A volte-face – Neoliberals and the Crisis

Recently, Finance Minister P Chidambaram boasted about the strength of India’s banking system and its “negligible exposure” to speculative practices like sub-prime lending. He proclaimed the banking system in the country to be “well regulated” and thus a protection against the full-fledged effect of the global financial crisis.

Again, his junior minister Pawan Kumar Bansal dubbed “any anxiety or uncertainty in India” to be misplaced. Why? Because “only a very small portion of our total population, less than two per cent, has any sort of exposure to the stock market”.

Ironically, till recently all these, which are being measured as India’s strength today, were considered to be the basic obstacles in India’s economic growth. Those who criticised financial liberalisation were dubbed conservatives, who did not like India’s new global image.

Though it is still very early to assess the ultimate impact of the crisis on India’s economy, or to proclaim an end to neoliberalism but the crisis has significantly shaken the self-confidence of the neoliberals in the country. The events have not been very kind to them from the very beginning. Amiya Kumar Bagchi rightly notes:

“Fortunately, despite all the attempts of successive governments at the Centre since 1991 to force the pace of ‘economic reforms’, the worst of their designs could not be carried through. These include full capital account convertibility, complete privatisation of the banking and insurance sectors, and total abolition of the distinction between banks and non-banking finance companies. Every time either major international crises or electoral compulsions have stayed their hand. In 1997 and this time around, financial crisis in Asia and the global financial crisis have prevented the enforcement of capital account convertibility”.


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