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August 26, 2015

Indian Economy|Capital Markets

Gathering Clouds

By Nitin Desai

  

Storm clouds are gathering and our polity and economy are going to face rough weather in the months ahead.  In Delhi there is a breakdown in the political culture  built on mutual respect between government and opposition.  In the economy the global impact  and response to the growth slowdown and currency devaluation in China will pose major problems of adjustment.  But of these two the big worry is the future of our political system.

Every nation seems fated to return to the modalities of its own birth. The French cannot make a major political statement  without setting up barricades in the streets of Paris; the British do it through a parliamentary upheaval; the Germans are happy to be led from above. We in India seem fated to repeat the tactics of satyagraha in the form of demonstrations, street protests and hunger strikes to assert a political demand. So deep are the roots of this political culture that even the ruling party  staged a street demonstration to protest the disruption of the Lok Sabha session by the Congress.  When  the tactics of street protest replace parliamentary discourse,  even in the parliament itself democracy is clearly under threat.

Dr.Ambedkar foresaw this and a passage from his speech introducing the Constitution for adoption in the Constituent Assembly on 25 November 1949 is worth quoting:

"The first thing in my judgement we must do is to hold fast to constitutional methods of achieving our social and economic objectives. It means we must abandon the bloody methods of revolution. It means that we must abandon the method of civil disobedience, non-cooperation and satyagraha. When there was no way left for constitutional methods for achieving economic and social objectives, there was a great deal of justification for unconstitutional methods. But where constitutional methods are open, there can be no justification for these unconstitutional methods. These methods are nothing but the Grammar of Anarchy and the sooner they are abandoned, the better for us."

The impasse that we saw in the monsoon session reflects also a new problem in our political culture - the breakdown not just of mutual respect but also  of communication between the treasury benches and the opposition. Some part of this is the consequence of leaders wanting to appeal to the party foot soldiers who confront one another at the ground level, often violently, rather than the broader constituency of voters. We have seen this in the confrontations in States like West Bengal and Tamil Nadu. But at the Centre a certain respect for the opposition and the opposition's acceptance of limits to dissent has been a welcome stabilising factor in parliamentary politics for most of post-independence history, except of course during the 1975-77 emergency. Forty years after that sorry episode in our political history are we fated to repeat that collapse of parliamentary democracy? What should frighten any concerned citizen is not just the noisy antics in the House but the fierce acrimony in the relations between the leaders on both sides.  This acrimony also threatens Centre-State relations as we saw when the Congress Chief Ministers stayed away from the recent NDC meeting.

Of course there is a lot that can be done through executive action and the Government should be complimented for the steps that it has taken, the most recent being the reform proposals for public sector banks.  But getting our political discourse back on a constructive and cooperative track is crucial for pushing through legislative changes like the GS Bill and more such legislative proposals which will emerge as the Government pursues its reform agenda.  The Government also needs the support of the opposition if the Prime Minister's foreign policy initiatives are to enjoy a bi-partisan (now, more accurately, multi-partisan) consensus.

Our political masters must reassure us that they are committed not just to the forms of parliamentary democracy but to its unwritten conventions of respect for political differences. Phrases like "Congress-mukt Bharat" are quite inappropriate and reflect a yearning for one-party dominance that would be a disaster in a country as diverse as ours.

The Prime Minister must take the lead and reach out and restore civility in the political discourse and the opposition must cooperate in the management of parliamentary business. He has shown a strong commitment to cooperative federalism and that too requires an even handedness  in the treatment of States where an opposition party is in power.  The Government's treatment of NGOs and the media, particularly State owned entities like Prasar Bharati, has raised concerns about its commitment to freedom of expression. In a fractious country the Government must be tolerant of dissent in public discourse.

A less confrontational and more constructive political discourse is desirable in its own right. But at present it is doubly desirable as the Central Government will face many economic policy challenges in the near future. The global economy is in for some turbulence and this will pose further problems for an already beleaguered industrial sector. The yuan devaluation will hit sectors like steel and power equipment as Chinese imports become even cheaper than now. Exporting firms will be hit in third country markets where Chinese exports will become cheaper and the downward export trend of the past six months may accelerate further. The RBI will surely let the rupee drift downwards to help exporters and counteract the yuan devaluation and competing devaluations that will follow. But the rupee devaluation will hurt the balance sheets of corporations that have borrowed abroad and are already over leveraged and are part of the 269 whose  debt of Rs 275 thousand crores is being restructured. Nor will the stress be limited to the industrial sector. It will hit the balance sheet of banks and, at one remove, the Government's budget also. The bottom line is that the ambitious growth and development programmes of the Government will be under threat.

At a time when storm signals are coming up the Government will need the cooperation of the opposition. The opposition too must recognise that its job is not to fasten onto this or that scandal to the exclusion of its responsibility to hold the Government to account for navigating the country through turbulent waters.  More responsible politics is what we want both from the Government and from the Opposition.

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