The document discusses the interaction between economic development and political democracy in India over the past 50 years, dividing it into three phases. The first phase from 1947-1966 saw development strategy shaped by political consensus and long-term planning. The second phase from 1967-1990 saw economic policies influenced by pressures of democracy with long-term consequences. The third phase from 1991-1997 was characterized by an absence of consensus and short-termism as liberalization policies and empowerment politics moved in opposing directions. It also examines the relationship between markets and democracy, and how exclusion from markets can exacerbate other forms of social, political, and cultural exclusion.

1. ECONOMIC DEVELOPMENT AND POLITICAL
DEMOCRACY
INTERACTION OF ECONOMIES AND POLITICS IN INDEPENDENT INDIA
DEEPAK NAYYAR
SUMMARY AND REVIEW BY -
Harsh Gupta

2. INTRODUCTION
 The literature reflects on the INTERCONNECTIONS between the economic development and political
democracy in India over the past 50 years.
 The five decades have been divided into three phases by the author.
 In the first phase i.e. 1947-66 the strategy of development was shaped by a political consensus and
characterized by a long-term perspective. All this is clearly evident by some of the steps taken during
those years like formation of the PLANNING COMMISSION and nationalization of major industries.
 The second phase (1967-90) saw economic policies being influenced by compulsions of political
democracy which had long term economic and political consequences.
 The third phase (1991-97) was characterized by an absence of consensus and a presence of short-
termism, in which the economies of liberalization and the politics of empowerment seem to be moving
the economy and polity in opposite directions.

3. DEMOCRACY AND MARKETS
 Markets and democracy are perceived as both virtue and necessity.
 It is widely believed that democracy is about political freedom for individuals and markets are about
economic freedom for individuals, the two together serving the interests of the people. However, there
are several arguments which can be presented against it.
 One is that democracy can lead to the tyranny of majorities i.e. the will of the majority should always
prevail in a democracy.
 Other argument is that markets are about the tyranny of minorities as minorities are not guaranteed
access to the market as buyers if they don’t have incomes or sellers if they have nothing to sell.

4.  In an economic democracy. People vote with their money i.e. purchasing power in the market
place.
Whereas a political democracy works on the basis of one-person-one-vote.
 To reach a middle ground in between economic and political democracy, a compromise must
be reached between the economic directions which the market sets on the basis of
purchasing power and the priorities which a political system sets on the basis of one-person-
one-vote.
 This is very difficult as markets EXCLUDE certain people -
 The Poor, from the whole process of development.
 As Consumers, if they do not have any or sufficient incomes.
 As Producers, if they have neither assets nor capabilities.
 Both as Consumers and Producers, if they do not accept or conform to the values of the market.

5.  Institutional arrangements which mediate between economic development on the one hand
and social development on the other are critical as these may accentuate exclusion or foster
inclusion.
 There is also an interaction between exclusion from the market in the economic sphere and the non-
economic dimensions of exclusion in the social, political and cultural spheres.
 The social exhibition of of exclusion can be powerful. For e.g. – SCs are poor because they have little in
terms of assets, entitlements or capabilities.
 Economic exclusion also accentuates social exclusion.
 An economic exclusion from livelihood often creates a political exclusion from rights i.e. the right to vote
for poor may only exist in principle.
 Cultural exclusion such as that of minorities interacts with economic exclusion from the markets.
 In all of this there is a unique asymmetry that economic exclusion exacerbates other forms of exclusion,
but economic participation does not eliminate other forms of exclusion which have social, cultural or
political roots.
 Also, Inclusion too is not always good.
 Coercive inclusion or inclusion on inferior terms by markets can be exploitative. For e.g. – Child labour,
employment of women as wage labour on terms inferior to those of men etc.