After the Congress lost the election in 1996, and during the 13-day rule of the BJP, there was a revealing incident in the financial markets of the Wes. There was an announcement that the new finance minister of India was someone called Jaswant Singh. Reporting the news, the reporter assured listeners that Jaswant Singh was a brother of Manmohan Singh! All were reassured that whatever the colour of the government in India, a Singh was in charge of the economy.
The world admires India as the largest democracy, but its real focus is on the economy. This is totally unlike what the country?s many political leaders focus on. They have talked of everything except India?s economic future. Partisan complaints about the rate of inflation?sadly for the Opposition, quite low at present?or a fake discussion on money hidden away in Swiss bank accounts or the ritual Left belly-aching about liberal economic reform is all we have had.
In the West, however, in the US, UK and Germany?the three places where I have had discussions with friends and even strangers?the questions asked are always the same: will India continue on its liberal path, will it continue to be a global competitor and will it catch up with China? No one is worried that India would cease to be a democracy. They are worried that an incoming government could wreck the economy. As far as the world is concerned, as long as a Singh is in charge, the Indian economy is safe. So, will a Singh be in charge again, they ask me.
One way I defend Indian democracy is to point out that since 1991, despite changes of government in 1996, 1998 and 2004, the economic reform has never been reversed. If not a Singh, a Chidambaram was in charge between 1996 and 1998. Then a Sinha at first and then a Singh steered the BJP/NDA economic policy successfully. Chidambaram returned in 2004 and the results have been good. India?s economic policy has been consensual rather than partisan. The only difference United Front governments of the 1996-98 period did was to slow down the pace of opening up industries to foreign participation.
This time around, the only likely combination which could renege on the reform is a Third Front government in which the Left is dominant. The CPM has come to regret its participation in the UPA even from a distance. Its visceral anti-Americanism has strengthened its anti-liberalism. The current meltdown has reassured it of the rightness of its beliefs. If it was to lead a government along with populist-clientelist parties like the SP, RJD, BSP, et al, assuming a majority, it may just try to batten down the hatches.
I do not expect this outcome, and if it does, the government would not last more than 18 months at most. The maximum likelihood is of the tried and trusted Dr Singh being back in saddle. If the Congress wins enough seats not to need the Left support from inside or outside, then a real possibility exists of a decisive acceleration of the reform process. Many people expected the UPA to move swiftly on the reform agenda after the trust vote last year, but they did not factor in the risk-averseness of the Congress president. Nothing was to be done until victory was achieved in the elections.
But if we grant for the moment that the Congress is back in power with a new assortment of allies but without the Left, then there will be a genuine opportunity for rapid economic growth. I would expect or at least strongly urge the government to make labour market reform a top priority. India needs to take a lot of surplus low-productivity labour off the farms and employ them in large industrial factories where they can have year-round employment and good wages. This can be the most effective and most inclusive anti-poverty strategy. The Singur tragedy also shows that land legislation is also long overdue. India needs to rethink a 19th century land alienation Act and the doctrine of eminent domain needs to be scrapped. Buying and selling of land should be a consensual act between buyers and sellers. The state tilts the balance against the poor farmer who sells his land willy-nilly. It is undemocratic and has politicised land sales, as Nandigram and Singur showed.
The urgent need then is to liberate the farmer from his/her ties to land either by moving him/her to a job elsewhere or by giving him/her a good price so that s/he can choose to go where s/he wishes to. This will get the manufacturing growth rate up to 15-20 % and GDP growth to low double-digits. It will accelerate the reduction of poverty like no other strategy can do. It is about time it happened.
?The author is a prominent economist and Labour peer