India fighting fires, left and
right By Ashok Malik
NEW DELHI - It has been a nightmare week
for Prime Minister Manmohan Singh's Congress-led
coalition government in India.
The
terrorist bombing of seven Mumbai trains last
Tuesday that left about 200 dead and 700 injured
came only five days after a key ally of Congress
threatened to walk out of the United Progressive
Alliance (UPA) unless plans to sell a 10% equity
in a state-owned coal company were canceled.
There is, of course, little connection
between disinvestment and terrorism. Yet for an
India that has become almost habituated to being
the world's "good news" story, the inevitable
juxtaposition of the two events has been a bit of
a rude shock. While hardly a definitive roadblock,
the spate of negative bulletins this past week
has
put tentative question marks in front of key
parameters that were acclaimed as India's
strengths.
In recent years, India emerged
as a standout emerging market and a candidate for
future power status for, in essence, three
reasons: political stability; policy continuity;
and, broadly, a physically safe environment for
business, especially for foreign businessmen.
Last week all three sets of certitudes
lost some of their sheen. They are not dead and
discredited - far from it - but more doubts are
being raised than earlier. It will be the lot of
the Manmohan Singh government to manage the
fallout and stymie any return to that old
perception - that India's fractious politics and
chaotic democracy will ever jeopardize its
economic hopes.
Tackle terrorism first.
India - as with China - was hitherto seen as
relatively insulated from the "global war on
terror" and the larger conflict between Islam and
the United States. Terror outside the state of
Jammu and Kashmir - such as the attack on
parliament in 2001 or the bombings in Delhi late
last year - was seen as an aberration, explained
away as an extension of the Kashmir problem.
The bomb blasts in Mumbai indicate a
strategic shift. These have been the most virulent
and destructive terrorist attacks in India since a
series of bomb blasts in March 1993, also in
Mumbai. That previous attack had come in the
aftermath of bloody Hindu-Muslim riots in the city
and other parts of India. This one came apropos of
nothing, as random as, say, those of September 11,
2001. Also it came in a city and a country that
had developed far stronger global business links
in the period since 1993.
Terrorism alone
cannot keep away investment. From New York to
Madrid, London to Bali, it is now recognized as a
ubiquitous postmodern scourge, something to live
with - and simultaneously fight. That second
clause is what must worry Manmohan.
The
Congress-led alliance came to power with strong
support from India's Muslims (13% of the
electorate). In the past two years, it has
stressed Islamic terrorism is a Kashmir-centric
issue, unrelated to millions of ordinary Muslims
in the Indian heartland. On more than one
occasion, the prime minister has pointed out that
not one of India's 150 million Muslims is a member
of al-Qaeda.
While these assessments are
largely correct, they ignore the increasing
evidence provided by intelligence agencies of the
radicalization of sections of India's Muslims, and
of the success of Lashkar-e-Toiba (LeT) in
recruitment across the country. LeT, the "Army of
the Righteous", is a Pakistan-based terrorist
group that began with Kashmir, but has expanded
its footprint to Iraq, Indonesia and even
Australia, where a local activist was arrested in
2003.
Indeed, after the Mumbai blasts
LeT-associated cells have been busted in
Aurangabad in Maharashtra state and Hyderabad in
Andhra Pradesh. Supposed foot soldiers have been
called in for questioning in Mumbai. Evidence of
LeT activity in Uttar Pradesh to the north,
Gujarat to the west and West Bengal to the east
has also surfaced, say official sources.
Obviously, the network of terror in India
is far more complex and well entrenched than the
Congress-led government has been willing to admit.
A hard crackdown is going to be politically
difficult for a coalition that counts India's
Muslims - most of whom, of course, abhor terrorism
but have vocal sections who are uncomfortable with
India's increasing proximity to the United States
or identification with US interests - as its core
voters. Yet a soft approach may seem to give more
space to those who place bombs on trains.
Second, move to policy continuity: with
the Left Front, a four-party Marxist collective,
giving the Congress crucial support in parliament,
India's economic reforms face their most serious
political challenge since they began in 1991.
Privatization was in effect killed the day the
government came into office. Disinvestment was
still deemed permissible, and the federal cabinet
this year approved the sale of 10% equity in
Neyveli Lignite, the top lignite-mining and
lignite-based power-generating company, about 200
kilometers south of Chennai.
On July 6 the
DMK (Dravida Munnettra Kazhagam), which heads the
government in Tamil Nadu, the state where the
Neyveli Lignite facility is located, threatened to
pull out of the UPA unless the proposed equity
sale was called off. The prime minister responded
by putting a stop to all disinvestment. The Left
Front, overjoyed at having found an anti-reform
ally in the DMK, has already opposed or scuttled
proposals for greater foreign direct investment in
retail, telecom (where security agencies have also
raised doubts), banking and insurance.
Liberalization of labor laws is stuck,
given that left-leaning trade unions are finishing
schools, as it were, for communist politicians. A
new electricity law that allows private companies,
and even residents' associations, to generate and
transmit electricity has been passed by
parliament, but lies largely unimplemented. Urban
renewal in India's biggest cities - including
Mumbai, which was brought to a halt by floods only
a week before the terrorist strike - is moving at
a slow pace.
"Infrastructural
inefficiencies still substantially increase the
cost of business in India," an economist said.
"How long will investors wait?"
The prime
minister's considered response to the
disinvestment deadlock was to set up a "group of
ministers" or GoM. A GoM is, as the name implies,
a small, ad hoc grouping of senior cabinet members
put together as a troubleshooting unit to address
an immediate issue that cannot be resolved in the
normal course and is the subject of
inter-ministerial or political wrangling.
It follows that the fewer the GoMs, the
smoother is everyday governance. The GoM on
disinvestment is, as it happens, the Manmohan
Singh government's 24th GoM. That figure should
tell its story; it also leads to Frown Factor 3:
political stability.
If political
instability is measured in the strict sense of
governments being overthrown, coups being
attempted and prime ministers being replaced every
other month, then India is clearly very, very
stable. If it measured in terms of the obstacles
to good governance and the ability of even
insignificant stakeholders and minor parties to
veto national policy, then the UPA is staring at a
mountain.
The junior UPA parties, and
sections of the Congress too, are in essence
economic populists. Manmohan and Finance Minister
P Chidambaram, in contrast, are fiscal
conservatives. For instance, they have fought, and
lost, battles against introducing the Rural
Employment Guarantee Program, an extravagant
exercise the annual outlay for which is expected
to climb to Rs500 billion (US$10.7 billion) in
four years, as it spreads nationwide.
"The
fiscal deficit is worrying and government spending
is running out of control, and disinvestment,
which could have filled the gap, is a
non-starter," a senior civil servant said. "The
left will not allow [consumer] subsidies to be
rationalized. At this rate, the finance minister
may have to raise taxes in his next budget. He
needs some source of income."
Between
jihadist terrorism and the left's economic
terrorism, Manmohan simply has too many fires to
put out. His burden is shared by India. In a
globalized economy, it is shared by the world.
Ashok Malik is a journalist
based in New Delhi. He can be contacted at
malikashok@gmail.com.
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