Not a mandate for neoliberalism

Published : Jun 05, 2009 00:00 IST

WHILE the celebrations in the victorious United Progressive Alliance camp are understandable, the reading of the verdict in terms of economic policy imperatives is far from obvious. It is indeed tempting to read it as a sign of popular approval for the economic policies of the UPA regime. In some circles, the reading goes further: The verdict, especially the reduction in the number of MPs from the Left, should be seized upon as the moment for accelerating neoliberal reforms. The corporate sector and its spokespersons in the media have already sounded the bugle. Not a moment, it seems, should be wasted. This is both a serious misreading of the electoral verdict and a recipe for economic disaster.

In the wake of the collapse of some global financial majors in September 2008, which announced the onset of a global crisis of finance capital, government spokespersons were on their feet to claim that India was unlikely to be impacted by the crisis seriously since the financial sector in India was "decoupled" from global finance, and that it had a strong public sector in banking and insurance. While the claim was overstated, and the crisis has hit the Indian economy in many ways, it is true that the incomplete integration of the Indian financial sector mitigated the severity of the impact of the global crisis on the Indian economy.

But it was the steadfast opposition of the Left parties to financial liberalisation, inside and outside Parliament, that limited the extent of financial integration into the global financial system. The panic response of the Government of India in the form of further liberalisation measures in order to stem the outflow of foreign finance capital in the wake of the global crisis deserves to be reviewed and pulled back, and not accelerated as some reactions to the new situation are suggesting.

The electoral verdict itself is a sum of several distinct outcomes and tendencies in different parts of the country and reflects several factors such as the desire for stability, the abhorrence of communalism and hate-politics, the degree of unity or disunity among the forces ranged against the ruling dispensations in each State, a host of local factors and, of course, economic issues. An important factor that helped the UPA do well across the country was the National Rural Employment Guarantee Scheme (NREGS), which provided crucial employment and wage earnings to a section of the rural poor, notwithstanding the weaknesses in its implementation.

The legislation underlying the NREGS and the legislation to protect the rights of tribal people and other forest-dwellers were the products of persistent efforts put in by the Left parties and a number of civil society organisations. These and some of the pro-people measures of the UPA government's National Common Minimum Programme must have been crucial in garnering votes for it in Election 2009.

It is important to keep this in mind while designing the economic agenda of the new government and not be carried away by a reading of the verdict that sees the weakening of Left presence in Parliament as the green signal for the pursuit of unbridled financial and other liberalisation measures. Caution needs to be exercised in respect of legislation seeking to enhance the ceiling on foreign direct investment in the insurance sector, the proposals to entrust pension funds management to private players and the attitude to regulating the participatory notes mechanism in the stock markets.

Several trillion dollars of pension funds have disappeared in the recent global financial tsunami, putting at risk the livelihood security of senior citizens in the advanced capitalist countries. The state of India's food and nutrition security is also most fragile, with a significant proportion of the population unable to access minimum calorific requirements.

Indicators of malnutrition, such as the percentage of women with chronic energy deficiency or children underweight for age, have shown only modest improvement over two decades of rapid growth of the gross domestic product. The major challenges of ensuring universal education and health and food and nutrition security as well as of insulating the Indian economy to some extent from global economic volatility require a nuanced economic policy that takes note of the principles of inclusiveness and economic self-reliance, and not a headlong plunge into the discredited paradigm of neoliberal economic policy.

In the context of the severity of the current downturn in the economy and the continuing agrarian crisis, the need for substantial fiscal stimulus by the government remains paramount for economic revival. Arguments against such a fiscal stimulus that invoke the Fiscal Responsibility and Budget Management Act (FRBMA) or a theoretically unsound obsession with the level of the fiscal deficit need to be rejected and a stimulus that focusses on agricultural revival and employment generation should be a policy priority. There is a need to expand investments in health and education and restore the universal public distribution system. The government should show the political will to mobilise the resources for this purpose.

Venkatesh Athreya
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