An Object Lesson for Indian Political Parties

Dr M N Buch (Visiting Fellow, VIF)

China is not a democracy and there is the one party rule of the Communist Party of China (CPC). From time to time the Party holds party meetings at which matters of policy are discussed in detail. The 16^th CPC Central Committee meeting was held in Beijing from 16th to 19^th September 2012 and at the Fourth Plenum the party adopted a document enshrining the policy of the Party, entitled “On the enhancement of the Party’s governance capability”. The Party felt that, “CPC’s ruling status is by no means a natural result of the Party’s founding and will not remain for ever if the Party does nothing to safeguard it”. In other words, CPC has envisaged a day when in China the Party may lose its sole ruling status.

My good friend, Dr. Surjit Mansingh, has sent me a brief note on the CPC deliberations and certain decisions taken by the Party. I am quoting from the note: “We must develop a stronger sense of crisis, draw experience and lessons from the success and failure of other ruling parties in the world and enhance our governance capability in a more earnest and conscientious” manner. The Party said,

“ CPC stresses importance, urgency to enhance governance capability,
CPC summarizes ruling experience
CPC document puts development as top priority of Party's governance
CPC document urges promotion of socialist democracy
CPC pledges to focus on Party building for advancement of ruling capacity
CPC pledges to build up harmonious society of socialism
CPC vows to uphold Marxism as guiding ideology
CPC to adhere to independent foreign policy of peace.”

It might be noticed that enhancement of governance capability is the top priority of CPC and this includes a review of the ruling experience of the Party. This indicates a degree of administrative maturity in which the Party is prepared to do introspection on and review of how China has been governed in the recent past. The enhancement and advancement of ruling capacity is repeatedly emphasised in the resolution passed by CPC.

There are two other items which call for special mention. One is that development as the top priority of the Party’s governance. This means that China’s economy and its growth are both matters of great concern to CPC. The second point is a pledge to build up a harmonious society of socialism. Harmony requires that various sections of society should have a mutual understanding and there should be no social conflict. Socialism in the Indian context would mean social, economic and political justice, equality of status and of opportunity, both of which find place in the Preamble of the Constitution and the establishment of a social order for the promotion of welfare of the people as stated in Article 38. In all social and economic relationships, therefore, equity becomes a key factor. One presumes that CPC, when talking of a harmonious society of socialism, is also thinking along these terms, though the evidence is that China is today a country in which capitalism is rampant. Whatever the meaning that CPC may give to words, the fact remains that there is someone in the Party who is thinking along the right lines.

I have made a somewhat lengthy reference to the 16^th CPC Central Committee meeting because I think there is a lesson in this for political parties in India. My limited knowledge of the subject suggests to me that no party, ranging from extreme left to extreme right, has ever done the kind of thinking or introspection as has been done by the Communist Party of China. How serious CPC is, is evidenced by the fact that there has to be a change of guard in Beijing, with the President and Prime Minister of the Republic being due for replacement. This seems to be a practice in China since Mao Tse Tung died and though initially there were elements of a palace coup in the manner in which the leadership changed, with the coming of Deng Xiao Ping there seems to be a more settled manner in which the leadership changes, generally with younger persons being brought to the fore. Another change is that from the older generation of persons who were experts in guerilla warfare and led the revolution, we are now getting more technocracy, science and administration oriented leaders who are in the vanguard of China’s modernisation. At the same time China seems to have developed a level of corruption which might even be greater than that in India, with this difference that in China corruption does not stop development whereas in India it has now become an enemy of development.

India is a democracy in which there are a number of political parties. The two main parties are the Congress, which can be described as a middle of the road party and BJP, which is considered to be right of centre and also, because of its RSS link, a party with a distinctly Hindu tilt. On the left we have a conglomerate of which CPI (M) is the most prominent member. CPI, the Revolutionary Socialist Party (RSP) and the Forward Bloc are the other main components of the Left. Standing to the extreme of the Left are parties such as CPI-M-L, the Peoples War Group (PWG) and other Naxalite groups which do not subscribe to democracy and are wedded to a philosophy of violence aimed at overthrowing the Indian State. Somewhere between the Left and the Congress are the various shades of the Socialist Party, the two most prominent groups of which are led by the Mulayam Singh Yadav in Uttar Pradesh and Lalu Prasad Yadav in Bihar. The more moderate section of the Socialists, the PSP, seems to have been submerged in the present groupings, which give little evidence of following a socialist agenda but are more interested in caste equations, especially of the intermediate castes, which give them power in localised areas such as Uttar Pradesh and Bihar. Socialism here has been totally overtaken by caste and, therefore, both Mulayam and Lalu can be accused of exacerbating the caste divide. To call these parties Socialists would be a travesty of the truth. Into this kind of vortex of divisiveness have jumped a number of regional parties such as DMK, AIDMK, AGP, Telugu Desham Party, Trinamool Congres, the Party fighting for a separate Telangana, etc., which have a narrowly regional outlook which prevents them from taking a larger view of the nation. Many of these regional parties have corroded the body politic and this has caused very substantial erosion of values in politics. Then we have the Bahujan Samaj Party (BSP) led by Mayawati, a party of the Dalits which seemed to reach out to all castes and classes. Unfortunately, because the party revolved only around Mayawati, who seems to be whimsical, BSP has not lived upto its promise. One hopes the party will introspect and improve itself.

Whether it is UPA at the Centre or the National Conference – Congress combination in Jammu & Kashmir, BJP in Karnataka, Trinamool Congress in West Bengal, one sees an erosion of the ability, desire and political will to govern and all around one sees the deleterious effect of failure of government. Large swathes of the country are victims of Naxalite insurgency, which government seems unable or unwilling to contain and eliminate. Prices are out of control and every measure that government seems to take to strengthen the economy only results in furthering the miseries of average citizens. Healthcare in the public sector has definitely deteriorated throughout the country. Corruption is not only rampant it is almost universalised to the extent where nothing happens in this country even at the level of ordinary routine without money being demanded. In the matter of legislation Parliament stands substantially weakened, if not paralysed and almost everything is now either decided in the streets or defeated there. One of the disturbing factors is the growing intolerance, bigotry and narrow mindedness which seems to afflict us in so many ways. Some American author writes some comments about Shivaji in one of his books and this causes Maharashtra to burn. One of the most respected centres of learning in Pune and its library was burnt down because this particular author’s book was on the shelves of the library. This was done at the instance of the Shiv Sena. Is Shivaji of such little intrinsic consequence that what some foreign author writes in some obscure book completely debunk this icon of resistance against tyranny? Does burning down a library enhance the status of Shivaji? Salman Rushdie writes “Satanic Verses” and India bans the book. Not only that, but several years later when Rushdie was to attend a literary get-together at Jaipur some Muslims threatened to demonstrate against him and government virtually prevented him from attending the conference. Have we become so intolerant that we cannot permit an author to attend a literary meet? Is Islam so fragile that, even assuming that Rushdie committed blasphemy, this magnificent edifice of a great religion would collapse if Rushdie comes to India? Is Allah liable to demolition by one of his own creations? Christianity gave up the doctrine of blasphemy long ago. The Christian church is as firmly founded today, in fact more so than in the days of Inquisition when heretics were burnt at the stake. Not building a temple of Ram at Ayodhya will not destroy Hinduism just as building it will not strengthen the religion. When the symbol becomes more important than the substance we are in grave danger.

All this background leads upto my main argument, which is that the time has come for Indian political parties to sit down and introspect on what they have been doing in the past and where the future lies for them and for the country. If somebody were to ask me what any of the political parties stand for I would not be able to give any worthwhile answer. For example, what is the Congress? When we were fighting for our independence the Congress was the party into which Mahatma Gandhi breathed life, bringing together various disparate elements so that, from a single platform, they could fight against the British and demand independence. The single aim of the party was to free India from British rule, but the strategy and the tactics by which this goal could be achieved were determined by the party under the leadership of the Mahatma. At the same time certain very clear-cut principles were prescribed. The movement would be asatyagrah, or a campaign based on truth. It would be conducted under the banner of ahimsa, or proactive non-violence. It would be inclusive, which meant that all religions, all castes and all classes would work together in harmony to achieve our goal. There would be no hatred for anyone, including the British and there would be tolerance in the best sense of the word. Another weapon would be swadeshi. This means that we would be dependent only on what we could grow or what we could produce and this was an economic weapon aimed directly at the industrial and commercial hegemony of Britain. It was certainly a weapon of which the British were afraid. Under these circumstances it was possible to define the Congress because a Congress man was fearless, honest, austere, nonviolent and wedded to truth.

Today how do we describe the Congress? What is the core policy of the Congress and what is its ruling political philosophy? I have been shown various election manifestoes of the Party, but I consider them works of fiction written to meet the immediate expediency of a forthcoming election, whose objective is to fool the people into voting for the party. No election manifesto of any party really contains the ideology, the philosophy and the programme of that party. I cannot think of a single document prepared by the Congress Party which tells me what its political philosophy is, what ideological moorings it has, what is its long term agenda and what are the programmes and projects it has in mind which would help it to give shape to the vision it has set itself. It is not even particularly democratic because when a party has a leadership which is almost entirely confined to one family, which militates against the setting up of grass-root units which elect the entire hierarchy, the party cannot be said to be democratic.

Let us come to BJP. RSS is the progenitor of the Jan Sangh and of its successor, BJP. RSS claims not to be involved in politics. In 1925 Dr. K.S. Hedgewar, the founder of RSS, told Mahatma Gandhi, with whom he was then associated, that he wanted volunteers to come together and work for the nation selflessly and, therefore, he was setting up a separate organisation divorced from politics and political parties. Despite this the fact remains that RSS is the mother who has given birth to BJP. The party cannot adhere totally to a RSS agenda both because the Constitution mandates that it should work in a secular environment and because a narrowly communal agenda is not acceptable to most Indians and, therefore, they will not vote BJP to power. Therefore, whilst promoting Hindutva BJP is forced to interpret this in a secular context. Is BJP a Hindu party or does it wholeheartedly accept secular India which does not discriminate between religions? What is its core ideology, what is its vision of India, what are its programmes by which India will become the country it dreams of? In other words, is BJP a clone of the Congress with a sharp Hindu tilt or does it have a political image of its own which distinguishes it from the Congress? We have no document which really tells us what BJP is. Perhaps the party should openly accept that it is there to protect majority interests, but because the Sanatan Dharma firmly holds that no one is “the other” the Party is secular and that the Muslim not also, but specially, is a partner as an equal. This would define the party clearly as being inclusive and not narrowly confined to a Hindu role.

The Left is equally in shambles. Dogmatic Marxism does not hold sway anywhere in the world and in fact the most powerful Communist ruled country, China, is now wedded to capitalism. Where, therefore, are the ideological moorings of the Left? What is the Left’s vision of India, what future does it chart for the country, what will be its strategy and the programmes by which its objectives will be achieved? In Kerala, for example, where the United Democratic Front (UDF) and the Left Democratic Front (LDF) alternate in power, the only ideological mooring of both groups is in capture of power and not necessarily in what will be done after power is captured. We need a very strong ideological statement and vision document from the Left so that we can see where the Left stands and how the Left will conduct itself in the future.

I do not intend to extend this discussion to the numerous other parties which exist on the fringe because my own view is that ultimately they must determine which of the larger parties suits them and, hopefully, the smaller regional groupings can then decide to merge with larger parties. This will cleanse our politics and reduce the corruption which seems to go hand in hand with the virtual blackmailing role of the smaller parties in an era of coalitions. I would, however, commend to the major parties the manner in which the Communist Party of China discusses major matters of national importance and issues relating to how the Party will conduct itself in the future. If, like the Communist Party of China, our major parties are able to produce one or more documents which enable the average citizen to understand the party and its philosophy and then decide which party to support, Indian politics will be become serious, purposeful and sharply focused.

Foreign Direct Investment and Economic Growth

Dr. M.N. Buch
Visiting Fellow, VIF

Paul Theroux in his book, ‘Riding The Iron Rooster’ has made some fascinating comments on China which can help us in trying to understand why China is today an economic power-house and India is still struggling. This book was written in 1988 and describes a series of train journeys that Theroux undertook across China in trains which were obviously not the new Bullet Trains that China has now introduced.

Starting from Victoria Station in London Theroux travels across Europe, Russia, and Mongolia and then enters China through Inner Mongolia, making landfall at Datong. After the emptiness of Mongolia Theroux finds Datong and the China it represents to be shabby, busy, disorderly, very crowded and thoroughly polluted by smog which was a combination of desert dust, fog and industrial smoke. The shops were full of goods; there was an air of prosperity, but coal as the source of energy and manufacture, especially of steam locomotives, created a lasting impression. The industrial process was not automated, but everyone was busy working. The guiding philosophy was the three great goals of the workers. To quote Theroux these goals were, “timing of production, so that no work was wasted; keeping the right mental attitude; and increasing productivity”.

I have begun this paper by referring at some length to the very first impression that Paul Theroux had when he entered China from Mongolia. It was one of a country which has industries, whose people had a mindset of production and whose government obviously had a commitment to manufacturing. After the revolution Mao Tse Tung deliberately fostered an economic policy which strove to build a huge manufacturing sector in the country so that China could become an industrialised nation. Remember the slogan that China would overtake America in steel production? The huge number of backyard furnaces that came up and produced very low quality pig iron was a part of this effort to industrialise. Not much pig iron was produced this way, but the people were weaned away from a rural psyche to one in which manufacturing became central to the economy. It must be remembered that in China only ten percent of the total land area is cultivable and more than sixty percent of the land consists of uncultivable wasteland. Geology, geography, topography, hydrology and soil morphology encouraged, in fact mandated, that China could not continue to prosper on the basis of agriculture alone. The industrial revolution in China was then an inevitable consequence of the land configuration, though to give Mao credit he hastened the transition from a basically subsistence rural economy to a very powerful industrial economy.

Industrialisation carries with it a number of prerequisites, sequential growth of support infrastructure, capital requirement and capital formation and research and development which would lead to invention, innovation and improvement. Industry cannot survive without power and the development of the power sector becomes a sine quo non for industrialisation. The development of communications so that goods, people and services can be transported over long distances is absolutely essential for industrial growth. Because a country starting from a low level of economic capability does need assistance for capital formation and for development of technology, China had to find partners. Therefore, despite the fact that China is a Communist country whose ideal is socialism and State ownership of the means of production, China opted for an open door policy in which foreign investment was welcomed and the off-shoring of foreign industry and its location in China was encouraged. China provided the land space and labour and many of the world industries established a base in China. A great deal of Chinese industrial grown has taken place because of this open door policy. The Chinese Government at no stage felt that it could not keep the multinational corporations under control and, therefore, the Chinese had no hesitation in letting in foreign capital. Despite the handicap of having a one-party rule and a judicial system which is certainly not Anglo Saxon, China has been able to reassure the foreign investor that his investment would be safe.

Let us contrast this with India. We have always been suspicious of foreigners coming and investing in India because after all the East India Company and its Dutch, French, Portuguese and Danish counterparts initially came to India for trade. Because of a succession of wars in Europe in which Britain emerged as the dominant naval power and also a great military power on land, the French, Portuguese and other European interventions in India were virtually liquidated and Britain emerged as the supreme European power. Starting from trading posts such as Bombay, Surat and Calcutta the British trader gradually grew into being an arbiter in matters of local, native administration and the East India Company expanded into an imperial power. These memories are fresh in the Indian mind and, therefore, the Indian people and the Indian politicians have always had a deep- rooted suspicion and antipathy towards the successors to the East India Company, the multinational corporations. That is why there is strong political opposition to allowing foreigners to come and take over our companies, our manufacturing units and our trade outlets. Surprisingly China, which calls itself a Peoples Republic and has the single party rule of the Communist Party of China, is today most openly capitalist and gives the warmest possible welcome to foreign investors. India, on the other hand, is a multi-party democracy in which the word “socialist” used in the Preamble to the Constitution is more a comforting slogan than a political commitment, but we are still hostile to the idea of foreigners participating in our economy because we still feel that Surat may become the base of a foreign empire. That does explain why there is such strong political revulsion whenever the question of opening up of our market to foreigners comes up for discussion.

Trade created an empire in India and, subsequently, this empire systematically destroyed such manufacturing capabilities that India had so that the factory-made goods of Britain may be sold in the Indian market and India may then be reduced to the position of a supplier of primary products to Britain. Despite this history the Government of India has decided to open up two sectors of the Indian economy to Foreign Direct Investment. These are retail trade and the civil aviation sector, the latter named being in absolute shambles because of mismanagement. Foreign Direct Investment in the retail sector is strongly opposed by the Left, BJP, Trinamool Congress and several such parties, some of which are a part of the present Congress led coalition. The argument advanced by government is that foreigners taking over the aviation industry will pump necessary working capital into the system and this part of the economy would revive. Similarly, Foreign Direct Investment in retail trade would cut out middlemen, create the infrastructure which would enable the supply chain to reach from the farmer right up to the customer in the retail store and would bring direct benefit to the cultivators while ensuing good quality of the produce and a reasonable price for the urban consumers. It is argued that the present system of agricultural production and marketing is such that there is considerable wastage of agricultural produce by inappropriate storage, spoilage and even destruction through putrefaction in the process of transporting the produce from field to market. The foreign investment retail chains would reach out directly to the producer, create adequate storage, including cold storage facilities and build an efficient transport system which would quickly bring goods to the retail stores. This would put more money in the hands of farmers, prevent wastage and enable the consumer to buy agricultural products at an affordable price. The fact that it would throw a very large number of small vendors, road side hawker and itinerant sellers who carry fruits and vegetables on hand carts right up to the doorstep out of a job does not seem to bother our American Business School, World Bank trained or oriented economists and policy makers.

We seem to be quite willing to allow foreign investors to invest capital, including working capital, in airline companies, most of which are utterly mismanaged. Why do we not encourage foreign investors like British Aerospace, Boeing, Dassault, etc., to invest in producing aircraft in India? Why do we not try and have foreign companies invest in building factories for producing the refrigeration equipment which keeps cold storage plants functional? In other words, why do we not encourage foreign companies to invest in the secondary sector in a big way in India? We have had a fair amount of success in the Build, Operate and Transfer model (BOT model) of road construction and certainly on highways such as that which connects Bhopal to Indore the BOT model has enabled a first rate road to be built. If a sufficiency of off-shoring of manufacturing facilities is done in India we would certainly be able to create more gainful employment, India would be able to evolve an industrial culture instead of the present satisfaction with trading and as our manufacturing capacity increases, we would become a major industrial power, economic power and military power. Obviously we need to take a fresh look at our policy relating to Foreign Direct Investment in India. Given the choice I would cut down all FDI in retail trade, the service sector such as running an airline and in real estate. I would have an open door policy towards investment in the secondary sector, including the setting up of hundred percent foreign owned manufacturing facilities in India. I would certainly give meaningful incentives for investment in physical infrastructure. My only restriction would be that employment generated by these activities would go to the citizens of this country so that their earning and welfare are enhanced.

The great advantage of having a powerful industrial economy is that it forces the manufacturing companies to invest in more research and development because if they do not improve, innovate and invent, their products will become unsaleable in the market. Therefore, industrial growth will bring about simultaneous growth in scientific research for the purpose of innovation and invention. This, in turn, will strengthen our institutions of technology and management because as industry grows, as the need for research grows, the market for these disciplines will expand, the research and development establishment will become stronger and the Institutes of Technology and Management will be forced to redesign teaching methodologies to keep up with the new demand.

My final words would be that government must realise that so far as the foreign direct investor is concerned, he would prefer an activity in which his own capital investment is miniscule, there is a quick turnover of commodities and, therefore, profits are earned almost simultaneously with trading. The gestation period in envisaging, constructing, commissioning of an industrial establishment and then going into commercial production is quite long and profit would have to be deferred to an appropriate date in the future. That is why in India trade is more attractive than manufacture. This would be true of the foreign direct investor also. We need to break this mindset, to make the industrialist realise that waiting for profit is not such a bad idea after all because the production capacity created will yield results year after year after year and that a well managed industrial enterprise will always be more profitable than just trade, whilst being less risky because it is unlikely to be affected by daily market fluctuations which retail trade has to face. Therefore, let economic reforms be targeted at opening up our economy to productive investment but not indiscriminately to trade. America and the developed world want exactly the opposite to happen and this we must resist.