The Left has made the claim that it should be thanked for halting reforms and therefore saving the economy from being hit even more than it has been, by the current global economic crisis. It has been claimed that workers’ savings, placed in debt schemes so far, have been saved because they were not invested in the stock market. These claims belie the fact that the economy has limited ability to withstand today’s shocks because no reform has been possible over the past four years. If operational efficiencies had been improved across the board through reform measures, the economy would have fared better in today’s difficult environment. Power is in greater short supply than ever because electricity reforms have been stalled or subverted; liquidity has been tight because the cost of petroleum products could not be passed on, and the oil companies financed imports with bank credit which then crowded out other borrowers; labour laws that would have trebled retrenchment benefits for workers could not be amended because the Left opposed any changes. The list of reforms not undertaken can be a long one.
Even in the case of the stock market, the Left came in the way of the government cashing in through public sector disinvestment when stock prices were at or near their peak—which is a net loss to the people of India. And if there is a shallowness to the trading on the market, which has made it difficult for domestic investors to counter-act the impact of foreign institutional investors pulling out of the market, the answer would have been more trading depth which therefore imparts greater stability. In other words, if there were more domestic institutional investors, and the relative importance of FIIs had been reduced as a consequence, the stock market would have better withstood the downturn. And if investments had been allowed when first planned, they would have yielded a good return because stock prices are still twice as high as they were when the UPA government entered office.
It would be a mistake, though, to place all the blame at the door of the Left parties; the Congress itself has been half-hearted about reform. It now shows some signs of wanting to make up for lost time, but there is as yet no clear evidence that the government is looking beyond the issues of short-term crisis management, and readying to push through critical long-term changes.
