Asian Development Bank, policy conditionalities and the social democratic governance: Kerala Model under pressure?

ABSTRACT

This case study of the implications of the Asian Development Bank (ADB) loan on the Indian state of Kerala explores how neoliberal reforms have impacted on the state's much-acclaimed social model of development. Notwithstanding resistance, the state moves towards market-driven reforms wherein external funds are privileged over internal resources, the reasons for which are probed within the context of social structures of accumulation and emergent power relations. It is argued that with the diversion of resources towards debt servicing and compliance with policy conditionalities, the collaboration with the ADB is likely to undermine social democracy. What ensues is a double collapse: a collapse of the Kerala Model of social development and the demise of an iconized Left. This paper thus contributes, first, to the growing literature on the political-economic repercussions of Structural Adjustment Programs in developing regions and second, to the limited scholarship on the adoption of right-wing neoliberal policies by social democratic governments.

KEYWORDS:

• Asian Development Bank
• conditionalities
• democracy
• Kerala
• India

ACKNOWLEDGMENTS

An earlier version of this paper was presented at the Department of International Studies, Queen Elizabeth House, University of Oxford (2007) and also at the Poverty and Capital Seminar and the Annual Workshop of the International Political Economy Group, both at the University of Manchester (2007). I am grateful to Barbara Harriss-White, Nandini Gooptu, Paul Cammack, Ben Fine, John Gledhill, Paul Langley and Andreas Antoniades for their comments on varying occasions. I am also grateful to David Hulme and K.P. Kannan who have made extensive comments on an earlier draft. I have also benefited from discussions with K.K. Subramanian, M.A. Oommen, K.T. Rajagopalan, P.B. Rakhe, Ajit Dayanandan, T.G. Arun, R. Mohan and Pinaki Chakraborty. The detailed comments made by the anonymous reviewers have proved invaluable in shaping the paper into its final form.

Notes

1 The Human Development Index is a composite index derived from per capita consumption expenditure, incidence of poverty, access to safe drinking water, proportion of pucca houses, literacy rate, intensity of formal education, life expectancy and infant mortality rate, see Human Development Report (2005).

2 This does not mean that the Kerala Model is without its own drawbacks, particularly from the perspective of its outliers whose poverty and marginality have been further accentuated in the neoliberal phase, see Kurien (2000); also see Rammohan (1991), Omvedt (1998), Bijoy and Raman (2003), Raman (2004a).

3 For details, see Aspects of India's Economy (2004).

4 For a brief survey of debt overhang in developing countries, see Sachs (1989: 80–102).

5 For details, see, Government of Kerala (2002a). ADB documents, 1–8, MGP: A Strategy Document, General Administration (Modernising Government Programme) Department, Government of Kerala, Secretariat, Thiruvananthapuram; ADB: Validation Report, Number: PCV: IND, 2007–27, Project Number 31328, India: Modernising Government and Fiscal Reform in Kerala Program; ADB (2000); Loan 2226-INDIA: Kerala Sustainable Urban Development Project, Local Self Government (Urban) Department, Government of Kerala, Secretariat, Thiruvananthapuram. All the documents are available at <http://www.keralamgp.org >; <http://adb.org/projects/project.asp?id=31328 >.

6 For the impact of the Indo–Sri Lankan trade agreement on the Indian economy, see Harilal and Joseph (1999: 750–53); the question of surplus drain from Kerala was dealt in Rammohan and Raman (1990).

7 Decentralization through local-self government institutions implies the devolution of powers to lower levels of governance such that elected bodies may function independently in terms of the use of authority and resources which was made effective by the seventy-third and seventy-fourth amendment acts of the Indian Constitution. While it is argued that fiscal centralization is better suited to provide macrostablization (see Garrett and Rodden, 2003 and Sambanis, 2006), decentralization may equally assist the penetration of global finance to the lower structures of governance.

8 Women's self-help programs such as micro-enterprises supported by the state.

9 GoK, Approach Paper for State Level Public Enterprise Reforms in Kerala, Enterprise Reforms Committee (2002), Thiruvananthapuram.

10 Various aspects of commodity taxation in Kerala have been explored by Jose (2000).

11 For a theoretical understanding of the ‘social structures of accumulation’, see Gordon et al. (1982) and Kotz et al. (1994); also see Harriss-White (2003).

12 Of late, political discourse in the state which even had to pass the Goonda Act 2005, has centered around the rampant corruption, high crime rate and a general erosion of values which pose a challenge to the political governance in the state.

13 For an early study exploring such state patronage with respect to Bangladesh, see Sobhan (1982).

14 Various estimates of foreign remittances have been made; for an early estimate, see Zachariah et al. (2002).

15 For the argument that Kerala in no way suffers from a lack of capital but is the victim of surplus drain through various routes, see Rammohan and Raman (1990: 17–19).

16 Alternatives to the existing pattern of development are often articulated through social movements, and it is particularly true with respect to Kerala, see Raman (2007a, 2007b); for state-led developmental possibilities, see Evans et al. (1985) and Escobar (1995).

17 For an early usage of the term, situating the World Bank, see Weissman Stephen (1974); also see Salil, C. S. and Raman, K. R. (2006) ‘ADB: Who Will Shackle the Trojan Horse?’, report in Samakalika Malayalam [Contemporary Malayalam], weekly in Malayalam, the regional language, 24 February: 8–17.

18 See Financial Express, <http://www.financialexpress.com/news/adb-no-to-change-in-kerala-loan-agreement>.