Good man, true. But can Manmohan bite?

It is not unknown for economists to drift into politics. Andreas Papandreou, after a distinguished career as Professor of Economics in the USA, went on to become Greek Prime Minister—but then he was part of a dynasty of Greek Prime Ministers. Lenin established his early reputation in Russian Social Democratic Party as an economist. There are others—Presidents Cardoso of Brazil and Zedillo of Mexico, the Portuguese dictator Caetano. Economists are no stranger to political power. But Manmohan Singh arrives as Prime Minister at a particularly difficult juncture.

He has to harness his professional knowledge as much as his political acumen to manage in what are going to be troubled times. Manmohan Singh has been an economist all his life, but he has also been one who has combined academic and policy careers. Unlike Amartya Sen, Jagdish Bhagwati or K N Raj, Manmohan has not only been involved in policy advice, he has made a grand tour of all the major posts in the economic policy area. Until 1991, he was known as an outstanding applied economist, well-known and well-liked.

In this he was similar to I G Patel, another economist who has dedicated his life to serving the country in the area of economic policy. But Manmohan went one better than many. He became Finance Minister at the crunch time in 1991 when bankruptcy threatened. He surprised everyone by being not just a mild pliable man willing to let things go on as before. He changed the course of Indian economic policy after 40 years of dirigisme which called itself socialism.

His boldness surprised everyone since he had been as much a part of the ancient regime as anyone else. How did this happen? Desperate times call for desperate measures but not desperate leaders. Nothing simple or tried and true would have worked in May 1991. It was not a matter of a commission or a foreign expert reporting or another 21-point programme for public display.

My guess is that Manmohan had seen how much the world had changed when he served as Secretary of the South Commission in Geneva. He had a vantage point from which to view the onset of globalisation. Although his role was to defend the interests of the South, he must have seen that the old nostrums would not work. The Brandt Report and the Manley Report were devices to appeal to the North to come forward with ‘A NEW NEW DEAL’ but he must have seen that after the collapse of the Berlin Wall and deregulation of capital movements, the North was in no mood to be Rooseveltian.

It was a tough competitive regime that was inaugurating itself in global markets. Julius Nyerere as Chairman of the South Commission could have told Manmohan how he now regretted his own idealistic experiments with Ujama in Tanzania. He had thought he was bringing socialism to Africa; what he brought was economic impoverishment. Nyerere certainly told me this, some years later, just before he died. So in 1991 Manmohan Singh was prepared, as no other economist of his stature in India was, to be bold. He also got away with it because of his total incorruptibility. No one could accuse him of benefiting from liberal economic reform. Indeed he is even today one of the few people in Indian political life who has refused to line his pockets despite ample opportunities to do so.

Yet the question is not his icorruptibility but his toughness. Can he be tough as manager of a coalition? As Finance Minister, he was obeyed for two years while the urgency of the crisis lasted. But after the mid-term elections of 1993, when the Congress saw off the BJP in a number of states, Narasimha Rao became smug and the pace of reform slowed down. Manmohan remained Finance Minister but he was sidelined. India paid dearly for that and sustained growth took another decade to arrive.

This time Manmohan faces several problems. For one, the Congress has only just about a quarter of the seats, only seven more than the BJP. So while the BJP in 1998 had 182 out of the 273 needed for majority—a ratio of 2 to 1 relative to coalition partners—the Congress has only 145 and needs 128 more—a near parity. Further, the Left will be supporting from the outside—a position that British Prime Minister Stanley Baldwin once described as privilege of a whore—power without responsibility. Thus Manmohan will have to massage egos and occasionally to squash them. He will also be consulting Sonia Gandhi, who could play the same role that Bal Thackeray plays in the Shiv Sena. One can only hope that she will not make life difficult for Manmohan. He is after all the only presentable face of the Congress.

The more serious problem is that the election results are likely to be misread. The surprise defeat of the BJP/NDA coalition is not necessarily a defeat for liberal economic reform, a rejection by the rural masses of India Shining etc. The results depend quite narrowly on a few states where incumbency has led to massive switches from the ruling party to the opposition party. The voter turnout rates as far as I can make out are not sharply different across the classes or even across regions. A lower turnout, incumbency plus the ruling party complacency about expected victory combined to turn the tide. In terms of popular support, there is hardly anything to separate the Congress and BJP; what is worse is that together their popular support has declined since 1991. India is getting more diverse, more fragmented if you like. It is the subnationalisms of regions and the petty loyalties of caste which rule the roost.

The lesson then is that a national vision will be harder to impose. The Mulayams and Laloos have no national perspective; they only care about their narrow patch. They want handouts and subsidies for their clients, not rapid growth for India. They care not for budget deficits but only for UP and Bihar. Economic rationality will be on the defensive while such a fragile coalition rules. The Left cares only about the pay awards for public sector employees and the continued existence of unreformed public sector enterprises.

Whatever the rhetoric about redistribution, the coalition partners represent sectional interests. Real redistribution to the rural poor would require a ruthless pruning of subsidies, most of which are regressive, a drastic shift in the burden of taxation from indirect to direct taxes, a serious grip on public spending, much of which since the halcyon days of Congress socialism does not cater to human development needs but feeds the aristocracy of the public sector workers. All this requires a national vision, a party which is not sectional but national and one that cares about India’s status in the world and not just Bihar’s fodder scams.

The Congress was always such a party; for 40 years till 1989, it was the only such party in Indian politics. Now it has lost that unique status, partly to the BJP, which despite its dubious Parivar has developed a national vision, but partly due to the deterioration in its own internal structures and culture. The Congress can regain its unique status if once again it goes back to its roots and asks what is its purpose, who does it represent. Its purpose is not just to be in office as it sadly became in later years of its history, nor yet to represent selected groups even though they be minorities—Muslims, Dalits or whatever. The Congress has to be truly national and its purpose has to be poverty elimination as much as enhancing India’s international power and status. This will require cleaning out the Augean stables of Congress regional organisations, but that will not be Manmohan’s task. The party will have to seriously examine its structures and its philosophy if it is to reform and not just ready itself for dynastic succession.

But the harder task is convincing coalition partners and indeed, the Lok Sabha itself, that India needs to pursue a vigorous economic reform programme for poverty reduction and human development as well as for competing in the global economic environment. China is the key country here. India has to learn from China and indeed regard China as its model and its rival. Not an Enemy to combat but a rival to catch up with. If India is to be a world-class power, it will need sustained growth at 8 to 10 per cent for a decade and more. This will not come through indulging in every sectional blackmailing demand for subsidies but through fiscal discipline, a drastic restructuring of taxes and spending towards the poor and the hard working. In short, it requires sound economics. Manmohan Singh is a sound economist. All he needs is courage and a bit of ruthlessness. And lots of good luck.

(Lord Meghnad Jagdishchandra Desai teaches at the London School of Economics, has served as Opp Spokesperson on Health and Treasury and Economic Affairs)