I used to listen to Atal Bihari Vajpayee in Parliament in the early 1990s during my days in the finance ministry; he was a great orator. Later, when he became Prime Minister, he nominated me to his Economic Advisory Council. I was concerned about his performance; this unsolicited advice was given in a column in Business World on 8 October 1999. I expected a good deal from him, and was a bit frustrated by his reticence and slowness, as can be seen in the next column from Business Standard of 18 November 1999.
How to do reforms
The President outlined the reforms that the new National
Democratic Alliance government proposes to carry out. The President’s speech
was drafted in the Prime Minister’s Office; this is the Prime Minister’s reform
agenda. It looks like a bold, decisive step: a new government takes over, and
at the very opening session of Parliament, it announces the reforms it proposes
to carry out. But to a more experienced observer, the announcement smells
different.
To begin with, this programme is that of the Prime
Minister, not of the government. The government was formed only a week before
the President’s speech. It consists of 70 ministers. There is no way they all
got together, deliberated on what needed to be done, and made up the list. The
PMO has made up the reform agenda without consulting the ministers.
That would an excellent strategy – if the Prime Minister
held the reins. If he were certain that he could impose his will upon the
cabinet, then the best way of doing reforms would be to say upfront, “This is
what we are going to do,” and ask the ministers to get on with it. The Prime
Minister could well decide that this was the last time he would hold the
office, that he wanted to be remembered for having changed the course of India’s
economy, that he wanted nothing more out of his political career. He could note
the fact that his alliance won because of him, that his ministers are beholden
to him, that the government could not survive without him, and that he has a
chance to do just what he wants. He might note that he will get weaker as the
time goes – things will go wrong, MPs’ reluctance to face elections will
lessen, competitors will try to trump him. In short, the PM could decide that
this is his moment and that he is going to catch it by the forelock.
If he had, he would not have had the President make the
speech he did. First, the President should not have announced new commissions –
on taxes, on expenditure, on railways etc. Everyone knows that commissions are
devices to delay and obstruct. No doubt they can be useful sometimes – to
consider issues in depth, to bridge differences, to give a certain colour to
what has to be done. But there have been so many commissions in the 1990s. The
end of 1999 is hardly the time to start considering options; the new
commissions only betray the indecision or lack of clarity in the PMO.
Second, he should not have promised any more policies –
on civil aviation, on health etc. Policies are dime a dozen. Every minister
promises one when he comes in; now the PM has got into the same game. A policy
may be a reform or just the reverse; promise of one says nothing about the
intentions of the government.
Third, he
should not behave as if nothing has happened in a certain area. In
telecommunications, the PMO has been very active, and generally ineffective.
The PM himself is on record as having said that the TRAI should be left free to
do its job; and then MTNL went to Delhi High Court in defiance of that
announcement and got TRAI’s tariff shot down. That by itself betrays the PMO’s
impotence; but then to ignore the entire imbroglio between the PMO and the
Telecommunications Department and to promise the latter’s corporatization makes
the PMO open to ridicule. Who is in charge? Not the PMO. Similarly, coal was
actually opened to the private sector in 1995 or 1996, but nothing happened all
these years thanks to the successful sabotage by Coal India and its mother, the
Department of Coal. To announce it now as if nothing has happened and no one
has failed makes the PM look ignorant.
Finally, the PM gets a good press and may therefore be
unaware of the fact; but he gives a general impression of lack of application,
especially when it comes to economic affairs. It is strongest on
telecommunications; how can a mere department so brazenly defy the Prime
Minister’s intentions and achieve just the opposite of what the PMO has
publicly advocated? But there are other pointers. In his public speeches,
Vajpayee seldom refers to economic affairs. In formal speeches he often has to,
but then he sticks to the text written by bureaucrats for him, which are full
of the weaknesses I pointed out above. The PM needs to convey the impression
that he cares about the economy, that he believes in something.
What does he believe in? I do not know. Despite being on
his Economic Advisory Council I have yet to learn what is his economic
philosophy; he needs to convey it, not just to us, but to the Indian people. I
assume – all evidence points to it – that he is a liberal; he should put that
on the line. He should say that 40 years of Congress socialism have reined in
the enterprise and creativity of the Indian people, and if he is going to do
one thing, it will be to break those shackles. Decontrol of administered
prices, removal of subsidies are fine things, but the people’s hearts are not
warmed by them. To do these things, Vajpayee has to give a philosophical
justification – that freedom is good, the world is full of risk and we must
meet it head-on. Vajpayee is actually very good at this aphoristic level. He
should just apply his oratorical skills to economic issues. And he should turn
his lack of application into a strength, and concentrate on a few things to do
at a time. Even now he should say: “I am going to do the following ten things
by the end of 2000.” To tell what those ten things would be to reveal his mind,
which is more than I can do.
I used to listen to Atal Bihari Vajpayee in Parliament in the early 1990s during my days in the finance ministry; he was a great orator. Later, when he became Prime Minister, he nominated me to his Economic Advisory Council. I was concerned about his performance; this unsolicited advice was given in a column in Business World on 8 October 1999.
Making the best of good luck
The Bharatiya Janata Party left office with much bitterness. It blamed fate for having lost power on account of one vote; it blamed the Congress for having pulled it down, and it thought that its performance in government had been poorly rewarded. All this bitterness can now be put behind. The gods have smiled on the Party. Its alliance has a solid majority. The Congress could not dream of pulling it down. It may still be vulnerable to a revolt from a constituent of the alliance. But only the Telugu Desam, Janata Dal and Shiv Sena have the numbers to cause serious trouble, and none of them is quite capricious enough to cause serious misgivings. The Prime Minister can now get down to the business of governing.
As luck would have it, the economy is also looking in good shape. Inflation is at a 20-year low. Industrial growth is looking up. After two years of stagnation, exports are rising again. These are early days of good news, and it may be too soon to start counting its blessings, but the government can afford to be more relaxed about the economy.
The last government had an ambitious finance secretary in Vijay Kelkar. He had planned to bring out a paper together with the February budget outlining a set of second-generation reforms. I had then suggested that the BJP government was short of good news. The budget was going to bring good news; if the Finance Minister presented the reform plans together with it, he would be wasting an opportunity. He would do better to present the reforms paper at the end of the budget session. That way he would be spreading out the good news; and he would be able to incorporate the fallout of the budget in the design of the reforms.
But luck was not with Vijay. The government fell in the meanwhile. The BJP toyed for a while with the idea of presenting the reforms proposal as a first instalment of the election manifesto. But doing so would have reopened the rift between the liberals and the swadeshi backwoodsmen in the party, so the paper was put off. In the meanwhile, Vijay was removed. Now, for the first time since 1991, there is no economist worth the name in the finance ministry. The reforms proposals will be announced with fanfare. But the BJP’s problem has been that it has no one who can judge what is a reform and what is not, or what is important and what is not. So its reforms are in danger of being the kind of mishmash that CII and FICCI nowadays put out – a mixture of the high-sounding, well-meaning, self-serving proposals that are sound only by accident.
I also think that some realism is necessary about what this government is and is not capable of. Vajpayee’s political acumen can only be admired. His party did not make things easy for him. Kushabhau Thakre served capably as a loose cannon. The swadeshi lobby provided the mob. In the sombre days of last winter, it looked as if the enemies within the BJP would do it more damage than the enemies without. However, doctrines do not win elections; moderation does. And Vajpayee is the only leader in the BJP who makes moderation his leitmotiv. He firmly told the Hindu extremists to leave him free to govern; after a determined fight he won. Now, having won the election as well, he has won freedom of manoeuvre which he must use.
At the same time, it must be admitted that Vajpayee is not a master of detail. Recall his forays into foreign policy – his precipitate return when China invaded Vietnam in 1978, his intemperate reaction to Mandela’s well meaning speech last year. Consider even the telecommunications policy on which he has set his heart; what a mess it remains to this day, despite the removal of Jag Mohan! Studying something thoroughly, getting one’s teeth into it, fine-tuning a document – these are not Vajpayee’s strong points. He is best at reaching a balanced judgment and setting a direction.
I think this implies that he should pick a few issues where a major direction-setting exercise is required. In terms of his interests, of his express concerns, three are paramount, namely foreign policy, public enterprise policy, and constitutional reform.
In foreign policy, the Pokhran ceremony made a break with Nehruvian humbug and blew India into uncharted waters. Jaswant Singh has tried bravely to navigate, but something handicaps him. It may be his great country complex; whatever he might tell Karl Inderfurth, India is not a great country. Its share of world trade is 0.6 per cent. Its share of world foreign investment flows is even lower.
This means three things. First, India must increase its presence in the world economy; and that means that the Indian economy must be opened up further. This may be unwelcome to the BJP rank and file and to truly indigenous Indian businessmen; but the way to make the world take India seriously is not by making serious speeches to foreign dignitaries, but by tripling our imports and finding a home in the country for $25 billion of foreign investment. It is not as drastic as it sounds, for imports cannot be tripled without tripling exports, and foreign investment will not find any use unless it goes into export production. But once this is seen as the path to the greatness that the BJP seeks, its implications follow – not only for import duties and advance licensing, but also for WTO, our relationship with the US, and telecommunication and power licensing. Foreign policy has implications for domestic policies in many areas that the BJP needs to face up to – and that Vajpayee must coordinate.
Second, Jaswant Singh’s approach of mending fences with the US and forgetting the rest must be abandoned. Vajpayee has the correct perspective of seeking closer relations with neighbouring countries. I was nauseated by Kapil Sibal’s finding scams in imports of sugar, edible oil and whatever else; he is a party colleague of Manmohan Singh, who should have told him that cheaper imports of mass consumer goods, whatever their source, make the common people better off. I think that Vajpayee was right to try out the Lahore overture, despite what happened later. Eventually India and Pakistan will have to make peace, and that peace will be easier to make if its leaders know one another personally. Vajpayee was also right to promise duty reductions to Bangladesh and Sri Lanka; I only wish he applied himself enough to stop the commerce ministry from sabotaging his initiatives. But the point is broader; we must seek closer relations not only with our south Asian neighbours, but with all our neighbours across the Indian Ocean; and the easiest way of building up relationships is to provide a large and secure market for their production in our country. If we were more closely integrated with the Indian Ocean countries, the world would begin to see us as a regional node instead of the insignificant India.
Finally – and this follows from the first two points – foreign policy involves not just politics, but also economics, society and science. We cannot attract students from abroad if the home ministry continues its vexatious visa restrictions; the elite of neighbouring countries will not come to India unless we allow them to invest in our stock markets. Thus, a liberal stamp must be imprinted on all our policies, whichever ministry they are the concern of. This is where the PMO is crucial; this is where Vajpayee must exercise authority.
The BJP prides itself on having dared mention privatization; but hitherto its contribution has been just a word. It is scared of provoking massive strikes of organized public sector workers if it goes any further. So it has continued with the approach initiated by Manmohan Singh seven years ago of selling public enterprise shares without parting with control. However, seven years have passed; the successful public enterprises, such as ICPL, BHEL or SAIL are now handicapped rather than helped by government ownership. Their trade unions will welcome it if the government loosens its stranglehold. The government should forget its obsession with disinvestments as a money raising device. It should give profit-making enterprises the freedom to issue shares whenever they like, provided they do it through a public, transparent process. When they do, the government should make a commercial decision whether it wants to buy any of those shares or whether it wants to use the issue to unload some of its own shares.
It is the bankrupt enterprises that pose the problem, and that problem will not be solved until the workers are separated from the assets. The only peaceful way is to pension off the workers by giving them a certain number of years’ salary. Once an enterprise is divested of its workers, rational decisions about what to do with its assets are easy.
On constitutional reform, the BJP swarms with stupid ideas like banning Sonia Gandhi from fighting elections. But the reality is that no constitutional changes are possible without the cooperation of the Congress, whereas if the NDA and the Congress agree, almost any constitutional reform can be passed. And it is in the interests of the Congress as well as the BJP to move the Constitution so as to facilitate a two-party system. My preferred solution is a changeover to list-based proportional representation with a cut-off point of 25 per cent. Other options can be thought of. The important thing, however, is to start thinking of big changes – and to bring them about in cooperation with, not in conflict with the major political formations. This is the task for which only Atal Behari Vajpayee is qualified.
