Is swadeshi being redefined?

Most reactions of sectional groups to the budget were predictable. But one surprised me, very pleasantly. This was the positive reaction of the Swadeshi Jagran Manch (SJM). Does this mean we are about to witness the evolution of a more modern and less fundamentalist version of the swadeshi concept?

Nobody could call Yashwant Sinha\’s second budget a swadeshi budget. Indeed, many would say it represents the reversal of the swadeshi direction given in his first budget. One reason why foreign investors have shown enthusiasm in stock markets is that the budget seems to signal the determination of the liberal wing of the BJP, headed by Atal Behari Vajpayee, to continue with the liberal economic programme of preceding governments. Yet the same budget has received the approval of SJM chief S. Gurumurthy. This is a notable development. For the first time that I can recall, foreign institutional investors and the SJM seem to be in approximate, if reluctant agreement. If this lasts, Yashwant Sinha will merit congratulations for helping bring about a remarkable rapprochement.

In recent months, the SJM and BJP leadership have clashed repeatedly, with the former accusing the latter of betraying the swadeshi ideals that both had professed for decades. The SJM is not the only section of the Sangh Parivar accusing the government of betrayal: many in the RSS have done so too. Jay Dubashi, once a prominent party spokesman on economic affairs, protests that the Vajpayee government has not only departed from the party\’s original economic dharma shashtra, it cannot even attribute this to the constraints of coalition politics. Its insurance policy, embodied in the Bill introduced in Parliament in December, is more liberal towards foreign investment than even the National Agenda for Governance.

The RSS and SJM are also unhappy with the party leadership\’s acceptance of World Trade Organisation rules on patents. While in Opposition, the BJP had lambasted these rules.

Given this friction, how has the budget cooled tempers? One explanation doing the rounds is that the finance minister consulted the SJM before budget day and accepted some of its suggestions. If dialogue of this sort can yield policy outcomes that are acceptable to both the SJM and liberalisers, it will amount to a major victory for conflict resolution.

The budget was a very mixed bag from the viewpoint of liberalisers and foreign investors. The surcharge on income and corporate tax constituted a questionable strategy to collect more taxes, and seemed to signal a reversal of the overall direction o reform. The maximum import tariff was reduced from 45 per cent to 40 per cent, but the average tariff went up slightly, and India continues to have one of the highest tariff regimes in the world.

On the plus side, the budget gave generous tax breaks for mutual funds which have sent the stock markets soaring. Interest rates were cut, an expanded automatic list for foreign direct investment was promised, as also clearance of FDI proposals within 30 days. And the budget slashed the number of customs and excise slabs, a positive step that will reduce corruption and litigation. The budget also laid special emphasis on foreign investment in pharmaceuticals, promising 74 per cent automatic foreign equity.

What did the budget have for the SJM\’ In terms of old-fashioned swadeshi protectionism, nothing: no curbs on foreign in vestment in consumer goods, no protectionist import duties. But last year\’s budge\’ had already demonstrated to the SJM i fundamental flaw in simplistic swadeshi That budget imposed an 8 per cent import duty almost across the board, yet instead of welcoming it, many swadeshi industrialists protested that it had made imported inputs too expensive. This drove home the point that for every swadeshi producer of an item there is also a swadeshi consumer, and you cannot help the first without hurting the second. Putting swadeshi into practice is more tricky than the Sangh Parivar imagined while in Opposition.

What the Sangh Parivar liked about the budget was its emphasis on agriculture and rural development, its sops to small-scale industries, its special provisions for NRIs, and the gold deposit scheme. Yashwant Sinha spoke of empowering the rural masses through panchayati raj, of providing funds directly to gram sabhas, of providing universal education through an Education Guarantee Scheme along the lines pioneered by Madhya Pradesh. He dropped names of the Gandhi family from various rural schemes and renamed a handloom scheme after Deen Dayal Upadhyaya. He greatly increased duty-free clearances for small-scale industries, and resisted pressures to de-reserve industries reserved for small units. He accepted a proposal made by the SJM and others, for a gold deposit scheme. He provided automatic clearance for 100 per cent foreign equity for NRI investors, and equalised capital gains tax treatment for swadeshi and videshi investors.

Not many would have bet on this package of measures assuaging the Parivar, especially after earlier fireworks between the Parivar and party leadership.

What has happened to change the mood?

It is probably too early for a good answer. Perhaps, we are merely witnessing a temporary truce. But there remains a more positive possibility: that the SJM and others are beginning to rethink their position.

Once, Indian business was equated with people producing steel, cement and the like. But today the fabulous rise of computer software companies like Wipro and Infosys has taken their stock market value above that of traditional giants like Tata Steel. Globalisation has suddenly produced a new galaxy of swadeshi businessmen who want to conquer the world, not shelter behind high tariffs. They represent the future of India far more than the old steel and cement producers.

This merits a re-think of the whole concept of swadeshi. I see signs of it in the reaction of the Parivar to the budget. Critics will accuse me of wishful thinking. Maybe so. Yet I dare to hope.

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