India. Craig Jeffrey

in machines over the decade).

      Kar and Sen enter a qualification into their account of this period, noting that, ‘the Indian state’s collusive relationship with certain sections of the business elite in the pre-reform period remained, and it may have been accentuated by the rise of increasingly powerful regional business groups that were closely connected with regional political elites’ (2016: 53). So, they say, ‘closed deals existed side by side with open deals’, and many traditional industries were still dominated by entrenched business elites (2016: 54). For all that there was a significant opening up of big business to new entrants in the 1990s, and although some of the old business groups lost out, others of them – the Tata group most prominently – consolidated their positions.

2.5 ‘Superfast’ Growth, Slowdown and Questionable Recovery: 2002–2015

      For all India’s relative success in stabilizing and raising rates of economic growth in the last years of the twentieth century, the international financial press remained cautious and even pessimistic about the country’s prospects, and it was still the case in 2003 that ‘the Indian elephant’ was compared unfavourably with ‘the Chinese dragon’. On the occasion of the Indian prime minister Atal Behari Vajpayee’s visit to Beijing in June 2003, the liberal newspaper The Economist, for instance, pointed out that ‘In the ten years from 1992, India’s GDP per head grew at 4.3 per cent per year, China’s twice as fast’, and it argued that ‘In the BJP India is saddled at the moment with an irresponsible government that is better at pandering to religious zealotry than pressing for economic reform’ (The Economist, 2003). Less than a year later, however (21 February 2004), the paper had changed its tune, saying that with growth that might reach 8 per cent in 2003–04, ‘the signs of economic good sense in India are increasingly robust’, and speaking of ‘a moment of shining opportunity’, in line with the election slogan that the BJP government had adopted. Now The Economist seemed to rate the Vajpayee government much more positively.

The shift in the way in which the progress of the Indian economy was being reported internationally by 2004 is one marker of the recognition of the possibility that growth was accelerating again. Indeed, this did happen, from 2002 according to Kar and Sen’s analysis – they calculate the average rate of growth of per capita income in 2002–10 as 6.42 per cent. According to Joshi (2017, table 2.2) the growth rate of GDP per annum accelerated to 8.5 per cent over the period 2003–04 to 2010–11, or in other words attaining to ‘superfast growth’, while World Bank researchers report a growth rate of 8.8 per cent in 2004–08 (Ahmad et al. 2018). Joshi attributes the acceleration to the cumulative effects of reforms, reflected in the rise in corporate savings and investment, and in overall productivity. These arguments draw on the work of Bosworth and Collins (partially reported in table 2.2 above), showing the strong upward shift in the rates of growth of output, TFP and physical capital in 2000–10, by comparison with the preceding decade. These authors, too, see the acceleration as being consistent with the lagged effects of the reforms; and they also report on increasing savings and investment rates in the 2000s – the savings rate peaked at 37 per cent in 2007, before falling back, as both household and public savings declined. The World Bank researchers, however, refer to excessive credit growth in the period, and it is for this reason that they describe the growth that was experienced as ‘unsustainable’. The former Governor of the Reserve Bank of India, Raghuram Rajan (Governor in 2013–16), in a note to a parliamentary committee in 2018, referred to the large number of bad loans that were made through the banking system in 2006–08, leading to the banks being weighed down with Non-Performing Assets in subsequent years (Rajan 2018).

The sectors of the economy that had driven growth in the 1990s – communications; finance, insurance, real estate and business services (including IT); trade, hotels and restaurants; and registered manufacturing – all continued to contribute strongly to growth acceleration, and were joined by the construction and transport industries. But there was also a shift within manufacturing towards natural resource-using sectors, especially refined petroleum products. Kar and Sen enter significant qualifications to the story of superfast growth, pointing out that there may even have been regression in regard to the structural transformation of the economy. This transformation can be understood as being reflected in moves by firms to more complex products, which is what had happened in India in the 1990s. But the weighting of such more complex products fell during 2002–10, a shift reflected most clearly in the sharp increase in the share of exports coming from what the authors describe as rentier sectors (such as petroleum products). Overall, Kar and Sen’s analysis shows that growth depended more than before on rentier capital (operating in export-oriented industries from which high rents can be secured), and on the capital of those they refer to as ‘powerbrokers’ (operating in sectors such as real estate, construction, utilities and telecommunications in which high rents can be obtained, but serving domestic markets), though the contribution of the ‘magicians’ remained strong. An analysis by Gandhi and Walton (2012) of the sources of the wealth of Indian dollar billionaires, however, shows a marked increase in the significance of ‘rent-thick’ sectors from 2003, and that these sources of wealth outweighed others through to 2012.

      These trends involved a further change in the deals environment, in which there was reversion towards more closed deals (Kar and Sen 2016: 53–5). The Economist (2018a) commented on this period, ‘Industries such as power generation, mining, telecoms and infrastructure require large chunks of capital and lots of interaction with government. That attracted plenty of entrepreneurs whose core competence was using their connections with officials, in order both to win necessary permits and to secure financing from state-owned lenders’. There were crony-capitalist deals in high rent natural resource sectors such as the mining of bauxite, coal, iron ore, manganese ore and natural gas (in a period in which there were price increases for many minerals). The Commission headed by Justice M. B. Shah that reported to government in 2012 showed up the extent of illegal mining, underpayment of mining royalties and over-extraction, involving closed deals depending on collusion between ruling politicians and mining companies (Shah 2012). The preferential allocation of licences for coal mining, together with the scam in telecommunications, over the allocation of 2G spectrum licences to mobile phone operators, were widely regarded as evidence of the way in which the Congress-led government (which came to office first in 2004, when voters rejected the BJP claim that India was ‘shining’, and won office again in 2009) had become mired in corruption. The 2G affair, which involved ministers from the Tamil party, the DMK, an important coalition party in central government, exemplifies a point made by Kar and Sen. They say, ‘Given the veto power exerted by numerically small but powerful groups of politicians in regional parties [e.g. the DMK] that comprised ruling coalitions in the 2000s, the deals that economic elites have had to strike with political elites increasingly accommodated the interests of these parties, with implications for both the “ordered” nature of these deals as well as their “open-ness”’ (2016: 65). Rent extraction by regional parties in the fractured politics of this period, and the increasing costs of election campaigns (which help to account for the increasing criminalization of politics – on which see Vaishnav 2017), were key factors underlying the surge of closed deals in rent-thick sectors that contributed considerably to super-fast growth, until 2010–11.

      These arguments are borne out by the recognition, subsequently, of the problems caused by the way in which banks became saddled in these years with Non-Performing Assets. As Raghuram Rajan argued, in the note referred to above, ‘it is hard to tell banker exuberance, incompetence and corruption apart’. But, he went on, ‘Finally, too many loans were made to well-connected promoters who have a history of defaulting on their loans’. There were too many crony-capitalist deals, in other words (Rajan 2018; and see also Kapur 2018).

After 2010–11, the growth rate slipped, right back to 5.4 per cent per annum in the period 2011–12 to 2014–15 according to Joshi’s figures (2017: table 2.2). The picture of what has happened in these years is complicated, however, by a controversial