P. Chidambaram: ‘Now, cronyism is a bitter fact’

Interview with P. Chidambaram, Member of Parliament, Rajya Sabha.

P. Chidambaram

There is a recognition , even within the Congress which introduced the economic reforms in 1991, that growing inequality is a grave challenge and a lot more should have been done. But the party wishes to draw a distinction between its vision and that of the NDA. Excerpts from an email interview to Frontline by former Finance Minister and veteran Congress leader P. Chidambaram.

As part of the party that heralded economic reforms in the early 1990s, how do you assess the situation three decades later?

The last three decades have seen many ups and downs, many impressive reforms and some bad decisions, and a golden period of growth (2004-2010) and a period of a depressing decline (2018-2021). I am therefore left with mixed feelings. Now, I am worried that we have taken our eye off the ball (rapid economic growth). The present government’s focus is on polarising the electorate and dividing the people. The people, on their part, are not demanding economic reforms and holding the government accountable. No country where large sections of the people live in fear, besides poverty and ignorance, can grow at a brisk rate.

The last 30 years have seen a great increase in income and wealth inequality. Was this outcome of the reforms inevitable or could things have been done differently?

When an economy that was closed for four decades is opened up, inevitably, there will be early winners and some losers. Inequality will increase. But such trends can be, and ought to be, arrested. We failed to do that. We tried to address inequalities through expanded welfare measures: MGNREGA [Mahatma Gandhi National Rural Employment Guarantee Act], right to education, food security and so on. Those were right measures, but not enough. We should have also addressed issues like unequal access to health care, unequal school education systems, low tax-to-GDP ratio, unsatisfactory proportion of direct taxes to indirect taxes, absence of inheritance tax, a soft wealth tax, emerging monopolies, ineffective laws on competition and so on. Growing inequalities is a grave challenge.

You have been part of non-Bharatiya Janata Party (BJP) governments, both in the United Progressive Alliance (UPA) and the United Front (U.F.). Is there a difference in approach to reforms between such governments and the BJP-led NDA governments or is there a fundamental unity in approach?

There is a fundamental difference between non-BJP governments and the BJP governments. In the former, the Congress had a major presence (UPA) or a major influence (U.F.). Now, the Congress is systematically excluded and all that it stood for is being deliberately erased. The approach to economic reforms of the Congress and its allies was “inclusive”, whereas the BJP and its allies have adopted a sinister and subtle form of “exclusion”. There is definitely no unity of approach and there never will be, given the political philosophy of the BJP.

The term crony capitalism has been associated with economic reforms, and this was acknowledged by Manmohan Singh when he was Prime Minister. How do you see the situation today?

Under the Congress and UPA governments, cronyism was a lurking danger. Now, under the BJP, cronyism is a bitter fact, a depressing reality. The most recent manifestation of cronyism is how the manufacture and supply of vaccines have been managed to protect a duopoly. Despite the initial hype, the Sputnik vaccine has only a nominal presence in the country. The entire process of Emergency Use Approval (EUA) and Final Approval has been orchestrated in such a manner that even after 10 months of the invention and the use of many vaccines, only two vaccines are used in India’s vaccination programme.

The COVID crisis has led to the realisation the world over that the withdrawal of the state may have been excessive. At least temporarily, many governments have discarded the logic that is behind India’s Fiscal Responsibility and Budget Management (FRBM) Act. Do you think a rethink is necessary in India?

India does not have the luxury of the United States or the developed European countries. They are not only developed, they are rich and can attract capital. They can afford to relax the fiscal discipline and quickly re-impose the discipline. We need, and we must adhere to, the FRBM Act always. The exceptions must be rare, few and far between. The dire situation in which the Indian economy was placed in 2020-21 was one such exceptional situation: a lethal combination of sliding economic growth over eight quarters (man-made) and a pandemic (beyond our control). In such an exceptional situation, we should have kept aside the FRBM Act and expanded government expenditure. The government should have spent, and even now, should spend money. If necessary, the government should borrow and spend.

What is the implication of the undermining of India’s secular democracy for the future of the reform process and the economy? Is there a mutual relationship between the two?

There is a close, almost symbiotic, relationship between a secular democracy and an open, reform-driven economy. History teaches us that only open societies have made rapid economic progress and eliminated poverty. This lesson is more relevant in a populous and plural country like India. If large sections of the people are kept out or discriminated against or left behind, the nation cannot achieve high economic growth. Because of discrimination, oppression and exclusion, millions of people belonging to the Scheduled Castes, Scheduled Tribes, Most Backward Classes, religious minorities and linguistic minorities are performing and producing below their potential. The below-potential contribution to output depresses the GDP, if that is taken as a measure of economic progress.Secularism does not concern religion alone. A secular approach means keeping out every kind of prejudice, hate, discrimination and majoritarianism. Unless India is a secular democracy and behaves like one, India cannot aspire to economic greatness.