KS NARAYNAN | Issue Dated: November 17, 2012, New Delhi
In the days of Socialistic License Raj, right wing theories of any kind were considered a strict no-no. When Indira Gandhi finally put her stamp on policy making by the beginning of the early 1970s, there was a rush of political-economists trying to establish their Leftist credentials.
Anything American was invariably CIA. With the top political leaders of the country laying the blame for most of India’s ills on Washington, it was clear that anyone deviating from the official line would find it difficult to function, much less get employment.
It was in this cloistered environment that Harvard economist Subramanian Swamy made his debut. As an associate professor of economics at the hallowed Harvard University, Swamy in 1964 was called in by no less than Amartya Sen himself to join the faculty at the Delhi School of Economics. But it was not to be. His free market theories, considered outrageous then, led to his appointment being canceled. Later he joined the Indian Institute of Technology (IIT) Delhi, was sacked again but reinstated by the Supreme Court, a position he held till 1991 after which he joined the Union Cabinet of PV Narsimha Rao.
A man who spoke his mind in the still-conservative India, he was regarded as a maverick and even ‘unstable’. As a life long opponent of the Congress and the Gandhi-Nehru family, Swamy’s political career was chequered, in the highest traditions of India’s non-conformist politicians.
But his best was yet to come. Decades later, his petition before the Supreme Court took the lid off the biggest political scam in the country’s 65-year-old history – the 2G scam. It is a scam that the ruling Congress-led UPA is finding rather difficult to wriggle out of.
Since then, he has emerged as the biggest thorn in the flesh of the Congress party, long used to fawning acolytes singing paeans in honour of the Nehru-Gandhi dynasty.
Swamy’s critique of the Manmohan Singh-led UPA government is based on an understanding of how India’s political system is working at the moment. “What is happening is that policies pursued by the UPA government have led to a decline in GDP. The UPA, right from day one, is a dyarchy. In other words, there are two centres of power. One is the constitutional position of the prime minister, which is occupied by a person who is not able to exercise that power. The other is a body created by the Cabinet Secretariat called the National Advisory Council (NAC), of which Sonia Gandhi is the head. This is, in practical terms, the defacto seat of power. Sonia is motivated by populist pressures and Mr Prime Minister is not able to do what is essential,” he told TSI in an exclusive interview.
According to Swamy, Prime Minister PV Narasimha Rao implemented the new economic policy in the early 1990s, the blue print of which was laid out by him. “Manmohan Singh was finance minister and a competent executive. But as prime minister, he does not have the political will, capacity or backing which Rao had in his vast experience as a politician. Therefore he is unable to do anything,” he says.
After long opposing the Congress, Swamy has his own take of those heady days when India formally adopted the World Bank model of global economic integration. The credit, he says, should go to Narasimha Rao and him and not to Manmohan Singh or Dr Montek Singh Ahluwalia, as has been projected by the media.
Swamy, whose political career began in Jayaprakash Narayan’s Sarvodaya movement, has many firsts to his credit, none more controversial than his appointment in 1994 as Chairman, Commission on Labour Standards and International Trade, with a Cabinet Minister’s rank. “It was perhaps for the first time that a member of the opposition party was given a Cabinet rank post by the ruling party,” he recalls. Given his known antipathy to the Nehru-Gandhi family, the appointment could not have pleased Sonia Gandhi, who then held no official position in the Congress but carried considerable clout nonetheless.
His pro-American bias is hardly a secret. In 2004 and beyond, the American economy was booming; as a consequence Europe was booming and India between 2002 to 2008 witnessed the advent of brilliant financial instruments which lead to a series of booms. Through these derivatives, money attained a velocity never seen till then.
True to himself, Swamy is not the one to follow the herd. His attack on populist schemes like the Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS) bucks the current trend. According to him, schemes like these do not create any assets.
During the Emergency (1975 to 1977), Swamy fled to America, seeking the company of an Indian businessman who had become the principle spokesperson of the Indian opposition in the US. Then came the element of daring. In 1976, with the Emergency still in place and an arrest warrant issued in his name, Swamy came to the Parliament to attend the session and managed to leave the country after the session. This one single act made him a hero in the eyes of the opposition parties, most of whom were still behind bars.
Swamy’s laissez faire economics propagated in the 1970s were considered outrageous. Yet, four decades down the line, that is precisely what successive Indian governments have now adopted as official economic policy.
The head of the one-man Janata Party believes he was right then and he is right now: in the process he proposes some radical solutions. “Abolish income tax because the middle class is getting squeezed and we are forced to cut back on consumption. For lower classes, there is no cut back in consumption. The middle class is not investing, they are probably buying gold. We have to motivate the middle class to save more and spend a little more and one sure way to do that is to abolish income tax. That money will go partly in savings. You create attractive bonds which are tax exempt or with higher interest rates.”
Nor are precedents any cause of worry, as far as Swamy is concerned. “No country has abolished income tax, but why should we follow others? I think we have to do what is good for the country.” As someone who has been elected Member of Parliament five times between 1974 and 1999, representing Mumbai, Uttar Pradesh and Tamil Nadu in the Parliament, he should know.
His other panacea? Auction resources which are being sold at administered prices at present, for instance spectrum, coal and mining assets like zinc and copper. “You will get enough resources to cover it plus the money that will come through indirect taxes,” asserts the quintessential rebel.
Swamy’s third solution is enough for any Leftist economist to pull his hair out. He stresses on the need to globalise Indian agriculture, which is the cheapest at the moment. “We have three crops a year unlike US, Europe or China, where there is snow for three to five months. Thus, we should develop cattle resources. Cows in India yield 200-300 litres per year as against the average of 11,000 litres in Indonesia. Food grains sell at one-seventh of the price in South Africa. We need to use agriculture to become an exporting country. We need some dynamic rounds in Doha and see that tariffs can be brought down,” the economist in him begins to assert.
How does India cut its budgetary fiscal deficit of almost Rs 5 lakh crores? “If you look at the items – government salaries, pension payments, interest rates of past loans, defence, police and subsidies cannot be pruned. They add up to 98 per cent of the total revenue that India gets. Rest of the expenditures are met by loans. In other words, we are getting into a debt trap.”
According to him, India needs to develop infrastructure to the point where the semi- processed goods of east Asia which are going to China today, come here where labour is more skilled and is available at lower wages. “China is getting more expensive and east Asia will find it easier to come to us. Then we could have a huge trade surplus,” he says.
Swamy predicts that a financial crisis awaits India – of her own making. When it arrives, he says, it will not be so easy to overcome. The only way out are sweeping economic and financial reforms which the present dispensation is incapable of implementing.
Does he think the decline in GDP or depreciation of the Rupee is a wake up signal for the government? “Not as long as Sonia Gandhi is at the helm of affairs,” quips Swamy, who Indira Gandhi had once famously described as the “Santa Claus with unrealistic ideas.”
For the man who wishes to stand out of the crowd, terms like inclusive growth, the prevailing economic mantra, are meaningless. “These are terms which mean nothing. We have to emphasise on development which generates jobs, uses labour, lowers costs and regulations that cuts transaction costs. Words like inclusive or exclusive are bunkum,” he announces with the air of someone who has tracked political economics for the last four decades or so.
Would India land up in bigger trouble than she was in 1991? The answer is in the affirmative, but with a caveat. “India has got good institutions. Crisis always produces change. We would wake up to change only when there is a crisis. We had food crisis – we got the Green Revolution; we had foreign exchange crisis – we had economic reforms. If faced with a major crisis, we will have structural reforms,” Swamy affirms.
What is his worst case scenario? “The government will not be able to pay salaries. The budget is bankrupt and is running on the money impounded from the public sector. I expect a major crisis next year. When people start buying gold, something is going terribly wrong,” he looks gloomily into the future. Clearly a case of a rebel without a pause.