near future.

The reforms in India are not to be parallelled to those in the European Union at the moment either, simply because these focus mainly on removing tariff trade barriers (i.e. this is where the real obstacle to freer trade lies in Europe, even though non-tariff barriers are also subjects of reform). The Indian ones center on deregulating the importing licensing system, which arose during the past two decades as a result of the Indian government's need to protect indigenous industries from over-severe foreign competition. The european common market seems at the moment to admit a certain amount of social regulation, in areas like consumer, environmental, working conditions, and health protection. In India the standards of these areas are lower than in Europe and not so much focussed upon. Other things are needed more urgently, for instance primary education, family planning and so on.

2.2. Reform criticism and prospects
Here I intend to go through some of the recent criticism to the reforms in a somewhat systematic manner, both positive and negative. This is done in order to provide the reader with an idea of what characterises the debate about the reforms at the moment in India. It is not possible to assess all implications in such an overview like this, but some of the wider conclusions that can be made in connection with stability and reform will follow.

Perhaps the most common object of criticism is the slow progress of the reforms. This cry was heard already in the beginning of the reform programme, the New Economic Policy, the NEP, in 1987. Inflationary pressures build up because of the growing fiscal deficit, caused above all by governmental profligacy and corruption (Jha and Hussain).

Politics in India is commonly held to be a way for politicians to gain influence; access that is, to a position in the hierarchy of society, where inducement can contribute to making a good living (Nandy). There have been few, if any, concrete suggestions as to how to reform the bureaucracy and, what should be, democratic institutions, from the political opposition in India, the BJP. Of course it must be simpler to use unsubstantiated campaigns just before the crucial elections, than to put forward suggestions which will be held against you if you should win these elections and try to forget about your promises to the electorate. This is not to say that these suggestions do not arise in the debate. The ones that do, range from more-or-less purely managerial governance, or merely questions of efficiency, to more obvious ones like the institution of a directly elected president to provide for stability in the turbulent years everyone is expecting to come (Ezekiel and Sathe).

Pani means that there is a lack of initiative in the budget. This has been inherent in the reform process since 1991. There is widespread urban dissatisfaction with the centralised state. In the past deregulation encouraged private investment, and control of the fiscal deficit. Increased competition brought down inflation, and lower tax rates improved collections. But Pani admits that the point of diminishing returns has been reached; even if taxes were to be lowered even more, there would be no corresponding gain in production of capital. Taxes simply cannot be reduced indefinitely, and this is what he calls the "optimal point". Private investment is not growing fast enough to make up for the decline in public investment, so reforms should be speeded up. Is there substance to this claim? Pani does not provide corroborating evidence why this should be so. There are no returns for private investors in the agricultural sector (see below). The government's efforts to use imports as price-controllers has only helped where commodities are cheaper; prices have rose in the international market where imports are not immediately possible. The repayment burden for the Rural Infrastructural Development Fund projects has been laid out on the states, who already have severe strains on their finances. "A politically canny move" Pani calls it.

Arun holds that the biggest threat is when the public sector lives above its fortunes, not by squandery, but investment. This may in the long run stimulate production, but inflation is the immediate consequence. Even subsidies should be slashed. Therefore he says: Save, in the name of the poor!

Another claim is that resources have been spent on "meeting current needs and not creating fresh investments" and that this has brought excessive demand in the economy with no matching increase on the supply side. This can partially explain the broad support for an increase in the speed with which market reforms should take place, and reflects the opinion of many sides to the debate, the IMF, the World Bank, foreign investors, Congress (I)´s reformers, and the political opposition, particularly in its BJP stronghold. But many of those have taken notice of the Mexican Peso fall, and switched positions now that over-severe liberalisation efforts have proved to be harmful to the economy (The Hindu and Baru). Besides, what has been called "current needs" has since the all time low of 1991 been nothing but indispensable efforts to relieve the over-burdened economy without having to the liberalisation which is currently taking place (see Wiemann). There are discrepancies along several dimensions concerning the reforms, for example, which sectors to liberalise next. There has been a proposal put forth by the BJP to use a Swadeshi-policy, a nationalist perspective, in order to reduce India's dependency on foreign money-lending institutions such as the World Bank, the IMF and so on, by retaining tariff trade barriers but liberalising the internal economy and thereby giving it a boost. And now, even Communist-led West Bengal has finally uttered its approval to reforms of the economy. The truth may be multi-faceted, but even so, there is probably a lot of substance to the statement that, even if the political opposition may be vociferous in its criticism of the Congress´ economic politics, they are probably happy not having to take care of the nation´s economy and assume responsibility toward the electorate. If the continuation of the reforms did indeed proceed too quickly for a consideration of the poor's situation, then ethnic, caste and communal tensions could increase due to a real or perceived sense of injustice and inequality (Subbarao, Muherjee, Baru et c).

PM Narasimha Rao's so-called Two-track strategy (Muherjee) - to protect the rights of the poor while liberalising the economy as much as possible - is of course disputed and by its critics taken to be an empty promise in view of the upcoming elections.

The following areas are crucial for development, and need to be protected: female literacy, primary health service, family planning, primary education. Added to this can be agricultural subsidies which is very disputed since there is both a lot of money involved in liberalising this highly subsidised sector and a lot of disagreement whom the reforms, if carried out, would actually benefit. On the other hand, like Pani asks himself above, who would gain from a deregulated agricultural sector? One answer is that mainly importers and interior firms of pesticides as well as farming output products would. What is also lacking is liberalisation in the banking and stock market, i.e. the capital market sectors.

One line of argument holds that the upward mobility should be increased for the poor. This is said to be modelled on the booming East Asian economies South Korea and Japan, and is in practice nothing but an excuse for lowering the wages, and taking the labour unions out of action. What has also been proposed (Subbarao) is the, again East Asia-influenced, idea that upward mobility should be made easier. This involves the use of caste-quotas, but these have led to feelings of inequality (for the now disprivileged, outquoted) and to tensions. Of course Hindu nationalism breeds on this. The caste system, which is fundamental to this ethnic movement, is supported mainly by the members of the middle and higher castes. The members of lower castes would have less to lose should the system once and for all vanish.

There is a remarkably high degree of foreign direct investment in the country, but there is a gap between investment approvals and the actual inflow of money. This is partly a consequence of the long implementation periods in petroleum and power projects, as in other infrastructural areas.

Political uncertainty, unrest of different sorts, inadequate infrastructure (with the obvious exception of those firms providing this), and the indigenous industries' opposition, contribute to scaring foreign investors off. Things which contribute to the opposition among Indian industries are, apprehension of losing out in the competition, high interest rates, import duties on certain products which discriminate against manufacturers of capital goods (this being a direct effect of the import substitution strategy nurtured for many years by the Indian Government), inadequate infrastructure (foremost electric power), difficulties in raising credit, high rates of corporate and capital gains taxes, tax restriction on investment a.s.o. It follows then, that the private foreign and domestic companies -  according to the degree that they can influence politicians and politics - will support reforms in areas like banking and infrastructure, mainly power, transport, and telecommunication, where they all have something to gain.

There are signs of health in the Indian economy however. Capital inflow has risen since 1991, GDP growth was at about 5.5% in 1994-95, and industrial output is expected to climb 11%. Licensing procedures have been simplified, the currency floated, and large areas of the economy opened up. This has increased competition, but obviously not sufficiently. What remains to be done, according to McDonald, is as follows. The budget deficit should be dealt with, for 1994-95 it was 6% of the Gross Domestic Product. Buoyant tax receipts is this author's medicine, but will work only if the government is tough on spending. Inflation is too high, and may reach the 10% level. Cure: open up farm imports. The plan is to have replaced all quotas and import bans with tariffs by April 1997. The sooner the better, is the answer. Loosen up lending controls in the banking sector, abolish the government monopoly on insurance, and make the stock exchange and the foreign exchange markets available to more players. A complete opening-up of capital flow could however cause a Mexican-type collapse of the Rupee, the author warns. Introduce a Value Added Tax, this would simplify tax collection. Put an end to government intervention in areas where regulation is far-reaching like urban land, infrastructure, and the public sector. Government investment in health-care and education yields poorly, and rural investment for example in irrigation need better maintenance and more rigorous pricing to limit waste. Basically, the message is: open up as much as possible and do it quickly, but watch the fiscal deficit and inflation! This line of argument belongs to the regular repertoire of the IMF and the World Bank, and these and other international money lenders probably stand behind much of the pro-reform (or rather pro-speed in liberalisation) arguments heard in the debate (Koch, Altmann).

Other things put forward in 1983 by the IMF in connection with the Indian economy has been to limit the amount of cash in the country, limit the domestic credit expansion, cut down state intervention to a minimum in order to decrease the fiscal deficit, eliminate or decrease agricultural subsidies (raise the prices for farming products), increase food production, liberalise import policies, take measures to increase exports, avoid financing the public sector by international lending, and set up aims in order to increase efficiency in the industrial sector (Koch).

Chapter 3. Conflict as the theoretical framework
The socio-economic parameter to the serious threat to Indian stability may be the gravest existing at present. To use this, I will consider it as one of distribution of income in interaction with other parameters which could be used as forming identity patterns, or conflict groupings, like religion, caste, class, region and other, minor ones. These get reinforced or played down by outside factors, like poverty or political stability, but they can also reinforce or play down each other. This is where I will focus my attention. They can namely - if added - contribute to creating a very broadly supported movement, even an uprising like the independence movement ending successfully in 1947. One could say that Nehru, Gandhi, and the Congress party managed to create unity in India back then, because the number of parameters they could incorporate in their politics and nation-building was larger than that of their opponents (Edwardes). In a way, it was successful cooptation in its essence. This is the basis for my interpretation of the stability in Indian society at present. If a large enough number of parameters unite one and the same group of people, they will firstly be many and secondly be strong enough to topple mountains, and governments, be it through the use of guns, or their votes. Using this framework would also mean considering the socio-economic parameter as the one most seriously challenging Indian unity today since it is the one around which many things evolve today. It is comprised by the notions both of equal distribution, of where to live, and which occupation to choose.

What my parameter-based perspective does not explain is which parameter is more important in igniting conflict than the others, mainly because this varies from one point in time to another. The different parameters are different in strength, and this also depends on the present situation, i.e. time is also an important factor for parameters to decide conflict. Things such as media influence and political campaigns surely play a role in deciding this. Actually, such actors can be seen as catalysts picking parameters. My theory does however underline the multitude of factors (here:parameters) which must be taken into account if one wishes to analyse conflict in India as elsewhere. It also forwards the hypothesis that the more parameters that, so to speak "work together" on one issue, the more likely will the success be in influencing politics. Let me exemplify this.

What followed the Ayodhya disaster in 1992 and the subsequent violence and pogroms between Hindus and Muslims in India was - within my framework - ethnic unrest along the religious parameter. This line has, both preceding and following these tragic developments, been taken up by the Bharata Janata Party - BJP and the Shiv Sena in a strong alliance also referred to as the Saffron Resurgence. Saffron is one of the colours of the Indian flag, and can be said to symbolise the nationalist Hindutwa ideology practised by them in the search for a support-base in the northern Hindu heartland. There were fragments of this nationalism even in their economic reform politics, but this seems to have faded and given way to a more globalised reform policy. That is, the way to get India going and into the international economy again is to open it up as far as possible, not for the state to intervene. Consensus on the general good of further liberalisation and reform is reported to be great all over the range of political parties in India. This means that even where there is conflict about the reform politics it isn't sufficiently identity-provoking for creating political conflict, since it - being economic-theoretical - does not reinforce the other parameters. It is instead the socio-economic parameter we should use, the redistributive one. This is one which may reinforce and itself get reinforced in the interaction with other parameters, (Unhemmed economic liberalisation does not eliminate all reasons for conflict because certain sections of society may feel discriminated against in case the redistributive capacity of the society in which they live is inefficient, but that is another story.) and thereby giving people a chance to identify with certain groups, ideals, or lifestyles (see Hettne).

There is really nothing which prevents the rest of the parameters from reinforcing the economic one, and if they do, all hell can break loose. If, for instance the parameters of ethnic identity, caste, and religion together could reinforce the economic one, then uprising and separatism could flourish and then India might not be a federation of states any more, but crumble to pieces, domino-like, just like the former Soviet Union did in the late 1980s.

There are a few reasons why this hasn't happened yet, though. Why haven't the Tamils for instance, who form a homogenous group, not yet tried to break free from the Union like their Tamil brethren in Sri Lanka and their attempt to establish a break-away republic in Jaffna? The Tamils generally belong to the more dark-skinned, lower castes according to the idea of Varna; they share a sense of ethnic identity based on a large and ancient cultural heritage; they have a long written history et cetera. Even if there are signs of a north-south divide; the Indian government's involvement in Sri Lanka and its supposed consequence the murder of former Prime Minister Rajiv Gandhi, Tamil terrorism in the surroundings of Madras, and the recent loss in votes for the Congress in southern state elections, a split hasn't yet materialised. Why has the south not been able to mobilise opposition to the northern Hindu-belt and challenged their privileged positions? Why haven't the Kashmiri separatists and the Sikh extremist Khalistan movement in the Punjab been able/willing to join sides against the centre in order to broaden their support-base? These three separatist movements have many parameters uniting their respective groups of people, but something else must be stronger than this feeling of unity, a centripetal power rather than a centrifugal one.

One part of the answer may be derived from the tactic of divide-and-conquer; to sow dissent and to use the disunity and the discrepancies, hence potential for animosities, among your enemies in order to avoid their fruitful cooperation. This has been practised for centuries, first employed by colonialists from the north, then by the English, and today possibly by something called the state class and/or the Congress party. In my parameter-based context this could be seen as a successful effort to emphasise and increase by volume and importance, the number of one's own uniting parameters, stressing. that is, the incoherence of the opponent camps' parameters and hence their potential for unity. This will be returned to below.

Chapter 4. Conflict in practice
4.1. A Congress crack-up?
The problems that have been facing the nation's biggest party for some time now are: how to settle in-party conflicts, to accomodate the poor in their politics, to check inflation, to continue to get credit from the World Bank and the IMF, to attract foreign direct investors, and to protect Indian business and industry. What it all boils down to is to stay in power. In my view, these strains, induced mainly by the fiscal policy problems are nothing but different aspects, or sides of my socio-economic parameter. These have become more serious lately, and pose a real threat to Congress and the maintenance of their co-optation of interests.

But the problems within the party have been many. Accusations of corruption, personal animosities between P.M. Narasimha Rao and Sonia Gandhi, Rajiv's widow, the splitting off of a few renegades, the reshuffling of ministers in Rao's cabinet, all ending in a split with a break-away faction of personalities such as Arjun Singh and N.D. Tiwari leaving the 110 year old Congress party in May 1995 (the Frankfurter Rundschau, 22 May 1995). If the Congress is to survive its recent split, the effects of which we will have to await, the remaining part will need a radical reidentification; possibly an updated ideological basis; and more than a simple reshuffling of a few persons in the leadership. This will undoubtedly happen, should the faction splitting off seem to gain support among the public. But if against all odds the original Congress party should remain in power in the crucial states, this might not be the case. Then further splits can be expected to follow. As we shall see later, a fall of Congress wouldn't mean a fall of India (Venzky). There are other things this society rests upon, others parameters uniting India.

4.2. The existence of a state class
Some of the criticism of and opposition to reform can be expected to come from the state class - if we indeed could talk of one in India - whose interests lie in accumulating capital gains by squandering state resources, nepotism, taking bribery, and ultimately by avoiding to invest in the country (Elsenhans and Weede). In India we might be able to see the structures of such a state class existing predominantly among the urban, educated, male, middle-class, non-lower caste (i.e. Hindu and hence active or passive supporter of the caste system) members of society. Having a position in the state bureaucracy further increases the risk that one person can be classified as a member of the state class. In a rent-seeking society like this, there also exists discrepancy or opposition between the urban and the rural classes. We shall try to see which role they are playing in the battle about political leadership in India, by investigating whether they share the same interests, whether the state class is identical with the members of the Congress party.

4.3. Accusations of corruption and inefficiency
Of course the accusations of corruption will be and have always been present in heated political debates of the Indian sort. It is therefore difficult to estimate the validity of such accusations. If the number or amount of such accusations increase, this might just indicate that a mud-throwing campaign is going on in either direction. But the accusations are real and corruption as well as inefficiency inherent in the present structure of Indian society. At least this sort of criticism has not yet been falsified in the debate. Whether it be the Congress or the BJP who find themselves in power, we need to know how the structures of corruption function in order to do something about it.

Supposing that there is a state class means - as I have mentioned above - supposing (following Elsenhans, and to some extent Weede) that its members accumulate capital gains because of their privileged position in society. In combination with the Indian import substitution, and an import licensing systemor the License Permit Quota-Raj as critics prefer to call it, that has paved the way for bribery or "Baksheesh", this at least indicates that the conditions for corruption exist. The existence of a rigid and much-embracing state bureaucracy adds to this and to the likelihood of this state class to protect their interests. In the end poverty itself, a very inequal distribution of income, and pyramidal servant and bribery structures contribute and add to my conclusion that many people in India make a fortune and, what's more, a living out of it. India is, to sum-up, a continent partly going round by the use of corruption, because of the large number of people depending on it. This I say not in order to suggest that we give up the fight against it, but in order to see the magnitude of the problem, and to understand how difficult it is to tackle. Whether we like it or not, there is stability or, to put it less bluntly, rigidity in such a system, despite its being illegal and abominable (c.f. Weede on rent-seeking socities). The problem won't go away just because we ignore it. Apart from the obvious implications for simple justice that the problem of corruption has, it also contributes to that the public sector has come under attack harder than would have been the case in the absense of it. Accusations of inefficiency are also used in "campaigns" against policies and politicians. Most of these are aiming at the public - not the private - sector. Nevertheless, if something needs to be done it is - apart from the obvious task of protecting the poor - to rsetrict the possibilities that the state class abuse political institutions in an undemocratic or unfair manner, in order to protect or increase their vested interests.

4.4. Paramilitary forces
Another, older, way of securing Union Government control over the peripheral states has been to establish paramilitary forces responsible to the union Government, and not - like the Police - to the state. In "Paramilitary has become a generalist force", The Asian Age, 27 Oct. 1994, p. 13, the author, Shankar Bhaduri states that there has been a "...proliferation in strengths and branching into specialities.. .".for these Union-appointed, and -ruled battalions. He lists them as:
the Border Security Force (BSF), the Central Reserve Police Force (CRPF), The Rapid Action Force (RAF, what else?), The Indo-Tibetan Border Police (ITBP), the National Security Guard, the Assam Rifles, and a new force, the Indian Reserve Police, as well as another, a coastal surveillance group: the Marine Security Force (for the Lakshadweep and the Andaman islands).

The only numbers given are about the size of the two first mentioned: 185,000 and 164,000 troops respectively, a substantial force, you surely will agree. What they have in common is that they are all said to be equipped with tasks like maintaining border security and the like, controlling the borders against external threats, the MSF is said to be controlling the coastal lines of the country keeping a check on poachers. This exterior threat might be real, but as Bhaduri points out, these forces are all at the moment being expanded and amended in order for the centre to be able to control the periphery for signs of insurgency, in short to make sure India stays one.

4.5. The revival of Panchayat Raj
This is a feature inimical to Indian society. We can see that it is considered important for the political stability of India and a continuance of the Congress leadership in the revival of the old institution Panchayat Raj - the village council - by a 73rd Amendment to the Constitution in 1993. After years of oblivion, the Government has rediscovered the double symbolism in this brainchild of Mahatma Gandhi's. It could create among the poor a sense of trust for Congress, preferably with a continued Nehru-Gandhi dynasty leadership in Sonia, and every Indian would be proud to see the Panchayat revitalised (since the concept Panchayat or Ur-Panchayat has been around in India for many hundreds, maybe thousands of years) help in the mental self-healing nation-building process, and make use of old power structures to take away power from the states, on which level Congress has been losing ground in particular to the BJP/Shiv Sena alliance.This revitalisation of an archaic and sleeping political institution is a phenomenon which probably will become more common in the future. The structures which already are there in society (people in general will know who is a member of the council even though elections to it haven't been held for years, own observations) and symbolism make for their attraction, rather than the creation of new  bodies in the already messy, jungle-like, political arena in India. These would only contribute to making the corporative element in politics in India less open, and the dangers of corruption and inefficiency as well as the suppression of opinion on a local basis, more real. Also, it does not emphasise a particular Hindu element; since it won't play into the hands of the BJP. Further, it underlines P.M. Narasimha Rao's Two-Track Strategy and its concern for the poor (Muherjee). Since the revival of the Panchayat Raj does take away some power from the administration by giving more power to the people (at least this is what is intended) this shows that the Congress party and the state class are not identical. The Congress must be supposed to have interests in the bureaucracy as well, and that, of the two, Congress in this respect is the stronger part. There are also indications of that, since this state-class protect their interests (by retaining the licensing system and thus their source of income) and the pro-reformists or more vehement of the liberalisers stand in opposition against each other. Thus it would hardly be surpricing if India would not face the same problem as, say, Vietnam: the rise of a class of newly rich people, the petit bourgeouis to use an untimely and controversial term, whose income is abominably higher than that of the state-class, employed in the state sector. Further cutbacks in expenditure can bring about an in-country brain-drain. The educated (teachers, doctors etc) will prefer being employed in the private sector where their earnings may be tenfold, or even a hundredfold. A vicious circle of cutbacks and decreasing competence might erode the already miserable conditions that exist there. My own experience is limited to a visit - supervised of course - in a government and a private hospital in Coimbatore in Tamil Nadu and several schools and public universities in the area. I will make a hypothesis as to where this may lead India in the conclusion of this essay.

4.6 Theory, conflict, reform
The Congress - because it has been in power for so long - can be said to use two different tactics to secure its grip on power. One, to pursue a tactic of divide-and-conquer, or put plainly, to rely on that the heterogenous structure of India will aid in this strategic cooptation of interests as opposed to the political opposition, and two, to use whatever political institutions that are available to them, to remain in office. Also, this means that the Congress relies on their support at the Union Government level and locally, thereby playing down the say of the states. The interests of the Congress and the state class are not identical. The opposition between those two actors can also be said to constitute one possible conflict parameter, one which at the moment is too weak to cause instability to the system. Also, P.M. Narasimha Rao's Two-Track strategy of reforming the economy while protecting the interests of the poor may hint at an interior split in opinions in the Congress (as in other parties I believe).

In this time of increased challenge and more strain on the Indian society, new parameters have come into focus. Since the 1980s and the culminating of the economic crisis in 1991, the parameter of "Who gets how much ?"- the socio-economic distribution of income (and interest on investments!) - has entered the Indian society. The other side of the coin is of course "Who will have to pay how much?". Along with the opening up of borders has come to India foreign influence, new perspectives, and philosophies of life. The different values and new consumer goods, and more of them, not only challenge, but will also break down the very identity of Indian societal structure. India has indeed always been able to accomodate its intruders, but this will have to be questioned. Money and new culture make for a new way of life which India to a large extent won't be able to resist. Indian culture is at the moment totally preoccupied with this theme, the clash of two different cultures. It is quite naive to think that India - practically isolated for so long - will not be affected by what is happening in her. I am thinking of all the repercussions of the reforms of the economy. How quick the new values will spread is the next question to be answered, but my hypothesis is that, when they do, there may be serious conflict. There is another dimension to this parameter though, since money makes for stability as well as conflict. Where other parameters divide two groupings clearly and conflict arises, that of wealth distribution may play down the other parameters. Conflict then is not seen as fruitful and therefore avoided, because this parameter is shared by the two opponent camps.

The Kashmiri question for instance is very sensitive. It involves three, maybe four of the conflict parameters; one Kashmiri Separatism vs. New Delhi Centralism, two, the Hindu vs. Muslim conflict, three, India vs. Pakistan, and possibly four, Money. The reason why I doubt that this parameter is important is that the little money that may be gained by a break-out from the union would only benefit those with capital interest in Kashmiri separatism, or rather independnce, mainly those in the tourism industry. Kashmiri separatism and the Hindu-Muslim conflict interact, but because of the large number of Hindus living in Kashmir, the terrible memories of the pogroms following Ayodhya in 1992, and the Union government's careful handling of the situation, this hasn't been enough for erupted large-scale conflict. India vs. Pakistan interacts with Hindu vs. Muslim, and this is a parameter deeply rooted in the Indian and Pakistani minds, ever since the bloodbaths succeeding the separation of Pakistan two years after Indian independence in 1947. But the situation is under control. If you don't agree, just think what the options are, with India and Pakistan being nuclear powers. I think that possibly my socio-economic parameter could be used as a tool to explain this. Money is certainly in the minds of the Delhi government when they calculate on and estimate the costs of a war with Pakistan. Believe me, they do. But in a passive way, the economic parameter soothes the situation. By not giving the sides any incentives, because these are nowadays increasingly financial, the socio-economic parameter has a pacifying effect. Not always, but here I think it does.

4.7 The international perspective of the crisis
The international perspective of the crisis is another factor, and a very serious one too. I do not however regard it as directly crucial to the Indian political debate. More urgent needs, like to make sure the reforms do not create widened social clefts, and more long-term goals like to increase literacy predominantly among women, to provide family-planning and health-care, improve housing and schooling must be fulfilled than international issues of safety, of concern mainly for the unpoor. Therefore the international issues have not been politicised or put crassly, there has been no big shares of the electorate to attract thereby, no vote districts to win. The IMF and the World Bank proffer an increased opening up of markets, and the U.S. supports this policy. The radically changed scene with the fall of the Soviet Union (being one of the major trading partnes of India since their "special friendship agreement was signed in 1971) surely helped affect the liberalisation process in India as well as it did in Vietnam. China, the booming tigers, and the rest of Asia will become both prospective trading partners and competitors for Indian business interests, and the same counts for the other two regional trading blocks, the EU and the US. Neighbouring Pakistan and the recently erupted Kashmiri crisis, India's relationship to Sri Lanka, and India's role in the increasingly tense relationship between the U.S. and China or Japan are other sources of international influence on the new, soon more or less fully developed market economy - India.

Germany should support not only market, but also democratic, reforms. The concept "the world's largest democracy" does not completely fit India, as we have seen. Investors can count on stability, at least in the long run, even though it seems clear that India finds itself in a vulnerable period of transition. At the moment there may be clouds above, but along the horizon, the skies seem clearer. It lies closer to the interests of investors that the bureaucracy be reformed and corruption exterminated, than that social regulation in India be abolished. In the competition for foreign capital (with a.o. China, Vietnam, and other East and South East Asian economies) democratic reform and consequently stability will be a must for India. For a summing-up of this complicated arena, see below.

Chapter 5. Conclusion:

In order to soothe the situation and eliminate the risk of conflict, the Indian Government must proceed carefully. There are dangers in releasing market forces to rule at their own free will, something which today even the most liberal of economists will subscribe to. Conflict may arise due to poor redistribution of capital gains. Too much import would start inflation. Corruption, inefficiency in the public sector, nepotism, and squandery of state resources do constitute a real threat, even if these are used as flak in election campaigns rather arbitrarily.

In the case of equilibrium between the different factors, India will stay one. This doesn't necessarily mean that the state class and Congress are unthreatened, just that India will most probably stay one and stable as long as disequilibrium does not occur. The socio-economic parameter of distribution reinforces the other parameters in interaction with them. What Hettne calls ethnic conflict may be based on religious, race, language or other cultural identification such as a separatist claim for an area. The socio-economic parameter is not only the biggest change and challenge India has experienced in times of liberalisation and reform, but it itself gets reinforced by another parameter, which draws on the animosities between the traditional and the modern values and ways of life.

If combined with others, the socio-economic parameter may very possibly ignite tension, which may spread and seriously threaten the country's stability. Economic reforms have to be carried through step-by step. This Has by now been acknowledged even by the more vehement of reformers. But the threats, as they see it, are predominantly the inflation and the growing fiscal deficit, not conflict.

Money is by the end of the day, what moves politics and politicians, just like ordinary people in their everyday lives. Therefore, this interest is what people will protect with their lives, if necessary, since India is a very poor society. It is a prophecy of mine that this will undermine, and radically change the structure of Indian society (it has actually already started) and it is my bet that if any parameter of the ones I have mentioned, it will be the socio-economic one which may start India's disintegration, not however without interacting with one or more of the others.

As a consequence of this, there is stability in the multitude of parameters in the Indian political arena and this helps maintain equilibrium. Not even my pet - the socio-economic or the equal distribution-parameter - can, even if it may be one of the most powerful ones, solely be made responsible neither for upholding nor for disrupting societal stability or equilibrium. Therefore I cannot accept how some authors keep on prophesying the fall, or the breakup of the Indian union, without paying regard to more than one factor (Kohli, Venzky). On the contrary, it may even contribute to playing down the other parameters, with the result that conflict is avoided. Let me elaborate on this a bit more.

The fight against corruption and inefficiency in the public sector also has to be given priority, not like now as an instrument in the battle for votes, but through democratic reform efforts executed by independent political institutions, in the spirit and the wake of T.N.Seshan's Election Commission and their recent work. In the long run this will benefit India even though it at present plays in the hands of the opposition, mainly the BJP but also the minor parties. Political reform is needed even more badly than is economic reform, if democracy is to be saved, and cleansed. There is of course no way of completely making sure that "independent" organs supervising the reforms of a corrupt system do not become politicised, but there is simply no alternative as I see it. A rather free press, and a general sense of faith in democracy in India (Raote) may be things aiding this much-needed development. Some sort of committees comprised by members from the different political parties, the bureaucracy, and the judicial powers could be a good way to start dealing with the bottlenecks and loopholes at all levels in the Indian system. This should be supported by foreign investors, since it would in the long run definitely be more lucrative than a cut-back in social regulation and food subsidies, which only hit the poor the hardest.

Even if I still believe that India will not dissolve because of separatism or other parameters, the erosion of the public or the state sector will continue. A new class of affluent people will take the place of the state-class as India's elite. The strength of this new class will probably be large enough to continue liberalisation. The multitude of parameters dividing the Indian society makes it impossible, in the long run, to foresee a future like that of England, where public enterprises have been privatised and returned to the hands of the state to and fro.

Another question for the future is whether in the Indian economy it will be the groups who benefit from agricultural output (on the export side) or those who do it from that of high-tech industries that decide the direction of the economic politics. Both groups support fast liberalisation in their own sectors in order to compete on the international market. I suppose there is a great deal of lobbying going on as well as the everyday bribery from those groups to direct reform politics in the direction they want. The labour union/s and the state-class may form an alliance against this.

However, any kind of government, coalition, majority, or even a minority, may make for stagnation in reform politics. Different conflict parameters, a major new socio-economic one, the concern for upcoming elections, and the arisal of a new rich elite speak for this.

Literature:
Jörn Altmann: Wirtschaftspolitik, Gustav Fischer Verlag, Stuttgart und Jena, Germany, 1992
Gunilla Andrae and Björn Beckmann: The Wheat Trap. Bread and Underdevelopment in Nigeria, Zed Books, London, U.K. 1985
A.L. Basham: The Wonder that was India, New Delhi India, 1990
Deutsche Bundesbank, Sonderdrucke, Nr. 3., Internationale Organisationen und Gremien im Bereich von Währung und Wirtschaft, Frankfurt am Main, 1992
Larry Diamond (ed.), Democracy in Developing Countries, Boulder Colorado USA, 1989
Michael Edwardes, Nehru. A Political Biography., Penguin Books Ltd. England, 1971
Björn Hettne: Etniska Konflikter och Internationella Relationer, Studentlitteratur, Lund Sweden, 1992
Samuel Huntington, The Third Wave. Democratisation in the 20th Century, Norman, London U.K. 1991
Wolfgang S. Heinz, Menschenrechte in der Dritten Welt, C.H. Beck Verlagsges. Munich Germany 1986
Hague, Harrop, and Breslin, An Introduction to Comparative Government and Politics, London U.K. 1992
Instituto Tercer Mundo, Third World Guide, Montevideo, Uruguay 1993/94,
Eckart Koch, Internationale Wirtschaftsbeziehungen,
Atul Kohli, Democracy and Discontent. India's growing crises of governability, Cambridge University Press, 1990
Jan Myrdal, Indien Väntar, Norstedts, Stockholm Sweden, 1979
V.S. Naipaul: India. A Million Mutinies Now, London UK, 1992
Dieter Nohlen and Franz Nuscheler, Handbuch der Dritten Welt, Band 7, Südasien und Südostasien, Hoffmann und Campe Verlag, Bonn Germany, 1992
Das Parlament, Themenausgabe Indien, Nr. 8-9,19/26 Feb. 1993
J.S. Railkar, Planning and Development Strategies, New Delhi, India, 1992
Susan Strange: States and Markets. An Introduction to the International Political Economy
I.A. Sondén-Haellquist, Indiens, Pakistans och Bangladesh's Historia, Almqvist-Wicksell AB, Stockholm Sweden, 1971
The World Bank, World Development Report, The World Bank, N.Y., USA, 1993
 

Scholarly essays:
 Hoshiar Singh, Constitutional Base for Panchayat Raj in India. The 73rd Amendment Act, Asian Survey, Vol. xxiv, no. 9, Sept. 1994.
 L.K. Jha: The Role of Foreign Collaboration and Trade in India's Recent Economic Policies in Vierteljahresberichte Nr. 110, Dec. 1987, p.365-367
 Abid Hussain: Reform and Liberalization ibid. p.369-371
 Jürgen Wiemann: India's Strategy of Self-reliance - Achievements, Shortcomings, and Perspectives, ibid. p.373-377
 Hartmut Elsenhans: Dependencia, Unterentwicklung und der Staat in der Dritten Welt, Politische Vierteljahresschrift, Heft 2., Juni 1986, p. 133-158
 Erich Weede, Warum bleiben arme Leute arm?, in PVS, H. 3, Sep. 1985, p. 270-286
Georg Simonis, Rent-seeking - eine neue Theorie der Unterentwicklung?, PVS, H. 1, Mar 1986, p. 100-108

Newspaper Articles:
Sunil Jain: On the Edge Again, India Today, 30 Apr. 1995, Changing Phase of Reforms, 31 Jan 1995,Behind the Silver Lining, 31 Mar 1995
Bernard Imhasly Narasimha Raos Ochsentour, die tageszeitung, 9 Feb. 1995
Duvvudi Subbarao: Reforms with a human face. The Economic Time, 16 Feb. 1995,
Hamish McDonald, Don't stop now,The reform agenda and Reality Check. Opposition parties gradually embrace change, FEER 2 Feb. 1995,Limited Express, 27 Apr 1995
Zafar Agha, Congress(I). The Face Lift, India Today 28 Feb. 1995,
Kongreßpartei schließt zahlreiche Abtrünnige aus, the Frankfurter Rundschau, 22 May 1995,
Alok Muherjee, The Two-track Strategy, The Hindu, 31 March 1995,
T.K. Arun, Reforming the Reforms. The Economic Time, 17 Feb. 1995
Prabul Bichlai, Wages of Neglect- Economic of Congress Defeat, Times of India, 24 March 1995
C.H. Manumantha Rao, Structural Adjustment. Lessons from East Asian Experience, Times of India, 10 Feb 1995.
L. Gordon Crovitz and Hamish McDonald, Stability for sure, FEER 2 Feb. 1995,
"Our correspondent", India Warned of Mexican-type Crisis, The Hindu 26 March 1995
Yuburaj Ghimre, The Saffron Resurgence, India Today, 31 March 1995,BJP: Brimming with Hope, IT 15 Mar 1995
Shefali Rekhi, Foreign Investors: Catching Their Eye, IT 15 Mar 1995
M. Rahman and Zafar Agha, Congress(I) Ifs and Buts all the Way, ibid.
Narendar Pani, Diminishing returns from reforms, ECT 23 Mar 1995,
Sanjaya Baru, The lesson India can learn from Mexico: Gradualism better than speed, TOI 13 Jan 1995
Gabriele Venzky, Ein Gigant, der zur Reform nicht fähig ist, Der Tagesspiegel, 23 May 1995
Vasant Sathe, India should be governed by a directly elected President, T.O.I. 15 Feb 1995
Hannan Ezekiel, Reinventing Government. Accent Should Be On Efficiency, T.O.I., 25 Feb. 1995

Unpublished material:
Hansi Elsbacher, Doing good things for the people. A report about Panchayat Raj and political power in a village in India, available in Swedish only at the Department of Political Science, Stockholm University, Sweden, or from the author. The fieldwork was carried out in Bommanampalayam, Coimatore district, Tamil Nadu, September 1993. Other observations have been made during three other journeys mainly in the south of India in 1987/88, 1989/90, and 1993.
Markus Lindenmann, Warum der Elefant nicht zum Tiger werden will, Otto-Suhr Institut, Freie Universität, Berlin Germany.