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Tuesday May 28th, 2024

What should modern independent India be and how can it get there?

This excerpt features the introduction to Mark Hager’s recently published book, ‘Elusive Ideology: Religion and Socialism in Modern Indian Thought,’ along with the book’s first chapter on the foundational work of the prototypical Hindu socialist, Vivekananda.

This is a study of what could be called the ambivalent relationship between religion and socialism in modern Indian thought. It highlights both congruences and antagonisms between religious and socialist ideas in a handful of leading thinkers. It explores problems they encounter attempting to reconcile religious and socialist concerns. It emphasizes the general character of these problems by highlighting recurrence of common themes. It also explores differences among these thinkers and suggests that those variations create a pattern of distinguishable responses to a unified set of concerns. India is sometimes not recalled these days as a haven for socialist thinking. Look again.

Attempts to restate traditional religious ideas and to juxtapose them with Western socialist ideas are so pervasive in modern Indian thought as to constitute perhaps its most distinctive and unifying characteristic. In varying ways, leading figures weave together interpretations of socialist ideas and traditional religious ideas, often so as to imagine social institutions and practices where spiritual values and economic organization might be mutually reinforcing.

It is not strange that socialism and religion should have an ambivalent relationship. On the one hand, their orientations tend to diverge. Socialism concerns itself with problems of material production, while religion devalues material concerns for spiritual ones. On the other hand, socialism generally and religion often translate concerns for human fulfillment into social visions of solidarity-sentiments of interdependence between private and general well-being. This resemblance sets religion and socialism apart from liberalism and capitalism, for example, which in their social theories typically de-emphasize solidarity. The commonality of religion and socialism tends to bring them into contact, but contrasting orientations can make that contact a tense one.

Ambivalence between religion and socialism has been especially acute in India, due largely to experiences of imperial subjugation. In the late nineteenth century, resistance to imperialism spawned a set of attitudes, including socialist and religious ones, which could be called the first Indian radicalism.

Imperialism, as it seemed, was first of all an experience of economic subservience and exploitation. The rise and triumph of industrial capitalism in Great Britain struck many as dependent on economic dominance over India, the impoverishment of which fueled Britain’s enrichment. Indian thinkers learned to focus on capitalism’s negative features. In imagining eventual liberation, they strove to imagine a system of non-exploitative production. They called it socialism.

Imperial subjugation was secondly an experience of cultural anxiety and doubt. Indian thinkers inhabited a twilight zone, feeling the attractions and repulsions of both Western and Indian cultures. Dominance of the West, combined with the apparently advanced nature of Western ideas, prompted an impulse to denigrate Indian culture. At the same time, dreams of liberation from imperial rule prompted impulses toward denigrating Western culture and exalting India.

The case for prompt liberation gained strength from asserting that Western culture was harmful to India’s well-being but weakened under any sense that Western culture was superior or necessary to India’s progress. Advocacy of Indian culture over Western culture involved sympathy toward religious themes.

Thus, radical resistance to British rule commonly linked up with advocacy of both socialism and traditional religion. Less radical anti-imperialism, by contrast, generally went with more muted economic critiques and less fervent allegiance to religion. This contrast exemplified itself in turn-of-the-century schism in the nationalist movement between “Extremists” and “Moderates.” There was generally more of both explicit socialism and religious preoccupation in viewpoints of Extremists such as Tilak, Aurobindo, Bipin Chandra Pal, and Lala Lajpat Rai than with Moderates like Ranade and Gokhale.

Modern Indian radicalism then, originated with intense symbiosis of religion and socialism, a symbiosis that ironically remained ambivalent. Born from experiences of imperial subjugation, this ambivalent symbiosis later fed upon the increasingly negative example of Soviet socialism. Some admired early Soviet developments while others frowned from the start on communist atheism and violence. Criticism mounted as the Soviet system grew increasingly autocratic, bureaucratic, cynical, and repressive. This did not, however, induce leading Indian thinkers to ignore problems of Western hegemony or to embrace the developed West as savior of the “free world.” They developed instead a critique of both Western and Soviet systems culminating in Nehru’s sponsorship of a Non-Aligned Movement for the “Third World.” This Third World consciousness reinforced India in its anti-imperial impulse to seek out virtues in its own heritage. Rejection of Soviet socialism struck some as leaving no option but to develop a socialism rooted in India’s distinctive heritage of flourishing religious sensibility.

For several reasons then, juxtaposition of religion and socialism lies at the heart of modern Indian thought’s most characteristic failures and achievements. It can therefore stand as an axis around which to interpret that thought as a unified intellectual tradition. This tradition drills down on a distinctive “problematic”: to interweave socialist ideas with Indian religious ideas in pursuit of a sound and worthwhile ideology. By “problematic,” I mean a persistent pattern of interrelated questions defining the subject matter for a system of inquiry. By “ideology,” I mean simply some picture of a better society combined with ideas on how to achieve it. As will become clear, the problematic explored here is an elastically-defined intellectual universe. It is by no means a unified answer to a single question, but rather a cluster of questions and proposed answers driven by a distinct and persisting sense of moral and intellectual unease.

By framing my analysis in terms of a problematic, I hope both highlight its centrality and to suggest a certain logic in its unfolding. Particular controversy may emerge from my treatment of thinkers within the problematic as “failures” or “successes.” By “failure” and “success”, I mean something quite particular: the degree to which various thinkers, in their deployment of religious and socialist ideas, manage to remedy the complementary weaknesses of each. Religion’s typical weakness as ideology is failure to visualize practical institutions to embody and express its values in all spheres of activity. Religion is often especially weak in reconciling aspirational values with demands of productive activity. Socialism’s frequent weakness lies in failure to investigate and cultivate spiritual virtues needed in any worthwhile system of socialized production. Socialism’s frequent and erroneous conceit holds that achieving socialized production-common and roughly equal ownership of productive resources-itself ensures moral regeneration. Even when it does focus on spiritual regeneration it often treats those concerns as secondary to socialized production.

Modern Indian thinkers have tried to steer a middle course avoiding typical failings of both socialism and religion. They by and large reject what may be called “materialist socialism,” which imagines either that right economic organization must precede cultivation of fraternal social relations or will yield such relations automatically afterward. These thinkers also by and large try to avoid what may be called “pure religious ideology,” which imagines that spiritual transformation can usher in a harmonious and just society prior to or without need of transformed productive organization. With one interesting exception they grope to articulate an ideology of mutual dependence and reinforcement between spiritual growth and socialist productive arrangements.

Within this problematic “success” lies especially in emergence and refinement of Gandhian socialism. Gandhian socialism maintains a simultaneous focus on cultivating virtue and socializing productive arrangements. Widespread practice of moral virtue and progressive socialization require and reinforce each other, pursued in tandem not isolation. These insights, crucial to Gandhian socialism, characterize the entire tradition examined here, with Ambedkar as the interesting exception. What distinguishes Gandhian socialism from “failures” within this tradition is its clarity in perceiving the issues and coherence in solutions offered. In a sense, therefore, this is a study of the background and development of Gandhian socialism. In contrast to many Gandhian studies, it seeks to locate Gandhi in a particular intellectual-historical framework. It seeks to understand the context of ideas in which Gandhi’s thought evolved as well as the pivotal impact of his thought upon that context.

Part I examines Vivekananda’s thought as the problematic’s first full-blown articulation. The protean character of this thought will be evident throughout the study as it explores themes, problems and vicissitudes that Vivekananda first raises somewhat awkwardly.

Part II explores “failures” within the problematic: formulations which, though steeped in its peculiar concerns, resolve those concerns in ways not conducive to innovative thought and progressive action. Part II classifies these “failures” in terms of differing attitudes toward the Hindu tradition. Bhagavan Das formulates a “backward-looking” Hindu socialist ideology based on the specific classical social scheme set out in Manu, the ancient text of legal and religious orthodoxy. Bipin Chandra Pal and Sri Aurobindo, by contrast, formulate “forward-looking” Hindu socialisms, de-emphasizing Manu’s specific framework and stressing instead notions of social order they find implicit in certain Hindu themes. While Aurobindo emphasizes Advaita, inquiry into the “non-dual” or “non-divided” nature of reality. Pal, stresses Bhakti, theistic devotionalism. B. R. Ambedkar, finally, represents complete rejection of Hindu tradition as any source of progressive social ideas. Though he repudiates Hinduism, he maintains identification with Indian spiritual culture by embracing and interpreting Buddhism, treating it as chief historical antagonist to Hindu social values.

For differing reasons, all these formulations represent “dead ends” within the problematic. Though rich with interesting and provocative conceptualizations, they lack the ideological fecundity of Gandhi’s thought. In various ways, thinkers examined in Part II paint themselves into ideological corners.

Part III inspects Gandhi’s thought, focusing especially on the evolution and revision of certain key ideas. It highlights how, despite serious problems in his thought, Gandhi lays the foundation for a self-consistent and plausible, innovative, and progressive theory of a worthwhile society and how to build it. Though Gandhi’s concept of wealth “trusteeship” is unpromising, two corollaries of his non-violent philosophy become cornerstones of India’s distinctive political vision: “Gandhian socialism.” One is sarvodaya, construction of egalitarian village communities. The other is satyagraha, non-violent confrontation as method of social change.

Parts IV and V trace the impact of Gandhi’s ideas upon Indian socialists rooted in Marxism. Here lies the emergence of a distinctive school of thought that can be called “Gandhian socialism.” Part IV explores “partial” Gandhian socialism by way of Asoka Mehta, Narendra Deva and Jawaharlal Nehru. “Partial” implies not inferior thought, but rather a somewhat piece-meal way of fusing Gandhian notions with socialist ones.

Part V explores “thorough” Gandhian socialism by way of Ramanohar Lohia and J. P. Narayan. These two differ from those in Part IV by the self-consciousness and ambitiousness with which they set about articulating a Gandhian socialism. They are also distinct in their strong emphases on religious themes, issues and ideas.

The Conclusion briefly considers some previously unaddressed questions on Hindu-Muslim confict and on the emergence, shortfalls, limits and significance of Gandhian socialism. There are two reasons for study of modern Indian thought in terms of the patterned problematic outlined here. It serves to clarify the distinctive concerns and ambitions of the thinkers involved, both individually and collectively. It also augments our own thinking about social matters, underscoring crucial issues and making accessible some serious reflection on them. The study’s ultimate purpose is to emphasize interdependence of the material and the spiritual in social matters. This theme raises análogies both Marxist and theological that may warrant brief comment.

A Marxist analogy arises from my bisection of social matters into a “material” realm of productivity and a “spiritual” realm of religion, culture, and values. This may recall Marx’s distinction of economic “base” from ideocultural “superstructure.” Marx sees causal linkage from productive arrangements to religious and cultural values. The tradition explored here departs from dogmatic versions of that paradigm, ones that portray ideocultural superstructure as causally determined by a dominant material base. To thinkers examined here, such views underestimate both possibilities for ideological change within an existing productive order and the necessity of such change in creating new ones.

The theme of spiritual-material interdependence may also bring to mind a theological analogy: incarnation. Gandhi’s thought implicitly entails a theory of incarnation-penetration of the material by the spiritual. For Gandhi, incarnation is no single event or series of events, but rather an ongoing transfiguration of the material by the spiritual, through which human affairs grow progressively moralized. This spiritualizing process reaches into the material sphere of production and presses for moral transformation there. Incarnation thereby “embodies” spiritual values in the material sphere, replacing exploitational arrangements by moralized ones. Gandhi’s thought rebukes doctrines of incarnation that fail to seek moralized productive arrangements.

Part 1 

Origins of a problematic

Vivekananda: Socialism and the Reconceptualization of Hindu Religion

Uninvited walk-on rock star at the World Parliament of Religions, Swami Vivekananda (1863-1902) was born in Calcutta with the given name Narendranath Dutt. He was the son of a successful attorney. In 1881, during his college education in Calcutta, Vivekananda first encountered the ecstatic mystical prophet Ramakrishna. Vivekananda’s relationship with Ramakrishna deepened after Vivekananda’s college education, upon the death of Vivekananda’s father in 1884.

Between 1884 and 1893, Vivekananda divided his time among his discipleship to Ramakrishna, work at various jobs to support his family, and wanderings throughout India. In 1893, he addressed Chicago’s World Parliament of Religions, where his speech brought him instant celebrity. He toured the United States lecture circuit until 1895, then travelled by way of England, continental Europe and Ceylon (Sri Lanka) back to India, arriving in 1897. It was in 1897 that Vivekananda launched a social service organization known as the Ramakrishna Mission. In 1899, he voyaged again to the West, returning to India fatigued and ill the following year. He thereafter remained in India, lecturing and writing insofar as his health permitted until his death.

His journey to the West in 1893 represented a mission unprecedented among Indian social reformers. He sought both to propagate Indian religious ideas and to secure funding for relief programs targeting the plight of India’s downtrodden masses. His subsequent shuttling between India and the West exemplified a turn in modern Indian sensibilities, and his writings mark a new era in Indian thought.

Throughout most of the nineteenth century, Indian thinkers had investigated a broad range of religious and social issues, motivated by desire to purge Hindu society of beliefs and practices inappropriate to contemporary challenges or to their conceptions of Hinduism’s essential genius. Arguments flared and movements emerged in a surge of visionary activity unprecedented since the days of medieval Bhakti. Issues various and vital demanded attention: the meaning or meaninglessness of ritual, the true nature of caste, the oppression and liberation of women, for example. It remained, however, for Vivekananda to focus on one of India’s most glaring ills: poverty, degradation and subjugation among most of India’s vast population.

“I am a socialist” proclaimed Vivekananda, the first major Indian social thinker to do so. He devotes great attention to the misery of India’s “masses.” No Indian thinker before him had stressed, as he did, urgent need to eradicate mass poverty. After Vivekananda, no Indian thinker could ignore issues of poverty, exploitation and socialism.

It was not merely the fact but also the manner of this new concern that made Vivekananda’s career paradigmatic. His travels between India and the West manifested fervor to forge some synthesis of Indian spiritual and Western material cultures. The way forward for India and perhaps all humanity lay in achieving a progressive material culture harmonizing rather than conflicting with Indian spirituality. Vivekananda’s dream was to become the dream of an entire era.


One striking feature of Vivekananda’s thought is its ambivalence on the religious meaning of progressive social action. Vivekananda pays official allegiance to certain classical Indian conceptions of religious life. The ultimate religious task, he claims, is personal spiritual liberation, conceived as escape from a meaningless conventional world into a transcendental dimension of awareness. Escape from the conventional world is, among other things, an escape from society, conceived as a realm of transient, illusory and ultimately meaningless relationships. He rejects the notion of social progress: how could there be “progress” in such a transient and meaningless realm? The balance of social ill and good remains forever constant, despite manifold apparent changes. Social “evil” and social “good” reflect aspects of worldly maya, matters of illusion and ultimate irrelevance from the standpoint of true spiritual insight.

Why then should anyone engage in any kind of social action? Vivekananda suggests that the value of social action lies exclusively in contributing to personal spiritual liberation. The most captivating aspect of conventional reality or maya is preoccupation with concerns of one’s worldly self. Social action entailing personal sacrifice helps the individual achieve liberation from such bonds of worldly ego-centricity. Vivekananda repeatedly speaks of the world as a moral “gymnasium” in which individuals can strengthen their spiritual natures through exercises of self-sacrificial social action.

Vivekananda seems on the surface unaware of any contradiction in advocating self-sacrifice for a society that cannot thereby benefit. “Self-sacrifice” implies a preference for a wider social good over a narrower personal one. This makes no sense if the possibility of wider social good is denied.

Though Vivekananda may not see the contradiction logically, he surely feels it existentially. He could not devote so much concern to alleviating social miseries without feeling positive transformation to be both possible and intrinsically worthwhile. He cannot, despite himself, resist the notion that the very pinnacle of religious life lies in social action. “I have realized…” he writes at one point, “that altruistic service only is religion, the rest…are madness-even it is wrong to hanker after one’s own salvation.” (sic). It is rare for Vivekananda to voice this viewpoint so explicitly. Far more typical are comments that “[O]ne must completely mold one’s religious life in solitude,” and that “All the work you do…is done for your own benefit.” He endorses classical notions of a sharp divide between social engagement and the highest religious life. Occasional comments, however, along with the sheer scope of his social concern, indicate Vivekananda wrestling with radical notions: that the true meaning of religion is society and that the highest religious life lies in working for progressive social change.



Vivekananda’s writings contain curious passages in which he rails against Indian advocates of “social reform.” Such passages at first appear reactionary, but in fact they represent a radical new approach to Indian social change. The problem with so-called “social reformers,” according to Vivekananda, is that they merely criticize specific ills in hopes of provoking changes in habits. Vivekananda finds this approach naïve: people do not change their practices just because they have been plausibly criticized. “A few men who think that certain things are evil will not make a nation move,” he writes.

Social change, he thinks, can be catalyzed, but not engineered. Masses of people must, through their own experience and reflection, create new ways of organizing their lives. True social reform requires augmenting the power of the “masses” to reflect and to act. Vivekananda writes:

It takes time, quite a long time, to make a healthy, strong, public opinion which will solve its own problems… The whole problem of social reform, therefore, resolves itself into this: Where are those who want reform? Make them first… First educate the nation… First create the power, the sanction from which the law will so ring.”

The masses require education and power. Hence, for Vivekananda, meaningful reform requires revolutionizing society’s fundamental order, an order of hierarchical exploitation:

To the reformers I will point out that I am a greater reformer than any one of them. They want to reform only little bits. I want root-and-branch reform. Where we differ is in the Method… Most of the reforms that have been agitated for during the past century have been ornamental. Every one of these reforms only touches the first two castes, and no other. The question of widow marriage would not touch seventy per cent of the Indian women, and all such questions only reach the higher castes of Indian people who are educated, mark you, at the expense of the masses. But that is no reformation. You must go down to the basis of the thing, to the very root of the matter. That is what I call radical reform.

Vivekananda seldom misses an opportunity to emphasize the plight of India’s poor or to condemn systems of exploitation that oppress them. “The one thing that is at the root of all evils in India is the condition of the poor,” he writes,” as he describes their condition:

(C)lusters of huts, with crumbling mud-walls… (M)oving about…emaciated figures of young and old in tattered rags, whose faces bear deep-cut lines of the despair and poverty of years…the pitiful gaze of lustreless eyes of the hunger-stricken… Devastation by violent plague and cholera; malaria eating into the very vitals of the nation; starvation and semi-starvation as second nature; the Kurukshetra (battlefield) of malady and misery… A conglomeration of three hundred million souls, resembling men only in appearance, crushed out of life by being downtrodden by their own people and by foreign nations…

Vivekananda points to the caste system and imperialism, “priest power and foreign conquest,” as twin causes of mass impoverishment. In Marx-like fashion, he analyzes both caste and imperialism as systems of exploitation in which the downtrodden produce wealth but do not own or enjoy it. He writes of the “tyranny of the higher castes,” in which:

The cultivator got almost nothing… The protector came to be known as the king; he who took the commodities from one place to another was the merchant. These two did not produce anything-but still snatched away the best part of things and made themselves fat by virtually reaping most of the fruit of the cultivator’s toil and labor.

Elsewhere, he writes of “the peasant, the shoemaker, the sweeper, and such other lower classes of India, who through the ages have been producing the entire wealth of the land,” while non-producing classes “have taken the substantial part of the fruits of their labor.”

A similar analysis applies to British rule, of which he writes “the main idea is blood-sucking.” “Indian labor and produce” could support the entire nation in material comfort, “if the whole thing is not taken off from them.” Instead, India suffers at the hands of the British, who have “carried away with them millions of our money, while our people have starved by villages and provinces.” Vivekananda argues that though famine seldom visits parts of India still free from British rule, it occurs as the “inevitable consequence” of exploitation in British-ruled India.

Keen to alleviate the plight of India’s poor masses, Vivekananda organizes resources and activities of the Ramakrishna Mission. He urges followers to “devote heart and soul to this one duty-the duty of raising the masses of India. “Borrowing from ancient religious notions of foreswearing normal pursuits in favor of spiritual seeking, he urges a life of sannayasa (renunciation) for his followers, who should subdue all private desires in order to serve the masses: “Vow, then, to devote your whole lives to the cause of these three hundred millions.”

Less than clear as to what activities these sannayasins of service should pursue, Vivekananda focuses most concretely on education. He imagines bands of “disinterested sannyasins, bent on doing good to others,” going from village to village, “disseminating education and seeking in various ways to better the condition of all…” The instruction should emphasize religion, as well as the “arts of life.” His images of instruction to offer seem sketchy:

Make an organized plan. A few cameras, some maps, globes, and some chemicals, etc., are needed. The next thing you want is a big hut. Then you must get together a number of poor, indigent folk. Having done all this, show them pictures to teach them astronomy, geography, etc., and preach Sri Ramakrishna to them.

Along with abstract learning should go enhancement of productive skills: the discovery of “new avenues of production” through “exertions aided by Western science,” enabling villagers to “produce food and clothing for themselves. ”

Vivekananda imagines that such efforts will spark mass movements so as to “revolutionize the whole country.” Villagers will join the educational movement, accelerating expansion of knowledge and problem-solving capacity. Vivekananda’s philosophy of change includes almost no analysis of specific problems or how to solve them. He explains his entire approach with a formula: “(E)ducate our people, so that they may be able to solve their own problems.” There is undoubted naïveté in this vision of mass liberation through mere education. In discerning the need for village mobilization, however, Vivekananda points out an approach which, in the hands of Gandhi and some of his followers, becomes a rich philosophy of transformation.

Exploitation, Vivekananda thinks, will ultimately cease with the triumph of socialism. In Marx-like fashion, he associates socialism with rule by the laboring class or Shudras. Like Marx, he sees the triumph of labor historically destined: “(A) time will come when…the Shudra class with their Shudrahood…will gain absolute supremacy in every society.” Again like Marx, he sees labor’s impending triumph as the crowning phase in an historical succession of rule by different classes. For Vivekananda, these correspond to the four varnas (caste groupings) of classical Indian social thought: “(H)uman society is in turn governed by the four castes-the priests, the soldiers, the traders, and the laborers.” He thinks of capitalism as rule by the commercial or Vaishya caste, “awful in its silent crushing and blood-sucking power… associates British imperial rule with Vaishya hegemony.

“Last will come the laborer rule,” writes Vivekananda, and he applauds this as the end to economic exploitation. Yet he is less than fully enthusiastic about this triumph of socialism. He sees socialism as a system or doctrine with something important missing. “I am a socialist not because I think it is a perfect system, but half a loaf is better than no bread.” Nowhere does he articulate in detail what he means by the “half a loaf” that socialism fails to provide. He indicates, however, that socialism-though essential from a purely economic standpoint-lacks moral or spiritual dimensions crucial to worthwhile social life. Of socialism he writes: “Its advantages will be the distribution of physical comforts-its disadvantages, (perhaps) the lowering of culture.” By “the lowering of culture,” he means decline in morality, which is decline in essential religion:

Everything goes to show that Socialism…is coming on the boards. The people will certainly want the satisfaction of their material needs, less work, no oppression, no war, more food. What guarantee have we that this civilization will last, unless it is based on religion, on the goodness of man? Depend on it, religion goes to the root of the matter. If it is right, all is right.”

Vivekananda insists that ancient Vedantic (philosophically scriptural) Hinduism is the “right” religion for socialism: “(E)qualising theories must have a spiritual basis, and that spiritual basis is the Vedanta only.” To understand this, we need to explore his interpretation of Vedanta. This will prove helpful when we touch on other thinkers as well.


Vivekananda’s Vedanta centers on Advaita, the philosophy of universal non-dualism, explanation of which occupies much of Vivekananda’s effort. It is crucial to understand the Advaitic doctrine of selfhood as Vivekananda interprets it.

Advaita, he observes, asserts a non-dual theory of selfhood. There may appear to be a plenitude of selves in the world, but this is an illusion. There is, in reality, only one unitary and universal Self, in which all the many separate and particular “selves” merely participate.

Classical Advaita, it has often been claimed, makes no strong pronouncements in ethics and morals. The goal is private salvation, not the well-being of others. Liberation, insight on the non-duality of Selfhood, consists in gnosis, or knowledge, not moral action. Vivekananda’s striking reinterpretation links the Advaitic doctrine of Selfhood with a theory of morality.

Morality for Vivekananda concerns two basic questions: what is moral action? and why should one practice it? His simple answer to the first question is: “(T)he only definition that can be given of morality is that: That which is selfish is immoral, and that which is unselfish is moral. ” His answer to the second question involves Advaitic interpretation of “selfish” and “unselfish.” Selfishness, concern for private wellbeing over general well-being, self-defeatingly posits an illusory, separate, and particular “self,” over the true and universal Self. In reality, however, there is no well-being apart from general well-being. Unselfishness pursues general well-being, the only true well-being. We learn why one should act morally: because only moral action promotes true well-being. True well-being, general well-being, advances only through unselfish action.

Borrowing from classical Advaitic philosophy, Vivekananda explains how humans naturally but mistakenly identify their well-being with illusory private selfhood. An illusion of isolated and particular “selfhood” arises from entanglement of universal Selfhood in the material world. There the Self inhabits particular bodies creating illusion of distinction and separation. The universal Self makes contact with nature through the sense experience of these illusory selves. This entanglement with nature, the sense experience of illusory separate selves, is root cause of selfishness. Well-being mistakenly seems identified with the body’s sensual enjoyment in the world of nature.

If pursuit of private well-being is illusion, it is also unfreedom. Selfishness is a life of slavery to sense experience, desire, and satisfaction. Vivekananda’s interpretation of Advaita owes much to Kant. For Vivekananda as for Kant, morality and freedom are one and the same. Like Kant, Vivekananda conceives of nature as a realm of determination and unfreedom. In nature, events follow laws of causality that allow no variation. There is therefore no freedom in the world of nature. Human beings, through their bodies, inhabit this enslaved realm, part of nature and therefore subject to determined causality. Human action tied to nature through the body can never be free. In particular, human action is unfree if determined by sensual imperatives of the illusory separate self. Sensually determined action, selfishness, unfreedom: these are equivalent.

Freedom, by contrast, lies in control of the sensual passions by the will, which is spiritual. Freedom lies in action not dictated by nature. Free action is moral action, aimed at general rather than private well-being. “That action is moral which frees us from the bondage of matter and vice versa,” writes Vivekananda. Pursuit of private well-being can yield only frustration because sensual desire is ultimately insatiable, only inflamed by temporary satisfaction. “Desire is infinite, its fulfillment limited,” Vivekananda writes. “The satisfaction of desire only increases it, as oil poured on fire but makes it burn more fiercely.”

To Vivekananda, true well-being implies a liberation from nature. This requires restraint upon sensual passions and material enjoyment. As with Kant, freedom requires self-restraint, exercise of power by will over nature. “No freedom without renunciation,” writes Vivekananda. As also with Kant, this freedom is equivalent to morality.

Vivekananda’s interpretation of Advaita provides socialism with an appropriate “spiritual basis.” Socialism seeks an end to exploitation. Exploitation and social inequality, thinks Vivekananda, are ultimately rooted in “selfishness,” slavery to inherently limitless material desire:

There is a limit to the working power of human beings, but no limit to desire; so we strive to get hold of the working power of others and enjoy the fruits of their labors, escaping work ourselves.

By explaining roots of selfishness in Advaitic terms as spiritual error and its consequences in Marxist terms as drive to command the labor of others, Vivekananda shows the mutual relevance of Vedantic religion and socialism.

To Vivekananda, the main shortcoming of most socialist doctrine lies in failure to identify and attack exploitation at its root: spiritual error. Advaita, urging restraint on material passions and preference for general well-being, attacks the root of exploitation and motivates effort to build a socialist order. Sannyasins of service exemplify Advaitic renunciation as they work for social transformation.

If Advaita is crucial to actualizing socialism, the reverse is also true. Vivekananda tirelessly insists on the emptiness of spiritual values not exemplified and fostered by concrete social institutions. He writes, “That society is the greatest, where the highest truths become practical.” His thought weakens, however, when he tries to imagine the incarnation of non-exploitation in “practical” arrangements.


Vivekananda’s exploration of the “practical” consists primarily of scattered commentaries on Indian and Western social arrangements. The bulk of these consists of two overlapping types: 1) contrasts of Indian and Western society; and 2) discussions of caste.

Societies, holds Vivekananda, can be distinguished from each other based on particular aptitudes for exploring and solving different sorts of problems. Hence every society displays a distinctive genius accounting for much of its overall character. To Vivekananda, the crucial distinction lies in contrast between Indian and Western societies. Indian society, he urges, is essentially spiritual, Western society primarily materialistic. India specializes in spiritual progress, the West in material progress.

Western materialism, thinks Vivekananda, inevitably fosters both exploitation and dissatisfaction. He sees Western capitalism as the apotheosis of exploitation and dissatisfaction rooted in a materialist approach to life. Capitalist wealth has “not solved the problem of want, but only made it keener.” Pursuit of material enjoyment brings no satisfaction, but only a greater quantum of desire. Accumulations of capital and productive power merely expand the power of selfish impulses. Hence, capitalism achieves record heights of exploitation and antagonism:

The material tyranny is tremendous. The wealth and power of a country are in the hands of a few men who do not work but manipulate the work of millions of human beings. By this power they can deluge the whole earth with blood…

Vivekananda maintains that the West cannot alleviate this appalling state of affairs through its own spiritual resources. Many Westerners, he maintains, have grown weary of the “competition,” the “struggle,” the “brutality of their commercial civilization.” He presumably has socialism in mind when he writes that “they are looking forward towards something better,” calling for “political and social changes” as “panacea” for capitalist ills.

Vivekananda finds little promise in what he sees as the narrowly institutional approach of most socialists, who expect progress from mere “political or social manipulation.” It is “spiritual culture and ethical culture,” he thinks, that the West needs in order to remedy its civilizational defects. Only India, with its rich reservoir of “spiritual culture,” can provide Western culture what it needs. “The nations of the West are coming to us for spiritual help,” he writes. The West must “learn from India the conquest of internal nature.”

India meanwhile stands in danger of infection by Western materialism. The “curse of the West-the senses,” has been “creeping into India,” contaminating Indian culture with “luxurious ideals,” he writes. India must “keep a firm hold on spirituality.” To adopt the “materializing civilization of the West” courts moral ruin.

Despite these moral hazards, Vivekaranda insists that India embrace greater materialism. What is most dangerous is also most necessary. India’s poverty and exploitation cannot be alleviated without massive attention to problems of production:

We talk foolishly against material civilization… Material civilization, nay, even luxury, is necessary to create work for the poor. Bread! Bread!… India is to be raised, the poor are to be fed, education is to be spread, and the evil of priestcraft is to be removed. No priestcraft, no social tyranny! More bread, more opportunity for everybody.”

There is obvious perplexity in Vivekananda’s mind as he alternately condemns and praises “luxury” and “material civilization.” Socialism’s practical requirements clash with its spiritual ones. Vivekananda attempts to resolve this dilemma through formula and conceptual compromise. In order to reap benefits while avoiding pitfalls, he advises that “material civilization” be adopted in moderate amount: “A little of it, perhaps, is good for us. ” The notion of moderate materialism is a fertile one, but only insofar as it transcends Vivekananda’s quick Goldilocks epiphany. Some thinkers explored below improve on this at least somewhat, offering spiritual discussions and productive proposals around themes of moderate materialism. On a related note, Vivekananda imagines a sort of hybrid of India and the West, producing a society progressive both materially and spiritually. “Can you make a European society with India’s religion? I believe it is possible, and must be.”A blend of Indian spirituality with Western material culture becomes a paradigm for later thinkers. Vivekananda articulates the paradigm but does not go far in applying it.

Vivekananda’s dilemmas grow more convoluted when he turns to the issue of caste. Caste, according to Vivekananda, is a system of exploitation. It is also Vedantic religion’s most prominent social feature. Hence, caste is an obvious embarrassment for asserting Vedantic religion as key antidote to exploitation. The simplest evasion is to deny any link between Advaitic spirituality and caste. “In religion,” Vivekananda writes, “there is no caste; caste is simply a social institution.” Caste is nothing more than hereditary division of labor, comparable to networks of trade guilds. It is a mere practical arrangement, devoid of religious meaning. Vivekananda warns that exaggerated ritual aspects of caste have nearly destroyed religion. “What more degradation can there be,” he writes, “than that the greatest minds of a country have been discussing about the kitchen for several hundreds of years, discussing whether I may touch you or you touch me, and what is the penance for this touching!” Vivekananda bemoans these bizarre preoccupations:

We are neither Vedantists, most of us now, nor Pauranics, nor Tantrics. We are just “Don’t touchists.” Our religion is in the kitchen. Our God is the cooking pot, and our religion is, “Don’t touch me, I am holy.” If this goes on for another century, every one of us will be in a lunatic asylum.

Vivekananda wavers, however, in separating religion and caste. He seeks in various ways to portray caste as an element in Vedantic religion’s moral and anti-exploitative genius. He portrays caste, for example, as an orientation in social life toward general well-being in communities rather than private well-being as individuals. Caste therefore exerts a moralizing influence in contrast with Western culture’s encouragement of selfishness:

You Western people are individualistic. I want to do this thing because I like it; I will elbow everyone. Why? Because I like to. I want my own satisfaction… So what is the basis of India’s social order? It is the caste law. I am born for the caste, I live for the caste. Born in the caste, the whole life must be lived according to caste regulation. In other words…the Western man is born individualistic, while the Hindu is socialistic-entirely socialistic.

In discouraging selfish individualism, the “socialist” spirit of caste protects the weak from exploitation. This it does by fostering cooperative rather than antagonistic economic relationships:

Competition-cruel, cold, and heartless-is the law of Europe. Our law is caste-the breaking of competition, checking its forces, mitigating its cruelties…”

The notion of caste as protector of the weak departs strikingly from Vivekananda’s portrayal of caste elsewhere as a system of exploitation. Contradiction emerges even more sharply when Vivekananda pictures caste as a hierarchy of renunciation, with higher-placed groups cultivating morality and spirituality through material self-restraint:

The higher the caste, the greater the restrictions. The lowest caste people can eat and drink anything they like. But as men rise in the social scale, more and more restrictions come…

This hierarchy of material renunciation culminates with Brahmins, “the poorest of all the classes in the country,” says Vivekananda, “who never covet wealth.” Vivekananda’s sociology breaks down in his attempt to defend Vedantic religion as a source of moralizing and even “socialist” institutions. Caste as a hierarchy of renunciation integrates poorly with caste as a hierarchy of exploitation.

This contradiction in Vivekananda’s doctrine of caste points subtler problems in his theories of social change and democracy. With such contradictory views on the nature of caste, Vivekananda cannot help but equivocate on the question of eradicating it. In one voice, he argues that caste is “bondage,” and India’s “greatest dividing factor.” Caste is “a barrier to India’s progress. It narrows, restricts, separates.” In another voice, he insists that, “caste is a very good thing,” “one of the greatest social institutions” ever devised.” For India, “caste is the plan we want to follow,” because it is “destined to lead Indian humanity to its goal.” Though Vivekananda’s views are deeply unsettled, he occasionally hints at a reconciliation. He imagines preserving caste as division of labor but destroying it as a system of exploitation. The division of labor will operate without such “privileges” as allow higher castes to “trample” on lower ones.

Eradication of exploitation does not, for Vivekananda, necessarily imply eradication of hierarchy. There will, it seems, be some castes to rule society and do its intellectual work, others to do its menial work. Though somewhat ambiguously, Vivekananda supports the notion that such divisions be based on aptitude and merit rather than birth.

Vivekananda envisions a sort of hierarchical socialism in which power differentials exist, but without exploitation. Such is his picture of the ancient caste system, prior to corruption by high-caste oppression and exploitation. He imagines a revival of that old order, such that Brahmins would once again exemplify renunciatory values and virtues, while tutoring lower groups progressively in them:

The plan in India is to make everybody a Brahmin, the Brahmin being the ideal of humanity. If you read the history of India, you will find that attempts have always been made to raise the lower classes. Many are classes that have been raised. Many more will follow till the whole will become Brahmin. That is the plan. We have only to raise them without bringing down anybody. And this has mostly to be done by the Brahmins themselves…

One difficulty with this hierarchical vision is that it contradicts Vivekananda’s other model of progress: mass action by the dispossessed, culminating in a Shudra regime of popular self-rule. Vivekananda the revivalist is at odds with Vivekananda the revolutionary. To be sure, Vivekananda hints that a truly egalitarian order would perhaps emerge from the system of hierarchical socialism and elite-managed change. Moreover, the two models can partially be reconciled through his notion of elite-sponsored education transmitting spiritual and material wherewithal that the downtrodden require so as to improve their own lives. The moral ascendancy of Brahmin-hood dovetails with the social ascendancy of Shudra-hood.

There is, nevertheless, a disturbing paternalistic flavor to Vivekananda’s hierarchical socialism, a flavor poorly concealed by his naive faith in the liberating power of mere education. Education initiated by the elite will “slowly and gently” alleviate oppression. Meanwhile, there must be no direct attack upon exploitational arrangements. Vivekananda admonishes activists to “take care not to set up class-strife between the poor peasants, the laboring people, and wealthy classes.” No direct attack is needed because the exploitative order is historically destined to disappear through the activity of the upper classes.

Vivekananda argues that the historical role of a ruling class is to “dig its own grave”-pave the way to its own demise and toward eventual end of exploitation. This seems to borrow from Marxism, but there is a crucial difference between a Marxist formulation and Vivekananda’s. In Marxist theory, there is a cunning to history by which a ruling class, precisely through pursuit of selfish class-bound interests, unwittingly creates conditions leading to its own demise and replacement by a successor dominant class. Vivekananda, by contrast, imagines ruling classes consciously pursuing their own demise as rulers by lending generous assistance to lower classes. Though the Marxist theory may be untrue, it is certainly more plausible than Vivekananda’s naivete. The sophistication Vivekananda brings to bear when criticizing piecemeal approaches to social reform deserts him when he envisions the moral regeneration of India’s ruling classes. As Vivekananda himself notes, groups do not yield their ways of life simply because reformers have criticized them.


There is, fortunately, a strong democratic thrust to Vivekananda’s thought that perhaps outweighs his hierarchical fancies. Contrary to his hierarchical socialism, Vivekananda also puts forward a vision of democratic self rule, with strong and widespread popular participation at its core. In this voice, Vivekananda rejects an ideology of benevolent hierarchy:

Being always governed by kings of godlike nature, to whom is left the whole duty of protecting and providing for the people, they can never get any occasion for understanding the principles of self-government.

At least three interrelated ills flow from this shortfall of popular self-government. First, it stifles initiative, that “inherent strength and energy” needed to solve common problems. Second, it dilutes morality, constraining active popular concern with and pursuit of the “common good.” Third, it blocks the downtrodden from acquiring power they need to fend off exploitation. On this third point, Vivekananda asserts a democratic sentiment that all should “gain the right of representation in the control of State revenues and expenditure,” which are after all collected by the government from the people.” Democratic rule, he suggests, succeeds better than even the most benevolent hierarchy in maximizing initiative and morality and in minimizing exploitation.

Vivekananda worries about the feebleness of democracy in Indian civilization:

Neither under the Hindu kings, nor under the Buddhist rule, do we find the common subject-people taking any part in expressing their voice in the affairs of the State… (T)he subjects… have no direct voice in the supreme government. The power of the populace is struggling to express itself in indirect and disorderly ways without any method. The people have not as yet the conscious knowledge of the existence of this power. There is neither the attempt on their part to organize it into a united action, nor have they got the will to do so…

This lack of democracy troubles him in particular because it blurs his notion of India’s special genius in promoting spiritual virtue. With caste, his problem is explaining the moral and anti-exploitative genius of a prevailing institution. With democracy, his problem is to deal with absence of a presumably moral and anti-exploitative institution.

Vivekananda attacks the latter problem by insisting that Indian culture is not totally devoid of democratic experience:

“That the government of the people of this country must be by the people and for the good of the people”-cannot however be said to have been totally unrecognized in ancient India. The Greek travellers and others saw many independent small States scattered all over this country, and references are found to this effect in many places of the Buddhistic literature. And there cannot be the least doubt about it that the germ of self-government was at least present in the shape of the village Panchayat, which is still to be found in existence in many places of India… In the religious communities, among Sannyasins in the Buddhist monasteries, we have ample evidence to show that self-government was fully developed.

Here Vivekananda identifies three distinct strands of “ancient democracy,” which subsequent thinkers also highlight in similar effort to prove India’s democratic genius. There is, first, “ancient republics”: small, independent states that existed primarily in Mauryan and Gupta times, practicing a form of democratic government through periodic citizen assemblies. There is, second, the notion of democratic village self-government in pre-British times by panchayats, councils or representatives chosen by residents. There is, third, democratic habits and procedures within organized settlements of ancient heterodox religious movements, especially Buddhism. Elsewhere, Vivekananda adds a fourth element, lending a “socialist” dimension to his picture of ancient democracy.”

All the land from time immemorial was nationalized, as you say-belonged to the Government. There never is any private right in land. The revenue in India comes from the land, because every man holds so much land from the Government. This land is held in common by a community, it may be five, ten, twenty, or a hundred families. They govern the whole of the land, pay a certain amount of revenue to the Government, maintain a physician, a village schoolmaster, and so on.

Though anxious to make the case for India’s democratic talents, Vivekananda frankly concedes their limitations:

(T)he germ of self-government…remained forever the germ; the seed though put into the ground never grew into a tree. This idea of self-government never passed beyond the embryo state…and never spread into society at large.

Later thinkers, especially Aurobindo, show less modesty in claims about India’s “ancient democracy.” Significantly, Vivekananda’s ancient examples-the intimate republic, the village, and the religious settlement all feature democracy in contexts of smallish community. Later thinkers will highlight this, developing the notion that though pre-modern India never experienced Western-style national democracy, it harbored genius in what some might call “decentralized democracy.”

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Sri Lanka reforms have started to yield positive outcomes: State minister

ECONOMYNEXT – Sri Lanka’s State Minister of Finance Shehan Semasinghe says reforms have lead to positive incomes, including an increase in reserves.

“The reforms have started to yield positive outcomes, reflecting significant progress in multiple areas. Sri Lanka’s gross official reserves have seen a significant increase, reaching USD 5.5 billion by the end of April 2024,” Semasinghe said on social media platform X (twitter).

“Additionally, the Sri Lankan rupee has appreciated by approximately 8 % against the US dollar so far in 2024. This will boosts investor confidence and enhances the country’s ability to manage external shocks and meet international obligations and enhance confidence on the economy.

“The appreciation of the rupee can help lower inflation and reduce the overall cost of living and make it easier for the government and businesses to service foreign debt, thereby improving our financial reputation globally. Further, will improve the trade balance by potentially reducing the trade deficit.”

Sri Lanka’s inflation was 1.5 percent in the 12-months to April 2024, measured by the widely watched Colombo Consumer Price Index, data from the state debt office showed.

The CCPI Index fell 0.8 percent, to 195.2 points in the month of April after falling 1.9 percent in March.

Sri Lanka’s central bank has been operating largely deflationary policy, since September 2022, except perhaps in December 2023, and also allowed the rupee to appreciate in the balance of payments surplus it created.(Colombo/May28/2024)

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Sri Lanka risks foreign retaliation over VFS visa deal

ECONOMYNEXT – The Maldives could take reciprocal action after Sri Lanka’s new system of outsourcing its visas, which requires the payment of “processing” and “convenience” charges of 26 dollars, even though the government does not collect any fees.

Maldivian authorities have reminded Sri Lanka of the long-standing bilateral agreement under which their citizens could travel freely between the two neighbours without any charges or bureaucratic barriers.

A one month stay is available without a fee.

Maldivians, who consider Sri Lanka their second home, often spend more than a month in the larger country, but are now required to pay 26 dollars to VFS Global, which has controversially been contracted to handle Sri Lankan visas.

“The Sri Lankan government will not charge a fee, but Maldivians still have to pay VFS after applying online for a visa,” a Maldivian government official said in the capital, Male. “This violates the spirit of our agreement.”

He said the new administration of President Mohamed Muizzu was taking up the issue with Sri Lankan authorities in both Male and Colombo.

In a worst-case scenario, the Maldives will be compelled to reciprocate the new cost of a Sri Lankan visa and charge Sri Lankans traveling to the archipelago. There are also expat Sri Lankans in the Maldives.

There are only a handful of countries to which Sri Lankan passport holders can travel without any visa restrictions.

Singapore is another country which could take action against Sri Lanka if the bilateral deal is found to be violated, according a source said.

Opposition parties have said in parliament that outsourcing the visa handling to VFS Global and their partners was a bigger corruption scandal than the bond scam of 2015 and 2016, when billions of rupees were stolen through insider deals. (COLOMBO/May 28, 2024)

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Sri Lanka’s WindForce Plc rated ‘BBB+(lka) with stable outlook: Fitch

ECONOMYNEXT – WindForce Plc said Fitch Ratings Lanka Ltd had assigned a ‘BBB+(lka)’ rating for the company with stable outlook.

“The rating reflects WindForce’s large exposure to Ceylon Electricity Board (CEB, BB+(1ka)/Stable) as the key offtaker. The Stable Outlook reflects Fitch Ratings’ view that risks of significant payment delays from CEB to WindForce has decreased, easing liquidity pressure,” the company said in a stock exchange filing.

The full Rating Action Commentary by Fitch Ratings Lanka Ltd:

Fitch Publishes Sri Lanka’s WindForce’s ‘BBB+(Ika)’ National Rating; Outlook Stable.

Fitch Ratings – Colombo – 22 May 2024: Fitch Ratings has published Sri Lanka-based independent power producer WindForce PLC’s ‘BBB+(Ika}’ National Long-Term Rating. The Outlook is Stable.

The rating reflects WindForce’s large exposure to Ceylon Electricity Board (CEB, BB+ (Ika)/Stable) as the key offtaker. The Stable Outlook reflects our view that risks of significant payment delays from CEB to WindForce has decreased, easing liquidity pressure. However, Fitch believes medium-term risks to weaker collections of CEB’s dues
remain, and this is subject to the consistent implementation of CEB’s cost-reflective tariff mechanism.

Key rating drivers

Improving Receivables Collection: We expect WindForce’s receivable days to remain at around 80 in next 12 months. This is based on our expectation that CEB will continue to settle its payables, following improvement in its financial profile from cost-reflective tariff revisions. WindForce’s receivable days fell to around 198 days by December 2023, from 348 days at the end of the financial year 31 March 2023 (FY23). The company says it received further payments in 1Q24 that improved its receivables materially.

Weak Counterparty Profile: WindForce’s rating is constrained by the weak credit profile of its key offtaker CEB, the sole electricity transmitter and distributor in Sri Lanka, despite CEB’s improved financial performance. CEB’s rating is ultimately contingent upon support from the Sri Lankan sovereign (Long-Term Local-Currency Issuer Default Rating (IDR): CCC-; Long-Term Foreign-Currency IDR: Restricted Default) and its weak credit profile.

WindForce derived an average 80% of its EBIT from CEB in FY23-9MFY 724, with balance coming from its Ugandan operations. We expect WindForce’s cash flow exposure to CEB to increase further in FY25-FY27 with the commissioning of a 1OMW solar project in Kebithigollewa and a 1OOMW solar power plant in Hambantota in Sri Lanka.

Risks to Cost-Reflective Tariffs: Fitch believes there are risks to consistent implementation of cost-reflective tariffs, affecting the credit profile of domestic power generation companies. This is because of the government’s competing priorities: managing inflation, CEB’s financial health and the state’s own finances. We have assumed WindForce’s receivables days will deteriorate to 100 by FY27 as a result, but a longer record of consistent implementation could support a moderation of these risks.

The Sri Lankan government has implemented a cost-reflective tariff mechanism since mid-2022, to ensure CEB’s operating costs and interest obligations are covered. The new mechanism supports break-even operating cash flow for CEB, as of its latest financial year. This has enabled CEB to clear part of its overdue payments to trade creditors over the past 12 months. The tariff regulator – the Public Utilities Commission of Sri Lanka – approved lower tariffs by an average of 21.9% in its March 2024 review, which is a greater decrease than CEB’s proposal, reflecting the risks.

Investments Weigh on Free Cashflow: We estimate negative free cash flow (FCF) in FY25-FY27, due mainly to high capex and investments. This is despite improving operating cash flow from a shorter working capital cycle and newly commissioned projects. WindForce expects to invest USD12 million for the 30% stake in a LOOMW solar project in Hambantota in FY25-FY27.

Moderate Leverage; Adequate Coverage:
We forecast WindForce’s EBITDA net leverage to rise to 2.5x in FY25 (QMFY24: 2.0x) and 4.2x in FY26 on higher capex. However, interest coverage should strengthen to 3.7x in FY25 (9YMFY24: 3.1x) due to falling domestic interest rates even as debt increases. Sri Lanka’s monthly Average Weighted Prime Lending Rate fell to 10% by end-April 2024, from the peak of 28% in December 2022. Around 70% of
WindForce’s loans carried variable rates as of end-2023.

Steady EBITDA Margin: We expect the EBITDA margin to remain around 70% in FY25-FY27. WindForce’s power purchase agreements (PPA) offer long-term cash flow visibility, with a weighted-average remaining contract life of around 12 years, but production volume is affected by seasonal and climatic patterns. This is mitigated by its diversified portfolio, comprising wind (74MW), solar (38MW) and hydro (15MW) power plants, totalling to 127MW excluding associates and joint ventures.

Derivation Summary

WindForce is rated two notches below domestic power producer and engineering, procurement and construction contractor Lakdhanavi Limited (‘‘A(Ika)/Stable). The difference is on account of Lakdhanavi’s larger operating scale, and geographic and business diversification.

Both Lakdhanavi and WindForce have significant exposure to CEB. However, Lakdhanavi has operations and maintenance (O&M) services, manufactures transformers and switchgears, and offers galvanizing services. We also believe CEB is likely to prioritise payments to Lakdhanavi in a stress scenario, given Lakdhanavi provides O&M services to one of Sri Lanka’s largest power plants, and is investing in a large liquefied natural gas power plant, both of which are critical to CEB’s future strategy.

Resus Energy PLC (BBB(Ika)/Stable), a domestic power producer, is rated one notch below WindForce. WindForce’s higher rating is driven by a comparatively better liquidity position with sufficient cash flow to cover near-term maturities and better diversification in power generation sources and geographies.

Vidullanka PLC (A+(Ika)/Stable) is a renewable power producer with operations in Sri Lanka (35MW) and Uganda (13MW). WindForce is rated three notches below Vidullanka, despite the latter’s smaller scale. Vidullanka has lower counterparty risk and lower exposure to CEB, as 80% of its EBIT came from its Uganda projects in FY23.

Key assumptions

Fitch’s Key Assumptions Within the Rating Case for WindForce:

– Revenue to increase by 14% in FY25, mainly driven by commissioning of 1OMW Kebithigollewa power plant and 15MW Hiruras power plant’s first full year of operation;

– EBITDA margin of around 70% in FY25 and FY26;

– Receivable days at 80 in FY25;

– Capex of LKR2.5 billion in FY25 and LKR6.0 billion in FY26;

– Investments of around LKR2.0 billion a year in FY25 and FY26 in associate companies;

– Dividend payout of 80% of prior year profit.

Rating sensitivities

Factors that could, individually or collectively, lead to positive rating action/upgrade

-A sustained and substantial reduction in counterparty risk, as reflected in a significant improvement in CEB’s credit profile.

Factors that could, individually or collectively, lead to negative rating action/downgrade

-Deterioration in liquidity, including due to delayed receivables collection or challenges in refinancing;

-EBITDA net leverage above 5.5x for a sustained period;

-EBITDA interest coverage below 1.5x for a sustained period.

Liquidity and debt structure

Liquidity Subject to Counterparty Health: WindForce’s liquidity is subject to timely collections of dues from CEB. It had around LKR2.9 billion readily available cash and cash equivalents as of end-2023, with around LKR6.3 billion of unused but uncommitted credit lines from domestic banks, against LKR2.2 billion of debt maturing in the next 12 months. Maturing debt mainly comprises the current portion of long-term debt obtained to fund the investments in its power plants.

We expect the company to generate negative FCF in the near-to-medium term due to high capex. However, WindForce has adequate access to domestic banks, as most banks are willing to provide longer-tenured facilities for the company’s operating power plants that have more than 10 years remaining under their PPAs.

Issuer profile

WindForce is a leading renewable power producer in Sri Lanka, with total installed power generation capacity of about 163MW (including its share of associates and joint ventures) as of end-March 2024.

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