A POLITICAL STORM ACROSS INDIA

Geopolitical notes from India

M D Nalapat

Friday, June 03, 2011 – Although Prime Minister Manmohan Singh has a personal commitment towards a peaceful resolution of outstanding issues with Pakistan, he is no Indira Gandhi and hence may not be able to fulfil his vision. The first – and thus far only – woman PM of India had a substantial political base, one that she demonstrated in both 1969 as well as 1978. Both those times, she split the Congress Party, and while in 1969,more than 40% of the party remained with her rivals rather than cross over to her side, in 1978 about 80% of the party cadre joined her in preference to those she was opposed to. Since that time, the Congress Party has been synonymous with the Nehru family, and neither its cadres nor its leaders would even dream of looking beyond The Family for the top leadership were Manmohan Singh to ever split the party in the way that Indira Gandhi did, it is doubtful if even 1% of the cadre would come over to his side. The rest would remain loyal to the Nehru family, now represented by Sonia Gandhi, who has established her control over the Congress Party and the Union Government efficiently and smoothly. Of course, Prime Minister Singh is himself loyal to the Congress President, and hence the question of his walking away does not arise. The problem that he faces is that this lack of a political base makes it difficult for him to implement the policies that he favours.

From 2004 onwards, economic reform has slowed to a crawl, and can even be said to have been reversed by the many new restrictions that have been introduced by dirigiste ministers eager to strengthen their (lucrative) roster of discretionary powers. Had economic reform of the type favoured by Manmohan Singh been pursued by the United Progressive Alliance (UPA), the country’s rate of growth would have been closer to 15% than the 9% presently achieved. Much of the demand in the economy has come because of money held abroad by Indian nationals, that is returning to the country because of the fear that foreign financial institutions may collapse. These funds are helping to keep the stock market from collapsing, and are ensuring a steady rise in property prices India is one of the few countries where regulators were unable to distinguish between short-term and long-term funds. The same treatment is given to both investments in the stock and money market (that can be withdrawn any time) and money invested in plant and machinery, that is tied to the enterprise.

The result of such a serious lacuna in a policy introduced when Manmohan Singh was Finance Minister of India is that foreign interests have been enabled to gobble up Indian enterprises very cheaply, with very little tax burden despite the fact that the value of assets has risen exponentially over the years. Indeed, policy in India has been tweaked since the 1990s to favour foreign enterprises over their Indian competitors, including in the key sector of defence, where much of the “indigenous” production is actually source from abroad. India has a pathetically low level of self-sufficiency in defence items, despite spending an average of $15 billion annually in procurement. Indeed, those local enterprises that seek to enter into high-technology spheres get brushed aside by officials and their political masters, who look upon foreign companies as a reliable source of money that can be placed in Swiss and other offshore banking institutions.

Although Manmohan Singh is personally honest, he has been unable to check widespread graft in several key ministries, including those that came within his direct purview, such as Coal. Just as foreign suppliers talk of a “Gulf Price” that takes account of the extra cash that needs to be paid in order to win contracts in the GCC, they now talk of an “India Price” that is much higher than the international average, because of the need to pay bribes that sometimes amount to 20% of the value of the contract. Thus, petro-products sold to India are more expensive than the same products sold to much richer countries in Europe, while the same can be said for several Defence items, as also machinery and services. Every transaction has a hidden cost, thereby pushing up prices in India. Ignoring the fact that the main cause of inflation in India is corruption, the ReserveBank of India continually raises interest rates, thereby pushing prices up still more. Of course, such a policy favours foreign interests, which is the intention.

After two generations silently bearing the heavy burden of graft on themselves, the people of India seem to have had enough. While the Finance Ministry points out that direct tax rates in India “are lower than for Sweden or Germany”, what they omit to mention is that in both countries, the taxpayer receives a raft of services from the state, ranging from liveable pensions to excellent housing, education and healthcare. In India, by contrast, the government gives back nothing but ramshackle infrastructure, public hospitals that are killing fields, educational units designed to turn intelligent minds into morons, and zero social security. As for law and order, it is best not to mention this subject in a country where the police are so demotivated and ill-paid that 70% of them turn to corruption and even worse criminal activities.

The sole purpose of government in India is what it has been during the British Raj, which is the collection of money for the benefit of the rulers. Trendy resorts across the world are dotted with the sons and daughters of VVIPs from India, who in their income-tax returns claim an income that is too low even to purchase an air ticket. These days, with tracking methods embedded in mobile telephones and the like, it would be a simple matter to keep track of such VVIP pre-resignations, but obviously, the anti-corruption agencies avoid looking into the misdeeds of the powerful.

And for good reason. For many of them get staffed – and even headed – by people who have paid hard cash for the privilege. Recently, a key officer with ample funds at his disposal saw that his boss needed to retire early if he were to get the top spot. So he “persuaded” the boss to send in his papers early, and walked into his job. Of course, after having taken care of sundry decision-makers. Departments of government have phone records of the conversations that precede key appointments, but these remain hidden from public knowledge, in order to protect the guilty. Only rarely do such conversations become public, and that too only when key officials themselves leak the information.

The miasma of corruption that fills the corridors of power in India has become so pervasive that the public has become restive. Tomorrow, a yoga guru, Baba Ramdev, is beginning a “fast unto death” in Delhi demanding the death penalty for the corrupt. Should he have his way, most of the Manmohan Singh Council of Ministers would disappear. The support that Baba Ramdev is getting in his crusade may lead to tremors that may affect the government. Despite the many scandals that are getting exposed each month, the UPA government still appears stable. The credit for that belongs to the BJP, which is led by a troika comprising of L K Advani, Arun Jaitley and Sushma Swaraj. All three prefer the Congress Party to the regional parties, and are therefore not willing to declare that the BJP would support a Third Front government from outside. Should they change their mind – or get changed themselves by a restive cadre – the chances of the government falling would be high.

Today, the BSP, the DMK, the Left parties, the BLD and the JDU are opposed to the Congress Party, but lack of an alternative keeps them from bringing forward a No Confidence motion. Should these parties get BJP support, they would carry the motion with ease. Some within the Opposition are calling for precisely that. They seek a “Third Front” government that would pursue corruption charges against the Congress Party. Fortunately for Sonia Gandhi, the BJP leadership seems uninterested in going after the Congress leadership. They believe that the Congress Party is the lesser evil and one that they had good relations with even during the six years when the BJP was in power. Then Prime Minister Atal Behari Vajpayee saw Sonia Gandhi as a second daughter, and ensured that her interests were protected. Today, the favour is being returned. Enquiries into the decisions made during the BJP period have been put under the carpet. However, the growing public anger against corruption may yet derail this tacit marriage of convenience between the BJP and the Congress, and create problems for the government.

—The writer is Vice-Chair, Manipal Advanced Research Group, UNESCO Peace Chair & Professor of Geopolitics, Manipal University, Haryana State, India.

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