Regulating Act of 1773

British came to India in 1600 as traders, in the form of East India Company, which had the exclusive right of trading in India under a charter granted by Queen Elizabeth I. In 1765, the Company, which till now had purely trading functions obtained the ‘diwani’ (i.e., rights over revenue and civil justice) of Bengal, Bihar and Orissa. This started its career as a territorial power. In 1858, in the wake of the ‘sepoy mutiny’, the British Crown assumed direct responsibility for the governance of India. This rule continued until India was granted independence on August 15, 1947. With Independence came the need of a Constitution. As suggested by M N Roy (a pioneer of communist movement in India) in 1934, a Constituent Assembly was formed for this purpose in 1946 and on January 26, 1950, the Constitution came into being. However, various features of the Indian Constitution and polity have their roots in the British rule. There are certain events in the British rule that laid down the legal framework for the organisation and functioning of government and administration in British India. These events have greatly influenced our constitution and polity. They are explained here in a chronological order:

This act is of great constitutional importance as (a) it was the first step taken by the British Government to control and regulate the affairs of the East India Company in India; (b) it recognised, for the first time, the political and administrative functions of the Company; and (c) it laid the foundations of central administration in India.

Features of the Act

1. It designated the Governor of Bengal as the ‘Governor-General of Bengal’ and created an Executive Council of four members to assist him. The first such Governor-General was Lord Warren Hastings.

2. It made the governors of Bombay and Madras presidencies subordinate to the governor-general of Bengal, unlike earlier, when the three presidencies were independent of one another.

3. It provided for the establishment of a Supreme Court at Calcutta (1774) comprising one chief justice and three other judges.

4. It prohibited the servants of the Company from engaging in any private trade or accepting presents or bribes from the ‘natives’.

5. It strengthened the control of the British Government over the Company by requiring the Court of Directors (governing body of the Company) to report on its revenue, civil, and military affairs in India.

SECTORS OF AN ECONOMY

Every economy tries to maximise the returns of economic activities in which it is involved. Whatever be the organising principles of an economy, the economic activities are broadly classified into three broad categories, which are known as the three sectors of the economy

1. Primary Sector

This sector includes all those economic activities where there is the direct use of natural resources as agriculture, forestry, fishing, fuels, metals, minerals, etc. In some of the economies, mining activities are considered as part of the secondary sector, though we see direct use of natural resources here. Broadly, such economies term their agricultural sector as the primary sector. This is the case in India.

2. Secondary Sector

This sector is rightly called the manufacturing sector, which uses the produce of the primary sector as its raw materials. Since manufacturing is done by the industries, this sector is also called the industrial sector—examples are production of bread and biscuits, cakes, automobiles, textiles, etc.

3. Tertiary Sector

This sector includes all economic activities where different ‘services’ are produced such as education, banking, insurance, transportation, tourism, etc. This sector is also known as the services sector.

WASHINGTON CONSENSUS

The term ‘Washington Consensus’ was coined by the US economist John Williamson (in 1989) under which he had suggested a set of policy reforms which most of the official in Washington (i.e., International Monetary Fund and World Bank) thought would be good for the crisis-driven Latin American countries of the time. The policy reforms included ten propositions:

(i) Fiscal discipline

(ii) A redirection of public expenditure priorities toward fields offering both

high economic returns and the potential to improve income distribution,

such as primary health care, primary education, and infrastructure.

(iii) Tax reform (to lower marginal rates and broaden the tax base)

(iv) Interest rate liberalisation

(v) A competitive exchange rate

(vi) Trade liberalisation

(vii) Liberalisation of FDI inflows

(viii) Privatisation

(ix) Deregulation (in the sense of abolishing barriers to entry and exit)

(x) Secure property rights

However, in coming times, the term became synonymous to neo-liberalism (in Latin America), market fundamentalism (as George Soros told in 1998) and even globalisation across the world. It has often been used to describe an extreme and dogmatic commitment to the belief that markets can handle everything.

But the reality has been different—the set of polices was already being recommended by the IMF (International Monetary Fund) and the WB (World Bank) together with the US Treasury, especially during the period of the eighties and early nineties. The prescription was originally intended to address the real problems occurring in Latin America at the time, and their use later to handle a wide array of other situations has been criticised even by original proponents of the policies. The name of the Washington Consensus has often been mentioned as being somewhat unfortunate, especially by its creator. John Williamson , says that audiences the world over seem to believe that this signifies a set of neo-liberal policies that have been imposed on hapless countries by the Washington-based international financial institutions and have led them to crisis and misery—there are people who cannot utter the term without foaming at the mouth. He further adds that many people feel that it gives the impression that the points outlined represent a set of rules imposed on developing nations by the United States. Instead, Williamson always felt that the prescription represented a consensus precisely because they were so universal. Many proponents of the plan do not feel that it represents the hard-line neo-liberal agenda that anti-free-trade activists say it does. They instead present it as a relatively conservative assessment of what policies can help bring a country to economic stability.

But the policy prescription led to processes which are known as Liberalisation, Privatisation, Globalisation, thus cutting down the role of the State in the economy—more so in the nations which got developmental funding from the WB or went to the IMF in times of the Balance of Payment crises (as in the case of India which commenced its reform process in 1991 under the ‘conditions’ of the IMF). It was as if the Adam Smith’s prescription of ‘free market’ (liberalism) has taken its rebirth (in neo-liberalism).

Many scholars believe today that the recent financial crises of the US and the European nations are somehow born out of the ideas rooted in the Consensus. In the aftermath of the Great Recession (after the ‘US sub-prime’ crisis) in the Western economies, it is believed that dependence on market to correct the growth and development may not sustain any longer—and the world might agree in favour of a development state, as in the case of the East Asian nations which never went for the Consensus for their robust growth. The Keynesian idea of ‘interventionist state’ seems the ultimate alternative in the present times, as is suggested by the US Nobel economist Paul Krugman and being followed by the Japanese Prime Minister, Shinzo Abe (the Three Arrows of Abenomics).