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Rediff.com  » Business » From licence raj to reform raj

From licence raj to reform raj

By Kanika Datta
July 25, 2008 10:47 IST
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It is telling that even as media commentators roundly condemned the behaviour of Messrs Argal, Kulaste and Bhagora, India Inc and stock-market investors discounted Tuesday's histrionics in Parliament.

For businessmen, political corruption, even when transparently on display in the most public of people's forums, is a long-acknowledged worst practice.

On the face of it, there seems to be a growing dissonance between the political theatre that is Indian democracy and the concerns of businessmen and industrialists. A closer look, however, suggests that there is actually a growing convergence of interests, though not of the means of realising them.

It is evident in the fact that, after Tuesday's trust vote, businessmen expressed heartfelt relief that the United Progressive Alliance had won the trust vote and jettisoned the Left so that economic reforms would be back on track.

This point is noteworthy. After all, there is nothing about the multi-party UPA (minus the Left) that is notably different from the rainbow National Democratic Alliance that preceded it in terms of commitment to economic reform. So it is clear that businessmen were applauding the promise of a few more months of stability and a nudge for more liberalisation.

This in itself reflects a minuscule but critical change in the broad nature of the political discourse. Bar a shrinking element of the Left (and perhaps Sonia Gandhi), there is an agreement on the benefits of economic liberalisation across the political spectrum.

To be sure, little of this consensus is based on a sophisticated understanding of the economics of globalisation. But the demonstrable impact on Indian prosperity from 17 years of incomplete and halting reforms has fostered a vague understanding that, somehow, industrialisation and investment, whether Indian or foreign, mean more jobs for the boys, more development and, therefore, more votes.

So whether it is BJP chief ministers B C Khanduri in Uttarakhand, P K Dhumal in Himachal Pradesh and Narendra Modi in Gujarat or the Leftist Buddhadeb Bhattacharjee in West Bengal or the mildly Leftist Nitish Kumar of Janata Dal (United) in Bihar, attracting investment has become a competitive priority.

This is also true, businessmen in Uttar Pradesh attest, of Mayawati, who has now emerged as the matriarch of the United National Progressive Alliance, in which Chandrababu Naidu, the original Mr Liberalisation of Andhra Pradesh, is a key member.

The emergence of economic reform as a widespread political agenda and a source of competitive politics is certainly a good thing. The problem is that the broad understanding of the concept has not been accompanied by a deeper insight of how it really works. That is why the old political instincts of rentiering and venality remain strong even as politicians vie for their reform legacies.

So, where yesterday's industrialists lobbied and bribed just to do business and keep competitors at bay, today's businesses are being importuned for the right to an enabling environment in which to grow and create wealth. In short, the licence raj has been replaced by the reform raj.

This is obvious in those industries in which the government still has a say - telecom, insurance, fuels, broadcasting - and in which industry is prey to the reforming proclivities or otherwise of the minister concerned. But it is also a factor in a range of basic services for which businesses depend on the state - water, power, roads and so on.

It may be argued that there is little harm if politicians compete for reforms. After all, even in one-party China, local officials vie for the ability to display their investment-attracting and job-creating talents to the central leadership, a competition that has created one of the fastest social transformations in world history.

In fact, though businessmen might disagree, this is one of the less admirable points about China's achievement since it shackles industry to the state and precludes enduring reform. A true enabling environment would require politicians to play a smaller but constructive role in business and a bigger role in welfare. That's the hard part and not always visible to the voters.

All in all, it is possible to question how far patronage-driven reform can take India. The tyranny of the markets forces corporate activity to be neutral in terms of caste, community and gender.

There is, therefore, a basic dissonance with the current configuration of India's politics in which power is largely derived from caste and communal affiliations. That is why, despite all the euphoria about the India story, doing business in the country will remain a challenge.

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Kanika Datta
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