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Mainstream, VOL LIV No 11 New Delhi March 5, 2016

A Book-keeper’s Exercise

Wednesday 9 March 2016, by Nikhil Chakravartty

From N.C.’s Writings

It’s like a political rope trick, Chidambaram’s maiden Budget as the Finance Minister of the United Front Government. Everyone from V.P. Singh and Somnath Chatterjee to the captains of the corporate giants have praised it and the Finance Minister coiuld go home in peace, as he has been anointed by the media as “Thiruvallu-var’s Disciple”. Indeed a long way that the young politician has travelled from the day when he promptly quit as the Commerce Minister to avoid being invoked in the affairs of a financial company of questionable bonafides.

A dispassionate view of the Budget as presented by Chidambaram on July 22 makes it clear that it is not only along the lines of what Manmohan Singh was delivering during the last five years as the Congress Finance Ministrer. In fact, Manmohan Singh’s Interim Budget of February last had already indicated its readiness to allocate more resources for the social sector, that his economic reforms programme from then on would seek to provide a humane face for it. Incidentally, Montek Singh Ahluwalia, the brains trust of the Manmohan Brigade (which Chidambaram has taken over lock, stock and barrel), frankly said in a television interview after the Budget presentation that there has been “no change in the direction” from Manmohan’s line and it is a “continuation down the road”.

Manmohan Singh was candid enough to concede that his much-publicised economic reforms package was meant to carry out the World Bank dictated Structural Adjustment Programme. It was precisely this point that provoked his critics at home despite copious commendations from the corporate sector, both at home and abroad. Inevitably, Manmohanomics became an anathema with a large body of concerned opinion inside the country which had noticed the negative impact of the World Bank programme in other developing countries. Its monomaniacal insistence on market forces thereby destroying the public sector became the central issue of dispute as Manmohan Singh spread his reforms. At that time, Chidambaram began as an ardent Manmohan disciple, even going beyond the master, wanting the opening up of even the domestic consumer goods market for the foreign investor. However, he had to promptly quit when Parliament and the public were agitated over the multi-crore securites scam.

Towards the end of his tenure as the Finance Minister, Manmohan Singh seemed to realise that starving the social sector was not only bad politics but bad economics as well. The powerful pressure that he had to encounter from the farmers’ lobby within his own party and outside, led him to promise generous allocations for the rural sector, while the number of yojanas that the Congress party announced as a sop to stem the growing tide of social discontent had to be dovetailed as part of an anti-poverty programme within Manmohanomics. This could be seen in the approach of the Interim Budget in February 1996 as also in the Congress’ Election Manifesto.

About this time, particularly during the last one year, there has been a noticeable change in the perception of many of the leading lights of the world economy, some of whom belong to the camp of the affluent G-7. After the end of the Cold War, there came the free run of the market forces as enjoined by the Fund-Bank pundits. When the deleterious effects of this unalloyed free-market line could be felt particularly in the developing world, apart from the devastation in the former Soviet Union, the wiser sections of the Western world once again have begun to recognise the imperative role of the state in guidng the economy of the developing countries. This has been felt particularly in the democratic countries of the Third World where the universal right to vote imposes the recognition of the necessity of ensuring the greatest good of the greatest number.

It is precisely at this juncture that our country was caught in the political turmoil brought about by the collapsing authority of the ruling Congress party of which Manmohan Singh was a prominent Minister. The indication of a shift in emphasis, particualry in the sphere of resources allocation to the social sector, could be discerned. This was seen by the public as an election-eve gimmick by the ruling party. However, the basic problem facing the government and the ruling party was that the entire economic reforms—leading to its modernisa-tion—was sought to be brought about by legisative and administrative means without bodly taking it to the public at large. The obsession with the market led Manmohan Singh and the Congress Government to keep away from the people the imperative of modernisation and the price that needs to be paid to bring about the transformation of the entire economy. With a pronounced basis for the affluent, the economic reforms meant more burdens on the underprivileged sector with rising prices and the spectre of unemployment. To this was added the impending ruin of the middle and small-scale sector with the open-door policy towards the giant multinationals that hurt the national ethos of self-reliance which in political terms meant self-respect.

It was at this point, the Congress lost the elections and the United Front Government was formed. The new Finance Minister, Chidambaram, found in the new Prime Minister a kindred soul. For Deve Gowda during his Chief Ministership in Karnataka had already become a favourite of the multinational corporations from the Kentucky Fried Chicken to the Cogentix. The chain-reaction of that policy still pursues him personally. No doubt the United Front has drawn up a Common Minimum Programme which Chidambaram swore by both at the beginning and end of his Budget speech. There is, however, litle sign that his understanding of economic priorities has distinictively changed. Many of the contentious issues he has tried to put off by promising to set up new corporations or issue discussion papers. He evaded mentioning that his Ministry would soon open up the insurance sector to foreign private investors. Above all, his Budget, in real terms, has to include the pre-Budget announcement of the steep hike in the administered prices of all petroleum products which is admittedly leading to a sudden rise in all prices. The Finance Ministry officials have clearly stated that there would be further rise in prices due to inflation.

All this makes it clear that the prospect set by Chidambaram is no better than the one held out by Manmohan Singh. Cosmetic changes can hardly be a substitute for the basic approach towards economic reforms. Cosmetic changes here and there do not touch the basic reality of Indian poverty. The question that stands out, therefore, is: who pays for the modernisation of the Indian economy?—the half-fed millions who toil and suffer, or the burgeoning affluent sections who by their praxis have already proclaimed themselves as the major beneficiary of the new economics of the marketplace? Unless and until this question is squarely faced, the political leadership of the United Front, the Congress or the BJP or any other party would be escaping the issue. Manmohan Singh as an economist could perhaps have faced it, but he preferred to rely on the World Bank prescription. As for Chidambaram, his is the case of a book-keeper pitchforked by a quirk of circumstances to the eminence of the Finance Minister of India.

(Mainstream, August 3, 1996)