Nobody imagined when Atal Behari Vajpayee became Prime Minister that he and other liberals in the party would soon be openly battling the Swadeshi Jagran Manch (SJM) and Rashtriya Swayamsevak Sangh (RSS) on insurance.
The issue proves how facile those S were who claimed that Vajpayee was simply a liberal mask of the BJP that would be ripped off when the party actually came to power. No, the liberal face of the BJP is no mask, it is a real and strong force that has proved extremely good for Indian politics, by helping tame the atavism of the saffron fringe.
The SJM and RSS are accurate in saying that Vajpayee has gone well beyond the party manifesto in the matter of insurance. Nor, as suggested by the manifesto, has the government imposed any curbs on consumer goods made by foreign companies.
They can produce potato chips no less than computer chips.
How come? Because India\’s nuclear tests, supposedly aimed at China and Pakistan, have actually landed on the RSS and SJM. This has forced a change in the BJP\’s interpretation of Swadeshi, which no longer corresponds to the an-tedeluvian notion of the RSS.
Traditional saffronites associated nuclear might with autonomy, and thought it would make India impervious to international winds. The very opposite has happened. The bomb has helped globalise India. In conducting a nuclear test, the BJP wanted the world to recognise India\’s new status. The world has done exactly that.
Unfortunately, the new status has as many negatives as positives. The test has taken India straight into the global web of security issues, which have many economic dimensions. India is now seen by global investors as a country carrying new risks of conflict. Its immediate prospects have been affected by G-8 economic sanctions. It can no longer rely on the World Bank and IMF unless it goes completely bust like Pakistan.
The East Asian crisis has produced new scepticism of all emerging markets. India has been downgraded by all credit rating agencies like Moody\’s. And so foreign interest in India has waned. Foreign direct investment is likely to drop to barely half last year\’s level, and foreign portfolio investment will be minuscule or negative.
The RSS may well ask, so what? After all, India\’s foreign exchange reserves are a healthy $ 26 billion, and it has withstood the financial hurricane in Asia. Its savings rate is 26 per cent, and foreign inflows add only marginally to this.
So how does it matter if foreign investors are pessimistic? The answer is, it would not have mattered very much in normal conditions. Unfortunately, conditions are far from normal. The BJP rules on the basis of a hairline majority, and so even minor economic setbacks (like a bad onion crop) can threaten its survival.
It needs a stream of positive economic news to improve its reputation as an economic manager. The slumping stock market makes millions of shareholders gloomy. The slack in industry hits small business and the middle class, the very foundation of BJP support. The global financial crisis has hit Indian exports and produced an avalanche of cheap imports. On top of all this comes the decline in foreign interest, which mean less investment and jobs, and a falling stock market.
Had the BJP enjoyed a clear parliamentary majority, had world trade and investment been booming, then the BJP could have shrugged much of this aside. In fact it has come to power in a very difficult environment, internally and externally. It does not want to be booted out of power as a party that produced economic stagnation or worse. If it is, the party\’s liberals will be ousted by hard-liners, one reason why the liberals are taking a firm stand today.
Some pessimists already predict a balance-of-payments crisis in 1999. Mr Yashwant Sinha presided \’ over the bankruptcy of the country when he was the finance minister in 1991. He does not wish to go down in history as the only finance minister to bankrupt India twice. These factors have made liberals in the BJP altogether more sensitive to world business sentiment than anybody could have expected when it came to power.
Nobody could have expected at the time that a new BJP government would avoid placing a single curb on multinational investment in any consumer goods, not even potato chips. Nobody could have expected that the BJP would go beyond its manifesto in pushing for foreign investment in insurance. Above all, nobody could have imagined open civil war within the BJP on these issues. Some stalwarts in the RSS feel that US deputy secretary of state Strobe Talbott may have arm-twisted Jaswant Singh into agreeing to liberalise insurance as part of a deal to lift US sanctions. I find this quite implausible. The US would like Indian insurance to open up, of course. But this is a very minor matter from the State Department\’s viewpoint, while nuclear missile proliferation is a very major issue.
There is no way the US is going to go easy on India\’s nuclear programme or lift its sanctions merely because India liberalises insurance. Yet in a broader context, the global repercussions of the nuclear test have forced an economic rethink in New Delhi. So perhaps I was wrong to criticise the nuclear tests so strongly at the time. I had not realised that the fallout would give Swadeshi leukemia.
