States, firms, and economic development

Abstract

The books by Aseema Sinha in 2016 and Adnan Naseemullah in 2017 focus on India’s international and domestic political economy, and Naseemullah examines Pakistan as well. The challenge for the study of contemporary Indian political economy is to explain why the 1991 reforms were successful at all, and to explain the limits to their success. During the early stages of the reforms there was considerable skepticism that they could succeed at all. Within India and internationally, this skepticism was expressed in journalistic commentaries and in academic analysis. The two books under review expose some of the fallacies that lay behind that skepticism. Sinha argues that there was a dynamic process by which Indian firms and business associations, which had feared international competition and markets before, embraced them and built new competitive advantages. The WTO, as it emerged in 1994 from the Doha round, proved to be a remarkably effective international organization which trained government officials and corporate managers in India in the new norms of the global economy. And equipped with this knowledge, India was able to innovate both in industry itself and in the realm of trade negotiation and governance. She shows that Indian firms – the owning and managerial class – did not have fixed interests over the period. And the Indian state also did not have fixed political economic interests. Naseemullah finds the liberalization and globalization processes gave rise to two major management styles. The owning and managerial classes of Indian industry transformed themselves in ways not anticipated by the skeptics. The major debate in the background of these two books is whether a liberal state or developmental state is more effective in economic development. A liberal state is one that may provide certain public goods but remains neutral