People's Democracy

Editorial

 

Political Alternative Must Be

Based on Alternative Policies

 

THE stirring call given by the Left parties at a National Political Convention at New Delhi on July 1, 2013 to intensify the popular struggles for an alternative policy direction in the country could not have come at a more appropriate time. 

 

Two years ago, the cheer leaders of neo-liberal economic reforms were euphorically celebrating two decades of the initiation of the reforms as having changed  India  and put it on a global pedestal as an `emerging economy’. It has also, so they celebrate, put India into the G-20 and permitted the Indian prime minister to periodically rub shoulders with the rich and powerful global leaders at its high table. All along we had been repeatedly warning, in this column, that the trajectory of economic development in our country is resulting in the creation of two Indias with the hiatus between them widening. We had further warned that because of this galloping growth of inequalities, the vast majority of the Indian people have seen a continuous shrinkage of their purchasing power. This, in turn, has led to a contraction of domestic demand halting the future growth prospects. 

 

Two years since such euphoric celebrations ended, these warnings are, unfortunately, coming true.  The government today admits that the recent economic slowdown has resulted in the worst slump of the Indian economy in recent years.  The consequent contraction of manufacturing and industry and, hence, of employment is mounting miseries on an already languishing majority of Indian people suffering under the dual impact of rising prices and subsidy cuts. 

 

Rather than address the people’s concerns and work for alleviating their miseries, this UPA-2 government is bracing itself for a further dose of reforms of giving greater concessions to the corporates, both foreign and domestic, allegedly for bailing out the sinking economy. According to media reports, based on official briefings, a series of decisions are in the pipeline.  Such reports say: “The thrust of the reforms is two-fold: increase inflows to cut the current account deficit that has triggered an alarming depreciation of the Indian currency, and break the logjam holding up investments in infrastructure.

“Top officials will meet on July 1 to firm up a plan, initiated by the finance ministry, to bring about major relaxations in the foreign direct investment (FDI) limit in many sectors.

“Further, the finance ministry will draw up an action plan to boost financial markets based on a closed-door interaction between Finance Minister P Chidambaram and investment bankers and economists.

“This includes launching financial instruments intended to encourage foreign sovereign wealth funds to invest long-term money in India.

"The government is keen to exploit the limited window it has before Parliament meets for the monsoon session and the code of conduct kicks in before the state elections due end of this year," a senior policymaker associated with the process told Economic Times (July 1, 2013).

 

There are two problems in such an approach. The first, of course, is the government’s keenness to attract foreign capital inflows into the country for which it is prepared to give further concessions. In other words, instead of bailing out the people, the government is bailing out capital – both foreign and domestic – by giving greater concessions and, hence, greater opportunities for profit maximisation. 

 

Secondly, the hurry to take such executive decisions before the parliament meets is indicative of the eagerness of the government to avoid any scrutiny and be accountable to the parliament. In the interests of both the people’s livelihood and our economic fundamentals, the government should not be allowed to escape from being accountable to the parliament and, through their elected representatives, to the people. 

 

The pre-occupation with attracting greater foreign inflows relates to the government’s panic at the alarmingly high rise in the current account deficit (CAD) (mainly the difference between imports and exports).  As a result of this, the current India's near-$260 billion of reserves are barely enough to cover six months of imports, down from reserves sufficient for nearly 15 months in 2008. Chillingly reminiscent of the 1990 situation which served as the launching pad for Dr Manmohan Singh, as then finance minister to launch the neo-liberal reforms. 

 

"This (the high CAD) poses the challenge of having to ensure financing of a somewhat elevated deficit for two more years," the PM has said in his foreword to the 12th Five Year Plan document. "This must be done through long-term capital flows, including FDI (foreign direct investment)," he said, arguing that though India's foreign exchange reserves are strong, they cannot be a "source for financing prolonged deficits."

 

Clearly revealing that greater burdens will be imposed on the people, the PM couched this under his by now infamous formulation: “difficult but necessary policy choices”. He says, “This is a challenge for our democratic system. We have to prove that vigorously competitive politics in a democracy can achieve a sufficient consensus to be able to implement the difficult but necessary policy choices we face. This is a national challenge that the entire political and intellectual leadership must come to grips with". The Indian economy must see a very sharp acceleration and return to 9 per cent plus growth by 2015-16 for the country to achieve its "ambitious" target of growing at 8 per cent through the 12th Plan, the PM has said in his foreword.

 

Apart from FDI in multi brand retail sector, the government has now hinted at opening up the defence production sector also to foreign direct investment. Media reports that based on the recommendations of a committee headed by the secretary in the Department of Economic Affairs, top bureaucrats will present a FDI reforms agenda that the FM has said will be taken up in the third week of July. The FM also met economists and market participants last week to seek feedback on investments and ways to stoke growth, which slumped to a decade-low five per cent in 2012-13.

 

In other words, this UPA-2 government appears hell bent upon to unleash a new wave of neo-liberal reforms in the name of lifting a sinking economy. The consequence of such a trajectory is all too well known. While  creating newer and fresher opportunities for profit maximisation, by foreign and domestic capital, these reforms will only  put further burdens on the people, as they have done in the past, compounding their already growing miseries.

 

It is precisely this policy trajectory that has to be changed.  The alternative policy direction lies in the path of utilising the country’s resources for higher levels of public investments to build our much needed social and economic infrastructure. Instead of doling out tax concessions of over Rs Five lakh crores annually over the last three years, often larger than the quantum of fiscal deficit, these legitimate tax revenues must be collected and put to use by increasing public investments. Such a trajectory would generate significant additional employment opportunities which, in turn, will appreciably expand domestic demand fuelling a healthy growth trajectory. 

 

Such a shift based on an alternative policy direction that the Political Convention of the Left parties has put forward before the people of our country. (See Declaration on front page.) The Left parties have appealed to all non-Congress non-BJP democratic and secular parties to rally around  such alternative policies much needed both for the country’s economy and for improving people’s livelihood. Any political alternative that may emerge as a consequence must be centered around the implementation of such alternative policies and not be merely confined to providing an alternative government. 

 

The need of the hour, therefore, is to strengthen popular struggles and, thus, mounting sufficient popular pressure for the creation of such a political alternative based on alternative policies in the forthcoming 2014 general election.

(July 2, 2013)