Economic reform, social development and conflict in India

The paper elaborates on changing economic paradigms in India over the past six decades that finally led to structural adjustment in 1991. The paper investigates how economic reforms failed to resolve social challenges in India. From the mid-1960s, when Congress dominance in independent India was challenged for the first time economic crisis and political instability have been closely related, at times bringing the country close to a civil war. Today however, India is seen as doing very well, despite increasing unemployment, enormous subsidies and masses of extremely poor people living surrounded by increasingly affluent middle classes. In the past economic crisis and political instability were closely related. Urban based industrialization had often caused resistance that mainly came from rural India at various junctures in India’s recent economic history. Removing poverty, and here in particular rural poverty, would allow India’s economy to further expand. However if social polarization further widens, if masses of poor remain excluded from economic success, social dissatisfaction will further enhance insecurity and violence intensifying political instability and insecurity of the entire Asian region. JEL classification: E6, E24, F4, N35, I3, J21