The much touted Rs. 20 lakh crore relief package announced by Prime Minister Modi and detailed by the Union finance minister has turned out not to be a relief package at all. Instead of offering a fiscal stimulus, she has urged enterprises of all sizes to borrow from banks to tide over the immediate crisis. To millions of poor people staring at prolonged starvation, all she has offered is an additional allocation for the MNREGA programme. And then, somewhat bizarrely, she has chosen this moment to display an entire wish list of long-term structural changes to allow greater participation of Indian and foreign corporate houses in sectors of the economy from which they had been hitherto excluded. Even though the usual cheerleaders are doing their best to present the prime minister and his team as farsighted and decisive, the package seems to have satisfied almost nobody. So what was the thinking behind it?
Major changes take place in history not necessarily because some deep structural dynamic automatically transforms social institutions, whether suddenly or gradually. On the contrary, they happen because organised groups manage to seize the opportunity thrown up by historical events to force those who wield power to make those changes or, failing that, to change the rulers. That is how revolutions take place, as do more limited but significant changes in policy regimes. The 1991 decision by Manmohan Singh – then finance minister in Narasimha Rao’s Congress government which only had minority support in parliament – to liberalise the economy in the middle of a crippling foreign exchange crisis was one such instance. Has Modi attempted to do something similar?
An alibi for reforms long in the making
Most of the structural reforms announced in the past few days have been on the cards ever since the Modi government first came to power in 2014 with the enthusiastic support of the entire capitalist class in India. The reforms could not be carried out because, with a slump in the world economy following the financial crisis of 2008-09, growth did not pick up in the Indian economy. Whenever the matter came up for public discussion, it became clear that there was not enough consensus behind radical pro-business reforms, neither in the Congress and most regional parties nor indeed among BJP leaders in the states. The reason was that with tax revenues stagnant, opening up the economy further to corporate capital would leave fewer instruments in the hands of the government to politically manage dispossessed farmers – the victims of land acquisition – or the swelling ranks of the urban informal sector. Tackling the agitations of the poor was primarily the business of state governments. The problem was dramatically revealed by the spate of farmers’ agitations in 2018-19, leading to hasty announcements of loan waivers by both state and central governments.
The opportunity presented by the global pandemic crisis lies in the sudden suspension in India of normal politics. No one has declared an emergency nor are political demonstrations being put down by force. Rather, the pervasive fear of being infected by the virus has engulfed the whole country. No one can dispute that, with a lockdown in force and the disease still on the rampage, public mobilisation on political issues has to be postponed to a less hazardous time in the future. A moment like this did not appear by design, nor could it have been predicted (regardless of what some apocalyptic soothsayers among environmentalists might say). It has appeared out of the blue.
That Narendra Modi should have turned this moment of crisis into an opportunity of a very special kind shows once more the streak of audacity that has characterised his style of leadership. That he has not responded to calls by a wide array of economists to put cash in the hands of the poor may have to do with a genuine ideological resistance to old-style welfare economics or his well-known contempt for experts – we can speculate about that. But what is surprising is that he did not even respond to what most business people were looking for, namely, some fiscal measures to stimulate demand so that it might make sense for them to borrow in order to restart their enterprises. Instead, following the prime minister’s pep talk on building a self-reliant India, the finance minister spoke of allowing the private sector to participate in space exploration and interplanetary travel. Surely, those were the last things on the mind of even the most ardent Modi fan among Indian entrepreneurs.
Self-reliance, with multinationals
Some of the more immediate steps that business circles have welcomed are those announced by BJP-ruled state governments to relax or do away with key elements in the laws regulating the employment of labour. Enforcing a 12-hour working day, hiring and firing at will, or doing away with minimum wage rules and provisions for health care or safety in the workplace will take a 21st century India back to 19th century England – the days of early industrialisation depicted by Dickens. Needless to say, the dismantling of labour laws has been done by ordinance, without even a pretence of public consultation. Among the Union finance minister’s announcements are the decriminalisation of certain offences under the Companies Act and the temporary suspension of bankruptcy laws. With many companies expected to default on their loans or otherwise violate regulations, these may salve some anxious souls in the corporate world.
But her other announcements, such as selling private sector companies to private players, opening up private participation, both domestic and foreign, in defence production, atomic energy and space exploration, offering new coal mines and power distribution in Union Territories to private companies, and the bold talk of breaking up existing networks of middlemen to create a free national market in agricultural commodities could only be of interest to a handful of large entrepreneurs. Even for them, this is hardly the time to make new investments, unless a cash-strapped government decides to get rid of public sector companies at throwaway prices.
There are rumours that many multinational corporations are planning to move their investments out of China. It seems the Modi government wants to motivate Indian entrepreneurs to be brave and bring some of them to India rather than see them go to Vietnam or Thailand. Staring at a disastrous economic collapse that may last a year or two, that is the lifeline Modi has decided to grasp. He wants to drag India’s big bourgeoisie, kicking and screaming, to lead the way to a self-reliant India. That self-reliance is not of the desi variety championed by the Swadeshi Jagaran Manch. It is a dream that floats over high technology sectors where globally adept Indian corporates will frolic with multinationals and give the Indian economy a first-world gloss. Modi is not shy of dreaming the impossible dream.
Fiscal measures to transfer cash to near-insolvent companies or impoverished workers and farmers are probably being kept back for worse times to come. For all the talk of the Indian economy bouncing back spectacularly in a few months, most decision-makers realise that the epidemic will not go away soon, nothing will return to normal in the near future, and the demand for relief will grow, not subside. The government may have decided that it is prudent not to throw away their best cards before things turn really ugly. The political risk is minimal since there is no politics anyway.
Towards a unitary state
If the so-called relief package is likely to have only a limited impact for now, there is another area where the absence of normal politics under conditions of a health emergency has been utilised to produce what is meant to be permanent structural change. This is the field of federal relations between the Centre and the states.
Immediately following the lockdown, the Central government has been daily represented in the media by senior bureaucrats who provide statistics, display charts and issue guidelines to the whole country on medical as well as civic matters. Secretaries of central departments send out inspection teams and upbraid state governments for their failings. Almost overnight, the country has been turned into a unitary government run by a centralised bureaucracy where state governments are little more than local implementing agencies of central policies. Every evening, news channels put up comparative figures, state by state, of the progress of the epidemic. Their relative performance is judged, almost like the daily medals tally in the Olympic Games, one state overtaking another in these dubious rankings among COVID affected states. Imperceptibly, the crisis has been made to look like one where the Central government is the all-knowing rational CEO and the states a bunch of inept field officers.
Yet rarely has the physical reality of the states as the actual governing units within the Indian federation emerged as vividly as it has in the last few weeks. States are scouring global markets for medical equipment and testing kits. All state borders are being policed as never before. States are negotiating with one another for the return of their workers. Karnataka has announced that it will not allow anyone from the heavily affected states to come in. Having created the migrant worker crisis by its thoughtless decision to clamp a lockdown with barely four hours’ notice, the Central government has washed its hands of the matter and left the states to squabble among themselves. And now, as part of the Union finance minister’s package, states have been allowed to borrow up to five per cent of the state GDP provided they implement central policies on the public distribution system, power distribution and municipal finance – all state subjects. Why are the state governments accepting this flagrant overturning of the federal structure? The answer can only lie in the overwhelming urgency of meeting the immediate crisis. Normal politics has to wait.
Few remember that M. S. Golwalkar, the RSS chief, campaigned incessantly in the years after independence to make India a unitary and not a federal state. The latter, he believed, would weaken the nation. He was resolutely against the reorganisation of states along linguistic lines, arguing that it would lead to the break-up of the nation. Although the BJP has since accepted the federal framework, the idea that a strong centre, preferably under its own control, is the best arrangement to ensure a strong nation-state is deeply rooted in its consciousness. By seizing the opportunity created by the pandemic, Modi has not only taken a decisive step in the direction of consolidating central powers; he has also nullified the effect of the series of BJP defeats in recent state elections.
The migrant crisis has also revealed another truth about contemporary Indian society. For some years now, a fundamental rift has opened up between the formal sector of the Indian economy consisting of government enterprises and services and the corporate sector on the one side and the proliferating informal sector overlapping with a crumbling agricultural sector on the other. This divide roughly corresponds to middle-class society, including many workers from the formal sector, with stable incomes and hopeful futures, on one side, and informal workers who struggle for their daily subsistence, on the other. The former have a natural claim on the attention of political leaders and government officials because, after all, they belong to the same social class. The latter are able to make claims on government only through the mediation of political representatives. When politics is suspended, those in the informal sector count for nothing. This explains why the country had to witness the appalling scenes of lakhs of desperate migrant workers amassing at railway stations, climbing on to loaded trucks, or simply walking on highways and railway lines while the central government simply looked away and state governments floundered.
Contrary to what some people believe, it is politics that ensures a degree of decency and compassion in the public life of this country. Without it, those in power are free to look after their own kind and declare the rest of the population redundant. It took a pandemic to demonstrate this simple truth.
Partha Chatterjee is a historian and social scientist