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By S.V. Ramakrishnan
The election results were so unexpected that an intense depression set in on one side and an euphoria on the other, both equally unwarranted from the long-range point of view.
The media, especially the English language press, ever one-sided in its sympathies, did its part and built up some myths at the top of the euphoria.
The first and foremost myth was that the Congress won a victory. Someone even called it a spectacular victory! The undressed up fact is that while the BJP was defeated, Congress did not win either. The total votes polled by each were surprisingly identical while the difference in the number of parliamentary seats was just seven. Just like in 1996, a number of other parties, who are averse to BJP forming the government, gathered together along with the Congress to claim a majority in the Parliament. The only difference is that while in 1996, the Congress was self-assured enough to let the smaller parties rule for some time, by now they had lost that self-confidence and were anxious to have their cut in the loaves and fishes of office. The result is a coalition headed by Congress. Communists are playing the role of the Congress in 1996-98 this time. They are remaining outside the government and want to call the shots.
That is exactly where the danger lies to the coalition government and to the country. For the comrades, it is power without responsibility, like the British East India Company in Bengal in the dark days of Clive, in the late 18th century. For Congress, it would mean constant blackmail, forced inaction or malfeasance and increased dependence on unreliable allies like Laloo and Karunanidhi, both of whom have already bared their fangs briefly before the day of swearing in. They are now quiescent but the manner in which Karunanidhi blackmailed and got away with all that he wanted could be ominous for the future.
The only way out is expansion in the field of service tax, where only the thin end of the wedge has been felt so far. Now, it can progressively assume the pride of place among taxes. For, direct taxes (income-tax, corporation tax, dividend distribution tax, etc.) have also to be friendly to the stock market.
In the process of placating this southern satrap, came the strange spectacle of divesting Chandrasekhar Rao of the coveted Shipping Ministry a day after he was invested and rendering him minister without portfolio. He is said to have willingly offered his head and the price promised to him in AP politics is not known. It could transpire to be unaffordable. Whatever it be, Congress could little afford a Karnataka-like situation ( where the tug of war between the allies is such that the cabinet could not be finalised for an indecent length of time) to develop in Delhi which would attract dangerously adverse national and international attention. A government of some kind had to be formed at whatever cost and it was done even with some known common criminals inside; the latter was part of the price that had to be paid to Laloo.
Hardly had a week passed since the new government assumed power, when the communists had already bared their teeth twice. When they said that PSUs should be divested only in consultation with the Trade Unions, the Bombay Stock Exchange index instantly shed more than 100 points. Two days later, Marxists led a noisy demonstration against the privatisation of Delhi and Bombay airports as proposed by their ruling allies. Are they friends or foes? The Sanskrit word is anukoola satru. It is clear that at every stage the Commies will obstruct the economic agenda of the Congress.
Manmohan Singh is an economist himself and an experienced hand in public finance. But he is severely handicapped in his present role, unlike in his earlier manifestation as FM in the early nineties. Unlike all his predecessors, the present PM is altogether separate from the ruling party´s power centre, which, as everyone knows, is Sonia Gandhi. In effect, he holds office at her pleasure. But worse is his dependence on the World Bank and American goodwill internationally and his exactly opposite dependence on the communists here for majority. It will indeed be a hard task reconciling the two. The election results all over India, whether in the Centre or in the states, have taught the need for populism as State policy. Populist measures cost money and where will Chidambaram find the money for Manmohan Singh´s government? For instance, the oil companies are not allowed to raise the prices in the face of international oil price rise. They cannot sustain the cushion indefinitely and the government will have to bale them out sooner than later. Out of which source?
In the olden days, FM´s job in each Budget was simple. He had to tinker some rates of duty or add some new items to the tax net under Customs or Central Excise. On the direct taxes side, India had one of the highest rates in the world for the upper brackets. Alas, those happy days are gone. We are no longer our own sole masters in matters of foreign trade and customs duties. We are hemmed in by our obligations to WTO and committed to progressively reduce customs duties. Since imported goods cannot be touched, we cannot also raise the tax on indigenous manufacture (Central Excise) much, lest local industry is ruined by unfair international competition. The only way out is expansion in the field of service tax, where only the thin end of the wedge has been felt so far. Now, it can progressively assume the pride of place among taxes. For, direct taxes (income-tax, corporation tax, dividend distribution tax, etc.) have also to be friendly to the stock market and inflow of foreign investment for a variety of reasons in today´s context for a reversion to the Indira Gandhi´s days is unthinkable.
This much for the revenue side. There are problems on the expenditure side also. World Bank frowns at subsidies and applies the stick if the carrot does not work. Now, administered price mechanism is practically restored for oil and the new electricity act is offered in sacrifice at the altar of populism, negating the gradual and delicate efforts of years. How this will affect our relations with the World Bank and the international investment climate, with the communists carping at the other end all the time, is a moot question.
The tragedy of the anti-BJP alliance (at the moment, it is called UPA) is that it is purely a negative combination without a sufficient positive content to cement together. Its raison d´etre is solely to exclude BJP from power. The Common Minimum Programme looks comical in a sad way. It seems to be a laboured papering over a bundle of contradictions. ´Exclude BJP´ slogan can sustain the combination for a year or at the most two, definitely not for five full years. By then the inherent conflicts will surface and overwhelm the alliance. It is interesting to speculate the possible scenario after that.
The government may get discredited, resign and face a premature election with the time-honoured anti-incumbency factor operating with a vengeance. Another scenario that may be better for the country and people, however unrealistic it may seem now, is the two major parties, BJP and Congress, coming together and forming a national government.
The second possibility is really not as fanciful as it may sound today, nor is it just wishful thinking. We can envisage the possible scenario. The alliance breaks up internally, the government fails externally and falls, discredited by its non-performance. In that situation, it would hardly be an attractive prospect for the Congress to face the electorate again. It will be in its own interest to form a coalition with BJP in the name of a national government. We must remember that, in reality, the basic agenda of the Congress is closer to BJP than to the communists, though that reality is at the moment clouded by noisy sloganeering. But slogans change when the circumstances change, especially when the change is adverse. If there could be a Common Minimum Programme of BJP with Karunanidhi and Ram Vilas Paswan in the past, it need be no more difficult for Congress and BJP to work out a CMP in the future either. And history is a dynamic process, after all!
(The writer is former Commissioner of Customs.)
