THE common minimum programme of the 15-party United Progressive Alliance and its supporters among the left parties that was formally announced on 27 May contains a plethora of pronouncements with which few can have major disagreements. The problem is one of actually implementing the fine-sounding statements of intent. It is often contended that political will is what is required to ensure proper implementation of the well-intentioned schemes outlined in the CMP. This is, however, only a part of the story.

Even if it is assumed that the current political leadership has the requisite will to push through the delineated programmes, what is also necessary is a thorough overhaul of the delivery mechanisms that exist at various levels of the Union, state and local governments. This is easier said than done. These delivery mechanisms are in the main decrepit, corrupt and unable to respond to popular aspirations. To be fair, Prime Minister Manmohan Singh evidently appreciates the nature of this constraint if his letter to all chief ministers in the country and his Independence Day speech are any indication.

The point is simple. If only 15 paise out of every rupee reaches the intended beneficiaries of development programmes – to go by Rajiv Gandhi’s famous remark – no amount of money allocated through the budget or largesse handed out by the Planning Commission can be effective in significantly reducing the incidence of deprivation or inequality in Indian society.

The formulation of a CMP had become inevitable in the current phase of Indian politics – a phase that has witnessed fragmentation of the country’s polity necessitating the formation of coalition governments. More than just the CMP, what has become especially important is the ability of the largest constituent of the coalition – the Congress in the case of the UPA – to carry along smaller partners and supporting parties to ensure relatively smooth governance.

 

 

If the Bharatiya Janata Party led National Democratic Alliance had at one stage as many as 24 constituents, not to mention the Telugu Desam Party supporting the coalition from outside, what is often not realized is the fact that the UPA comprises no less than 14 relatively large and small political parties excluding the Congress. These are the Rashtriya Janata Dal, the Dravida Munnetra Kazhagam, the Nationalist Congress Party, the Pattali Makal Katchi, the Telengana Rashtra Samithi, the Jharkhand Mukti Morcha, the Lok Janshakti Party, the Marumalarchi Dravida Munnetra Kazhagam, the All India Majlis-E-Ittehadul Muslimeen, the People’s Democratic Party, the Indian Union Muslim League, the Republican Party of India (Athawale), the Republican Party of India (Gavai) and the Kerala Congress (Joseph).

Economic policies pursued by coalition governments should presumably be different from those devised by governments that are led by, or comprise, a single political party. Economic policies of coalition governments should under most circumstances not only reflect the diversity and heterogeneity of the combination of parties in the coalition, but also be the outcome of a consensus among the various constituents. However, this has not always been the case in India for a variety of reasons. One is that a large party has dominated the coalition (the Congress in the UPA, the BJP in the NDA). A related factor is that most of the smaller constituents of the coalition rarely have a coherent economic programme worth talking about.

It is often claimed that currently there is considerable consensus among contending political parties in the country – especially between the two largest parties in the country, the Congress and the BJP – on the broad direction of economic policies that have been followed by various Union governments since June 1991, the month the policies of economic liberalization were introduced by Manmohan Singh when he became finance minister in the P.V. Narasimha Rao government. This claim is, however, difficult to substantiate.

 

 

There was considerable confusion and chaos in the BJP-led NDA government on the thrust and tenor of particular economic policy issues, including the efficacy of privatization, the role of foreign capital and the need to amend labour laws (to name three). Part of the chaos was a result of deep-rooted ideological differences among the disparate constituents of the NDA while some of it was a direct consequence of the compulsions of coalition politics.

This story is being repeated in the UPA government. Consider, for instance, the tussle between the Communists and the Congress on the desirability of increasing the sectoral caps on foreign direct investment in insurance, civil aviation and telecommunications that was mooted by Finance Minister P. Chidambaram in his proposals for the Union budget for 2004-05 presented on 8 July. The left remains unconvinced by the logic put forward by Chidambaram for raising the sectoral FDI caps. The finance minister has said that if 51 per cent foreign investment is allowed in airports it should also be allowed in civil aviation; the Communists argue that majority foreign holdings should not be allowed in either case. Chidambaram has said foreign investors already hold 74 per cent in certain private telecom companies – that is, through foreign institutional investors and complex cross-holdings – and that his proposal would merely impart transparency to the situation prevailing.

 

 

The most contentious issue in this context is the proposal to hike the FDI cap in the insurance sector. The finance minister has argued that there is little to differentiate between a cap of 26 per cent and one of 49 per cent for insurance companies, except that a higher cap would attract more foreign investment. The Communists have said they would not support any legislative amendment to this effect. Curiously, so has the BJP and its opposition to the move has been articulated by none other than Atal Bihari Vajpayee himself. This is a clear instance of opposition for the sake of opposition for such a step may have been proposed by a BJP-led NDA government had it remained in power. As for the left, the Communists have never been convinced of the need to have private investment – leave alone foreign investment – in insurance companies in the first place.

It may be recalled that after the NDA came to power for the second time in October 1999, the Union government was able to push through the bill to allow entry of the private sector into the insurance business. Ironically, when Chidambaram as finance minister in the United Front government had introduced a similar bill in 1997, the BJP had resisted it on grounds that the insurance business should be opened up initially only to private Indian firms and not foreign companies. The Congress supported the BJP to amend laws governing the insurance industry, allowing Indian as well as foreign firms to enter an area that was earlier monopolized by two state-run corporations, the Life Insurance Corporation and the General Insurance Corporation. Even in 1999, it was not as if there were no sections within the Sangh Parivar that were opposed to the insurance bill. The Swadeshi Jagaran Manch (SJM) and the Bharatiya Mazdoor Sangh trade union (both closely affiliated to the Rashtriya Swayamsevak Sangh) had (and continue to have) serious reservations on this score.

 

 

The pulls and pressures of coalition politics on economic decision-making have been starkly revealed on the issue of increasing the price of petroleum products. Whereas the United Front government had dilly-dallied and agonized for months on end over such a decision in 1997, the Vajpayee government too succumbed to pressure from NDA constituents not to hike the price of petroleum products between March 1998 and April 1999. Eventually, just before the BJP-led NDA coalition came to power for the second time in October 1999 – exactly a day after the last round of polling – the then caretaker government of Vajpayee hiked the politically-sensitive price of diesel by a whopping 40 per cent.

The story has been repeated all over again in 2004. During the first six months of the current calendar year, oil refining and marketing companies did not increase domestic prices of petrol and diesel although world crude oil prices had shot through the roof – by over 30 per cent in this period. Although the administered pricing mechanism had been done away with in April 2002, the Ministry of Petroleum and Natural Gas arm-twisted public sector oil companies not to hike prices although these companies are supposed to function autonomously. The NDA government evidently did not want oil companies to increase the price of petroleum products in view of the impending general elections – not that it mattered very much in terms of influencing the electoral outcome.

 

 

It was left to the UPA government to perform this politically unpopular chore and the price of transportation fuels – petrol and diesel – went up on two occasions in July and August. And not surprisingly, the left expressed its unhappiness. The BJP, of course, had to play the role of an opposition party. In private, however, representatives of all political parties concede that there is little that Indian oil companies can do when faced with a sharp and sudden rise in international oil prices. World prices of crude oil and petroleum products were ruling at record levels at the time of writing this article in mid-August. It is no secret that the Indian economy is especially vulnerable to oil price shocks since the country imports close to three-fourth of its requirement of crude oil and petroleum products, much of it from the Middle East.

There has been a gradual convergence of political opinion on many economic issues cutting across party lines, notwithstanding the fact that this consensus among opposing parties and formations periodically breaks down, particularly on issues like privatization, labour laws and foreign investment norms. Within the Congress and the BJP there is internal divergence of opinion on these and other policy issues. The two major political formations that have been opposed to the broad direction of the so-called economic reforms, and not just its details, are the left, comprising mainly the two Communist parties, and the SJM, an offshoot of the RSS.

 

 

Both the Communists and the SJM have had to compromise on economic policy issues because of overriding political compulsions. While the left may not have liked the direction of economic policy formulated by the United Front government, it could not threaten to withdraw from the UF coalition since that would have meant helping either the BJP or the Congress. A similar TINA (‘there is no alternative’) factor had constrained the SJM in its opposition to the policies followed by the BJP-led NDA government. Interestingly, the SJM heartily welcomed the UPA’s CMP soon after it was announced on 27 May. The Marxists, despite their opposition to higher FDI caps in insurance, civil aviation and telecommunications and a lowering of the interest rate on deposits in the Employees’ Provident Fund, have repeatedly asserted that they would do nothing to destabilize the UPA government.

Thus, a divergence of opinion on economic policy issues has more often taken place – and continues to take place – within political parties and their ideological fraternities rather than merely among them. It can, therefore, be argued that instead of a genuine consensus on economic policy issues what we have is an illusion of consensus, on account of the fact that there are some similarities between the economic policy prescriptions espoused by the BJP and the Congress. At one stage, like the Congress, the BJP had claimed it had faith in ‘Gandhian socialism’. Subsequently, both rejected the ‘socialist’ policies that were put in place since the 1950s by India’s first Prime Minister Jawaharlal Nehru, although of late, there are indications that the economic programme of the Congress has veered distinctly leftwards.

It is a separate matter altogether that Nehru himself had advocated a ‘mixed’ economy for India, one that he saw as incorporating the best elements of both capitalism and socialism. Interestingly, even the NDA government’s Finance Minister Jaswant Singh had sought to impart a ‘pro-farmer’ tilt to his policies and espoused the view that growth would be meaningless without equity – a tilt that came rather late in the day for the BJP and its coalition partners. Both the BJP and the Congress agree that market forces do not work well in certain areas, especially social infrastructure, including elementary education and basic health care.

 

 

While the BJP and the Congress both loudly proclaim the virtues of economic liberalisation in public, there are in fact deep differences of opinion within both political parties on the direction and pace of economic reforms. When it was the largest opposition party, the Congress felt obliged to criticize the NDA government’s economic policies even if these were not substantially different from the policies that were pursued by the earlier Congress government headed by Narasimha Rao. The BJP is behaving in exactly the same manner.

The fact of a political party opposing another’s policies for the sake of opposition was earlier illustrated by the turnaround in the BJP’s ‘swadeshi’ rhetoric. Before the party came to power in March 1998, it had asserted that the economic reforms process had not been sufficiently pro-Indian. The BJP’s slogan was: ‘reforming the reforms’, with the party arguing that reforms had been overly sensitive to the needs of foreign investors and had failed to provide a level playing field for Indian industry. The party’s pre-election manifesto had proclaimed an aim at an India ‘built by Indians, for Indians’.

 

 

Within a year of coming to power, swadeshi was no longer the flavour of the month in the BJP. Since 1997, the balance of power within the Sangh Parivar clearly shifted in favour of the pro-liberalization section. Seven years later, most economic analysts would agree that the NDA government’s economic policy thrust had not been substantially different from what a Congress government would have followed. If anything, the BJP’s economic policy thrust was more to the right than that of previous governments. With the electoral defeat of the NDA, the centre of the country’s political economy had to inevitably shift leftwards and it has.

Those who perceive Manmohan Singh and Chidambaram as gung-ho liberalizers, individuals overly enamoured of not just the virtues of free enterprise capitalism but also its relevance for the Indian economy, may be a bit off the mark. Neither is exactly a flaming-red Communist. At the same time, compulsions of coalition politics have transformed them into left-of-centre social democrats. Both not only have to coexist with Marxists; they have to necessarily attack the economic policies pursued by the NDA government, even if some of these policies are ideologically compatible with their way of thinking.

It is well known that Manmohan Singh had offered to put in his papers as deputy chairman of the Planning Commission after Rajiv Gandhi had derogatorily described the members of the commission as a ‘bunch of jokers’. This statement was subsequently denied but reportedly it took some persuasion to convince Manmohan Singh that he should not insist on quitting. Subsequently, he is believed to have thankfully accepted the post of secretary of the Geneva-based South Commission when an offer came from Kenneth Kaunda. It is noteworthy that the current Planning Commission headed by Montek Singh Ahluwalia, the prime minister’s close confidante, is packed with more heavyweights than in the recent past and is, therefore, likely to play a more proactive role in economic policy formulation.

 

 

Both when he was with the South Commission and earlier in the 1960s when he wrote Export Trends and Prospects for Self-Sustained Growth (Oxford University Press, 1964), Manmohan Singh hardly appeared enamoured of the prescriptions of the World Bank and the International Monetary Fund vis-a-vis developing countries. Yet, this is the same person who tried valiantly to convince his political opponents that the IMF’s 3D prescription of deflate, devalue and deregulate, was a bitter pill that was ‘necessary’ for the revival of the economy since the government had just borrowed $ 5 billion from the Fund. Even if he was unsuccessful in convincing his critics that he had not capitulated to the IMF, the subsequent years saw him try and restore some of the savage cuts that had been made to government spending on the social sector.

In July 1991, this writer had interviewed Manmohan Singh for the now-defunct Sunday magazine and asked him to react to those who were claiming a sudden transformation in his timid personality. This is what he said: ‘I don’t think it is at all true that I have been timid. One day, when the country’s archives are prepared, people will know the truth. What I’m saying now is what I’ve been saying ever since I came into the government. It is true that I have lived within the system and that I have not been successful in changing the system’s thinking earlier. Go through what I’ve written in the Sixth Plan and Seventh Plan documents – I’m saying the same things even today. Maybe I was not able to implement everything. But then I was just a small cog.

‘When I came to the Finance Ministry in 1971, I wrote a paper called What To Do With Victory (that was when Indira Gandhi’s popularity was at its peak). I had written at that time that all these controls in the name of socialism would not lead to growth but would strangle the impulses for growth. I had said that these controls would not reduce inequalities but increase them. I have not been timid. I have spoken my mind freely and frankly. But I’ve also served as a faithful civil servant. Even if I have been overruled, I have carried out the orders of my political masters.’

 

 

During the same interview, I had asked Manmohan Singh in what manner his economic views had changed over the years. He replied: ‘I used to be in favour of gradual change. But I look around the world and realize that time is not on our side. There has been a complete collapse of the command economies of Eastern Europe. This country will be marginalized if we don’t move forward at a breathtaking pace. I’m convinced that if there has to be structural change, it must be done quickly. That’s how my views have changed.’

Over the last thirteen years, Manmohan Singh’s views have continued to change. The person who had initiated the process of disinvestment, at present justifies the UPA government’s decision not to privatize profit-making public sector undertakings. He is today talking about the need to create job opportunities for those belonging to the scheduled castes and scheduled tribes with captains of private corporate bodies. This is same man who has repeatedly asserted in recent weeks that the Communists are ‘patriots’. Chidambaram too, like his prime minister, has changed over the years. He today describes the left as his ‘conscience keeper’. Time and political compulsions have mellowed Manmohan Singh. Among his cabinet colleagues are political stalwarts who had viciously attacked him and blamed his ‘pro-rich’ policies for the defeat of the Congress in the 1996 elections.

 

 

Of the prime minister’s many incarnations, the avataar we may perhaps see more often is that of the person who headed the South Commission that espoused the cause of Third World countries and the adviser to Indira Gandhi during her garibi hatao days, not the individual who trashed socialism in the wake of the break-up of the Soviet Union – a period that coincided with the beginning of economic liberalization in India. Circumstances change people. India’s present prime minister is no exception.

What might make the task of Singh and Chidambaram a little easier is that the Marxists too have changed. West Bengal Chief Minister Buddhadeb Bhattacharya is welcoming foreign investment with open arms and closing down unprofitable government-owned companies. So what’s the difference, if any? The difference is that there is a new emphasis on creation of jobs, on rural development, on poverty alleviation, on education and health care. A cynic may choose to dismiss the pronouncements made by UPA functionaries and the goals of the CMP as mere political rhetoric. But if the UPA proves to be no different from the NDA, it would surely meet the fate of the latter, sooner rather than five years later.