In Search of the Holy Grail
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Image: Raghu Rai
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During those last years of Mrs. Indira Gandhi, Pranab Mukherjee became the finance minister and Manmohan Singh was appointed governor of the Reserve Bank of India.
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or many years, no party has had as powerful a hold on the seat of power as the Congress does now. Its position and the current environment allow it to implement what it set out to do under Indira Gandhi nearly three decades ago.
Of course, the context has dramatically altered. For one, there is now a unique convergence of interest between the government and big business. The government’s socialist agenda has been embraced by big business and the elite; it is now fashionably called “social inclusion”. The process of opening up to private capital begun by Indira Gandhi is no more stealthy. It is an open declaration of intent. Finance minister Pranab Mukherjee made it clear in his budget speech on July 6 — the aam aadmi is now the focus of all government programmes and the private sector will take the lead in generating growth..
While there is consensus on the need for social sector spending, there are worries over where the money will come from. Says Rajya Sabha MP and former RBI governor Bimal Jalan, “That is a problem area. That is a balancing act that the government will have to do.”
In an exclusive interview to Karan Thapar in CNBC-TV18 hours after his budget speech, Mukherjee himself admitted that the strategy is not without its share of risks. “I am not gambling. I am taking a calculated risk to have demand-driven growth by injecting money in the system.” He is banking on the big ticket government spending stoking rural demand, which in turn will help push up the growth rate. Mukherjee said, “Please remember that whatever has been achieved during the last five years, the key to that is 8-9 percent average growth rate which led to the tax-GDP ratio substantially high which has provided substantial elbow room to the government to come to the aid of the needy sections.”
Politics of Poverty
Some would say Mukherjee is plain lucky. For the first three decades after Independence, the Congress steadfastly followed a Nehruvian pro-poor, socialistic economic policy — arguably with little success. During most of that period, the country remained one of the slowest growing nations in the world and the majority of its people were languishing in extreme poverty and inequality.
Towards the end of the Seventies, the environment, both external as well as internal, was changing and when Indira Gandhi came back to power in 1980 after two years of unstable Janata Party rule, she was quite convinced that the thinking had to change.
“The previous government had messed up. Externally, the Cold War dynamics were changing. China was changing. Development literature was also growing. Internally, protection was not benefitting the people. Mrs. Gandhi understood and recognised that,’’ says Bimal Jalan, the former RBI governor who was then chief economic advisor to the government. For those who think economic reforms started only in 1991, this may be surprising, but the seeds of change were planted in the early Eighties by Mrs. Gandhi.
Politically, however, change was a challenge. It was difficult to move away from its left-of-centre positioning overnight. It required someone as politically astute as Indira Gandhi to figure the way out. Change would be so slow that it would be imperceptible. Explaining the political background to her changed outlook in the essay Politics of Economic Liberalisation in India, Atul Kohli, professor of politics at Princeton University and chief editor of World Politics, says that after 1980, it was clear to Mrs. Gandhi that her socialism was not working and anti-poverty programmes were not successful. “The support she was getting from the poor, therefore, was based not so much on concrete rewards, but primarily due to her ideological and rhetorical appeal. This rhetoric she knew she could maintain, while watering down the overall socialist programme.”
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Stanley Kochanek, professor emeritus, department of political science at the University of Pennsylvania and author of The Congress Party of India, says that by the late Seventies a series of reports had concluded that the Indian economy had to become more open. “The Dagli Commission noted the adverse consequences of controls. The Narasimham Commission noted the need to expose the economy to competition and reduce controls. Finally, the Abid Hussain Commission focussed on the need for expanding trade,’’ Kochanek says about the growing literature that built up the case for liberalisation.
He says that the economic re-orientation was apparent, as, by the early Eighties, Indira Gandhi had replaced her leftist advisors such as D.P. Dar and P.N. Haksar with more liberal advisors, including P.C. Alexander, L.K. Jha and Manmohan Singh. Many influential combinations were also first created during those last years of Mrs. Gandhi. Pranab Mukherjee became the finance minister for the first time in 1982, and soon Manmohan Singh was appointed governor of the Reserve Bank of India. Current Deputy Chairman of the Planning Commission, Montek Singh Ahluwalia, was then advisor to the finance minister.
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