What’s reform, Mr PM?
When his foreign direct investment (FDI) bouquet to Walmart had put the government at risk, the Prime Minister Manmohan Singh addressed the nation on September 21 and defended the ‘reforms’. His commerce minister Anand Sharma had been going to town over the ‘reform’ in FDI in multi-brand retail. The pink media celebrated a Deepavali over ‘reforms’. A week later, on September 28, Union finance minister P Chidambaram spoke of the need for such ‘reforms’. A couple of days later, the PM asserted that ‘reforms’ were not one-off process, hinting at more ‘reforms’. The pink media roared. A day later, the Congress rose in support of ‘reforms’. Forthwith came announcement that the PM, Sonia Gandhi and Rahul Gandhi would address a rally to support ‘reforms’, and now come the ‘big ticket reform’ proposals of rise in the FDI cap on insurance from 24 per cent to 49 per cent and to put a new companies Bill before Parliament. The game plan is clear: to keep the shrill cry of ‘reforms’, ‘reforms’ and ‘reforms’ rising to drown the 2G, coalgate and other noises. However, is the hike in price of diesel ‘reform’? Or cutting back cooking gas? Or bringing in Walmart?
Take the United Progressive Alliance story of oil price ‘reforms’. After the PM had told that “no government can spend its way to prosperity”, Sonia Gandhi opposed a hike in the price of oil and advised that kerosene and LPG should not be touched (Outlook June 26, 2006). The PM succumbed. Petroleum minister Murli Deora said: “Sonia Gandhi has clearly told that poor man’s kerosene, diesel, cooking gas prices should in no case go up” despite Rs 73,500 crore under recovery (Financial Express October 28, 2006). The government obeyed. Sonia told the government ‘to cut oil prices petrol by Rs 2 and diesel by Rs 1’ (Hindu Business Line November 29, 2006) and the government obliged. “Global crude prices have doubled in a year, but “the government has not raised the domestic fuel prices on a direction from Sonia Gandhi” Murli Deora gloated in the Lok Sabha (Economic Times November 22, 2007). ‘Sonia Gandhi told a rally in Rae Bareilly that fuel prices would be reduced; the next day, the Centre cut petrol prices by Rs 5, diesel by Rs 2, and cooking gas by Rs 25 per cylinder’ (Times of India January 29, 2009). So if Sonia allows fuel price rise, it is ‘reform’. If she stops it, or cuts the price, it is for ‘aam aadmi’, not anti-reform. Could anything be more ridiculous, Mr Prime Minister?
Till now the reformers have not revealed their secret understanding of what ‘reform’ means. For fear of being dubbed by ‘reformers’ as being against reform, no one asks them what ‘reform’ means. Etymologically ‘reform’ originated in reformation movements for less church control in Christianity. In the 15th century, reform meant ‘to bring a person, institution or government away from evil course of life’ – ‘Reformed churches’ (1580s), ‘Reformed Judaism’ (1843). ‘Reform School’ (1859) (see http://www.etymonline.com). Economic reform postulated less state control. In a perceptive article titled ‘What Do We Mean by “Economic Reform?”’ (See: http://www.wallstreetpit.com) Scott Sumner, economist, wrote on September 27, 2010: ‘economic reform implicitly meant more government between 1875 and 1975, and has implicitly meant less government since. That’s how we can tell whether or not we are still in the neoliberal era.’ From after 1975, economic reform meant neo-economic liberalism — which is measured by how much economic space the government vacates for private business. But Sumner adds: ‘When the recent financial crisis first hit I was worried that it would push us toward statism, just as in the 1930s. And indeed that seems to have occurred in the US.’ So, more government in finance and economics means ‘reform’ in US today; but the US wants less government in business and finance everywhere else. So, today ‘reform’ has one meaning in the US, another in India! ‘Reform’ also means righting wrongs by deformers of the economy in the past. In India, the very deformers of the national economy for four decades quickly branded themselves as ‘reformers’ in 1991! The result is that the original deformers of yesterday masquerade as ‘reformers’ today.
To understand what ‘reform’ means, recall the early 1990s, when P V Narasimha Rao, as prime minister, was skilfully U-turning the Nehruvian socialist India that had put most economic space in government hands. See the sea of changes he brought about, without much ado. He repealed the draconian industrial licensing law that destroyed Indian entrepreneurship and the monopoly law which put a cap on the size of Indian corporates; abolished capital issue controls and brought in regulatory SEBI; instituted the National Stock Exchange and digital trading in stocks; brought about rationalisation of import tariff, excise duties and income tax; raised the FDI limits for foreign joint venture partners to 51 per cent. This integrated package reducing the government’s role in command economy illustrated economic ‘reform’.
Therefore the economic space that a government cedes to private business measures the depth of economic reforms. If the government vacates more space, it is ‘reform’; the other way round it is deform. Now test September 14 ‘reforms’ against what ‘reforms’ really are. As Sonia has allowed fuel rate rise, it is ‘reform’. If she had not, she has stood for the aam aadmi. Again, the present rise in the price of oil and cooking only prevents further deficit, that is, further deform. It is no ‘reform’ of the past wrongs. The real ‘reform’ in the oil sector is deregulation, which the Congress is terrified of.
Take FDI in multi-brand retail touted as a huge ‘reform’. It robs the trading space of Indian communities — the kutchis, nadars, chettiars, rowthers, marwaris, banias, and hundreds like them — and hands it over to multi-national corporates, the Walmarts! It is ridiculous to call this robbing Nadars and paying Walmart ‘reform’, unless ‘reform’ means replacing communities by corporates. Or doing the bidding of the US. Hillary to Obama have been openly touting for Walmart. Yet, the PM denied on September 30 that it has been done under pressure from the United States.
On June 28, some loyal Congressmen organised a meet at the Andhra Bhavan in Delhi on the 91st anniversary of Narasimha Rao, the ‘Father of Indian Economic Reforms’, as Voice of America had rightly paid homage to him. The prime minister, invited as the chief guest for the event, bunked the meeting. That measures his loyalty to the Gandhi family and his gratefulness to Rao who made him an Indian and global icon.