Ten Years of Economic Politics

Ten years ago, India bid farewell to its 40-year-old socialist economic policy. In July 1991, a newly elected Congress government under the Prime Minister ship of Narasimha Rao adopted the policy of economic reform with liberalisation and globalisation as its hallmarks. Dr. Man Mohan Singh, the new finance Minister realised that India’ budget deficit had to be curtailed under 5 percent of GDP, our foreign exchange reserves had to be rebuilt and our credibility in the international economic community had to be established once again. The time had come for India to open its doors to foreign investment and foreign industry. These objectives could not be realised unless Indian economy was restructured to suit the foreign investor. Two major hurdles had to be removed. Firstly, sufficient opportunities for profit making had to be generated. India’s socialist economic regime did not leave enough room for this. There were quantitative restrictions on production as well as price control. Secondly, State interference in economic affairs had to be brought to a minimum. All aspects of economic activity were crippled by a licensing regime, bureaucratisation and strenuous administrative controls. It was clear that the foreign investor despised such a suffocating atmosphere. In order to invite him to India, it was essential that the flow of money as well as material (both raw and finished products) should be free from bureaucracy and politics. Therefore, dr. Man Mohan Singh began to demolish the quota License regime and remove the artificial tariff barriers erected during 40 years of protectionism. Drastic reforms in labour laws were planned to allow for retrenchment during recession. The Public Sector, which the congress had proudly built as the foundation stone of Indian economy was now viewed as an epitome of inefficiency. Hence, schemes of disinvestments and privatisation of State ventures were planned.

Consequently, the leftist space, which the Congress party had occupied for 40 years, was left open and the communist parties could not hope for a better opportunity to pounce upon. They grabbed this chance and launched a shrill attack on liberal economic policy. They opposed labour reform and privatisation of public sector with a special vengeance to strengthen their constituency. However, the Bharatiya Janata Party (BJP) was in a fix. Apart from riding on a wave of Hindu buoyancy, it had always promoted the idea of a liberal economy. Since the liberal plank was now occupied firmly by congress and leftist plank by the Communists, the BJP was stuck in between. It was the principle opposition party and it had to oppose. The BJP therefore claimed to invent a Svadeshi (nationalist) economic policy. The BJp began to voice the argument that the then Finance Minister was an agent of International Monetary Fund and the World Bank. The Congress government was playing in the hands of foreign elements and destroying India’s economic heritage. They would allege that Dr. Man Mohan Singh (the finance Minister) was acting as a mouthpiece of the World Bank or the IMF. India was being sold to international financial institutions and its fate could be worse than Latin American countries that were back broken by IMF loans. The BJP forgot that Svadeshi was in fact championed by Mahatma Gandhi during the national movement. Mahatma Gandhi believed that there was no need to import goods, capital or labour from outside when they were available locally. Gandhi Svadeshi was meant to build national morale and instil a feeling of self-reliance. An element of defiance of unjust British policies was built into Svadeshi too. Thus, when the British ordered that making salt within India was illegal, Gandhi defied this law through the famous Dandi march. When he saw that cheap Manchester cloth was being dumped here using India as merely a peripheral economy serving the British market, he decided to boycott all foreign cloth. Enormous amounts of foreign commodities were brought and set afire on his call. BJP Svadeshi is different. Neither do they have the moral strength of Mahatma Gandhi, nor do they enjoy such mass following. On one hand, the BJP created euphoria by alleging that India was threatened by an economic imperialism, which was worse than the British imperialism. On the other hand, they voted with the Congress and kept the reforms going for five years from 1991-1996. In fact, when the Left Front National Front coalition came into power in 1996, all political parties went out of their way to convince the international community that there was no difference of kind about economic reforms. Economic reforms would continue was the call of all parties. If reforms were to go on, that what was the opposition about?

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