Guest Column Economy Matters UPA, beware of internal enemy
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Guest Column Economy Matters UPA, beware of internal enemy

Archive Manager by WEB DESK
Dec 12, 2004, 12:00 am IST
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By Rajendra Prabhu

It is heartening to find a world-famous economist like Jagdish Bhagwati rejecting the theory that it was the economic reforms that did the NDA in. I have been writing in these columns that it was not the reforms, but it was the failure to explain the pains of the reforms and prepare the people for these constraints that caused the NDA’s electoral defeat. Recently BJP president, L.K.Advani has also endorsed this stand.

The Columbia professor’s recent pronouncements in Delhi were a warning to the UPA government, specially to his friend from his student days in Cambridge, Dr Manmohan Singh, not to slow down the economic reforms and globalisation just because the Left is opposing them. Dr Singh’s party, the Congress, has been claiming that it was not opposed to reforms as such but that it would put a human face to these reforms.

But Dr Bhagwati, whose recent book In Defence of Globalisation has become a global best-seller, demolished the theory that economic reforms had no human face. In ‘Walk the Talk’ programme with Indian Express editor Shekhar Gupta, the economist said: “I think India has to certainly admit the fact that globalisation has a human face.” He said that it meant the reforms were also about removal of poverty, reduction in child labour and improving economic opportunities for the bulk of the people. He rejected the usual criticism of globalisation that it made the poor poorer still, while increasing the incomes of the rich.

Dr Bhagwati also exposed the dilemma of the UPA’s pro-poor platform explaining how it was actually working against the poor. The attempt to show that massive amounts were being spent on the poor actually turned out to be the creation of massive deficits.

Though Bhagwati did not give any statistics in the course of his TV show and the earlier talk he gave at the Institute of Foreign Trade in the presence of the Prime Minister, the fact that today there is large-scale recruitment in the IT and the ITES/BPO industry is one instance of how globalisation is increasing job opportunities. As a case study, economists quote the situation in Malaysia. Once a low-income country depending entirely on export of tin and rubber, Malaysia has now become an emerging industrial giant with almost full employment (in fact, labour scarcity) and a per capita income of 3,800 US$ (against 500 US$ in India and 1,000 US$ in China) for its 23.8 million people (2001 figures) in just 20 years of economic reforms and globalisation.

In the six years of NDA’s economic reforms, the shift in the Indian industry from inward-looking to outward-looking manufacture in two- and four-wheelers, in apparel and textiles, engineering, could not be overlooked. Rahul Bajaj was in the early 90s the champion of what was known as Bombay Club that was afraid of global competition. Now his industrial empire is an indigenous giant competing with anyone on global scale. Venu Srinivasan’s TVS and Kalyani’s Bharat Forge, are some other examples of Indian enterprise rising to global competition. Tata Motors has its four-wheelers in European market. The huge foreign exchange reserves and the rise in exports from the 30 billion US$ level to a 50 plus billion US$ and the recognition India got as a global player were other indicators of success of economic policy. Despite such achievements, one electoral setback has made the captains of NDA mumble apologies for their drive on the economic reforms path. Since 2001, the emphasis on massive infrastructural development with the huge roads and railway projects, the port modernisation and the power sector reforms plus the telecom revolution, set the tone for the next phase of reforms. If today the UPA government is turning back to emphasise infrastructure, why should not the credit be claimed by the NDA?

The Prime Minister admitted, while releasing the stamp to honour industrialist Walchand Hirachand, that “we have failed to build on our historic foundations in maritime development. There has been a neglect of ship building.” Walchand Industries were the first to envisage India building maritime ships in the modern era. The Prime Minister was referring to India’s glorious past when India was known to be builder of ships for the whole world. The galleons that helped Rome build a maritime empire and dominate the Mediterranean by defeating the Carthaginians were built in India. Indian maritime traders were all over the then known world—East African coast, Middle Eastern ports, even Rome and Spain. The entire enterprise collapsed during the colonial regime.

But the first 40 years of Independence also did not emphasise revival of ship-building. Little South Korea snatched the initiative and today it is importing our steel to build maritime ships to be sold to the world. Walchand Hirachand had ideas to build India’s own cars but the prevailing command and control economy did not allow him to do that and he was struck with the Fiat JV. The Congress regime in the first 40 years did not allow either JRD Tata or Walchand Hirachand to build cars because that was reserved for someone privileged from the First Family whose car venture ultimately proved to be a flop show when it was in power.

Jagdish Bhagwati has been quite frank even in the presence of his Cambridge classmate Dr Manmohan Singh. The economist warned the Prime Minister that under the UPA government privatisation definitely suffered. Dr Bhagwati also exposed the dilemma of the UPA’s pro-poor platform explaining how it was actually working against the poor. The attempt to show that massive amounts were being spent on the poor actually turned out to be the creation of massive deficits. With the known tendency in the administration to divert funds mostly to middlemen and miss the target audience, these massive spends actually result in rising prices, hurting the poor. According to the economist, this would result in more spending to overcome the impact. He left no one in doubt that the present government had already got into this quagmire. The rise in loan interest rates, the growth in inflation and rise in prices, despite attempts to muffle the impact of international oil price rise, all have given the Opposition the handle to pillory the UPA government as Parliament begins the winter session.

It is well known by now that within his own party, Dr Singh has growing opposition to the reforms agenda with one section aligning with the Left, who are the obvious opponents of reforms. Even Dr Bhagwati was warning his friend, the PM, against this. “He is going to be constrained,” said Dr Bhagwati in his TV show, “to some extent because he will have to contend with this internal dissent, not just the external one from say, the communist coalition and others.” There, it is the enemy within.

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