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Business Commentary/ Ashok Mitra

Second time unlucky

The finance minister has been travelling much within the country. Representatives of the chambers of commerce and industry are having chummy sessions with him at different metropolitan centres. Now that the elections are over and the ruling coalition has seemingly comfortable majority in the Lok Sabha, the finance minister is getting ready to preside over the second phase of reforms.

The excitement among CII types naturally knows no bounds. Once the reforms as ordained by the International Monetary Fund-World Bank masters are pushed through -- the insurance business privatised and foreigners allowed to hold as much as 74 per cent of the equity of an insurance company, the banks further opened up to foreign ownership, disinvestment of public undertakings according to the pattern decided upon for the Gas Authority of India Limited extended in other directions, the World Trade Organisation regulations enforced to the full, all price regulations terminated in the same manner trade regulations have been and job opportunities ruthlessly cut back with the objective of optimising efficiency, the Indian economy will be harmonised with the global symphony of the free market.

The blessings of the technological revolution will swamp the country. Should these transformations eventuate, what China has accomplished would be equally achievable in India, that is to say, a rate of growth approximating 10 per cent per annum and a spectacular rise in foreign exchange holdings. A couple of things are however left unmentioned. In China's case, the overhaul of the agrarian structure was crucial: it ensured a rising spiral of demand and foreign investors made a beeline for the country. The eradication of illiteracy and rapid spread of knowledge regarding the advantages of appropriate technology had a major impact on improving labour productivity.

All this apart, a one party system helped in enforcing social discipline, an important precondition for smooth economic growth. India has problems in these areas. No worthwhile reconstruction of the entrenched caste-class framework has been possible here; this has hampered educational advance, rise in productive efficiency and spiralling of demand for goods and services.

The corporate sector, otherwise known as India Incorporated, is however undeterred; it continues to cherish fond hopes of an economic breakthrough. It has been campaigning hard to persuade the principal political parties to accept a common economic policy. As it is, the two major parties in the country have already a large measure of overlap in their stated economic plank; it could hardly be otherwise given their close class affinity. The private sector lobby as well as groups campaigning to further the interest of foreign business have been making optimistic noises about India's prospects, drawing encouragement from the fact that the government and the principal opposition are both desperately eager to initiate the second phase of economic reforms.

But parliamentary democracy can be a funny business, with many a slip between cup and lip. All of a sudden circumstances may develop making it difficult to implement the pledges in the election manifestos. Consider the dilemma the Congress is already facing.

Privatisation of the insurance sector was its conceptual baby. It had made a commitment in the matter to Western aid-givers in 1991, at the time the first phase of reforms was sponsored. There was a gleam in the eye of the American insurance industry during those halcyon days when the Congress, getting rid of all its past inhibitions, promised denatalisation of both banking and insurance.

A beginning was made with the dismantling of the banking sector; perhaps because of absentmindedness or because of inept floor management the party failed to pass in Parliament the bill for denationalising insurance. The new regime in New Delhi has one basic advantage: the insurance legislation it is supposed to move for adoption is verbatim the Congress bill; the leftists may holler; there should still be no problem in getting it enacted.

Silly things, nonetheless, happen. The Congress has received a drubbing in the Lok Sabha polls. It has managed to emerge as the second biggest party, but a considerable erosion has taken place in the number of seats captured by it. The party has shrivelled to insignificance both in Bihar and Uttar Pradesh, the two states which constitute the heartland of Aryavarta. The Sharad Pawars and the Purno Sangmas having shown the way, the party may actually splinter further; partly out of a sense of frustration among the second rank leadership, but also on account of its feudal roots. Feudalism and feuds are interdependent entities. What is of even greater relevance, the possibility of a fissure in the Bharatiya Janata Party in the not too distant future, cannot be ruled out. The Kalyan Singh episode may for the present die down; none can guarantee that the sort of truce entered into will last for long. After all, the BJP and the Congress share the same social identity, and therefore, the same behavioural patterns.

India Inc has been relying upon a simple economic logic. Ignore the three quarters of the population which is irretrievably poor: Attention of foreign investors should instead be drawn to the prospect of a fast growing market for goods and services based on the consumption desires of the top one quarter of the country's population.

Besides, have not the election results assured a stable two party system, with both the parties swearing by reforms? Here is the rub. Neither India Inc nor the foreign lobby has reckoned with the possibility of internal instability in either party. The BJP has been carrying the cross of a swadeshi lobby for some time; now some first term Congress members of parliament are reportedly having second thoughts on the insurance bill.

If these are irritants, other emerging signs of instability cannot be ignored either. It is no longer only Kashmir and the Northeast; sporadic insurrection has spread to other parts of the country. True, there is little immediate chance of India deviating into the kind of chaos threatening much of the rest of the world, barring west Europe and North America. But one does not really know what the twists and turns in Microsoft-guided civilisation will be prone to.

That motley body, the United Nations, firmly under the thumb of the United States administration, will therefore have to worry not merely on account of occasionally wayward Indians and Pakistanis flying at each other's throats or the primitive Talibans flexing their muscles in Afghanistan. Sectarian trade interests could spoil the relations between Western governments. It could well be a model of the mad cow phenomenon illustrating 'beggar my neighbour' propensities. Even worse, Russian mafia groups may begin to attract admirers -- and followers -- on a global scale. Ideology has collapsed, the history of the country's past military prowess, nearly approaching that of the Americans, has long been discarded as decrepit fiction. A vast stock of Kalashnikovs and small arms are obtainable at a song though.

Civil war will conceivably break out in Russia and the neighbouring lands every now and then; a ceasefire of some sort is likely to be reached at the end of one week or thereabouts, it will be impossible to distinguish the victors from the vanquished. Ideology is dead, but pretence dies hard. Fidel Castro's Cuba has survived these 40 odd years, it has attracted devotees and worshippers and yet, while it has greatly inspired Latin American literature, political radicalism in that part of the world has barely registered much progress.

China continues to be an enigma; otherwise the prevailing aura is one of uncertainty embellished by more uncertainty. Chandrika Kumaratunga's dream of a Sri Lanka restored to peace and progress lies in ruins. Megwati Sukarnoputri too has struck a compromise in Indonesia; she may be by far the leader most admired by the people, she cannot still be elected as the nation's president in case the army objects. Bangladesh formally remains an independent republic, but it is a civil war situation day in and day out. India's borders have turned soft, rebels and espionage agents regularly enter into temporary compromises and break off as regularly. India Inc has seemingly not a clue about such matters.

The country's administrative frame is so fragile that flood-stricken Orissa cannot be reached food and other basic necessities even weeks after the cyclone. The stock exchanges could keep booming, but CII types fumble when questions are posed on their plans for putting Orissa back on its legs. India Inc is incapable of doing things on its own; in the olden days, it prospered because of the licensing regime; now it leans all the way on investors from foreign lands.

The CII set will prefer to leave the task of Orissa's succour too in foreign hands. Much like the Indian cricket captain who would like all 50 overs in a one day international match be bowled by a certain youngster from Mumbai.

Ashok Mitra

Business

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