Cabinet reshuffle and the Big Picture

By Swapan Dasgupta

There is something in the air of Lutyens’ Delhi that makes its inhabitants heady over any real or proposed reshuffle in the Union Council of Ministers. During his five years at the helm, Rajiv Gandhi pandered to this yearning for unending churning by changing his ministerial team every six months or so. By contrast, Manmohan Singh has been partial to continuity. Maybe this has been due to the fact that he was never a complete master of his own destiny. Buffeted between coalition imperatives and the non-playing captains in 10 Janpath, he has operated under severe limitations.

Last week’s reorganisation of the team was a little different from half-hearted exercises of the past. First, this time there were no coalition pressures. Apart from a solitary Minister of State from the Nationalist Congress Party who was quietly palmed off to his mentor Sharad Pawar’s ministry, the alterations were exclusively a Congress affair. Whether the Congress has the comfort of numbers to be able to confine its sights exclusively to the party is something that must await the course of the winter session of Parliament beginning later in November. However, to the outside world the Prime Minister and Congress President maintained the pretence that the party had a majority on its own. The real significance of the openings created by the departure of the Trinamool Congress and the reluctance of the DMK to fill its ministerial quota were quite deliberately understated.

Secondly, this delusion of grandeur was further maintained by the special accommodation of Andhra Pradesh. That the late Y.S. Rajashekhara Reddy contributed disproportionately to the success of the UPA in both 2004 and 2009 is a matter of record. However, it is clear that the benefits that accrued to the state in October 2012 stemmed less from Andhra’s clout in the Congress than from its vulnerability. The elevation of Pallam Raju to the Cabinet, the inclusion of Chiranjeevi as a Minister of State with independent charge and the accommodation of other junior worthies may actually seem a desperate measure to somehow contain the pincer movement by the YSR Congress and the Telengana Rashtriya Samity. Recent opinion polls suggest that the Congress may find it extremely difficult to win more than five Lok Sabha seats in the event of a snap election.

If the past is any indication, the mere induction of ministers doesn’t by itself change political equations in the localities. The Government of Atal Behari Vajpayee had some five Cabinet ministers from undivided Bihar at the time of the Lok Sabha dissolution in 2004. However, both the BJP and its ally did disastrously in Bihar at the parliamentary election. Likewise, when the V.P. Singh wave first hit Uttar Pradesh, Rajiv Gandhi tried to offset his estranged colleague’s influence among Thakurs by resurrecting Dinesh Singh from oblivion and appointing him External Affairs minister. This had very little effect on the ground.  

Inducting a politician into the ministry may, at best, give an individual enhanced status in the locality. But symbolic gestures rarely translate into the larger political goodwill the Congress craves for. What matters is the wider political message.

To the extent that the Congress was desirous of packaging last week’s reshuffle as an attempt to give more responsibility to younger ministers the party was aware of the importance of the big picture. Although statistically the average of Manmohan Singh’s team has fallen marginally from 65 years to roughly 64 years, the Congress was successful in conveying the message that the process of generational change that was being demanded has begun, albeit modestly.

More important was the emergence of another theme that the Congress, perhaps understandably, was not unduly anxious to over-emphasise: the domination of the economic ministries by those who have the reputation of being reformers and who share the Prime Minister’s broad economic philosophy. The injection of a measure of ideological coherence into the economic ministries is no doubt welcome. At least the coming months may see an end to the confusion over and resistance to market-based reforms. Manmohan may even take advantage of his nominee in the Railways Ministry to try and remove a major infrastructural bottleneck. Indeed, so high is the apparent optimism of being able to achieve reforms and ensure fiscal consolidation that Finance Minister P. Chidambaram announced the Government’s willingness to travel by the fiscal roadmap of the Vijay Kelkar committee. Chidambaram has also been less squeamish about putting political pressure on the Reserve Bank of India to cut interest rates.

What this implies is something quite dramatic. Does the behaviour of the Prime Minister and Finance Minister indicate that the Congress has decided to go slow on Sonia Gandhi’s desire to expand the welfare net? Expressed in another way, has the Prime Minister decided to liberate himself from the shackles of populism for the remainder of his tenure?

The signs are confusing. At one level the Government has chosen to persevere with its in-principle decision to raise user charges in power, fuel and railway travel. At the same times, there is frenzied activity to ready the Aadhar scheme for direct cash transfers before the election. The Government, it would seem, is keeping both options ready. The outcome of the Gujarat and Himachal Pradesh election and the course of the parliament session will us whether the regime will turn right or left. The state of the opposition will shape the final judgment. 

Deccan Chronicle/ Asian Age, November 2, 2012

ONE MORE GATE - Popular perceptions troubling for the future of India

By Swapan Dasgupta

Last week, when Arvind Kejriwal first dragged the son-in-law of the Gandhi family into public controversy, there was a facile suggestion that shareholders should ask DLF—the real estate company which is also in the eye of the storm—why it gave a generous unsecured loan to someone who had no business track record worth writing home about. This week, after the anti-corruption crusader-turned politician went public with ‘proof’ of the cronyism that marked the relationship between DLF and the Congress-controlled Government of Haryana, this question is unlikely to be pursued. If the ‘proof’ supplied by Kejriwal is to be believed, the top brass of DLF should instead be complimented on its farsightedness. In enabling Robert Vadra to multiply a Rs 51 lakh investment into a handsome Rs 300 crore in just two years or so, DLF could be said to have gained many times more. It was, by all accounts, a very satisfying, mutually exploitative relationship.

As political scandals go, what was instantly dubbed ‘Damaad Gate’ by excitable members of the twitterati, doesn’t belong to the same league as the 2-G rip-off and Coal Gate. There are no long series of zeros pointing to the notional losses suffered by the treasury. The charge is not short-changing the public exchequer but conferring a most-favoured –entity status on a company with which Vadra was associated. Using a historical analogy, the kerfuffle over Vadra, DLF and the Bhupinder Singh Hooda Government of Haryana belongs to the same league as the Maruti sweetheart deal involving Sanjay Gandhi and the Bansi Lal Government of Haryana which was exposed by the indefatigable CPI(M) MP Jyotirmoy Basu nearly four decades ago—and which many insist were among the factors that triggered the Emergency in 1975.

For the Government, the timing of Kejriwal’s maiden political intervention was singularly inopportune. Having partially succeeded—thanks in no small measure to an extremely obliging media—in diverting public attention from the coal scandal that even left the Prime Minister singed and having talked up the capital markets with the promise of economic reforms and fiscal responsibility, a beleaguered Congress now finds itself battling a fire that has reached its sanctum sanctorum—the private chambers of the Gandhi family. At stake is the very credibility of the family that has provided both the inspiration and the glue to keep India’s largest political party together. Damaad Gate has all the ingredients to become another embarrassing Bofors moment for the Congress. Certainly, the mood of disgust and despondency that has overwhelmed India after more than two years of non-governance has enhanced the likelihood of a wild card such as Kejriwal puncturing the pretensions of the high and mighty.

However, like cricket, politics is also a game of glorious uncertainties and it is impossible to be certain that this latest storm will set in motion an irreversible process of downfall for the fragile UPA-2. Yet, at the same time, Damaad Gate has the potential of unsettling some of the cherished assumptions governing public life.

First, the apparent ease with which DLF allegedly benefitted from its close association with Vadra has added to the prevailing exasperation with the crony capitalism that has prevented a genuine entrepreneurial culture from striking deep roots in India. The alacrity with which the Finance Minister, the Law Minister and the Corporate Affairs Minister jumped into the ring to do battle on behalf of Vadra, and issued him certificates of innocence are reminiscent of caricatured versions of corrupt dictatorships in faraway lands. India has always flaunted its credentials as the world’s largest democracy. The grim realities of the prevailing political culture don’t justify the swagger. From a distance India seems just another rotten egg in the international basket.

In the past, the Government of the day had often conspired to subvert inquiries into alleged corporate wrongdoing. Yet, the suo moto interventions of key Cabinet ministers suggested that there are areas of political life that are considered no-go areas by the Congress and deemed unworthy of both public intrusiveness and the ethics of corporate governance. To outsiders, not least foreign capital that is being so assiduously wooed by the Government, this behaviour has the potential of sending out an unwelcome message: that it is advantageous to view Indian capitalism through the prism of a Third World banana republic where cronyism opens doors and cuts deals.  

Secondly, Damaad Gate raises troubling questions of the quality of Indian democracy. It is by now known in relevant circles that documentary evidence of the cosy DLF-Vadra relationship had been in circulation since February 2011 and, indeed, formed the basis of a very cautious report by a financial daily in March 2011. At that time, there were at least two senior BJP leaders—Arun Jaitley and Yashwant Sinha—who were prepared to raise the issue in Parliament and bring it into the public domain. They were prevented from doing so by the party’s all-important Core Committee on the ground that it would be wrong to target the children of political opponents.

This apparent act of high-mindedness has now recoiled on the party. It is now being alleged, not least by the politicians spawned by the Anna Hazare movement, that the BJP’s silence was proof of the complicity of the entire political class in perpetuating a system based on cronyism and corruption. The charge is not entirely untrue and is likely to generate a political cost. More than anything else, the BJP’s reluctance to hit the holy dynastic cow has ensured that the political benefits of the disgust against unethical practices won’t fully accrue to the principal opposition party.

The consequences of this immoral equivalence are ominous. It is now becoming increasingly apparent that mainstream political parties, including regional parties, are attracting precisely the type of people public life can do without. The bright young idealists who entered the political arena in the past via student activism are now increasingly shying away from the main parties and either opting out of politics altogether or drifting to non-governmental organisations and protest movements like the one headed by Kejriwal. The cumulative loss to Indian democracy is incalculable.

Finally, and equally troubling for the future of India, is the growing impression that the culture of Indian business is by and large rotten and that reposing faith in the private sector as a powerful engine of economic growth carries an unacceptable social cost. There was implicit arrogance in Vadra mocking the anti-corruption zealots as ‘mango people” which hasn’t gone entirely unnoticed. It has reinforced a growing popular conviction—which the 2G and coal allotment scandals helped perpetuate—that ‘reforms’ are merely the pompous façade to hide an economic system based on organised loot. Till a few years ago, political parties undertook a fine balancing act between populist politics and sensible economics. With the anti-corruption epidemic hitting the country, it will be very difficult for mass politicians to argue that a market-oriented, liberal economic regime provides India the best opportunity to extricate itself from endemic backwardness. The growing ‘sab chor hai’ mood will make it virtually impossible for the reformists to convince the electorate that they need to pay more for power, fuel and cooking gas for the sake of a system that is tailor-made for the well connected.

Circumstances generate strange symbols of both affection and disrepute. In the past fortnight, the popular imagination has come to associate Robert Vadra with greed, privilege and arrogance—everything that Middle India has learnt to despise. As the imagery of a brat percolates down the social ladder, the Gandhis will have to some hard sell to redeem the family reputation. 

The Telegraph, October 12, 2012

Rousing a sleeping giant without moral authority

By Swapan Dasgupta

Reflecting on the spread of the British Empire to which he was passionately committed, Lord Curzon once remarked that “We have often blundered into many of our greatest triumphs.” Many Indians who cherish a vision of a vibrant India but were nevertheless disappointed by the prolonged drift in public policy could well be wishing that what Curzon held to be true for the Empire will also turn out to accurate for the Indian Republic.

Contemporary India has rarely conducted itself with a sense of mission. The economic deregulation initiated by P.V. Narasimha Rao and Manmohan Singh in 1991didn’t happen because the two were conviction politicians made by the same firm that created Lee Kwan Yew and Margaret Thatcher. India turned its back on an inefficient socialistic path at gunpoint. Likewise, the second wave of liberalisation was prompted by the NDA Government’s desire to offset the possible adverse consequences of the sanctions imposed on India by the West after the nuclear tests of 1998.

If Prime Minister Singh was indeed the great reformer he is portrayed to be, he would have unleashed India’s “animal instincts” immediately after his May 2009 victory when he had little to fear but fear itself. Instead, he waited till GDP growth had fallen below 6 per cent, the rupee was fragile, inflation soaring, the fiscal deficit out of control, politics vitiated by corruption scandals and business confidence at an all-time low. What would have been bold initiatives in 2009, grudgingly digested by a dispirited opposition and accepted by a people anxious for more of the good times, has become a last-ditch, cynical gamble three years later.

The public discourse in India cherishes boldness and decisiveness. To the extent that the Government has been propelled into a burst of activity, there is critical appreciation of the fact that there is more to the Prime Minister than the ridicule that was heaped on him for the past year. Industry bodies have rallied enthusiastically to his support, stock market speculators have given their thumbs-up, the editorial classes are awe struck and even a demoralised Congress appear to have convinced itself that it is better to have fought and lost than not to have fought at all. On the face of it, a sleeping and indolent giant appears to have been aroused.

However, as the old colonials used to remark, for everything that is true of India the opposite is also true. For the past 20 years, market economics has become the new consensus. With the exception of dinosaurs in West Bengal and Kerala and ideologues who nurture a visceral hatred of what they call ‘neo-liberal’ economics, mainstream India is committed to the idea of reform. However, like vocational education which is always good for the neighbour’s child, reform is also expected to be detached and morally uplifting at the same time. In the 1990s, reforms implied dismantling controls and opening up large chunks of a fortified economy to the private sector and global forces. This liberation from Nehruvian dogma unleashed entrepreneurship and put an end to the shortage economy. Some people got very rich but a larger number of Indians moved into the middle class and ceased to be impoverished. It was win-win situation.

Today, the situation is different. The Government is asking people to lower expectations, make sacrifices, to reconcile themselves to the erosion of subsidies and to tighten their belts—all for a larger cause. Unfortunately, for the past few years this larger cause has become both hideous and blurred. After repeated scandals, some involving unimaginable sums, the earlier mood of expectancy has turned to cynicism and disgust. The Government stands discredited; the political class is equated with venality and brazenness; and India Inc. is increasingly being seen as the nesting ground of cronyism and dodgy practices. Almost all the institutions associated with public policy have become objects of disrepute.

In an India overwhelmed by disgust and despondency, the Government’s plea for a sense of national purpose may well end up being viewed as a cruel joke. It has become necessary to refurbish the moral authority of the economic order first. Unfortunately, that is beyond the scope of economists.

Sunday Times of India, September 23, 2012

Congress, not allies,opposed to reforms

By Swapan Dasgupta

Speaking to a TV channel from Washington DC last Friday, the Government’s Chief Economic Adviser Kaushik Basu expressed his bewilderment that his “mandane” comments on the Indian economy to a Carnegie Endowment-organised meeting had triggered a huge controversy. He wondered if he had unwittingly stumbled into a dull news day and helped keep the ticker rolling.

A part of Basu’s consternation is understandable. He will not be the first public figure to be concerned about what one senior politician once described to me in private as the “media illiteracy” on economic subjects. His erudite proffering on the likelihood of a European banking crisis in 2014, quite understandably, attracted little attention. However, since the talk was on “India’s Economy and the Looming Crisis Global Economic Crisis of 2014” and he occupies the post of Chief Economic Adviser, it is hardly surprising that the media reportage was focussed on what he had to say about India.

If Basu had decided to don the mantle of the Deputy Chairman of the Planning and act as the permanent defence counsel for the Government he is serving, he could have escaped unscathed. He could well have set intellectual honesty to one side and argued that India remains reform obsessed and that it all depends on what we mean by reforms. He could conceivably have taken a cue from Minister of State Jyotiraditya Scindia who haughtily told a TV channel that it was India which was complaining and that Bharat was delighting in the entitlement-based policies of the UPA.

Fortunately Basu has not been too long in sarkari service to completely disregard his formidable reputation as an economist and a man of letters. If media reports are correct, he told the gathering in Washington three things. First, that decision-making in a coalition had taken the steam out of reforms. Secondly, that it was unlikely that there would be any big-ticket reforms before 2014, the Goods and Services Tax being the only possible exception. And finally, he expressed the hope that a return of one-party government could be the biggest fillip to reform.

It is not necessary to be either a UPA-hater or a Congress lover to admit that what Basu said is conventional wisdom. Yet, what he said was only half the story. For reasons of tact, Basu left many things unsaid.

A closer scrutiny of what is meant by coalitional constraints is revealing. The fact that Mamata Banerjee has proved a very difficult coalition partner, preventing much-needed fare hikes in the Railways and helping to derail the opening up of the retail sector as a whole to foreign direct investment, is well known. It is also a subject that Congress loyalists aren’t wary of addressing in private and even in public. What the Government is, however, less enthusiastic about admitting is the fact that the opposition to reforms doesn’t come from obstreperous coalition partners and a cussed opposition alone. The Congress is split down the middle over the priority to be accorded to reforms.

It is worthwhile recalling that what clinched the roll-back of the retail sector reforms earlier this year was not merely the opposition of the Trinamool Congress and DMK, but the quiet but determined opposition from the Congress’ own backbenches. The average Congress MP, brought up on a diet of Nehruvian socialism where the state sector propels change, was suspicious of the very idea that large corporations (with foreign capital) can usher efficiency in agricultural change. To them, that initiative rests with bodies such as the Food Corporation of India and NAFED. The Congress is inherently statist in its orientation and will be unenthusiastic about reforms that involve opening up sectors to all-round, including global, competition. This explains its foot-dragging in reforms connected to pensions, insurance and banking. It even explains why a stupendous amount of public money is being expended on keeping a vanity public sector airline afloat.

Manmohan Singh succeeded in pushing through a large measure of deregulation between 1992 and 1995 for two reasons. First, because in 1991 India was confronted with an economic crisis that forced a change of direction. Secondly, he had the full backing of Prime Minister P.V. Narasimha Rao who extended full political support to him.

Today, the feeling in the Government is that the GDP growth is healthy enough to not be coerced into doing things that go against the instincts of the party. Secondly, it would not be an exaggeration to say that neither Sonia Gandhi nor her successor see reforms as the priority. Their stress is creating a welfare state based on entitlements and they are least concerned with issues of affordability. The most discredited facets of the post-War European experience are being sought to be imported into India.

In 1992, India charted a new course with an entrepreneur-driven trajectory of growth. In the past seven years, an attempt has been made to turn the clock back and revert to state-driven stagnation.

The Government of Manmohan Singh is confronted with political schizophrenia. A minusculity wants to keep the faith of 1992 but the political forces that drive the regime would rather go back to the regime of high taxes, high interest rates, deficit financing and high government spending—bound together by the repudiation of the federal ethos. It is not the Manmohan spirit that is prevailing but the Sonia consensus.

Why are men of integrity like Kaushik Basu wasting their time on such a self-destructive venture?


Sunday Pioneer, April 22, 2012