Consensus that never was

By C. Rammanohar Reddy

There never has been a consensus on liberalisation - if by consensus is meant a broad-based democratic support and not an agreement among those who make policy and those who benefit from it.

`A DISAPPEARING consensus on reforms' is a complaint that Mr. Yashwant Sinha, Union Finance Minister, has voiced on more than one occasion in recent weeks. The context has been the strong protests over the hike in ration shop prices of rice and wheat, the reduced subsidy for urea and the increase in prices of petroleum products. The National Democratic Alliance Government has since managed to push ahead with these measures, though lurking round the corner when the Budget Session of Parliament resumes are possible cut motions on the price increases. Mr. Sinha has also had words of criticism for the Congress(I) which has begun talking again about ``pro-poor policies''. Then there has been the statement by the four former Prime Ministers (three of whom oversaw measures of liberalisation) which, carefully worded as it was, raised a number of warning flags on reform.

But all these are immediate events. Mr. Sinha has in half measure and by accident touched on something more fundamental. A `disappearing consensus' assumes there was a consensus earlier. It may seem absurd to say so close to a decade after the reform programme was initiated, but if truth be told there never has been a consensus on economic liberalisation - if by consensus is meant a broad-based democratic support for the reform programme and not an agreement among those who make policy and those who benefit from it. The difficulties that the NDA Government has begun facing on reform, which will only increase in the weeks and months ahead, have got to do with the absence of this consensus and not its sudden disappearance.

It may be only posturing on the part of the Congress(I), which began and managed what has been hitherto the longest duration of liberalisation, to talk now of the poor being hurt by liberalisation. A number of political formations oppose liberalisation when in the opposition and do exactly the opposite when in office. The BJP after all used to talk enthusiastically about `swadeshi' before it came to power. And Mr. Deve Gowda during whose brief Prime Ministership some very wide-ranging liberalisation measures were taken now loses no opportunity to rail against the baleful effects of reform. This is political opportunism. But it thrives because there is no underlying mass support for liberalisation. And there is no broad-based support for reform because after a decade of reform there has been no widespread percolation of its benefits in terms of income and employment gains.

There is no larger consensus on reforms and yet no Government during the past decade has reversed any component of liberalisation. This is not a contradiction. It only reflects the way in which the reform programme was introduced in 1991 and has since been managed in a particular global setting. On the eve of the 1991 reforms both the Congress(I) and the BJP did advocate a greater play for the market. But full-blown liberalisation in the form of financial sector reforms, withdrawal of the State from many areas and closer integration with the world economy were not on the agenda of any political formation. The setting for the sweeping reforms was of course a balance of payments crisis. Liberalisation also began at a time when domestically there was a dissatisfaction with economic dirgisme (though the 1980s had witnessed a rapid growth of the economy) and globally there was a shift towards market liberalism.

And the reforms were initially designed and administered by a small group of officials and economists (with some help from the International Monetary Fund and the World Bank). Liberalisation, in short, was not in way rooted in the domestic polity. The contrast with the introduction of planning and the policy of state-led industrialisation which were debated across political formations between the late 1940s and the mid-1950s before they were adopted with a measure of consensus could not have been more striking.

If this was liberalisation from `above' why is it that four Governments that have followed the Congress(I) regime of 1991-96 have maintained the same features of the reform programme? The reason is simple. The pre-1991 paradigm had exhausted itself years earlier, so no Government could even dream of returning to those policies. At the same time there was no alternative paradigm on offer. So in an international setting where globalisation was the ruling ethos, all Governments - of the Congress (I), United Front and the BJP-led coalitions - have persisted with the liberalisation programme as originally devised. This is why reforms have been `irreversible' and have been so since the day in July 1991 when industrial licensing was abolished and trade liberalisation was set in motion. But since this has been a `there is no alternative' approach the so-called consensus on reforms has been a negative and not positive one.

There is of course a positive consensus on reforms among certain groups and individuals: the economists and officials who make policy, groups of industrial entrepreneurs, the collaborators of foreign investors and international finance institutions and players in the stock markets. These groups either believe in market liberalism or stand to benefit from policies built around it, which is also why they keep saying that there is a consensus on reforms. But their advocacy is not the same thing as a broader consensus on reforms in democratic India. Because a larger agreement is absent, nearly a decade after reforms began there is still no positive consensus among the main political formations about even the core of the liberalisation programme - reduction of the fiscal deficit, lowering of subsidies, privatisation and integration with the world market.

The absence of a positive consensus also explains why the Indian liberalisation has occurred in spurts. The major changes of 1991- 93 were followed by a long spell (1994-96) of relative inactivity in the face of electoral reverses linked to rising food prices and an inadequate generation of employment. The reformers in the United Front Government (mainly the Finance Ministry) gave it a new thrust in 1996-97, before that too petered out as a result of opposition from within the ruling coalition. In its first incarnation, the BJP-led coalition took some time (1998-99) before it knew what its economic agenda in office was going to be. In its second incarnation as the NDA it started off with a bang, rushing through with a variety of laws to open up the economy further and administering India's first full-scale private sale of a public sector company. But now that spell of reform too appears to be sputtering in the face of the `disappearing consensus' that Mr. Sinha has now (mis)identified.

The absence of an initial or subsequent consensus on reforms may not have mattered if liberalisation had delivered some benefits in the form of higher employment or faster poverty reduction. But that has not happened. Although there remains some ambiguity about the trends on the ground, it does seem that in spite of as rapid a pace of expansion as in the 1980s, the 1990s witnessed a slower growth of employment and a slow- down in poverty reduction. (Some would even argue that this outcome has been intrinsic to the way liberalisation has been designed and administered in India.) It is this unease about the results of a decade of economic liberalisation that is being articulated in the form of an opposition to higher administered prices and lower subsidies, a further opening up of the domestic economy to trade, disinvestment and many other such proposals. This opposition is often expressed as a defence of the interests of the Indian poor. In many instances this is not quite the case. It is more a defence of patronage and sectional interests. But because liberalisation is seen to benefit (and indeed so far has benefited) only a thin strata it is possible for any political group to express its opposition to any decisions as a `pro-poor' approach.

It will be a different story if the political class makes a serious attempt to forge a consensus on specific economic issues. Decisions taken on the basis of such a consensus will then enjoy greater public support. They are also more likely to lead to growth that is more inclusive in content. But there is as yet no sign of the political class recognising the importance of such a consensus.

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