By Rohit Saran and Rukmini Parthasarathy

"The party will continue the process of industrial and trade liberalisation that it initiated in 1991."
Congress-I

"The policies of liberalisation and globalisation (pursued since 1991) have resulted in economic stagnation."
Bharatiya Janata Party

"Under pressure from the World Bank, the government has been surrendering the commanding heights of (the) economy to transnational corporations."
Samata Party

"The party will follow a balanced approach towards globalisation and liberalisation, keeping in view the objective of India's autonomous development."
Janata Dal

"The policies ushered in the name of economic reforms since 1991have enriched 10 per cent of the population at the expense of the remaining 90 per cent."
Left Front

"We welcome policies which will lead to more economic reforms and liberalisation."
Tamil Maanila Congress

Consensus? The only clarity in obscurity, which the manifestos of the political parties that were in the fray in Elections '98 reveal, is the absence of any agreement on the future of India's reforms. If business is looking for critical indicators of commitment--widening political support for the reforms, or the inevitability of further liberalisation--it is doomed to disappointment. Indeed, the persistence of politically-divergent views, even seven years after the launch of the reforms, belies the hopes of the separation of economic uncertainty from political instability.

True, manifestos are an exercise in pre-poll rhetoric, aimed at appealing to the widest possible range of the electorate. So, the pre-poll disharmony in words may not, necessarily, indicate a lack of post-election consensus in deeds. That, at least, is how the optimist would interpret these manifestos. After all, the track-record of a motley grouping of 14 political parties, which comprised the United Front Government, almost outshines that of the single-party administration of the Congress-I, which initiated the reforms.

Do not, any more, bet on the continued isolation of pre-election promises from post-election performances to deliver the reforms that industry needs in the manner that it desires. So far--be it under the Congress-I or the United Front--the reforms have been driven by individuals, not strategy. Without the backing of a consensus, the reforms have been ad hoc and sporadic. For corporate India, more than the reforms per se, it is the absence of their planning--and a sequence--that is the issue.

It was to force the political parties to come clean on specific areas of the reforms that industry--through groupings such as the CII, the FICCI, and the Assocham--had, for the first time, set forth its own economic manifesto in December, 1997. That, surely, should have forced the political parties to attend to these issues in greater detail. But, as a BT study shows, any exposition of views by a political party merely adds up to a disconcertingly discordant picture.

Indeed, the Congress-I is the only party which has promised to carry forward the reforms on virtually every front. The other national party, the Bharatiya Janata Party (BJP), does not see eye to eye with the Congress-I on most issues even though it promises to pursue a faster deregulation of the economy than before. Paradoxically, the BJP's heightened jingoism--it promises to promote the interests of domestic industry by putting on hold import liberalisation for the next 10 years--is not only contrary to its erstwhile image, but is also similar to the Left's apprehensions.

On the other hand, the smaller and regional parties, whose support for the reforms is critical in a coalition, are mostly non-committal. Of the 28 political parties in the last Lok Sabha, only 8 have made at least one reference to the reforms in their manifestos. That's either because they are yet to take a position on the reforms, or because they simply don't wish to state their position until they know which alliance they are going to be in after the elections.

Eventually, their free-wheeling status could be the biggest hurdle to the process of liberalisation. For example, the Communist Party of India-Marxist's (CPIM) success in stalling the Insurance Regulatory Authority (IRA) Bill, and in delaying the phase-out of the Administered Price Mechanism in the petroleum sector under the UF Government show how a single, small party can stymie a coalition's drive for reforms.

To gauge the real extent of the political consensus on different aspects of the reforms, BT analysed eight political manifestos--that is, only those which had at least one reference to the reforms--on 15 issues. Our consensus:

Areas Of Consensus

There is a complete consensus--on catch-phrases. When it comes to levelling the playing field for domestic industry, encouraging small-scale industry, or pruning the size of the government, the manifestos display a remarkable similarity. Unfortunately, a unanimity of pre-poll party slogans is not going to translate into a post-poll unanimity on the reforms.

For starters, this masks significant differences of approach. Certainly, the competitive pressure generated by the increasing globalisation of the economy has infused the obligatory references to swadeshi and self-reliance with a new sense of urgency. But while the ends may be the same, there is little agreement on the means to achieve it.

The BJP promises Indian industry "a period of 7 to 10 years for substantial integration with the global economy." For this, the party "will ensure that policies of tariff reduction and lifting of quantitative restrictions are formulated by taking into account this adjustment period." In contrast, the Congress-I talks of accelerating the external sector liberalisation because it believes that India "will be truly self-reliant when it opens up further so that Indian businessmen and goods are able to face up to, and withstand, foreign competition and, eventually, conquer the world."

Secondly, this consensus may amount to no more reforms. Take, for instance, the tired slogans on small-scale industry. No mention is made by any party of the welter of incentives and product reservation categories that have stifled the growth of small-scale enterprise and bred industrial sickness. Instead, the emphasis is on more protection, and enhancing the flow of directed credit to small-scale units. Which would, effectively, amount to a tax on financial intermediation.

Consensus is no guarantee of action either. Since there is universal agreement on the need for downsizing the government, and the logic of further delicensing, pre-poll promises to this effect will, no doubt, be popular. But both the convenience of maintaining the status quo, and the pressure of catering to lobby groups have paralysed post-poll initiatives. So, after the initial burst of delicencing in 1991 and 1992, investment licencing continues to restrict entry into several industries.

Similarly, despite the recommendations of numerous Commissions, the only check on bureaucratic bloat remains the process of natural attrition. Worse, even amidst the proposals to restructure government, the manifestos suggest the creation of more administrative appendages. For instance, the Congress-I plans to create a new ministry of minorities while the BJP intends to set up a forum for industry-government interaction, modelled on the lines of Japan's Ministry of International Trade & Industry (MITI).

Areas Of Partial Consensus

There is a partial consensus--on partial reforms. On the need for an acceleration of the disinvestment process and greater private-sector participation in the infrastructure sector, the views of the Congress-I and the BJP coalesce.Of course, the Left Front continues to strike a discordant note. Its manifesto clearly states that "the Left parties will fight for ending of disinvestment in profitable public sector units, and will review (the New) Power and Telecom Policies." Naturally, this will continue to hobble the ability of a United Front government to pursue such reforms.

While a Congress-I or a BJP government would, at least, have the advantage of a clearly-defined agenda, their progress may still be limited. For instance, the Congress-I's programme for public enterprise reforms stops short of the dread P-word: Privatisation. Investing the Disinvestment Commission with statutory powers, and implementing its hitherto-ignored recommendations are laudable goals, but a comprehensive programme of public sector reform will have to go beyond equity dilution. Likewise, while the BJP promises to confine these reforms to "sensitive and residual" areas, the contrary position of some of its political allies--notably, the Samata Party--will constrain a bold privatisation programme.

Infrastructure reforms will be plagued not so much by limitations in scope as by limitations in the government's jurisdiction over such changes. Most manifestos--with the exception of the Left Front's--endorse a greater mix of public-private initiatives in this area. However, the implementation of these policies will hinge on both central and state government initiatives. At least in this key area of the reforms, the regional political parties should have articulated their policies. Unfortunately, they are silent. Without a framework, infrastructure reforms in our country are bound to be uneven, dictated more by personality than by policy.

Areas Of Confusion

There is little consensus--and lots of confusion--on globalisation. In the run-up to the nation's 12th general elections, this debate has generated more noise--and more garbled signals--than any other issue. But this cacophony is unlikely to derail the trade and foreign investment reforms already implemented simply because the policy-makers have hardly any room for manoeuvre.

Take the threats to review India's WTO Agreements. That is credible only if re-negotiation, or exit, are exercisable options. Fortunately, they are not. Unless India manages to get the support of the other developing nations, renegotiation is unlikely. Exit would force us to work out bilateral agreements with all our trading partners, which will result in huge transaction costs.

Meanwhile, time is running out. The Patents Amendment Bill, 1995, which was drafted to conform with the global agreement on Trade Related Intellectual Property Rights (TRIPS), has lapsed. And appeals by India to extend the deadline for amending patent laws have been rejected by the WTO's Appellate Body. The continuation of an elaborate regime of quantitative restrictions also has little legal justification. In such a situation, endless reviews will only provoke punitive measures from other countries.

Restrictions on investment inflows would also be at odds with the freer investment regime that the negotiations on Trade Related Investment Measures (TRIMS) seek to build. That, however, has not deterred the political parties from whipping up the anti-foreign investment sentiment. The Samata Party, for example, warns that "transnationals and large corporations operating in the food processing industry will be phased out." However, a capital-scarce economy can ill-afford a stop-go approach on this front.

Moreover, the din obscures implementation issues, chief amongst which are problems of definition. What constitutes a core area? Is it the type of industry? Or the backward linkages and employment it generates? Faced with these problems of differentiation, the UF Government, virtually, abandoned its Common Minimum Programme commitment to discourage foreign direct investment in "non-core" areas.

In areas where substantial liberalisation has already taken place, the opportunity costs of a reversal in policy would be high--and visible. Thus, the market will have a larger role in setting the pace of the reforms than the next government will. That is in stark contrast to areas like insurance, where reforms have been scarce, and the opportunity costs remain hidden.

In fact, insurance is one sector where the lack of a political consensus has had the most dilatory impact. It was in 1994 that then-Union Finance Minister, Manmohan Singh, promised to break the public sector monopoly in insurance, and allow pension funds to invest in classified debt instruments. The first step was supposed to be the formation of a regulatory authority through an act of Parliament. But the fear of a backlash kept Singh from tabling the IRA Bill in Parliament. Three years later, his successor, P. Chidambaram's, brave attempt to get the IRA Bill passed failed due to a lack of political support.

Despite four years of intense debate, a consensus on opening up the insurance sector remains elusive. While the manifesto of the Congress-I promises to "allow joint ventures in insurance with majority equity held with Indian companies," the BJP and the Samata Party want it to be opened up only to the Indian private sector. The Left Front, however, rules out any change in the status quo. States its manifesto: "The insurance sector should not be privatised, and foreign companies should be barred entry into this sector."

Areas Of Least Commitment

There is a consensus of silence--on the most difficult reforms. These manifestos make little mention of either fiscal reforms or an Exit Policy. And that is not surprising. They would require tough choices on the part of the policy-makers--choices they will assiduously strive to avoid. Tragically, the price for such populism is high. Not only will omission stymie these reforms, it will also jeopardise other policy objectives.

For instance, employment-generation is a paramount goal. Yet, by precluding exit and limiting industrial flexibility, India's archaic labour laws have, actually, limited employment growth in the country. Worse, these laws cover only a small proportion of our workforce. If the 18 million-odd government employees are excluded, 9 out of 10 workers in the economy are not protected by the labour laws. So, while it is no doubt a politically-popular gambit, the opposition to retrenchment effectively protects a pampered minority at the expense of the majority.

Promises to increase public expenditure on the physical and social infrastructure also make good political sense. They will make sound economic sense only if accompanied by a unwavering--and explicit--commitment to fiscal containment. But such commitment is conspicuous by its absence in most manifestos.

Even a regional party like the Rashtriya Janata Dal--which could be a critical component of a future coalition--does not mind fiscal profligacy. Its manifesto proclaims that the party "rejects the current theory of fiscal discipline which suggests that the State should withdraw and release funds and resources for the private sector." Clearly, such non-commitment portends proliferation of handouts.

Granted, any pre-election policy statement will be long on ambition and assurances, and short on implementation and intricacies. But India's political parties also appear to be short of ideas on where the reforms should go. Thus, the gyrations of coalition politics alone will dictate the momentum of the reforms into the new millennium.

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