The organising principle of socialist politics rests on funding entitlement for the poor with extraction from the rich and deriving power to keep them apart and in awe. This week, July 20 to be precise, marked the 50th anniversary of the nationalisation of banks. Expectedly, the narrative was riveted with reasoned critique and criticism with rhetorical flourish. For many it was a calendar opportunity to upbraid Indira Gandhi and another occasion to blame history.
Context and circumstance are critical in assessment of policy. The chapter Das Kapital, in my book Accidental India, narrates the coming together of a political and economic crisis that triggered the move—beginning with the monopolising of credit by owners to poor aggregation of savings, which afflicted funding of the green revolution and industry. On the political plane, Indira Gandhi leveraged an economic necessity into a political virtue.
India’s big blunder was in persisting with state ownership even after liberalisation. When the government issued licences to private players, it could have arguably offered management of some of the banks with limited government shareholding to be diluted along the way. It did not come to be—neither under the Congress nor under the BJP. Public sector banks retained holy cow status.
The eternal expectation of change was awakened when the BJP came to power under Narendra Modi in 2014—the urban chatterati and non-resident non-voting classes saw in him the avatar of Ronald Reagan and Margaret Thatcher. Fact is political entrepreneurship—like any business—is governed by the law of returns.
Embedded in the criticism of bank nationalisation is a dying hope of loosening the grip of the socialistic pattern of politics. Right-wing commentators pinned their hopes on the BJP to do the needful. After all, the BJP’s progenitor, the Bharatiya Jana Sangh, had promised to reverse the nationalisation of banks.
The approach of the Jana Sangh reflected the confounding contradictions Indian conservatism has been riddled with. The 1971 manifesto promised to denationalise banks but also promised to nationalise foreign banks. It promised to abolish licence raj and also limits on concentration of economic power.
History shows the evolution of the BJP’s approach to economic policies has been rooted in socialistic conservatism and paternalism. The party opposed India’s entry into GATT and WTO and opening up of FDI—eloquently illustrated by the microchips vs potato chips debate. Jana Sangh leaders had raged against the inclusion of the word ‘socialist’ in the preamble of the Constitution of India, yet the party’s 1980 constitution chose “Gandhian socialism” as its economic ideology.The BJP first came to power in a state in March 1990, with Bhairon Singh Shekhawat as chief minister in Rajasthan. Since then it has completed three terms in many states. But divesting ownership of state enterprises is off the agenda.
At the Centre, the privatisation of state enterprises during the Vajpayee era is an aberration which validates the norm. The government is the largest business house and owns 339 enterprises in 2019. Leave alone the disinvestment of Air India or 23 other enterprises. In 2018, the ownership of private carrier Jet Airways is parked on the balance sheet of public sector banks. The debate is not just about government ownership but about political management.
Socialistic conservatism is also about taxation—an 18 per cent GST on small service providers flies in the face of the rhetoric on creating job providers, as does tax on start-up investors. There is also the bane of corralling of resources to fund the political agenda. India’s subsidy bill has shot up from Rs 25,692 crore in 2000 to Rs 30,1694 crore in 2019. Outlays for MGNREGS have risen from Rs 12,000 crore in 2007 to Rs 60,000 crore in 2019. The need for welfare for levelling asymmetries is indisputable, but this must be accompanied by measures for growth and expenditure control. During NDA I, BJP ministers ensured the burial of the most comprehensive expenditure management exercise.
In 2014, the Modi government promised expenditure management, and in 2019 the debate is about extracting resources from the RBI’s contingency reserves. The Securities and Exchange Board of India is estimated to have reserves of about Rs 3,800 crore. The finance Bill seeks transfer of 75 per cent of SEBI’s general reserves of Rs 3,800 crore to the consolidated fund of India. The government also wants 15 per cent of the unspent CSR funds with companies.
Public policy is essentially about the role of the government—where it needs to participate, when it needs to step back and be an umpire and when it must simply be a cheerleader—and this is a debate missing from public discourse.Ralph Waldo Emerson said that people only see what they are prepared to see. In popular perception, the BJP was seen as the home of right of centre economics. And the centre continues shifting to the left.
Shankkkar Aiya is author of Aadhaar: A Biometric History of India’s 12 Digit Revolution, and Accidental India