People say we are a free country --- a democratic nation with a liberal economy. But then why do we fail to ensure that our economy gets a free run? The country saw a full-fledged political war unfolding after the Manmohan Singh government took two vital decisions this week in hiking diesel prices and clearing foreign direct investment (FDI) in multi-brand retail, aviation and broadcast sectors. The Union Finance Minister, P Chidambaram, has even proposed setting up a National Investment Board for speedy clearance of mega proposals.
Both allies and opposition to the Congress slammed the twin moves, saying they would trample the ordinary people. Although some economists differed on the issue, the market forces welcomed the moves, saying it saved India from being junked by the credit rating agencies. It would have worsened the balance of payments, the rupee and stock markets.
Globalised economy is here to stay and we can't ignore it
Whatever be the pros and cons of the move, there is no denying the fact that neo-liberal economy is here to stay. Parties, which resort to blatant populism for their survival, construct it as a big threat and accordingly cash in, saying the FDI will ruin the indigenous industries and people and that they are opposed to it. What philanthrophy are they speaking about when even simple national projects meant for popular welfare are put to the mercy of 'looters' who belong to one or the other among these parties?The opposition to the liberalist regime will not be able to sustain any pressure for it has no deep understanding and alternative idea to project before the people. Whether its Mamata Banerjee, the Left Front, the Samajwadi Party or the BJP, none of them have any viable alternative to present apart from putting up a pseudo-concern for the ordinary people. I strongly believe that the BJP will not do anything dissimilar if it comes to power in the Centre again. The UP Chief Minister, Akhilesh Yadav, had said in July that his party was not against FDI in retail.
Policy change will cause an impact but that need to be absorbedIt won't be smooth, that is for sure. Like any policy change, the initial years may leave a jerking impact on the country's market forces. But that does not mean that we will continue to keep ourselves aloof from the benefits of a globalised economy and hope to survive on subsidies for ages to follow. According to economist Swaminathan Aiyar, a big advantage of the FDI is that it brings in knowledge and marketing links that lead to the growth of an unprecedented comparative advantage. He gave the example of the automobile industry. The economist said FDI was a liability in that sector one day but today, it has transformed the land of Ambassador and Fiat into a global auto-hub.
The industry today employs several thousands of workers who otherwise would have struggled ina closed economy. Not only that. Today, when we see serious labour crisis hitting a auto-manufacturer's plant in Haryana, there is a feeling that we have grown mature in terms of market-labour interactions in a globalised economy compared to what it was in the 1980s. FDI, hence, has some positives and it is not a destructive force as political forces with 'over-simplistic' understandings often claim.
Today's world is characterised by intensive interaction. If we choose to keep ourselves detached from the external forces, we will be doomed. No protectionism can ever shield the poor class about whom the populist parties are sympathising. In the name of protectionism and subsidy, we are actually allowing fiscal deficit which according to some economists, leads to inflation, and in a way harm the poorer sections.
Our welfare concept is nothing but a political stunt
Subsidy economy has only bred corruption
Why don't the protesting parties shout on corruption in social development schemes like the NREGA and instead happily appease minorities and promote reservation in key sectors like job and education? The idea of a subsidised economy has only bred corruption instead of actually doing any good to the people. Why don't we open markets and allow global forces to determine the economic well-being of the people? Unless we take the first step and test new waters, there is no possibility of us learning about the drawbacks of the new system and gradually try reforms to overcome them.
Will poor suffer?
There is a vegetable vendor who sells his product everyday near my home in Kolkata. One day, I saw him selling broccoli and asked him where did he find broccoli because till then I never saw him selling the vegetable.
He replied in an elated tone: "I have bought it from Cash & Carry (a wholesale retailer in Kolkata which was opposed by Left parties for a long time) and now earning a profit." It meant that the poor vendor saw some benefits from the retailer which he could not have otherwise. The profit-making middle-class will be rendered ineffective if the retailers indeed enter this country and engage in direct dealings.
A convenient opposition
Leaders like Mamata Banerjee and all those who are opposing the reforms perhaps are not aware about what had happened in 1991. The country found its foreign reserves exhausted and had to mortgage its gold reserves. There was an imminent crisis and the Narasimha Rao-Manmohan Singh duo had to take the decision for disallowing it would have been suicidal for the nation. Twenty-one years later, when the country is again facing an economic problem if not a crisis, those who reaped all benefits of the previous liberalisation, are shamelessly obstructing a fresh drive for reforms. If the reforms then enabled the Hindu rate of growth improve significantly, then why is there so much fuss about them today?
Why don't we build on our rich base?
The legacy of great Jawaharlal Nehru was found in a political democracy, strong institutions like judiciary and bureaucracy, quality high education, but it was only the state-centred economy which failed to take off. In the 1990s, when the liberalisation was effected, the positive legacy of the Nehruvian era had gone a long way to elevate India's status in the globalised economy. We have the resources and a sensible liberalisation effected by Rao helped us reap benefits. The IT industry has put us in an international league and so will other sectors, if the policy of liberalisation is pursued with proper guidance. But today, it is the short-sighted politics which is undoing the economic prospects of the country and its people.