By Swapan Dasgupta
There is a singularly purposeless battle being
fought on television and the pages of the print media which can be given a
simple title: ‘remember’. Remember what an approach paper of the erstwhile
National Democratic Alliance said about foreign direct investment in retail in
2002? Remember the pronouncement of the Bharatiya Janata Party’s Vision
Document on the same subject in 2004? Remember what the then Leader of
Opposition Manmohan Singh wrote in a letter to a retail trade organisation in
2002? Remember what Arun Shourie said in Parliament around the same time and
square it with what he is saying now? Remember the assurance given to
Parliament earlier this year by the then Finance Minister Pranab Mukherjee
about ‘consultations’ preceding any move to permit foreign capital in retail
trade? And so on.
Consistency being the virtue of little minds, the
only discernible winners in the ‘Remember’ game happens to be Communists,
Mamata Banerjee and functionaries of the Rashtriya Swayamsevak Sangh who have
kept away from electoral politics. Apart from them, almost every mainstream
party, be it the Congress or the BJP, stands guilty of inconsistency or, as the
Breaking News scroll on TV would have us believe, ‘doublespeak’.
‘There is no inconsistency’, those charged with the
offence will doubtless argue, ‘there was a context to the earlier stand.’ That
is stating the obvious. Every position and every political move always has a
‘context’. When the BJP cosied up to foreign direct investment during the NDA
years they did so because they imagined the timing was right: India was on a
high and Prime Minister Atal Behari Vajpayee was dreaming of a sustained 10 per
cent growth that would keep the alliance in power for the foreseeable future.
When the Congress opposed the 2002 initiative, it did so because it believed it
would expose the saffron party’s swadeshi pretensions and highlight its elitist
orientation. Today, the Congress wants a rash of FDI initiatives because it seeks
to reassure global investors that India hasn’t lost the plot. And the BJP is
back to its swadeshi ways because it is convinced that ‘reforms’ are just a
ploy to divert attention from the Congress’ record of corruption and fiscal
mismanagement. Additionally, there is the BJP’s loyal base of small traders in
the Hindi heartland to cater to.
There is one overriding message that flows from the
transition from correctness to correctness: political parties (with some
dishonourable exceptions) are not committed to non-negotiable economic
philosophies. This by itself is not such a bad thing. India’s experiences with
economic experiments based on ideologies that have ostensibly been adapted to
Indian conditions have not been encouraging. The socialistic path, for example,
had run out of steam by the late-1960s when India became a third-rate, shortage
economy that lived a ‘ship-to-mouth’ existence. Yet, the formal recognition
that it was time to change course didn’t happen till 1991, although Rajiv
Gandhi did make tentative moves in that direction.
Was September 2012 another 1991 moment, as the Prime
Minister hinted in his bland address to the nation? The Confederation of Indian
Industry and some other industry bodies seem to believe so, and they have
extended enthusiastic support to the ‘reforms’ agenda. Unfortunately, the
evidence isn’t so conclusive.
For a start, it is pertinent to ask why the UPA
Government slept over much-needed reforms for a full eight years? Mamnmohan Singh inherited an economy that was
well poised to benefit from the business-friendly measures and the structural
reforms, including fiscal consolidation, initiated by the Vajpayee Government.
For nearly four years, the UPA-1 regime wallowed in the positive fallout of
these steps. It shifted the Government’s priority from the creation of
infrastructure to the creation of welfare net for the aam aadmi. The total
quantum of subsidies, for example, rose from Rs 57,125 crore in 2006-07 to Rs
2,16,297 crore in 2011-12. The fiscal deficit rose from 3.3 per cent of GDP to
5.8 per cent in the same period. At the same time, the UPA halted and indeed
reversed the NDA bid to roll back the frontiers of the state. Most important,
the NDA Government’s attempt to facilitate entrepreneurship and make life
easier for business was abandoned. The term ‘reforms’ disappeared from the
official vocabulary and was replaced by a new word—‘entitlements’.
The shift in the strategic thrust of government was
given a resounding thumbs-up by the electorate in 2009. A post-mortem of that
election suggests that many of the UPA’s populist measures, notably the
introduction of the National Rural Employment Guarantee Act, the generous
waiver of loans to farmers and the freeze on prices of petroleum products
helped the Congress upstage a disoriented BJP which, in any case, had dialled a
wrong number on the Indo-US nuclear accord.
The UPA’s re-election in 2009 also led to a strange
consensus among the entire political class. While it was acknowledged that
India had changed unrecognisably since the liberalisation process began in
1991, the political class arrived at the simultaneous conclusion that reforms
and market-friendly policies don’t and can’t win elections. The lessons of the
NDA’s failure to secure re-election in 2004 through its ‘India Shining’ theme
were imbibed by all parties, as were the implications of the UPA’s victory in
2009 on a populist plank.
The BJP responded by shifting tack from aspirational
politics to espousing ‘good governance’ which covered a multitude of approaches.
These ranged from Narendra Modi’s relentless quest for higher growth through
entrepreneurship and infrastructure-building to Shivraj Singh Chauhan’s perusal
of efficient Keynesianism. An invitee to a recent conference of BJP chief
ministers was struck by how difficult it was difficult to achieve a measure of consensus
on national economic priorities.
On its part, the Congress which always carried the
inheritance of an over-burdened state, thought of economic restructuring in two
ways. First, it was justified as a measure of expediency to stave off a crisis.
Alternatively, for the more cynical, a measure of extra space to the private
sector was perceived in terms of cronyism. Just as the public sector had also
served as a means of patronage and a nest egg for loyalists, the private sector
and, indeed, foreign capital, began to be seen as a milch cow. The commodities
boom and the sharp rise in the value of real estate fuelled these tendencies
and turned growth into greed, as did the maze of clearances an entrepreneur had
to negotiate.
Over the past two years, industry bodies,
India-watchers overseas and the ratings agencies made ‘policy paralysis’ and
the absence of reforms the focal point of their dissatisfaction with UPA-2.
However, despite the prognosis of a crisis of monumental proportions, it is
significant that ‘reforms’ had slipped away from the lexicon of the political
class. Its abrupt reappearance a fortnight ago had as much to do with a fear of
the fiscal deficit running riot, the rupee sliding further and corruption
becoming a battering ram against the government. The Government needed a
short-term agenda to talk up the market and pool resources to fund a Food
Security Bill and a possible universal healthcare scheme in next year’s Budget.
A reforms agenda born of economic conviction has few takers.
This, indeed, is the problem the UPA-2 has to
confront. It needs to talk reforms to instil confidence among investors and the
creamy layer of the middle classes. Yet, its understanding of politics indicates
that only sops, hand-outs and populism are electorally viable. Unless the mind
of India undergoes a miraculous transformation, Manmohan Singh has only the
smallest window of opportunity before his reformism is subsumed by political
common sense.
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