Tribute: Balraj Mehta

[(Veteran journalist Balraj Mehta, 92, passed away in New Delhi on June 19, 2013. He was suffering from a kidney ailment for some time. He is survived by his wife, children and grandchildren.

A noted analyst of economic and financial developments, he was an outspoken critic of the policy of liberalisation ushered in by the then Finance Minister and present Prime Minister, Dr Manmohan Singh, in 1991 and scathingly attacked it in his columns. He regularly contributed to the Economic and Political Weekly as well as the India Press Agency news and feature service. He was the Economic Editor of The Indian Express till the 1990s.

He was a close friend and colleague of N.C. and wrote for Mainstream occasionally. He was associated with the communist movement since his student days in undivided Punjab.

His daughter Nirupama organised a get-together on June 23 at the Gulmohar Club (since he lived in Gulmohar Park) to remember him. Poems were read out by senior journalists and old songs of the IPTA movement, that were close to his heart, sung by the Parcham group members. Some other friends sang a moving and appropriate poem of Faiz Ahmed Faiz, the renowned progressive poet of the subcontinent and doyen of Urdu poetry.
The departure in quick succession of O.P. Sabherwal, Satyapal Dang and Balraj Mehta, all of whom hailed from Punjab and were past 90, has left a deep void in the world of journalism and politics while dealing a heavy blow to the progressive movement in general.

As a token of our tribute to his memory we are reproducing (a) an article he wrote for this journal in mid-1991 when the outlines of Dr Manmohan Singh’s new economic policies were just coming out in the public domain, and (b) the call from a convention, sponsored by the Left parties, in the Capital (the first of its kind) against those policies shortly thereafter (wherein Balraj Mehta had played a prominent role along with Harkishan Singh Surjeet, Indrajit Gupta, Ashok Mitra, Prakash Karat, N. Ram, Geeta Mukherjee, Prabhat Patnaik). S.C.)]

Implementing Bank-Fund’s
 Neo-Colonial Blueprint

by Balraj Mehta

The devaluation of the rupee against leading world currencies heralds what can only be characterised as a reckless march under the present political dispensation towards neo-colonial dependency. This is seemingly a conventional economic instrument to promote exports. But as part of what is euphemistically called a structural adjustment programme, it has far-reaching socio-economic and political implications. The present devaluation is, therefore, significantly different from and far more ominous than the devaluation under the fixed exchange regime a quarter century ago. It is disconcerting however, that the earlier devaluation attracted much more adverse notice than the present one, especially from the political and academic circles who seem to regard it fatalistically as something inescapable, if not necessary.

It was in the mid-eighties, after careful and calculated preparations in the first half of the eighties, that the World Bank-IMF combine, working in tandem with the GATT which was preparing for the launching of the Uruguay Round of trade negotiations, had drawn up for India a ten-year programme of structural adjustment. The then Government of India was invited to implement this programme and complete it by the mid-nineties. Generous financial backing was assured for the purpose. This is what the shrill cry of entering the twentyfirst century was all about.

The ouster of the Congress-I from power in 1989 created some problems in the way of the smooth working out of the programme. But on its return, though with much reduced strength and authority among the people and in Parliament, the Congress-I leadership appears to be anxious to complete its obligation to the international financial institutions in the remaining three years as originally stipulated by the World Bank-IMF combine. The minority government headed by P.V. Narasimha Rao has, meanwhile, come under such a squeeze that it has been compelled to take politically the most obnoxious of the measures, namely, devaluation of the rupee, well before the presentation of the Budget for 1991-92 embodying the conditiona-lities attached by the IMF to its loan in support of the World Bank-IMF programme of structural adjustment for India.

It is indeed really pathetic in this context that both the Prime Minister, P.V. Narasimha Rao, and the Finance Minister, Dr Manmohan Singh, have made statements that the IMF had nothing to do with the devaluation of the rupee and that the devaluation had been ordered by the Reserve Bank of India in the normal course of the adjustment of the exchange rate of the rupee under the prevailing market-determined floating exchange rates of currencies. The fact, however, is stark that the scale of the devaluation is much too large for it to be a normal depreciation. The devaluation has come in the wake of the continuing depreciation of the rupee under the floating exchange rate system. Finally, it is the first instalment and the second instalment of the same order will come after the IMF loan for structural adjustment is signed so that the exchange rate of the rupee is fully market-related. What has been set in motion is a process for making the rupee convertible and exposing the Indian economy and market for the free inflow and outflow of foreign capital. Considering its weak economy, the Indian market will then become a playground for hot money operators.

The World Bank-IMF side seems to be fully enjoying the spectacle that India is presenting as a supplicant for foreign credits to complete the adjustment programme drawn up for it by its foreign creditors. “There were no instructions to the Indian authorities to adjust the value of the rupee,” an IMF spokesman has cheekily said in public. Mark the word “instructions” used by him. A World Bank spokesman has similarly said that “we have sent a detailed programme to New Delhi for immediate action, prior to the passing of the Budget..... Further help to India would depend on the progress of the reform programme.” But the World Bank does not care to ask for specific percentage of devaluation, he pompously declared. The Indian side has been made to eat the dust with its credit-rating in mud and with new credits withheld not only from official and institutional sources but also commercial sources. What is being attempted is to add insult to injury by creating conditions where there will be default on foreign payments, albeit for a few days or weeks, before the purse strings for the grant of credits are opened in advance of the signing of the big IMF structural adjustment loan for India.

All this is to ensure that conditionalities attached to the IMF loan arrangements are scruplously respected and energetically implemented under the stipulated time-frame unlike in the past, when broad guidelines were laid down and the performance of the debtor watched. The World Bank-IMF combine now insists on time and item-bound compliance so that the debtor is left with no initiative and flexibility in the management of the economy. The tentacles of the conditionalities are spread out far and wide so that not only policy but also administrative and management decisions have to be subject to World Bank-IMF surveillance and approval. Witness, for instance, the directions that have been given to restructure the ONGC and financial institutions.

♦

So far as the first instalment of the devaluation goes, side by side with ongoing adjustment of exchange rate of the rupee under the system of floating exchange rates of currencies, the immediate upshot will be a sharp increase in the rupee cost of imports as well as servicing of old loans. It will be necessary at the same time to export more in volume terms to fetch value in terms of foreign exchange. The pressure on prices in the domestic markets will thus increase. There will be no easing of pressure on exchange reserves either so that dependence on foreign credits to manage payments to foreign suppliers of goods, services and capital will increase. The position was so difficult that the two loans taken in February have already been exhausted. At this rate a loan of even $ 7 billion from the IMF will not be an adequate cushion to ease the payments position for more than 15 months, especially in the regime of import liberalisation, except by way of financing of imports by commercial credits from different sources. India’s vulnerability on the balance of payments front can, therefore, become still more glaring.

India in the past avoided specific structural and sectoral adjustment loans which the World Bank and other foreign creditors were keen to give. But with the World Bank joining hands with the IMF for “adapting and expanding its economic policy and lending instruments” going so far as to include even the IDA within the system to “promote policy change”, the way has been cleared for India to go for structural adjustments which aim at the promotion of what is euphemistically called an open and competitive trade and economic policy and bring about changes in investment and production pattern as desired by foreign creditors. It is no longer possible to be impressed by familiar shibboleths. The fact to be reckoned with is that the liberalising philosophy pursued in the eighties, with special gusto in the second half of the eighties, has so blunted and distorted the budgetary and economic balance of India that “longer-term imbalances in the growth of revenues and non-Plan revenue expenditures, the increasing burden of interest payments and shortfalls in resources generated by public enterprises” have become unavoidable.

The so-called resources crunch and the growing budgetary deficit have assumed unmanageable dimensions over a period of time. It is not going to be easy or painless, economically as well as politically, to restore normalcy and balance. What is involved here is the policy-induced increase in the disposable incomes of upper and middle classes which has given a strong elitist orientation to the consumption as well as investment pattern. The idea that better compliance in response to reduction in rates of taxation, in particular on incomes and wealth, market borrowings which generate rentier incomes and deficit financing which activises inflationary pressures, will increase revenue to meet the growing expenditure demand of the government was misconceived to begin with. It has turned out to be a tragic adventure in the economic and development history of India. The entrenched political-power establishment is, or at least should be, aware of the real threats, in contrast to the shrill cries of phoney destabilisation raised by political vested interests from time to time, to the stability of the economy and the polity which have stemmed from the so-called liberalising economic policy and elitist social philosophy.

What has happened really, considering the style and narrow vested interests of the entrenched political-power establishment, are an intolerably adventurous series of gambles in economic policy as well as political management to land the country in the present sad plight. What is involved in the structural adjustment process with the piling up of credits from the IMF, World Bank and other sources is the acceptance of onerous conditions, strictly to be enforced, the primary condition being that the autonomous economic development of India which forms a large segment of the world has to be aborted, the role of the Indian state in this direction extinguished and the content and direction of India’s socio-economic development has to be determined and supervised by foreign agencies and authorities. India now is faced with only two options. One is the acceptance of the World Bank-IMF line which will shift the burden of the development process on the poor and less endowed while sacrificing the economic and political sovereignty of the country, and in the process completely subvert the ability of the system to find an independent alternative. The other, as a group of Left economists said, is to build on whatever little room for manoeuvre is left and move towards a more egalitarian social order that preserves the economic and political sovereignty of the country.

The issues and alternatives have to be squarely faced and must not be allowed to be obfuscated by ignoring the specifics of the current economic situation, especially the payments crisis. Full account at the same should be taken of the whole area of economic philosophy and policy, including industrial relations, wage costs and role of administered prices and taxation. There is the need to blow away the myth sedulously cultivated and spread about horizontal diffusion of technology imported on a continuing basis when it is closely tied to direct foreign investment and collaboration arrangements with comprador Indian business interest to enhance capital-intensity in contrast to labour-intensity in the production structure. There is hardly any scope under such a dispensation for taking advantage of the international division of labour except insofar as it is based on adverse terms of trade for India.

What is prescribed by the international creditors for India is the enlargement of the running tribute to be paid by its deprived masses to maximise returns for foreign investment and satisfy the elitist demand of a small segment of the population under a neo-colonial arrangement. There is much noise about market forces helping to forge a link between economic activity and rewards. This is an euphemistic way of making a case for maximising returns for foreign capital and widening opportunities for the thin elite segment in India to ensure rewards for their physical and mental or hierar-chical assets, and deride the positive intervention of public authority for alleviating the condition of the deprived and exploited masses of the people and uplift them from their prevailing backward economic condition and social degradation.

(Mainstream, July 6, 1991)