Sunday, December 6, 2015

THE AWKWARD ALLIANCE

From Business World of 8 November 2004. The alliance between the Congress and the communists was fraught from the beginning, and broke down eventually, leading Manmohan Singh to ally himself with the spectacularly corrupt southern party, Dravida Munetra Kazhagam.

The foreign devil

Although they would be the first to agree that he is the least of all evils, the communists have a problem with the Prime Minister: he behaves like a friend of foreign investors and a lackey of American capitalists. They first took umbrage when he met American industrialists and financiers in New York last September and invited them to invest in India; he rebutted them gently saying that it was his job to serve the national interest.
More recently, they upbraided Manmohan Singh for congratulating George W Bush on his reĆ«lection. If they had reflected on it, they would have realized that he did not do what is usual on such occasions – namely pick up the telephone and say, “Well done, George! The people of India rejoice at your victory.” Instead, he wrote a long letter reiterating the agenda for Indo-US cooperation that he had spelt out when Bush and he met over breakfast on September 20. That meeting itself came at the end of phase one of the Next Steps in Strategic Partnership initiative, which was begun last January. The US has had a problem with India since the NDA government staged the nuclear ceremony in 1998. The Vajpayee government was trying for years to overcome the estrangement that its nuclear explosions occasioned. Slowly it had brought the US over to shift from boycott to cooperation. The stakes for India are substantial: they involve strategic technologies whose exports to India the US has prevented. Prime Minister Manmohan Singh understands the stakes, and is simply continuing the process of persuading the US to treat us better. The communists want an end to the process, and a return to the cold war, 15 years after it ended.  
The national interest in attracting foreign investment was spelt out to them by the finance minister, who said that the huge investments required in infrastructure – he mentioned the Rs 1.6 trillion required for telecommunications in the next five years – could not be financed without foreign investment. On telecommunications, the communists got a learned paper drafted by their fellow travelers from the Jawaharlal Nehru University; Chidambaram gave an equally erudite reply drafted no doubt by his kitchen cabinet.
The communists have assailed the finance minister on foreign investment in banks as well. Reserve Bank has made rules that would deprive any foreign investor from a voice in the management of a bank he buys into. As money supply and the deposit base expand, the banking industry is poised for expansion; and as it expands, it will need more capital. In this process, Reserve Bank has given nationalized banks an advantage by making it difficult for private banks to attract new capital. The finance minister has tried to moderate Reserve Bank’s obstructiveness by suggesting that investors should be allowed to increase their stake in banks in steps of 10 per cent a year. Here too, the communists have taken issue with him. They control a major bank trade union, and nothing favours it more than state ownership and lack of competition. So their opposition to foreign investment is closer to self-interest in this regard.
Whilst the Prime Minister has resolutely followed his own foreign policy, he has been meticulous about adherence to the Common Minimum Programme. He may have reckoned that as long as he honours his agreement with the Left, the Left will let him follow his own judgment in matters not covered by the CMP. But the Communist Party (Marxist) refuses to let him entertain such illusions. In a statement on November 1, its Politburo rejected an approach where “The core issues of liberalisation and privatisation should be left to the government to pursue, while the Left should confine itself to concerns such as employment generation and food supply, education and health”. So if the Prime Minister hopes for a quiet life, he is living in a fool’s paradise. Very likely he is not.
In the circumstances, he could draw support from the opposition to his external policies. But he is unlikely to do so because the Left would see that as treason, and the BJP would want its pound of flesh for support.
So he does not have any easy options. In the circumstances, he may temporize. But he should also take a leaf out of his predecessor’s book. Atal Bihari Vajpayee, whenever he encountered a difficult issue, used to call for a public debate on it. In his case it was prevarication. But Manmohan Singh might do well to involve the broader society in a discussion of what is to be India’s place in the new world order. The communists are not entirely immune to rational argument; even they see that the world has changed since the fall of the Soviet Union. A public debate would give them too a chance to persuade the country that hostility towards the United States is in national interest.