The turning of the wheel

There is a cycle in Indian affairs. Every so often, there is a renewed energy, an ambitious reform, a new purpose.

There is a cycle in Indian affairs. Every so often, there is a renewed energy, an ambitious reform, a new purpose. Things change, growth accelerates. This lasts about five years or so. Then something happens and torpor sets in again. The period between 1953 and 1959 was like that. The Second Five Year Plan, all those big dams, non-alignment and Panchsheel, Panditji dominant and benevolent. Then in the next 10 years there was the defeat by China, Plans had to be pruned, two famines.

There was a similar outburst when Indira Gandhi split the Congress. For five years between 1969 and 1974, there was tremendous energy in her activities and a lot of hope. Then came the people’s movement in Gujarat against inflation, her defeat in the Courts, the Railway strike which was smashed up and then Emergency. Again in the mid-eighties, there was an élan, the economy advanced. Rajiv was the new hope but he too fell by the wayside with Bofors and Shah Bano. Then again, darkness till the mid-nineties, followed by the nightmare of United Front rule, and, again at the turn of the century, resurgence.

I fear we have come to the end of the good period now. Growth has been good, but now it is slipping away. While growth was good, Indians began to take it for granted and populist redistribution became the fashion among political parties. It used to be development with inclusion; now it will be inclusion and no growth. Why?

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There is now a 75 per cent chance that next year the world economy will be in recession. OECD will enter negative growth territory. This will be the case despite the success of Brown-Paulson intervention to recapitalise banks. It is not that Capitalism has ended (no such luck) but that it will take time to rejuvenate. Investments will not flow from the rich countries to the poor, nor will the consumption of rich countries fill the coffers of exporters in the developing countries.

In India, the last six months have been traumatic as far as economic performance is concerned. Inflation was the highest and industrial growth lowest for two decades. Tata was driven out of Singur. Now Naresh Goyal has surrendered without a fight. There will be a cry raised soon that liberal reform has failed, and the time has come to go back to the days of Nehruvian Socialism. It should be said that Nehru only nationalised two firms—the Imperial Bank of India, which became the State Bank, and life insurance, to create LIC. The economy grew 45 per cent in 10 years in the fifties. It was his daughter who nationalised the banks and tried to take over trade in foodgrains. As growth collapsed and inflation increased, she nationalised even more until Emergency had to be invoked to protect (Indira) Gandhian Socialism.

Whoever wins the next election will face, and, no doubt, concede the demands for job protection and for large uneconomic subsidies to sustain the protected jobs. For a spoiled middle class which enjoys $50 billion of petrol subsidies, Socialism means even larger subsidies for jobs, to sustain low EMIs and for higher education in elite institutions. As the economy will slow down—thanks to these policies—there will be demands for reservations in the private sector for SC/STs and OBCs (though not Muslims because that will be ‘pandering to minorities’).The private sector, which has thrived in the last 10 years and proved its worth by becoming globally competitive, will be browbeaten into submission.

This would not matter much if there was a sign that one political party or another among the two national ones had seeds of renewal in it. But both the Congress and the BJP are devoid of ideas and fearful of what may happen in the coming elections. The BJP has gone back to cow worship while bashing up Christians in the South and stirring up anti-Muslim feelings in the North. The Congress has been paralysed by its secular friends from fighting terrorism and too scared of the BJP to ban the Bajrang Dal or even prevent violence in Orissa and Karnataka.

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It may take two elections before India resumes high growth and peaceful politics.