4 - The local State and the informal economy

Summary

The balance between state and market has changed over time, from a relationship of control and antagonism to one of partnerships and complementarity. In solving the problems of market failure and helping markets to grow … (g)overnment intervention can be market enhancing

(Chhibber 1996, p. 15).

The World Bank's vision of the State, captured in this quotation from the Staff Director of the Bank's 1997 World Development Report on the role of the State, could hardly be more different from the reality of the actually existing State in the India of the 88 per cent. The aim of this chapter is to bring out this difference, its causes and potential consequences, and to grasp the role of the State as a structure of accumulation at the local level. We will find that while corruption, which the Bank sees as the central problem of the State, is indeed commonplace, a deeper and more quantitatively important phenomenon is fraud. Of particular significance is the complicity of the State in tax evasion; indeed, the development of tax evasion is the real ‘structural adjustment’ that has occurred in recent decades, a structural adjustment more significant and profound than the set of reforms implemented under that title from 1991 onwards.

The actually existing State

Few terms in social science are as contested as that of the State, but this chapter deals with it at a much lower level of abstraction than that at which most of the debate has taken place.