There are striking similarities between what is happening within the Bharatiya Janata Party (BJP) now, after it has faced a complete rout in the recent Assembly elections, and what hit the Congress after its defeat in some Assembly elections in 1993. More than eight years separate the Congress setback then and the BJP's defeat now. But the fears and dilemmas now being faced by the Prime Minister, Atal Bihari Vajpayee, cannot but be reminiscent of what then Prime Minister, P V Narasimha Rao, had gone through in 1993.
Those were the early days of economic reforms launched by Manmohan Singh under Mr Rao's leadership. Prices of foodgrains and fertilisers had gone up as the subsidy bill on food and fertilisers had to be brought down. Divestment of government equity in public sector undertakings had just begun, provoking the Opposition parties to accuse Mr Rao and Dr Singh of having sold family silver to reduce the government's fiscal deficit. Private sector banks were being allowed to be set up, thereby striking at the deeply entrenched vested interests of bank employees and trade unions.
The 1993 Assembly polls were turned by the Opposition as a virtual referendum on the reforms. The Opposition had planned it very well. During the election campaign, they promised the electorate rice and wheat at a ridiculously low price of Rs 2 per kilogram. These promises worked as this was one of the many reasons cited as the cause for Congress defeat then. Mr Rao was under severe attack and pressure from his own party colleagues to roll back some reform measures that they claimed had led to a rise in prices. The big question then was: should the government go ahead with reforms or go slow on implementing the tough measures?
As the events unfolded in the subsequent months, the reforms programme of the Rao government did lose considerable steam after the Congress faced electoral reverses in 1993. True, there was persistent talk of the reforms having reached an irreversible stage and that the mindset on economic reforms had changed decisively. But what did influence the gov- ernment's approach to further reforms was Mr Rao's emphasis on the so-called "middle path" and Dr Singh's insistence on carrying out reforms with a human face. There was certainly a marked deterioration in the pace and quality of reforms after 1993.
Mr Vajpayee went into the recent Assembly elections as a leader of a government that was committed to reforms, but had failed to check rising prices. In fact, just a few days before the elections, his government had taken bold measures with the Cabinet approving foreign investment in the insurance sector and allowing exclusive marketing rights for patented products under the World Trade Organisation (WTO) regime.
There was obviously no connection between these decisions and the defeat the BJP suffered in the Assembly elections. If the BJP lost the elections, it was largely because of its failure to govern, control prices (which were allowed to be manipulated by traders) and to correct an impression in the minds of the people that the government lacks direction and that its leadership is divided at the top.
However, at the first meeting of the BJP party leaders held after the election results were declared, none of these issued figured very prominently. What did was how the Prime Minister had gone ahead with reforms without seeking the consent of his party colleagues. In particular, Mr Vajpayee came under attack from his own colleagues including his party president for opening up the insurance sector to foreign investment. It was a virtual repeat of what happened in 1993. Once again, reforms came under attack by members of the ruling party after they lost an election.
Like Mr Rao and Dr Singh, Mr Vajpayee has also vowed that come what may, he would continue to pursue the path of reforms. He even told foreign investors at a meeting of the World Economic Forum that his government had succeeded in depoliticising economic reforms. All these may be brave words, which will appear very soothing for foreign investors in India. But what is the reality?
Political parties in India still believe that issues pertaining to economic reforms continue to be potent factors in elections. In fact, reforms seem to be one of the few issues that political parties can still cling to and make their political platform. Therefore, it is naive of Mr Vajpayee to believe that he has depoliticised reforms in India. He should learn a few lessons from Mr Rao's experience and also from what his own colleagues in the party and the government are doing.
A big controversy is already raging over whether the insurance Bill to open the sector to foreign investment should be presented to Parliament in the current session. The finance minister, Yashwant Sinha, may want to push it during this session, but the parliamentary affairs minister, Madan Lal Khurana, obviously does not consider that the Bill deserves to be in the first priority list of bills to be presented to Parliament in the first week of the winter session. Mr Vajpayee cannot remain oblivious to the hard reality that economic reforms are still a live political issue.
Does this then mean the end for economic reforms in India? Of course not. Reforms will continue, but at a slow pace. The danger is that the country's top political leadership should not lull itself to a belief that reforms have been taken beyond the realm of political debate in India. Governments and investors will have to recognise that further reforms must recognise and address the political reality and the politicians' reservations on this issue.
