A K Bhattacharya: Reforms and reservations

NEW DELHI DIARY

Times have changed. In 1979, Ghanshyam Das Birla, the tallest Indian industry leader then, spoke at a luncheon meeting organised by the Federation of Indian Chambers of Commerce and Industry (Ficci) and asked industry to break free from the shackles imposed on it by industrial licensing controls. He urged industry leaders to produce more even if that meant exceeding the production limits ordained by their industrial licences and, therefore, going to jail. George Fernandes, industry minister at that time, sat on the same table and looked aghast at what Mr Birla had advocated.

Last week, Finance Minister Palaniappan Chidambaram addressed India's industry leaders at the Business Standard awards function in Mumbai. Mr Chidambaram did not ask industry leaders to break free from industrial licensing controls. There was no need to do so, for more than 15 years ago industry had been freed from the licensing shackles that Mr Birla talked about. But what the finance minister said was equally breath-taking and reflective of the changing times.

Mr Chidambaram urged Indian industry to go all out on an overseas acquisitions drive. He told them not to worry about the foreign exchange they needed to acquire companies abroad. The important goal was that Indian industry must become an economic powerhouse. The government, he said, would take care of the problems posed by the Left or the Right, but industry should move ahead, without shying away from globalisation and at the same time preparing for fallback strategies if things went wrong. It was a speech that inspired every industry leader present at the meeting.

There are key differences between the two speeches""one made by

G D Birla in 1979 and the other by Mr Chidambaram in 2006. And these differences indicate the long distance that policy-making by the Indian government has traversed and also the mindset change that has taken place in these years.

Note the differences. The call to break free from licensing shackles in 1979 came from an industry leader. And the minister present at that meeting did not look very comfortable with that idea. In 2006, it is the minister who urges industry leaders to spread their wings abroad, leaving the government to tackle problems related to policies and politics. And industry leaders lap it up with applause and approbation.

In 1979, industrialists were a little muted in their reaction to what G D Birla suggested. The minister was obviously not very happy. To be fair, how could he have stomached the idea of industry breaking the law? In 2006, industrialists are in agreement with the suggestion of India Inc going on a drive to acquire more companies abroad. In fact, given an opportunity, they would have asked for more freedom""in the form of a full capital account convertibility. In 1979, the industry-government divide was too large. In 2006, the government and industry are speaking almost in the same voice.

Why travel back so far to look for signs of a changing India? Consider how industry, political parties and the people are reacting to the recent announcement of a proposal to increase the reservation of seats in educational institutions and comparing it with the violent reaction evoked by the V P Singh government's move in 1990 to implement the Mandal Commission's recommendations on reservations for backward classes, and you will realise how India has changed.

In 1990, large parts of north India reacted with strike and agitation by sections of the students community. There were violent protests, one of which even led to a self-immolation attempt by a student in Delhi. The Bharatiya Janata Party was in the forefront of the agitation. Its leaders lost no time in launching a virulent attack against the VP Singh government.

What has happened now? The BJP is yet to make up its mind on whether it should launch an agitation against the move to increase reservations for backward castes in educational institutions. The students community is not yet excited by the implications of the move towards increased reservations. Instead of street protests, we are witnessing a spurt in the number of protests being posted on the Internet. Students are more busy with their part-time call centre assignments or preparing for job interviews.

The government, on its part, is planning to increase the number of seats available in educational institutions. There is a clear attempt to increase the capacity of educational institutions so that there is no real impact of increased reservations on the total availability of free seats. The objective is to render reservations as an issue irrelevant by increasing the supply of seats in educational institutions. The southern states have shown the way, where an adequate availability of seats has made reservations less of a political headache.

How has this change come about? Why are industry and the government talking in the same tone and why have reservations failed to ignite popular passion? One obvious reason is economic growth. If an economy grows by over 7 per cent per annum for more than three consecutive years, as India has managed to do, politicians lose their grip over issues pertaining to reforms and reservations. Neither can they incite people to oppose reforms, nor can they present reservation as the only villain in their lives.