On most economic issues, the Congress manifesto is explicit: full steam ahead with reforms. Compare this with the 1996 one which hardly said anything on economic policy. One reason for this was that the man who was supposed to write the chapter on the economy, P. Chidambaram, had left to form the TNC while the manifesto was still being written. But the deeper reason was growing doubt in the Congress leadership that the economic reforms had alienated the common voter from the party. For the last two years of the Narasimha Rao government, ever since the Congress fared badly in four assembly polls, reforms had been more or less on hold; economic policy concentrated instead on curbing money supply to slash inflation and bring down prices, and so win the 1996 Lok Sabha elections.
The result: prices did not come down, throttled money supply caused a credit squeeze and slowdown in industrial growth, and the Congress did not even make it in the polls.
This time round, the party has freed itself from the mid-'90s ghosts and decided to be specific about most issues. If voted to power, it will delicense all industries except those important for defence and strategic purposes. It will make the Insurance Regulatory Authority a statutory body. It will open up the health insurance and pensions businesses to Indian companies both in the public and private sector, and life insurance over the next two or three years. Joint ventures will be allowed with majority equity with Indian companies.
It will give full autonomy to the Reserve Bank of India to maintain prices. It will "seriously and systematically implement the recommendations of the Disinvestment Commission". Disinvestment proceeds will not be used to meet gaps in budgetary resources. Says former finance minister Manmohan Singh: "We have had a disinvestment commission to identify areas to be privatised up to 74 per cent. I would like an autonomous body like that to have the mandate, authority and power that ensures that the recommendations are implemented. We need an expanded programme of privatisation to find resources for the social sector, to retire part of the public debt and to fund high-priority public sector activities."
Observers are taken aback. "I am surprised that the Congress has decided to push the economic reforms in its election manifesto," says economist Bibek Debroy. "And the programme is well detailed and fleshed out. Sir Humphrey Appleby would not have approved."
The important change that the manifesto makes in the direction of reforms is in taking liberalisation to rural and agricultural India. Says Jairam: "Earlier, the reforms were addressing the inefficiencies of the modern sector. The need now is to focus on rural areas." So the Congress says it plans to give industry status to agriculture. It will strengthen the agricultural credit system to increase the flow of credit to farmers. It will also launch "a massive programme of creating rural infrastructure", including building all-weather roads connecting all villages by 2000. "Investment is the key to continued agricultural growth," says the manifesto.
"We need to project that poverty cannot be eradicated through mid-day meal schemes and rojgar yojnas ," says Jairam, "but only by increasing investment in rural infrastructure, credit, agricultural research and extension." But the manifesto is silent on the modalities of this increased investment. Will it be through the state governments? But they have no money. And anyway, the principal problem with such good intentions has always been at the execution stage, when petty corruption takes over and the schemes degenerate.
"The Congress package is courageous," says Debroy. He lists several sections of society which will be angered by the manifesto. One, some sections of Indian industry. The manifesto is rather vague on what a Congress government will do to look after domestic industry's competitive interests. All it says is that "the Congress will ensure that Indian companies are given every support to compete effectively with foreign companies at home and abroad". Also, the manifesto's promise that the Congress government will help Indian companies establish their brands abroad is unlikely to cut any ice. After all, dozens of Indian brands have already been bought over by transnational corporations in India, so talk about establishing Indian brands abroad could look like plain lip service to a lot of people. "The swadeshi flavour, which industry has been lapping up," says Debroy, "is missing."
The Congress says it does not believe in allowing foreign direct investment in some industries and not in others. "We prefer investments in infrastructure, hi-technology and export-oriented industries," says Manmohan. "But as the economy expands, too many restrictions will only make it difficult to police them. There is the argument against foreign investment in consumer goods. The question is, if these industries are hi-tech and create jobs and export opportunities, why not? Look at China. It has become a global player on the strength of simple consumer goods exports."
But what about a level playing field for domestic and foreign industry? "I understand and empathise with the demand," says Manmohan. "Domestic players have limited staying capacity. The need therefore is to push financial reforms so that local industry can get loans at low rates of interest and compete with foreign companies. Also, infrastructure needs to be improved so that there are first-class roads, ports and power systems. Level playing field is therefore not an argument for pushing back to the pre-liberalisation era but to push reforms and greater transparency. Liberalisation, properly calibrated, will give Indian industry more elbow room to survive and flourish."
Can't argue with that logic, at least in theory, but will that satisfy Indian industrialists? Organised labour too may be upset by the manifesto's views on delicensing industries, banking sector reform and opening up insurance. Large farmers will possibly be incensed by this sentence in the manifesto: "Farm prosperity cannot be sustained merely on the basis of subsidies that benefit a small section of the farming community."
Though the BJP's economic agenda is still unclear, given the pressure groups within the Sangh parivar, the one thing the BJP seems to be adamant about is renegotiating the World Trade Organisation (WTO)treaty if it comes to power. The BJP feels that the WTO is a First World weapon to establish a total economic stranglehold on developing countries and wants to link up with like-minded nations and pressure the WTO to change many terms and conditions of the treaty.
THE Congress is equally clear about what it will do on this issue if it comes to power. "There is no question of renegotiating the WTO. We have made international obligations and we have to fulfill them," says Jairam. "The Congress stand is as simple as that. We have to change our patent laws, introduce product patents and we have 10 years to move in that direction."
"Where are these like-minded countries the BJP is talking about?" adds Manmohan. "Asian countries were supposed to argue along with India on labour standards and other issues but they went ahead and signed the WTO at the Singapore summit. Personally, I think India has much to gain from liberal market access. If the world trading environment becomes more protectionist, it will hurt our exports. When people talk of renegotiating WTO, they think we will be able to restrict imports while others will continue to provide market access for our exports. That world existed in the '50s and '60s. It's dead and gone today. Our bargaining power is anyway very low considering the type of goods we export: garments, textiles, leather. They can be imported from anywhere. People who talk of renegotiating haven't really thought of the consequences. If there is no WTO, the law of jungle will prevail. Big economic powers will control the world."
Where Manmohan advocates caution is on full convertibility of the rupee. Here, a Congress government would tread a far more wary path than Chidambaram may have if the UF government had lasted its full term. "We need to take measured steps," he says. "Unless the fiscal system is in good shape, the balance of payments situation is healthy, inflation is under control and the banking system can take the rigours of a competitive and open economy, you cannot move to capital account convertibility. There can be no pre-determined time period for this." So, given that India is set for either a BJP-led or a Congress-led government, it is highly unlikely that the Tarapore committee recommendations of full convertibility by the year 2000 will be followed.
As things stand, the Congress's economic think tank is making all the right noises. "The state of public finances is horrendous—both at the Centre and in the states," says Jairam. "The proportion of development expenditure has been dwindling over the years. The fiscal deficit is very high—it might have been brought down to 4 per cent through VDIS, etc, but the real way to bring it down is to re-orient expenditure from consumption to investment. The problem is that the Indian politician does not believe in fiscal prudence. He thinks the state is a kamdhenu and you can keep milking it. So the cornerstone of any economic policy for any government has to be fiscal discipline. This level of government borrowing and spending is unsustainable." Conspicuous by its absence in the manifesto is Sitaram Kesri's pet scheme of a Rs 500-per-month dole to all unemployed Indians.
The question of course is: How likely are these good intentions to be translated into government policy?