There is a strange commonality in ideas between the Right (BJP) and the Left (the Communists). The opposition to the nuclear agreement with the USA is another instance of this strange unanimity. The NDA government initiated the policy of closeness to the USA. They had demonstrated India’s resilience to sanctions imposed by the USA after they exploded the nuclear bomb. The BJP learnt very quickly that both for revenue and efficiency reasons they had to get private shareholding into public enterprises.
The Left opposes policies on the basis of ideology, based on unflinching hostility to the USA, support to China and blind support to Arab and Islamic countries even against the interests of India. The BJP in opposition opposes for the sake of political expediency, not conviction or ideology. This commonness of thought between the BJP and the CPM has been in many areas. Almost in unison, both initially opposed efforts that would have improved efficiency in government, tax collections, etc.
Both CPM and BJP had opposed opening up of the economy to competition through easier imports of foreign goods (‘yes to computer chips, not potato chips’); reducing the hold of some small-scale units, who were a minority (less than 2 per cent) that has benefited immensely from measures like cheap credit, reservations of product areas exclusively for small scale, price preferences and other benefits; an expanding role for foreign investment even in peripheral sectors like consumer products and retail trade; closing down of perennially loss making and inefficient companies owned by government; opening up to the private sector the production of “strategic” products for defence use now manufactured by inefficient government owned departmental enterprises that supply low quality products at high prices; or raising tariffs for electricity in order to improve the viability of electricity suppliers over the country.
The NDA, dominated by the BJP, reversed its positions on some issues and liberalised the economy more than the Congress, before them or now when supported by the Communists. The BJP became cozy with the Americans, initiated the policies of collaborating with Israel and distancing from the Arabs and Iran. Out of office, they have joined the CPM in opposition to closeness to the USA.
Other instances of this consensus are the inability to change procedures and processes, leading for example, to inordinate delays in project approvals and implementation in a variety of sectors. The solutions, cut the revenue deficit, distance government from active participation in production, privatise the public sector, reduce procedural red tape, and over time eliminate open and hidden subsidies, cut the size of government, and so on.
The NDA paid lip service to these ideas as did the Congress and both have been unable to push them through in consistently and cohesively. The Communists of course have always preferred to protect the interests of inefficient public sector enterprises against the growth of the economy.
Since 1991 many things have happened: the BJP initiated privatisation of public enterprises and supported it for electricity distribution in Delhi; began the moves that are replacing the leaky and inefficient sales tax system with value added taxation, though Octroi has not been eliminated; raising income tax slabs, and computerising tax collections. These have raised tax revenues significantly for both Central and state governments and we are able to undertake massive development expenditures.
However, there is no system yet in place to plug the wastages and corruption or improve government delivery especially of health, education and rural employment guarantees. There has been little progress on privatisation, even in obvious sectors lie electricity distribution. There have been no significant cuts of subsidies in fertilisers, food, water or electricity. Downsizing government and linking pay to performance of government servants has not happened. Our political class finds innovation difficult especially on economic policies.
As with the “silent majority” in the USA that Nixon tried to appeal to, there is a “silent middle” in India. My five tier pyramid of Indian markets consisting of the destitutes, the climbers, the aspirants, the consuming classes and the rich, is still valid. More than 60 per cent of Indian households are made of the three classes in the middle. Their interest is in jobs, good education for their children, easily accessible health services, and the opportunity to live more comfortable lives. They are not looking for immediate transformation in their lives, but are satisfied if it appears that policies are moving in that direction. This “silent middle” is more concerned about inflation, good education and job prospects, affordable and good health care, easy commuting to work, the intrusion of corruption into their daily lives, and the problems caused by excessive government. They need to be educated on why less government expenditures, privatisation, downsizing government and subsidy cuts are required. They must understand why closeness to the USA and its allies can get us investment, technology, markets, and greater security. This “silent middle” will not get excited about the nuclear agreement. It will, if it thinks the Communists are disloyal and the BJP are hypocrites.