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 Ever since the Congress decided that it would have nothing to do with Mulayam Singh Yadav's Samajadi party in the Lok Sabha, and therefore made itself wholly dependent upon the support of the communists to stay in power, realists in Mumbai and Delhi have been waiting for the day when the two would clash over economic policy. But even the pessimists among them had not imagined that the clash would come so soon, would be so fierce, and would take place over such trivial issues.
The confrontation has come when the Manmohan Singh government is only seven weeks old. Although the Left has thrown in two extra issues, it has come basically over the raising of the cap on foreign direct investment in the insurance sector. If Sitaram Yechury's naked threats to the government on a TV talk show are to be taken as a serious reflection of the Left's policy, then it is prepared to scuttle this government and take the risk of a fresh general election and the return of an NDA government, rather than back down. This is a complete volte-face from its earlier stand that it will never allow this government to fall, because its first priority is to keep the BJP from returning to power.
How seriously should the Congress take the threat of the Left? And should it respond by accommodating its demands, or by calling its bluff? The temptation to do the former must be formidable. The Left has said that raising FDI in the insurance sector was not in the Common Minimum Programme, so it will not support the government in the vote on the budget if it does not withdraw this proposal. Should it even abstain, there is a real possibility that the government will not be able to pass the budget. And since the budget is a money bill, that will be forced to resign.
Yet despite that the Congress would do well to call the Left's bluff. For this clash is not really over ideology - witness the West Bengal government's frantic efforts to attract foreign direct investment and its readiness to close down its own loss-making public enterprises. This is a battle for control. It will determine whether the country will be ruled for the next five years, or for however many years this rickety ensemble is able to stay in power, by the duly sworn in United Progressive Alliance, or be driven from the back seat by a party that did not have the courage to assume the responsibility of office, and does not have the intelligence to understand how the globalisation of capitalism has changed the world and made its age old nostrums irrelevant.
 The element of bluster in Yechury's remarks gave away the nature of the Left's gambit. "The government had better withdraw the increase in FDI cap" he told the TV anchor person, or else…"when we bite, we bite hard". "We will not do anything to bring down this government, but the government … (should not do anything) to bring itself down". And finally, " We have submitted a number of proposals to the government for its consideration. Its response will determine whether we will stop barking and start biting". Yechury was no doubt provoked by doubts about whether the left's bark was not worse than its bite. But no matter what brought it on, he has thrown down the gauntlet to the Congress in the plainest of terms and has, at least as of now, not been disowned by his party.
The Left's strategy is therefore very clear. It regards the hurried withdrawal of all privatisation proposals by the prime minister within hours of being nominated to the post by his party, and the emphasis in the common minimum programme on redistribution rather than growth, not as the Congress' response to widespread unease over privatisation, growing unemployment and rural distress, but as a sign of its weakness and pliability when put under pressure.
It's belief in the weakness of the government has been reinforced by the prominence finance minister P Chidambaram gave in his budget speech to ameliorating social distress, and his decidedly low key references to enforcing fiscal discipline and increasing public sector investment. It believes that the budget provides the final opportunity to bring the Congress to heel. Were the Congress to accede to even some of its demands, and in particular, should it withdraw the increase in the FDI cap in insurance, all of India will know that it is not the UPA but the Left that is ruling the country.
If the Congress values the promises it has made to the people of India; if power is a means to an end for Dr Manmohan Singh and Mrs Sonia Gandhi, and not the end itself, then it has no option but to reject not just some, but all of the demands that the Left has made. It must do this even if that means the fall of this government, for it is better to go back to the people and ask for a clean mandate to carry out its programme of reform than to become a slave to a party that does not, even now, understand how globalisation has turned the old Left, to echo the political philosopher Anthony Giddens, into the most reactionary force in the world.
Had the Left raised its demands in private, as the NDA allies used to do with Mr Vajpayee or George Fernandes, an accommodation might well have been possible for in itself, the level of the FDI cap is of little immediate relevance to the future of the country or its young people. But since it has chosen to do so in public, via threats brandished through the media, the issue that the Congress now faces is no longer economic but political. It is not just the survival of this government the survival of the party itself.  Yechury's outburst has already undermined the strategy that Dr Manmohan Singh and Mr Chidambaram had unveiled in the budget for increasing public investment, raising the rate of growth and restarting the growth of employment in the country. This was to re-instil confidence in the private sector, start share prices rising once again, revive the flagging spirits of the private sector and restore the growth of investment that had begun at he end of last year.
If the rate of industrial growth climbed from last year' 6.9 per cent to 8 or 8.5 per cent, the 24 per cent tax revenue increase predicted in the budget would be easily realised. A reasonable monsoon and moderate inflation would have kept the government's consumption expenditure in check and enabled Chidambaram to bring down the revenue deficit by one percent. This would have freed a similar amount for augmenting public sector investment. That increase, reserved for the next budget, would have given the private sector the fillip it needed to take industrial growth up still further next year. The resulting increase in revenues and decline in the revenue deficit would have freed still more resources for investment and pushed the rate of GDP growth up above seven percent. Only then would employment growth have resumed in a big way.
This strategy will fail completely if the Congress buckles under the threats of the Left. The country will then experience neither growth nor equity, for unemployment will continue to rise and the money needed for the employment guarantee, food for work, education, school feeding, health and insurance schemes with which the Congress hopes to give development a more human face, will never materialise. In a year to 18 months at most it will be apparent to the entire country that the UPA alliance is no more capable of governing the country than the United Front was. After that its days will be numbered . The next election will see a huge swing to the NDA, with or without Narendra Modi. * The author, a noted analyst and commentator, is a former editor of the Hindustan Times, The Economic Times and The Financial Express, and a former information adviser to the prime minister of India. He is the author of several books including, The Perilous Road to the Market: The Political Economy of Reform in Russia, India and China, and Kashmir 1947: The Origins of a Dispute, and a regular columnist with several leading publications. |
