As the previous chapter has shown, until the early 1980s, the role of corporate profit-making in the functioning of the Indian economy was limited by various institutional settings. After peculiar conditions during the emergency rule under Indira Gandhi (1975–1977), followed by two years of ineffective policy-making under a government based on a heterogeneous coalition, the return to power of Indira Gandhi in 1980 marked the beginning of a new period for India's political economy. This period, which is still ongoing, is characterized by four interrelated trends:

The present chapter provides an empirical analysis of these four interrelated trends, which are investigated in more detail in Chapters 5 and 6.

Economic reforms and the ‘pro-business’ tilt of India's economic development policies

Indira Gandhi is known as a political leader who was obsessed with securing her own power and position both within the Congress Party and within the state apparatus. In the late 1960s and early 1970s, this motive had led her to assert her autonomy against rural elites, which exerted significant control over the Congress Party, as well as over regional and local politics. To counterbalance this loss of a powerful support base, Indira Gandhi had crafted a rhetorical – and partly political – alliance with left-wing political forces. Under the slogan garibi hatao (war on poverty), this alliance was framed as a ‘pro-poor’ movement that would defend the masses against predatory agrarian exploitation and big-business capitalism.

After the emergency rule (1975–1977), followed by a massive electoral defeat of the Congress and two years of ineffective coalition government under the Janata Party, Indira Gandhi returned to power in 1980. At this point, however, garibi hatao was not a suitable political strategy anymore. The authoritarian turn of Indira Gandhi and her ruthless oppression of trade unions and political activists during the emergency had alienated the support of left-wing political forces.