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
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
Here are some ways in which the Constitution promotes economic
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
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.
Again, in the case of Indra Sahani vs. Union of India
, 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, 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, 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, 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. Industrial matters and notions of social
justice are to be avoided and applied in order to find a solution between
employers and employees.
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
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
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
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,
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
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
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
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.
- 1984 AIR 1471, 1984 SCR (3) 582
- AIR 1993 SC 477
- 1992 AIR 573
- 1992 AIR 1992 SCR (3) 658
- 1993 AIR 2178,1993 SCR (1) 594
- 1984 AIR 802,1984 SCR (2) 67
- 961 AIR 1170