Opinion
Economic Agenda Will be More of the Same With New Government
Even as uncertainty looms large in India over which party or coalition will run the next national government, what has emerged as a given is continuity in the country's economic policies - but for some sensitive areas like lifting the cap on foreign investment and divestment of stake in state-run enterprises.
After six decades of independence, the distinct differentiation in the economic policies among the major political parties with ideologies tilted toward the right, left and the centre has transformed into a fuzzy kind of sameness.
This is far removed from the time when there were vast ideological differences over the issue of economic development in this country. The parties which occupied the right-wing space shortly after independence were the Jana Sangh and the Swatantra Party. They not only advocated a free-market capitalist economy but were also admirers of the US.
The Congress party in those days led by the non-alignment pioneer, Jawaharlal Nehru, described itself as Socialist - a neat trick to distance itself both from capitalism and communism. Perhaps, that was being a tad too cynical given Nehru's avowed commitment to the socialist ethic.
In any case, his brand of socialism had a perceptible tilt towards the erstwhile Soviet Union, which helped by providing technology to launch the Indian economy onto the path of industrial growth. And, of course the Left, as it grew roots in the fertile soils of Kerala and West Bengal, remained ideologically committed to communism despite splintering into many groups.
The new avatar of the Jana Sangh is now the Bharatiya Janata Party (BJP). But it has abandoned its originally free-market, pro-US stance and also has in its wing leaders whose "swadeshi" (economic nationalism) policies are utterly opposed to economic liberalization.
The Congress, which was determinedly socialist, became the party of the great liberaliser under P.V. Narasimha Rao and dismantled its own carefully crafted controls over the economy. Only the Left today has retained its Marxist ideology despite the Soviet Union having abandoned it, even as China is virtually the leader of the global free market.
The uniformity of economic policies cutting across party lines became clear when the Third Front led by H.D. Deve Gowda and then I.K. Gujral broadly followed the economic liberalization policies of the previous Congress government. And then the BJP-led National Democratic Alliance (NDA) became a ferocious advocate of economic reforms. This coalition even tried hard to sell public sector firms, including profit-making oil firms, despite the "swadeshi" agenda of some BJP leaders.
In contrast, the Congress-led United Progressive Alliance (UPA), which completes five years in power May 22, had to slow down on a number of major reforms such as public sector divestment, because of roadblocks by its alliance partner, the Left front.
In such a scenario, one has to expect that economic policies to remain on course irrespective of which political grouping comes to power. Certain areas, nevertheless, remain sensitive and may be postponed for some more time in view of the global slowdown and recession. These areas include raising the foreign direct investment ceiling in insurance from 26 to 40 percent, diluting government equity in public sector banks and permitting pension funds to invest in stock markets. The Left is totally opposes to all these measures.
At the same time, there will continue to be a broad effort to reduce red tape and make the life of the domestic and foreign investors easier than in the past. The Left had also not been able to prevent the UPA from introducing foreign investment in the retail of single brand products or from gradually ensuring that all major industries are freed from the licensing regime.
As for major schemes launched by the UPA, like the National Rural Employment Guarantee Scheme, it is unlikely that either the NDA or the Third Front would discontinue them despite the BJP manifesto describing it as a "flop". The fact is that most governments have been built on the foundation of Indira Gandhi's anti-poverty programmes and the changes have largely been in ways to implement them so that the maximum benefit percolates down to the poorest of the poor.
Even the BJP, if it comes to power, would probably make some cosmetic changes to the scheme, and perhaps give it a new name, but continue with the job-guarantee scheme. The scheme has been successful in some regions and not so much in others largely depending on the efficiency of the state governments who are always the key players in any anti-poverty or employment-oriented programme.
Besides, there are few differences in economic policies as enunciated in the manifestoes of the BJP and the Congress. The BJP, of course, is aggressive in attacking the UPA's claims of achieving high economic growth and has warned that the entire special economic zone policy would be reviewed. But even the Congress, having recognized the public clamor against land acquisition, has spoken of the need to involve farmers in industrial projects where their land has to be taken away.
This apart, even if the Third Front comes to power, it is clear that there is a broad political consensus on the need for economic reforms and thus there is little likelihood of a drastic change in policy direction.
To sum it up, the economic outlook for any new government currently is somewhat bleak given the global recession and the declining trend of both industrial output and exports. The aim of all parties therefore would be to invest heavily in infrastructure and try to provide a stimulus to the economy to push growth to at least 6 percent in the current fiscal and perhaps higher next year.
The options are, thus, limited for the new regime on the economic front. The net result would probably be a continuation of the existing policy framework with, perhaps, minor differences over the pace of implementation, depending on which coalition manages to get the crucial numbers to form a viable government.
If the Left front has considerable weight in the coalition, the pace may be a bit slower. If not, it will definitely be faster. In any case, the final picture on economic policies will emerge only when the final contours of the new government are revealed, which has so far mystified all the pundits and pollsters.
(Sushma Ramachandran is an economic and corporate analyst. She can be reached at sushma.ramachandran@gmail.com)
12-May-2009
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