In a brazen display of authoritarianism, the politically illegitimate Manmohan Singh government has announced, over two days, a set of controversial measures, varying from a hike in diesel and LPG prices to liberalisation of rules governing foreign investment in the retail trade and in civil aviation and broadcasting. It has also announced its intention to launch a massive drive to disinvest equity in lucrative public sector corporations.
The simultaneous announcement of this combination of policies flouts all democratic norms and is indicative of the capture of the state by a small coterie. It has been clear for some time now that there is little agreement across the political spectrum and within the UPA on the impact and advisability of such reforms. Hence, thus far the argument has been that measures such as these cannot be adopted till some consensus is achieved, if at all. Now in a cynical play of words a section of the government, according to its Commerce Minister, has decided that there is indeed “consensus” on these policies even if no “unanimity”.
The policies are ostensibly aimed at realising two objectives. The first is to reduce the fiscal deficit and release some funds for expenditures in support of private capital by heaping burdens on the working people and the poor, by cutting subsidies and engineering inflation. The second is to offer big capital new avenues for profiteering (as in the retail trade) or ways of recouping losses resulting from irrational behaviour (as in civil aviation), by allowing acquisition of assets in sensitive sectors by global players. This way of incentivising foreign and domestic investment through policies that redistribute income in favour of big capital and erode national sovereignty and policy space would, it is argued, trigger private investor interest and investment in a sluggish economy. However, the real intention seems to be to appease foreign financial and corporate interests. This was clear from the statement of the Deputy Chairman of the Planning Commission that this neoliberal thrust is needed to improve the ratings India receives from foreign rating agencies.
What needs to be noted is that while these measures may set off a temporary speculative boom and deliver profits to capital, especially foreign finance capital, they would not do much to spur growth or stall the effects of the intensifying global crisis on India and would definitely worsen the position of the millions who still suffer from the worst forms of deprivation. The policies on diesel and LPG prices and other measures relating to subsidies would also stoke the already high levels of inflation in the country. The UPA government seems hell bent on engineering stagflation.
Since this is suicidal for the Congress that leads the UPA as well, the behaviour of the government, to say the least is bizarre and inexplicable. The only explanation is that it has been captured a coterie that permits profiteering through legal and illegal means and concentrates on appeasing foreign finance and favouring big capital, domestic and foreign.