Federalism, Nationalism and Development

India and the Punjab Economy

Pritam Singh

• Publisher: Routledge
• Year: 2008
• Print ISBN: 9780367183196
• eBook ISBN: 9781134049455
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Nationalism & Patriotism
• Index: Politics & International Relations

This book throws new light on the study of India's development through an exploration of the triangular relationship between federalism, nationalism and the development process. It focuses on one of the seemingly paradoxical cases of impressive development and sharp federal conflicts that have been witnessed in the state of Punjab. The book concentrates on the federal structure of the Indian polity and it examines the evolution of the relationship between the centre and the state of Punjab, taking into account the emergence of Punjabi Sikh nationalism and its conflict with Indian nationalism. Providing a template to analyse regional imbalances and tensions in national economies with federal structures and competing nationalisms, this book will not only be of interest to researchers on South Asian Studies, but also to those working in the fields of politics, political economy, geography and development.

1
INTRODUCTION

The pattern of development of a region in a country with multiple nationalisms is different from that in a nationally homogenous country in one critical respect: the framework of negotiated relations between the region and the centre in a country with multiple nationalisms tends to become an influential institutional factor. Federalism, as a system of inter-governmental relations between the federal centre and the regions, provinces and states, developed out of the need to reconcile the goals of regional and national development in multi-national countries. Being a system of negotiated accommodation between the two parties—the centre on one hand and the states on the other—this arrangement is bound to be a dialectical mixture of harmony and conflict, satisfaction and dissatisfaction. To the extent that regional development is facilitated by the national pattern of development, it is likely to lead to a successful and strengthened federation; and to the extent that goals of national development entail neglecting the development of a region or demand sacrifices from a region for the sake of national development, it is likely to put the federation under strain. Neglect of a region or economic sacrifice from a region may follow either because of the necessity to centralize control over the utilization of resources or because of the necessity to transfer resources from one region to another (Schoenfeld 1960, Blough 1962, Svennilson 1962, Lakdawala 1967, Grewal 1975, Grewal 1986). Transfer of resources may take place due to the relatively weak bargaining power of the region being neglected vis-à-vis the centre or for the ostensible purpose of achieving balanced regional development. A federation may, therefore, come under stress due to either region–centre conflict (a vertical conflict) or a region–region conflict (a horizontal conflict), or a mixture of the two, with varying degrees of importance of these two forms of conflict.

As an area of study, federalism and development seems to attract more scholarly attention when federations fail or are in crisis than when they are successful (see Dikshit 1975, Hicks 1978, Davey 1983, Rath 1984, Hardy and Mihaljek 1992). Although only about 20 government systems out of the 150 or so territorial states can be considered as federal according to their constitutions, in terms of area, federations represent some of the largest national entities in the world: the United States of America (USA), Canada, Australia, Brazil, Argentina, Venezuela, Mexico, Germany, India, Pakistan, Nigeria, Tanzania and South Africa. More than half of the inhabited space of the world lives under a federal form of government of one sort or another (Merkl 1975, Rath 1984). Federalism was a key issue in the negotiations between the Christian Democrats and the Social Democrats on the formation of a coalition government in Germany (Williamson 2005). The contestation on the dimensions of federalism in the Iraqi constitution and the growing power of Russia over its regions have also attracted serious media commentary on issues of federalism and governance (Anon 2005, 2005a).

The pre-Second World War federations such as the federations of the USA, Canada, Australia and Switzerland seem to be cases of successful federations, though Canada has faced a crisis in the Quebec region (Leslie 1988, Birch 1989). The former Union of Socialist Republics (USSR), the former Yugoslavia, Pakistan, the former Czechoslovakia and Ethiopia are some well-known examples where some of the units of these failed federations became independent nation states (Leff 1999). India and Sri Lanka in Asia (Phandis 1989), Nigeria and Sudan in Africa, and Spain in Europe are some of the cases which have witnessed a high level of tension in their federal political arrangements (Birch 1989). Cases of both lessening regional inequality and accentuating regional inequality have acted as catalysts for regions to feel dissatisfied with federal arrangements (Wheare 1962, Williamson 1965, Holland 1976, Davey 1983). If regional inequalities are accompanied by the conflicts of ethnicity and nationalism, the relationship of a region to the federal centre becomes even more conflict-ridden (Blaut 1987, Johnston et al. 1988, Keating 1988, Pritam Singh 1990, Sinha 2005).¹

The most well-known cases of regional conflict with the federal centre are likely to be those where the region, because of its relative economic backwardness, feels dissatisfied with the prevailing structure of economic relations with the centre (Keating 1988, Birch 1989). North-eastern states (Assam, Nagaland and Mizoram) in India, the Kosovo region in the former Yugoslavia, Corsica in France, Sind in Pakistan and the Tamil region in Sri Lanka may be considered cases of this category (Blaut 1987, Keating 1988, Birch 1989, Phandis 1989, Rao and Singh 2005). The other, opposite, category of cases where a relatively developed region is in conflict with the centre may include the Basque region in Spain, Slovenia in former Yugoslavia, and the Baltic states (Lithuania, Estonia and Latvia) in the former USSR (Bookman 1991).

This study aims to capture the implications of Indian federal arrangements for Punjab’s development pattern. My main thesis is that in order to overcome national food deficiency, the centre has exploited Punjab’s agricultural resources to the detriment of Punjab’s own need for all-round and diversified development.

In the mid-1960s, a national crisis of food scarcity led the Indian planning authorities to incorporate Punjab into the Green Revolution strategy, a strategy initiated for the maximization of national food output. This contributed to agricultural prosperity in Punjab in the 1960s and early 1970s. However, to sustain economic development, Punjab needed to diversify its economy by developing its industrial sector. Like all developing economies in their earlier stage of transition to industrialization, Punjab needed public sector investment for its industrialization. This crucial public sector investment was denied to Punjab by India’s planning authorities for the sake of regional equalities and national integration. The diversification of Punjab’s economy was thwarted. This created the material conditions for conflict between the aspirations of regional Punjabi nationalism and the needs of Indian nationalism articulated by the centre. This conflict further damaged Punjab’s economic development.

Contextualizing Punjab

Punjab is one of the northern states of India. It is relatively small in terms of territory and population size but significant in terms of its economic, political and strategic importance in the Indian federation. The name Punjab derives from the Persian term panj-ab (five-waters), thus referring to a land of five rivers.² Punjab has a geographical unity distinct from neighbouring countries and the rest of India (Khushwant Singh 1999: 3). It was once dry desert land between the Khyber Pass and the Ganga basin, beyond the constricted passage between the Delhi Ridge and the Himalayan foothills. The rainfall from the south-west monsoon, which blows up the Ganges Valley from the Bay of Bengal, dies out as it reaches the Khyber. The semi-nomadic warriors inhabiting this dry Punjab, the entry-point to the wealth of India, contested this region with invaders from the north west. While attempting to control this region and block the external threat from the Khyber, the British developed an irrigation system based on the five rivers. Thus Punjab was transformed into an agricultural land of canal colonies in the nineteenth century, giving it a distinctive economic identity. Additionally, with the development of the Sikh religion, founded by Guru Nanak in the fifteenth century, Punjab came to be substantially occupied by a group with a distinctive religion, ethnicity and territorial identity.

The present Punjab acquired its distinct geographical and political identity as a Punjabi-speaking state in 1966. The focus of our study is on the period from 1966 to 1991, though the pre-1966 period is also taken into account to provide the historical context. I have also attempted to draw out the significance of the pre-1991 policy of economic development guided by central planning for the post-1991 period, when the Indian central government initiated a new policy regime of liberalization and structural adjustment in conformity with the World Bank and IMF perspective.

The planning policy regime operates within the framework of the Indian federal structure. The Indian constitution specifies the division of economic and political powers between the centre and the states. This study is, therefore, an exploration of the development experience of the state of Punjab as a part of the Indian federal state’s experience of planned economic development.

Planning was viewed by the Indian federal state as a key political as well as economic tool with which to weld India into a strong unified nation. ‘Jawaharlal Nehru [the first prime minister of independent India] thought of development planning as the new, strong and positive bond that would hold the country together’ (Paranjape 1970: 34). The project of nation-making in India therefore included a process of framing the constitutional divisions of power between the centre and the states, setting up a planned development strategy, and then actually implementing constitutional provisions and the planning strategy.

Between 1966 and 1991 Punjab attracted the attention of academic scholars and policy planners predominantly for two reasons. In the 1960s and 1970s the success of the Green Revolution strategy in increasing food output was the most prominent issue concerning Punjab, while in the 1980s it was the rise of militant confrontation between the Punjabi/Sikh nationalists and the Indian federal state that attracted global attention.

Both the Green Revolution and Sikh militancy raised questions about the economic and political placing of Punjab in the federal structure of India’s economic and political governance. The Green Revolution seemed to be a story of successful development, while the rise of Sikh militancy indicated some fault lines in the Indian state’s federal political management.

Punjab: rich but not developed

Punjab between 1966 and 1991 seemed to present a mixed picture. By one criterion (per capita income), it was in the category of richer states in India.³ By this criterion, Punjab may be more appropriately placed along with the second category of cases of regional conflict discussed earlier. However, judging by another criterion (degree of industrialization), Punjab appears in the category of less developed states in India. On the basis of the level of industrial production (aggregate net income generated in registered factory production, 1984–85), Punjab ranked 13th among the 25 Indian states and the Union territories (Govt of Punjab 1989: 370). In terms of per capita net income generated in the registered factory production sector, Punjab ranked 12th.⁴ Based on the share of the secondary sector in state domestic product, Punjab had the lowest position among the 17 major states in India in 1990–91 (Bhattacharya and Sakthivel 2004). Agriculture, therefore, is the main contributor to Punjab’s relatively higher per capita income level. Agriculture, as the mainstay of the economy, may be viewed as a sign of a weak structure for economic development and it may be argued that it belongs to the first category of cases of regional conflict mentioned above.

Two different indicators (per capita aggregate income, share of the secondary sector in the state domestic product) for comparing levels of economic performance may give two different perspectives on the contribution of centre–state economic relations to Punjab’s economic development. One view, which may be described as the federal centre’s view or the Indian nationalist view, can be put as follows:⁵

The centre has pursued an agrarian policy in the constitutional framework of centre–state economic relations that has raised Punjab’s per capita income to one of the highest levels among the Indian states. The centre’s contribution has made Punjab the most developed agrarian region in the country. The classes/strata which have accumulated agrarian capital want the centre to pursue a similarly favourable industrial policy in order to help these strata to make transition to industrial capital. The centre cannot concede this demand because such an industrial policy will accentuate regional inequalities. The centre, in its role as nation-builder, has to follow a package of policies which lead to balanced regional development. The centre’s inability to concede Punjab’s demands has bred Punjab’s dissatisfaction with the federal arrangement and has given birth to demands for state autonomy or secession. Such an approach on the part of those demanding autonomy or secession, apart from not being in the national interest, is short-sighted from the viewpoint of Punjab’s interests also. Ultimately the federal centre’s policy of balanced regional development will lead to a higher level of national development as a whole and this will be conducive to Punjab’s development as well. Therefore, the existing pattern of centre–state economic relations is conducive, albeit in the long run, to Punjab’s further economic development.

The opposite view, which may be considered the Punjabi nationalist view, can be summed up as follows:⁶

Punjab, having been integrated into the federal centre’s goal of national development through the network of centre–state economic relations, was forced to concentrate on agricultural development and that also on mainly two crops (wheat and paddy). According to the index number of agricultural production in Punjab (base: triennium ending 1969–70 = 100), the weight of food grain crops was 61.19 and that of the wheat–rice combination alone was 40.77 in 1969–70 (Govt of Punjab 1989: 172–173). This food grain oriented (mainly two-crop) agrarian economy hinders the diversification of agricultural development. Punjab’s small-scale industrial structure does not have the potentiality of generating diversified and large-scale industrialization of the region. The federal centre, having contributed to Punjab’s agricultural development in a specific way, chooses to concentrate public sector investment (crucial to industrialization in a less industrialized economy) in other states with the objective of attaining balanced regional development. The centre, through control of the licensing system in the existing structure of centre–state economic relations, has refused to grant licenses in adequate number either to the Punjab government or to Punjabi industrialists to set up industrial units in the public and private sector, respectively. Severe constraints are imposed even on expanding existing productive capacity. The structure of centre–state economic relations has, therefore, become an institutional fetter on Punjab’s industrialization and further economic development. It is only through a fundamental restructuring of these economic relations and, failing that, through snapping ties with the federal centre that Punjab can move ahead on the path to autonomous, self-sustaining and internally articulated diversified agricultural and industrial development.

My study is situated in the context of these two competing contentions about the implications of centre–state economic relations for the Punjab economy.

The existing literature on centre–Punjab economic relations can be divided into two categories: journalistic and academic. The journalistic writings, some of which are of good quality, are either broad generalizations or on-the-spot quick impressions about some aspects of Punjab agriculture and industry.⁷ The academic writings, very few in number, are in the form of chapters in edited books or journal articles.⁸ So glaring is the absence of serious academic work on the subject that, so far, there is not even one book written on the subject.⁹

The forces and factors that determine the development of a state’s economy in a federal structure may be classified into two categories: external and internal. Among the external factors, one may include historical and existing relations with the world economy and the national economy. Within the national economy, one can include the federal government and the other states in the federation. Among the internal factors, one may include: the endowment of resources (natural and human); the pattern of income/asset distribution in the industrial, agricultural and tertiary sectors; the consumption, savings and investment patterns; employer–employee relations; and the political, social and cultural institutions. The development process, in the end, can be viewed as the resultant effect of the interaction between the external and internal factors. The process of interaction, in turn, influences the behaviour of external and internal factors.

Of all these external and internal factors, the scope of my work is limited to focusing on an examination of the influence of only one of the external factors on the Punjab economy—that is, the federal centre–Punjab economic relations. To examine the implications of centre–state economic relations in India for Punjab’s economy, I have focused on three aspects: state finances, agriculture and industry. To keep the present study within manageable limits, this study does not go into the implications of Punjab’s horizontal economic relations with other states for the Punjab economy.

In studies on centre–state relations in India, the overwhelming emphasis has been on centre–state financial relations. The study of centre–state relations in the fields of agriculture and industry has largely been neglected. The main reasons for this lopsided emphasis on financial relations can be identified as follows:

1. These relations ...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• List of tables
• Preface and acknowledgements
• Note on terminology
• List of abbreviations
• Map of Federal India
• 1 Introduction
• 2 The geography and the political economy of Punjab: an historical overview of Punjab–centre relations
• 3 Federalism, nationalism and India’s development strategy: an historical overview and analytical framework
• 4 Federal financial relations in India and their implications for centre–Punjab financial relations
• 5 Centre–state relations in agriculture and their implications for Punjab agriculture
• 6 Centre–state relations in industry and their implications for the pattern of industrial development in Punjab
• 7 Summary and conclusions
• Appendix
• Notes
• Bibliography