Asia's Next Emerging Giant?: Political Change and Economic Reform in India

Research Paper 5 1996-97

Dr Stephen Sherlock
Foreign Affairs, Defence and Trade Group


Major Issues


A Flourishing Democracy

  • The Congress Party-Dominance and Decline
    • Secular Politics and State-centred Economy
    • Indira Gandhi's 'New' Congress
    • Congress after the Nehru/Gandhis
  • The BJP and the Hindu Right
    • The Hindu Nationalist Tradition
    • The Strengths and Weaknesses of the BJP
  • The United Front-The Politics of Caste, Class and Region
    • Parties of the Marginalised
    • The Rise of Regionalism

Economic Reform in a Democratic Society

  • Maintaining Economic Reform
  • Promoting Social Justice

Australia's Relations with India




Major Issues

In recent years India has been undergoing a basic redirection of its economic and strategic policy. The highly protectionist economic policies of the past are giving way to attempts to increase the country's integration into the world market. The collapse of the Soviet Union has forced India to build closer ties with pro-Western countries. All these developments mean India is seeking stronger connections with East and Southeast Asia. The opening of the Indian economy is bringing new commercial opportunities for Australia and with India's growing involvement in the Asia-Pacific and Indian Ocean regions, the affairs of the two countries are likely to intersect to an increasing extent in the near future

In the Indian elections of May 1996 no party was able to win a majority. Parliament was divided into three groupings of roughly similar size: the right-wing Bharatiya Janata Party (BJP) and two small allied parties, the centrist Congress Party, and the populist/leftist United Front. The BJP formed a government but was unable to survive its first vote of confidence in parliament. A government was then formed by the United Front (a coalition of about six major parties and a number of splinter parties and independents) under the leadership of Deve Gowda, with the Congress Party agreeing to support the coalition from the outside.

India is a vast country of great social, cultural and regional diversity. The country's democratic political system has prevented any one group from monopolising political power, but that diversity is now becoming the basis for governmental instability. With a disparate minority coalition in power and an increasingly fractured electorate, India may be entering an extended period of governmental instability just at the time when it is undergoing a major process of economic reform.

Economic reform was seen to be necessary because of the failure of India's state-directed, protectionist development strategy to make significant inroads into the country's poverty. Reform was initiated in 1991 in the wake of a balance of payments crisis. The reform process so far has been successful in increasing the Indian economy's exposure to the world market, increasing the flow of foreign investment and boosting economic growth to over 6 per cent. There are, however, concerns that reform may have stalled because of the Government's inability to tackle politically difficult structural changes.

The Congress Party used to dominate Indian politics. It has formed most of India's governments and it defined the mainstream consensus of the post-independence polity-secular politics and a state-led economy. Congress succeeded because it provided wide representation for minorities. Since the late 1970s, however, Congress has been in continuous decline from a grass-roots based mass organisation to a party dominated by small cliques and dependent on populist sloganeering for its electoral success. With the end of the Nehru/Gandhi family's leading role, Congress has not been able to overcome its leadership problems.

With the decline of Congress, the right-wing BJP has come into greater prominence. The BJP is the inheritor of a tradition of Hindu nationalism which has always rejected the Congress vision of secular politics and the protection of minorities. It has also exploited dissatisfaction with the apparent failure of India's state-led economic policies. The appeal of the BJP's Hindu nationalism remains confined, however, to middle-class, upper caste Hindus of northern and western India. Its reputation for extremism has prevented it from building alliances with other parties.

The United Front is made up of a range of disparate parties. It is composed of parties which could be seen as inheritors of the original Congress secularist ideas and of parties which are supported by the marginalised groups of India, whether in caste, class or regional terms. The rise of this coalition is a reflection of the growing assertiveness of many of India's minority groups.

The main challenge for the United Front is to maintain the momentum of economic reform while keeping to its promises of promoting social justice. The benefits of economic reform have yet to be felt by India's poor. Many of the reform tasks ahead of the Gowda government are difficult ones which will bring immediate hardship to many of its own supporters. But without changing the current structure of government spending, which is heavily weighted towards subsidies to producers and consumers, it will not be able to find capital for vitally needed investment in education, health and infrastructure. Major structural change will place strains on India's democratic system, but India is making significant progress in economic development without the violence which has overcome many developing countries.


The federal parliamentary elections in India in May 1996 produced a very uncertain result, with no party able to win a majority. Voting produced a parliament which was divided into three groupings of roughly similar size: the right-wing Bharatiya Janata Party (BJP) and two small allied parties, controlling 194 of the 545 seats, the centrist Congress Party with 136 seats, and the populist/leftist United Front, a grouping of several parties, controlling 177 seats. As the largest party in parliament, the BJP was asked by the President to form a government, but was unable to survive its first vote of confidence and resigned after twelve days in power. A government was then formed by the United Front under the leadership of Deve Gowda, with the Congress Party agreeing to support the minority coalition government from the outside-that is, in any key votes such as confidence votes in Parliament.

Doubts about the longevity of the new minority government, made up of disparate parties and dependent on the support of Congress, together with the increased fracturing of the Indian electorate, raise the possibility that India may be entering an extended period of governmental instability. These are particularly critical issues because India has, since 1991, been undergoing fundamental economic reforms which are yet to win popular acceptance and which could cause strains within the Indian political system.

India has, in recent years, begun to re-examine the assumptions on which its economic policy has been based. Indian policy-makers were shaken by the collapse of the Soviet Union in 1991, an event which ended India's most important international relationship, cut off one of its major sources of foreign trade and marked the final shattering of what had appeared to be an alternative model of economic development. A sense of immediate crisis was created when the country's foreign exchange reserves fell to critical levels in July 1991, forcing the government to seek bridging finance from the World Bank and IMF. The loans were provided on condition that India undertake a program of economic reform. This combination of circumstances triggered the beginning of a series of changes in India's economic policies which were designed to increase the country's exposure to the world market and to reduce the role of the state in the domestic economy.

At the same time the realities of the post-Cold War world have forced India to reorient and broaden its international relationships. In particular, relations with the United States, which had sometimes been frosty during the years of the Cold War, have developed markedly since 1991. India has made efforts to develop relations with countries in the Middle East and Central Asia and to cultivate commercial links in Western Europe. There is, however, still potential for friction in India's relations with other major powers. Like China, India has shown resentment that its aspirations to the status of a major world power due not always receive what it considers to be due recognition. India's efforts to play a leading role in the South Asian region have, in the past, led it into conflict with or within neighbouring countries. The dispute with Pakistan over the disputed territory of Kashmir is a continuing source of possible regional instability. Both India and Pakistan are considered nuclear threshold states and both countries' refusal to sign the Nuclear Non-Proliferation Treaty has been a cause of international concern.

Recent Indian policy has focused on increasing the country's involvement, both economically and strategically, in the Asia-Pacific region. This has been manifested in India's recently acquired status as a dialogue partner in the ASEAN Regional Forum and in the Indian Government's lobbying to join APEC. On the economic front, the increasing openness of the Indian economy has seen the beginnings of a flow of investment and technology from the burgeoning economies of South and East Asia, notably Singapore and South Korea.

From Australia's point of view these changes come at a propitious time as the country is looking to deepen its involvement with the countries of Asia. Australia's relations with India have traditionally been cordial but indifferent, tinged with occasional suspicions during periods of the Cold War. Trade between the two countries was fairly low, reflecting the differing structures of the two economies. In recent years, however, trade between Australia and India has begun to grow substantially, exceeding $1.6 billion in 1995.(1) While this is still far from the levels reached with other major economies of the Asia-Pacific, the growth in trade reflects the emergence of some commercial complementarity between the two countries.

This paper aims to provide a broader context in which to understand recent developments in the politics and economy of India. It examines the origins of the main political groupings and the reasons for the recent fracturing in the political system and the increasing difficulty in the establishment of stable majority government. The paper discusses the challenges presented to a minority coalition government by the still-unfolding process of economic reform in India and briefly considers the prospects for Australia-India relations.

A Flourishing Democracy

Despite its uncertain outcome, the election of 1996 proved to be one of the most peaceful and well organised in recent years, and underscored the basic strength of Indian political institutions. India is remarkable in being one of the few developing countries to sustain parliamentary democracy and a lively and open political life since its achievement of independence in 1947. Western commentators have tended to analyse every Indian election as a crisis of democracy, but on each occasion the country's democratic institutions and political culture have shown their resilience.(2) Because India is such a huge, culturally diverse country, no one social group can easily dominate the Indian polity. Representative democracy has flourished because it has maintained a balance amongst the various forces competing for political and economic power.

The very diversity of Indian society has, however, provided the background to the emerging problems of governmental instability. India is divided along regional lines: not only between the northern and southern regions of the country which are characterised by distinct historical, linguistic and cultural traditions, but also between the various states of the federal Indian Union, whose borders are mainly drawn to coincide with regional languages. To this should be added the differences between religious communities such as the Hindus (also internally divided on caste lines), Muslims, Sikhs and Christians, the rural-urban divide, and class distinctions between the mass of subsistence peasants and their landlords, together with growing new classes such as farmers producing for the market, urban workers and the wealthy business class.(3)

The Congress Party-Dominance and Decline

Despite the country's diversity, Indian politics was for many years dominated by the Congress Party, and to understand post-independence India one must understand the central role of this party. Before the recent election, Congress had been in power at the federal level ever since independence in 1947, except for two brief occasions from March 1977 to January 1980 and from November 1989 to May 1991. Congress inherited the immense prestige of being the main leader of India's independence struggle: the Congress flag, only slightly modified, became the flag of the Republic of India. Congress became one of the key binding political institutions in the post-independence Indian state, with a strong network of party organisations extending down to the village level where the mass of the Indian people lived. Local Congress politicians were often local landowners and people in traditional positions of power who used their influence to win votes, and who promised (and sometimes delivered) benefits to their constituents through connections in high places. From 1947 until the mid-1970s many political scientists described India as having a 'one dominant party system'.

Secular Politics and State-centred Economy

In addition to a strong base-level organisation, Congress was also able to articulate a vision which dominated political ideas and debate in post-independence Indian politics. The two key aspects of this vision were secularism and state-led national economic development. On the first, given the potential for violent conflict inherent in India's deep religious differences, the Congress leadership under M.K. Gandhi (usually known by the title popularly attached to him of 'Mahatma' or 'great soul') and the first Prime Minister, Jawaharlal Nehru, maintained a strict separation between religious and political affairs. Gandhi and Nehru projected an image of Congress as a protector of the rights of disadvantaged minorities such as the 'untouchables' (low caste Hindus) and the Muslims. These latter two groups became key electoral supporters of Congress. Secondly, Congress economic policy under Nehru emphasised the role of the state in building up an industrial base for India behind high protective barriers against foreign competition. During the 1950s and early 1960s these policies succeeded in promoting significant economic growth and were generally supported by the business class, the intelligentsia and urban workers. Congress policies held out the promise of economic progress for the poor, with equity in income distribution for all communities.

The organisational and political dominance of Congress was, however, not as total as it appeared. Although it won most elections, it was never able to win a majority of votes. It won a majority of seats under India's 'first-past-the-post' electoral system because the opposition parties were so fragmented. Challengers from the left, in the form of the Socialists and Communists, gained significant electoral support, but could not shake Congress from its central position because they really only offered modified versions of the Congress vision. The left parties were committed to secularism and would have liked even more state involvement in the economy. Challengers from the right, mainly Hindu fundamentalists, had little appeal beyond high-caste urban Hindus. The small right-wing Swatantra Party had some wealthy backers, but could muster little electoral support. Although these left and right parties together won more than 50 per cent of the vote, they could not unite except in their opposition to Congress: hence the short tenures of the non-Congress coalition governments formed in 1977 and 1989.

Indira Gandhi's 'New' Congress

By the late 1960s, cracks had begun to appear in the Congress 'system'. From the mid-1960s economic growth began to falter as the achievements of autarkic, state-controlled economic growth reached their limits, and a series of poor monsoons brought hunger and even famine to large parts of the countryside. These problems emerged just as popular expectations of economic progress were beginning to rise and electors were becoming more aware of the power of their vote. When even illiterate peasants began to vote contrary to the directions of the local landowner, the power of the village-level Congress organisation was weakened. In the 1967 election, Congress won little more than 40 per cent of the vote, and once again was able to form a government only because of opposition disunity.

The challenge of reviving Congress' fortunes fell to Nehru's daughter, Indira Gandhi (no relation to 'Mahatma' Gandhi) who had assumed the leadership of Congress in 1966, following the death of India's second (and now often forgotten) Prime Minister, Lal Bahadur Shastri. In what was to prove a fateful decision for Indian politics, Indira Gandhi took the Congress Party in an entirely new direction. She perceived that the old party bosses had lost their power to influence voters and precipitated a split in Congress in 1969 to rid it of the old leadership. Mrs Gandhi did not, however, rebuild the Party's grass-roots organisation, but based her resounding victory in the 1971 elections on a direct appeal to electors using the mass media and populist slogans such as Garibi Hatao (Abolish Poverty) to tap into the rising desire for economic prosperity. Symbolic of the dominant role of Indira Gandhi in the new Congress was its renaming as Congress (I) (I for Indira). From this time on Mrs Gandhi tolerated no opposition to her leadership within the party. Internal party democracy withered as appointments to party posts and preselection for election became dependent on Mrs Gandhi's support. It has been observed that she seemed to trust no-one within the Party except her older son, Sanjay. When Sanjay was killed in a plane crash in 1980, Indira brought her other son, Rajiv, into politics, despite his reluctance to join public life.

Congress under Indira Gandhi lost the 1977 election in a popular backlash against the suspension of democratic rights during the 1975-77 Emergency, but regained power in the 1980 elections after the Janata Party coalition government collapsed. By this time, however, Congress as an organisation was a shell of its former self and depended even more on Mrs Gandhi's personal charisma. The radical-sounding populism of the 1970s was losing its electoral appeal. Measures such as nationalising the country's banks and abolishing state subsidies to India's former aristocracy may have had symbolic attraction, but they delivered little or nothing in real benefits to the mass of India's poor.

In the place of such populist gestures, Mrs Gandhi attempted to win the support of those (mainly higher caste and middle class) Indians who resented what they saw as pandering to minorities. Congress began to voice rhetoric which had previously been the monopoly of the Hindu right, such as preserving the rights of Hindus and defence of the Indian nation in the face of internal elements such Sikh separatists and external threats such as Pakistan. While such ideas were popular in a more right-wing constituency, they cost Congress votes amongst its traditional low-caste and Muslim supporters, and a hard line against minorities risked stirring up conflict. Indeed Gandhi paid the ultimate cost when two of her Sikh bodyguards assassinated her in 1984. The guards had shared the anger of most of their community when Gandhi had ordered the Army to storm the holiest of Sikh shrines, the Golden Temple in Amritsar, to remove extremist Sikh separatists who were using the building as a sanctuary.

The assassination of Indira Gandhi revealed the extent of the decay of Congress as a grass-roots organisation and the depletion of the ranks of its leadership. Party involvement had become attractive to individuals with a greater commitment to personal aggrandisement than political principle. With Indira's death there was no Congress leader of any significant stature, and the Party found itself with no option but to try to capitalise on the Nehru/Gandhi name by inducting her politically inexperienced son, Rajiv, into the leadership. Rajiv benefited from his image as a youthful fresh face untainted by the reputation for corruption which marked most other Congress leaders, and in the wave of sympathy for Congress after Indira's assassination, led the Party to victory in the 1984 election. As Prime Minister, however, Rajiv failed to break with his mother's tendency to be intolerant of independent figures within the Party and became embroiled in allegations of kick-backs in overseas armament contracts. Congress was defeated in the 1989 elections, and during campaigning for the subsequent elections in May 1991 Rajiv was assassinated, leaving a vacuum of leadership in the Party. The Party's weakness was exemplified by the serious suggestion that Rajiv's Italian-born wife, Sonia, who had made no secret of her distaste for political life, should take up the reins of leadership.

Congress after the Nehru/Gandhis

In the 1991 election Congress once again benefited from a sympathy vote following Rajiv's assassination, but was barely able to form a parliamentary majority under the leadership of Narasimha Rao. Rao was in poor health and was widely seen as a compromise and transitional figure, but he proved to be a more lasting leader than generally anticipated, and led Congress through a full term of government from 1991 until the elections of 1996. The economic reforms begun under Rao's administration did not really lose Congress votes, but failed to bring the Party any electoral rewards because they did not show tangible benefits for most Indians. Rao made a fitful attempt to reform the Congress Party by holding internal elections, but abandoned the effort in the face of strong opposition from vested interests in the Party. His leadership was generally seen as uninspiring, and faced with growing allegations of corruption against large numbers of Congress leaders, Rao has been unsuccessful in stemming the loss of popular support and respect for the Congress Party. The results of this failure were evident in the defeat of Congress in the May 1996 elections.

Many commentators, both hostile and sympathetic to Congress, have concluded that the Party is in a state of terminal decay. It has been observed that without the assassination of two of its leaders Congress might not have achieved its last two election victories. Despite leading the Party to defeat, Rao initially retained his leadership but resigned as President of the Party in late September 1996 after he was summonsed to court to answer allegations of being associated with corrupt business practices. The fact that the Party could only elect a 'provisional' President, Sitaram Kesri, while Rao continued to lead in parliament, further highlighted its leadership problems. Just the same, however, Congress has been a fixture of Indian politics for more than a century and can probably maintain a role even while drifting in a rather directionless manner. The question seems to be whether it can once again become something more than just one of a range of competing parties. Much of this, of course, depends on the activities of its rivals. The following section is therefore devoted to a examination of these other currents of political organisation in India.

The BJP and the Hindu Right

The Hindu Nationalist Tradition

While Congress was the largest single party in post-independence India, and its ideas of secularism captured the mainstream of debate, there were always rival currents which rejected the vision of the Indian nation articulated by 'Mahatma' Gandhi and Nehru. The most important of these was the Hindu right (sometimes called Hindu fundamentalists) which saw the Indian nation not in terms of a collectivity of communities but as an expression of Hinduism. They saw the non-Hindu religions of India, particularly Islam, as foreign impositions on the country, and argued that their presence was the result of the past subjugation of India and the forcible conversion of some of its people from their true native faith.

Such ideas were not without their adherents in Congress itself and some Congress supporters were quietly in favour of the partition of India in 1947 as a way of ridding the country of Muslims. The main expression of the Hindu nationalist current was, however, found in an organisation called the RSS (initials for a Hindi name meaning, roughly, National Volunteers' Association or National Service Squad). The RSS, organised along paramilitary lines, emphasised discipline and service to the Indian nation, which of course it saw as a Hindu nation. Because it was an extremist with RSS connections who was responsible for the assassination of 'Mahatma' Gandhi in 1949, the organisation was banned for some time after independence and retained a stigma for many years. Nonetheless, it retained a committed core of supporters and with its well-organised cadre structure built up an impressive political machine which now numbers in the hundreds of thousands.

The RSS has seen itself as a cultural service movement rather than a political party, but it has been the inspirational and organisational core of parties which have openly campaigned on a Hindu nationalist platform. The first of these, the Jan Sangh (People's Association), became a prominent opposition party during the 1960s and early 1970s. Although the Jan Sangh consistently won less than 10 per cent of the vote, together with other opposition parties it became the driving force behind a campaign of mass opposition to Congress which was one of the main reasons for Indira Gandhi's declaration of the Emergency in 1975.

With the organisational and political decline of Congress, Hindu nationalist groups began to grow in influence from the late 1970s. The role of the RSS and the Jan Sangh in opposing authoritarian Emergency rule broke down some of their political "untouchability" as far as other parties were concerned. In the 1977 election a number of Congress MP's joined together with the Jan Sangh and a couple of centrist parties and formed the Janata Party, roundly defeating Congress and forming India's first non-Congress government. The Janata Party coalition collapsed within two years and Congress regained government in the 1980 election, but the Hindu right had strengthened itself considerably and reorganised itself into the Bharatiya Janata Party (BJP) in 1980. The BJP fared poorly in the 1984 election, but in subsequent polls improved its position in terms of both votes and seats. In 1991 it won almost 21 per cent of the vote, and although its support hardly changed in the 1996 election it picked up many more seats and became the first non-coalition party to win a larger parliamentary representation than Congress, albeit well short of a majority.

The Strengths and Weaknesses of the BJP

The social basis of the BJP is largely found in the urban lower middle class of northern and western India. The BJP also gains support in some rural areas in this region where its leaders from the former local aristocracy continue to wield influence. Hindu nationalism has long had currency among traditional merchant groups; and as India has urbanised, such ideas have spread to the growing lower middle class, particularly those with a high or middle caste background. The BJP's main problem is that this strong support base is also its biggest limitation. Hinduism is a religion with many manifestations and is socially divided along caste lines. The version of Hinduism articulated by the BJP has appeal only amongst high and middle caste groups in the north and west, and is strongly rejected by many lower castes (especially untouchables). It finds few adherents at all in the south of the country. Thus even when winning its largest ever number of seats in the recent election, it has virtually no representation in the southern or eastern states, including populous states such as Tamil Nadu and West Bengal.

The dilemma for the BJP is a choice between appealing to its core support and thus remaining limited in its social and regional base, or watering down its ideology to win wider appeal and thereby alienating its traditional followers. The Party did, for example, win many supporters during its campaign, during the early 1990s, to demolish a mosque in Ayodhya in the northern state of Uttar Pradesh because it was said to be built on the birthplace of the Hindu god Ram. But the wave of violence which swept parts of the country after the mosque's destruction in late 1992 turned many potential voters away from the BJP because of its association with extremism. Many business people, who as a group had been wooed by the BJP, were alienated by fears that the Party's campaigns were a source of political instability which could jeopardise economic activity. Related to these problems has been the BJP's loss of its previous image of incorruptibility and discipline. The BJP has campaigned with claims of being a 'clean' party unsullied by the corruption associated with Congress, but its record when in government in a number of states has destroyed much of this popular goodwill. A reputation for corruption has now reached the highest levels of the Party at the national level, with several leaders resigning from parliament before the last election because of allegations of corrupt practices.(4)

The increase in support for the BJP in recent elections has led some foreign commentators to see the Party as the future dominant party in India. With more close analysis, however, one can see the force of the arguments of other observers who consider that the BJP may well have reached the limits of its strength. Despite its growth, the Party remains a party of the north and west of the country. With the exception of the Shiv Sena, (an extreme right-wing party in the western state of Maharashtra), the BJP has not been able to build the alliances with other parties to enable it to form a coalition or minority government at the federal level. While the BJP sees its version of Hinduism as the model for all Hindus (and all Indians), Hinduism is in fact a tolerant religion whose theological and social diversity is stronger than any attempt to homogenise it. In fact, attempts by what are seen as upper-caste northerners to impose their ideas on other parts of the country are resented and opposed by many Indians, including many Hindus.

The BJP's problems in breaking out of its heartland are particularly acute because in recent years there has been increasing politicisation amongst lower-caste and untouchable Hindus and amongst many regional minorities. These developments have become part of the driving force behind the third current of Indian politics which is examined in the following section.

The United Front-The Politics of Caste, Class and Region

In the recent elections neither of the two largest Indian parties formed a government, but power was assumed by a diverse coalition of minority parties called the United Front, under a previously little-known (to foreign observers at least) regional leader, Deve Gowda. Gowda was Chief Minister of the southern state of Karnataka and state leader of the largest party in the coalition, the Janata Dal (People's Party, not to be confused with the Janata Party which was in power in 1977-80). The diversity of these parties makes it difficult to outline a complete picture, but there are a number of common currents amongst these parties which have made them logical coalition partners.

Parties of the Marginalised

The most important common denominator of the United Front parties is that their popular support is drawn from many of the marginalised peoples of India. This may be understood in class terms since they tend to be peasants, landless agricultural labourers or urban workers, in caste/religious terms as members of lower castes or minorities such as Muslims, or in regional terms in that many are outside the demographic and political heartland of Hindi-speaking northern India. Recent years have witnessed increasing assertiveness amongst many underprivileged groups in both rural and urban India, particularly the development of a current of low-caste peasant leaders who mobilise supporters on the basis of caste solidarity. In certain parts of the country one or two lower castes may form a majority of the regional population and have come together behind parties which have become dominant within their home state. The common idea that caste makes people passively resigned to their fate is becoming decreasingly true, if it ever had much validity. The current Parliament has a higher number of representatives from minorities and what are generally called 'backward' groups than at any time in India's post-independence history.(5)

The Janata Dal draws its support from lower caste peasants and farmers in a number of states in both the north and south of the country, together with pockets of trade union support. Many of its leaders are former Congress politicians who became disillusioned with Congress because of its undemocratic internal regime and because of its drift away from secular politics in the 1980s. Many left Congress during the course of the party's regular factional and personal disputes. Other Janata Dal leaders were members of the socialist parties which were important rivals to Congress in the 1960s and 1970s. The Janata Dal has thus attracted many former Congress voters or those who might have supported more leftish versions of the Congress vision in the past. It is the United Front party with the greatest claim to be a national party and it has most of the experienced national-level leaders. The United Front is also supported by the smaller of India's two communist parties, which can also be seen as part of the secular-centrist-leftist tradition. The larger of the two communist parties, which is powerful in the states of West Bengal and Kerala, is not part of the coalition but has promised to support the United Front in key parliamentary votes.

The Rise of Regionalism

Other constituents of the United Front are strictly confined to a particular state. In the case of the Samajwadi Party in the large northern state of Uttar Pradesh, this is because the castes which tend to support it are mainly confined to that state. In other cases, the party has become influential because it has been able to tap into regional sentiment and a sense of separate identity. The oldest party of this type is the DMK(6) in the southern state of Tamil Nadu where there has been a long tradition of regional nationalism. In the 1950s there was a violent agitation in Tamil Nadu against the attempt to spread Hindi as a national language, because it was seen as a threat to Tamil identity. Similarly, the Telegu Desam Party is another regional party which expresses some of the cultural distinctiveness of another southern state, Andhra Pradesh. There are also a number of other regional parties from the smaller states of the Indian Union who have joined the United Front, including from Punjab, Assam and Kashmir.

Economic Reform in a Democratic Society

Many commentators have questioned whether the United Front government can survive in the long term or will break up because of internal policy and personality differences. The precedent of the previous two non-Congress administrations does not augur well for the future of the Gowda government, as both collapsed well short of half a normal term in office. The United Front's greatest weakness is that many of its leaders are ambitious and individualistic and have a history of factionalism and party-splitting based on mainly personalised disputes. Its main asset is that it is made up of parties which do have philosophical commonalities and whose supporters come from similar social and economic backgrounds. They have been able to produce a Minimum Common Program which lays down a set of political objectives. The Gowda government's prospects for stability improved when the resignation of Narasimha Rao as President of Congress ensured that Congress would be preoccupied with its own internal leadership wrangles.

Apart from the problems inherent in its make-up, the Gowda government's greatest challenge will be to continue with the program of economic reform begun under the previous Congress government while not compromising on what it sees as its special goal of advancing social justice. Bringing about major structural reform is a difficult task for any government, but the challenges are especially acute for policy-makers in a developing country where the groups that bear the often considerable costs of reform cannot be ignored because they still have a voice in the democratic process. The United Front's primary criticism of reform under Congress was that it was taking place at the cost of the poor and was focused only on the interests of business and the middle class. It will therefore be under pressure from its own constituency to show that there are tangible benefits in the continuance of restructuring and that the poor will be protected from its ill-effects.

Maintaining Economic Reform

The economic reforms begun in 1991 were motivated by a growing perception that the development strategy pursued by successive Indian governments since Independence had largely failed. India maintained a growth rate of about 4 per cent during the 1950s, with stagnation and serious drought during much of the mid-1960s, before returning to a rate of less than 3.5 per cent during the 1970s. This performance came to be referred to as the 'Hindu rate of growth'-not disastrous but far from spectacular and certainly insufficient to make major inroads to the country's widespread poverty. There were important achievements during this period: in particular the food shortages which led to famines during the droughts of the mid-1960s are now a thing of the past. Increased irrigation and improved productivity from 'Green Revolution' farming technology have made India self-sufficient in food and government-funded poverty-alleviation programs have ensured that food is distributed to drought areas. Nevertheless, up to 30 per cent of the population still live below the poverty line as defined by the Indian government, although even this is an improvement over the nearly 50 per cent of two decades ago. Poverty remains especially entrenched in many rural areas and regional disparities are a major cause of concern, with some areas yet to benefit from the improvements of recent years.(7)

Economic growth improved during the 1980s, with an average of over 5 per cent during the decade. The reasons for this improvement are the subject of debate, but most commentators agree that it was assisted by the limited reforms to government regulations, the taxation system and currency devaluation from the mid-1980s.(8) The enhanced performance of the 1980s came to an end, however, with the massive foreign exchange crisis of 1991. Balance of payments problems have been a persistent feature of the Indian economy, with remittances from Indian workers in the Middle East being relied on to compensate for the trade deficit and the cost of servicing foreign loans. This delicate balance was upset by the Gulf War of 1990-91 which brought the combined impact of a sudden end to remittances and an increase in the cost of imported oil.

With external sources of financing drying up, domestic savings as a ratio of GDP stagnant at around 20 per cent and imports not financed by export earnings, the economy was plunged into a liquidity crisis in early 1991. The Government was left with no choice but to make a concerted effort to reduce the current account deficit.(9)

Faced with this crisis, the Rao government agreed to an IMF/World Bank program of structural adjustment which provided loans to overcome the immediate financial problems and which stipulated that the government undertake a number of measures to open the Indian economy to greater international competition.

Liberalisation under the Rao government concentrated on reforms in the financial sector and in the investment and foreign trade regime. Key reforms since 1991 have included:

  • Encouragement of private sector investment with the abolition of licensing requirements for investment in most industries and a reduction in the number of sectors reserved for public investment;
  • Elimination of the requirement for large companies to seek permission for expansion, merger or takeover;
  • Encouragement of foreign investment, with the ceiling on foreign equity holdings increased to 51 per cent (up to 100 per cent in some cases);
  • Phasing in, from 1991 to 1994, of full foreign convertibility of the rupee on the current account, with partial capital account convertibility (this has led to substantial devaluation of the rupee);
  • Liberalisation of foreign trade, including replacement of most import quotas with tariffs, reduction of the maximum tariff from 150 per cent to 65 per cent, and a reduction in the number of imports subject to licensing requirements; and
  • Reform of the banking system to bring accounting and management systems towards international norms and to make the banks (which are state-owned) more market-oriented.(10)

The clear signs of Government commitment to reform, together with international concessional finance, quickly overcame the immediate crisis of foreign exchange and international investor confidence. The longer term effect has been a steady increase in the inflow of foreign capital. In 1995 the total capital inflow to India was over $US22 billion. Foreign direct investment increased from virtually zero in 1990 to almost $US2 billion in 1995-96. Portfolio investment increased from less than $US100 million in 1992-93 to $US3.6 billion in 1994-95.(11) Economic growth has been over 6 per cent in the last two years, and projections have estimated a 6-7 per cent rate in 1997. Industrial growth has been around 10-13 per cent in the same period.(12)

Despite these developments, however, it remains to be seen whether the Indian economy will be capable of sustaining such growth in the long term and of reaching rates of growth comparable with the economies of East and Southeast Asia. Increased foreign investment, while impressive in Indian terms, is still nowhere near the level experienced by China over the last decade. The poor state of much of India's transport, power and communications infrastructure is rapidly emerging as a major constraint on development and will require massive investment to bring it to international standards. Despite the encouragement of private investment, the state sector still retains a dominant position in basic secondary industry. Most state-owned corporations are unprofitable and consume large amounts of investment capital, but their privatisation or restructuring remains an extremely sensitive political issue. Much of the vital agricultural sector is still at the mercy of the monsoon, and India's good fortune in experiencing eight successive good seasons cannot continue indefinitely.(13)

Many international commentators have expressed concerns that the United Front government might not proceed with economic reform because of its fragile character and because of its leftist orientation. Prime Minister Gowda has, however, been quick to reassure international investors that his government is committed to further liberalisation of the economy and to attracting foreign capital. When Gowda was Chief Minister of the southern state of Karnataka he was well-known for his efforts to promote both foreign and domestic investment. He was also prepared to tackle politically difficult issues such as reforming urban land laws-the avoidance of this issue by other state governments has helped push rents and land prices in cities such as Bombay to world record-breaking levels. Bangalore, the capital of Karnataka, is now said to be Asia's fastest growing city and is home to much of India's burgeoning computer software industry. Other strong advocates of reform in Gowda's cabinet include the Finance Minister, P. Chidambaram, who was actually the Commerce Minister under Narasimha Rao, and the Industry Minister, Murasoli Maran, who has reportedly spent most of his brief time as Minister simplifying procedures for the approval of foreign investment proposals.(14) The government has, however, been in power for five months at the time of writing and has yet to undertake any major new initiative in the reform process. There are signs that foreign investors are becoming wary that reform has stalled. A recent conference on German investment in India supported by both the German and Indian governments, for example, showed continued German investor interest in India but indicated growing reservation about the continuity of reform. Some investors express their frustration at the persistence of complex regulations and slow official decision-making.(15)

Promoting Social Justice

The critical issue for the Gowda government will be to maintain progress on economic reform while making good on its promises to promote social justice and the economic uplift of India's poor. In many ways the Rao government has already completed much of the easy part of the reform process, mainly financial and trade measures which pleased domestic and international business interests without imposing significant social costs. While the new government has continued with reforms aimed at increasing the level of foreign capital flowing into India, it has yet to give any indication of a willingness to undertake changes which would affect the well-being of electorally-important groups in rural and urban areas.

The most difficult problems confronting the United Front administration will be fiscal policy and the role of public sector industry. Prime Minister Gowda, like his Congress predecessor, has the stated aim of bringing about a major reduction in the budget deficit, which is currently running at over 5 per cent of GDP.(16) The issue, however, is not so much the actual level of the deficit but the fact that much of it is composed of support delivered to agricultural producers in the form of fertiliser and electricity subsidies and high procurement prices and, on the revenue side, exemption of agriculture from income tax. Expenditure reductions in recent budgets have largely been achieved by cutting development spending, while outlays on subsidies have continued at the same level. The wealthier farmers who mainly benefit from these policies are thought to influence the votes of large parts of the rural constituency (such as their tenants and labourers) and successive governments have been loath to interfere with these subsidies, even though they are costly to the treasury and often distort the allocation of agricultural resources. The government also provides subsidies to keep food prices low for urban consumers, a scheme difficult to cut without a political backlash.

Restructuring of public sector industry is, similarly, a political as well as an economic problem. The public sector employs 4.9 million people in secondary industry and mining, which is equal to the number employed in private sector industries of the same kind.(17) Restructuring of these industries (including in the private sector where labour laws limit job-shedding) would inevitably mean the loss of large numbers of jobs, with resulting social dislocation and political discontent. Concern for members' jobs has led many trade unions to oppose industrial reform, but equal and perhaps more powerful opposition has come from the class of managers and administrators which has grown up around the post-independence expansion of the public sector.(18)

A few public sector industries are relatively efficient and some make a profit, but the sector as a whole is poor in terms of capital productivity, that is it requires large amounts of capital for a small increase in GDP.(19) This has the effect of crowding out scarce capital for other investment and pushes up interest rates, which are currently running at around 15-18 per cent.(20) These high rates are also exacerbated by government borrowing to finance the continuing budget deficit. Inflation as measured by the consumer price index has been in the range of 9-10 per cent in the last two years.(21)

Apart from the macroeconomic effects of these problems, the unbalanced allocation of resources to subsidies and public sector industries makes it difficult for the government to direct resources into the social spending necessary to promote the government's stated goals of social justice. One of the most telling criticisms of the current program of economic reform, based largely on World Bank/IMF models, is that it concentrates on macroeconomic settings without taking human resource development into account. Most examples of successful economic development in East Asia have been accompanied by high levels of government investment in education and health which boost labour productivity and the best use of labour resources. India's performance, on the other hand, in improving primary social indicators such as literacy, life expectancy, infant mortality rates and access to health services has been extremely poor.(22)

While attention to such issues should be high on the agenda of a government committed to social justice, the structure of government spending and overall resource allocation in the economy militate against government investment in education and health. In addition, the political culture from which many of the parties of the United Front have come has tended to be preoccupied with short-term populist schemes (such as subsidised rice by the state governments of Tamil Nadu and Andhra Pradesh(23)) which appear to benefit the poor and which reap immediate political gain, but which do not significantly improve long-term economic opportunity. The first budget of the Gowda government, delivered in July, was little different from what might have been expected under Congress, including cutting spending on development projects to limit the deficit, rather than by cutting recurrent expenditure on subsidies or by reforming the tax system. It remains to be seen whether the Gowda government can regain the momentum of reform lost during the political uncertainties of the recent interregnum and broaden the program of restructuring away from narrowly defined macroeconomic issues towards broader social concerns.

Australia's Relations with India

Australia's relations with India have been consistently cordial but rarely close. Before 1991, relations were sometimes overshadowed by differing Cold War allegiances, but links were maintained by shared active membership in the Commonwealth. The relationship has been characterised by long periods of relative indifference punctuated by fitful efforts to deepen mutual involvement. Prime Minister Rajiv Gandhi visited Australia in 1986, for example, a reflection of the strong personal rapport he developed with Prime Minister Hawke, but the expressions of amity and good intentions did not lead to development of substantial new connections between the two countries. Underlying the lack of progress was the fact that the two countries' economies had little complementarity. Australia's traditional strategic, economic and cultural orientation towards North America and Western Europe also found little common ground with India's focus on its own region and the Soviet Union.

Recent years have, however, seen the beginnings of change. The post-1991 opening of the Indian economy has the potential to enmesh with Australia's efforts to broaden its already strong links with the countries of Asia. Trade between the two countries has grown significantly in recent years, reaching $A1.6 billion in 1995 (See Appendix).(24) The Indian government's decision in 1994 to reduce tariffs on coal and wool widened opportunities for sales of these major Australian export commodities which, in 1995, made up 65 per cent of Australian exports to India. India's efforts to attract foreign investment and technology for much-needed infrastructure development is also presenting openings for Australian business. Telstra and an Indian partner, the B.K. Modi Group, recently won the contract to provide cellular phone services in Calcutta. As well as its telecommunications technology, Australia's mining expertise has the potential to find a growing role in India, with the main obstacle being slow progress on reform of India's restrictive mining regulations.

Australia's trade and investment in India is still very low compared with the countries of East Asia and further growth will depend essentially on continuing economic development in India. But the Australian government will have an important role in ensuring that the lack of attention to India that has marked past Australian policy does not allow new opportunities in India to be passed by. Recognition of the increasing importance of India led the Australian Government to sponsor a major trade, cultural and scientific promotion of Australia in India from October to December 1996 (under the title 'Australia-India New Horizons'). Although the Australian press chose to focus on organisational problems at one cultural event, the promotion appears to have had some success at improving Australia's profile in India. The previous Labor government and now the Coalition government have also recognised that developments in the Indian Ocean region, especially in South Africa and India, warrant increased attention as a complement to Australia's deepening involvement with Pacific Rim countries.

The development of greater economic and strategic ties with India has only really just begun and, for the foreseeable future they are unlikely to assume anything like the importance of relations with East and Southeast Asia. There will be a particular need for Australia to take account of Indian sensitivities as it upgrades its involvement in the Indian Ocean region. The Indian government reacted negatively to Australia's 1995 initiative on the establishment of an Indian Ocean regional grouping because it saw the proposal as overly ambitious and the attempt to include security issues on the agenda as inevitably involving sensitive issues such as Kashmir and nuclear weapons. The continuance of significant differences of approach on some key issues was underscored by the contrary positions taken by Australia and India over the Nuclear Non-Proliferation Treaty. Nevertheless it would seem important for the Australian government to give sustained attention to the Indian Ocean region to ensure that new ideas do not lapse in the manner that has sometimes characterised Australia-India relations in the past. The emergence of greater economic complementarity between Australia and India, Australia's growing involvement in Southeast and East Asia, and India's efforts to build greater links in the region suggest that the affairs of two countries are likely to intersect to an increasing extent in the near future.(25)


Supporters of economic reform argue that opening India to the world economy and reducing state involvement in the economy will promote economic growth and eventually benefit the mass of the people. While the reforms do appear to have improved growth in the last two or three years, the fruits of this growth have mainly been confined to some of the urban middle class. The GDP growth of the last two years (6 per cent) will have to be sustained well into the next decade before it has a significant impact on India's poverty. Whether a government elected on a promise of social justice can rely on the patience of the people of India is a moot point. It is unlikely, moreover, that growth will be sustained unless there is vastly improved access by India's poor to the services which promote human resource development.

India is entering a period of major change as it turns away from many of the economic policies which have been part of the consensus of the country's politics since independence nearly fifty years ago. Reforming an economy which was structured around high levels of protection and heavy state involvement is a massive task with great promise but with many risks. While there is the promise of benefits for many in the future, there is also the reality of immediate costs being borne by some who can ill-afford them. Within a democratic polity these tensions are sure to manifest themselves in electoral politics and in increasing pressures on the country's leaders. Most of India's parties are effectively committed to economic reform, whatever their rhetorical position, but there does not yet appear to be widespread popular support for the new policies.

There is usually a mismatch between what politicians are forced to promise in a democracy and what they can actually deliver in an underdeveloped economy. Thus many Indian parties have tended to build their support on irresponsible populist claims or by diverting people's attention to supposed enemies within, such as religious or other minorities. In a land as large as India, there is a danger that these divisions can become as myriad as the many communities of which the country is composed. The recent fracturing of Indian politics is, in part at least, a reflection of some of these realities. On the other hand, it is unlikely that any other political system could contain the diversity of Indian society and maintain a tradition of fifty years of peaceful changes of government. Few Third World countries have made the transition to developed status without major upheavals and violence. Despite its problems, and the prospect of instability in the parliamentary sphere in the immediate future, India appears to have taken some important steps towards such an historic achievement.


  1. Department of Foreign Affairs and Trade, Composition of Trade Australia 1995, p.170.
  2. Sumit Ganguly, 'Uncertain India' Current History, April 1996, p.145-50.
  3. For a survey of the minority populations of India see Myron Weiner, 'India's Minorities: Who are hey? What do they Want', The Indian Paradox: Essays in Indian Politics New Delhi, 1989, pp.39-75.
  4. Walter Andersen, 'India in 1995: Year of the Long Campaign' Asian Survey, February 1996, pp.171-72.
  5. Harinder Baweja, 'Changing Face of Parliament', India Today, 15 July 1996, pp.25-36.
  6. Tamil initials for Dravida Munnetra Kazhagam or Dravidian Progressive Federation. Although the DMK has support only in Tamil Nadu, 'Dravidian' refers to the peoples of southern India whose anguages are unrelated to the languages of northern Indian such as Hindi, which are more closely related to the languages of Europe. The DMK also had its origins in an anti-Brahmin movement in he region dating from the turn of the century, which saw the high-caste Brahmins as part of the oppression of the Dravidian peoples by the Aryan invaders from the north.
  7. East Asia Analytical Unit, India's Economy at the Midnight Hour: Australia's India Strategy, 1994, p.20.
  8. John Adams, 'Reforming India's Economy in an Era of Global Change' Current History, April 1996, p.151. East Asia Analytical Unit, India's Economy at the Midnight Hour, pp.42-43.
  9. East Asia Analytical Unit, India's Economy at the Midnight Hour, p.44.
  10. Economist Intelligence Unit, India Country Profile 1994-95.
  11. Department of Foreign Affairs and Trade, Country Economic Brief: India, June 1996, p.20.
  12. Economist, 27 April 1996, p.22.
  13. For a survey of the problems and prospects for the Indian economy see, East Asia Analytical Unit, India's Economy at the Midnight Hour.
  14. Far Eastern Economic Review, 12 September 1996, p.56.
  15. The Hindu, 5 November 1996, p.16.
  16. Economist, 27 April 1996, p.22.
  17. In 1994, 4.9 million people were employed by the public sector in industry and mining, with 4.82 million employed in the same industries in the private sector. Centre for Monitoring the Indian Economy, India's Social Sectors, February 1996, p.233.
  18. Far Eastern Economic Review, 9 March 1996, pp.58-60.
  19. Economist Intelligence Unit, India Country Profile 1994-95, p.18.
  20. Australian Financial Review, 24 September 1996, p.14.
  21. Asian Business, July 1996, p.35.
  22. United Nations Development Programme, Human Development Report 1995, pp.155-57. The UNDP Human Development Index rates India at 134 of the 174 countries listed.
  23. Economist, 27 April 1996, p.23.
  24. This figure omits the important indirect trade in diamonds between Australia and India which is estimated at around $400 million. The trade is routed through the international diamond exchange n the Netherlands.
  25. For a comprehensive discussion of Australia's relations with India see East Asia Analytical Unit, India's Economy at the Midnight Hour: Australia's India Strategy, 1994 and 'India', The Australia-Asia Survey, 1996-97, Melbourne, 1996, pp.181-205.



A$'000                                               1991       1992      1993       1994      1995 

Total exports                                     662,625    840,233   921,616    874,094 1,103,552 

Total imports                                     258,793    321,230   406,892    476,066   553,370 

Balance of merchandise trade                      403,832    519,003   514,724    398,028   550,181 
Principal Australian Exports to India (a)               

054  Vegetables f.c.f. or simply prepared           21,174    17,253   27,276    47,205     13,744 
263  Cotton                                            315    13,898      702    13,338      3,234 
268  Wool & animal hair (incl wool tops)            65,232    88,966   89,416    98,803    135,217 
284  Nickel ores conc & mattes                       7,855     4,448    1,181         0      2,379 
287  Ores & conc of base metal nes                       0    16,389   15,481    18,286     26,640 
288  Base metal waste & scrap nes                    4,752     7,473   10,166    10,217      9,601 
2*   Crude materials (excl food & fuels)             4,318     4,553    6,162     7,515      7,392 
321  Coal                                            2,732   394,089  439,737   486,363    587,894 
333  Crude petroleum & oils                         61,850    41,802   11,255         0          0 
334  Refined petroleum & oils                       59,573     3,415       21        48        136 
3*   Mineral fuels lubricants etc                    3,554     1,901      647       246          2 
522  Inorganic chemical elements oxides etc          3,501     1,098    7,505     5,046      7,754 
575  Plastics in primary forms nes                   6,309     7,904   11,676     7,581     18,668 
5*   Chemicals & related products                    3,572     4,929    6,968     9,572     13,161 
673  Flat-rolled iron steel not coated               1,274     3,933      183    21,977     28,048 
67*  Iron & Steel                                    1,687     1,732    1,187     5,028     11,806 
682  Copper                                          1,245    12,284   24,862    21,766     48,767 
685  Lead                                            8,991     8,555    9,467    16,931     17,035 
686  Zinc                                           16,508    16,360   10,114     8,220      4,698 
6*   Manufactures classified by material             5,230     6,279    8,190     9,974     19,412 
723  Civil engineering equipment                        43    32,977   14,296       401      1,316 
728  Other industry-specific machinery                 712       962    1,689     2,938     41,145 
744  Mechanical handling equipment                       6    13,638   16,138     2,390      1,196 
759  Computers & office mach parts etc                 746     1,627    7,601     4,958     11,789 
77*  Electrical machinery & appliances               1,014     6,150    7,636     7,581     11,276 
792  Aircraft and associated equipment                 497       526   12,904     3,832      3,466 
793  Ships boats & floating structures                   0    12,025       10     1,085        423 
7*   Machinery & transport equipment                 4,165     5,954   14,100    23,183     31,947 
874  Measuring & checking equipment                  2,021     5,825    3,745     2,681      3,602 
882  Photo & cinematographic supplies                1,098     1,669   4, 773     4,066      1,827 
8*   Miscellaneous manufactured articles             2,238     2,638    5,142    11,334      9,529 
988  Confidential items of trade                   368,971   95, 849  150,008    13,487     24,704 
     Other                                           1,448     3,128    1,378     8,038      5,753 

Principal Australian Imports from India (a)             
036  Crustaceans etc f.c.f. dried                    3,054     1,977    2,645     2,715      2,270 
057  Fruit & nuts fresh or dried                    18,092    15,750   22,991    25,198     30,681 
071  Coffee & coffee substitutes                     1,408     1,974    2,455     6,910     13,167 
074  Tea & mate                                      7,353     8,595   10,337     8,963      8,376 
0*   Food & live animals                             4,745     6,475    9,423     8,671      7,811 
273  Stone sand & gravel                             3,989     5,033    4,701     4,480      3,837 
281  Iron ore & conc                                11,470    12,290   12,133     8,532     10,054 
292  Crude vegetable materials nes                   2,035     2,730    2,881     3,809      4,622 
2*   Crude materials (excl food & fuels)             2,529     3,327    3,558     4,099      4,521 
515  Organo-inorganic & heterocyclic comp            2,098     3,669    5,534     5,293      8,576 
516  Organic chemicals nes                           3,216     2,310    3,238     2,542      2,733 
51*  Organic chemicals                               1,468     2,058    2,914     3,892      5,113 
523  Metallic salts & peroxysalts                    3,232     2,053      576       489      1,309 
531  Synthetic organic colouring matter              3,004     4,218    6,038     5,103      5,019 
5*   Chemicals & related products                    3,720     3,986    6,822     9,734      9,047 
611  Leather                                        10,023    10,101   10,263    11,819      7,562 
62*  Rubber manufactures nes                         2,326     3,387    2,630     3,264      5,692 
651  Textile yarn                                   13,606    20,508   24,401    28,766     29,970 
652  Cotton fabrics woven                            9,519    16,367   21,059    27,333     24,738 
654  Textile fabrics woven nes                       9,410    11,545   11,092     8,082      6,770 
658  Made-up textile articles nes                   12,542    24,475   25,964    18,714     26,765 
659  Floor coverings                                 8,334    11,246   15,088    19,556     19,506 
661  Cement & construction materials                 1,688     1,492    2,260     5,347      7,020 
667  Pearls & precious stones                       22,699    19,354   23,847    24,893     25,414 
66*  Non-metallic mineral manufactures               1,361     1,509    2,864     5,202      5,296 
671  Pig iron granules & ferro-alloys                  122       325       19        16     12,434 
675  Flat-rolled products of alloy steel               274       666    4,302     6,617      5,071 
676  Iron & steel bars rods etc                      2,238     1,921    1,851     9,706      6,504 
679  Tubes pipes etc of iron steel                   3,428     2,104      871     1,825      1,971 
67*  Iron & steel                                      578       599      269       375      6,037 
695  Hand or machine tools                           2,079     1,888    2,551     3,865      3,158 
699  Metal manufactures nes                          5,781     9,545   10,501    13,194     14,896 
69*  Manufactures of metals nes                      2,538     3,472    4,321     6,142      7,982 
6*   Manufactures classified by material             3,408     6,375    7,536    10,727     13,232 
71*  Power generating machinery                      1,703     2,290    3,084     3,845      3,547 
74*  General industrial machinery                    4,955     5,930    8,297    10,353     11,939 
778  Electrical machinery nes                        1,831     2,243    3,728     7,023      8,690 
782  Goods and special purpose vehicles                411     1,862    1,308     6,314      4,125 
78*  Road vehicles                                   1,968     2,364    3,239     3,786      4,658 
7*   Machinery & transport equipment                 2,466     3,229    4,012     6,511      7,298 
831  Travel goods handbags etc                       9,803    12,302   14,751    21,077     26,281 
841  Males' clothing not knitted                     9,254    12,849   14,557    20,324     32,331 
842  Females' clothing not knitted                  14,966    21,942   28,355    32,626     37,646 
845  Clothing of textile fabrics nes                 2,570     3,270    4,407     5,324      7,924 
84*  Clothing                                        3,374     4,846    5,580     7,277      8,847 
851  Footwear                                        9,456    10,064   15,166    19,185     22,395 
894  Sporting goods toys games etc                   6,256     7,105    8,813    10,717     12,247 
897  Jewellery                                       1,142     2,283    5,184     4,295      2,939 
89*  Miscellaneous manufactured articles nes         1,524     2,212    5,581     5,718      6,239 
988  Confidential items of trade                     1,705       407    8,735       210      2,006 
     Other                                           2,041     2,710    4,157     5,605      7,108 
(a) Commodity groups do not include any items classified as confidential   

*   denotes 'Remainder of category'                                        

Source: DFAT, Composition of Trade, Australia 1995