Turn into something else

Having led BJP for 15 years, the PM feels it needs a face-lift to be a majority party.

When the prime minister decided to make development the main issue for election 2004, he tried to lend a new face to the BJP. Having led the BJP through the last 15 years, he obviously feels that the BJP needs a face-lift to become a majority party on its own to remain in power. The face of the BJP that won electoral success in the recent past represented cultural chauvinism of Hindutva and social divisiveness. But now that the BJP wants to have a lasting majority for itself, the PM has realised that it has to take on an agenda which goes beyond narrow identity politics and allows it to emerge as a party committed to the development of the whole nation.

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Of course, he’s aware that this is the space of the Congress, by virtue of not only its past as a champion of national independence but also by bringing about development for the whole country growing at about 6 per cent a year, at least for 15 years of its rule before the BJP came to power. He still chose to take on that space, because only if the country accepts his party as a truly national party does he have a chance to lead his party to power.

The PM’s choice of the timing of the election was also quite astute. He was aware that the BJP’s performance in the last seven years of its rule could not sustain its image as a promoter of development. In practically every field — industry, agriculture, employment, social development, fiscal performance, rural development and poverty eradication — the record of the BJP government was consistently worse than the performance of the Congress in the previous 15 years and especially during 1992-1997.

So, he chose a time when, entirely fortuitously, the Indian economy was doing very well. From mid-2003 our economic growth has picked up mainly because of an excellent monsoon, pushing up the growth of agriculture. This was despite the fact that in the previous six years, the agriculture performance was very poor, with little expansion in irrigation facilities and productivity, and an almost zero increase in investment in the use of credit by the farmers. The growth of agriculture was hardly 2 per cent during 1997-2002 and negative in 2002-03 compared to 4.62 per cent in 1992-1997 and more than 4.5 per cent a year in the decade during 1980-90.

The growth in agriculture this year had a major effect on the economy, raising demand for industrial products and that of services. The industrial growth in the last six years was just about half of 1992-97 and also of 1985-91.

There was hardly any new investment in industry in these six years. A demand-push from increased agricultural income used up the idle capacity and raised industrial growth and services. It appeared that the economy is doing suddenly very well. This has been supported by a large capital inflow from abroad, as there is an unprecedented boom of capital flows to almost all developing countries and because Indian interest rate remains significantly higher than abroad. The result was a stock market boom.

Added to this was a substantial increase in the profits of the corporate sectors with a lower cost of working capital and higher utilisation of excess capacity. All these made the business sectors appear as ‘shining’. Obviously, the government felt that if a hype can be built on the performance of the last six months, people will forget about its failures in the previous six years.

Nevertheless, the PM’s decision to make development the key issue should be welcomed by all Indians who hoped that this election will now focus on governance and performance from the point of view of development — and not on narrow, sectarian, chauvinist issues extending to personal attacks in the election. But for the BJP it is very difficult to adjust to this facelift. Their track record on development is dismal and focusing on development today would mean focusing on reforms and liberalisation. For all its years — and especially when these reforms were introduced — the BJP opposed deregulation, especially of domestic trade, that affected its trading lobby, and opposed liberalisation of foreign trade and investment. Fiscal discipline, which would mean controlling expenditure and reducing subsidy, would directly affect the BJP support base. In the name of helping the poor, they actually benefit the middle- class trader and rich farmers.

During the last six years of the BJP rule, it is its party stalwarts who forced their finance minister to flip-flop on policies, their disinvestment minister not to do much disinvestment till recently, their labour minister to oppose labour reforms flouting cabinet decisions. Their minister in charge of public enterprises refused to give them any autonomy. Their petroleum minister delayed the discipline of price decontrol as long as possible. They just did not have the culture of reforms.

Upholding the logic of reforms would need them to completely re-invent themselves. The PM probably wants them to do so. But when the going gets difficult — and as their hype on India shining dissipates with the Congress getting its act together and attacking them consistently on their record with only a tiny fraction feeling good — the development image will wear out.

For the Congress taking on the development posture, saying that they are better reformers and they had performed far better earlier need not make them reinvent themselves. They only have to talk of adjusting their reforms programmes to suit the changing situations. For the BJP that reinventing would be like changing the whole basis of their existence. It would be much easier and tempting to bring in the personal issues and the divisive platforms of Hindutva on which they had thrived earlier.

There lies the major source of danger to our economy and our nation in the near future. For development to be sustained today the rate of investment must increase sharply. A 7 per cent growth would require more than 28 per cent investment, as against the current rate of hardly 24 per cent. Since the fiscal situation will not permit much rise in public investment, we have to depend on private investment. If we can’t reduce government dissaving — as the BJP’s record of fiscal management has shown — it will just not be possible to achieve that rate by domestic investors. We have to invite foreign investors to come in as much as possible even if the Swadeshi Jagran Manch does not like it.

Any investors doing business in India and hoping to get their returns over the next five-ten years, will need an assurance of policy stability and social stability, the risk factors that alter the expectations of return on investment. The BJP’s record of policy stability, with all its flip-flop and internal contradictions, has been miserable. More important is the threat of social instability that will result from any resort to its old divisive agenda.

Indian society is too diverse and fractious with a huge minority and other ethnic groups, and with hostile neighbours only too eager to foment destruction. A look at the record of foreign investors in countries with internal troubles such as Sri Lanka will convince any one of the danger of divisive politics.

The prime minister should be welcomed for projecting the agenda of development. Consistent with the expectations created, he should declare that from now on his party will totally reject any Hindutva and divisive agenda and take action against their instigators. Too much is at stake. If investors withdraw from India, with a capital flight, with a kind of openness, we can plunge into a very deep crisis.