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Mainstream, Vol XLVI, No 50

Sonia Gandhi’s Unambiguous Pronouncements

Editorial

Wednesday 3 December 2008, by SC

Congress President-cum-UPA chairperson Sonia Gandhi’s spirited defence, at the Hindustan Times Leadership Summit, of bank nationalisation (carried out almost 40 years ago in the second half of 1969) and her emphatic assertion that ’’public sector financial institutions have given our economy the stability and resilience we are now witnessing in the face of the economic slowdown’’ reflect a fresh effort on the part of the head of the principal and premier national ruling party to reiterate her and the Congress’ continued adherence to the Nehruvian concept of mixed economy as well as the principle of growth with social justice. To stress the importance of the first major step to unveil a radical economic policy perspective in this era of LPG (Liberalisation-Privatisation-Globalisation) was indeed most noteworthy as it came in the midst of and despite the gale of attacks on the public sector by influential segments of the media totally sold-out to the laissez faire approach to problems where any kind of state initiative is anathema. However, by placing it against the backdrop of the economic turmoil being experienced the world over she did not forget to project the strength and potentiality of the public sector banks that have withstood the test of time regardless of whatever nonsense the market-only protagonists and venomous opponents of state intervention may spew as they already have as a reaction to her public observations on the issue.

In her defence of Indira Gandhi’s bank nationalisation measure, Sonia did not mince words and candidly pointed out much to the chagrin of the Big Business club assembled at the Summit:

Our prudence has been most marked in the case of the financial sector. If you allow me the liberty of showing what is to you the proverbial ’red rag to the bull’. Let me take you back to Indira Gandhi’s much reviled bank nationalisation 40 years ago. Every passing day bears out the wisdom of that decision.

Sonia was also exceptionally frank while speaking about the plight of the poor in the present scenario:

What concerns us most today is that this economic upheaval could grievously affect the most vulnerable sections of our society. The poor have had nothing to do with the hubris of the rich. Their lives are spent close to the edge...... they have nothing to do with the fancy sounding financial instruments—derivatives and credit default swaps—that have ensnared so many ... Should they then become the victims of the unchecked greed of bankers and businessmen? Should the avarice of a few be allfowed to inflict misery on the many?

And it was most appropriate on her part to remind the gathering (which inter alia comprised the creme de la creme of Corporate India) that the ’’object of public policy is not only to facilitate their (industry’s) success, but also to ensure the well-being of the hundreds of millions of (poor) Indians’’. She unhesitantly declared: ’’Whatever action we take, we must protect them. This is our firm commitment.’’ She further underlined:

We believe in an open economy, but not an unregulated one. We believe in the freedom to pursue prosperity, but not at the expense of social justice. We believe in the right of each individual to fulfil his or her productive potential, but not to forget those who are unable to exercise this right.

(It would be worthwhile to recount here what one had witnessed in a similar HT Leadership Summit conclave a few years ago—when a questioner had sought to deride the jholewala social activists in the UPA’s National Advisory Council she was chairing, Sonia went out of her way to justify their presence in the panel while highlighting their ’’excellent work” to uplift the poor and the marginalised in the remote parts of the country.)

In the light of what Sonia has said about the wisdom of the decision to nationalise banks in 1969, it is pertinent to recall how, at a time when the Asian tigers were on the ascendancy, the IMF and World Bank had launched an attack on the policies of Jawaharlal Nehru and Indira Gandhi based on the Nehru-Mahalanobis model intended to boost the domestic market, domestic savings and domestic labour, and instead prescribed the alternate model of an export oriented growth strategy the Asian tigers were pursuing. That model came in for frontal criticism in an exhaustive paper by Dr K.N. Raj who emphasised the abiding validity of the Nehru-Mahalanobis model and thereafter the Fund-Bank prescription could not be implemented. However, things changed in 1991 with the initiation of the new economic policies by Dr Manmohan Singh as the Finance Minister in the P.V. Narasimha Rao Government and there was at that time also a move to go for capital account convertibility in tune with the recommendations of the Taraporewala Committee. Things would have been far worse if that move had succeeded. However the attempt could not fructify since the South-East Asian giants collapsed with the sole exception of Malaysia whose leader in those days, Mahathir Mohamed, had prevented foreign speculative capital from taking away funds from the country (for which reason he was denounced by the Western governments). It is also to be noted that despite intense pressure the Indian Government did not eventually proceed to denationalise the public sector banks and reverse the nationalisation of the insurance sector carried out in Nehru’s time. If denationalisation of those banks had taken place we would have been in dire straits as the private banks have been hardest hit by the prevailing crisis. [Of course, the Left can also claim credit for stalling such suicidal steps, but the government being the final arbiter in such matters it can draw the satisfaction of having been able to withstand the pressure and thus protected national interest.] These facts borne out of experience fully vindicate Sonia’s contentions.

The Congress President has not, however, signified a complete departure from the course adopted since 1991. As she explained,

We will not be thrown off-course by the winds buffeting us from abroad. There is no need for over-reaction, let alone for panic. There is no need for us to get back into the era of controls. At the same time we cannot allow things to spin out of control ... This means that liberalisation must be pursued within a framework of sensible but not heavy-handed regulation.

This means there is no going back on the commitment to liberalisation but there would be no embracing the idea of an unregulated free-market as was proposed only a short while ago. But how does one reconcile the concept of ’’sensible regulation’’ with the appointment of Raghuram Rajan, a Professor of Finance at the University of Chicago’s Graduate Business School (and the former Economic Counsellor and Director of Research at the IMF) as the government’s Economic Advisor?

Nevertheless, the significance of Sonia Gandhi’s unambiguous pronouncements in defence of bank nationalisation and in support of the poor and vulnerable sections of our polity should not be underestimated just as Pakistan President Asif Ali Zardari’s positive statements through video conference at the same Hindustan Times Leadership Summit should be given due importance for, after all, public declarations of public figures do carry weight in the final analysis. Of course, one has to judge the value of such announcements and observations from the yardstick of the concrete steps being taken to translate words into deeds. However, against the backdrop of the global economic crisis and the prevailing situation in our country on the economic front, Sonia’s assertions and observations offer an indication of the path the Congress President wants to traverse in the campaign for the coming battle of the ballot.

November 25 S.C.

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