UPA
II, the argument goes, is afflicted by paralysis in
policy making, especially on matters relating to the
economy. Not without reason. There are few new initiatives
that are being implemented with vigour, and many that
began during UPA I, including the rural employment
guarantee scheme, languish under the current regime.
But all those who identify the government as being
overcome by paralysis are not referring to the same
policies. ''Paralysis'' of the kind that preoccupies
the financial media, corporate India and international
investors, refers to the failure of the government
to deliver fully on its explicitly or implicitly stated
commitment to so-called ''economic reform''. When in
Washington recently to attend the spring meetings
of the World Bank and the IMF, the Finance Minister
and his Chief Economic Adviser, realised that the
sources of such criticism were not just domestic.
Moreover, the term economic reform means different
things to different people: deregulation of various
kinds, reduced taxation or more tax concessions, privatisation,
public expenditure cuts, measures to curtail subsidies
and reduce the fiscal deficit, a lax monetary regime
with low interest rates, dilution of labour laws,
and many combinations of these.
The fact remains that successive governments since
the early 1990s have gone a significant way down this
path of liberalisation, privatisation and so-called
reform of the fiscal and monetary regime. But there
seems to be no end to the demands for further liberalisation.
Each round is followed by a campaign for a new generation
of reforms, so much so that now it is impossible for
advocates to put a number on the next round. Further,
since the interests of foreign investors in manufacturing,
of different components of the domestic corporate
sector, and of foreign and Indian finance capital
differ, the specific set of reform policies being
emphasised by each sectional interest also differs.
However, faced with criticism from these economically
powerful circles, the government has turned defensive.
It sometimes accepts that the slow pace of reforms
under UPA II is because of the constraints set by
coalition politics or by the intransigence of the
opposition. Many accepted that argument when the Left
was supporting the government under UPA I, but it
is less credible now. Sometimes government officials
attribute the slow pace of liberalising reform to
the indecision that results from repeated allegations
of corruption. That is seen as constraining other
officers from taking responsibility for government
spending. And at yet other times, just the fact that
some set of elections is imminent (which is always
true) is cited as reason for tardy implementation
of the so-called ‘consensus' over reform. Even the
Prime Minister has at times used such excuses to explain
the inability to implement reforms. But, since the
consensus among the elite that constitutes the state-capital
nexus is that these reforms are good, officials like
the Chief Economic Adviser who reportedly advanced
such arguments, sometimes come under attack and are
forced to retract.
The problem with this version of the policy paralysis
argument is that it presumes that the neoliberal version
of reform is right and that democracy (in the form
of elections, coalition governments, opposition and
dissent) is not all good since it constrains or slows
such reform. What is missed here is the evidence that
reform in India has been accompanied by significant
worsening of income inequality, on the one hand, and
a fall in the rate at which welfare improvements for
the poorest are realised, on the other. Whether it
be poverty incidence, malnutrition and hunger, reasonably
stable and remunerative employment or a host of other
indices of deprivation, the pace of progress has slowed
after liberalisation. This association between reform
and inadequate advance on the human development front
has challenged the legitimacy of the liberalisation
process. In the event sections of the opposition,
including the BJP, which advocate similar policies
when in power, are constrained to oppose the government
in some form when new measures of liberalisation are
being pushed. The real problem is that neoliberal
reform has no legitimacy in the perception of the
majority of Indians.
It is not surprising therefore that it is not just
neoliberal reform but also the economic programmes
of the parties that push such reform that have lost
their legitimacy. They may be all for the poor on
paper, but the evidence on the ground is too stark
now for the electorate to ignore. That loss of legitimacy
is compounded by the evidence that the growing state-capital
nexus has resulted in a huge transfers of surpluses
in favour of capital, facilitated by associated payments
to a section of the political and bureaucratic elite.
Neoliberal reform has served as a mechanism for a
drastic, engineered redistribution of income and wealth
in favour of the rich. Hence, with two decades of
reform behind us, the majority in India is no longer
persuaded that it can make much of a difference to
their lives. If, despite this, the push for reform
persists, it is because a section of the vocal middle
class that has benefitted from liberalisation has
joined the elite's clamour in its support, because
electoral politics is increasingly influenced by money
power, and because the political parties and movements
that oppose such reform are yet to gather adequate
voter support.
But democracy being democracy does impose some constraints
on parties and their progammes. There has to be a
semblance of concern for the majority, even if action
points to neglect. It is for this reason that the
UPA has had to declare its commitment to and make
a feeble attempt to implement programmes such as the
NREGS and food security. They are even showcased as
flagship programmes, though some of the UPA's leaders
had initially dismissed such initiatives as populist
and a waste of good money. But the support for such
programmes has been more in rhetoric than in practice,
with implementation neglected or consciously reined
in. Nothing illustrates this than the fact that real
allocations of resources for the NREGS have stagnated
or declined in the years when it was reportedly being
geographically expanded and strengthened.
This divergence between rhetoric and practice is of
course no new disease. In terms of outcomes, there
has been a longer-term paralysis of policy making
in certain areas that has characterised governments
during the whole of the post-Independence period.
As a result, India ranks high in the hunger index;
malnutrition and stunting are overwhelming despite
their being considered a national shame even by the
Prime Minister; and, six and a half decades after
Independence we have not been able to put all children
in the relevant age group into school. Official assessments
harp on the slow progress with respect to most human
development indicators, rather in the persisting shortfall
after so many decades of development.
It is on top of this long run failure that the setback
in achievement during the reform years has occurred.
Rather than recognise this long-term failure in addressing
deprivation by allocating additional resources and
improving delivery to accelerate advance on the human
development front, we are observing a slowing of progress
in this area. What is disconcerting is that it was
in periods when GDP growth had accelerated relative
to the first three decades after Independence, as
in the 1990s, and even boomed, as during 2003-04 to
2007-08, that success in overcoming deprivation has
flagged. One obvious reason is that the government
has not been able to appropriate the required resources
to compensate for the inequalising effects of growth,
even though profit shares in organised industry and
services and incomes of the rich were rising. Clearly
a combination of fiscal conservatism, a rising tendency
to favour capital in the name of private sector-led
growth and an ideological inclination against state
action in support of the poor was responsible for
this setback. There are many elements reflecting that
ideological inclination: control over economic policy
in the hands of those who are neither capable of nor
are willing to fight and win popular support in elections;
celebration of a neoliberal economic policy package
as technocratically correct, despite its hugely adverse
distributional implications; justification of engineered
shifts in the distribution of income in favour of
the corporate sector, finance and the rich in the
name of incentivising private savings and investment;
and the refusal to treat woefully inadequate progress
in the battle against deprivation as a failure while
arguing that the inability to push neoliberal reform
is a sign of malfunction.
This then is the true paralysis that characterises
the UPA. It is a paralysis that is visible in governments
across the world in the age of finance, including
in Europe. In some of them austerity is being implemented
by unelected governments, and in all of them ordinary
citizens pay the price for a crisis engineered by
finance and the rich. But the impact of such paralysis
in a country with the scale of deprivation that India
reflects is a shame. But that is not the paralysis
that most commentators are pointing to today and which
was being referred to in Washington. Rather the paralysis
they speak of is the inability of the government to
push further ahead with policies that would redistribute
incomes from the poor to the rich. What they implicitly
lament is the fact that India's democracy still retains
some of its early representativeness and vibrancy.
The challenge then is not to the Indian state, but
to democracy itself.
* This
article was originally published in the Frontline
Volume 29, Issue-09 (May 05-18, 2012).
