Economic Practices in Indian Paradigm

The discourse on economics, like the other fields of social sciences, has long been defined and presented through the western paradigms in our country. Even after independence no course correction was possible due to the domination of the Western ideologies on the Indian economists. As a result, we see university text books explaining even today that there are only two economic models namely, capitalism and communism, that are universal and hence applicable to all the countries in the world.  

By now we all know that both the above approaches, that were born in the West during the eighteenth and nineteenth centuries, have failed miserably in their own karma bhoomis (major countries such as USSR and US) during the last three decades. Besides, the multilateral bodies such as the World Bank and almost all the economists accept that there could be  different models for different countries. Moreover, they have also begun to recognize that there could be factors such as culture that could also play a pivotal role in economic activities.

But our educational institutions and much of our elite are so used to depending on others, particularly the West, that we refuse to look at India from our own perspectives. The emergence of India at the global level, even when the West is falling, could not make them look and realise the realities.

Our field studies conducted in different parts of the country during the past twenty five years reveal a clear picture. First of all, we have to remember that India is not just another country. It is an ancient civilization with a very long history and unique characteristics. We cannot understand India through popular text books written during the past few decades. We have to reach out to the ground reality with an objective mind to “learn” and understand.

Our studies reveal that the economic practices in India are unique. They do not fit into the popular western paradigms; rather they are vastly   different. They are rooted in the dust and soil of our nation. The culture and traditions of our land have dominant influence over them. They   defy the state policies, when they are unsuitable, and find their way to success.

India was a poor, under developed and less literate nation during Independence. About 45 per cent of the population was living below poverty line. The literacy rate was around 18 per cent and the average age of life was just above 32 years.  But now after just seven decades, we are the fastest growing economy in the world. All predictions unanimously point out that India is the most potential economy for the future. Earlier London Business School had estimated that we have around 85 million entrepreneurs, perhaps the highest in the world.

How was it possible? We know that for more than three decades since the 1950s, the ruling establishments followed the socialistic approach for   policy making.  As a result, we had to face great difficulties and at one point of time we did not even have the funds to pay for our imports.  Then beginning from the 1990s, the policy makers opted for the market approach with globalization as the core. Again we had to face serious difficulties, especially in the critical sectors such as agriculture and MSMEs.

But in spite of the policy makers adopting the unsuitable western approaches successively over the years, India has progressed. Studies show India has been moving forward continuously over the decades, silently but steadily, following native practices. The contemporary economic history of the world shows us that there is no other country in the world that has made such a U turn in a period of just seven decades - from being the poorest to the fastest growing and the most potential nation in the world.

Studies reveal that Indians, by nature, possess a high economic sense. Hence their regular economic practices are patterned on their original understanding. Let us take for example, savings. Saving is part of life in India. People save, even without realizing that they are saving. Spending more than what is necessary is considered a sin even today in most places and saving takes place at different levels and among different sections.

There was a study among the lady flower vendors in the Coimbatore main flower market, conducted fifteen years back. They did not even have the funds to buy flowers for their business; so they borrowed them from the local financiers and repaid them with high interest by the afternoon. Their daily earnings were in the range of Rs. 250-300. But each of them was saving Rs. 100 or even more. The annual saving of those women came to around Rs. 1,73,000. We generally consider them as very ordinary uneducated women. But their sense of saving is very high.

Savings happen at different levels. In MSME centres one could notice entrepreneurs saving as high as 90 per cent and even more of their earnings. Even at the corporate level, the reserves as a percent of share capital in the Indian companies are more than the corporates of the Western countries.

Entrepreneurship is another major economic practice that has special Indian characteristics. Indians have very high entrepreneurial abilities. Global Entrepreneurship Monitor (GEM) Report 2002 noted that India has the second most entrepreneurially active population in the World, with about 19 per cent of the population engaged in entrepreneurship. In fact, this score was the highest among all the big countries, including   that of China and the US.

The story of entrepreneurship in post-independent India would be revealing. The seeds of many of the bigger industrial and business clusters in our country were sown during the 1950s and the 60s, when Nehru was implementing policies for a “socialistic pattern of society.” Over the years they have become prominent clusters, contributing higher shares to the national economy in their fields of activities. Beginning from the 1950s and even earlier during the colonial periods, our entrepreneurs have started working on their own without waiting for the state to make policies. 

The history of each industrial and business cluster would be interesting with Indian orientation. Local factors and relationships play an important role in all these. The community called Nadars, who are dominant in Southern Tamil Nadu, are a toddy-tapping community by profession since early days. They were from very ordinary backgrounds, with little access to funds. When they wanted to enter into business, they created a native community financial system, called Mahamai, through which each one in the locality contributed a minimum to a common pool. The funds so mobilized would be given to the members for their business activities. 

Now they are the largest business community in south Tamil Nadu. Sivakasi contributes around three fourth of the cracker manufacturing in the country and make more than half of the match boxes. Besides they have one of the best off-set printing centres in India, printing high security items such as cheque books and flight tickets for international customers. Virudhunagar is the major trading centre in the state. Besides, the community has the major share of grocery shops across the state and many such shops in other major cities of our country.  Moreover, the Tamil Nadu Mercantile Bank, which is one of the most successful banks, was promoted by the community decades back.

Community networks and relationships result in higher social capital. Social capital helps in economic and business activities. World Development Report 2001 published by the World Bank notes that the emergence of Tirupur as the top knitwear export centre in the country is due to social capital, through close-knit relationships. It says that the entrepreneurs are able to successfully compete in the international markets through cheaper prices, as their cost of capital is low due to cheap borrowings through community networks.

Community networks make Indian businesses successful at the global level also. The international diamond market in Belgium is dominated by Indians, with Patels and Jains playing a major role through relationships. We all know that Patels dominate the motel industry completely in the US.

The native practices make regions prosperous and vibrant, contributing larger shares to the economy of the state and the country. The western part of Tamil Nadu, known as the Kongu region, is estimated to contribute about 45 per cent to the economy of the state. The dominant community of the region called Gounders from agricultural backgrounds are now into different industrial and business activities such as textiles, transport, engineering and exports. There are many major centres in the region such as Tirupur, Karur, Namakkal, Sangakiri, Thiruchengode and Coimbatore with each of them occupying an important place at the national and international levels.

Families remain the base for economic practices, with family values dominating the economic and business decisions. Women, as mothers, wives, sisters and even grand mothers play a critical role silently. A study conducted among the largest hotel owners in Tamil Nadu showed  that in about 20 per cent of the cases, married sisters helped their brothers in raising initial capital for their ventures.

Faith and trust among entrepreneurs is an important factor that helps them in smooth business activities. A study among the Karur non-corporate finance entities showed that in most of the cases, the financers do not demand documents when they lend funds to the local businessmen.  Unwritten norms and basic values systems govern the business activities to a large extent, especially in the non-corporate centres, making transactions easy.

An important aspect of the Indian paradigm is that people prefer to be self-dependent and do not want to depend on the state. As such they continue with the activities on their own without expecting much.  Studies reveal that most of the development in different economic centres have taken place  without much help from the state. In fact, most of the educational institutions across the country have been promoted by the local societies. Besides, they construct and manage their temples and develop common facilities for themselves.  The responsibility of the state is reduced due to the self-dependent nature  of our societies.

Hence the economic practices in Indian paradigm vary from that of the other countries, especially that of the West. Individualism, consumerism, contract-based relationships and state dependence are the major features of the Western paradigm.

The study of global economic history during the last two thousand years by Angus Maddison shows that the share of India in the global GDP was 32.9 per cent during 0 CE, the highest in the world. India remained the most prosperous country for most of the time during the last two millennia, till the eighteenth century. It only indicates that India must have had her own unique economic systems since the ancient periods. India had to lose  her supremacy and status only due to the large scale interference and destruction of the native systems by the Europeans.   

It is due to the strong foundations and native practices that India is once again emerging as a powerful nation. Studies show that our society has enormous capacity to move forward even through very difficult times, besides ‘Indianising’ outside systems wherever necessary.

(Manthan – Journal of Social and Academic Activism, Year-39, Issue-4, Oct-Dec. 2018,  New Delhi )