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India is passing through a dystopian
nightmare. The scene is as gloomy as it can possibly be. High
inflation, low investment, falling growth rate and a widening gap
between the rich and the poor, as testified by the Organization
for Economic Cooperation and Development (OECD), have been
compounded by the government's policy paralysis which has been
diagnosed by an unnamed Congress minister as a symptom of
Parkinson's disease.
What has deepened the murkiness is the government's ignominious
retreat on permitting foreign direct investment (FDI) in the
multi-brand retail sector under pressure from an opportunistic
opposition and shortsighted allies. The backtracking appeared to
be even more unfortunate since FDI in retail was heralded as the
beginning of the long-delayed big ticket reforms.
It was welcomed because the bold initiative followed a long period
of official inaction in the wake of numerous corruption scandals.
The government was seen, therefore, to have finally shed its
lethargy and decided to inaugurate the second generation reforms,
which had been held up since its first term (2004-09) because of
the Left's obstructionism.
Now, all these hopes have turned to dust. What is even more
worrisome is that it isn't only the FDI in retail which has been
kept on hold, but the possibility of the entire 20-year-old reform
process being derailed. The reason for the fear is that the
opposition parties and intransigent allies like Mamata Banerjee
have smelt blood. They have realised that if they stand firm, the
government will retreat.
Moreover, it can be expected to do so because it does not have
either the courage of conviction to stand by its decision or to
call the bluff of the opponents by ignoring their threats and
implementing the decision. The government's succumbing to the
pressure is strange because both the Trinamool Congress and the
DMK had let it be known that they would not vote against the
government if there was an adjournment motion on the FDI issue in
parliament.
There must have been a deeper reason, therefore, for the
government's withdrawal from the battlefield. And, it is
undoubtedly related to the by now well known differences between
the "neo-liberal" Manmohan Singh and the "left-of-centre" Sonia
Gandhi. Her studied silence on the subject of FDI during a Youth
Congress rally the day after the decision was announced was the
first indication that the prime minister and the Congress
president were not on the same page on the subject.
This divergence of opinion was not surprising considering that
they had differed on a host of other topics such as the nuclear
deal, on which she had said that the Left had a point in its
objections, on the rural employment and food security schemes
because of the huge expenditure and high possibility of leakage,
and on including caste in the census enumerations because it would
give a fresh lease of life to caste-based politics.
The latest difference, however, can have portentous consequences,
for it can permanently stall the reforms process for two reasons.
First, since there is little likelihood of the government
acquiring a majority in parliament in the near future, it will
continue to be at the mercy of an unscrupulous opposition and
stubborn and short-sighted allies. Secondly, there is no unanimity
in the Congress about the reforms, which have always had
detractors in the party belonging to the camp of Nehruvian
socialism.
It has to be remembered that the Congress declared the
establishment of a "socialistic pattern of society" as its goal in
1955 and had the word 'socialism' incorporated in the constitution
in Indira Gandhi's time. It is not beyond the realms of
possibility, therefore, that influential sections in the Congress
secretly cherish a return to the days of a controlled economy.
They still apparently believe that the restoration of socialistic
principles is what the poor want because of their distrust for the
private sector in general and the multinationals in particular.
But, if the Congress is unable to make up its mind about an open
or a closed economy, the opposition is concerned solely with ways
to embarrass the ruling coalition irrespective of the merits or
demerits of the case. Both the Bharatiya Janata Party (BJP) and
the Left - the communalists and the communists - are united on
this approach except for the fact that while the comrades are
guided by their anti-American worldview, the BJP, which has no
such angularities, is interested only in making trouble for the
Congress.
Unlike the BJP, the allies of the Congress like the Trinamool
Congress and the DMK may not want to corner the Congress, but
their restricted outlook, confined only to their respective
states, makes them impervious to the intricacies and usefulness of
economic measures at the national level. In this particular case,
the Trinamool's fear was that support for FDI would have exposed
it to the Left's charge of being anti-people and pro-capitalist in
West Bengal. It is a pity that partisan politics sabotaged good
economics.
Amulya Ganguli is a political analyst. He can be
reached at amulyaganguli@gmail.com
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