Political Aspects of Globalization

Section V
Political Dimensions
464 Globalisation, Governance Reforms and Development in India
18
Political Aspects of Globalisation with
a Focus on Nation State in India
Vidhu Verma
I NTRODUCTION
If we read the Indian Constitution as a text about achieving social justice, then the idea of
citizens prescribing equal laws for themselves take on a dimension that a society deliberately
acts to transform social relations. However it is recognised today that this idea was realised
only in the framework of the nation state; if this nation state is now being redefined by global
society and global economy then is this connection between nation state and democracy
weakened?
In addressing this question I will first examine how globalisation has changed the nation
state by focusing on the concepts of sovereignty and democratic citizenship.1 I shall then briefly
describe four political responses to the processes of globalisation. Finally using this debate
as a springboard, I shall map out some of the challenges to the Indian state and evaluate its
responses to the new context of globalisation with reference to the Information Technology
industry and politics of decentralisation. This chapter ends with the proposal for a more
profound global transformation that is responsive to distributional considerations.
A few preliminary points before I proceed further. Globalisation is difficult to define not
only because there are multiple projects in progress but also because it has been explored from
a multiplicity of intellectual angles, academic lenses and disciplinary epistemologies. It comes
in many different versions.2 This chapter only examines political aspects of globalisation that
have caused major changes in the nation state system since 1980s.
Broadly, the term globalisation refers to the intensification of global interconnectedness
particularly in trade, capital, technology and information within a single integrated global
market. It also refers to innovations in technologies of communication and transportation,
which are reconfiguring social relationships spatially, and temporally; and to international
divisions of labour operated by multinational corporations that stretch the production and
manufacture of commodities across regional and national boundaries.3
Although a great deal has been written on globalisation, an inquiry into its political aspects
poses major challenges of both an analytical and normative kind. The analytical challenge
centres on the range of misconceptions that have become associated with globalisation that
it destroys sovereignty, or that it is a recent phenomenon and different from modernity.4 The
normative challenge is in considering the voices and interests that evaluate global processes.
To respond to these challenges, I focus on two key notions in political theory that have
been debated recently in the context of globalisation and which have a bearing on the state
in India.
The first is the nation state and the nature and extent of its sovereignty. In modern Western
political thought, the idea of the state is linked to the notion of an impersonal and legal or
constitutional order with the capability of administering and controlling a given territory
(Held 1995: 38–40). The classic concept of sovereignty entails that there is an authority in
a political community that has undisputed right to determine the framework of rules and
regulations in a given territory and to govern accordingly. Over time, in modern democratic
states sovereignty came to mean the supreme law making and decision-making power of a
community whose ultimate source of sovereignty lies with the people. The second aspect of
sovereignty in the international context means states should be regarded as independent in
all matters of internal politics and should in principle be free to determine their own fate
within this framework. It implies the assertion of the states of sole rights to jurisdiction over
a particular people and territory (Held 1995: 38–40).
Many issues raised by globalisation have significant implications for traditional concepts
of state sovereignty at three levels; (a) traditional domains of state activity and responsibility
(defence, communications, legal systems) can rarely be fulfilled without collaboration with
other states (see Held 1995: 91); (b) states have to operate within a post cold war situation
where the US has emerged as the sole military superpower in the Western world; (c) states
face pressure from global civil society organisations on an increasing number of issues. The
question is: whether sovereignty still remains intact while political autonomy of the state has
diminished or whether state actually faces a loss of sovereignty; whether the nation state is
being strengthened in certain respects in so far as it suits corporate interests or is weakened
in both its economic and political sovereignty?
The second notion is democratic citizenship.5 The main principle of democracy is that
people should be self-determining. Scholars writing on globalisation in the 1990s assumed
that the removal of commercial barriers by national governments, greater mobility of people
and the cultural impact of global information flows would pave the way for democratic forms
of government. These assumptions are rendered highly problematic by the growing gap
between the democratic governments of nation states that have to be accountable for their
performance (mostly through electoral politics) within their territorial boundaries, as op-
posed to the multinationals that are not accountable to the wider body of citizens of any
nation. Indeed talk of a ‘global democracy deficit’ comes from many quarters most notably with
regard to interstate agreements or interdependent financial markets that are not accountable
to any democratic will formation (Bohman 1999; Anderson 2002); or whenever the set of
those involved in making democratic decisions fails to coincide with the set of those affected
Political Aspects of Globalisation with a Focus on Nation-State in India 467
by them. The case of the European Union is an example of democratic deficit caused by the
shift away from national decision-making bodies to bureaucratic decision-making committees
of experts.
Theoretically, both these concepts seem contradictory to each other since sovereignty of
the state is incompatible with the needs of democratic citizenship that is more sensitive to
governance. The shift from government to governance in some respects reorients the in-
stitutions of the state (party system, electoral participation) to a highly diverse range of actors
who participate through networking and alliances between different groups in cooperative
forms of action. Since sovereignty is unitary and indivisible, it has to stem from a single
source. Promoting democratic citizenship in the world means that national sovereignty is
inviolable except when tyrannical regimes do not provide democratic citizenship or if local
groups, movements and nationalism question a nation state’s representative and accountable
nature. Following this principle, the US has rallied many states in the Western world while
invading Kuwait in 1991, and later in Afghanistan and Iraq. In this context, the US has been
following hegemonic social practices by promoting certain sets of values as well as norms of
governance. As a corollary, promoting private initiative, minimising the role of the state to
maintenance of law and order and building representative democracies have become part of
its larger objective of constructing hegemony or what some call ‘empire’.6
My argument is that while state sovereignty is highly conditional on global patterns of
interdependence, the state as a political institution is far from being submerged, either by
global capitalism or by transnational political organisations. The two factors that need to be
kept in mind are first, global capital still requires state functions to be performed. Second, the
persistence of national identity and nation-focused sentiments in conjunction with ethnicity
reaffirm the boundaries of the nation state.
This is not to deny that the processes of globalisation have introduced new players in the
world economy or that in developing countries like India, governments have withdrawn
from certain social sectors and instead imposed new set of obligations on their citizens. ‘Global
city regions’ are fast emerging as spaces where proliferation of identities go on. Despite these
changes, nation states remain the main political players but the political institutions and
national markets are not the same. Governments now share aspects of governance with cor-
porate entities and civil society organisations.
The only way of overcoming the contradictory aspects of state sovereignty and democratic
citizenship is if on the one hand, the global rules of the game especially for multinational
business become more sensitive to the democratic accountability of national governments, by
playing a part in enhancing this accountability by following a more transparent code of con-
duct that discourages corrupt and unfair trade and business practices. On the other hand,
national governments need to recognise the gains that can be made from selective and yet
greater international interdependence. The main challenge is to define an economic role for
the state in countries like India within the global setting without rooting it in a narrow eco-
nomic or cultural nationalism and a political role that is responsive to distributive justice for
all citizens.7
T HE N ATION -S TATE AND G OVERNANCE : H ISTORICAL D IMENSIONS
There is no single theory of the politics of nations and states but the nation state is indisputably
associated with political integration in the modern age. The rise of the modern state can be
seen as part of a set of parallel developments characterised by the rise of nationalism, mass
parties, the transition towards new forms of legitimisation of power based on domination and
the concentration of political power in the institutions of the state. Party organisations can
be seen as closely tied to a concept of the political rooted in interest and power that in turn
are intrinsically linked to a particular concept of the state.
According to David Held, ‘the conditions involved in the creation of nationalism were also
often the conditions which generated the democratic modern state’ (see Held 1995:58; 1991).
In the second half of the 20th century, nationalism and democracy were generally taken as
synonymous in the political thought of Western nations. At the heart of these arguments is
the proposition that the rise of nationalism is normally associated with deep running social
ferment and change which disrupt the old order of society and speed up the processes of so-
cial mobilisation. On this basis, nationalism is seen as one of the major manifestations of the
fundamental democratisation of society, the stirring into action of those classes who formerly
played a passive part in political life (Emerson 1960).
The nation state was regarded as the political expression of the democratic will of the people.
It was spread throughout the world with an almost ‘missionary zeal’ to the newly colonised
areas of Asia, Africa and Latin America as part of the ideological fight against colonialism. It
became central to the twin projects of nation building and secular nationalism. Secular na-
tionalist loyalties ‘were based on the idea that the legitimacy of the state was rooted in the
will of the people, divorced from any religious sanction’ (Juergensmeyer 1993: 11).
In the post-World War II period, the role of the nation state was critical. The interventionist
state took many forms around the globe: the Keynesian welfare state involved extensive state
guidance of a predominantly private economy, the developmentalist state in third world
structures focused on overcoming the underdevelopment caused by colonialism and the Soviet
model of the state that ruled out private economy (Rapley 2003).
The concerns of the industrialised countries in the cold war period were strongly influ-
enced by the misery caused by the depression that created the desire for full employment
derived from the conception of a welfare state, and the legacy of the second world war which
motivated the quest for peace and reconstruction. In the post-colonial states like India the
state was committed to economic development through planning with the explicit purpose of
raising productivity and output. There was a conscious attempt to limit the degree of openness
and integration with the world economy in pursuit of a more autonomous, if not self reliant,
development. The state was assigned a strategic role in development because the market by
itself was not perceived as sufficient (Nayyar 2002a).
In the 1980s the debt crisis led to a devaluation of the dollar and gradually allowed for the
introduction of a system of floating exchange rates in the world economy. The partial collapse
of the world economic system coincided with a massive rise in the price of oil that led to profits
for major oil producing countries. The international rules developed during the cold war were
rendered largely irrelevant by the collapse of state bureaucracies and party dictatorships in
the former Soviet Union, Eastern and Central Europe along with the growth of the inter-
national drug trade, new brands of terrorism, Islamic fundamentalism and the possibilities
of cyber warfare.
Financial liberalisation and the emergence of a global capital market compelled virtually
all governments to become far more responsive to the signals that emanate from that market.
Given these changes, state firms almost everywhere were privatised, and policymakers shifted
towards regulation as a means of using the state to influence economic policy. In the last
decade, even countries like India adapted different strategies in order to integrate their domestic
economic policies much more into the world economy and to enlarge the role of the market
vis-a-vis the state.8
The widespread consensus in thinking about development came to be known as the
Washington Consensus in the late 1980s. Despite many voices of dissent, international fi-
nancial institutions imposed restrictions on debt-ridden third world countries which included
trade liberalisation, clearing all hurdles to foreign investment, privatisation, deregulation,
strengthening property rights and tax reforms. It implied that the state should be rolled back,
particularly in third world countries from the social sector; the market should be central in
the accumulation process and civil society organisations should claim some kind of autonomy
from the state (Chandhoke 2002: 43; Harriss 2001). It was during this period that NGOs in
many third world countries including India proliferated in sectors like education, health,
instituting income generating schemes, and rural areas.
However, the rhetoric of free and untrammelled markets faced a major setback in the mid-
1990s with the financial crisis that hit many countries of East Asia, Japan, Brazil and Mexico.
Many scholars and politicians blamed globalisation for the destabilisation of financial markets,
political disorder and income disparities between nations (Rhodes and Higgot 2000, Mahathir
2000). It was argued that ‘a global economic order had been forged through globalisation
without any prospect for justice, or democracy, or redistribution’ (Chandhoke 2002: 43). It
was widely acknowledged that market liberalism if left to private corporations gave rise to
its own problems and it was felt that if markets were to endure they had to be controlled
(Krugman 1995).
In this way, the Washington Consensus lost some of its lustre in the 1990s and its pre-
scriptions were subjected to question (Nayyar 1997). This led to a radical shift in the under-
standing of the role of globalisation; the replacement of the language of the market by that of
governance, accountability, transparency and democracy. Even though the dominant concerns
of neo-liberalism continued, it was now recognised that along with economic growth there
was a need for governance ( Jayal 1997).9 It implied the need for regulation and moderation of
the processes of globalisation. It had a lot to do with the growth of civil society organisations
all over the globe that criticised the policies of international financial institutes for their
policies on development.
In this way, where earlier the emphasis was on opening up of national borders to the free
flow of global capital and free trade, the emphasis now is on governance of these very activities.
However despite these changes the significant elements of free market and a minimal state
continue to be seen as important elements in a democratic society.
D OES G LOBALISATION S PELL THE E ND OF THE N ATION S TATE ?
Kenichi Ohmae, author of The End of the Nation State argues that the advance of markets and
economic interdependence will soon see nation states being replaced by city states. The claims
for group-differentiated rights actually arise out of the space of the city. The concentration
of immigrants, refugees, and their identities are intertwined with the articulation of various
citizenship rights against the state. Further, he sees a future world of city states that define
their identity primarily from involvement in a borderless world economy.
In a narrow, sense Ohmae’s prognosis seems accurate since contemporary world challenges
to state sovereignty come from the global economy (multinational companies, global capital
markets), transnational bodies (World Bank, GATT, WTO, United Nations, European Union),
International Law (legal conventions recognised by national courts), hegemonic power and
power blocs (NATO). Powerful multinational enterprises are able to transfer investment across
political boundaries, control the terms of technology transfer and negotiate favourable tax
and subsidy deals with government. Global business strategies are themselves enhanced by
radical changes in information technology and telecommunications. These flows of investment,
technology, communications, and profit across national boundaries are often seen as the most
striking symptom of a global challenge to the nation state.
However, scholars like Ohmae wrongly assume that due to these changes a political order
is emerging that will produce worldwide homogenisation and a global civilisation. There are
four common responses to globalisation in relation to the nation state that I will consider:
(a) the functional interpretation of the nation state; (b) globalisation as an expression of the
rise of the free market or of neo-liberalism all over the world; (c) globalisation undermines
the scope for meaningful democratic citizenship and (d) nation state survives only in the form
of cultural and religious nationalism.
The Functional Interpretation of the State

The functional interpretation of the state is based on three claims: that the state is no longer
capable of performing the functions for the contemporary world; that all states are equally inte-
grated in the world economy and that a decline in the freedom of action in the international
arena implies erosion of sovereignty of the state. I will argue against these claims because by
suggesting homogenisation, they ignore the complex ways in which though nation states
persist, the way in which they operate has been greatly transformed (Rapley 2003).
Multinational corporations are involved increasingly in activities like licensing, outsourcing,
and joint ventures including international marketing that are not captured in the measures
of foreign direct investment (FDI) (Bhaduri 2002: 36). They become important in influencing
the overall performance of the nation state through these channels. Domestic firms located
in a developing country have greater access to commercial loans internationally through joint
ventures, and can obtain a better credit rating if they are linked to a multinational. Through
multinational investment developing countries hope to attract both modern technologies and
other forms of international capital inflow, including portfolio investments (ibid). The erosion
of authority occurs because governments have far less control over domestic corporate tax
rates, interest rates, or financial markets triggering off massive speculative capital flight.
In India, for example, flows of private capital through foreign institutional investors
(henceforth FII) have displaced domestic mutual funds in importance in the equity market.
Although FII investment of around $11 billion is a welcome sign for boosting the capital mar-
ket for many, there is unease over the nature of these investments and their impact on the
stock market (Mohan 2005).
Despite the onslaught of global corporations and new international actors, scholars like
James Petras argue that the nation state plays a more decisive role or intervenes with more
vigour in shaping economic exchanges and investment at the local, national or international
levels (Petras 1999, Hirst and Thompson 1995). It is impossible to conceive of the expansion and
deepening involvement of multinational banks and corporations without the prior political,
military and economic intervention of the nation state. Nor is it possible to understand the
expansion of the market in the former USSR, China, Eastern Europe and former radical third
world countries without acknowledging the vital political role of the US in fuelling arms race
and subsidizing cultural and religious propaganda.
Scholars like Pantich (1994) stress that the state is an agent actively promoting the political
construction of globalisation through trade agreements and regionalism. The most ele-
mentary and important trade agreements (GATT, NAFTA, ASEAN) and trading blocs (EU) were
formulated, codified and implemented by nation states. The major policies stimulating vast
tax windfalls, massive subsidies, and lower domestic labour costs have all been formulated by
the nation state (Holton 1998). The scale and scope of nation state activity has grown to such
a point that one needs to refer to it as the New Statism rather than the free market.
As Michael Mann (1997) argues that one can only understand the changing role of the state
during globalisation if one makes distinctions between powerful and weak states. Economic
interdependence is asymmetrical since the reactions of a powerful state are going to be dif-
ferent from those of weak peripheral states in the post-colonial world like India. Economic
globalisation is not an evenly spread process, when nation states themselves vary in size, wealth
and power. To speak of the impact of the globalisation upon the nation state, as if this were a
unitary process that took the same form in every sector of the economy and for every nation
state is, therefore, highly misleading. Macroeconomic policies adopted in a national context,
particularly by the major industrialised countries exercise an important influence on econ-
omies in the rest of the world through interest rates, exchange rates, or inflation rates.
Further, these emerging issues are difficult to control in countries like India because national
laws are applicable to resident individuals or registered firms but their jurisdiction does not
extend to individuals or firms across national boundaries. The reason is that ‘individuals or
firms are subject to national laws enacted by their parliaments. But countries are not subject
to similar international laws for there is no world government or parliament that can enact
laws binding on nations’ (Nayyar 2002: 12).
A recent example is the debate on quotas in the textile industry. Trade associations from
more than 50 countries including countries such as Bangladesh, Indonesia and Sri Lanka
signed the Istanbul Declaration asking the WTO to keep the quotas for a further three years.
The signatories feared that the end of quotas would mean the loss of important inflows of
foreign exchange. Having no natural comparative advantage beyond abundant cheap labour
they feared losing markets to China.10
Thus, variations in the capacities of nation states to regulate cross-border transactions are
an important variable when we consider the impact of globalisation on sovereignty of indi-
vidual nations. The position of powerful players such as the USA and other G7 nations such
as Japan and Germany who exert considerable influence in World Bank or WTO, for instance,
contrasts markedly with the bargaining power of developing countries such as India and more
worse off states like Bangladesh and Mozambique.
Globalisation and the Neo-Liberal Paradigm

Globalisation has led to viewing the neo-liberal paradigm as the only acceptable form for
celebrating the market (Hirst and Thompson 1995).11 Neo-liberal theory has had a strong
influence on the structural adjustment and stabilisation programmes introduced by many
governments since the early 1980s (Rapley 2003, Macewan 1999). It is characterised by an
excessive optimism concerning the role of market forces in promoting development. It as-
sumes that nation states can relatively easily break into export markets on the basis of their
comparative advantage but the reality is somewhat different.
Since producers in the developed world monopolise the most advanced technology, research
and development, and marketing practices in most situations, producers in the third world like
India face non-tariff protectionist barriers in First World markets and are part of an unequal
exchange. It is for these reasons that adjustment policies such as the blanket removal of import
controls and state subsidies and tariff reduction can therefore be regarded as unjustified even
from the narrow viewpoint of promoting economic growth.
Indeed, despite globalisation, many problems related to poverty, inequality and deprivation
still exist (Falk 1999). One-eighth of the people in the industrialised world are affected by
poverty. Almost one-third of the people in the developing world, an estimated 1.5 billion, live
in poverty and experience absolute deprivation (Nayyar 2002: 5). Many scholars argue that
globalisation may have created opportunities for a few countries in the developing world but
a very large proportion of people are still marginalised by the same process.
This is because market forces not only may be inefficient, but also promote injustice.
Markets are hierarchical institutions in which people are constrained by their initial position
in the bargaining power even though the transaction is viewed as fair. The profits of a few,
and growth for some, thrive in conditions of uncertainty, inequality and vulnerability of
all those who sell their labour power and of most consumers. Although markets emphasise
juridical equality between individuals they marginalise groups of people by emphasising on
certain assets or skills that can be used to provide an income. In a national labour market, the
state can step in to provide solutions for this exclusion because governments are accountable
to the people. However in the changed context, the openness and interdependence between
labour and capital has made it difficult for governments to preempt such exclusions.12
Further weaknesses in the neo-liberal paradigm have been noted. First, the paradigm
homogenises countries of both the West and third world. Moreover, by reducing development
to good governance based on market forces, it overlooks alternatives that might be explored
in different political and cultural contexts. The result is a technocratic approach that overlooks
the deepening contradictions of the development paradigm that rests on a prevailing global
power structure that is grossly inequitable and undemocratic. Indeed the commitment to
electoral democracy ignores how inequalities at the global and local level restrict the institutions
of good governance.
Indeed, these arguments have given rise to a critique of the international economic
order in many third world countries like India. It is realised that third world is assigned a
marginal place in the international economic order. Although economic growth has been
made, the pressing issues of environmental degradation, exploitation, state oppression and
impoverishment remain.
Democratic Citizenship Rights

It is widely acknowledged that national governments are no longer the site of democratic
politics and democratic citizenship rights. Several scholars have argued that in an age of
globalisation citizenship cannot be confined within the boundaries of nation states; it must
become transnational. Proponents of cosmopolitan citizenship like David Held for instance,
advocate the need for a cosmopolitan democratic law to which citizens whose rights have
been violated by their own states could appeal (Held 1993). Whether the present institutional
framework, the UN, UNICEF, UNESCO, UNDP, the Bretton Woods, WTO and IMF is adequate,
appropriate, or sufficient to meet the governance needs of the contemporary world economy and
polity is a major concern. Griffin calls for the scrapping of non-performing global institutions
such as the World Bank, and the transformation of IMF into a world central bank, and the
creation of new global institutions to enforce world civil and criminal laws (Griffin 2003).
However, focusing on institutions as David Held does, misses out certain issues that have
gained significance in the contemporary world. Whether the present institutional framework is
adequate or sufficient to meet the governance needs of the contemporary world economy and
polity has a lot to do with the nature and scope of international economic transactions. Since
there is considerable structural change in international trade flows and international capital
movements, cross border transactions in technology and movements of a larger number of
people, developing countries are spectators rather than participants. Thus, asymmetrical rules (a
point made earlier) need to be reassessed. Moreover, there are almost no mechanisms, let alone
institutions, which could coordinate macroeconomic policies and their management across
the world. Institutional responses are obviously of great importance but global institutions
are only effective when they promote and deepen democratisation and when they facilitate
popular participation.
Another set of scholars view the growth of a global civil society consisting of transnational
non-governmental organizations, political activists, social movements, religious denomin-
ations and trade unions to business and financial groupings as having a democratic basis.
In many ways global civil society represents transnational associational life that challenges
the state system in two ways (Lipschutz 1992). On the one hand, it has focused attention on
issues such as human rights, the environment, development that are within the province of
state sovereignty. On the other, it has challenged the contours of the world economic order
as mandated by the World Trade Organization, the World Bank, and IMF. There have been
major protests in Seattle, at Prague and then in Geneva. But, from these actions it is difficult
to conclude that global civil society is autonomous of other institutions of international
politics or can provide an alternative notion of governance (Chandhoke 2002). This gives rise
to the question whether they can counteract deep-rooted structures of global capitalism and
provide an alternative to the present system? While it is perfectly true that global civil society
has critiqued the workings of the international economic order, it is found that most of
these organisations rely upon states, their institutions and laws. While they might critique
the practices of states, in the field of human rights, they also require states to create political
and legal frameworks that facilitate setting up of the rule of the law, civil and political rights,
or environmental protection. In effect as Chandhoke points out ‘the very states that global
civil society supposedly opposes enable the latter in the sense that only they can provide the
conditions in which the civil society agenda is realized’ (2002: 51)
Returning to my earlier argument it could be now safely asserted that the state cannot be
ignored as a site of democratic politics. It is important in terms of democratisation because
elected governments are susceptible to the influence of citizens using democratic political rights.
There remains considerable scope for national policy making. Moreover countries continue to
exercise their autonomy in very different ways, reflecting their different political cultures. Even
if forces of globalisation put similar pressure on countries like India, China or Pakistan they do
not respond in the same way. Furthermore, it is important to stress that citizens deeply care
about maintaining their national differences in social policy and they provide considerable
differences in political participation at the domestic level.
Nation State, Cultural and Religious Nationalism

Since 1980 new frames of reference related to cultural and religious identity have emerged along
with local, regional and global interconnectedness.13 These demands range from a greater share
of political power and respect for cultural identity to a more balanced allocation of resources
for development that would minimise the demands to which minorities are subjected to in
multiethnic societies. These demands came along with radical changes in eastern European com-
munist regimes that were overthrown in a dramatic manner in the 1980s and which then
brought their economies into line with the requirements of a global market economy driven
by competition (Haynes 1998).
Elsewhere in some third world countries, along with changes in approaches to the market,
ethno-national entities, long considered extinct, and which had not been an integral part of
the nationalist movements of the 19th century came forward with demands for independent
sovereign statehood and many states were caught in a maelstrom of redefinitions of the nation
state. The argument of nationalities asserting their political rights of autonomy have in recent
years spread to countries like Indonesia, China and Africa. Some have noted a global religious
revitalisation since the communications revolution has led to the development of transnational
religious communities (Huntington 1996).
However, the matter is complex. Some scholars argue that nationality
‘answers one of the most pressing needs of the modern world, namely, how to maintain
solidarity among the populations of states that are large and anonymous, such that their
citizens cannot possibly enjoy the kind of community that relies on kinship or face-to-face
interaction’ (Miller 2000: 31–32).
This argument is pitched against those who see national sentiment as somehow an extension
of the desire for a homogenous, local and immediate community. Summarising these contrast-
ing trends, Robert Holton (1998: 156–59) proposes the idea of the complex interpenetration
of global, national, regional and local elements. He is of the view that the nation state draws
strength from its symbolic significance as a source of political and cultural identity and is in
certain senses, a form of resistance to globalisation.
But the question is: can we formulate a normative and social theoretical account of a nation
state that preserves a place for the distinctiveness of people without endorsing the exclusions
typical of nationalism?
An answer to this question lies in viewing how early forms of anti-colonialism that drew
heavily on classical European nationalism and were inspired by the idea of national self-
determination assumed a different form from the European one because the assertion of
national identity was a form of struggle against colonial rule and economic exploitation; it
assumed to be a liberating force linked to other goals of liberty, justice and democracy. For
African and Asian nations, the quest for political independence was inextricably linked to
a desire for social and economic development and for an end to their subordination to the
industrialised states of Europe. The goal of national liberation, therefore, had an economic,
social as well as a political dimension.
Another feature of these nationalisms was that they were for most parts linked to state-
building. Even when nationalism did not appear as a distinct ideology in as many Asian
countries, it affected the path of nation-building they were to follow in the post-colonial
period. Whereas some countries like India, Indonesia and Burma developed their nationalism
in the face of imperialist threats, others began in earnest after independence. In contrast to
the creation of European nations that sought statehood on the basis of a preexisting national
identity many post-colonial societies tried to build nations on the foundations of the exist-
ing states. Yet all these countries were united in proposing visions of social and economic
progress as part of a larger project for modernity; the emphasis was on the need to reform or
reconstruct society and its traditions along modern lines. In this task, they produced a discourse
that challenged the colonial claim to political domination while also accepting the premises
of Western models of modernity (Chatterjee 1996).
In the 1960s, one of the main tenets of the then conventional wisdom regarding Third
world development, modernization theory, was that all societies would secularise as they
modernised and industrialised. But the so-called primordial loyalties did not wither away in
these societies over the following decades. There was no explanation except that processes of
modernisation along with declining faith in both secularism and state-backed development,
left many people with feelings of loss rather than empowerment. Additionally, modernisation
not only undermined traditional hierarchical systems but also tried to allocate opportunities
to people in highly unequal ways. It stimulated in many people the search for an identity to
give them meaning and purpose during a period of historically unprecedented changes.
T HE I NDIAN S ITUATION
As argued above, anti-colonial consciousness in India revolved around conceiving the state as
a democratic nation state. It was premised on the idea that the Indian state although a creature
of constitutionalism must be based on an appropriate modern political idiom for articulating
plural identities and loyalties. Such a state cannot discriminate against any religious group
or impose a uniform pattern among its citizens. Consequently, there was on the one hand, a
universal and abstract appeal to transcend primordial loyalties that stand in the way of full
equality, while on the other, concrete interests and groups they represented appeared frag-
mented. In addition to making the new state reflect the diverse interests of society, they also
assigned primacy to the state in the whole process of nation-building. The state intervention
in the economy was not merely to invest, rapidly accumulate capital or protect domestic
capital; its overall goal was to bring about far reaching transformations through a policy of
affirmative action.
However in the process of nation-building many indigenous models of governing were
marginalised. Many people suffered in the hands of nation-building efforts to suppress or
assimilate culturally distinct peoples. In the last two decades, challenges to the state have come
from at least three sources: first is the process of globalisation and economic reforms leading
to liberalisation and withdrawal of the state from the economy; second, the emergence of
multiple political identities that question the idea of the nation. Along with this is the rise of
a discourse of civil society defined substantially in terms of non-governmental organisations
aspiring to take on the developmental functions that had so far been the concern of the Indian
state ( Jayal 1997).
In this section I shall limit myself to the following features characterising the nation state
in India resulting from an engagement with the global economy mentioned above: a decline in
state’s capacities for control; a shift from government to governance (articulated in the
movement away from the state as the major sponsor of economic development to the state
as cooperating with other organisations to realise its objectives); problems in legitimation of
decision-making processes (manifested in an increasing inability to perform certain kinds
of state actions in response to citizens’ demands); and finally that the state that continues to
perform very poorly on the economic front may try to improve its accountability image by
taking recourse to nationalism (like religious fundamentalism or increased military might).

These challenges raise an intriguing set of questions raised in the beginning of this chapter:
what if any, is the relation between these developments, globalisation, state sovereignty and
democratic citizenship? Furthermore, if there is a relationship what are the lines of causality?
Are they necessary effects of globalisation?
Economic Reforms and the Nation State

The Indian state is confronted since 1991 by economic globalisation that involves not only
flows of finance, capital investment, technology and labour but also an expanding web of
transnational regulatory institutions (Sachs et al. 1999). The introduction of economic reforms
by the Congress government under Narasimha Rao in 1991 was due to the gross fiscal deficit
of the Central Government and the problem of external indebtedness. The reforms in India
followed a gradual approach by focusing in the first phase macroeconomic stabilisation and
in the second phase, simultaneous reforms of industrial policy, trade and exchange rate policies,
along with tax reforms, financial sector reforms and public sector reforms. Most significantly,
in addition to stabilisation measures, structural reforms were introduced that reduced the
extent to which the public sector controlled and influenced the private sector.
While foreign-based Indian economists like Jagdish Bhagwati (1997) or Deepak Lal have
been advocating neo-classical economics on which the globalised vision of the world of the
1980s was founded, India-based scholars see globalisation as a process that states must try
to adjust but also critique (Kothari 1995, Patnaik 1995). Kothari claims that the legitimacy
and authority of the nation state has been eroded by globalisation (1995: 1595). Some of
the scholars view the emergence of a new form of international finance capital as serving the
interests of neo-liberalism (Patnaik et al. 2004). Indeed the rhetoric of democracy now consists
of a neo-liberal globalising thrust and thrust towards localisation through self rule, diversity
and decentralisation (Kothari 1995). They also argue that despite its macro integration design
at the global level, globalisation would reinforce disintegrative tendencies within existing
nation states. Patnaik claims that forcible integration of the third world societies into global
financial and commodity market producers will produce disunity in these societies forcing
their retrogression into a variety of separatist tendencies (Patnaik 1995: 2050).
With this debate as a backdrop, I will discuss the IT sector as an example of the unique
opportunities offered by globalisation while reflecting the state’s lack of control (sovereignty)
over transnational capital. I also reflect briefly on some of the salient characteristics of class
formation taking place in the Indian economy. I then examine the movement for decentral-
isation that has been encouraged by the state but which also tends to be guided by the concerns
of a transnational cadre that insert their priorities into its agenda.
The IT Sector
India is one of the important players of the world in the information technology sector and it
is one of the fastest growing foreign exchange earner for the country. The engine of growth of
the booming Indian IT sector is the software industry, which has grown at an estimated average
annual rate of 50 per cent between 1992 and 1999. India’s software industry performed very
well as compared to the other sectors of the Indian economy (Saxenian 2002: 194).
The IT industry underwent an unprecedented transformation in the 1990s as part of the
liberalisation package set by the international institutions like IMF, WB and WTO. This im-
plied removal of barriers on imports and pursuance of a free trade policy as specified by the
WTO. Prior to 1991, FDI in India was limited to 40 per cent joint ventures and its approval was
very time consuming. After 1991, the government introduced new guidelines for extending
approval for ventures with upto 51 per cent foreign equity in 13 major industries. In January
1997, the government opened its securities market to FIIs taking the step towards selling of
government debts to overseas markets.
As the extent of a company’s research and development effort is driven more by technology
and competition rather than firm size, the rapid growth of spending on technology requires
internationalisation of companies if profitability is to be maintained. The last decade has seen
a number of collaborative agreements and strategic alliances between leading multinationals.
Strategic alliances typically in automobiles (as in Honda city, Fiat and Ford), pharmaceuticals
(Ranbaxy), biotechnology, information technology, and textiles (Arvind Mills) substitute
earlier international economic transactions.
Prior to 1984, the Indian software industry operated within the framework of a highly
regulated model of import substitution-led industrialisation that guided the Indian economy.
Rajiv Gandhi’s administration emphasised new policies for electronics, software, and tele-
communications and recognised software as an industry. They lowered import duties on soft-
ware and PCs and permitted the import of computers in exchange for software exports at a
special low duty. In 1986, the Computer Software Export, Development and Training Policy
‘marked an explicit rejection of India ISI and the idea of self-reliance in software’ (Saxenian 2002:
172). The import of software in any form was permitted and various procedures simplified.
The post 1984 policy changes were crucial to the growth of the Indian software industry
because they allowed domestic producers to exploit domestic resources in global markets. But
the shift to offshore production allowing the programmers to work at facilities in India was only
possible following the reforms of the early 1990s, particularly the removal of licenses on imports
of industrial equivalent and the establishment of the STPs (Software Technology Parks).14
Earlier, offshoring was mostly restricted to manufacturing. Technology was transferred to
less developed countries when it entered into maturity and degradation phase. In the decades
of 1960s and 1970s transfer of obsolete technology to developing countries was criticised and
so was the manner in which multinationals relocated many polluting industries to underdevel-
oped countries to skip environmental regulations.
In recent years, taking advantage of the internet and corporate networks global corporations
have found it easy to find their service providers in India (Mukherji 2004a). India’s greatest
asset is a skilled educated workforce that is willing to work for low wages. The difference in
time zones facilitates efficient project execution and gives an opportunity to Indian firms to
perform maintenance and engineering tasks for US customers by accessing their computers after
regular users have finished their work for the day. Cheap satellite communications, internet
and quality focus encourage corporations to increasingly outsource routine, labour intensive
projects, such as coding and maintenance to Indian software houses.
Companies have located their operations in Bangalore, Chennai and Pune. These centres
have emerged as branches of leading global players as well as fine academic institutions, IT-
focused venture capitalists and innumerable small scale outfits. Such operations create job op-
portunities in Indian cities and help lower costs for foreign companies. Data transcription and
transmission for hospitals in the US and telemarketing for US firms is also being undertaken by
Indian companies based in various Indian metropolitan cities (Mukherji 2004a). The growth
of offshore facilities also allows some established Indian companies like Wipro and Infosys to
begin building a base of in-house knowledge and to develop internal training programmes,
quality processes and productivity tools. This has transformed Wipro into a multinational
that can compete with IBM, Accenture and other global companies.
It has led to a qualitative transformation of the economy in three ways. First, the emerging
global economy is integrated through information systems and communication technologies
rather than hierarchical organisation structures. Second, the dramatic increase in the scale of
technology and intense competitive pressure in relation to prices and product development
has led to the reorganisation of its operations both geographically and functionally. Finally,
this sector has been able to secure the benefits of globalisation through strategic transnational
alliances and forms of collaborative arrangements that provide a significant advantage to
India as compared to other countries in Asia. Saxenian is of the view that these networks are
increasingly structured among diverse actors, the IT start-ups, NRI community members, local uni-
versities and research institutions rather than through large multinationals (Saxenian 2002).
According to Carol Upadhya, this industry is distinguished by its close integration into the
global economy and its relative autonomy from the old economy dominated by the public
sector and national economic class. In the last decade, the emergence of new kinds of trans-
national linkages has been due to the operation of foreign venture capital (henceforth VC).
This was possible when changes in financial regulations in 1995 permitted the entry of foreign
VC funds and institutional investors. Much of the capital came from non-resident Indians
especially wealthy entrepreneurs and financers but more significantly VCs provide important
inputs such as advice on strategy, technology, management, or human resources (Upadhya
2004: 5141).
For these reasons, some scholars tend to view the flow of transnational capital into the
Indian software industry as responsible for producing a new kind of a capitalist class in India
even though most of the founders of software firms are drawn from the middle class, ‘building
on their cultural capital of higher education (engineering) and on the cultural and social capital
(knowledge and networks) acquired through professional careers’ (Upadhya 2004: 5148). This
transnational business class or capitalist class comprises of NRI technological entrepreneurs,
venture capitalists, the founders and top executives of large and medium size Indian IT com-
panies and even top managers of MNC software centres in India (ibid: 5146).
There is no doubt that the IT industry has developed a distinctive corporate culture that is
more global and multicultural than other sectors of the Indian economy. However, I would
argue that the identity of this emerging class and their politics is too early to assess even though
they form transnational business networks. Moreover, to view them as part of a transnational
ethnic middle class or capitalist class is difficult because their salaries and economic status
varies in different countries.
What is important for the argument of this chapter is that this class has a ‘disproportionate
impact on public policy both directly by forging links with the state, and indirectly as icons
of a resurgent India’ (Upadhya 2004: 5148). This has occurred not because of their ownership of
the means of production but because of their access to knowledge systems, technology and
information flows.
The main charge against the IT sector is that the software boom has exacerbated the brain
drain. Programmers in India are increasingly aware of the global demand for their skills and
the substantially higher compensation available in more developed economies. Many thus
aspire to work for foreign companies not only for high wages but to be transferred overseas.
The concentration of the software industry in a small number of cities in the south has
the potential to exacerbate the already desperate rates of growth across states and regions in
India (Ahluwalia 2002). These technological innovations, largely related to the processing of
information, will lead to the growth of a relatively small elite of well-paid software engineers
and executives and a mass of poorly paid information processors.
Offshore facilities for outsourcing commercial activities has expanded service trade sig-
nificantly but it poses challenges for tax authorities in a poor country like India. It has been
argued that globalisation can hurt the revenue collecting power of the state in India, more so
as capital abundance and capital scarcity within different countries is bound to effect the
rules of value creation. A capital-scarce producer country like India has an interest because
it needs to invest the revenues it gets out of trade and commerce in physical and human
capital. However, given that foreign direct investment can exit to low tax locations (with
little economic infrastructure) there is an emerging consensus that globalisation constrains
redistributive aspect of government. Recent studies show that social spending in develop-
ing countries was negatively affected by globalisation to a much greater extent than in devel-
oped countries (see Mukherji 2004b: 91).
Thus, it is important for IT to become more than an enclave in an otherwise backward econ-
omy. There is a need to develop a wider range of industries and institutions to support the
economic and spatial diffusion of IT. Indeed, India should not seek to replicate other tech-
nologies or countries beyond a point. There are compelling reasons that India will need to
define its own pathway in the IT era. The US economy has the advantage of a large domestic
market, a widely educated population, and well functioning infrastructure and regulatory
institutions. In India, by contrast, a vast rural, as well as urban population lives in poverty,
lacking even minimal levels of education. The nation’s transportation and communications
infrastructure remain woefully inadequate. Furthermore substantial bureaucratic regulations
continue to hinder the modernisation of the private sector.
Indian states like Andhra Pradesh, Karnataka, Tamil Nadu and Kerala have pioneered far
reaching innovations in the IT sector and raised two concerns crucial for governance in India:
a) the inadequacy of the infrastructure: telecommunications, roads, airports and power supply;
b) the cumbersome bureaucratic hurdles and red tapism. India’s telecommunications, roads
and air transport infrastructures rank extremely poorly in the bottom 10 per cent of ranked
countries on a global scale (Saxenian 2002: 182). Economic activity requires infrastructure
because poor infrastructure adds to costs and creates uncertainty in delivery times, then buyers
are likely to seek alternative sources in this competitive global environment (ibid).
Given the implications of federalism and state level politics in India, these changes are
crucial for improving governance. With the decline of the Congress Party regional forces and
leaders have become powerful. Many policies that have a critical bearing on the progress of
economic reforms are on the state list in India’s Constitution. For these reasons, the increasing
role of private investment has afforded greater autonomy to the states to take the initiative to
grow. The abolition of industrial licensing ensures that private investment would be attracted
to the states where productivity gains would be the greatest. This makes it more urgent that
infrastructure in the form of power, telecommunications, roads be rapidly improved. However,
fiscal deficits are very high in many states and cause for concern. In the future it is likely that
private sector, rather than government would meet most of the enormous infrastructure
needs of a growing economy. For good governance, states need to deliver essential services in
areas such as health, education, civic amenities, infrastructure and a reliable legal system. This
requires a more accountable bureaucracy that is responsive to public grievances (Mukherji
2004b: 111–12).
But scholars have cautioned that the central government needs to continue to play a role
in order to check disparities between regions. The inequality within the states grew during the
reform period. Some scholars argue that relying only on the markets that is part of the neo-
liberal agenda will worsen regional disparities and create grave consequences for the political
economy (Ahluwalia 2002, Bhattacharya and Sakthivel 2004).
From the discussion above we find in the political economy a growing hold of corporate
capitalism that is likely to increase with the growth in the high-tech variety of industries.
These changes will widen the class, caste and regional divisions and increase unemployment
following retrenchment and exclusion of people (mostly women, child labour and migrants)
belonging to the unorganised sector (Kothari 1995). Will these changes in the political economy
have an impact on democratic and decentralised politics in India? I attempt to address this
question in the next section.
Decentralisation and Governance

After independence, the government of India embarked upon a path of major social and
economic transformation in which the state played a major role. A structure of centralised ad-
ministration in which ministries of agriculture, health and rural development which is primarily
state government responsibilities received funds from the central exchequer on the basis of five
year plans prepared by the Planning Commission. This arrangement was carried successfully
through the National Development Council, chaired by the Prime Minister through schemes
designed by the ministries and often implemented by them through agencies set up by them
in a uniform manner across the states. Through central planning, an increasing number of
economic activities were placed in the public sector—steel, fertilisers, heavy chemicals, machine
tools, hotels along with infrastructure activities.
Meanwhile, a massive bureaucracy emerged over the years to implement the many schemes
of the government in the social sphere. The civil servants while subject to a code of conduct
and to disciplinary action enjoy protection through articles 310 and 311 of the Constitution.
Although the impact of these schemes was well below expectations, the civil servants were
not accountable to citizens but their seniors in their services. What resulted in the field was
inefficiency and corruption on a massive scale. The result was a people unfriendly local bur-
eaucracy that politicians took advantage of for rent seeking activities followed by corruption
and inefficiency (Vyasulu 2004).
Despite these problems, the sheer conception of a decentralised development particularly
of the Panchayati Raj type has always a great appeal since it represented the spirit of Article 40
in the Directive Principles of State Policy. The constitution had envisaged that the state shall
take steps to organise village panchayats and endow them with such powers and authority as
may be necessary to enable them to function as units of self government.
The Balwant Rai Mehta Committee (1957) was the first of its kind that looked into the
bureaucratic framework of these local institutions. Despite its claim that community devel-
opment could endure when the community was involved, not much was gained. There are
various reasons for this, such as, the political and bureaucratic resistance at the state level to a
sharing of power and resources with local level institutions and a takeover of these institutions
by the rural elite. The lack of progress in the social sector, in areas like health and education,
began to be taken seriously when Ashok Mehta Committee (1978) spoke strongly of the need
for locally elected governments. Some of its recommendations were carried out in Karnataka,
Andhra Pradesh and West Bengal.
Although the state was engaged with the issue of decentralised democracy, the debate
on panchayati raj focused narrowly on how people could be made to participate in the im-
plementation and development schemes of the Union Government. Instead of correcting im-
balances in the local power structures that get reflected in the panchayati raj institutions, the
latter are viewed as a vehicle for progressive social transformation. Critics of decentralisation
point to the lack of control by local authorities over the allocation of funds, their planning
capabilities and the design of macro-economic policy, and to the undemocratic nature of the
selection of local officials.
A new phase of decentralised democracy to overcome these problems began with the 73rd
and 74th amendments to the Constitution which devolved power to institutions of local self
government. It made it mandatory for ‘a uniform two to three-tier panchayat system to be
constituted in every state, with direct elections to each of the three levels, viz, the village,
block/taluka and the district’ ( Jayal 2001: 148). Apart from reserved seats for the scheduled
castes and tribes provision was also made for one third of the seats to be reserved for women
representatives. The amendments enabled the state legislatures to endow the panchayats
with such powers and authority as may be necessary to enable them to function as institutions
of self-government ( Jayal 2001).
The idea of giving constitutional status to the panchayati raj institutions is sometimes
viewed as a state response to the increasing recognition that the institutional initiatives of the
preceeding decades had not delivered the goods. However the decentralisation of government
for the most part can be traced back to initiatives from below.
The demand for greater representation of women in political institutions in India was taken
up in a systematic way by the Committee on the Status of Women in India (CSWI) which
published its report in 1976. The CSWI report suggested that women’s representation in pol-
itical institutions, especially at the grass roots level needed to be increased through a policy of
reservation of seats for women. In 1988, the National Perspective Plan for Women suggested
that a 30 per cent quota for women be introduced at all levels of elective bodies.
Apart from the womens’ movement, for several decades social movements had protested
and interrogated the basis of development as economic growth. This process had created some
of the mechanisms and conditions for popular participation in public decision-making. Along
with this, the governance agenda favoured by multilateral agencies, like the World Bank, pro-
moted and funded participation through a network of non-governmental organisations. They
focused on women empowerment, environmental conservation and compensation to people
displaced by large projects. They funded NGOs to reach relatively inaccessible areas and for
their capacity for innovation and experimentation. Eventually, the two-pronged strategy of
the state making way, simultaneously for NGOs and market forces, made a strong plea for a
greater role for the voluntary sector through strategies of decentralisation and people’s partici-
pation ( Jayal and Pai: 2001).
The trend towards decentralisation due to pressure from grassroots is evident in the way
laws like the Official Secrets Act that governed civil servants have been critically assessed. It
has led to serious introspection about the lack of information with citizens about the develop-
ment establishment and its administration. The Right to Information (henceforth RTI) demand
formulated initially by members of the Mazdoor Kisan Sangathan (MKSS) is indeed a story
of the extraordinary efforts of ordinary people in Rajasthan. The right to access government
records was an assertion of many democratic principles and a claim on a share of governance.
The right to information campaign includes public hearings, institutionalisation of RTI through
social audit forces and equal standards of transparency and accountability on the users of
information that include NGOs and citizen groups (see Roy and Dey 2002). Legislation on
right to information has been passed in several states in India. And even though the resulting
laws have been far from perfect, they may still recognise these as solid achievements by the
people at the local level.
In the face of globalisation, decentralisation seems to offer the most feasible way to create a
more just political process in India. So those who worry about the demise of the nation state
in India have turned to the emancipatory potential of local-level institutions (Kothari 1995).
A consensus seems to be emerging among critics of the nation state, multilateral agencies and
NGOs that the idea of participation—whether it is equity-based or agency-based privileges—
the idea of the community and the local. The debate about the status of the ‘local’ has come
to centre on ‘how the institutions in which people are enmeshed structure, and are themselves
structured by, the experience of locality…and how these institutions are implicated in wider
networks of relationships’ (Day and Murdoch 1993: 93). In this manner the discourse of
participation found among basic needs theorists, environmentalists, sustainability groups,
feminists and human rights activists, presents a valorisation of the local, as well as a critique
of nationalist agendas of political elites that focused on projects of nation building and heavy
industrialisation. What is surprising is that the privileging of the local space is linked to the
decline in the capacity of the nation state.
Now, while it might be correct to argue that most sources of community problems lie beyond
their spatial boundaries, organising around communities may reinforce the very patronage
caste and religion driven political mobilisation in the first place. The context of decentral-
isation has also changed making these dilemmas appear greater than ever. On the one hand,
the electoral triumphs of lower caste groups and women promise greater representation and
accountability and on the other, economic restructuring, income inequality and continuing
poverty undermine and wipe out the gains of local actions.
I would argue that this terrain of the local is fairly problematic. In its basic form many
proponents forget that the local is a space of internal differentiation and power contestation.
If by civil society we mean voluntary associations of citizens, then this interpretation will
find it difficult to accommodate the existence of a variety of global NGOs that are not created
through a democratic process or lack representation from local people. Many of them have
their own agendas and adopt a very professional approach towards local problems. In this
way, citizens are unlikely to engage with them or influence their agendas. Although many
NGOs have demanded transparency and accountability from public agencies, they have for
the most part, been fairly vulnerable to similar charges. Finally, the question of consultation
and accountability central to the idea of democratic citizenship is not possible if most agendas
affecting the local originate elsewhere.
State and Cultural Nationalism

The movement to centre stage by BJP in contemporary Indian politics raises theoretical and
political issues of great complexity. Although the dramatic rise of cultural nationalism in India
has been possible due to the resources found in our own anti-colonial heritage there have
been other explanations as well. It is evident that the evolution of democratic institutions
in India has led to ideological and structural transformations. In the years after independ-
ence, political mobilisation based on language, religion or region were unleashed. The political
assertions of the historically disadvantaged lower castes, primarily the dalits and the castes
designated as the Other Backward Classes undermined the rigidity of the caste system. But the
militant Hindu right wing—the Sangh Parivar—has asserted what they consider the claims of
a culturally majoritarian community.
Another explanation is that since the 1980s, there has been intensification of ethnic,
religious and nationalist movements in various parts of the world as a result of the processes of
globalisation and its link with the economic immiserisation and marginalisation of popu-
lations. If national identity may be formulated on the basis of the differentiation of a nation
from others and/or the affirmation of a specific vision of the historical continuity of a nation,
resurgent cultural nationalism by the BJP has promoted the sense of the specificity of a Hindu
identity among the people mainly through the process of symbolic boundary marking of cul-
ture. The principal ground for their ascendance has been a critique of the premises of the
secular nationalist project.
BJP’s membership and its public profile arose dramatically after it gained political power
in 1996. Initially, apart from the BJP the Shiv Sena, VHP and Bajrang Dal were engaged in
religious fervour, thus isolating the minorities and members of lower castes. The appeal to a
Hindu identity with its emphasis on culture and Hinduism became a rallying point in mo-
ments of perceived Muslim threat in a multicultural society. In this situation, BJP offered a
distinctive identity for the fears and anxieties of the Hindu community and later the political
cooptation of the scheduled castes and tribes were attempts to strengthen the legitimacy
of the BJP amongst its political constituency. But the political rhetoric in the last decade is
quite different from its earlier statements and understanding this difference is essential in
coming to terms with the new political terrain. The mechanisms through which this change
has occurred include a combination of electoral politics, resurgence of religious identity and
their popular mobilisation.
In May 2004, they were further changes related to the politics of cultural nationalism that
arose with the BJP. The first is the change in political thinking that reduced the Atal Bihari
Vajpayee-led National Democratic Alliance government to a minority in the 14th parlia-
mentary elections. The voters also rejected important coalition partners at the state level,
Chandrababu Naidu in Andhra Pradesh, S. M. Krishna in Karnataka and J. Jayalalitha in
Tamil Nadu. One obvious reason for this defeat is inner party disputes and differences among
the coalition partners within the BJP. The other factor relevant for the argument of this
chapter is that government claims about the economic growth and development the
country achieved were inaccurate. Middle class consumerist dreams without being matched
by distributive justice that were sold to rural folk living in abject poverty were completely
rejected. Within the RSS, there is a perception that the BJP lost the election because it did
not follow the Hindu line rigorously enough while others claim that the communal riots in
Gujarat, among the worst in the nation’s history led by Narendra Modi, caused the debacle.
The party’s loss could also be related simply to anti-incumbency against state governments
across the country.
Today we still are confronted on the one hand with a militant Hindu revivalism trying to
define India in terms of an upper caste Sanskritic Hindu identity (an ethno-cultural conception
of the nation) and on the other hand, with voices from below from tribals, dalits, religious,
linguistic and ethnic groups which are demanding acceptance of their cultural identity along
with distributive justice.
C ONCLUSION
In this chapter, I argued that the world inhabited by nation states is rapidly changing. The
forces of globalisation represented by transnational corporations and international bureaucrats
are a significant source of the change that has set limits both to state sovereignty and demo-
cratic citizenship. Globalisation is characterised by a basic asymmetry of scope between pol-
itical and economic organisations or between nation states and national markets. Thus, while
the mode of organising politics remains grounded within the state’s territorial boundaries, the
economy is increasingly organised in terms of wider transnational networks (Held 1993).
These networks transfer wealth and capital across national boundaries and deepen and extend
the nature of the international division of labour triggering changes in class formation.
This perspective is important in the light of the growing awareness that state capacity and
authority are essential for protecting rights of citizens. Having said that I argued that the state
is being displaced as the centre of economic activity and its sovereignty is being undermined
in areas of foreign trade, taxation and contract laws. This erosion of economic sovereignty can
be explained by the location of the Indian economy, its place in the international financial
system and its relations with other international organisations. Meanwhile, the state in India
has notably withdrawn from public expenditure in the social sector but it is misleading to
assume the demise of the nation state because this fails to see the relationship between nation,
state and democracy. If the market economy marginalises sections of society and denies public
goods to a majority of the people then the government as an accountable institution has to
intervene otherwise its political authority will be called into question through electoral politics
and civil society organisations. Indeed the same government may rely upon the politics of
cultural majoritarianism to assert its authority. These actions have seriously challenged the
nation state framework for resolving minority rights.
My argument is, whatever the character of globalisation, it has led to growing social in-
equalities, greater social polarisation and increasing transfer of state resources to transnational
capital. The distributive consequences of globalisation cannot be separated from the analyses
of ownership and control of institutions, the class structure and the state. Thus, there is a
need to make globalisation more democratic, not just through decentralisation, and such
other institutional changes at the global level, both of the United Nations and intergovern-
mental type, but through a process of looking for new alternatives for dispersal of power
among citizens.
Notes
1. An introductory point is necessary to distinguish between two aspects of what is bundled together
in the concept of the nation state. Broadly, the idea of nation has been understood in two ways in
modern times—nations as cultural communities and nations as political communities. The former
views community as based on objective characteristics such as common heritage, language, a distinct
territory, shared religion, customs and history. In its more recent versions, cultural nationalism is
characterised by a commitment to one particular ethnic, religious or linguistic group over others.
Political nationalism highlights political values, citizenship and loyalty for the nation. This describes
the way a political community that occupies a defined territory is organised under the political authority
of the state. Throughout this chapter, I use the term nation state and state as having overlapping
concerns although I am aware that the latter is commonly used as a legal concept. The characterisation
of the modern state as a nation state and being composed of culturally homogenous people is also
inaccurate although it is very much alive. It gives rise to a range of complex issues that are outside
the scope of this chapter.
2. There are three schools of thought on globalisation, the hyperglobalisers, skeptics and the transform-
ationalists. For more see introduction to Held et al. (eds.) 1999: 3–7.
3. There are many definitions of globalisation. Harold Levitt (1983) and Kenichi Ohmae (1990) promised
boundless prosperity in their earlier writings whereas Paul Kennedy (1993) and Dani Rodrik (1997)
warned about our lack of structures to deal with a global world. Some scholars see it as set of processes
inscribed within the structures of the capitalist mode of production. They see it as something inevitable
to which necessary alterations can be made. From this perspective, the challenge for a particular country
is to adjust to changes in the world economy under the most favourable terms. Others view it as the
outcome of a consciously pursued strategy or the political project of a transnational capitalist class.
(See Petras and Veltmeyer 2001).
4. The origins of globalisation are a contested issue (see Held et al. 1999, Petras and Veltmeyer 2001).
World system theorists view the expansion of European capitalism in the 16th century as the beginning
of this process. Some see globalisation as arriving only after Second World War. I believe that although
the end of the cold war signified the opening of a new chapter in the history of the globalisation of
capital, it is useful to remember that capitalism is by its nature global in character. During the 19th
century globalisation, rate of export of capital, international trade, migration was much more, but in
the matter of communications the volume, range, density and speed of global communications today
are far superior to those in the 19th century.
5. Due to the limited nature of this chapter I do not explore the two strands in the concept of citizenship,
the strand with its origins in Greek polity, civic republicanism (participatory model), and the modern
liberal strand (focus on citizen as bearer of rights against the state). In India most debates rage around
the range of social citizenship.
Theorists particularly those who are committed to a civic republican conception of citizenship are
deeply suspicious of cosmopolitan citizenship which they view as endangering democratic forms of
government (Mouffe 1992). David Held tries to develop a sociological understanding of cosmopolitan
democratic governance. He argues that the autonomy of the nation state is severely limited by
global processes as sovereignty is divided between national, regional and international agencies. He
is principally concerned with democratising formal political institutions at the international and
transnational levels.
6. There is a narrative of globalisation that links it with the unraveling of pax Americana in the early
1970s. Due to lack of space I shall not focus on these aspects in this chapter. (See Chatterjee 2004).
7. The 1980s and 1990s witnessed a dramatic upsurge in the popularity of the BJP and its ideologically
disparate partners. Although, they did not speak in a single voice, proponents of hindutva identified
nationalism with a rediscovery, redefinition and reaffirmation of Hindu uniqueness. The use of political
power for promotion of cultural nationalism further led to inter-community polarisation and set aside
the discourse on distributive justice. See section on ‘State and Cultural Nationalism’ in this chapters
for more details.
8. These economic reforms are seen as a consequence of internal crisis situations in economy, polity
and society, influenced by the collapse of India’s planned economy and excessive state intervention
in market economies. I will not go into the debate regarding whether these economic reforms could
have been averted or not. (See Sachs, Varshney and Bajpai, eds. 1999).
9. Again there is an extensive literature on governance that follows different theoretical approaches.
According to Martin Doornbos, it was vague enough to include both donor and academic definitions.
He writes ‘the notion of good governance was broad enough to comprise public management as
well as political dimensions, while at the same time vague enough to allow a fair measure of dis-
cretion and flexibility in interpretation of as to what good governance would or would not condone’
(Doornbos 2003: 7).
10. The row over quotas is an illustration of my view that I develop in the end of this chapter. The row
became more intense as manufacturers in USA argued that China would destroy the American textile
industry. China’s sales in America and Europe will surely grow once quotas are lifted. They wanted
their government to maintain 15 of the 91 quotas that was to expire at the end of 2004. This whole
debate shows how globalisation can affect different classes and nations differently. See Special Report
on The Textile industry, in Economist, 13 November 2004.
11. Since the 1990s neo-liberalism has been used for global market liberalism and for free trade
policies.
12. Many scholars are of the view that the brunt of the capitalist globalisation process has been borne
by labour, the restructuring of which in effect has been the major mechanism of structural adjust-
ment. (For more, see Petras and Veltmeyer 2001).
13. Due to the scope of this chapter I do not examine definitions of nationalism; nationalism as
modernisation; nationalism as a religion; nationalism as construction of language and literature;
nationalism as a discourse of gender, sexuality and ethnicity.
14. Software Technology Parks is like an export processing zone for software. It gives guaranteed access
to high speed satellite links and reliable electricity.
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Political Aspects of Globalization

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Section V

T HE N ATION -S TATE AND G OVERNANCE : H ISTORICAL D IMENSIONS

D OES G LOBALISATION S PELL THE E ND OF THE N ATION S TATE ?

The Functional Interpretation of the State

Globalisation and the Neo-Liberal Paradigm

Democratic Citizenship Rights

Nation State, Cultural and Religious Nationalism

taking recourse to nationalism (like religious fundamentalism or increased military might).

Economic Reforms and the Nation State

Decentralisation and Governance

State and Cultural Nationalism

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