Paranjoy Guha Thakurta

May.18 : Now that the Left and the Right in Indian politics have been convincingly defeated by the Congress, the big question is whether Prime Minister Manmohan Singh would, in his second term, espouse policies that accentuate the rightward shift in his government’s economic ideology. Would he instead emphasise improvement in the quantity and quality of spending on welfare programmes and public works as is being done in almost all the 292 countries on the planet that have been hit terribly hard by the ongoing economic crisis, the worst of which is not yet over?

Or, would the Prime Minister be able to judiciously mix "market friendly" policies that benefit the upwardly mobile while strengthening "social safety nets" for the underprivileged? That, indeed, is the immense challenge for his new government at a time when industrial production has declined, jobs continue to be lost, exports are down by a third and consumer prices (including food prices) are going up by nearly 10 per cent although wholesale prices are virtually static.

Everybody and his brother agrees that economic growth is in itself meaningless unless it is "inclusive", namely, that it improves the lives of the poor and creates employment opportunities. There is also no controversy over the need for the government to spend not just large amounts on social infrastructure (shikhsha, swasthya) and physical infrastructure (bijli, sadak, paani) but, equally importantly, to ensure that the money is properly spent. There is also general consensus today that in view of the economic slowdown at home and the worldwide recession, the government should not at this juncture be reining in the fiscal deficit to curtail public spending.

Further, the need for good governance is hardly at dispute and Dr Singh surely knows why the Congress was unable to make inroads into states such as Orissa, Bihar, Gujarat, Chhattisgarh, Madhya Pradesh and Karnataka.

Since the Prime Minister is no longer the "bonded slave" of the Left and given the fact that there is little to distinguish between the economic policies of the Congress and the Bharatiya Janata Party (BJP), it is worth going over some of the important policy changes proposed by the United Progressive Alliance (UPA) government that were allegedly "vetoed" by the Communists:

l Raising the cap on foreign direct investment (FDI) in Indian insurance companies from 26 per cent at present to 49 per cent;

l Creating a new regulator for pension funds to break the monopoly of the Employees’ Provident Fund Organisation and allowing pension funds to be invested in stock markets;

l Allowing the government’s equity holding in public sector banks to come down below 50 per cent;

l Removing the 10 per cent limit on voting rights of foreign investors in private Indian banks irrespective of the size of their holding;

l Allowing FDI in multi-brand retail outlets;

l Changing labour laws, in particular, the Industrial Disputes Act;

l Increasing the involvement of the private sector in mining, including coal mining;

l Enacting the Regulation of Foreign University Entry and Operation (Maintenance of Quality and Prevention of Commercialisation) Bill; and

l Divesting the government’s equity holding in profit-making public sector undertakings (PSUs).

Consider some of these "reforms" that are unlikely to materialise, not on account of the now-depleted Left, but because of opposition from within the Congress and its coalition partners. Foremost among these would be changes in labour laws. Not only would the trade union affiliate of the ruling party, the Indian National Trade Union Congress (Intuc), oppose any amendment to the Industrial Disputes Act, but so would Opposition trade unions. When Yashwant Sinha, the then finance minister in the BJP-led National Democratic Alliance (NDA) government, suggested in his February 2001 Budget speech that the Act be applicable only to industrial establishments employing up to 1,000 workers (against 100 at present), he was roundly abused by the late Dattopant Thengadi, leader of the trade union wing of the RSS, Bharatiya Mazdoor Sangh, who publicly called him an "anarth mantri" (literally, a minister who is useless) instead of an arth mantri (finance minister).

Nitish Kumar’s confidante N.K. Singh, MP and former member, Planning Commission, has pointed out that the NDA’s bill to reduce government’s stake in nationalised banks to 33 per cent was "given a quiet burial since there was no consensus within the Congress party" and that the decision to cap foreign equity in insurance companies at 26 per cent was "at the insistence of the Congress".

As for divestment in PSUs, on more than one occasion, the Prime Minister has been critical of the policies of privatisation of profit-making PSUs that were implemented by the BJP’s two Aruns, Shourie and Jaitley. It should be remembered that it was not just the Left but the Dravida Munnetra Kazhagam (DMK) too (then a part of the NDA) that was particularly strident in opposing divestment of government shares in Neyveli Lignite Corporation. What could, however, happen is that government equity up to 50 per cent could be divested in select PSUs to the public and the funds parked in the National Renewal Fund, which needs revamping if it is to play a more meaningful role.

It is no secret that there is a "left wing" within the Congress that has traditionally not favoured many of the neo-liberal economic policies favoured by Dr Singh, P. Chidambaram and Montek Singh Ahluwalia. The crisis in international capitalism may make this section exert pressure on Dr Singh to continue to spend more on subsidised food for the poor (as has been promised in the Congress manifesto). Individuals like Arjun Sengupta would urge him to extend the insurance scheme for workers in unorganised sector enterprises.

Rural India has to some degree been insulated from the global recession. This has, to an extent, helped the Congress. The party was able to garner votes despite high food prices. The intelligent ordinary voter — unlike so-called analysts such as yours truly — realised that the government was not to be excessively blamed for the current slowdown and that political stability was necessary for faster, better economic growth and development.

By May 2014, there is every possibility that Dr Singh would have become the first Indian Prime Minister after Jawaharlal Nehru to complete two successive five-year terms. Nehru favoured a mixed economy. He wanted the country to assimilate the best elements of both capitalism and socialism. More than five decades later, the verdict is almost unanimous: we took the worst of both worlds. Private enterprise (the hallmark of capitalism) was stifled by excessive and mindless bureaucratic controls till the 1990s. At the same time, the government has not been able to provide quality healthcare and elementary education (the kind prevalent in socialist societies) to the majority of Indians.

We in India drew a spurious differentiation between the "public" and the "private" sectors. The Right and the Left agree that public corporations have served as personal fiefdoms of politicians and bureaucrats with the state becoming the "private" property of the privileged few. At the same time, private corporate groups used to prosper on account of generous infusions of funds from government-controlled banks and financial institutions. Till date, many of them continue to benefit from official patronage. The losses of the public sector often get transformed into profits for the private sector. Thus, the gap between the "right" and the "left" gets blurred insofar as economic policies are concerned.

Time will tell whether Manmohan Singh can complete Jawaharlal Nehru’s unfinished tasks.

Paranjoy Guha Thakurta is an educator and commentator based in New Delhi