Mid-Course Deviation

11 August, 2008, C.P. Chandrasekhar

The Indian Left cannot be accused of deviance for its decision to withdraw its support for the UPA government on the issue of the Indo-US nuclear deal. It has for long espoused the position that given the aggressive expansionism of the US under Bush, the silence or collaboration of other major capitalist powers in response to this aggression and the end of multipolarity after the collapse of the Soviet Union, the contradiction between Imperialism led by the US and the people of developing countries like India had emerged as the principal contradiction of our times. Supporting any truck with the US would have meant both a violation of its programme and a betrayal of its cadre and the people. Unresolvable disagreement over any attempt to forge a strategic relationship with the US through the instrumentality of a specially crafted nuclear deal was inevitable.

It was the recognition of this reality, besides its own residual desire for political survival, that had possibly ensured that the Indo-US nuclear deal was nowhere mentioned in the Common Minimum Programme of the UPA, which formed the basis for the Left’s support. Given, the single-mindedness and no holds barred-approach with which Manmohan Singh the Prime Miniister has pursued this deal, it must have been a project that Manmohan Singh the politician was keen on pursuing when he was gifted the Prime Ministership. This project he must have temporarily shelved since it would have not been bought by the Left, and since much of the Congress and most other parties in the UPA were clearly not even contemplating such a deal. It was only when he was convinced that he could possibly swing a deal of this kind and had garnered the confidence to try and pressure an ally like the Left to join a “new consensus” on India’s position in global politics that he pulled out this card. From then on the effort has been to win the game, which finally succeeded when the government managed to garner the support to stay in power without the Left. In sum, if anybody deviated from the original consensus it was the UPA, led by the Prime Minister.

This should come as no surprise because there were other areas – especially the contentious one of accelerated economic reform – where the tendency to deviate from the original consensus has been visible for long. The project of the Prime Minister and his inner circle obviously went much further than the nuclear deal. It included a shift in economic policy that Manmohan Singh has been pursuing ever since he was a bureaucrat and through the years when he was Finance Minister and opposition MP. If with hindsight we put together the different elements of that project, it appears to be one which privileges the private capital over the State and labour, privileges international finance and privileges the US (and its allies) in India’s foreign relations.

The difficulty Manmohan Singh faced was that the Congress did not have the parliamentary strength to pursue this agenda unimpeded, since it could not take office without the support of the Left. To gain that support the UPA had to frame its programme in a form that could ensure Left support, even if from outside. The Common Minimum Programme of the UPA was the compromise document that was clear in areas where there could be little opposition from the Left (National Rural Employment Guarantee Scheme, agricultural credit, health and education expenditures, constitution of bodies like the NCEUS and the Competitiveness Council). In areas where Left opposition was likely or certain the document chose to be vague and non-committal. In many areas it fleetingly referred to the movement the government aspires for, only to caution that this should not be pursued if its repercussion were adverse. Thus the document does recognize “that some flexibility has to be provided to industry in the matter of labour policy”, but cautions that such flexibility must ensure that workers and their families are fully protected. More importantly, it refers to pursuing “closer strategic and economic engagement with the USA” (not a strategic relationship), but promises that “the UPA government will maintain the independence of India’s foreign policy stance on all regional and global issues.” 

These non-committal and ambiguous statements make clear that the CMP was not a document forced on the Congress or the UPA by the Left, whose support from outside was crucial for the government. It was a document which the Congress and its UPA allies owned, but could not draft as desired by its leaders given the need to satisfy the Left. The actual inclinations of the government came through when in the four years that followed the CMP, the emphasis has been more on pushing policies that were not mentioned in the document, rather than focusing on those that were. When seeking to do implement policies outside the CMP the constant refrain was that the Left had to change and to join the new consensus that incorporates policies that the CMP did not endorse. These included contentious policies such as privatizing public sector banks and profit-making companies, removing the cap on voting rights of private shareholders in private banks, permitting lightly regulated use of pension funds for investments in the stock market, allowing near-complete foreign ownership of insurance companies and providing capital the right to freely “hire and fire” workers.

In the event, the last four years of the UPA regime have been characterised by two tendencies. First, an effort to delay and if possible avoid the implementation of pro-poor programmes, including schemes like the National Rural Employment Guarantee Scheme. While more recently the Prime Minister may have chosen to declare the NREGES a “flagship” programme of the UPA, it is well known that for long he considered that programme a waste of money and agreed to implement it only because of pressure from the National Advisory Council when it was still headed by the Congress President. A second tendency was to use all manner of propaganda and pressure to get the Left to support, or at least not oppose, the kind of economic reforms which could not be explicitly and clearly included in the Common Minimum Programme. Despite the CMP’s silence, ambiguity or clear opposition, rather early in its term the government sought to push ahead with measures of liberalisation, be it in the form of divesting equity in profit making public sector units, hiking FDI caps in crucial sectors including telecom and banking, pushing ahead with the current form of restructuring of the electricity sector rather than reviewing the Electricity Act, opting for full convertibility on the capital account, diluting and for all practical purposes shelving the promised Employment Guarantee Act and, above all, reforming labour laws. It succeeded in some areas, but failed in many due to staunch opposition from the Left and other sections of civil society.

While the government’s “success” with pushing through such policies in particular areas may have been distributed over time and may have appeared too small for the Left to withdraw support and risk a return of the BJP, the cumulative effect of these measures of reform was a direction in policy which the Left could not have been seen as condoning for too long. It was a measure of forbearance of the Left that it stuck to voicing its opposition without withdrawing support, but there are many who believe that if this trend persisted, the continuation of support from without was under threat even if the government did not accept the strategic embrace of the US.

The government’s urge to push ahead with reform was strengthened because of three factors. First large capital inflows into the country which resulted in substantial accumulation of foreign exchange reserves. This gave India a China-like image, even though, unlike China, India had not earned these reserves through exports, but accumulated them because of excess inflows of speculative capital . Second, an unprecedented boom in the stock market that over just a year and a half resulted in a doubling of the value of the Sensex from 10,000 to more than 20,000 in January this year. This speculative surge was seen as reflective of strong fundamentals and a sign of economic health. And third, the high levels of savings, investment and growth in the period after 2002, even though this growth was driven by a few sectors and its benefits were visibly bypassing a majority of the population.

The decision to celebrate these signs of buoyancy and use them to push ahead with liberalisation of a kind that the Left could not accept, also amounted to a deviation from the rhetoric the Congress and UPA used to win itself the position of the single larges party in Parliament in the last election. That rhetoric attacked the India Shining slogan of the previous NDA government and stressed that the kind of neoliberal policies adopted by it had implied that the benefits of whatever growth had occurred had bypassed the poor. Second, some of these policies were seen in that rhetoric to be destroying the ability of the government to deal with deprivation. Finally, the UPA claimed to be opposed to privatization of the public sector not only because these enterprises were profit-making, but because the process endangered the employment of those associated with these enterprises.

In sum, if the political propaganda adopted by the Congress in the last election is given any credence, then the government that was formed after the elections has deviated significantly from its original agenda. Many political observers attributed this shift to a few to whom the reins of economic policy had been handed over by the Congress President, including obviously the Prime Minister. But if the decision of the Congress to rally behind the Prime Minister is any indication, this does not seem valid any more.

In fact, the immediate fall-out of the withdrawal of Left support and the Congress’ victory in the Trust Vote based on dubious partners and practices, is speculation that the government would not only push ahead with the nuclear deal but also with that larger reform agenda which was either expressly negatived or completely ignored by the CMP. Fortunately for the Left, it no more needs to tone down its opposition to these kinds of policies that now would be coloured by the strategic embrace of the US. For the Congress and its UPA allies, support for this agenda would not only amount to a betrayal of the 2004 mandate, but could be the basis for substantial loss of legitimacy and erosion of even its limited popular support. Unless, of course, it is believed that the nuclear deal with the US is an election winner that can neutralise the adverse responses to this agenda, the effects of inflation, the agrarian crisis and persisting poverty.

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