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Understanding The Facets Of Economic Democracy In India

India's fight for independence from British colonial control has its origin in the country's quest for economic democracy. Economic democracy was a key component of the early Indian nationalist movement's goal for an independent India, which also included the eradication of poverty and redistribution of wealth.

Democracy, the most widely used form of government, has undergone significant evolution, leading to a variety of forms, largely dependent on techniques of governing. Economic democracy is a type of democracy that practices the financial security of every resident of the state and aims to achieve economic equality for all.

A form of economic governance that seeks to provide greater involvement, equity, and justice in the distribution and allocation of resources is known as economic democracy. The basic idea behind economic democracy is that everyone should have equal access to resources and opportunities and that economic power should be divided such that everyone benefits, not just a few individuals.

Economic democracy in India entails measures and programs including participatory budgeting, public sector companies, planned economies, social welfare programs, and land reforms that are aimed at eradicating poverty and advancing social welfare.

These programs seek to ensure that all groups are equally benefiting from economic growth and development.

In this article, the definition and interpretation of economic democracy by different economists, the purpose behind it, how economic democracy is beneficial for the general public, and how it can be implemented are discussed. It also offers a brief discussion about the problems in promoting economic democracy enshrined through the Indian constitution and the vision of constitutional makers about the idea of economic democracy.

Theory of Economic Democracy by the Key Thinkers Who Contributed to The Development of Economic Democracy
The development of the socialist and labour movements in Europe and North America at the turn of the 20th century gave rise to the idea of economic democracy. Socialists and labour activists advocated that economic power should be dispersed more evenly and that employees should have a voice in the management of the companies where they worked.
Robert Dahl, an American political scientist in his book "a preface to economic democracy" (1985) claimed that democracy should permeate all aspects of life, including the economy, and was a crucial figure in the development of the theory of economic democracy. Dahl claimed that in order to achieve economic democracy, employees would need a voice in decisions affecting their working conditions and the distribution of resources within their organizations.

French economist Thomas Piketty is well renowned for his studies on wealth and income inequality. In order to solve the growing income and wealth inequality, which Piketty sees as one of the major problems faced by modern countries, he has suggested that economic democracy is necessary.

According to Piketty's thesis in his book "Capital in the Twenty-first Century" 2017 democracy and social stability are at risk due to the accumulation of wealth in the hands of the small elite. He advocates for measures that support economic democracy, including progressive taxation, wealth taxes, and measures that encourage employee involvement in business management.

Additionally, Piketty has also argued that economic democracy is not only a matter of justice and equality but also necessary for economic growth and innovation. He contends that when economic power is concentrated in the hands of a small elite, resources are not allocated effectively, and innovation is inhibited. On the other hand, there is greater room for innovation, entrepreneurship, and economic growth when economic power is spread more fairly.

In general, initiatives designed to advance economic democracy have been influenced by Piketty's research on income and wealth inequality. His efforts have helped to increase understanding of the value of economic democracy in promoting social welfare, economic development, and political stability.

Economic democracy's key objective is to align forces with democracy's fundamental ideal, which Mahatma Gandhi beautifully described through the phrase Sarvodaya, which is Sanskrit meaning "the welfare of all". Mahatma Gandhi was a key figure in the Indian independence movement and a proponent of economic democracy. He believed that economic power should be distributed more equitably, and advocated for the development of a decentralized economy based on local self-reliance and community ownership.

Economic Democracy Enshrined Under Indian Constitution
Indian constitution promotes the principle of economic democracy through several provisions that aim to establish an equitable economic system and reduce inequalities.

Here are some ways in which the Constitution promotes economic democracy:
Directive Principle of State Policy:
The Directive Principles of State Policy (DPSPs) are guidelines for the government to follow in the governance of the country.
Economic and Social Planning: Article 38 of the Indian constitution enjoins upon the state to strive to promote the welfare of the people by securing a social order in which justice, social, economic, and political shall inform all the institutions of national life and to minimize inequalities in income, status, facilities, and opportunities not only amongst individuals but amongst a group of people.

Article 39 directs the state inter-alia to secure to the citizens the right to adequate means of livelihood; that the ownership and control of material resources of the community are so distributed as best to subserve the common good; that the operation of the economic system does not results in the concentration of wealth and means of production to the common detriment; that youth and childhood are safeguarded against exploitation and against moral and material desertion, and that the children are provided with the possibilities and resources to grow up in a healthy way, with freedom, and with dignity.

Effective provisions are included in Articles 41 and 42 for safeguarding the right to work, reasonable and humane working conditions, and maternity leave.

Reservation Policy: Article 46 provides for the promotion, with special care of, the educational and economic interest of the weaker sections of the people and particularly of the Scheduled Castes and the Schedules Tribes, with special emphasis on going in the favor of the weaker section of the society in the case of Sadhu ram vs. Pulin[1].

Again, in the case of Indra Sahani vs. Union of India[2], it was decided that 27% reservation for socially and economically disadvantaged groups of society in central services was legal. At the same time, the court also attempted to strike a fair balance between justice and the distribution of public benefits.

Supreme Court in the case of Calcutta electrical construction company ltd, v. S.C. Bose[3], held that the right to social and economic justice is a 'fundamental right'. All the judgments of the hon'ble supreme court clearly emphasize the reservation and give a boost to promote economic justice in India.

The Supreme Court has expanded the criteria of social justice to attain a substantial degree of social, economic, and political equality, by adjudicating on diverse social matters concerning education, livelihood, gender, and environment. In Mohini Jain v. State of Karnataka[4], the supreme court said that "a man without education was no better than an animal", and held that the right to education was an essential part of living a life. In Bandhu Mukti Morcha v. Union of India[6], the court, while denouncing the practice of bonded labour, held that the Right to life means the right to live with dignity.

The notion of justice has been more broadly interpreted by the Supreme Court to include the economic sphere, giving it a tool for addressing socioeconomic injustices and disadvantages. In J.K. Cotton spinning and weaving mills vs. the state of Uttar Pradesh and ors[7]. Industrial matters and notions of social justice are to be avoided and applied in order to find a solution between employers and employees.

Fundamental Rights: The Indian constitution's fundamental rights include the right to equality, which includes economic equality, and the right to freedom of occupation, trade, and business. These rights ensure that all individuals have equal opportunities to participate in the economic system and prevent economic discrimination.

Public Sector Enterprise: As Article 39 explained in the above case, the provision has been used to justify the establishment of public sector enterprises aimed at promoting economic democracy and reducing the concentration of economic power in the hands of a few.

Purpose & Implementation of Economic Democracy in India
Indian democracy is facing new difficulties as a result of a boom in material demands. Underneath all the wrath about crony capitalism, poor leadership, and lack of jobs comes dissatisfaction brought on by a fundamental misalignment between the political and economic spheres.

Inside the voting booth, we might be on equal footing with each vote having equal weight and each person having one vote. However, equality does not exist in the marketplace.

The main purpose of implementing economic democracy in India are:
Reducing Inequality: Economic democracy means that all the resources that are used to produce goods and services are owned collectively by everyone, and the dividends obtained are also distributed equally among everyone. Worker cooperatives, community farming, etc, are some of the production models that embody the idea of collective ownership. Moreover, many of the jobs people do today aren't necessary because they can be easily automated using machines or computer software.

Capitalist by laying off workers, and by using this technology, raises unemployment. This issue arises because the machinery and automation technologies are monopolized and owned by the capitalist class even though the development of these technologies came as a result of collective human knowledge through generations.

Thus, this control of means of production and automation technologies by the capitalist oligarchy ensures that all wealth created using them goes only to the capitalist, while 99 percent of the human population has to live on scrap these capitalists throw at them.

Due to this enormous economic inequality, capitalists can easily influence government decisions because they have total control over politicians, media, the internet, and public discourse. They use the state and state apparatuses like the police to protect their property and hegemony over the resources and exploit the masses.

India is one of the most unequal nations in the world, according to the "World Inequality Report 2022," with rising poverty and an "affluent elite."

In India, the top 10% and top 1% possess 57% and 22%, respectively, of the entire national income, according to the research, while the share of the bottom 50% has decreased to 13%. 
The issue India is facing is not the lack of resources due to overpopulation, but it is an issue of massive inequality in ownership and distribution.

In order to address these problems of economic inequality, India might implement a progressive taxation system that taxes people with higher incomes more heavily. This might help the government raise more money for spending on social security programs, education, and healthcare.

Investment in education and skill development, to give people the information and abilities they need to obtain higher paying jobs and expand their economic chances. Land reforms to lessen land concentration and broaden access to land for marginalized groups and small farmers. This can aid in enhancing rural lives and lowering inequality and poverty. India can work to improve working conditions, provide fair wages, and protect workers' rights by strengthening its labour laws. This could support the economy and lessen economic exploitation. Social protection schemes to create a safety net for vulnerable groups and lessen economic uncertainty, India might increase social protection programs including health insurance, unemployment compensation, and pensions.

India can advance financial inclusion by granting marginalized people greater access to credit, savings, and other financial services. Doing so encourages economic empowerment and lessens economic inequality. In order to ensure that economic opportunities and resources are dispersed based on merit rather than political connections, India can combat corruption and enhance governance. This could aid in fostering economic democracy and lowering inequality.

Promoting Inclusive Growth: Economic democracy can also promote more inclusive growth by ensuring that economic benefits are shared more widely across society. This can help to promote economic development, reduce social tension, and build a more stable and prosperous society. All production models should be owned collectively where decisions are democratically made rather than by the authoritarian structure found in today's business model. Creating community-owned farms, cooperative societies, workers' cooperatives, and other collective democratic models of decision-making and functioning need to be encouraged. Economic democracy aims to end income disparity and give everyone the power to manage the means of production rather than a few elites.

In order to promote more inclusive growth investment in infrastructure, focus on education and skill development, encourage entrepreneurship, promote financial inclusion-increasing access to credit, support small and medium enterprises, etc.

Enhancing Democratic Participation: Economic democracy can enhance democratic participation by ensuring that economic decisions are made in a more participatory and transparent manner. This can help to strengthen democratic institutions and promote greater accountability in economic governance. Participatory democracy expands on the idea of democracy, where citizens should be given the power to make political decisions.

Participatory democracy was used in the 1871 Paris commune and the 1930s revolutionary Catalonia in Spain. Additionally, Porto Alegre, one of the largest cities in Brazil experimented with participatory democracy in its budgeting for public investment known as the participatory budget. Through neighborhood, regional, and citywide assemblies, citizens participated and directly voted on how public money should be allocated to various projects.

Empowering Marginalized Communities: Economic democracy can empower marginalized communities, such as women, Dalits, and Adivasis, by providing them with access to economic resources and opportunities.

Consensus democracy is distinguished from systems where vote-winning majorities may potentially overlook minority perspectives by a decision-making structure that takes into account a wide range of viewpoints. The goal of consensus decision-making is for participants to generate and choose solutions that will be accepted by all. Instead, then competing for personal preferences, all participants equally contribute to the creation of a shared proposal and its modification into a conclusion that as nearly as possible addresses the interest of all group members.

How India Can Foster Economic Democracy & Recommendations
Having a say in every decision that affects you is what democracy is all about. It reflects liberty, equality, and justice in their most idealized and egalitarian forms. Every person has the right to dignity, the freedom to follow their own intellectual and creative interest in any field, the ability to generate and access knowledge from where ever they want, and the ability to participate equally in decision-making.

We must take note of the broader notions of democracy and research the various ways that democracy is applied in diverse nations around the world. We can envision and strive towards establishing a new structure and mode of operation for our society with the aid of this information.

Decentralization has been acknowledged as a most successful tool for advancing economic democracy and providing services that facilitate the requirement of the people. Decentralization can occur through political, administrative, or fiscal channels.

Political decentralization is a tool for increasing citizen involvement, boosting people's power and authority, and influencing and rethinking political decisions in the creation of public policy, resource mobilization, and social gain.

Decentralization of the administration entails transferring management and administrative duties from the federal government to local government and localities. This can involve giving local authorities responsibility for tasks like planning, carrying them out, and providing services.

Financial resources and authority are transferred from the federal government to local governments and communities as part of fiscal decentralization. This can involve giving local governments financial support, setting up revenue-sharing policies, and developing local taxing.

Current status of decentralization in India as the Amendment inserted part IX relating to panchayats and IX A relating to municipalities in the constitution. Article 243-243O and 243P-243ZG of the constitution are in the nature of basic provisions supplemented by laws of the respective states, which define the details of the power and functions of the various organs. All states have enacted new Acts or incorporated changes in their existing Acts in conformity with the 73rd and 74th Amendments.

India has made huge progress with political decentralization, but challenges remain with fiscal and administrative decentralization, with over 100 million people living in poverty in the lagging regions, there are significant spatial discrepancies between those regions and the leading ones. To advance economic democracy, India requires a level playing field.

The administrative machinery at various levels of government exhibits a significant variance in execution and monitoring.

Due to a number of reasons, administrative decentralization is lagging:
  • Resistance to change, partly because they fear the loss of control and authority over decision-making process.
  • Lack of capacity due to lack of trained personnel, inadequate financial resources, and insufficient administrative infrastructure.
  • Political interference is a major obstacle, which can undermine their ability to function independently and effectively.
  • A mixed and complicated administrative framework.

In order to make it work the central government should design common criteria for activity mapping of functions across different levels of government. To comprehend how money moves to lower tiers of government, activity mapping should be expanded to include centrally sponsored programs.

Funds should match functions and should be united and flexible. Panchayat should be empowered to hire and fire staff at the local level. PRIs should be allowed to seek the expertise and assistance of qualified professionals, institutions, and civil groups outside the government.

To monitor the development of administrative decentralization across the nation, the Devolution Index must be checked frequently.

Challenges of economic decentralization are related to discretionary transfer from the central government to sub-national governments tend to be shifted towards the richer state. Currently, panchayats do not contribute to the designing of the schemes. PRIs also have very little discretionary power while implementing any schemes. They also have limited control over their staff, unlike state or central have.

Suggestions for economic decentralization to make it work in India is to shift from scheme-based transfer into broad economic programs to increase rural livelihood. Provide more resources and expenditure responsibility to different levels of the government, along with increased financial resources, improved capacity, accountability, and participation at the local level for supporting the regions which are not performing well.

India is urbanizing at a rapid pace. India's decentralization agenda need to be aligned with the urbanization agenda at a large.

Decentralization is a tool for advancing economic democracy and providing services that are responsive and practical to the needs of the people. India must now proceed toward administrative and fiscal decentralization within the area of political decentralization as discussed above.

Economic democracy has the potential to considerably reduce inequality and increase the well-being of all social groups, notably the working class. Additionally, it circulates money among communities rather than concentrating vast quantities of wealth in the hands of a select few.

The founding fathers of the Indian constitution believed in the ideals of economic democracy and enshrined several provisions and principles to promote it.

India still has a long way to go before achieving economic democracy, however, due to issues like extreme inequality, a lack of administrative decentralization, and the dominance of corporate interest in governance. India should prioritize policies that increase public involvement in economic decision-making, deepen administrative decentralization, encourage inclusive growth, and lower economic inequality in order to advance economic democracy. India may advance towards a more just and equitable society that maintains the principle of economic democracy through concentrated efforts by politicians, civil society, and individuals.

  1. 1984 AIR 1471, 1984 SCR (3) 582
  2. AIR 1993 SC 477
  3. 1992 AIR 573
  4. 1992 AIR 1992 SCR (3) 658
  5. 1993 AIR 2178,1993 SCR (1) 594
  6. 1984 AIR 802,1984 SCR (2) 67
  7. 961 AIR 1170

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