NEO-LIBERALISM SPURNED

Print edition : June 18, 2004

In a stunning verdict, the people of Andhra Pradesh convincingly reject their Chief Executive Officer N. Chandrababu Naidu and the neo-liberal development model he assiduously promoted in his nine years as Chief Minister. The electoral experience of other Chief Ministers who have embarked on a similar economic programme is no different. Here, an assessment of the performance of five Chief Ministers and the people's response, starting with Andhra Pradesh.

in Hyderabad

THE stunning defeat of the government led by the shining icon of economic liberalisation in India, N. Chandrababu Naidu, is perhaps the single most important result of the recent elections. Heading the Telugu Desam Party (TDP) government in Andhra Pradesh for nine years, Chandrababu Naidu changed the nature of politics and turned the very notion of economic development on its head. His public appearances, invariably through video teleconferences, endeared himself to the media as an IT-savvy, modern-minded chief executive officer (CEO) of Andhra Pradesh Inc. But living up to an image always is risky.

Former Chief Minister N. Chandrababu Naidu.-P. V. SIVAKUMAR

The mind-numbing regularity with which news of suicides by farmers in the State has flowed in in the last few weeks best illustrates all that is wrong with a system that has marginalised the poor while heaping favours on the privileged. Chandrababu Naidu rocked every social institution and engineered a social cleavage that demarcated the winners from the losers. In fact, it is not surprising that the elections were thus highly contentious. Both winners and losers were desperate to win this time - the winners to protect what they had gained and the losers hoping to gain something after having lost everything.

Nothing captures this gulf in society better than the contrast between the glitz in a small part of Hyderabad and the wave of farmer suicides that has swept the countryside in recent weeks. To reduce the electoral verdict to a "rural-urban divide" would, of course, be a grave injustice to the will of the electorate. For instance, in the Khairatabad Assembly constituency in the heart of Hyderabad, which has more glitz than any other place in the State, TDP Minister and former director of the Central Bureau of Investigation (CBI) K. Vijaya Rama Rao lost by a margin of more than 32,000 votes. The HiTec City, Cyberabad, the Indian School of Business, the Indian Institute of Information Technology and Banjara Hills, where Hyderabad's elite reside, all fall under this constituency. How could things have gone so badly wrong for Chandrababu Naidu here? Ashhar Farhan, an engineer who has an IT start-up in the city, points out that Khairatabad may appear glitzy, but there are also working class slums in the constituency. He said: "The underclass voted with their feet against the TDP because they had nothing to gain from Chandrababu Naidu's notion of development."

The roots of the popular anger against the TDP can be traced back to Chandrababu Naidu's deviation from the path charted by the TDP founder and popular film icon N.T. Rama Rao (NTR). It is significant that Chandrababu Naidu's path coincided with the vision that the World Bank had for the State. D. Narasimha Reddy, Dean, School of Social Sciences, University of Hyderabad, pointed out that Chandrababu Naidu was the "first politician in India who did not talk in terms of the weaker sections and the poor, even during times of elections". Political democracy was instead a matter of managing society. Although he assumed office in 1995, his real break with the legacy of NTR occurred the following year when he effected sharp increases in user charges for a range of public services such as drinking water and public transport. The popular base of the TDP under NTR was strengthened by his prohibition policy and the decision to supply rice at Rs.2 a kg. This expanded the TDP's appeal among the other backward classes (OBCs) and provided a political platform for the growing economic clout of the rich peasantry that rose as a result of the Green Revolution in coastal Andhra Pradesh. Narasimha Reddy pointed out that under the leadership of NTR the State budget allocated more funds for education and health, reflecting a distinctly welfare state orientation.

B.V. Raghavalu, secretary of the Andhra Pradesh unit of the Communist Party of India (Marxist), said that the increase in user charges effected in 1996 paved the way for the Chandrababu Naidu government's subsequent association with the World Bank. In 1997, the World Bank initiated a massive loan programme for the State, which required a comprehensive alteration of almost every conceivable aspect of its economy. The Andhra Pradesh State Electricity Board, one of the profitable and efficient state-owned electricity grids in the country, was to be dismantled. State-run industrial units were to be privatised or closed down. In the field of agriculture, the State agreed to dismantle subsidies and stop the supply of free power to farmers.

Chandrababu Naidu was forced to slow down the pace of reforms by the uncertainties of coalition politics on the national stage and the Assembly elections in 1999. However, after he won the elections in 2000 he announced a massive hike in power rates, which triggered protests across the State. It also led to closer cooperation among the Opposition parties. As a result of the economic policies, the State suffered a massive problem of industrial sickness. According to C. Ramachandriah, reader at the Centre for Economic and Social Studies in Hyderabad, about one lakh small-scale industrial units have closed down in the State in the past five years, leaving about 15 lakh people jobless. Raghavalu said that as many as 55 public enterprises were handed over to private industrialists "at throw-away prices". Many others have been closed down, downsized or disinvested. To oversee this restructuring programme, the Chandrababu Naidu government established an Implementation Secretariat, which is advised by consultants of the Adam Smith Institute, a United Kingdom-based think tank that advises governments across the world how to go about dismantling state-owned enterprises.

Even as people were being thrown out of jobs in the industrial sector, the misery in the agricultural sector worsened. Narasimha Reddy said that the past five years witnessed a serious agrarian crisis. He pointed out that the crisis had a long history, going back more than two decades. While investment in agriculture has fallen, both at the national and State levels, the cost of production in the sector has risen, despite the subsidies. Product prices have fluctuated wildly in this period and marketing has become a serious problem for the peasantry. Moreover, the growing dependence on ground water resources added to the uncertainty. This has resulted in small and marginal farmers having to make risky investments. The phenomenon of farmer suicides in the last five years is unprecedented. Narasimha Reddy said: "Although these issues needed the attention of the government, these were precisely the issues Chandrababu Naidu was least bothered about." Instead, he issued a White Paper on agriculture, which considered issues related to small and marginal farmers as being part of "an old paradigm". The "new" thinking, according to him, was to make agriculture work for global markets, through contract and corporate farming. "There was a benign neglect of agriculture, despite the talk of investing in irrigation," said Narasimha Reddy.

Chandrababu Naidu tried to make up for the slide in the real economy by concentrating on visibility rather than substance. Narasimha Reddy, who has observed the former Chief Minister as a Ph.D student (he did not complete his thesis) at S.V. University in Tirupati in the mid-1970s, said that "he always focussed on imagery and visibility". In this the financial press proved a willing ally, especially because he caught its imagination and spoke its language. Thus, while the media ignored the widespread phenomenon of suicides by farmers and weavers, it focussed on the former Chief Minister's managerial style. Narasimha Reddy points out: "There is not a single meaningful programme to come to the rescue of people working in the handloom and powerloom sectors." The State apex cooperative has worsened the plight of the weavers by delaying their payments. Weavers have borrowed money at interest rates as high as 36 per cent and have been unable to clear their debts. He said: "There are many schemes but there is no effective mechanism to provide relief to the weavers. Instead, the master weavers who control the business, particularly the supply of subsidised yarn, have an effective hold on the fortune of the hapless weaver."

The Janmabhoomi programme, introduced by the Chandrababu Naidu government, was marred by allegations of misuse of funds meant for local bodies. Under the programme, funds were distributed through the State bureaucracy (nodal officers) instead of elected representatives. A lot of publicity at considerable expenditure accompanied the Janmabhoomi programme. Referring to the new government's decision to abolish Janmabhoomi, Narasimha Reddy said: "People outside the State may have a feeling that the new government has destroyed what Chandrababu Naidu has built. But people outside Andhra Pradesh are not aware of how, in the name of Janmabhoomi, the basic features of democratic decentralisation have been destroyed by Chandrababu Naidu." Narasimha Reddy also alleged that the only beneficiaries of the government programmes were vested interests. Most of the schemes were aimed at distribution - distribution of seeds, food for work and so on. The only other kind of work undertaken was building of roads. "Everybody knows that there is money to be made by vested interests in such schemes. A road to a village means there is a cut for someone," said Narasimha Reddy. There were also widespread allegations that foodgrain meant for the food-for-work programme was diverted to TDP functionaries. In the last two years, Chandrababu Naidu used his leverage with the Central government to get a substantial portion of the rice distributed by the Centre for Andhra Pradesh. But there were allegations that only a small portion of it reached the poor. Raghavalu said that ordinary people started feeling that while they were suffering, a section was making money at their expense. "Chandrababu Naidu was cut off from the people. His grand gestures, through teleconferences, were nothing but a gimmick," he said.

Although the TDP government introduced a number of schemes for every conceivable section of society - farmers, women, tribal people, weavers, artisans and even the minorities - these did not have much effect on their lives. In fact, there is evidence to show that the World Bank was willing to accommodate the requirements of its client who was going into election mode. The World Bank, on the eve of recent elections, extended Rs.900 crores to the government. However, it is evident that the massive "leakage" of funds, in favour of local elites - both urban and rural - increased popular ire against the TDP.

Raghavalu argues that the TDP's core social base, among those who have benefited from its policies, remains more or less intact. He said that the rich and middle peasants and the rural rich "vehemently" supported the TDP in the elections. After all, the TDP-BJP alliance got 39 per cent of the votes polled in the Assembly elections. The Congress, the Left parties and the Telangana Rashtra Samithi (TRS) together polled 8 per cent more votes than the TDP-BJP alliance. The margin was 12 per cent in Telangana, 7 per cent in coastal Andhra Pradesh and only 2 per cent in Rayalaseema. Raghavalu said that the richer sections of the peasantry support the TDP because they have benefited in many ways (from the World Bank funds, for instance). He pointed out that the government spent about Rs.1,000 crores for digging canals. Almost all the contracts were given to the water users associations, in which the rural rich enjoy clout. About Rs.1,200 crores was spent in Janmabhoomi works and the main beneficiaries were the contractors. Raghavalu said that the TDP had developed a network of the rural elite, consisting of ration depot owners, rural and urban contractors, chairpersons of the education committees and water users associations and Development of Women and Children in Rural Areas (DWCRA) groups. He said: "This organisational network worked for the TDP and they, in turn, benefited from the contracts issued by the State. In fact, it is this machinery that prevented the complete erosion of the TDP in rural Andhra Pradesh. The TDP is unique in the sense that it is the first political party that has tied its destiny to the implementation of the World Bank's agenda while building its own organisation in the process. The beneficiaries from this were the elite, the World Bank and the TDP. This mechanism worked as a bulwark for the TDP, cushioning the impact of this electoral defeat."

The Congress campaign, focussed as it was on the widespread distress in the countryside, engaged the attention of the peasantry. Chief Minister Y.S. Rajasekhara Reddy, while undertaking his 1,500-km long padayatra in the summer of 2003, talked about their problems. His popularity also enabled him to establish himself as the undisputed leader of the party in the State, which is marred by infighting. His major promise to the peasantry was free power and waiver of electricity dues, which he promptly adhered to soon after taking oath as Chief Minister on May 14. During the campaign, Rajasekhara Reddy promised free power, elimination of liquor chains known as "belt" shops in the rural areas, inquiry into corruption scandals, help to peasants to prevent suicides, enhancement of family, old-age and widow pensions, 180 days of agricultural employment, completion of irrigation projects in a time-bound manner (24 projects, costing Rs.42,000 crores, within five years), the establishment of a pay revision commission for employees, dearness allowance revision for pensioners, loans for DWCRA groups and peasants at lower interest rates ("four annas", three per cent a year) and the protection of the minorities.

Narasimha Reddy pointed out that when the Congress raised the issue of waiver of electricity dues and free power it caught the imagination of the people. However, Chandrababu Naidu and other critics have said that this is not feasible. Narasimha Reddy said: "I think the whole issue has been reduced and placed in a World Bank kind of framework. The point is that the rural sector is in deep crisis and needs some transfer of funds as relief. Farmers argue that when NTR made power supply free, it enabled a poor peasant to save Rs.3,000 a year, which enabled him to avoid debt. Now, the situation is that the peasant has to borrow to make this payment. He now is burdened by a debt of Rs.6,000, which he is unable to clear. It is very obvious that even in the richest countries of the world, the farming community cannot survive without state support. My argument is that we need to transfer Rs.3,000 to Rs.5,000 to provide relief to distressed farmers; we can call it what we want but this transfer is absolutely essential to the life of the peasant. It is also possible to do this."

Although he has "grave apprehensions about the Congress government's ability to solve the problems of the State", he believes that it has "started off with a very big advantage" - a "genuine identification of the problems of the people".

Prof. G. Hargopal of the University of Hyderabad argues that the peasantry is not asking for free power, it is only asking for power at reasonable rate. He points out that the peasant's main problem is access to resources. Private moneylenders are extremely oppressive. He pointed out that the peasant's demand for power is different from what people in urban areas may imagine. "He needs power mainly to draw water. The question really boils down to whether the state can do something to give the farmer water at an affordable rate. Water is in short supply. Production is risky. And, on top of all this, the farmer has no idea what he will get for his produce."

Raghavalu believes that the promises made by the Congress can be implemented if it has the political will. However, he said: "But, given its track record, we cannot hope that it will do so. Half of the promises made by it do not require major financial allocations. For instance, land distribution to the landless. According to one estimate, there are about 60 lakh acres of vacant land, for which pattas can be issued. There are 30 lakh applications pending for house sites. Most of this can be given by the government without incurring any financial liability." He believes that once the government establishes its commitment it can tackle the other issues of a long-term nature. As the supply of free power and waiver of power dues will cost the government Rs.450 crores and Rs.1,100 crores respectively, it may have to explore other avenues to make up this loss. Raghavalu argues that the supply of free power should be discriminatory; they should be focussed on small and marginal farmers. Otherwise, there is a danger of the entire scheme collapsing because of big farmers acting as free riders on a scheme meant for the small peasantry. Raghavalu observes that four lakh applications from farmers awaiting pumpset connections are pending before the government. If and when all these are connected to the grid, the bill will be substantially more than the Rs.450 crores that the State is going to incur annually.

Post-poll pundits in the media have added their own spin to the electoral verdict, commiserating with Chandrababu Naidu. In particular, they argued that the TDP was defeated by the "anti-incumbency factor", despite its government's contribution to the "development" of Andhra Pradesh. But Chandrababu Naidu's critics argue that the "anti-incumbency" argument conceals the widespread anger against neoliberal policies. Raghavalu says: "Anti-incumbency is a shallow argument and is only a euphemism to camouflage the real reasons for the rejection of the Chandrababu Naidu government. People from all major sections voted against the TDP and the BJP. The reforms had a universal impact, and the verdict has also been universal."

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