Kautilya: Still Going Strong

India Today
September 21, 1998

KAUTILYA
Still Going Strong

Pachmarhi reinforced Manmohanomics.

Jairam Ramesh

For 24 consecutive weeks, Kautilya has tried to be impersonal and avoided being partisan. This week, its self-discipline has been broken so it can debunk the false notion that following Pachmarhi the Congress has abandoned its commitment to liberalisation and disavowed the legacy of Manmohan Singh. He is very much the guru but the Congress is rightly searching for a larger political and social strategy within which reforms and liberalisation can be embedded.

Pachmarhi started with the most forceful articulation yet of the Congress' view of economic reforms by its president. Sonia Gandhi said the essence of economic reforms was the redefinition of the role of government at all levels to make it a more effective instrument of economic change and social transformation. While exhorting the Congress to constantly reinterpret its economic philosophy in the light of changing circumstances, she made two significant (to the Congress mindset) observations.

One, poverty can be abolished only through higher economic growth and more effective management of anti-poverty programmes.

Two, we cannot spend our way to prosperity. The pattern of public expenditure must undergo a fundamental reorientation at both the Centre and in states so as to enable us to invest more in poverty alleviation and social development programmes.

This speech, not the resolution, is the authoritative statement of Congress policy. Following Sonia's speech, a group of 20-25 Congress leaders got down to discussing economic issues. There was all-round agreement on a number of points.

Reforms had become essential in 1991. They had strengthened the Indian economy. Liberalisation had accelerated growth, exports and investments. Further liberalisation was required but this must be sequenced carefully.

The Congress lost the elections in 1996 not because of economic reforms but because of political mismanagement.

The Centre's expenditure on rural development and social sectors increased from 19 per cent of total Plan expenditure in 1990-91 to 31 per cent in 1995-96. Even so, the perception gained ground that liberalisation was anti-poor.

There were serious differences of opinion on a few issues. Some participants rejected the idea of an across-the-board privatisation of the public sector. Some said all loss-making public-sector units should be privatised. But there were some who felt that without the government reducing its equity to below 50 per cent, the public sector, including banks, could not be made autonomous and profitable. Some called for this bold approach selectively.

The majority view was that both fertiliser and food subsidies must not be tampered with. It was but natural that Kerala Congressmen expressed opposition to the restructuring of food subsidies -- with 3 per cent of India's poor, Kerala draws 10 per cent of the food subsidy, while Uttar Pradesh with 18 per cent of the poor draws 8 per cent of the subsidy. It is the vociferous airing of these differences and some aggressive posturing by a couple of Congressmen wanting to assert their relevance that gave journalists the mirch masala to report that the Congress is anti-reforms.

India's vibrant agricultural economy, vast manufacturing base and extensive scientific and technological infrastructure are undoubted strengths that give us the capability to engage the world in a self-confident manner. Pachmarhi justifiably felt proud of what had been accomplished in the pre-1991 era. But these days it is not fashionable to recall our achievements of the Nehru-Indira period. The media misinterpreted this recall as a defeat for the reformers.

The Congress is not exactly bursting with liberalisers. No political party is. But Kautilya's estimate is that no more than seven out of the 275 who attended the Pachmarhi conclave had fundamental objections to the very idea of liberalisation. The Congress chief ministers were gung-ho on liberalisation, demonstrating that reforms have stronger proponents outside Delhi in all political parties.

Kautilya also suspects that the use of the word "socialism" dealt a body blow to the Congress's pro-reform image. But liberalisation and socialism are not mutually exclusive. The Chinese call their model a socialist market economy. At Pachmarhi, socialism was defined in terms of a commitment to egalitarianism, full equality of opportunity, greater redistributive justice in an expanding economy and increased access of the poor to the basics of education, health and nutrition. Defined this way, Kautilya believes the only true socialist society in the world is the United States.

Pachmarhi should have taken place in 1991 or in 1992 itself. The packaging of reforms, the articulation of the linkages between liberalisation and social needs and an honest discussion of concerns and fears would have served the cause of reforms greatly. Sustained public education and communication in a simple idiom have been lacking. Most politicians are extraordinarily illiterate on economics, finance, trade and technology. The media too has done great damage by its simplistic either/or approach.

It is possible to believe in purposeful state intervention and planning and champion faster liberalisation, as Kautilya does. But these nuances are lost in today's binary world. Despite the confusion it seems to have caused in the outside world, the Congress is more reassured about reforms after Pachmarhi -- signal left, turn right and veer to the Centre.

The author is secretary of the AICC's Economic Affairs Department. The views expressed here are his own.

Issue Contents | Write to us | Subscriptions | Syndication