Wildcat 83, Spring 2009 [w83_india_en.htm]
India is the sub-continental test case for global capitalism, the country underwent all its development models: colonial rule followed by democratic catch-up nationalism and mixed socialist/market planning economy, which was able to transform into a centralised draconic state of emergency and to become a neo-liberal regime subsequent to a severe crisis in 1991. Each phase was a test case in the sense that 'development' had to secure both the reproduction of the class relations; and a promise for the masses of the impoverished rural population and the growing urban proletariat, a way out for the India of malnourished peasants and labouring children of the city slums.
Global Crisis in India
During the last years of the boom the dependency on massive capital inflow and on software-related exports led to an over-valuation of the Indian Rupee, to rising inflation and a constant increase of prime interest rates. Under the burden of the unfavourable exchange rate and the high interest rates the traditional and labour intensive export sectors, e.g. textiles, tea or other agricultural products, got stifled. The onset of the global crisis in autumn 2008 showed that it was not a mere stock-market, currency or real estate bubble, but with the trickling down of the credit crunch it became clear that each sector of Indian economy was affected.
The main stock-market index (Sensex) has fallen by more than 50 percent during the year 2008, from 20,800 in January 2008 to under 10,000 in mid-October. The first companies who had to digest major losses were exactly those companies who were presented as the shining symbols of the 1990s boom, for example the real estate giant DLF, the multi-sector group Reliance or bio-tech firms like Ranbaxy. In October 2008 the stock-market lost one trillion US Dollars, which is about the GDP of the year 2007/08. One of the reasons for the massive losses was the sale spree of Foreign Institutional Investors (FIIs), who basically invest short-term. FIIs held about a quarter of the floating stock of the Indian stock market.
The sales of the FII shares and the subsequent massive US Dollars outflow resulted in the largest fall of the foreign exchange reserves in eight years. While in July 2008 the reserves stood still at 300 billion US Dollars, by November 2008 they had plunged down to 258 billion, showing that a big portion of the reserves do not stem from export gains, but are only stored as a result of the stock-market speculation. After a panic reaction of Indian companies to borrow from banks in order to convert into Dollar funds the market experienced a massive credit squeeze. In an economy like India this credit squeeze translated immediately down to the various micro-credit systems of the rural sector.
The withdrawal of capital from the Rupee caused a massive devaluation of the currency. Early 2008 the Rupee stood at 39.25 US Dollars, by end of November 2008 it had depreciated to 50.5 US Dollars. As we can see below this devaluation was accompanied by massive cancellation of orders from the US and therefore did not alleviated the problems for sectors such as textile export, but rather aggravated the situation for the main import product of the Indian economy: oil and related products like fertilizers. In the period April to July 2008 India imported fertilizer worth 4.1 billion US Dollars from the international market, in contrast to the total export of agricultural products from India at 7.3 billion US Dollars.
Mainly due to the increase in value of oil imports the Indian trade deficit stood at 14 billion US Dollars in August 2008 alone, compared to 7 billion US Dollars in August 2007. If we bear in mind that the major crash of 1991 manifested itself as a payment crisis of external debts and of depleted foreign currency reserves, this trend of increasing trade deficit in addition to the FII capital outflow the foreign currency reserves mentioned above no longer seem so 'bullish'. The trade deficit will not easily be re-balanced by the current drop of global oil prices given the significant drop in exports since the second half of 2008. If petroleum is excluded from the bill, the merchandise exports dipped by 20 percent during October 2008, shipping rates for bulk cargo dropped by nearly 50 percent in August 2008, tonnes of iron ore for the Chinese market are reported to be stuck in Indian ports. The bitter irony of the crisis of the Indian export regime: while there was much blood shed over the opening of Special Export Zones all over the country, including the several protesting peasants who got shot dead in NOIDA in August 2008, many of these SEZ are now up for sale. As we can see in the next part, the trade war with China has intensified since October 2008, closing further margins.
The State's Reaction
We can summarise the first reaction of the Indian state in few words: unlike in the US or Europe there hasn't been a major bail-out package and unlike in China the Indian state did not mobilise or promise a major financial package to boost the economy. The financial clout of the indian state is limited. State (external) debts and deficits did not increase much in recent years, but they remained significant if we see that out of the total expenditure of 174 billion US Dollars, about 45 billion is spent on interests and loans.
In December 2008 the state announced that it will spend 8.5 billion US Dollars (42,480 crore Rs) as an extra stimulus package in 2009. In the media this 8.5 billion was compared to the 580 billion US Dollars extra spending plan of the Chinese state. There has been criticism of such large chunks of the state's deficit spending going not into investment, but actually being used in a 'populist' way to finance loan waivers for farmers or in order to guarantee prices of agricultural products like cotton. The last decade of neo-liberal policies have resulted in major cuts in tax and customs income, a disguised credit and deficit spending policy. Now the state faces a liquidity problem.
Another main variable in the Indian crisis regime is the dependency on energy imports. Around 70 percent of oil used in India is imported; oil and lubricants accounting for 40 percent of the total imports in the first half of 2008. In April - July 2008 India imported oil worth 40 billion US Dollars, compared to India's total exports in the whole year 2007/08 of 72 billion US Dollars. In most industrial areas oil-fuelled energy-generators have to back-up the public grid. The Indian state sets the national fuel price. The government's price dictation - basically a state subsidy - to the three major distributors resulted in an estimate loss of 106,000 crore RS, around 21 billion US Dollars. After the general fall of global oil prices in the second half of 2008 the state did not pass on the lower prices immediately, which immediately led to protests of the opposition parties and shortly after to a mass general strike of the truckers association for lower prices and oil company employees for higher wages. The attempt to exploit oil fields in Assam - where a fifth of Indian's total oil production takes place - are frequently endangered by separatism and local low intensity warfare; the gas supply from Burma by the demise of the dictatorship. The turn to other sources of energy seem similarly political precarious, e.g. the 7.6 billion US Dollar pipeline project which is supposed to supply India with gas from Iran via Pakistan or the nuclear deal with the US, which lead to the split up of the Indian central government in 2008.
The Rural Social Crisis
The massive spending for the agricultural sector is neither populist nor an economically promising investment, but a desperate attempt to curb an explosion of proletarianisation, in turn preventing huge future welfare spending, mass starvation and/or social unrest encompassing around 800 million people on the Indian countryside. Here the state has to constantly juggle with the economic costs and political dimension of agricultural prices, being both guaranteed income for millions of small farmers and reproduction limit of the growing proletarian masses. While small farmers tend to individualise and localise their misery, the rural landless proletariat tends to move and behave less predictably.
At the end of July 2008 we saw a symbolic confirmation of the enormous social pressure emanating from the rural south acted out on the political stage of institutionalised globalisation: the WTO talks in Geneva failed because China and India kept up the tariff barriers and thereby did not allow the over-production of agricultural products of the global north to shake up the precarious balance of agriculture product and food prices in their respective countries. The fact that the global food riots some months previous didn't find much echo in India had confirmed the protectionist attitude, including enforcing a export ban on rice and by hiking the internal minimum support price by 20 percent. But protectionism is not declared or legally enacted; it needs a material and financial buffer. In order to protect local farmers against the much higher productivity of the global north, while at the same time the sector depends on enormous fertilizer import and is meant to secure low prices for the local proletarian masses, the state has to pay heavily to keep the balance. The onset of global recession shakes up this balance.
In 2008 the bill for fertilizer state subsidies exploded to around 24 billion US Dollars. To this we can add around 17 billion US Dollars for farm loan waivers in 2008/09. The debt waivers have been topped-up after the onset of the credit crunch in October 2008, which left a lot of (micro-credit) banks dry. And we can add 10 billion US Dollars for the National Rural Employment Guarantee Scheme NREGS if we assume that it was actually implemented in all Indian districts in summer 2008. Just for these three schemes alone the state would have to pay around 48 billion US Dollars in 2008/09. This is compared to 158 billion US Dollars total state receipts in 2007/08! To this bill we would have to add the costs of the state's minimum price policies for farmers.
In October 2008 traders expected the global cotton price to fall by 40 percent over the period of the year 2008. Indian cotton traders complained about cancelled orders and assume that export numbers will halve in 2008/09, due to both China and India expecting an over-production of a fifth of the current harvest. In September 2008 the central state hiked the minimum support price (MSP) for cotton by about 40 percent, paying tribute to about 10 million cotton farmers. The representatives of the Indian textile industry in turn announced they would import cheaper cotton from Pakistan. In Punjab the state agency Cotton Cooperation of India (CCI) was said to be the only buyer on the cotton market after commercial traders refused to pay the minimum support price. A similar picture can be drawn from the sugar cane and rice production. After the crash of 1991 the Indian state and the IMF used the economic emergency to restructure the agricultural price system. Today the general price pressure, the decline of internal and global demand and dwindling financial clout of the state to mediate prices might result in downward spiral. The food riots in April 2008 spared India, mainly due to the export ban on various food grains. In future it will become more difficlut to maintain this kind of protectionism.
The Industrial Impass
The most profitable manufacturing sectors are directly or indirectly (e.g. via middle-class consumption) linked to the export and outsourcing market or, like real estate and construction, to the massive capital inflow. In the last decade the global relocation of the textile industry and call centre services from North to South has been completed. The labour-intensive manufacturing sectors, ranging from the metal industry, to textile production and construction, have squeezed the wage costs to a minimum and pushed working times to the maximum - thanks to the enormous pressure of rural misery. Now - having fed off the casualisation of workforce, the tax and customs reductions of the neo-liberal regime and eased commercial global borrowing - they are starved of capital liquidity for a technological jump. The second half of 2008 witnessed a heat-up in the trade war with China and other Asian national economies, trying to compensate for the slump in internal demand by further cutting prices for manufactured goods. Following some examples of industrial downturn in various sectors.
With the IT and call centre industry depending on US companies for 70 percent of its business, particularly of the financial sector, the impact of the crisis will be severe. There are various reports of wage and job cuts affecting call centres or office workers of outsourced American banks or software companies in India. The Union of Information Technology Enabled Services (UNITES) estimates in January 2009 that between September and December 2008 10,000 jobs were lost in the IT industry and anticipates a further 50,000 cuts in the first half of 2009. As if to mimic the US Enron scandal that buried the new-economy bubble in the US, the Satyam scandal came at the right time to finish off the last doubts about the state of the sector in India.
The Indian textile industry was able to compensate for the stagnating internal demand and dropping profits by higher export outputs - benefiting from the higher production costs in countries like Greece, Spain, Egypt and Dominican Republic (and therefore the severe effect the end of the quota system had on those countries). In competition with other major Asian producers the industry in India is squeezed between the much higher degrees of mechanisation (e.g. in China) and lower wages (e.g. in Bangladesh). In autumn 2007 the industry was hit by the Dutch Disease; meaning that the over-valuation of the Rupee stifled exports and dried up credit sources. Only a year later, despite the slump of the Rupee, a massive slump in orders led to the next wave of lay-offs. The competition with other national economies will increase, not only on the global market, but also within India itself. For example at the end of December reports about the major influx of embroidery machinery, silk and artificial silk products from China warned of the severe impact on local employment. In towns like Varanasi, where around 700,000 people depend on the weaving industry, incomes are dwindling. A closer look at the CAD embroidery machinery in the bigger Indian (export) factories would be sufficient to grasp that the main threat to the remaining artisan labour is not as far away as Shenzhen. In October and November 2008 news from Bangalore said that only three quarters of the total workforce - around 600,000 workers - are currently »utilised«. Workers report wage cuts, unpaid enforced holidays or delayed wages. In the knitting hub of Tirupur (Tamil Nadu) reports say that orders dropped by 30 percent and that 20,000 workers are at risk of losing employment; most of them now work only five instead of six or seven days per week. In Gurgaon bigger exporters like Modelama sacked hundreds of workers in October. The Confederation of Indian Textile Industry warns in November 2008 that 700,000 jobs could be lost Indian-wide within the next months. In January 2009 the Apparel Export Promotion Council (AEPC) estimates that around 500,000 jobs have been lost in the last six months of 2008.
The Indian steel industry still mainly produces for the internal market; with exceptions such as iron ore export through steel internationals like Posco or the merger of Arcelor and Mittal. Indian is the fifth biggest steel manufacturer in the world, but its output is only about a tenth of the Chinese one. The massive slump in global steel prices of about 40 to 50 percent, the decreasing demand from the local manufacturing industries and the announcement that China plans on lifting its export tax on steel created an enormous pressure on the industry. In November 2008 JSW Steel, India's third biggest steel manufacturer, announced a 20 percent cut in production. ArcelorMittal said it would delay the two major green-field projects in Orissa and Jharkhand worth 20 billion US Dollars and shut down production in its European plants. Other steel manufacturers followed, for example Welspun in Gujarat. By the end of November 2008 iron ore mining companies in Orissa, Jharkhand and Karnataka closed down 20 mines and down-scaled production in 50 others, leaving thousands of temp workers unemployed. The mines are hit by the current fall in demand for iron ore in China and falling prices, e.g. the price for a tonne in 2007 was around 120 US Dollars, now it came down to 45 US Dollars. Other newspaper articles report about 5,000 unemployed truck drivers and cleaners in the Chitradurga district (Karnataka), who used to work for the mines.
After liberalisation in 1991 nearly all major global automobile manufacturer opened plants in India during the 1990s and early 2000s, attracted by the promising growth rate. By 2007 the official direct and indirect employment in the Indian automobile industry stood at 13.1 million employees manufacturing around 8 million two-wheelers, 2 million cars, 300,000 tractors and 480,000 commercial vehicles and trucks. Attached to the dozen new passenger car assembly plants - employing between 4,000 to 5,000 workers - most global car part manufacturers opened factories. The ratio between output and workforce in the main assembly plants doesn't vary much from the plants in the global North, indicating a similar degree of mechanisation, e.g. in the body-works, welding departments or paint-shops. This also means that most plants will run profitably only under full utilization of around 300,000 passenger cars per year. Consequently passenger car sales in India would have to go up to at least 3.5 million. Less than ten percent of the total production is for export. This means that most of the output depends on industrial investment in India (tractors, trucks) or increasing middle-class income, given that the gap between workers' monthly wage - around 5,000 to 10,000 Rs for a temp worker in the assembly plant - and product price - around 400,000 to 600,000 Rs for a passenger car - remain considerable.
With the onset of the crisis the car sales fell drastically. Basically all automobile manufacturers reported a 20 percent sales decline (passenger cars) in the last quarter of 2008, the biggest decline for eight years, and subsequent production cuts, dismissals of hundreds of temp workers - 2,000 at Hyundai alone and cancellation of investment plans. The production of trucks saw an even steeper slump of 25 - 40 percent indicating the worsening wider investment climate. The supplying industry followed; all major tyre manufacturers scaled down production. There has been a first surge of lock-outs, for example at Dunlop and Bosch. Here, as well, the industry starts to suffer from Chinese cheap car parts and tyres start flooding the Indian market.
New Divisions or Re-composition of the Working Class?
On this background of a likely recession in agriculture and industry resulting in a tighter state budget we can make some broad assumptions about the consequences for the crisis regime in India. In this sense the crisis will deepen certain tendencies of segregation and division. The state will have fewer resources to appease various conflicting interests. One recent example is the attempt of the state to secure the collaboration of the rural elite after the cotton minimum price hike, by using the falling oil prices to regain some income through not adjusting prices immediately. This resulted in the day long Indian-wide strike of the All India Motor Transport Congress (AIMTC) demanding lower fuel prices and fees, allegedly stopping 600,000 trucks.
The question of distribution of state money and jobs will also strain the relation between central governments and states. Shortly after the major slump in October 2008 we saw Maharashtra Navnirman Sena (MNS) nationalist activists attacking Bihari job seekers who applied for national railway jobs in Mumbai. The attacks triggered further riots and inter-state tensions and finally a Supreme Court notice issued to Maharashtra government. In November 2008 the governments of West Bengal and Kerala complained about the crisis effect on the relation between central government and the states, demanding higher shares of central tax for the states and debt relief. Finally the rekindled threat of a Pakistan-Indian war after the Mumbai terror displayed the various separatist or nationalist channels which the ruling class might drag the proletariat into.
The main enemy to confront will be the working class itself. We can also see that both state and companies are trying to reassure a certain section of the working class - the small backbone of the existing regime - that they won't face the full brunt of future restructuring. To this section of the working class belong the middle-management of state administration who benefit from the recommendation of the Sixth Pay Commission which was brought into effect in various states in November 2008. Another significant group are the permanent workers with mainly supervisory tasks: Tata Steel and Tata Workers Union announced a wage deal for the permanent staff in Jamshedpur in October 2008 while at the same time Tata sacked hundreds of temps in its car plants. The official established unions and employers also start to form 'interest alliances' for certain industries, asking the state for debt relief, for example in the textile or diamond industry. The main unions want to demonstrate their ability for more responsible co-management, which will inevitably involve meeting the employers' demand for further casualisation of the workforce. The first public announcements of crisis related lay-offs were immediately converted into play-fights on the political stage, for example the case of the dismissals at Jet Airlines in October 2008.
The impact of the crisis hits hard on a generation of workers who regained their confidence in various struggles over the last few years, particularly those in the booming industries and new industrial clusters. In October 2008 casual workers at Hero Honda went on wildcat strike for better conditions and pay; only a few days later all major two-wheeler manufacturers announced that sales will probably drop by 10 percent in 2009. We find a similar situation in a very different sector, the diamond industry in Surat and Saurashtra regions in Gujarat, where the industry depends on the work of roughly 700,000 workers and their families. The region witnessed a major strike wave in July 2008 with workers demanding a 20 percent wage increase. Diamond factories were pelted with street stones; security guards shot at protesting workers. This movement was then hit by the crisis. Undertaken after the onset of the recession in November 2008 a study comprising 1,000 diamond units in Surat revealed that over 600 have been shut down. In Amreli 60 percent of the total 1,500 units were said to be closed. On 20th of December workers gave an ultimatum of 10 days to the government to support laid off workers and their families and give a 20 percent electricity subsidy to the crisis stricken units - otherwise they would resort to strike action. The actions of diamond workers continued despite the looming threat of work-time or even job cuts.
The tragic element of this crisis is that it has enforced in some parts what the workers' struggles haven't been able to - but on terms of capital: in the textile industries in Bangalore or the diamond polishing factories in Surat the working-week was reduced to five days and many units operate on eight-hours shifts. But this will be only a temporary situation before actual further job cuts take place. Currently workers' wages are being cut and they are forced to sign that they will make up for the lost working-time in the future. In that sense two major questions arise: what happens to the sacked migrant workers, i.e. will they be able to stay in the industrial areas, will they have to go back to their respective villages and how will this affect the economically drained rural areas, of Orissa, UP, Bihar etc.? And will the crisis wash away the little gains of the boom - in terms of minor wage increases, but more importantly, in collective experience of struggle?
In the following we want to dare an optimistic outlook on the possibly unifying or at least reshaping impact of the crisis. We will focus on three terrains of the proletarian unrest which have been politically decisive over the past few years: the new industrial and urban clusters, the movements against destructive industrial projects and the battlefields of the rural proletariat.
The new urban and industrial clusters
During the 1990s various new industrial clusters developed - or older industrial areas were restructured by FDI inflow and new industries such as call centres. The industrial belt around Delhi (NOIDA, Faridabad, Gurgaon), Bangalore, Chennai, Pune became mass concentrations of a very mixed new generation of industrial workers in the wider sense. They became a magnet for a migrant workforce; they became signs of future promises. In the industrial areas of Gurgaon textile export factories run next to car suppliers, next to mass call centres and IT office blocks, surrounded by slum settlements, serviced by masses of drivers, security guards, rickshaw wallahs. The crisis hits all these sectors more or less at the same time; closures of call centres become more frequent, cutting of wages and certain services are common now. If under the impact of the crisis the betrayed hopes of a lost academic call centre generation, the productive mass experience of temp workers, and the vast informal networks of the service proletariat find points of fusion or repercussion the possible might become real.
The movements against destructive capitalist development
In recent years there have been various local rural movements against industrial or infrastructure projects including those against: the Narmada dam; the Posco steel plant and mining in Sundergarh district in Orissa; aluminium processing plants in Kashipur; a chemical industrial complex in Nandigram; the Tata car plant in Singur West Bengal and various SEZs in the country. The backbone of these movements were local small peasant families whose land and livelihood was put at stake, either by land acquisition and displacement, or by the industries' destructive effect on the environment. In that way - on the basis of actual divisions between land-holding peasantry / landless and urban / rural proletariat - these movements got caught in the crossfire of various political parties and local interests of different factions of the ruling class. The current crisis hits hard, particularly in these very same mining and steel processing areas; thousands of temp workers, drivers and cleaners were laid off in the second half of 2008. The higher prices for land compensation gained by the local movements and the additional costs caused by it are now intensified by the current slump in steel and car sales and the further development of several SEZ are put on hold. The state uses the increase in Maoist guerilla activities in these areas to quell any kind of protest. In November and December 2008, after a brutal police raid tens of thousands of impoverished 'tribals' set up road blockades and encircled police stations in the West Bengal district of Lalgarh. After a month of partly violent confrontations with CPI(M) cadres and state forces, the rank-and-file dominated movement won their demands for compensation and withdrawal of the police presence in the area. will have to see whether the local struggles against destructive development, the uprisings of large communities of impoverished semi-proletarianised peasants like the one in Lalgarh in November 2008, and the struggles of laid off workers in these semi-rural areas will be able to find moments of practical solidarity on the bases of their common proletarian existence.
The battlefields of the rural poor
After the food riots in spring 2008 the think tanks of the ruling class - including the Food and Agriculture Organization of the UN - talked about the need to strengthen small peasantry and subsistence farming. We think that this new emphasis is not a humanitarian move towards food security and democratic small-scale development, but a strategic move to contain and individualise mass misery. Those who drop out the rat-race of the cash crop sector are supposed to survive on their own plot of land, backed up and controlled by micro-credit schemes and NGO management. Those who cannot be tied to their own soil are supposed to enrol in the labour intensive rural labour schemes, becoming dependent on political leaders of the village council or the ration shop regime. The question is how to break out of either the misery of individual subsistence or the subjection to state welfare schemes. Struggles over land-ownership or distribution used to be bloody and those land-occupations we read about are often long drawn out and tend to get stuck in the division between 'landless ex-farmers' and 'rural labourers'. More frequently we can read about struggles within the NREGS, which demonstrate that the rural poor do not see themselves as individual claimants, but as waged workers. The NREGS might turn into the opposite of what the state had intended. I.e. into an Indian wide generalisation of struggles along two main proletarian questions: how much do we earn, not based on an individual harvest or individual relation with the local land-holders, but in a power-relation with the state as the general manager of social surplus; and what kind of work do we have to do, why should it be labour-intensive and what kind of 'infrastructure' are we supposed to construct with our work. Their struggles will turn dry as long as the state manages to isolate them from those struggles in the material profit production of rural industry and agro-business, e.g. the struggles of plantation workers. In many cases the struggle of plantation workers has gone in a similar direction, cutting out the middle-men of individual plantation proprietors and addressing the state with their demands. We can only hope that these 'proletarian' struggles - through the massive waves of rural migration - will mix with or at least influence the experience of small farmers' struggle and their attempts of, e.g. cooperative farming and permaculture - in a common attack on the state.
Full text on: www.gurgaonworkersnews.wordpress.com